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DMDB Adults, Inc. v. Bank of America

98 A.D.3d 903, 951 N.Y.S.2d 492 (1st Dep’t 2012)

ZEK employed a trio of successful defenses in aid of its bank client in an action seeking reimbursement of funds stolen from plaintiffs’ accounts by a dishonest check forging bookkeeper. We successfully employed: the Uniform Commercial Code’s one-year notice rule as well as its repeat forger rule that further shortens the notice period when all forgeries are committed by the same person (both contained in UCC § 4‑406) as well as the failure of the plaintiffs to adhere to the 60-day notice requirement in the customer agreement with the bank. Significantly, the First Department Appellate Division, applying New Jersey law, held that the UCC’s ordinary care standard applicable to a drawee bank’s processing of checks for payment did not require by hand bank examination of individual checks or signatures. Rather, relying on the affidavits of bank employees and the bank’s expert, the Appellate Division held that the bank’s automated computer review of checks represented a check processing practice and procedure consistent with those of all other large money center banks in the metropolitan New York region and therefore satisfied the UCC’s ordinary care requirement. The Appellate Division affirmed New York County Supreme Court’s grant of summary judgment to the bank, dismissing the complaint in its entirety.