Justia Banking Opinion Summaries

Articles Posted in Business Law
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In 2004, Foster, a real estate investor, purchased Florida property, with a $1.1 million loan secured by a PNC mortgage. Foster and PNC had multiple disputes. PNC acquired force‐placed insurance. While the parties disputed that issue, Foster only made payments in the amount originally specified in a 2010 modification although the payments had increased as a result of the force‐placed insurance policies. In 2012, PNC began returning Foster’s payments as incomplete payments. As of May 2019, PNC claimed Foster owed more than $1.75 million. PNC reported delinquent payments to credit agencies; Foster’s credit score dropped.Foster’s lawsuit included a claim under the Fair Credit Reporting Act (FCRA) for PNC’s failure to investigate the two credit reporting disputes; a breach of contract claim regarding the force‐placed insurance policies; a breach of the implied duty of good faith and fair dealing claim for the insurance; and a breach of fiduciary duty claim for the alleged mishandling of the escrow account. PNC counterclaimed to seek judgment on the loan. After determining that Foster’s affidavit was conclusory and speculative as to proof of insurance and his loan payments and that his evidence of damages was too general and conclusory, the district court granted PNC judgment. The Seventh Circuit affirmed but found that the FCRA claim should be dismissed for lack of standing. Foster did not establish an injury-in-fact fairly traceable to PNC’s conduct. View "Foster v. PNC Bank, National Association" on Justia Law

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Young claims her employer told her that it had received a wage garnishment order in 2019. Young then discovered the existence of a 2010 default judgment against her, in favor of Midland, for a purported debt of $8,529.93 plus interest. Young sued to set aside the 2010 default judgment, based on extrinsic mistake or fraud. She sought damages, penalties, and reasonable attorney fees and costs under the Rosenthal Fair Debt Collection Practices Act (Civ. Code, 1788), arguing that Midland was a debt collector of consumer debt and had engaged in false and deceptive conduct in attempting to collect that debt, citing her contention that she was never served with process. Midland denied Young’s allegations, asserted affirmative defenses, and filed an anti-SLAPP motion (section 425.16) to strike Young’s claims.The trial court granted the anti-SLAPP motions, finding Young did not show she would probably prevail on the merits of her claims and awarded Midland attorney fees and costs. The court of appeal vacated. Young showed she would probably prevail on the merits of her Rosenthal Act claim, producing prima facie evidence that Midland falsely represented substituted service on her was accomplished. She was not required to show that Midland knowingly made this false representation. Young’s Rosenthal Act cause of action was not time-barred. View "Young v. Midland Funding, LLC" on Justia Law

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Lightning, a Delaware start-up company that owns intellectual property protecting designs for a pallet used for transporting cold foods, sought $26 million in outside funding to retire debt, cover operational expenses, and purchase equipment to begin production. GrowMI, an entity created by the Michigan Economic Development Corporation, agreed to loan Lightning $5 million and used its relationship with Flagstar Bank to secure an additional $7 million loan. GrowMI and Flagstar conditioned their loans on Lightning’s securing the rest of the $26 million by selling equity and securing lines of credit from Lightning shareholders. Lightning’s creditor LT sent GrowMI a letter indicating that Lightning owed LT $3.3 million, secured by an interest in Lightning’s intellectual properties. GrowMI allowed Lightning to use a portion of GrowMI’s loan to repay LT, ensuring GrowMI’s first secured position on Lightning’s intellectual properties.GrowMI subsequently became aware of wrongdoing at Lightning, which defaulted on its debt to GrowMI. GrowMI sued LT and its principals, Lightning shareholders, Lightning employees, and a consulting company, alleging violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962, by a pattern of racketeering activity that included bank fraud, transactions involving money derived from that bank fraud, trade secrets misappropriation, and wire fraud. The Sixth Circuit affirmed the dismissal of the suit. GrowMI’s claims rest on its status as Lightning’s creditor, making its injury derivative of the harm incurred by Lightning. GrowMI does not plausibly allege that it was directly injured by reason of the alleged racketeering activities. View "Grow Michigan, LLC v. LT Lender, LLC" on Justia Law

