The U.S. Supreme Court case First National Bank of Alken v. J.L. Mott Iron Works in 1921 revolved around a dispute over the payment for goods sold and delivered by the defendant, J.L. Mott Iron Works, to a third party who subsequently went bankrupt before paying for them. The plaintiff, First National Bank of Alken, had provided loans to this third party secured by its accounts receivable which included the unpaid invoice from Mott Iron Works. When it became clear that the debtor would not be able to pay its debts, both parties claimed rights over the funds due from these invoices: The bank argued that their lien on all accounts receivable gave them priority while Mott contended they retained ownership until full payment was received under a reservation of title clause in their sales contract. The court ruled in favor of First National Bank stating that although New York law recognized such reservation clauses as valid between buyer and seller (Mott and their customer), it did not extend protection against creditors like banks with security interests unless explicitly stated so within financing agreements or if notice is given prior to credit being extended.

In the dissenting opinion of the First National Bank of Alken v. J.L. Mott Iron Works case, Justice McReynolds disagreed with the majority's decision to hold a bank liable for accepting and cashing checks that were fraudulently endorsed by an employee of J.L. Mott Iron Works who was not authorized to do so. He argued that it is unreasonable and impractical to expect banks to verify every signature on every check they handle, especially when there are no obvious signs of forgery or misconduct. Furthermore, he contended that businesses should bear more responsibility in preventing internal fraud within their organizations rather than shifting blame onto third parties like banks who have limited means and resources for detecting such fraudulent activities.