AMERICAN STATE BANK, — v. UNION PLANTERS BANK, N.A., —

LOKEN, Chief Judge.

When one payee indorses a check that is payable jointly to two payees, and a bank pays the indorsing payee without the other’s consent, Article 3 of the Arkansas Uniform Commercial Code provides that the bank is liable for conversion to the non-consenting payee. In this situation, “the measure of liability is presumed to be the amount payable on the instrument.” Aek. Code Ann. § 4-3-420(b) (emphasis added). The appeal in this diversity case raises the difficult question whether the bank’s liability under Arkansas law is limited to the actual harm to the co-payee caused by…