Citibank Dodges Conned Lawyer’s Check Claims

     CHICAGO (CN) – An Illinois lawyer who fell for an advance-fee scam will not be able to proceed on claims against Citibank over its compliance with Illinois’ “midnight rule,” a federal judge ruled.




     In May 2010, Robert Hirsch, an Illinois lawyer, received an email from one Julie Kobayashi, whom he had never met, requesting representation in a marital dispute. According to Hirsch’s complaint, Kobayashi then sent him a $298,500 cashier’s check, to be drawn on Citibank, with instructions to keep $29,000 as payment and wire the remainder to a Japanese bank.
     Hirsch followed the instructions, making the initial deposit in his IOLTA account at Fifth Third Bank. According to the order, “[a]s part of the Wire Transfer Agreement between Hirsch and Fifth Third, when asked if the wire transfer was being sent to someone he met over the internet, Hirsch answered ‘no.'”
     Relying on Hirsch’s allegations, the order states that “Fifth Third wired these funds to the Japanese bank on Monday, June 7, and that evening Citibank sent Fifth Third notification that the cashier’s check was counterfeit. Fifth Third received this notification on the morning of June 8, but this was too late to reverse the wire transfer.”
     In the process of defending himself against a lawsuit subsequently filed by Fifth Third Bank, Hirsch filed a suit against Citibank. According to the ruling, “Hirsch claims that Citibank received the counterfeit check on Friday, June 4, and untimely sent its notification that the check was defective on Monday, June 7.”
     This notice was allegedly untimely because “it should have been done by Saturday, June 5” under Illinois’ “midnight rule.”
     According to U.S. District Judge Virginia Kendall, the midnight rule “makes payor banks liable for not timely dishonoring counterfeit checks. […] To appropriately dishonor the cashier’s check (and escape liability for the amount of the check), Citibank had to send Fifth Third a notice of dishonor before midnight ‘on the next banking day after the banking day on which [Citibank] received the check.'”
     However, Saturdays are not “banking days” for purposes of Illinois and federal law. “Federal Reserve Regulation CC,” Kendall explained, “specifically excludes Saturdays and Sundays from its definition of a ‘banking day.'”
     To save his claim, “Hirsch trie[d] to rely on a copy of the back of the counterfeit check… to argue that Citibank ‘returned’ the check to the Federal Reserve Bank on June 9, 2010, two banking days after the expiration of the midnight rule.”
     The court found that even if the allegations in his third party complaint supported this claim, Illinois law mandates that a “counterfeit check need not actually be returned by midnight of the next banking day.”
     “Sending a notice of dishonor is enough,” reasoned Judge Kendall, “which is exactly what Citibank did.”
     Though his claim has been dismissed, Hirsch will not be sanctioned for filing it, as he did not do so on bad faith or for “vexatious reasons,” Kendall said.

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