Justia Banking Opinion Summaries

In a consolidated appeal, the plaintiffs from four separate actions (collectively, Appellants) ask the Supreme Court to reverse the trial court's order granting a motion to dismiss in favor of respondents Branch Banking & Trust Company (BB&T) and BB&T employee James Edahl. Skywaves I Corporation (Skywaves) was a South Carolina corporation that develops technology for the wireless telecommunications industry. In 2005, Skywaves entered into a factoring agreement with BB&T. From 2005 to 2007, Skywaves and BB&T occasionally amended the agreement via written modifications so that BB&T could fund Skywaves's working capital needs as those needs developed and expanded. In early 2007, Skywaves won several lucrative government contracts, and its Board of Directors determined that the company required more capital than BB&T provided at that time in order to meet the increased demand for their products. Skywaves therefore solicited funding proposals from various entities, including Wachovia, Hunt Capital, and BB&T. In July 2007, Edahl made a presentation to Appellants, each of whom was a director, officer, or shareholder in Skywaves, in addition to a current or potential investor in Skywaves. During the presentation, Edahl told Appellants that BB&T believed that Skywaves would continue to develop and expand into new markets, that BB&T "was fully committed to providing all of Skywaves['s] short-term and long-term financial needs for growth," and that BB&T would honor the new factoring agreement between itself and Skywaves. Appellants alleged that they each relied on these statements and were induced to "invest[] in the growth" of Skywaves via purchasing equity positions and making loans to Skywaves. BB&T funded Skywaves in accordance with the new factoring agreement from March 2007 until January 2008. In January 2008, BB&T asserted that Skywaves had defaulted under the terms of the factoring agreement, and BB&T refused to honor any further financial commitments in accordance with the contract. In the absence of funding, Skywaves filed for bankruptcy. As a result of the bankruptcy proceedings, Appellants lost their equity investments in Skywaves. Skywaves and Appellants therefore filed separate lawsuits against Respondents—Skywaves on its own behalf, and Appellants in their capacity as investors and employees of Skywaves. The trial court granted the motions to dismiss, finding all of Appellants' claims were barred for various reasons. The Supreme Court concluded that while Skywaves might be able to show that, as a BB&T customer, the bank owed the corporation a duty, Appellants were not BB&T's customers and therefore were not owed a similar duty. Accordingly, the Court affirmed the trial court's ruling that Respondents were entitled to judgment as a matter of law as to all of Appellants' claims. View "Kerr v. BB&T" on Justia Law

This case arose from a business venture that was established by plaintiff Brendan Allen and defendant Asnel Diaz Sanchez. The venture was operated through plaintiff ADS Associates, Inc. (ADS), a corporation fully owned by Sanchez. Allen and Sanchez opened a business checking account in the name of ADS at a branch of Oritani Savings Bank where ADS had preexisting accounts. By agreement between ADS and Oritani, the new ADS account required the signatures of both Allen and Sanchez to appear on each check drawn on the account. Despite that limitation, Sanchez linked the new ADS account to other ADS accounts within his control and, through a series of internet transactions, transferred a substantial sum of money from the ADS account he had established with Allen to his other ADS accounts. After learning of these transfers, Allen sued Oritani and Sanchez. Although it dismissed Allen’s claims, the trial court permitted Allen to assert claims on ADS’s behalf against Oritani, notwithstanding Sanchez’s issuance of a resolution denying Allen the authority to maintain an action on ADS’s behalf. A jury returned a verdict in favor of ADS. The trial court, however, entered a judgment notwithstanding the verdict in favor of Oritani premised on an indemnification provision in the agreement governing ADS’s account with Oritani. An Appellate Division panel reversed the trial court’s determination. It found that the ADS resolution signed by Sanchez deprived Allen of authority to assert a claim on behalf of ADS. The panel held, however, that Allen could assert a common law negligence claim against Oritani despite the fact that he was not Oritani’s banking customer. It concluded that Allen had a “special relationship” with Oritani, and that Oritani had a duty to advise Allen of its internet banking policies when he and Sanchez opened the ADS account. The Supreme Court agreed with the trial court that Article 4A of the Uniform Commercial Code (UCC) governed the wire transfers at the center of this case, and that Allen could not assert a claim under Article 4A against Oritani because he did not meet the statutory definition of a bank “customer.” Furthermore, the Court held that Allen could not assert a negligence claim based upon an alleged special relationship with Oritani. Accordingly, the Appellate Division was reversed and the trial court's judgment was reinstated. View "ADS Associates Group, Inc. v. Oritani Savings Bank" on Justia Law

