Justia Banking Opinion Summaries

Malone owned a cattle feedlot. He cared for cattle, including some owned by GLS, and worked as an agent of GLS to buy cattle. Anderson was president of GLS, which was owned by others. GLS’s cattle were collateral for its loans. In 2008, the feedlot started losing money, jeopardizing Malone’s business and GLS’s loans. Malone and Anderson began kiting checks; one would write a check to the other, and before it was collected, the other would write a check back to the first. Malone was overdrawn by $400,000 in 2009. Malone and Anderson arranged to sell O’Hern 700 cattle. O’Hern paid $400,000, which Malone deposited to his overdrawn bank account. In reality, there were no cattle. Malone gave O’Hern $115,000. Unsatisfied, O’Hern visited the feedlot and removed cattle that did not belong to Malone; obtained liens on property owned by Malone and Anderson; and filed a state court civil suit. Malone pled guilty to bank fraud and money laundering. He urged the district judge to refrain from ordering restitution, arguing that O’Hern had already received full recovery and that the judge exercise her discretion under 18 U.S.C. 3663A(c)(3)(B), because the need to compensate O’Hern was outweighed by the burden of determining complex issues regarding his losses. The judge imposed restitution of $285,000, stating that she had no discretion under the Mandatory Victims Restitution Act, 18 U.S.C. 3663A.The Seventh Circuit affirmed the award as supported by the preponderance of the evidence regarding O’Hern’s loss and the cash returned to him, the only relevant factors. It would have been error for the judge to consider other amounts O’Hern may be adjudged to owe Malone or Anderson in the state court litigation. View "United States v. Malone" on Justia Law

As a mortgage broker, Chandler was able to falsify documents, close fraudulent loans, and judge what a house would appraise for after cosmetic work. In 2005, Causey and Rainey founded a construction company to make minimal changes to houses. They recruited real estate novices to buy houses. Chandler would fill out a mortgage application, falsifying income, down payments and other information to make the buyer a viable loan candidate. She would order appraisals, title work and pre‐approval from the lender. A “trainee” appraiser reported a greatly inflated price. Chandler gave false information to the lenders on HUD‐1 statements. Chandler made up false construction invoices for the remainder of the loan after expenses were paid. Before the participants were arrested, they had executed the mortgage scheme 25 times. Causey, the only co‐conspirator who did not plead guilty, was convicted. The Seventh Circuit affirmed, rejecting arguments that the court improperly admitted prejudicial photographs taken of the houses around the time of trial rather than at the time of the sale and evidence of a fraudulent sale that took place outside of the conspiracy. A defense witness’s testimony was properly excluded as undisclosed expert testimony. The court also upheld admission of testimony by a co-conspirator and a two‐level sentencing enhancement for being an “organizer, leader, manager, or supervisor.”View "United States v. Causey" on Justia Law

Plaintiffs filed suit against Wells Fargo, raising multiple causes of action under state and federal law pertaining to plaintiffs' home loan and deed of trust. At issue was whether, under 28 U.S.C. 1348, a national bank is a citizen of both the state in which its principal place of business is located as designated in the banks' articles of association. The court concluded that, under section 1348, a national bank is a citizen only of the state in which its main office is located. Therefore, the district court had diversity jurisdiction because there was complete diversity between plaintiffs, citizens of California, and Wells Fargo, a citizen of South Dakota. Accordingly, the court reversed the district court's judgment to the contrary and remanded for further proceedings. View "Rouse, et al. v. Wachovia Mortgage" on Justia Law

Plaintiffs filed a complaint against their bank and others, asserting a cause of action under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), among other claims, asserting that Defendants engaged in an unlawful scheme to lend Plaintiffs money in violation of federal margin requirements limiting the extent to which securities can be used as collateral for funds loaned to purchase the securities. The district court (1) dismissed the complaint as to two defendants for failure of service, and (2) dismissed the remainder of the suit for failure to state a claim upon which relief could be granted, finding that the alleged misconduct was not actionable under RICO, which does not encompass private claims that would have been actionable as securities fraud. The First Circuit Court of Appeals affirmed, holding that the district court (1) correctly concluded that Plaintiffs failed to state a claim for relief under RICO; and (2) did not abuse its discretion in dismissing the complaint as to two defendants for failure of service. View "Calderon-Serra v. Banco Santander P.R." on Justia Law

Under the Fair Debt Collection Practices Act, 15 U.S.C. 1692g(a)(3) a collector must notify the individual from whom it seeks payment that it will assume the validity of the debt unless he disputes it “within thirty days after receipt of the notice.” Diversified wrote to Wallace that it would assume the validity of a debt unless he disputed it “within 30 days of receiving this notice.” Based on the letter’s use of “of” rather than “after,” as in the Act, Wallace sued Diversified. The district court granted the debt collector judgment on the pleadings. The Sixth Circuit affirmed. A collector need not parrot the Act to comply with, but only must communicate with enough clarity to convey the required information to a reasonable but unsophisticated consumer. The Act and the letter mean the same thing. View "Wallace v. Diversified Consultants, Inc." on Justia Law

Congress passed the Durbin Amendment as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, which modified the Electric Funds Transfer Act (EFTA), Pub. L. No. 96-630, 92 Stat. 3641. At issue were two key provisions of the EFTA: section 920(a), which restricted the amount of the interchange fee and section 920(b), which prohibited certain exclusivity and routing priority agreements. Merchant groups challenged the Board's issuance of regulations imposing a cap on the per-transaction fees banks received (section 920(a)) and, in an effort to force networks to compete for merchants' business, requiring that at least two networks owned and operated by different companies be able to process transactions on each debit card (section 920(b)). Merchant groups sought lower fees and even more network competition. The court applied traditional tools of statutory interpretation and held that the Board's rules generally rest on reasonable constructions of the statute. The court remanded one minor issue regarding the treatment of so-called transactions-monitoring costs to the Board for further explanation. Accordingly, the court reversed the district court's grant of summary judgment to the merchants and remanded for further proceedings. View "NACS, et al. v. FRS" on Justia Law

