RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 11a0240p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

EA MANAGEMENT; WILLIAM ELIAS,

Plaintiffs-Appellants,

v.

JP MORGAN CHASE BANK, N.A.,

Defendant-Appellee.

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No. 09-2464

Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 07-11629—Avern Cohn, District Judge.

Argued: December 3, 2010

Decided and Filed: August 26, 2011 

Before: MARTIN, GIBBONS, and KETHLEDGE, Circuit Judges.

_________________

COUNSEL

ARGUED: Jamie K. Warrow, NEUMAN ANDERSON, P.C., Southfield, Michigan,

for Appellants. Jason P. Klingensmith, DICKINSON WRIGHT PLLC, Detroit,

Michigan, for Appellee. ON BRIEF: Jamie K. Warrow, Leif K. Anderson, Kenneth

F. Neuman, NEUMAN ANDERSON, P.C., Southfield, Michigan, for Appellants. Jason

P. Klingensmith, Toby A. White, DICKINSON WRIGHT PLLC, Detroit, Michigan, for

Appellee. 

_________________

OPINION

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KETHLEDGE, Circuit Judge. William Elias sued JP Morgan Chase Bank after

Chase refused to honor three cashier’s checks that Chase thought Elias had obtained by

fraud. The district court granted summary judgment to Chase as to all of Elias’s claims,

finding among other things that Chase had reason to believe that Elias actually did

commit fraud. Elias argues before us that the question whether he committed fraud is

1
No. 09-2464 EA Management et al. v. JP Morgan Chase Bank NA Page 2

“disputed.” We conclude that, under the Uniform Commercial Code as enacted in

Michigan, Chase’s actions were lawful even absent any finding of fraud. So we affirm.

I.

In 2005, Elias worked with Direct Lending, a Michigan lender and broker in the

subprime-mortgage business. In that capacity, he had signatory authority for Direct

Lending’s bank accounts at Chase. Direct Lending revoked that authority in September

2006, which is when Elias left the company. Elias alleges that he was part owner of

Direct Lending and that the company agreed to buy out his interest for $600,000. Direct

Lending responds that it agreed to pay Elias an unspecified amount in severance, but that

he owned no interest in the company. Either way, in October 2005 Direct Lending

issued Check No. 2253 for $100,000 to EA Management, an assumed name used by

Elias. He deposited the check into his account at LaSalle Bank, but the check bounced

on October 4, 2006. LaSalle debited Elias’s account $100,000 for the dishonored check

and $5 as a returned-check fee, for a total of $100,005. 

On October 9, 2006, Direct Lending issued Check No. 2275 in the amount of

$100,005 to EA Management. The parties dispute whether this check was issued as a

replacement for No. 2253; the check’s amount strongly suggests it was, but Elias insists

it was not—making this the first of several remarkable coincidences under his view of

the facts of this case. For the most part we are constrained to accept his view for

purposes of this appeal. After receiving Check No. 2275, Elias opened a new account

at Chase, deposited the check into it, and immediately withdrew $88,000.

Almost three months later—on December 26, 2006, at 5:53 p.m.—Elias visited

a Chase branch in Canton, Michigan. There he deposited two instruments. The first was

Check No. 2253—the same check that had bounced more than two months before. The

second was a starter check (No. 99993), which Elias had signed and made out to himself

in the amount of $80,000. That check was dated five months earlier, i.e., July 26,

2006—which, again coincidentally, was back when Elias had signing authority for

Direct Lending’s accounts. Elias says he forgot about the check for five months after

he wrote it. Another explanation—the one advanced by Chase—is that Elias made out
No. 09-2464 EA Management et al. v. JP Morgan Chase Bank NA Page 3

the check on or around December 26 and backdated it to the same date in July. That

explanation gains traction from the undisputed fact that the preceding check in the starter

registry—No. 99992—was dated August 11, 2006, which is more than two weeks after

Check No. 99993 was dated. But again we are constrained to accept Elias’s story on this

point.

Prior to these deposits, Elias’s balance with Chase was $12,005. With

them—assuming the checks cleared—his balance would rise to $192,005. Elias sought

to withdraw $190,000 from his account on the spot, but the bank refused.

Later that night, someone shifted funds between several of Direct Lending’s

accounts with Chase. The apparent result of those transfers was that the accounts on

which Check No. 2253 and the starter check were drawn, respectively, had sufficient

funds to cover them. Although the fact of the transfers is not disputed, the identity of

the person who shifted the funds is. Direct Lending says that person was Elias. Elias

himself says nothing about the subject—making this, at best, the Mount Everest of

coincidences in this case. 