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Borrower took out a $5.6 million dollar bridge loan, with 8.5% interest per annum, secured by a deed of trust on real property. They defaulted on a monthly payment of $39,667, triggering late fee provisions: a one-time 10% fee assessed against the overdue payment ($3,967) and a default interest charge of 9.99% per annum assessed against the total unpaid principal balance. Borrower filed a demand for arbitration, alleging the loan was in violation of Business & Professions Code 10240 and the late fee was an unlawful penalty in violation of section 1671. The arbitrator rejected both claims and denied the demand for arbitration. Borrower petitioned to vacate the decision, arguing that the arbitrator exceeded their authority by denying claims in violation of “nonwaivable statutory rights and/or contravention of explicit legislative expressions of public policy.”The court of appeal reversed the denial of that petition. The trial court erroneously failed to vacate an award that constitutes an unlawful penalty in contravention of public policy set forth in section 1671. Liquidated damages in the form of a penalty assessed during the lifetime of a partially matured note against the entire outstanding loan amount are unlawful penalties. There is no precedent upholding a liquidated damages provision where a borrower missed a single installment and then was penalized pursuant to such a provision. View "Honchariw v. FJM Private Mortgage Fund, LLC" on Justia Law

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NJBA, a non-profit trade association representing 88 New Jersey banks, sought to make independent expenditures and contributions to political parties and campaigns for state and local offices. NJBA has not made these payments because of N.J. Stats. 19:34-45, which provides that, “[n]o corporation carrying on the business of a bank . . . shall pay or contribute money or thing of value in order to aid or promote the nomination or election of any person, or in order to aid or promote the interests, success or defeat of any political party.” NJBA brought a facial challenge on its own behalf and on behalf of third-party banks.The district court held that section 19:34-45’s prohibition on independent expenditures violates the First Amendment but that the ban on political contributions by certain corporations does not violate the First Amendment and passes intermediate scrutiny. The Third Circuit reversed, declining to address the First Amendment issues. The statute does not apply to trade associations of banks. NJBA is not “carrying on the business of a bank.” With respect to the facial challenge, NJBA does not satisfy the narrow exception to the general rule against third-party standing. View "New Jersey Bankers Association v. Attorney General New Jersey" on Justia Law

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Plaintiff Citibank, N.A, the Administrative Agent for the lenders on a $1.8 billion seven-year syndicated loan to Revlon Inc., appeals from the judgment of the district court in favor of Defendants, the Loan Managers for certain lenders, who received and refused to return  Citibank’s accidental, unintended early repayment of the loan. The district court, after a bench trial, relying on Banque Worms v. BankAmerica International, 570 N.E.2d 189 (N.Y. 1991), ruled that the rule of discharge for value provided a defense against Citibank’s suit for restitution.   The Second Circuit vacated the district court’s ruling. The court held because the Defendants had notice of the mistake and because the lenders were not entitled to repayment at the time, the rule of Banque Worms does not protect the Defendants. The court explained that the Court of Appeals’ specified requirement of entitlement to the money, combined with the cases it cited as precedents for the rule, and its continued espousal of New York’s general rule that mistaken payments should be returned, lead the court to conclude that, in New York, a creditor may not invoke the discharge-for-value rule unless the debt at issue is presently payable. Here, the debt on which Citibank mistakenly made a payment was not due for another three years. As a result, Defendants may not invoke the discharge-for-value rule as a shield against Citibank’s claims for restitution. View "In re: Citibank August 11, 2020" on Justia Law

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A federal district court decision in a declaratory judgment action that an insurance policy issued by Certain Underwriters at Lloyd’s, London (“Underwriters”) covered certain negligent actions undertaken by the former directors and officers of Omni National Bank (“Omni”) during the 2008 banking crisis. The Federal Deposit Insurance Corporation (“FDIC”), acting in Omni’s name as Omni’s receiver, demanded payment and prejudgment interest from Underwriters under the insurance policy for a stipulated judgment previously entered against three of Omni’s former directors and officers for $10 million, the limit of Underwriters’ insurance policy. Underwriters paid the $10 million once the Supreme Court denied certiorari for its appeal from the declaratory judgment but refused to pay prejudgment interest, causing the FDIC to institute this action.   On appeal, the FDIC argues that demands for prejudgment interest are timely under Georgia law so long as they are made before the entry of a coercive final judgment, which declaratory judgments are not. The Eleventh Circuit agreed, concluding that the district court erred by granting summary judgment for Underwriters. Accordingly, the court remanded for the determination of when prejudgment interest began to run.   The court explained that Underwriters’ argument that it lacked a full and fair opportunity to litigate the issue of prejudgment interest, as Section 9–11–54(c)(1) requires, is false on its face. This entire lawsuit has been dedicated to extensively litigating prejudgment interest. Further, the court held that FDIC’s claim is not barred. View "Federal Deposit Insurance Corporation v. Certain Underwriters at Lloyd's of London" on Justia Law

