SCADIF, S.A., a French buying cooperative, appeals a judgment from the U.S. District Court for the Southern District of Florida favoring First Union National Bank (now Wachovia Bank). SCADIF claims First Union is strictly liable for approximately $3.2 million due to its failure to pay or return a check by the "midnight deadline" mandated by the Uniform Commercial Code (UCC) in Florida. The district court ruled that SCADIF sent the check for collection rather than payment, which exempted First Union from the midnight deadline requirement. The court also denied SCADIF’s motion for sanctions against First Union, finding no misconduct deserving of such measures.
The appeal concerns a complex factual background involving SCADIF's procurement of parapharmaceuticals through a Canadian company, I.Tra. S., which misrepresented the sales location. I.Tra. S. later sought reimbursement through a loan guaranteed by Banque Francaise, in turn guaranteed by SCADIF. Ameriplex Group, Inc. was to fund a loan for I.Tra. S. but failed to do so, leading to a chain of financial obligations. On April 3, 1998, Ameriplex issued a post-dated check for $3,215,183 to SCADIF, which SCADIF retained rather than deposited for over three months. The check, drawn from a First Union account, was a starter check, handwritten and hand-numbered as '0002.' The appeal confirms the district court's judgment and jurisdiction under 28 U.S.C. 1291.
A discrepancy existed between the numeric and written amounts on a Check issued by Ameriplex, which prominently listed only one address for First Union as 'First Union National Bank of Florida, Sarasota, Florida 34236,' while also indicating 'Branch 273.' On April 21, 1998, Ameriplex initiated a stop-payment order on the Check. The account balance from which the Check was drawn averaged only $3.83. On May 5, Ameriplex notified Banque Francaise that a lender had tried to deposit funds into the account but that the Federal Reserve had placed a hold. Despite promises to provide proof of funds by May 13, Ameriplex failed to do so, and communications continued without resolution. On June 12, Ameriplex's president was expected in Paris to settle obligations but did not appear, and proof of funds was never provided.
On July 20, 1998, SCADIF sent the Check to Banque Francaise with a letter instructing its collection. Banque Francaise did not credit SCADIF’s account and instead sent the Check directly to First Union, bypassing its usual correspondent process. The Check was sent with a Collection Letter outlining collection instructions and fees, requiring a response via the SWIFT system. The Check, addressed to First Union's listed address, was delivered to the Center City branch due to a routing slip error, despite Ameriplex's account being at the St. Armands branch. The Check was not initially routed to First Union's International Operations due to human error. After inquiries from Banque Francaise on July 30 and August 1, First Union located the Check and delivered it to International Operations on August 5, promptly notifying Banque Francaise.
Nine banking days after receiving the Check, International Operations informed Banque Francaise that the Check was being returned unpaid due to a stop-payment order and a discrepancy between the written and numerical amounts. On August 6, First Union sent a SWIFT message to Banque Francaise and returned the Check via Federal Express, requesting reimbursement for cable charges, which Banque Francaise paid. SCADIF subsequently filed a lawsuit against First Union, claiming it was strictly liable for the Check's amount, $3,215,183, for failing to pay or return the Check within the midnight deadline. The district court ruled in favor of First Union, determining that the Check was sent for collection rather than payment, thus the midnight deadline rule was inapplicable, and that First Union's actions did not cause SCADIF any loss. SCADIF later filed a motion for sanctions alleging First Union's concealment of documents and misconduct by a witness, which the court denied, stating that any misconduct did not warrant sanctions. SCADIF is appealing both the judgment for First Union and the denial of sanctions.
The key legal issue is whether the district court erred in determining that the Check was sent for collection rather than payment, thereby exempting First Union from the midnight deadline rule. The resolution hinges on whether the parties agreed that the Check was sent for collection, meaning First Union would only pay if sufficient funds were available in Ameriplex's account. The court found that such an agreement existed under Florida law, affirming that the midnight deadline rule does not apply. According to Florida’s UCC, the midnight deadline applies only to payor banks presented with checks for payment, while collecting banks are not subject to this rule. SCADIF contends that the Check indicated First Union as the drawee, thus making it a payor bank. However, the court disagreed, emphasizing that UCC provisions can be altered by mutual agreement of the parties, which, in this case, was established. The definition of 'agreement' under the UCC includes the actual bargain of the parties, which can be inferred from their language, conduct, or trade usage.
Course of dealing, usage of trade, and course of performance are relevant in determining if parties have agreed to modify UCC provisions, as outlined in Fla. Stat. ch. 671.201(3). Testimony indicated that a check sent with a collection letter is recognized as a 'clean check collection' in the banking industry, meaning the receiving bank is a collecting bank and not bound by the midnight deadline rule, which applies only to payor banks per Fla. Stat. ch. 674.302. The district court appropriately considered this trade usage in concluding that the Check was sent for collection. SCADIF's arguments that this evidence could lead to indefinite application of the midnight deadline rule or prevent foreign banks from presenting checks directly are unfounded; such determinations hinge on whether the parties agreed on the check's classification, not its presentation method. The evidence showed the Check was sent with an agreement for collection based on communication between Banque Francaise and First Union.
The district court also evaluated SCADIF's motion for sanctions against First Union, which claimed that First Union concealed documents and conspired with Professor Barkley Clark regarding amendments to his treatise during the trial. Although First Union did not produce some documents on time, the district court deemed these failures a serious violation but found the documents minimally relevant. SCADIF failed to demonstrate an abuse of discretion in this finding. Concerning Professor Clark, while his amendments raised concerns, the district court noted no actual prejudice occurred, as it did not rely on his treatise, and SCADIF had ample opportunity to question him. Consequently, the district court's denial of sanctions was upheld. The judgment for First Union is affirmed.
