Justia Banking Opinion Summaries

A group of borrowers in California brought a class action against Flagstar Bank, alleging that the bank failed to pay interest on their mortgage escrow accounts as required by California Civil Code § 2954.8(a). Flagstar did not pay interest on these accounts, arguing that the National Bank Act (NBA) preempted the California law, and therefore, it was not obligated to comply. The plaintiffs sought restitution for the unpaid interest.The United States District Court for the Northern District of California, relying on the Ninth Circuit’s prior decision in Lusnak v. Bank of America, N.A., granted summary judgment for the plaintiffs. The court ordered Flagstar to pay restitution and prejudgment interest to the class. Flagstar appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed the district court’s decision, holding that Lusnak foreclosed Flagstar’s preemption argument. However, the Ninth Circuit remanded the case to the district court to correct the class definition date and the judgment amount due to errors in the statute of limitations tolling and calculation of damages.On remand from the United States Supreme Court, following its decision in Cantero v. Bank of America, N.A., the Ninth Circuit reviewed whether it could overrule Lusnak in light of Cantero. The court held that Cantero did not render Lusnak “clearly irreconcilable” with Supreme Court precedent, and therefore, the panel lacked authority to overrule Lusnak. The Ninth Circuit affirmed the district court’s holding that the NBA does not preempt California’s interest-on-escrow law, but vacated and remanded the judgment and class certification order for modification of the class definition date and judgment amount. View "KIVETT V. FLAGSTAR BANK, FSB" on Justia Law

A borrower in Rhode Island financed a home purchase with a mortgage from a national bank. The mortgage required the borrower to make advance payments for property taxes and insurance into an escrow account managed by the bank. The bank did not pay interest on these escrowed funds, despite a Rhode Island statute mandating that banks pay interest on such accounts. Years later, the borrower filed a class action lawsuit against the bank, alleging breach of contract and unjust enrichment for failing to pay the required interest under state law.The United States District Court for the District of Rhode Island dismissed the complaint, agreeing with the bank that the National Bank Act preempted the Rhode Island statute. The court reasoned that the state law imposed limits on the bank’s federal powers, specifically the power to establish escrow accounts, and thus significantly interfered with the bank’s incidental powers under federal law. The court did not address class certification or the merits of the unjust enrichment claim, focusing solely on preemption.On appeal, the United States Court of Appeals for the First Circuit reviewed the case after the Supreme Court’s decision in Cantero v. Bank of America, N.A., which clarified the standard for preemption under the National Bank Act. The First Circuit held that the district court erred by not applying the nuanced, comparative analysis required by Cantero. The appellate court found that the bank failed to show that the Rhode Island statute significantly interfered with its federal banking powers or conflicted with the federal regulatory scheme. The First Circuit vacated the district court’s judgment and remanded the case for further proceedings, allowing the borrower’s claims to proceed. View "Conti v. Citizens Bank, N.A." on Justia Law

A South Carolina resident brought a lawsuit in federal court against a Michigan-based bank, alleging that the bank engaged in three improper practices related to overdraft and ATM fees. Specifically, the plaintiff claimed the bank assessed overdraft fees even when accounts had sufficient funds, charged multiple insufficient-funds fees for a single transaction, and imposed two out-of-network fees for a single ATM withdrawal. The plaintiff sought to certify nationwide classes for each alleged wrongful fee practice.The United States District Court for the District of South Carolina denied the plaintiff’s motion for class certification. The court relied on South Carolina’s “Door Closing Statute” (S.C. Code Ann. § 15-5-150), as interpreted by the Supreme Court of South Carolina in Farmer v. Monsanto Corp., to conclude that nonresidents whose claims did not arise in South Carolina could not be included in the class. As a result, the court found that the plaintiff could not satisfy the numerosity requirement of Federal Rule of Civil Procedure 23 and denied class certification. The plaintiff appealed this decision under Rule 23(f), and the United States Court of Appeals for the Fourth Circuit granted review.The United States Court of Appeals for the Fourth Circuit held that Federal Rule of Civil Procedure 23, as interpreted by the Supreme Court in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., directly conflicts with the Door Closing Statute’s additional requirements for class actions. The Fourth Circuit concluded that Rule 23 alone governs the certification of class actions in federal court and that the Door Closing Statute cannot limit class membership in this context. The court reversed the district court’s denial of class certification and remanded the case for further proceedings. View "Grice v. Independent Bank" on Justia Law

