The corporation had multiple counterfeit checks drawn from its checking account and deposited into accounts at various locations of the bank. Following the deposit of the checks into the bank, a suspicious and unusual outflow of wire transfers occurred from that account, with multiple international wire transfers to foreign nations. The corporation alleged that the bank failed to exercise ordinary care and substantially contributed to its loss from the checks under Fla. Stat. § 673.4041. The corporation argued that the “facial irregularities” on the checks, unusual transaction behavior, and the amounts of money being transferred should have alerted the bank of potential fraud. At issue are eleven checks, three deposited in Florida and eight deposited in New York. The bank responded by transferring the case to federal court based on diversity of citizenship and subsequently filed a motion to dismiss.
In Artistic Tile, Inc. v. JPMorgan Chase Bank, N.A., No. 24-7267 (SRC), 2024 WL 4680296, 2024 U.S. Dist. LEXIS 200859 (D. N. J. Nov. 5, 2024) (unpublished opinion), the court granted in part and denied in part the bank’s motion to dismiss. First, the court applied New Jersey’s choice of law statute under UCC § 4-102(b) to determine whether the adopted Uniform Commercial Code (UCC) in New York or the adopted UCC in Florida applied. UCC § 4-102(b) states that “in the case of action or non-action by or at a branch or separate office, its liability is governed by the law of the place where the branch or separate office is located.” Therefore, the eight checks deposited in New York are governed by New York’s UCC, and the three checks deposited in Florida are governed by the Florida UCC. Because the corporation only brought a cause of action under Florida’s UCC and did not bring a cause of action under New York's UCC, the court dismissed the corporation's cause of action with prejudice with respect to the eight checks deposited in New York. Second, the court looked to determine whether the corporation had plausibly stated a claim for relief under UCC § 3-404. The court determined that the corporation’s allegations were sufficient because the bank received and deposited counterfeit checks containing both forged signatures and indorsements. The fraudsters did not intend the imposter payee to have any interest in the instruments, satisfying Florida’s UCC § 3-404(b)(i) and showing that UCC § 3-404 applied. Because there was an issue of fact as to whether the bank failed to exercise ordinary care and that “failure substantially contributed to loss resulting from payment of the instrument,” the court denied the motion to dismiss regarding the three checks deposited in Florida. UCC § 3-404(d).
By Jace Brown [email protected]
Edited By Hayden Mariott [email protected]
Edited By Ashley Boyce [email protected]