Defendants appealed the district court's order granting Bank of America's motion for summary judgment on their counterclaims for rescission and statutory damages under the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. The court concluded that the district court did not err in determining that defendants' right to rescission had expired and that their rescission claim was time-barred under section 1635 because defendants notified Bank of America of their intent to rescind but failed to file a lawsuit within the three-year period. The court concluded, however, that defendants have offered evidence that Bank of America failed to deliver the TILA disclosures and notices. Therefore, there was a genuine issue of material fact regarding the failure to deliver the required documents. Accordingly, the court affirmed the grant of summary judgment to Bank of America on defendants' counterclaim for rescission; vacated the grant of summary judgment to Bank of America on defendants' counterclaim for statutory damages; and remanded for further proceedings. View "Bank of America v. Peterson, et al." on Justia Law

Abair emigrated from Russia in 2005 and married an American citizen. Abair owned an apartment in Moscow. After her divorce, Abair sold the apartment and deposited the proceeds with Citibank Moscow. She signed a contract to buy an Indiana home for cash. Citibank refused to transfer funds because her local account was in her married name and the Moscow account used her birth name. Over two weeks Abair withdrew the daily maximum ($6400) from Citibank ATMs and deposited $6400 to $9800 at her local bank. A deposit on Tuesday, May 31 followed the Memorial Day weekend and was posted with one made on Saturday, pushing her “daily” deposit over the $10,000 trigger for reporting, 31 U.S.C. 5313(a). Abair was charged with structuring financial transactions to evade reporting. IRS agents testified that during her unrecorded interview, Abair, who is not fluent in English, revealed knowledge of the reporting rules. Abair testified that she was aware of the limit when she spoke with the agents, but had learned about it after making the deposits, when she asked why identification was required. She said her deposit amounts were based on how much cash would fit in her purse. Abair was convicted and agreed to forfeit the entire proceeds. The Seventh Circuit remanded, finding that the government lacked a good faith basis for believing that Abair lied on tax and financial aid forms and that the court erred (Rule 608(b)) by allowing the prosecutor to ask accusatory, prejudicial questions about them. On the record, Abair is at most a first offender, according to the court, which expressed “serious doubts” that forfeiture of $67,000 comports with the “principle of proportionality” under the Excessive Fines Clause. View "United States v. Abair" on Justia Law

Target Guest Cards only permit purchases only at Target. Target Visa Cards are all-purpose credit cards that can be used anywhere. Target used different underwriting criteria and agreements for the cards. Between 2000 and 2006, Target sent unsolicited Visas to 10,000,000 current and former Guest Card holders, with agreements and marketing materials to entice activation of the new card. If a customer activated a new Visa, its terms became effective and the Guest Card balance was transferred to the Visa. If the customer did not activate the Visa, Target closed the account. The materials did not suggest that keeping the Guest Card was an option, but customers could opt out. A Guest Card holder could call Target to reject the Visa but ask to keep the Guest Card. If a holder attempted to use the Guest Card after the Visa was mailed, she was informed that the account had been closed but that she could reopen it. The credit limits on the Autosubbed Visas were between $1,000 and $10,000, and Target could change the credit limit. New customers had to open a Target Visa through a standard application, and cards could have credit limits as low as $500. The Autosub materials did not indicate that credit limits were subject to change; customers often had their credit limits reduced after activation. The district court rejected a putative class action under the Truth in Lending Act, 15 U.S.C. 1642, which prohibits mailing unsolicited credit cards and requires credit card mailings to contain certain disclosures in a “tabular format.” The Seventh Circuit affirmed. View "Acosta v. Target Corp." on Justia Law

Sentinel specialized in short-term cash management, promising to invest customers’ cash in safe securities for good returns with high liquidity. Customers did not acquire rights to specific securities, but received a pro rata share of the value of securities in an investment pool (Segment) based on the type of customer and regulations that applied to that customer. Segment 1 was protected by the Commodity Exchange Act; Segment 3 customers by the Investment Advisors Act and SEC regulations. Despite those laws, Sentinel lumped cash together, used it to purchase risky securities, and issued misleading statements. Some securities were collateral for a loan (BONY). In 2007 customers began demanding cash and BONY pressured Sentinel for payment. Sentinel moved $166 million in corporate securities out of a Segment 1 trust to a lienable account as collateral for BONY and sold Segment 1 and 3 securities to pay BONY. Sentinel filed for bankruptcy after returning $264 million to Segment 1 from a lienable account and moving $290 million from the Segment 3 trust to the lienable account. After informing customers that it would not honor redemption requests, Sentinel distributed the full cash value of their accounts to some Segment 1 groups. After filing for bankruptcy Sentinel obtained bankruptcy court permission to have BONY distribute $300 million from Sentinel accounts to favored customers. The trustee obtained district court approval to avoid the transfers, 11 U.S.C. 547; 11 U.S.C. 549. The Seventh Circuit, noting the unique conflict between the rights of two groups of wronged customers, reversed. Sentinel’s pre-petition transfer fell within the securities exception in 11 U.S.C. 546(e); the post-petition transfer was authorized by the bankruptcy court, 11 U.S.C. 549. Neither can be avoided.View "Grede v. FCStone LLC" on Justia Law