## Facts

- Two federally insured banks suffered losses from a November 1993 check-kiting scheme involving large reciprocal deposits of checks drawn on each other.
- On November 18, 1993, checks totaling $3,997,406.75 drawn on Standard accounts were presented to First National (then NBD), and checks totaling $4,025,000.00 drawn on First National accounts were deposited at Standard.
- On November 19, 1993 (Friday), each bank presented the checks it held to the other through normal collection channels, and their accounts were provisionally debited/credited through a collecting bank.
- On November 22, 1993 (Monday), First National decided not to pay the items drawn on it and returned those checks (totaling $4,025,000.00) to Standard.
- On November 23, 1993 (Tuesday), after receiving notice of First National’s dishonor, Standard attempted to return checks drawn on Standard (totaling $3,785,441.35) by having officers personally deliver the items to First National’s processing center.
- First National received the returned items at 3:58 p.m. on November 23 but refused to credit Standard, contending the return was late under the “midnight deadline” concept incorporated into the federal timing framework.
- First National filed a declaratory action asserting Standard violated the Expedited Funds Availability Act and Regulation CC by failing to return the checks within the required time.

## Issues

1. Whether Standard’s personal delivery return on the second business day after presentment satisfied Regulation CC’s timeliness rules, including any extension when a “highly expeditious” return method is used.
2. Whether the district court erred in setting prejudgment interest at the three-month Treasury bill rate rather than a prime-rate measure.

## Decision

- The court affirmed summary judgment for Standard on timeliness, holding the return complied with Regulation CC.
- The court vacated the prejudgment interest award and remanded for recalculation.
- The court directed that the prime rate should be used as the benchmark for prejudgment interest absent a reasoned justification to select a different rate.

## Legal Principles

- Regulation CC permits an extension beyond the UCC-derived “midnight deadline” when the returning bank uses a “highly expeditious” method of return that satisfies the regulation’s timing requirements.
- Personal delivery can qualify as a highly expeditious return method under Regulation CC, making a return timely if completed within the regulation’s extended deadline.
- In federal cases seeking compensation for the loss of use of money, prejudgment interest should generally be pegged to a prime-rate measure to reflect commercial borrowing costs; selecting a lower, risk-free Treasury rate requires an articulated justification.
- The selection of a prejudgment interest rate is reviewed for abuse of discretion, and a court must provide a reasoned basis tied to compensatory objectives.

## Conclusion

The Seventh Circuit held that Standard’s personal delivery return fell within Regulation CC’s extended deadline for highly expeditious returns, but it vacated the Treasury-bill-rate prejudgment interest award and required a prime-rate benchmark absent good reason to depart.


First National Bank of Chi. v. Standard Bank & Tr., 172 F.3d 472 (7th Cir. 1999)