2 Sep No Comments MikeT Counterfeit Check, Expert Matters

Facts:  The defendant was a law firm that received an e-mail advising the firm that a foreign entity was seeking legal assistance in a collection matter.  The law firm accepted the engagement.  A few days later, the representative of the alleged foreign entity advised the law firm that its debtor wished to make a voluntary payment of the debt to avoid litigation and that the debtor would be sending the law firm a cashier’s check for $489,630.00.  The check was received by the law firm and deposited into its attorney trust account at the plaintiff community bank.  The community bank, as was its practice, gave the check next day availability.  The following day, the law firm received an instruction from its client to wire transfer $458,000.00 of the proceeds of the check to a third party in South Korea.  The law firm did so.  A several days later, the deposited check was returned to the bank as a counterfeit.  The bank charged-back the law firm’s attorney trust account for the amount of the counterfeit check resulting in a substantial overdraft.  When the law firm refused to cover the overdraft, the bank filed a lawsuit against the firm.  The bank also engaged legal counsel in South Korea.  Counsel in South Korea was able to recover $365,000.00 of the proceeds of the wire transfer from the bank in South Korea and return these funds to the bank. 

Client:  The plaintiff community bank.

Subject of Expert Report:  Whether the law firm was liable to the bank for breach of its transfer warranty that all the signatures on the purported cashier’s check were genuine made to the bank at the time that the check was deposited.

Outcome:  The matter settled at a court-ordered mediation.