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These consolidated cases, on appeal from a judgment of the district court, present competing claims to a blocked electronic funds transfer. The parties are the United States, which blocked the transaction because terrorists initiated it. On the other side are victims of Iran-sponsored terrorism who have obtained multimillion-dollar judgments against the Iranian government.   After learning of the government’s forfeiture action, attorneys for two groups of victims of Iranian terrorism and their relatives, holding judgments against Iran, filed separate writs of attachment. Plaintiffs sought to attach the funds at Wells Fargo pursuant to two federal statutes. The first, 28 U.S.C. Section 1610(g) of the Foreign Sovereign Immunities Act (“FSIA”). The second is Section 201(a) of the Terrorism Risk Insurance Act of 2002 (“TRIA”).   The district court ruled that Iran lacked any property interest in the blocked funds held by Wells Fargo. The court, therefore, quashed Plaintiffs’ writs of attachment. The DC Circuit court reversed and remanded. The court explained that tracing resolves this case in Plaintiffs’ favor. The government admits that the $9.98 million blocked funds at Wells Fargo “are traceable to Taif” and thus to Iran. The premise of the government’s forfeiture action is that the funds are traceable to Iran. The district court, therefore, erred in concluding that Plaintiffs had failed to show that the blocked funds were, under Section 201(a) of the TRIA, the blocked assets of [a] terrorist party. View "Estate of Jeremy I. Levin v. Wells Fargo Bank, N.A." on Justia Law

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Triller Inc., a social media company was being sold to a group of owners, including Carnegie Technologies, Inc. Prior to the sale, Triller executed a promissory note in favor of Carnegie and then immediately assigned the note to a group of “legacy” owners—including Carnegie—as part of the deal’s closing. After the note was defaulted, Carnegie sued Triller to collect the amounts due. Triller claimed that it had no obligations under the note because it had been assigned, resulting in novation. The district court rejected Triller's novation defense and Triller appealed.The Fifth Circuit affirmed, finding that the plain meaning of the agreement was silent on the extinction of any obligation between Triller and Carnegie. The laws of both California and Texas require clear evidence illustrating the parties' intent to replace an earlier agreement, and the agreement's merger clause precludes evidence of a contemporaneous or earlier agreement. Thus, the court held that Triller failed to raise an issue of material fact regarding whether its obligations under the note were extinguished. View "Carnegie Technologies. v. Triller" on Justia Law

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The FDIC removed Calcutt, a bank executive and director, from his position, prohibited him from participating in the conduct of the affairs of any insured depository institution, and imposed civil money penalties. Calcutt challenged the conduct and findings in his individual proceedings and brought constitutional challenges to the appointments and removal restrictions of FDIC officials. His first hearing occurred before an FDIC ALJ in 2015. Before the ALJ released his recommended decision, the Supreme Court decided Lucia v. SEC (2018), which invalidated the appointments of similar ALJs in the Securities and Exchange Commission. The FDIC Board of Directors then appointed its ALJs anew, and in 2019 a different FDIC ALJ held another hearing in Calcutt’s matter and ultimately recommended penalties.The Sixth Circuit denied Calcutt’s petition for review, concluding that his 2019 hearing satisfied Lucia’s mandate. Even if he were to establish a constitutional violation with respect to FDIC Board of Directors and ALJs being shielded from removal by the President, he would not be entitled to relief. Any error by the ALJ in curtailing cross-examination about bias of the witnesses was harmless. Substantial evidence supports the FDIC Board’s findings regarding the elements of 12 U.S.C. 1818(e)(1). View "Calcutt v. Federal Deposit Insurance Corp." on Justia Law