Justia Banking Opinion Summaries

In 2010, EFIH borrowed $4 billion at a 10% interest rate, issuing notes secured by its assets; the Indenture states that EFIH may redeem the notes for the principal amount plus a “make-whole premium” and accrued, unpaid interest. It contains an acceleration provision that makes “all outstanding Notes . . . due and payable immediately” if EFIH files for bankruptcy. Interest rates dropped. Refinancing outside of bankruptcy would have required EFIH to pay the make-whole premium. EFIH disclosed to the Securities and Exchange Commission a “proposal [whereby] . . . EFIH would file for bankruptcy and refinance the notes without paying any make-whole amount.” EFIH later filed Chapter 11 bankruptcy petitions, seeking leave to borrow funds to pay off the notes and to offer a settlement to note-holders who agreed to waive the make-whole. The Trustee sought a declaration that refinancing would trigger the make-whole premium and that it could rescind the acceleration without violating the automatic stay. The Bankruptcy Court granted EFIH’s motion to refinance. EFIH paid off the notes and refinanced at a much lower interest rate; the make-whole would have been approximately $431 million. The Bankruptcy Court and district court concluded that no make-whole premium was due and that the noteholders could not rescind acceleration. The Third Circuit reversed. The premium, meant to give the lenders the interest yield they expect, does not fall away because the full principal amount becomes due and the noteholders are barred from rescinding acceleration of debt. View "In re: Energy Future Holdings Corp." on Justia Law

Freestone Insurance Company was a Delaware-domiciled insurer that was placed in liquidation. The liquidation proceeding was governed by the Uniform Insurers Liquidation Act (the Uniform Act). The order that placed Freestone into liquidation contained an injunction (the Anti-Suit Injunction) barring third parties from pursuing claims against Freestone other than through the statutory process for receiving evaluating, and paying claims (the Claims Process). U.S. Bank National Association (the Bank) moved to lift the Anti-Suit Injunction, claiming that it wished to litigate against Freestone outside of the Claims Process and establish the amount of its claims and its status as a general creditor of Freestone. The Court of Chancery denied the Bank’s motion, holding that granting relief on the facts of this case would contravene the policies of the Uniform Act, interfere with the Claims Process, and impose unnecessary costs on Freestone and the Insurance Commissioner of the State of Delaware, who was serving as the receiver for Freestone. View "In re Liquidation of Freestone Ins. Co." on Justia Law

Plaintiff requested payment for the one year remaining on his employment contract, but the FDIC advised that the payment was a prohibited “golden parachute,” under 12 U.S.C. 1828(k) and 12 C.F.R. 359.1, which the bank could not make without prior agency approval. Plaintiff, a former executive at Reliance Bank, filed suit against the bank and the FDIC, alleging a breach of contract under Missouri law and sought a declaration that federal law does not prohibit the payment. The district court upheld the FDIC determination and granted summary judgment to the bank. The court rejected plaintiff's argument that the agency determination is not worthy of deference because it is inconsistent with FDIC positions taken elsewhere. Rather, the court concluded that Chevron and Auer deference is irrelevant because the agency treats the word "contingent" as unambiguous and relies on its dictionary meaning. The court concluded that one could reasonably characterize the payment obligation as contingent on either plaintiff’s termination or his continued employment. In this case, plaintiff alleged the bank came to owe the payment because of his termination, not because of services he rendered. Therefore, the agency determined the payment was contingent on termination, and the court found this finding was neither arbitrary nor capricious. The court concluded that the bank’s obligation to pay plaintiff was rendered impossible when the FDIC determined the payment was a golden parachute. The court rejected plaintiff's remaining claims and affirmed the judgment. View "Rohr v. Reliance Bank" on Justia Law

In 2005, the Harrises bought tens of thousands of shares in Bancorp through a TD Ameritrade account. Six years later, the Harrises sought to hold some of their Bancorp stock in another form, registered in their name and reflected in a physical copy of a certificate signifying their ownership. TD Ameritrade refused to convert the Harrises’ form of ownership, stating that all Bancorp stock was in a “global lock,” prohibiting activity in the stock, including changing the Harrises’ form of ownership. The lock was created because someone had fraudulently created hundreds of millions of invalid shares of Bancorp stock. The Harrises sued, alleging that TD Ameritrade had violated SEC Rule 15c3-3 and Nebraska’s version of the Uniform Commercial Code. The Sixth Circuit affirmed dismissal.. Neither the SEC Rule nor Nebraska’s Commercial Code creates a private right of action to vindicate the alleged problem. View "Harris v. TD Ameritrade, Inc." on Justia Law

