Bank vs. Business: Judge Rejects Motions

No Arbitration to Settle Question of 'Reasonable Security'
Bank vs. Business: Judge Rejects Motions
The judge in the PlainsCapital Bank case struck down the bank's requests to waive a jury trial and to move the case to arbitration.

Judge Amos Mazzant, U.S. Magistrate Judge in the U.S. District Court, Eastern District of Texas, says in his one-page order that he is denying the motion to strike the jury, calling the request "premature." Judge Mazzant also found that the bank's motion to compel arbitration as an alternative to the motion to strike jury demand "is not appropriate."

This case began when PlainsCapital, a $4.4 billion bank headquartered in Dallas, filed suit against Hillary Machinery Inc., following a series of incidents that began last November, when cyber thieves made a series of ACH and wire transactions that totaled $801,495 from Hillary's bank account.

The bank was able to retrieve about $600,000 of the money, but when Hillary subsequently sent a letter requesting that the bank refund the remaining $200,000, PlainsCapital responded by filing a lawsuit in U.S. District Court for the Eastern District of Texas. The lawsuit requests that the court certify that PlainsCapital's security was, in fact reasonable, and that it processed the wire transfers in good faith. Hillary filed a countersuit in February, saying it would not be bullied by the bank, and has since then moved its business accounts to another bank in Texas, citing security as a factor.

Patrick Madden, Hillary Machinery's legal counsel, says the company is very pleased with the judge's ruling. "It is not dispositive of the rest of the case," he says.

Madden says this ruling does not get to the "guts" of the case, which is set to be heard on March 7, 2011 in the U.S. District Court, Eastern District of Texas.

When contacted for comment on the ruling, PlainsCapital's spokesperson John Floeter says the bank did not have a comment on the ruling.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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