In 2011 and 2012, HH Computer Systems, Inc. (HH), employed Jennifer Kim as an accounting manager. During this time, Kim took about 300 checks payable to HH to one of three check-cashing companies: Oksun USA, MH Brothers, and DDK Express. Kim endorsed the stolen checks, despite not having the authority to do so, and then cashed them. The three check-cashing companies subsequently deposited the checks in their own bank accounts at Hanmi Bank, US Metro Bank, Wilshire State Bank, and Pacific City Bank. After finding that $650,000 was missing, HH launched an investigation which led HH to terminate Kim’s employment and to sue the check-cashing companies and their banks for being negligent. The three banks contended that they were not liable because they were not the first banks to process the checks and pointed their fingers at the three check-cashing companies.
What is the special role of the “first bank”? Why is the role of the “first bank” important when it comes to negotiable instruments? Who did the court decide was liable for accepting the falsely endorsed checks?

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