Cable Cast Magazine v. Premier Bank
Court of Appeal of Louisiana
729 So. 2d 1165 (1999)
Cablecast's employee Pennington, entrusted with indorsing and depositing company checks, instead fraudulently indorsed and deposited $7,913.04 worth of Cablecast checks into her own account at Bank One (defendant), falsely representing to the bank that she was Cablecast. Cablecast (through publisher Telemedia, plaintiff) sued Bank One under UCC § 3-307 for accepting the checks; Bank One argued UCC §§ 3-405 and 3-406 placed the risk of an entrusted employee's fraud on the employer. The trial court found for Telemedia, and Bank One appealed.
Whether an employer must prove the payor bank failed to observe commercially reasonable standards, or acted in bad faith, when accepting fraudulently indorsed checks, in order to shift liability for an employee's fraud away from the employer and onto the bank.