Former students of the University of Montana filed a class action lawsuit against the university, alleging mishandling of student loan reimbursement payments. They claimed that the university's contract with Higher One Holdings, Inc. subjected them to excessive bank fees and unlawfully disclosed their personal information without consent. The university had contracted with Higher One from 2010 to 2015 to process student loan reimbursements, which involved issuing debit cards and charging various fees.The District Court of the Fourth Judicial District in Missoula County certified three classes of plaintiffs but was later partially reversed by the Montana Supreme Court, which upheld the certification of two classes and reversed the third. The case proceeded to a jury trial, where the jury found in favor of the university, concluding that it did not breach its fiduciary duty, violate privacy rights, or unjustly enrich itself.The Supreme Court of the State of Montana reviewed the case on appeal. The students raised several issues, including the admissibility of evidence regarding their banking practices, the testimony of the university's expert witness, the university's closing arguments, the admission of a fee comparison chart, and the refusal of a burden-shifting jury instruction. The court found that the District Court did not abuse its discretion in its evidentiary rulings, including allowing the university to present evidence about students' banking practices and admitting the fee comparison chart. The court also held that the expert witness's testimony was permissible and that the university's closing arguments did not prejudice the students' right to a fair trial.Ultimately, the Supreme Court of Montana affirmed the District Court's judgment in favor of the University of Montana, upholding the jury's verdict. View "Knudsen v. U. of M." on Justia Law

The case revolves around a dispute between Alex Cantero, Saul Hymes, Ilana Harwayne-Gidansky, and others (the plaintiffs) and Bank of America. The plaintiffs had obtained home mortgage loans from Bank of America, which required them to make monthly deposits into escrow accounts. These accounts were used by the bank to pay the borrowers' property taxes and insurance premiums. Under New York law, banks are required to pay borrowers interest on the balance of such escrow accounts. However, Bank of America did not pay interest on the money in the plaintiffs' escrow accounts, arguing that the New York law was preempted by the National Bank Act. The plaintiffs filed class-action suits against Bank of America, alleging that the bank violated New York law by failing to pay them interest on the balances in their escrow accounts.The U.S. District Court for the Eastern District of New York ruled in favor of the plaintiffs, agreeing that New York law required Bank of America to pay interest on the escrow account balances. The court concluded that nothing in the National Bank Act or other federal law preempted the New York law. However, the U.S. Court of Appeals for the Second Circuit reversed this decision, holding that the New York interest-on-escrow law was preempted as applied to national banks. The Court of Appeals argued that federal law preempts any state law that attempts to exercise control over a federally granted banking power, regardless of the magnitude of its effects.The Supreme Court of the United States, in reviewing the case, focused on the standard for determining when state laws that regulate national banks are preempted. The Court noted that the Dodd-Frank Act of 2010 expressly incorporated the standard articulated in Barnett Bank of Marion County, N. A. v. Nelson, which asks whether a state law "prevents or significantly interferes with the exercise by the national bank of its powers." The Supreme Court found that the Court of Appeals did not apply this standard in a manner consistent with Dodd-Frank and Barnett Bank. Therefore, the Supreme Court vacated the judgment of the Court of Appeals and remanded the case for further proceedings consistent with its opinion. View "Cantero v. Bank of America, N. A." on Justia Law

