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Thompson v. First BancoAmericano

518 F.3d 128 (2d Cir. 2007)

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Thompson v. First BancoAmericano

United States Court of Appeals for the Second Circuit

518 F.3d 128 (2d Cir. 2007)

Facts

J. Walter Thompson (JWT) (plaintiff) issued a $382,210.15 check from its Bank of America checking account to Outdoor Life Network. Someone altered the check’s payee to “Diversified Business Enterpises” and deposited the check into that entity’s account at First BancoAmericano (FBA) (defendant). FBA presented the check to the Federal Reserve, which presented the check to Bank of America’s check-processing facility. Bank of America debited JWT’s account and transmitted the payment to FBA. JWT discovered the alteration and notified Bank of America. Prior to this incident, there were 10 instances of check fraud or attempted check fraud on checks from JWT’s Bank of America account. JWT’s total losses from the previous incidents were under $9,000. JWT subscribed to Bank of America’s Positive Pay Program, which identified potentially fraudulent checks. However, the system lacked the ability to match payee names. JWT asked Bank of America to credit its account for the check. Bank of America refused and instead asked FBA to return the check proceeds. FBA refused. JWT sued Bank of America, and Bank of America filed a third-party complaint against FBA and the Federal Reserve bank that had presented the check to Bank of America for payment. JWT moved for summary judgment against Bank of America, and Bank of America moved for summary judgment against FBA and the Federal Reserve. The district court granted both motions, and FBA and the Federal Reserve appealed to the United States Court of Appeals for the Second Circuit.

Rule of Law

Issue

Holding and Reasoning (Cabranes, J.)

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