Choice Escrow Fraud Case Settled

Account Takeover Dispute Dates Back to 2010
Choice Escrow Fraud Case Settled

The long legal battle between Choice Escrow and Land Title LLC and Mississippi-based BancorpSouth over a $440,000 account takeover case dating back to 2010 is finally over.

See Also: How to Scale Your Vendor Risk Management Program

The parties in the dispute have reached a settlement in which each agreed to pay their own legal costs. Choice Escrow had considered appealing to the U.S. Supreme Court after an appellate court ruled against its request for a rehearing of the case (see: Fraud Case May Go to Supreme Court).

Choice Escrow co-owner Jim Payne declined to comment on the settlement. BancorpSouth did not immediately respond to a request for comment.

Case Background

In June, a panel of Eighth Circuit Court of Appeals judges ruled that Choice Escrow was responsible for the losses it suffered in the March 2010 account takeover incident. The panel found that the liability for account takeover losses shifted when the escrow company declined to use a two-person authorization security feature offered by the bank (see: Bank Wins Account Takeover Loss Case).

The court also ordered that Choice Escrow pay BancorpSouth's legal fees, dating back to November 2010, when the Missouri escrow firm initially filed its suit (see: Wire Fraud Victim Sues Bank). But the recent settlement in the case removes that financial obligation.

Choice Escrow argued that the court's order to cover the bank's legal fees essentially rendered meaningless Article 4A of the Uniform Commercial Code, which provides fraud protections for commercial customers as well as defines what constitutes reasonable security offered by a bank.

The company requested that the case be reheard en banc, meaning before the entire appellate bench rather than just a panel of judges. But the appellate court on July 17 denied that request.

PATCO Case Cited

When the case was ongoing, Choice Escrow argued that the Eighth Circuit ruling conflicted with the First Circuit Court of Appeals' ruling in the PATCO Construction Inc. vs. People's United Bank case handed down in July 2012 (see: PATCO ACH Fraud Ruling Reversed).

In the PATCO ruling, the First Circuit reversed a lower court's decision in favor of the bank in the account takeover case and determined that the bank's one-size-fits-all approach to security was not "commercially reasonable."

Choice Escrow argued that the Eighth Circuit's decision in its own case did not follow the precedent set by the PATCO case. In the PATCO ruling, the court found that Article 4A considerations regarding the customer's unique circumstances should be reviewed when determining whether a bank is taking reasonable security steps.


About the Author

Jeffrey Roman

Jeffrey Roman

News Writer, ISMG

Roman is the former News Writer for Information Security Media Group. Having worked for multiple publications at The College of New Jersey, including the College's newspaper "The Signal" and alumni magazine, Roman has experience in journalism, copy editing and communications.




Around the Network

Our website uses cookies. Cookies enable us to provide the best experience possible and help us understand how visitors use our website. By browsing bankinfosecurity.eu, you agree to our use of cookies.