Justia Banking Opinion Summaries

The Republic of Argentina and interested non-party-appellant, Banco Central de la Republica Argentina (BCRA), appealed from orders of the district court to attach funds held in BCRA's account at the Federal Reserve Bank of New York (FRBNY) on the theory that, pursuant to First National City Bank v. Banco Para El Comercio Exterior de Cuba (Bancec), those funds were attachable interests of the Republic. At issue was whether sovereign immunity for central bank property "held for its own account" pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. 1611(b)(1), depended upon a presumption of the central bank's independence under Bancec, and the proper definition of central bank property "held for its own account" under section 1611(b)(1). The court held that because BCRA's sovereign immunity over the FRBNY funds had not been waived and the FRBNY funds were property of BCRA held for its own account under section 1611(b)(1), the FRBNY funds were immune from attachment and restraint. Therefore, the court held that the district court erred in concluding that it had subject-matter jurisdiction to adjudicate a suit for attachment and restraint for the FRBNY funds. Accordingly, the court vacated and remanded for further proceedings.

These two consolidated appeals arose from actions taken by American National Bank (ANB) to execute on a judgment against Michael Medved, an Arizona resident with business interests in Nebraska. Medved's wife, Laura, unsuccessfully sought to intervene in an action ANB filed against Medved in the district court for Douglas County. The district court denied her motion and issued charging orders against Medved's transferable interest in three Nebraska limited liability companies. Laura also unsuccessfully sought to intervene in an action filed in the district court for Sarpy County. The Sarpy County action resulted in a garnishment of Medved's wages. Medved appealed and Laura cross-appealed, arguing that the Nebraska order violated their rights under Arizona community property law because the earnings and distributions from the limited liability companies were Medved and Laura's community property and were protected by Arizona law. The Supreme Court affirmed, concluding that under either Arizona or Nebraska law, there was no error in the enforcement of the judgment.

Plaintiffs, companies that acquired Floating Rate Accrual Notes (FRANs), commenced numerous separate actions against Argentina seeking damages for the nation's default on the bonds and the claims were subsequently consolidated. At issue, through certified questions, was whether Argentina's obligation to make biannual interest-only payments to a bondholder continued after maturity or acceleration of the indebtedness, and if so, whether the bondholders were entitled to CPLR 5001 prejudgment interest on payments that were not made as a consequence of the nation's default. The court answered the certified questions in the affirmative and held that the FRANs certificate required the issuer to continue to make biannual interest payments post-maturity while the principal remained unpaid; having concluded that the obligation to make biannual interest payments continued after the bonds matured if principal was not promptly repaid, and that nothing in the bond documents indicated that the payments were to stop in the event of acceleration of the debt, it followed that Argentina's duty to make the payments continued after NML Capital accelerated its $32 million of the debt in February 2005; and based on the court's analysis in Spodek v. Park Prop. Dev. Assoc., the bondholders were entitled to prejudgment interest under CPLR 5001 on the unpaid biannual interest payments that were due, but were not paid, after the loads were either accelerated or matured on the due date.

First Union National Bank of Florida (First Union) appealed a judgment in favor of the Lee County Commission (Commission) and Philip Summers. Mr. Summers executed a mortgage on property he owned within the County on which he built a summer home. The home was ultimately subject to a tax sale by the County. The trustee for Mid-State Trust IV sued the Commission and Mr. Summers in 2009 seeking the excess redemption proceeds from the tax sale of the Summers property. The trustee later filed a motion to substitute First Union as the real party in interest. The trial court eventually entered a judgment finding that Mr. Summers was entitled to the excess funds from the tax sale because he was the last "owner" as defined by state law against whom the taxes were assessed. Upon careful consideration of the trial court’s record and the applicable legal authority, the Supreme Court affirmed the lower court’s decision.

Countrywide Home Loans, a mortgage holder on certain real estate, foreclosed its mortgage, took title to the property at a sheriff's sale, and then sold the property to a third party. Before these events, the property owners executed a promissory note in favor of Citizens State Bank. When the property owners failed to pay the note, Citizens Bank obtained a judgment in trial court, which was properly recorded. At the time Countrywide filed its foreclosure action, it did not name Citizens Bank as a party. After Countrywide discovered Citizens Bank's judgment lien on the property, Countrywide filed an action to foreclose any interest Citizen Bank may have had on the property. Citizens Bank filed a separate complaint seeking to foreclose its judgment lien. The trial court directed Citizens Bank to redeem Countrywide's mortgage or be barred from asserting its judgment lien. The court of appeals reversed. The Supreme Court also reversed the judgment of the trial court but on different grounds, holding that because Citizen Bank's lien on the property was properly recorded and indexed and because Countrywide did not explain why the lien was overlooked, Countrywide failed to demonstrate that it was entitled to the remedy of strict foreclosure.

