C. Nicholas Pereos, Ltd. v. Bank of America, N.A.

Mary Williams was employed by law firm C. Nicholas Pereos, Ltd. (firm) (plaintiff). C. Nicholas Pereos was the firm’s sole lawyer. Williams and Pereos had signing authority over the firm’s account with the Bank of America, N.A. (bank) (defendant) until September 2006, when Pereos removed Williams as a signatory. However, Pereos did not close or monitor the account. In early 2010, Pereos discovered that Williams embezzled money from the firm’s account by writing checks to herself, which the bank paid despite Williams no longer being a signatory. Pereos also learned that, at some unknown point, Williams enrolled the firm in online banking, meaning that the firm stopped receiving mailed account statements. The firm sued the bank for paying the checks to Williams. The bank moved to dismiss or for summary judgment. Per the bank, the firm’s unauthorized-payments claim was untimely under Nevada’s version of Uniform Commercial Code (UCC) § 406(4)(b) because the bank exercised ordinary care and because the firm did not report the payments within 30 days of obtaining statements reflecting the payments. The bank further argued that Nevada’s UCC § 4-406(6), which imposed a one-year notification deadline regardless of the bank’s level of care, also fully barred the firm’s claims. Per the bank, the one-year period commenced for all the unauthorized payments (including future payments) as soon as the firm first received a statement reflecting the embezzlement because there was a single wrongdoer. The bank also contended that Pereos personally obtained statements that reflected Williams’s unauthorized transactions. The firm countered that the statements Pereos obtained did not include canceled checks (which would have shown the unauthorized signatures) but merely listed check numbers and amounts and that even if the Pereos-obtained statements started the one-year limitations clock, each unauthorized payment was subject to its own individual deadline. The trial court granted summary judgment to the bank. The firm appealed.