First Citizens BancShares, Inc. (FC North), a bank holding company incorporated in Delaware and headquartered in Raleigh, North Carolina, adopted by forum selection bylaw (the “Forum Selection Bylaw”) the same day it announced it had entered into a merger agreement to acquire First Citizens Bancorporation, Inc. The Forum Selection Bylaw selected as the forum the federal or state courts of North Carolina instead of the state or federal courts of Delaware. The City of Providence filed complaints challenging as invalid the Forum Selection Bylaw and asserting various claims against the FC North board of directors concerning the proposed merger. The Court of Chancery granted Defendants’ motions to dismiss both complaints for failure to state a claim, holding (1) the Forum Selection Bylaw is facially valid; and (2) it is not unreasonable, unjust, or inequitable to enforce the Forum Selection Bylaw in this case. View "City of Providence v. First Citizens Bancshares, Inc." on Justia Law

SFG, a Texas firm specializing in distressed‐asset investing, bought a loan portfolio from McFarland State Bank for $1.27 million (28.8% of the face value of the debt). Materials provided by McFarland’s agent indicated that the portfolio was secured by 19 real estate properties in Wisconsin. Both parties were well represented during negotiations. The Sale Agreement provided limited remedies in the event of a breach and disclaimed all other remedies. Soon after purchasing the portfolio, SFG learned that three of the 19 collateral properties that supposedly secured the loans had been released before the sale. SFG contacted McFarland; McFarland disputed liability. Months later, SFG sued, seeking damages beyond the remedies provided in the contract. Applying the contractual remedies limitation, a formula that resulted in zero recovery under the circumstances, the district court granted judgment for McFarland. The Seventh Circuit affirmed. Except in the most extraordinary circumstances, courts hold sophisticated parties to the terms of their bargain. View "S. Fin. Grp. LLC v. McFarland State Bank" on Justia Law

Bank and Lumber Company had business and financial relationships with Sawmill. A few years into its operation, Sawmill began experiencing serious financial difficulties. Sawmill defaulted on approximately $1.4 million in loan obligations to Bank and owed Lumber Company approximately $900,000. Proceedings were initiated in bankruptcy court and district court. While the cases were pending, Sawmill was destroyed by fire. Bank recovered approximately $980,000 from Sawmill's insurance proceeds. In a subsequent case between Bank and Lumber Company, the jury determined that neither Bank nor Lumber Company was entitled to recover damages from the other. The Supreme Court affirmed, holding that the district court did not abuse its discretion in refusing to admit into evidence a particular letter written by the Bank president. View "H.E. Simpson Lumber Co. v. Three Rivers Bank of Mont." on Justia Law

Gary Hopkins and Randal Burnett formed a LLC and financed the project with a small business administration (SBA) loan. Bank 1 loaned the remainder of the total project costs. Hopkins secured the SBA portion of the loan with third mortgages on his rental properties. Bank 2 subsequently acquired Bank 1. After Burnett bought Hopkins' membership in the LLC, Bank 2 released Hopkins from his loan. However, an agreement entered into by the parties did not mention the third mortgages on the property held by SBA. Burnett subsequently defaulted on his loan obligations, and Bank foreclosed on the mortgage covering the business property. Because Hopkins' third mortgages on his rental properties were not released by SBA, Hopkins was forced to continue to make the payments on the SBA loan. Hopkins and his wife (Plaintiffs) sued Bank 2, Burnett, and the LLC, arguing that, pursuant to the agreement, Bank 2 was supposed to remove Hopkins' liability and the mortgages held on his property. The district court granted summary judgment for Bank 2. The Supreme Court affirmed, holding that the terms of the contract between the parties were unambiguous, extrinsic evidence was not required to discern the parties' intent, and Bank 2 had abided by the terms of the contract.View "Hopkins v. Bank of the West" on Justia Law

