Watson Coatings, Inc. v. American Express Travel Services, Inc. 436 F.3d 1036 (2006)

Christine Mayfield used to work for Watson Coatings, Inc., where part of her role was to act as company treasurer. During her employment, Mayfield wrote 45 to 47 checks from Watson’s account to American Express to cover her personal debts totaling $745,969.39. American Express credited each check to Mayfield’s personal account. After dismissing Mayfield from her job, Watson Coatings discovered the theft and filed suit against American Express for accepting the checks from Mayfield despite their having been clearly labeled as belonging to Watson Coatings, Inc.
The district court granted American Express’s motion for summary judgment, but Watson filed an appeal. Judge Smith’s opinion explained that because a payee can be considered a holder in due course, American Express qualified as such a holder. However, the court also needed to decide whether this status offered American Express any protection. The appeals court found that it did, even though Watson had brought forth several common law claims, because American Express accepted the checks in good faith. Thus, the appeals court affirmed the district court’s grant of summary judgment to American Express.

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