In the case of Bardes v. Hawarden Bank, 1899, the United States Supreme Court was tasked with determining whether a bank could be held liable for accepting and cashing checks that were fraudulently endorsed. The plaintiff, Bardes, had issued several checks to third parties who then fraudulently endorsed them over to an individual named Smith. Smith subsequently deposited these checks into his account at Hawarden Bank which accepted and cashed them without verifying their authenticity or legitimacy. The court ruled in favor of the defendant (Hawarden Bank), stating that it is not within a bank's duty or responsibility to verify endorsements on every check they receive as this would place an unreasonable burden upon banking institutions. They further stated that if such a requirement existed it would greatly hinder commerce by slowing down transactions significantly. Therefore, according to this ruling banks are not responsible for fraudulent endorsements unless there is evidence suggesting they acted negligently or in bad faith when accepting said endorsement.

The dissenting opinion in the Bardes v. Hawarden Bank case argued that the bank, as a national institution, should be held to federal law rather than state law. The justice disagreed with the majority's decision to allow Iowa state laws regarding garnishment proceedings to supersede federal banking regulations. He contended that allowing states' rights to prevail over national banking legislation could lead to inconsistencies and confusion across different jurisdictions. Furthermore, he believed this ruling undermined Congress's intent when establishing national banks - creating uniformity and stability nationwide in financial matters by subjecting them primarily under federal control.