Judgment creditor PAL I, LLC levied and executed upon collateral in which KeyBank had a perfected security interest. PAL argued that because KeyBank did not file a third-party claim to the collateral in accordance with I.C. 11-203, it waived its interest in the collateral. The district court held that a perfected security interest survives a creditor's failure to comply with the statute, that KeyBank's security interest extended to the proceeds PAL realized from the sheriff's sale of the collateral, and that KeyBank was entitled to judgment against PAL in that amount. PAL appealed to the Supreme Court. Finding no error, the Supreme Court affirmed. View "Keybank Nat'l Assoc v. Pal I, LLC" on Justia Law

After Westernbank of Puerto Rico was ordered closed in the late 2000s and the Federal Deposit Insurance Corporation (“FDIC”) was appointed receiver, the FDIC discovered that certain bank directors and officers had breached their fiduciary duty by jeopardizing the bank’s financial soundness, causing over $176 million in damages to the bank. The directors and officers asked their insurer, Chartis Insurance Company, to confirm coverage under a directors’ and officers’ liability-insurance policy issued by Chartis to Westerbank’s owner, W Holding Company, Inc. Chartis denied coverage. The directors and officers and the FDIC sued Chartis. In this “procedurally complicated” case, a district judge eventually issued an order requiring Chartis to advance defense costs to the directors and officers. The First Circuit Court of Appeals affirmed, holding (1) the Court had jurisdiction to hear the parties; and (2) the district judge did not err in making its cost-advancement ruling. View "W Holding Co., Inc. v. AIG Ins. Co. - P.R." on Justia Law

IMCC loaned Harbins $60 million to buy Georgia land to construct a shopping center. In addition to a mortgage, IMCC obtained a guaranty from Chivas, providing that if IMCC “forecloses … the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.” Harbins defaulted; IMCC foreclosed in a nonjudicial proceeding, involving a public auction conducted by the sheriff after public notice. IMCC successfully bid $7 million and filed a petition to confirm the auction. Unless such a petition is granted, a mortgagee who obtains property in a nonjudicial foreclosure cannot obtain a deficiency judgment if the property is worth less than the mortgage balance owed. A Georgia court denied confirmation. Chivas refused to honor the guaranty. A district court in Chicago awarded IMCC $17 million. The Seventh Circuit affirmed, noting that the Georgia statute “is odd by modern standards,” but does not prevent a suit against a guarantor. The agreement guaranteed IMCC the difference between what it paid for the land and the unpaid balance of the loan, even if the land is worth more than what IMCC paid for it. The agreement is lawful under Georgia and Illinois law. View "Inland Mortg. Capital Corp v. Chivas Retail Partners, LLC" on Justia Law

This interlocutory appeal arose from an action filed by the FDIC, as receiver for Integrity Bank, against former Bank directors and corporate officers (defendants). The FDIC sought to recover losses that the Bank suffered as a result of defendants' alleged negligent conduct. The court certified questions of state law regarding the standard of care established in O.C.G.A. 7-1-490 and Georgia's business judgment rule to the Supreme Court of Georgia. Because the FDIC has failed to demonstrate the existence of an established and long-standing common law rule barring defendants' affirmative defenses, and because the court must decline to create a barring rule, the FDIC was unentitled to partial summary judgment. Accordingly, the court affirmed in part and certified questions in part. View "FDIC v. Skow, et al." on Justia Law