In 1944, while Bank of America National Trust & Savings Association (B of A) (plaintiff) was preparing to submit bearer bonds to the Federal Reserve Bank for payment, the bonds disappeared. In 1948, Parnell (defendant), acting on behalf of Rocco (defendant), presented the bonds to First National Bank in Indiana (First National) (defendant). First National forwarded the bonds to the Federal Reserve Bank of Cleveland (FRB Cleveland) (defendant), which cashed them and paid First National. First National paid Parnell who then transferred the proceeds to Rocco minus a fee. On the basis of diversity, B of A filed an action for conversion against Parnell, Rocco, First National, and FRB Cleveland in Pennsylvania federal district court. Applying state law, the court instructed the jury that defendants bore the burden of proof that they had taken the bonds in good faith. The jury returned verdicts in favor of B of A. On appeal, the court of appeals ruled that federal, not state, law applied and that pursuant to Clearfield Trust Co. v. United States, 318 U.S. 363 (1943), B of A bore the burden of proof to show that defendants had notice and acted in bad faith. B of A petitioned the United States Supreme Court for certiorari.