In any event, at 9:30 the next morning, Elias went to a different Chase

branch—in Livonia—and asked for three cashier’s checks totaling $191,251.31. This

time he received them, likely because of the account transfers the night before. At

Elias’s request, two of the cashier’s checks were made payable to third parties, Green

Tree and Mortgage Service Center, to pay off mortgages on Elias’s home. Those two

checks totaled $121,251.31. The remaining $70,000 cashier’s check was payable to

Elias himself. 

Hours later, Direct Lending’s treasurer, Tina Shukeireh, discovered that “there

had been several transfers done [between Direct Lending’s accounts], early in the

morning[.]” She testified that she “had not done” those transfers. Shukeireh also

noticed that Elias had deposited Check No. 2253 and the starter check for payment. She

immediately notified Chase that Elias was not authorized to sign or cash either check,

and that the overnight transfers between Direct Lending’s accounts were fraudulent.
No. 09-2464 EA Management et al. v. JP Morgan Chase Bank NA Page 4

Shukeireh also ordered Chase to stop payment on both checks. Chase complied with that

order. 

Chase then unwound its transactions with Elias. First, it debited $180,000 (the

total for both of the checks he had deposited) from Elias’s account and credited that

same amount to Direct Lending’s account. That left Elias’s account with an negative

balance of $179,298.31. Second, Chase dishonored all three cashier’s checks.

Elias’s own bank statement shows that on February 28, 2007, Chase credited

Elias’s account in the amount of $191,251.31. (More on that below.) That same date,

Elias withdrew the remaining funds and closed his account at Chase. 

On March 6, 2007, Elias sued Chase in Wayne County, Michigan, alleging that

Chase had wrongfully dishonored the three cashier’s checks, causing him damages

exceeding $191,251.31. Chase removed the action to federal court and thereafter moved

to dismiss Elias’s claims. The district court granted the motion. This appeal followed.

II.

We review the district court’s dismissal of Elias’s claims de novo. See Max

Arnold & Sons, LLC v. W.L. Hailey & Co., 452 F.3d 494, 503-04 (6th Cir. 2006). For

the most part, Elias argues that the district court decided a genuine issue of material

fact—namely, whether Elias obtained the cashier’s checks by fraud—when it dismissed

his claims. But we can affirm on any basis supported by the record. See Angel v.

Kentucky, 314 F.3d 262, 264 (6th Cir. 2002). We choose to determine first whether

there is a basis here for affirmance independent of fraud.

A. 

Elias’s complaint included a claim under the Uniform Commercial Code (UCC

or Code) as enacted in Michigan. Elias has cited the wrong sections of the Code

throughout this litigation, but his argument essentially is that Chase lacked authority to

dishonor the three cashier’s checks that it issued at Elias’s request on December 27,

2006. So we proceed to analyze whether Chase’s actions were lawful under the Code.
No. 09-2464 EA Management et al. v. JP Morgan Chase Bank NA Page 5

First, Chase was entirely within its rights—and indeed its obligations—when it

complied with Direct Lending’s order to stop payment on Check No. 2253 and the

$80,000 starter check (the “deposited checks”). Chase was both the payor bank and the

depository bank for these checks. See M.C.L. § 440.4105(b), (c). Direct Lending issued

the stop-payment order to Chase (in its capacity as payor bank) on the morning after

Elias had deposited the checks with Chase. Elias does not allege in his complaint that

any of the events recited in M.C.L. § 440.4303(1) had occurred by that time, which for

our purposes means that the stop-payment order was timely. Chase was therefore correct

to comply with the order, and indeed could have been liable to Direct Lending if it had

not. See id. § 440.4403(1), (3).

That Chase stopped payment on the deposited checks in its capacity as the payor

bank means that it did not get paid for those checks in its capacity as the depository

bank. And that in turn knocks the bottom out of Elias’s claim that Chase was required

to honor the cashier’s checks. A cashier’s check is a negotiable instrument. See id.

§ 440.3104(3), (6). Article 3 of the Code applies to negotiable instruments. Id.

§ 440.3102(1). Section 440.3305—which is part of Article 3 as enacted in

Michigan—provides that “the right to enforce the obligation of a party to pay an

instrument is subject to[,]” among other things, “[a] defense of the obligor stated in

another section of this article or a defense of the obligor that would be available if the

person entitled to enforce the instrument were enforcing a right to payment under a

simple contract.” Id. § 440.3305(1)(b). (Some holders in due course are not subject to

those defenses, see id. § 440.3305(2); but Elias does even not allege that he is a holder

in due course with respect to the cashier’s checks.) 

