Iowa bank seeks Deluxe settlement

Northwestern Financial Review, May 15-May 31, 2002

An out-of-court settlement is being negotiated in a lawsuit Deluxe Corp., filed against Raccoon Valley State Bank in Adel, Iowa. If a settlement is not attained, the case that was filed a year and a half ago will go to court.

Deluxe filed the suit in November 2000 against the $66 million bank for breach of contract after the bank notified it that it was dropping its agreement to encourage customers to order checks exclusively from Deluxe. The company is seeking $85,000 from the bank, said Raccoon Valley State Bank President Daniel Hawkins.

Hawkins explained that the bank was less than one year into a five-year arrangement with Deluxe when bank customers started reporting problems with their checks. Some account numbers had been incorrectly printed. When customers inadvertently used the checks, funds were debited from the accounts of other customers.

"We were unhappy with the way Deluxe handled the situation," said Hawkins. The situation persisted for about three months and the company gave conflicting reports about the source of the trouble, Hawkins said.

Hawkins said the bank's agreement with Deluxe gave the bank the opportunity to terminate in the event of unsatisfactory service. Raccoon Valley State Bank notified Deluxe it was moving its check business. Hawkins said the check printer refused to acknowledge the bank's decision to terminate the agreement, and eventually filed the lawsuit.

Hawkins said he believes the bank could win the lawsuit, but that the expense would be significant. He said the bank already has spent $15,000 related to the case and would expect to spend another $30,000 if the case goes to court.

Deluxe Corp. attorney, Todd Wylie, declined to return telephone calls to participate in this story. A spokesperson said company policy prohibits commenting on pending legal action.