TCF National Bank (TCF) sued to enjoin a portion of the Dodd-Frank Wall Street Reform Act (Act) of 2010, Pub. L. No. 111-203, 124 Stat. 1376, that would limit the rate some financial institutions could charge for processing debit-card transactions. Section 1075 of the Act, the Durbin Amendment, amended the Electronic Fund Transfer Act, 15 U.S.C. 1693, et seq., by adding several provisions regarding debit-card interchange fees. TCF alleged that section 1693o-2(a)(2), (a)(4), and (a)(6) of the Act were facially unconstitutional because these provisions would require the Board of Governors of the Federal Reserve Board (Board) to set an interchange rate below the cost of providing debit-card services. TCF also alleged that these provisions arbitrarily exempted smaller issuers from the Board's rate regulations and thus violated TCF's due process and equal-protection rights under the Fifth Amendment. The court held that the challenged provisions in the Durbin Amendment survived rational basis review where "Congress's decision to link interchange fees to issuing banks' actual costs was reasonably related to proper legislative purposes: (1) to ensure that such fees were reasonable and (2) to prevent retailers and consumers from having to bear a disproportionate amount of costs of the debit card system." The court also held that the Durbin Amendment's distinction between larger and smaller issuers of debit-cards was rationally related to the government's legitimate interests in protecting smaller banks, which did not enjoy the competitive advantage of their larger counterparts and which provided valuable diversity in the financial industry. Therefore, the court held that TCF was not likely to prevail on its equal-protection argument. Accordingly, the court affirmed the district court's denial of TCF's motion for a preliminary injunction.

This case stemmed from a dispute between MBIA Insurance Corporation (MBIA) and certain of its policyholders who hold financial guarantee insurance policies. The principal question presented was whether the 2009 restructuring of MBIA and its related subsidiaries and affiliates authorized by the Superintendent of the New York State Insurance Department precluded these policyholders from asserting claims against MBIA under the Debtor and Creditor Law and the common law. The court held that the Superintendent's approval of such restructuring pursuant to its authority under the Insurance Law did not bar the policyholders from bringing such claims. Accordingly, the court held that the order of the Appellate Division should be modified, without costs, in accordance with the opinion.

1/2 Price Checks Cashed (Half-Price) brought a suit in a Dallas County justice court asserting breach of contract on the basis of the obligation owed by the drawer of a check under Tex. Bus. & Com. 3.414 and requested attorney's fees. At issue was whether a holder of a dishonored check could recover attorney's fees under Texas Civil Practice and Remedies Code section 38.001(8) in an action against a check's drawer under section 3.414. The court held that Half-Price's section 3.414 claim was a suit on a contract to which section 38.001(a) applied and applying section 38.001(8) to the claim did not disrupt Article 3 of the Uniform Commercial Code's statutory scheme. Therefore, the court reversed the judgment and remanded for a determination of attorney's fees.

Cach, L.L.C., alleging that it was an assignee of Bank of America, filed a complaint against Nathaniel Kulas seeking principal and interest on an unpaid credit card balance. The complaint stated that Kulas owed $6042 on the account. Cach then filed a motion for summary judgment, supporting its motion with affidavits and other documents alleging that the balance due on the account was $6042. In response, Kulas filed an objections to the summary judgment motion. The court found Kulas's responses were procedurally defective and granted Cach's motion for summary judgment. On appeal, the Supreme Court held that Cach's support for its assertions that it received an assignment of the account from the bank and that Kulas owed $6042 on the account was inadequate. Because Cach failed to properly establish each element of its claim without dispute as to material fact, the Court vacated the district court's grant of summary judgment and remanded the case.

Bondholders of the failed Washington Mutual Bank ("WAMU") alleged that JPMorgan Chase ("Chase"), through a series of improper acts, pressured the federal government to seize WAMU and then sell to it the bank's most valuable assets, without any accompanying liabilities, for a drastically undervalued price. The bondholders asserted three Texas state law claims in Texas state court, but after the Federal Deposit Insurance Corporation ("FDIC") intervened in the lawsuit, the case was removed to federal district court. At issue was whether the district court properly dismissed the complaint, finding that 12 U.S.C. 1821(d)(13)(D)(ii) jurisdictionally barred appellants from obtaining judicial review of their claims because they had not exhausted their administrative remedies under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). The court held that the suit fell outside the scope of the jurisdictional bar of section 1821(d)(13)(D) because the complaint neither asserted a claim under FIRREA nor constituted an action for payment from, or seeking a determination with respect to, the assets of a depository institution for which the FDIC was receiver. Consequently, the court did not reach alternative arguments and therefore, reversed the decision of the district court and remanded for further proceedings.