Lack of consideration is a defense available to “[t]he drawer or maker of an

instrument” under M.C.L. § 440.3303(2). Chase was the drawer of the cashier’s checks,

see M.C.L. § 440.3104(7); and § 440.3303(2) is part of the same “article” as

§ 440.3305(1)(b), which means the defense is available to Chase in this action, so long

as Chase can prove it. Lack of consideration is also a defense to a contract claim under

Michigan law. See M.C.R. 2.111(F)(3)(a); Sherman v. DeMaria Bldg. Co., 513 N.W.2d
No. 09-2464 EA Management et al. v. JP Morgan Chase Bank NA Page 6

187, 191 (Mich. Ct. App. 1994). And that defense would be available to Chase if Elias

were seeking to enforce a simple contract here. When Elias deposited Check No. 2252

and the $80,000 starter check, Chase credited his account $180,000. Elias used that

credit to purchase the cashier’s checks on December 27, 2007. But Chase reversed the

$180,000 credit after it stopped payment on the deposited checks. Elias does not argue

that Chase’s reversal of that credit was itself unlawful under the Code. And the fact of

that reversal means that—as a matter of law—Chase was not paid for the $191,251.31

of cashier’s checks that it issued at Elias’s request. That in turn means that Chase’s

obligation to pay the cashier’s checks was not supported by consideration, which finally

means that Elias cannot enforce that obligation here. See M.C.L. § 440.3305(1)(b).

Two other points bear mention. The first is that Elias is not entitled to enforce

two of the cashier’s checks in the first place. A bank is liable for a cashier’s check only

to “a person entitled to enforce” the instrument. M.C.L. §§ 440.3412, .3411(2). A

person is entitled to enforce an instrument if he is the holder of the instrument, a

nonholder in possession of the instrument with the rights of a holder, or a person

otherwise entitled to enforce the instrument under UCC sections 3-309 or 3-418. M.C.L.

§ 440.3301. Elias is none of these things with respect to the cashier’s checks made out

to Green Tree and Mortgage Service Center, respectively. That is another ground for

affirming the district court’s judgment with respect to those checks.

The second point is that Elias has not suffered any damages as a result of Chase’s

refusal to pay the cashier’s checks. As noted above, on February 28, 2007—two months

after it refused to pay the cashier’s checks—Chase credited $191,251.31 to Elias’s

account, which is the same amount, to the penny, of the sum of the cashier’s checks.

That credit restored Elias to the same position he was in when he walked through the

doors of Chase’s Livonia branch office on December 27. And that means Elias has no

damages as a result of Chase’s refusal to pay the cashier’s checks, at least as measured

by his December 27 transactions with Chase as a whole. What Elias seeks in this

litigation, in short, is a windfall in the amount of $191,251.31, for which he has not

provided Chase a penny of consideration. His claims are frivolous.
No. 09-2464 EA Management et al. v. JP Morgan Chase Bank NA Page 7

B. 

Elias’s lack of any damages also scythes down his common law claims. And we

offer some additional reasons why those claims are meritless. Regarding his breach of

contract claim, Elias contends that Chase breached his account agreement with him “by

allowing Direct Lending to stop payment on the Cashier’s Checks and by failing to hold

the disputed funds in [Elias’s] account.” Elias Br. at 42. But Direct Lending did not

stop payment on the cashier’s checks; rather, it stopped payment on the deposited

checks, on which Direct Lending was the putative drawer (putative, because Direct

Lending says it was only a drawer by means of Elias’s fraud). Suffice it to say that

nothing in Elias’s account agreement forbade Chase from complying with a timely stoppayment order from another customer with respect to checks drawn on that customer’s

account. Nor is there anything in Elias’s agreement that obligated Chase to pay him

$180,000 on the spot when he deposited Check No. 2253 and the starter

check—particularly under the circumstances present here. 

Finally, Elias argues that he has a viable negligence claim because Chase

breached its “duty to conduct itself reasonably in banking transactions.” Elias Br. at 43.

That claim is very likely “displaced by the UCC[,]” since it “relate[s] to the Bank’s

handling of the [cashier’s] checks.” Donovan v. Bank of Am., 574 F. Supp. 2d 192, 200

(D. Me. 2008). And relatedly—for the reasons explained above—there is not a shred

of evidence that Chase acted unreasonably with respect to its actions here. All of the

relevant evidence, instead, is to the contrary.

The district court’s judgment is affirmed.