## Facts

- Choice Escrow and Land Title, LLC, a Missouri escrow company, maintained a trust account at BancorpSouth Bank and used the bank’s online platform to initiate wire transfers.
- BancorpSouth’s online wire-transfer security measures included user IDs and passwords, device authentication, transaction dollar limits, and an optional “dual-control” feature requiring approval by two distinct users.
- Choice declined the optional dual-control feature after being advised of its availability and warned that declining it increased fraud risk.
- On March 17, 2010, unknown fraudsters accessed Choice’s account using Choice’s credentials and initiated a $440,000 wire transfer to an account in the Republic of Cyprus for the benefit of “Brolaw Services, Ltd.”
- BancorpSouth executed the wire and covered a shortfall in the trust account, then debited Choice’s account.
- Choice asserted it did not authorize or ratify the wire and had no relationship with the named beneficiary.
- Choice sued under UCC Article 4A and asserted tort-based claims; BancorpSouth counterclaimed for contractual attorney’s fees.
- The district court granted summary judgment for BancorpSouth on the Article 4A claim and rejected the attorney’s-fees counterclaim.

## Issues

1. Whether the bank and customer agreed to a “commercially reasonable” security procedure under UCC § 4A-202 such that the fraudulent payment order could be treated as effective against the customer.
2. Whether the bank accepted and executed the payment order in good faith and in compliance with the agreed security procedure and written customer instructions as required by UCC §§ 4A-202 and 4A-203.
3. Whether contractual fee-shifting provisions allowing the bank to recover attorney’s fees were enforceable and not displaced by UCC Article 4A.

## Decision

- The Eighth Circuit affirmed summary judgment for BancorpSouth on the Article 4A claim, holding that the loss from the unauthorized wire transfer was allocable to Choice.
- The court held the bank’s security procedures were commercially reasonable, including in light of the bank’s offer of dual control and Choice’s informed decision to decline it.
- The court held the bank acted in good faith and complied with the agreed security procedure when it processed the payment order.
- The court reversed dismissal of BancorpSouth’s attorney’s-fees counterclaim and remanded for further proceedings on entitlement and amount.

## Legal Principles

- Under UCC Article 4A, an unauthorized payment order may be effective against a customer if the parties agreed to a commercially reasonable security procedure and the bank proved it accepted the order in good faith and in compliance with that procedure and applicable written agreements.
- “Commercially reasonable” does not require the best available or fraud-proof security; it is assessed in light of the customer’s circumstances, the bank’s size and sophistication, and general banking practice.
- A security procedure may remain commercially reasonable where the bank offers a more protective alternative and the customer, after notice, chooses a less protective procedure in writing; the customer may bear resulting fraud risk.
- Article 4A’s allocation of loss is not altered merely because the bank executed a wire despite insufficient account funds, absent proof that doing so violated the agreed procedure or good-faith standards.
- Contractual attorney’s-fees provisions in bank–customer agreements may be enforceable in an Article 4A dispute absent a specific statutory prohibition.

## Conclusion

The court allocated the loss from an unauthorized online wire transfer to the customer because the bank offered and implemented commercially reasonable security procedures and executed the order in good faith, and it permitted the bank to pursue contractual attorney’s fees on remand.


Choice Escrow & Land Title, LLC v. BancorpSouth Bank, 754 F.3d 611 (8th Cir. 2014)