Patco Constr. Co., Inc. v. People's United Bank, No. 11-2031 (1st Cir. 2012)Annotate this Case
Over seven days in 2009, Ocean Bank authorized six apparently fraudulent withdrawals, totaling $588,851.26, from an account held by Patco, after the perpetrators correctly supplied Patco's customized answers to security questions. Although the bank's security system flagged each transaction as unusually "high-risk" because they were inconsistent with the timing, value, and geographic location of Patco's regular orders, the system did not notify commercial customers of such information and allowed the payments to go through. Ocean Bank was able to block or recover $243,406.83. Patco sued, alleging that the bank should bear the loss because its security system was not commercially reasonable under Article 4A of the Uniform Commercial Code (Me. Rev. Stat. tit. 11, 4-1101) and that Patco had not consented to the procedures. The district court held that the bank's security system was commercially reasonable and entered judgment in favor of the bank. The First Circuit reversed the grant of summary judgment on commercial reasonableness and remanded for determination of what, if any, obligations or responsibilities Article 4A imposes on Patco.