Tribeca sued after First American refunded a $1 million deposit to a real estate investor out of an escrow account that Tribeca had opened. Tribeca claimed it was entitled to the deposit and asserted claims for breach of contract, breach of fiduciary duty, fraud, and negligence. The trial judge and court of appeal ruled in favor of First American. The escrow instructions did not require that the funds, which had been deposited by a third party, be subject to Tribeca’s directions. First American’s expert witness testified that its conduct fell within the standard of care and that returning the money to the depositor was proper. The court credited the testimony of that expert above the testimony of the Tribeca expert. View "Tribeca Co. v. First American Title Ins." on Justia Law

Grand Rios purchased a Brooklyn Park, Minnesota hotel and waterpark, assuming $4.61 million of the debt owed to Northeast Bank by the original owner, and purchased insurance from Hanover Insurance. The roof was damaged by a snowstorm. Sill was hired to handle the claim. Hanover issued checks totaling $350,000 made jointly payable to Grand Rios, Northeast, and Sill. Without Northeast’s endorsement, knowledge, or consent, Wells Fargo Bank paid the full amount of the checks to Grand Rios. Months later, Northeast and Grand Rios entered into a Settlement Agreement under which Grand Rios agreed to a voluntary foreclosure, assigned all insurance proceeds to Northeast, paid $50,000 to Northeast, and allowed a state court to appoint a receiver for the hotel and waterpark. Hanover made additional insurance payments of approximately $1.2 million. Ultimately Northeast received approximately $200,000 more than the debt Grand Rios owed and sold the property to CarMax. Northeast sued Hanover and Wells Fargo. The district court dismissed Hanover and granted summary judgment in favor of Northeast against Wells Fargo.. The Eighth Circuit reversed. While the payment constituted conversion under the UCC, Minn. Stat. 336.3-420, Northeast has not suffered any damages because it was subsequently paid the full amount of the debt for which the checks were security. View "Northeast Bank v. Wells Fargo Bank, N.A." on Justia Law

Knickel approached Macquarie Bank about a loan to develop North Dakota oil and gas leases, providing confidential information about leased acreage that he had assembled over 10 years. Macquarie entered agreements with Knickel’s companies, LexMac and Novus. His other company, Lexar was not a party. Macquarie acquired a mortgage lien and perfected security interest in the leases and in their extensions or renewals. Royalties and confidential information—reserves reports on the acreage, seismic data, and geologic maps—also served as collateral. The companies defaulted. Because of the lack of development or production, many leases were set to expire. Knickel claims he agreed to renew only leases that included automatic extensions. Macquarie claims that Knickel promised to renew all leases serving as collateral in the names of LexMac and Novus. Upon the expiration of the leases without automatic extensions, Knickel entered into new leases in the name of Lexar, for development with LexMac and Novus, since they owned the confidential information. A foreclosure judgment entered, declaring that LexMac and Novus’s interest in the leases would be sold to satisfy the debt: $5,296,252.29,. Marquarie filed notice of lis pendens on Lexar’s leases, leased adjoining acreage, used the confidential information to find a buyer, and sold the leases at a profit of about $7,000,000. Marquarie filed claims of deceit, fraud, and promissory estoppel, and alleged that the corporate veil of the companies should be pierced to hold Knickel personally liable. The defendants counterclaimed misappropriation of trade secrets and unlawful interference with business. The Eighth Circuit affirmed summary judgment on all but one claim and judgment that Macquarie had misappropriated trade secrets. View "Macquarie Bank Ltd. v. Knickel" on Justia Law

