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Watson Coatings, Inc., v. American Express Travel Related Services, Inc.

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The 8th Circuit Court of Appeals filed its order on January 31, 2006, affirming a district court's ruling in favor of American Express, in a case brought under Missouri's Uniform Fiduciaries Law, the Uniform Commercial Code, and certain common law concepts. The ruling helps clarify when a payee may and may not be held liable for a fiduciary's breach of duty in states, like Missouri, that have enacted a version of the Uniform Fiduciaries Act. It also states that the payee of a check may qualify as a holder in due course under the UCC and therefore be insulated from common law claims, under limited circumstances.

In this case, Watson's trusted employee issued $746 thousand in company checks to American Express over a four-year period, all in payment of amounts owed on her husband's American Express account. Watson alleged that American Express was put on notice of the employee's breach of duty when it accepted corporate checks in payment of the husband's debt.

The court held that Missouri's Uniform Fiduciary's Law limits the common law concept of notice to cases in which there is "actual" notice of the breach or knowledge of sufficient facts to constitute "bad faith." The court then found that Amex had neither actual notice nor knowledge of sufficient facts to be acting in bad faith.

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