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Miller v. Citibank

September 14, 2010

CLAUSEN MILLER, P.C., PLAINTIFF,
v.
CITIBANK, N.A., DEFENDANT.



The opinion of the court was delivered by: Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER

Plaintiff Clausen Miller, P.C., filed a one-count complaint against defendant Citibank, N.A., alleging that defendant violated 810 ILCS 5/4-302 by failing to timely return and dishonor a check, and that defendant is accountable to plaintiff for the amount of the check ($372,640) plus interest. The parties have filed cross-motions for summary judgment. For the reasons below, the court denies plaintiff's motion for summary judgment and grants defendant's motion for summary judgment.*fn1

FACTS*fn2

On July 11, 2008, plaintiff Clausen Miller, P.C., received a check payable to it in the amount of $372,640 and drawn on an account at defendant Citibank. Plaintiff deposited the check into its Chicago bank account at Bank of America ("BofA") on July 14, 2008, and BofA conditionally credited plaintiff's account in the amount of the check. BofA then sent the physical check to the Federal Reserve Bank Philadelphia ("Fed Philadelphia"). Defendant received the physical check from the Fed Philadelphia on July 16, 2008.*fn3 Defendant determined it was counterfeit, and prepared a notice to BofA through the Electronic Advance Return Notification System ("EARNS") informing BofA that it was dishonoring the check.*fn4 Defendant sent that EARNS notice at 7:29 p.m. on July 17, 2008. Also on July 17, 2008, defendant returned the physical check to the Fed Philadelphia by giving it to a courier as part of a bundle of items to be returned to the Fed Philadelphia. The courier picked up the bundle at 7:50 p.m. on July 17, 2008, and delivered it to the Fed Philadelphia at 9:20 p.m. on that date. BofA picked up the EARNS notice at 8:41 a.m. on July 18, 2008, and thereupon revoked the credit to plaintiff's account in the amount of the check. BofA notified plaintiff at approximately 1:00 p.m. on July 18, 2008, that the check had been dishonored.

Plaintiff's complaint claims that defendant's return of the check was untimely under 810 ILCS 5/4-302 ("§ 4-302"). Section 4-302 (corresponding to that section of the Uniform Commercial Code) provides that "[i]f an item is presented to and received by a payor bank, the bank is accountable for the amount of . . . a demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline." § 4-302(a)(1). Plaintiff alleged that defendant received the check on July 15, 2008, and dishonored it and returned it to BofA on July 18, 2008. Defendant's answer denied that it received the check on July 15, 2008, and denied that its return of the check was untimely because, for purposes of § 4-302, defendant returned the check on July 17, 2008.

The day after defendant filed its answer, the parties filed a joint status report. In that report, plaintiff acknowledged that defendant provided notice of its return of the check at 7:29 p.m. on July 17, 2008, but maintained its position that defendant received the check on July 15, 2008, and did not return it until July 18, 2008. Defendant stated that it received the check on July 16, 2008, returned the check for purposes of § 4-302 on July 17, 2008, and returned the check, for purposes of 12 C.F.R. § 229.33(a) (a provision not at issue in this case), to BofA on July 18, 2008.

Less than two months after the parties filed their joint status report, they conferred to discuss the possibility of reaching factual stipulations. Each party requested that the other follow up on certain questions regarding how the check was received and returned. A few weeks later, defendant informed plaintiff that it had returned the check, using a courier, to the Fed Philadelphia on July 17, 2008. On March 26, 2010, defendant filed an update to its statement in the joint status report, clarifying that it returned the check to the Fed Philadelphia before midnight on July 17, 2008, and provided notice of the return to BofA at 7:29 p.m. on July 17, 2008, and that BofA received notice of the return at 8:41 a.m. on July 18, 2008.

DISCUSSION

I. Summary Judgment Legal Standard

The parties have filed cross-motions for summary judgment pursuant to Fed. R. Civ. P. 56. A movant is entitled to summary judgment when the moving papers and affidavits show there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Village Church v. Village of Long Grove, 468 F.3d 975, 988 (7th Cir. 2006). The moving party bears the initial burden of pointing out the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. Once the moving party has met that burden, the nonmoving party must go beyond the pleadings and "set forth specific facts showing there is a genuine issue for trial." Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 322-23. The court considers the record as a whole and draws all reasonable inferences in the light most favorable to the party opposing the motion. Fisher v. Transco Services-Milwaukee, Inc., 979 F.2d 1239, 1242 (7th Cir. 1992). The court's role "is not to evaluate the weight of the evidence or to determine the truth of the matter, but instead to determine whether there is a genuine issue of triable fact." Doe v. R.R. Donnelley & Sons Co., 42 F.3d 439, 443 (7th Cir. 1994).

II. Cross-Motions for Summary Judgment

Under the banking article of the Illinois UCC, defendant is liable to plaintiff for the amount of plaintiff's dishonored check if defendant did not "return the item or send notice of dishonor" check before midnight of the next banking day after it received the check. § 4-302(a)(1). In the instant case, that deadline is midnight on July 17, 2008. The definitional section of UCC Article 4 defines "midnight deadline" for a bank as "midnight on its next banking day following the banking day on which it receives the relevant item . . . ." 810 ILCS 5/4-104(a)(10). Section 104(a)(3) defines "banking day" as "the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions . . . ."

The parties dispute whether defendant returned the check in a timely manner, according to the statutory meaning of "return." Although plaintiff attempts to frame this disagreement as a factual one, the undisputed record evidence leaves no material fact in dispute; the true issue is what the statutory meaning of "return" is. The undisputed facts establish that defendant's return of the check was timely under § 4-302.

Defendant offers extensive and uncontested evidence that it returned the check before midnight on July 17, 2008. In support of its position, defendant provides the affidavit of Brian Todd, a Vice President and Senior Manager of defendant, who has personal knowledge of defendant's processes regarding receipt and return of checks, along with a number of its business records that verify Todd's testimony and are properly authenticated and admissible as business records under Fed. R. Evid. 803(6). Todd's affidavit establishes the following facts: BofA received the check on July 15, 2008. The next day, it electronically transmitted the check to the Federal Reserve Bank, which printed the check and, using a courier service, physically delivered the check to defendant. A report entitled "Reco Cash Letter Details," dated July 16, 2008, identifies the check by its check number and establishes that defendant received it on July 16, 2008. The next day (July 17), defendant prepared an EARNS notice, which was transmitted at 7:29 p.m. on July 17, 2008, informing BofA that ...


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