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FOX RIVER GRAPHICS, INC. v. FIRST MIDWEST BANK

March 15, 2004.

FOX RIVER GRAPHICS, INC., an Illinois corporation, Plaintiff,
v.
FIRST MIDWEST BANK, an Illinois banking association, and HANA BANK, as successor in interest to Seoul Bank, Defendants



The opinion of the court was delivered by: JOAN H. LEFKOW, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, Fox River Graphics, Inc., an Illinois corporation ("Fox River"), brings this action against Hana Bank, as successor in interest to Seoul Bunk ("Seoul Bank"), alleging violation of Federal Regulation CC, 12 C.F.R. pt. 229 (Count V), and violation of sections 4-301 and 4-302 of the Uniform Commercial Code ("UCC") (Count VI).*fn1 Before the court are the parties' cross-motions for summary judgment. For the reasons set forth below, Fox River's motion is denied while Seoul Bank's motion is granted.

SUMMARY JUDGMENT STANDARDS

  Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). To determine whether any genuine fact exists, the court must pierce the pleadings and Page 2 assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed R. Civ. P. 56(c) Advisory Committee's notes. The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Moms Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact must be outcome determinative under the governing law. Insolia, 216 F.3d at 598-99, Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most favorable to the non-moving party as well as view all reasonable inferences in that party's favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), On cross-motions for summary judgment, the court must consider the merits of each motion and assess the burden of proof that each party would bear on an issue at trial. Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997).

  FACTS*fn2

  Fox River is an Illinois corporation engaged in the business of supplying LCD projectors. (Stip. Facts ¶ 1.) On February 4, 2002, Fox River received a bank draft (the "Draft") in the amount of $95,388.00 from P.C. Tradelink Corp. ("Tradelink"), a Korean corporation, for the Page 3 purchase of $63,573,00 worth of LCD Projectors. (Stip. Facts ¶ 8.) Tradelink explained the difference of $31,815.00 as a mistake, and requested that Fox River return that amount after the Draft had cleared. (Stip. Fads ¶ 9.) The Draft was allegedly drawn on the Pusan Branch of Seoul Bank, payable to the order of Fox River, and payable at Seoul Bank, New York Branch. (Stip. Facts ¶ 10.)

  According to the first date stamp on the back of the Draft, Fox River deposited the Draft in its account at First Midwest on February 4, 2002. (Stip. Facts ¶ 11.) According to the second date stamp on the back, First Midwest presented the Draft to the Chicago Federal Reserve Bank (the "Chicago FRB") for clearing on February 5, 2002. (Stip, Facts ¶ 12.)

  On February 11, 2002, the New York Federal Reserve Bank (the "New York FRB") debited Seoul Bank's FRB account #36003262 in the amount of $122,326.18, (Stip. Facts ¶ 13.) In an envelope Seoul Bank received from the New York FRB, however, all that was contained was a single check in the amount of $26,938.18. (Def. L.R. 56.1 ¶ 20.) The balance of $95,388.00 was left unexplained, (Id.)

  First Midwest notified Fox River that the Draft cleared on February 11, 2002. (Stip. Facts ¶ 14.) After receiving this notification, on the same day Fox River authorized a wire transfer in the amount of $31,815.00 from its account at First Midwest to Tradelink. (Stip. Facts ¶ 15.)

  On February 12, 2002, Seoul Bank requested that the New York FRB credit its account in the amount of the unexplained debit of $95,388.00. (Def, L.R. 56.1 ¶ 25.) On February 14, 2002, Seoul Bank received the Draft by pouch from the New York FRB, and its account with the FRB was again debited in the amount of $95,388,00. (Stip, Facts ¶ 16.) Within 24 hours of Page 4 receipt of the Draft, on February 24, 2002, Seoul Bank returned the Draft, marked as counterfeit, to the New York FRB by hand at 1:36 p.m. (Stip. Facts ¶ 17.) The Transmittal Letter to the New York FRB states "for settlement on the next business day," (Stip, Facts ¶ 18.) Also on February 15, 2002, the New York FRB credited Seoul Bank's account in the amount of $95,388.00 pursuant to its request of February 12, 2003. (Stip. Facts ¶ 19.) On February 19, 2003, the New York FRB again credited Seoul Bank's account in the amount of $95,388.00 pursuant to its return of the Draft on February 15, 2002. (Stip. Facts ¶ 20.)

  First Midwest did not receive notice of the dishonored check until it received the Draft on February 22, 2002 from the Chicago FRB. (Stip, Facts ¶ 21.) Seoul Bank and First Midwest are located in separate checking regions in the United States. (Stip. Facts ¶ 29.)

  DISCUSSION

  Before addressing the parties' cross-motions for summary judgment, the court pauses for a. brief moment to explore its jurisdiction over this action. Fox River's Complaint alleges that this court's jurisdiction is invoked pursuant to both 28 U.S.C. § 1331 and 1332, At least at the time this suit was filed no diversity jurisdiction could have been present, as Fox River and Midwest are both identified as citizens of Illinois.*fn3 And diversity jurisdiction would not appear present now between Fox River and Seoul Bank because Fox River claims damages in the amount of $31,815.00, well below the $75,000 diversity threshold.

  Fox River does, however, allege violation of Federal Regulation CC, 12 C.F.R. pt. 229. Regulation CC was implemented by the Federal Reserve Board under the Expedited Funds Page 5 Availability Act, 12 U.S.C. § 4001-4010 ("EFA"). See Bank One Chicago v. Midwest Bank & Trust Co., 516 U.S. 264, 268 (1996). Subsection 4010(a) of the EFA provides that
Except as otherwise provided in this section, any depository institution which fails to comply with any requirement imposed under this chapter or any regulation prescribed under this chapter with respect to any person other than another depository institution is liable to such person in an amount equal to the sum of [a specified measure of damages.]
Bank One Chicago, N.A., 516 U.S. at 267 (bracket in original) (citing 12 U.S.C. § 4010(a)). Moreover, subsection 4010(d) of the EFA provides that "[a]ny action under this section may be brought in any United States district court, or in any other ...

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