Chuhak & Tecson, P.C. successfully defended a national bank client in an appeal/cross-appeal brought before the U.S. Court of Appeals for the Seventh Circuit. After briefing and oral argument, with Chief Judge Frank H. Easterbrook writing the decision, the 7th Circuit Court of Appeals ruled in favor of the bank.

The case in question involved a corporation that did not pay subcontractors and suppliers for work and materials on certain projects. The corporation’s insurance company paid out more than $2 million to satisfy the corporation’s obligations and obtained a judgment for that amount against the CEO, the corporation, and an employee of the company.  During post-judgment citation proceedings, the insurance company discovered that the employee had been making payments toward his personal mortgage loan debt with the bank using checks drawn on the funds of his employer, the corporation, allegedly without the corporation or CEO’s authorization. Thereafter, the insurance company initiated third-party citation proceedings against the bank in an effort to recover the monies paid. The insurance company alleged that the bank failed to satisfy its duty of inquiry to ensure that the corporation intended its employee as depositor to receive the corporation’s money. 

Attorneys from Chuhak & Tecson successfully argued that the insurance company had failed to meet its evidentiary burden because the insurance company failed to prove that the payments to the bank were not authorized. The 7th Circuit agreed and reversed the District Court’s order against the bank.  In addition, Chuhak was able to successfully reverse an order of the District Court requiring the bank to pay the insurance company’s attorney’s fees. Big win for the bank!