So, You Think It’s Safe To Disburse Those “Available” Funds In Your Account?

This one isn’t just for personal injury attorneys, but anyone that drops a check into an attorney trust account, waits for it to clear, and then disburses the funds. Warning: Banks may suspend the ordinary usage of English.

An interesting decision yesterday out of the Second Circuit regarding funds placed in a lawyer’s bank account that Citibank said were “available.” Except when they said “available,” they didn’t really mean it in the sense that you and I mean it. Because after they were “available,” and the lawyers wired the money money overseas, the bank called to say the check was counterfeit. Now the funds weren’t so available anymore.

This case arose out of a scam. The firm of  Fischer & Mandell collected $225, 351 that was allegedly a partial debt owed to another. Then, when their Citibank website said the funds were “available” they disbursed the money by wire transfer. Then they were unavailable, and the bank took the money needed for the wire transfers from another account of theirs.

“Available,” it seems, isn’t the same as “cleared.” Apparently, Citibank has in one of its agreements — the bank agreements drafted by the bank that no one ever reads until something bad happens — that the funds are only “provisionally” cleared. Nice. If you happen to be the bank.

You can almost hear the BigLaw lawyers that likely wrote the agreement chuckling about this over a beer.

Local attorney Stephen Chawkin emailed me his own thoughts on this when the subject came up for discussion later yesterday:

When I was taking my commercial paper course in law school 8,000 years ago, the teacher – who was a good guy and nobody’s fool – said that the underlying principle that trumped all other is simply this: “the bank wins”. Everything else is a corollary, an elaboration, a commentary, or (once in a blue moon) an exception to this.

The decision is here: Fischer&Mandell-v-Citibank

Hat tip: Blawgletter: Sucker Law Firm Loses Claim to Undo Wire Transfers


5 Responses Leave a comment

  • Jon Lewis 2011.2.5 at 10:44 | Quote

    Big Law can get hit too. This firm has worked for major banks.

  • Nancy 2011.2.5 at 22:56 | Quote

    This is similar to a scam that is targeted at non-lawyers. The mark receives an e-mail that purports to come from a company overseas. The company is looking for someone to act as their US agent. They would be responsible for receiving checks, depositing them, then sending a check to the parent firm, after taking a percentage for themselves. Instead of thinking, “why aren’t these people looking for a professional business agent?” some people go ahead, accept the offer, and end up in debt and in trouble.

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