## Facts

- Shawmut Worcester County Bank (Shawmut) initiated a $10,000 Fedwire funds transfer to First American Bank & Trust (First American) for the benefit of Fernando Degan.
- Shawmut’s payment order directed First American to credit a specified account that was jointly held by Degan and Joseph Merle.
- The $10,000 transfer was a duplicate of an earlier, valid transfer to the same account and resulted from Shawmut’s unilateral error.
- Shawmut discovered the mistake 106 days later, reimbursed its customer whose account had been mistakenly debited, and asked First American to “reverse” the transfer.
- First American contacted Merle to seek authorization to reverse the credit; Merle refused, and First American declined to reverse the transfer.
- Shawmut sued First American and its employee Michael Woods, asserting conversion, agency-based liability, negligence, and statutory claims (including EFTA, Massachusetts UCC provisions, and Mass. Gen. Laws ch. 93A).
- The case was presented on cross-motions for summary judgment.

## Issues

1. Whether First American or Woods committed conversion by crediting the account per Shawmut’s payment order and later refusing to reverse the transfer.
2. Whether an agency relationship between the banks required First American to reverse the transfer upon Shawmut’s request more than three months later.
3. Whether First American was negligent in executing the Fedwire order or handling the belated reversal request.
4. Whether Shawmut had a viable claim against First American under the Electronic Fund Transfer Act, Massachusetts UCC provisions, or Mass. Gen. Laws ch. 93A based on an interbank Fedwire mistake.

## Decision

- The court granted summary judgment for First American and Woods on all counts.
- The court held that First American acted properly by executing Shawmut’s payment order and crediting the identified account.
- The court rejected conversion liability because First American did not exercise wrongful dominion over Shawmut’s property when it complied with the payment order.
- The court rejected the asserted broad agency theory; any relationship arising from the Fedwire transaction was limited to executing the specific order, not post-settlement reversals months later.
- The court found no negligence because First American breached no duty to Shawmut by declining an unsupported reversal request after consulting its customer.
- The court dismissed the statutory claims, concluding they did not shift loss to the receiving bank under these facts.

## Legal Principles

- In an interbank Fedwire transfer, a receiving bank that accepts and executes a payment order according to its terms is generally not liable to the originating bank for the originating bank’s mistake.
- Conversion requires wrongful or unauthorized dominion; compliance with the originator’s instructions in crediting the designated account is not conversion.
- Any agency concept in a wholesale funds-transfer setting is confined to executing the specific payment order, absent evidence of a broader agreement creating continuing duties.
- A receiving bank does not act negligently by refusing to reverse a completed funds transfer where it complied with the original order and has no independent duty to unwind the transaction.
- Consumer-focused electronic transfer statutes and state unfair-practice statutes do not supply a loss-allocation remedy to an originating bank against a receiving bank for a purely interbank transfer error where the receiving bank’s conduct is not unfair or deceptive.

## Conclusion

The court held that Shawmut’s duplicate-transfer error did not create tort, agency, negligence, or statutory liability for the receiving bank or its employee where the receiving bank executed the Fedwire payment order as instructed and had no obligation to reverse the transaction months later.


Shawmut Worcester County Bank v. First Am. Bank & Tr., 731 F. Supp. 57 (D. Mass. 1990)