First Financial Bank, N.A. v. Citibank, N.A.

Facts

On July 7, 2010, Ms. McDonald deposited a cashier’s check from AMPG at her local First Financial bank. The check purported to be a Citibank Official Check in the amount of $298,750.00. Ms. McDonald believed the Check to be partial payment of money owed by AMPG to a company that had recently engaged her services to try to collect from AMPG. The same day, First Financial credited Ms. McDonald’s account with the funds and sent an electric copy of the check to its correspondent bank, J.P. Morgan Chase, N.A. (“Chase”), so that Chase could forward it to the payor bank, Citibank. On July 8, 2010, Citibank determined that the account number on the check did not exist and that the endorsement of the depository bank, First Financial, was illegible. After Citibank refused to honor the check, it sent the check to the Federal Reserve Bank, another correspondent bank of First Financial. Citibank also sent notice to Chase that the check was being returned for an invalid account number. Citibank did not send notice to First Financial, as it contended that First Financial’s endorsement was illegible. Chase received notice from Citibank through the Electronic Advanced Return Notification System (“EARNS”) on July 9, 2010, at 7:10 A.M., and Chase subsequently notified First Financial of the returned check by sending two letters, neither of which were received by First Financial until July 14th. Meanwhile, First Financial had completed a wire transfer request on behalf of Ms. McDonald to the Bank of China in Beijing, China. First Financial attempted to stop the wire transfer but the beneficiary of the transfer had already been paid by the Bank of China. First Financial set off Ms. McDonalds account but she only had $26,172.21 on deposit, and First Financial was unable to recover the remaining $272,577.79. First Financial sued Citibank, alleging that Citibank had failed to provide timely and proper notice of nonpayment of the check.