Rhode Island Hosp. Trust Nat'l Bank v. Zapata Corp.

A Zapata Corporation (Zapata) (defendant) employee forged company checks between $150 and $800 over several months, and Rhode Island Hospital Trust National Bank (Bank) (plaintiff) paid them; Zapata's statements first showed the forged payments in April, but Zapata didn't examine them closely and didn't catch the forgeries until July, by which point over $109,000 had been paid on forged checks. The Bank sued Zapata for the forged-check payments; Zapata argued the Bank couldn't recover under UCC § 4-406 because the Bank itself lacked 'ordinary care.' The Bank showed that, consistent with industry practice, it only examined signatures on checks in that dollar range when suspicious or randomly selected, covering about 1% of such checks, and that this practice was cost-effective and didn't meaningfully increase forgeries. The district court ruled for the Bank, and Zapata appealed.