## Facts

- Roger Chavez, a Venezuelan resident, opened a bank account in 2002 at Mercantil Commercebank, N.A.’s Miami branch.
- The account was governed by a Funds Transfer Agreement (FTA) addressing payment orders and “security procedures,” with a customer-selected option set out in an annex.
- In February 2008, Chavez deposited $329,500.
- Two days later, a person claiming to be Chavez presented a written payment order for $329,500, and the bank processed the transfer after comparing the signature on the order with Chavez’s signature on file.
- The funds were transferred to a recipient in the Dominican Republic.
- Chavez alleged the payment order was fraudulent and unauthorized and sued to recover the $329,500.
- The bank asserted a statutory safe-harbor defense under Florida’s UCC Article 4A (Fla. Stat. § 670.202(2)) and obtained summary judgment in the district court based on risk shifting to Chavez.

## Issues

1. Whether the parties’ agreed method for accepting payment orders constituted a “security procedure” under Fla. Stat. § 670.201, given the statute’s exclusion of “mere comparison of signatures.”
2. Whether the bank could rely on discretionary, additional verification measures (per the FTA) as part of the “agreed” security procedure to invoke Fla. Stat. § 670.202(2)’s risk-shifting safe harbor.

## Decision

- The Eleventh Circuit reversed the summary judgment for the bank and remanded.
- The court held the parties’ agreed-upon procedure did not satisfy Fla. Stat. § 670.201; therefore, Fla. Stat. § 670.202(2) did not apply.
- Because the arrangement did not meet the statutory definition of a security procedure, the court did not reach whether the procedure was commercially reasonable or whether the bank acted in good faith.
- The court rejected the bank’s argument that contract language allowing the bank to use “any other means” of verification transformed unilateral internal measures into an “agreed” security procedure under Article 4A.

## Legal Principles

- Under Fla. Stat. § 670.201, a “security procedure” must be “established by agreement” between bank and customer to verify authenticity and/or detect transmission or content errors.
- Fla. Stat. § 670.201 expressly excludes procedures that merely compare a signature on a payment order with a specimen signature; such signature comparison cannot, standing alone, satisfy the statutory definition.
- The Fla. Stat. § 670.202(2) safe harbor applies only if there is an agreed, commercially reasonable security procedure within § 670.201 and the bank accepts the order in good faith and in compliance with that procedure and any written agreement or instruction.
- A bank may not invoke § 670.202(2) by relying on unilateral verification practices that were not explicitly agreed to by the customer as part of the security procedure.

## Conclusion

Because the agreed method for processing written payment orders amounted to in-person presentment plus signature comparison—conduct excluded from the statutory definition of a “security procedure”—the bank could not shift the loss to the customer under Fla. Stat. § 670.202(2), and summary judgment for the bank was improper.


Chavez v. Mercantil Commercebank, N.A., 701 F.3d 896 (11th Cir. 2012)