Door to Increased Liability for Banks Opened by U.S. Court of Appeals for the First Circuit

[author: Kristen J. Mathews]

The United States Court of Appeals for the First Circuit has opened the door to increased liability for banks when hackers make fraudulent withdrawals. In Patco Construction Co., Inc. v. People's United Bank, the Court held that Ocean Bank, a division of People's United Bank, failed to establish "commercially reasonable" measures to prevent six fraudulent withdrawals from an account held by a local business. This alert provides an analysis of this significant decision and its potential implications for financial institutions.