In "Vinings Bank v. Brasfield & Gorrie, LLC," (759 SE2d 886 (2014)), the Court of Appeals affirmed, among other rulings, the trial court’s determination that Vinings Bank was not entitled to summary judgment with regard to a counterclaim for conversion brought against the Bank by Brasfield & Gorrie, LLC ("B&G"). This case stemmed from a defaulted $1.4 million business loan. The bank made the loan to Wagner Enterprises, Inc., which used as collateral, a security interest in all of its accounts and accounts receivable, including Wagner's contract to provide drywall services for general contractor B&G. Wagner defaulted on the loan, and the Bank filed suit against B&G seeking to collect on Wagner's accounts receivable. B&G counterclaimed for conversion, and the parties filed cross-motions for summary judgment. The bank appealed the denial of its motion. The Supreme Court affirmed in part, reversed in part, and remanded. In affirming the trial court's judgment, the Court of Appeals did not consider whether B&G had any right to assert a counterclaim against the bank for conversion of funds due to Wagner's subcontractors. The Supreme Court found that B&G had no direct relationship with the Bank, B&G was not, itself, a subcontractor of Wagner entitled to any of Wagner's funds, B&G did not have direct contractual relationships with any of Wagner's subcontractors, and B&G had no fiduciary relationship with any of Wagner's subcontractors. Furthermore, there was no evidence that Wagner or Wagner's affected subcontractors assigned B&G any of their rights. "Therefore, even if we assume without deciding that funds in [Wagner's] account were held in a constructive trust for the benefit of [Wagner's] subcontractors, B&G is not the party to assert those rights and had no standing to do so." View "Vinings Bank v. Brasfield & Gorrie, LLC" on Justia Law

Defendant was a CEO and director of now bankrupt Agra Services of Canada, Inc (Agra Canada) and an officer and director of Agra USA. Agra Canada entered into a purchase agreement with Cooperative Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) under which Rabobank purchased and financed certain receivables of Agra Canada. Thereafter, Defendant and Eduardo Guzman Solis, Agra Canada’s president and a manager of both Agra businesses, signed personal guarantees in favor of Rabobank. After Guzman Solis died, an investigation revealed fraudulent receivables based on nonexistent transactions submitted by Guzman Solis. Rabobank sued Agra Canada, Agra USA, and the estate of Guzman Solis seeking to recover the millions of dollars owed to Rabobank under the purchase agreement and guarantees. Defendant appeared represented by counsel but failed to retain counsel for Agra USA. The district court entered default judgment against Agra USA. Rabobank then filed this action in state court alleging that Defendant was liable under the guaranty. The Appellate Division granted Rabobank summary judgment. Defendant appealed, arguing that the default judgment against him was obtained by Rabobank’s collusion. The Court of Appeals affirmed, holding (1) Defendant’s collusion claim constituted a defense barred by the language in the guaranty; and (2) Defendant’s claim of collusion was contradicted by the record. View "Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro" on Justia Law

Sergio Acosta petitioned for a writ of mandamus to direct the circuit court to vacate an order granting a motion filed by Trinity Bank to strike Acosta's jury demand with respect to all counts in Acosta's counterclaim and third-party complaint in the bank's action against him. The bank filed filed suit seeking a judgment against Acosta for financial losses it incurred after Acosta defaulted on certain "Multipurpose Note and Security Agreement[s]" he had executed with the bank. The bank alleged that Acosta had executed two secured notes and one unsecured note, which, it said, Acosta had failed and/or refused to pay; that the bank had foreclosed on the properties pledged as collateral on the secured notes; and that proper credit had been applied to the notes. The bank sought a judgment for the balance due on the notes, plus interest, fees, costs, and attorney fees. Acosta filed a counterclaim against the bank, as well as a third-party complaint against two of its officers, alleging that he had entered into a business relationship with R&B Properties under the name of SilverPalm Properties, LLC; that loans from the bank were the principal source of funding for SilverPalm; that the financing plan was for SilverPalm to procure from the bank the funds to construct the properties, for SilverPalm to pay the interest on the notes until the properties were rented, and for SilverPalm to pay off the notes once the properties generated sufficient rental income to do so. Acosta and R&B Properties dissolved SilverPalm because of a downturn in the economy; but the bank induced that Acosta was personally liable for the notes previously secured only by SilverPalm The bank at some point advised Acosta that additional security was required to continue financing the notes, that Acosta declined to pledge additional security. The bank then called the notes due and foreclosed on the properties securing the notes. Acosta requested an accounting for the amounts claimed by the bank on the notes and the mortgages securing the notes, and he sought damages based on allegations of wantonness, breach of good faith and fair dealing, negligence, fraud, breach of fiduciary duty, unjust enrichment, and promissory estoppel. The counterclaim and third-party complaint included a demand for a jury trial. In its motion to strike Acosta's jury demand, the Bank relied on a jury-waiver provision in four Assignments of Rents and Leases that Acosta had executed in consideration of the notes. The trial court initially denied the bank's motion to strike, and then granted it after reconsideration. The Supreme Court concluded that Acosta demonstrated a clear legal right to a jury trial on the claims asserted in his counterclaim and third-party complaint. As such, the Court granted the petition and directed the trial court to vacate its order striking Acosta's jury demand. View "Ex parte Sergio Acosta." on Justia Law