In the case of Talbot v. Sioux National Bank, 1901, the U.S. Supreme Court ruled that a bank could not be held liable for cashing checks with forged endorsements if it had no knowledge or reason to suspect forgery at the time of transaction. The case arose when Mr. Talbot's checks were stolen and fraudulently endorsed by an unknown party who then deposited them into their account at Sioux National Bank in South Dakota. When Mr.Talbot discovered this, he sued the bank for negligence in accepting these fraudulent checks without proper verification of endorsement signatures. The court concluded that while banks have a duty to protect customers from fraud, they are not absolute insurers against all forms of deception and cannot be expected to detect every instance of forgery especially when there is no apparent irregularity or suspicion surrounding transactions made in good faith.

In the dissenting opinion for Talbot v. Sioux National Bank, Justice Harlan argued that the majority's decision was inconsistent with previous rulings and principles of equity. He contended that a bank should not be allowed to profit from its own wrongdoing by charging interest on an overdraft created through its negligence or misconduct. In this case, he believed that Sioux National Bank had acted improperly in paying checks against insufficient funds without notifying Talbot, thereby creating an overdraft situation which it then charged him interest on. According to Justice Harlan, allowing such behavior would incentivize banks to act negligently or even fraudulently in order to create profitable situations for themselves at their customers' expense.