The Indiana Supreme Court heard a case involving a dispute between Tonia Land and the IU Credit Union (IUCU). When Land became a customer at the credit union, she was given an account agreement that could be modified at any time. Later, when she registered for online banking, she accepted another agreement that allowed the IUCU to modify the terms and conditions of the services. In 2019, the IUCU proposed changes to these agreements, which would require disputes to be resolved through arbitration and prevent Land from initiating or participating in a class-action lawsuit. Land did not opt out of these changes within thirty days as required, which, according to the IUCU, made the terms binding. However, Land later filed a class-action lawsuit against the credit union, which attempted to compel arbitration based on the addendum.The court held that while the IUCU did provide Land with reasonable notice of its offer to amend the original agreements, Land's subsequent silence and inaction did not result in her assent to that offer, according to Section 69 of the Restatement (Second) of Contracts. The credit union petitioned for rehearing, claiming that the court failed to address certain legal authorities and arguments raised on appeal and in the transfer proceedings.Upon rehearing, the court affirmed its original decision, rejecting the credit union's arguments. However, the court also expressed a willingness to consider a different standard governing the offer and acceptance of unilateral contracts between businesses and consumers in future cases. The court found no merit in the credit union's arguments on rehearing and affirmed its original opinion in full. View "Land v. IU Credit Union" on Justia Law

In 2017, Plaintiffs-appellants Loreto and Mercedes Lagrisola applied for and obtained a loan from North American Financial Corporation (NAFC), secured by a mortgage on their residence. In 2021, the Lagrisolas sued NAFC, individually and on behalf of a class of similarly situated persons, alleging NAFC was not licensed to engage in lending in the state of California between 2014 and 2018 and asserted violations of California Business and Professions Code section 17200 and Financial Code sections 22100 and 22751. The trial court sustained NAFC’s demurrer to the FAC without leave to amend, concluding that the allegations in the FAC were insufficient to establish an actual economic injury, necessary for standing under Business and Professions Code section 17200, and that there was no private right of action under Financial Code sections 22100 and 22751. The Lagrisolas appealed, arguing the trial court erred in its judgment. On de novo review, the Court of Appeal reached the same conclusions as the trial court, and accordingly, affirmed. View "Lagrisola v. North American Financial Corp." on Justia Law

The Supreme Court reversed the judgment of the trial court granting a motion to compel arbitration brought by Defendant Star Financial Group, Inc. in this class-action complaint alleging that Defendant collected improper overdraft fees, holding that Plaintiffs' account agreement did not allow Defendant to add an addendum to the terms and conditions of the account agreement.When Plaintiffs opened their checking account they assented to an account agreement detailing the terms and conditions of their relationship with Defendant. Before Plaintiffs brought this suit Defendant added an arbitration and no-class-action addendum to the terms and conditions of Plaintiffs' account agreement. When Plaintiffs filed this lawsuit Defendants cited the addendum and filed a motion to compel arbitration. The trial court granted the motion. The Supreme Court reversed, holding that Plaintiffs were not bound by the arbitration addendum to their account agreement because the account agreement's change-of-terms provision did not allow Plaintiff to add the addendum. View "Decker v. Star Financial Group Inc." on Justia Law

Plaintiff brought this putative class action against more than twenty banks and brokers, alleging a conspiracy to manipulate two benchmark rates known as Yen-LIBOR and Euroyen TIBOR. He claimed that he was injured after purchasing and trading a Euroyen TIBOR futures contract on a U.S.-based commodity exchange because the value of that contract was based on a distorted, artificial Euroyen TIBOR. Plaintiff brought claims under the Commodity Exchange Act (“CEA”), and the Sherman Antitrust Act, and sought leave to assert claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”).   The district court dismissed the CEA and antitrust claims and denied leave to add the RICO claims. Plaintiff appealed, arguing that the district court erred by holding that the CEA claims were impermissibly extraterritorial, that he lacked antitrust standing to assert a Sherman Act claim, and that he failed to allege proximate causation for his proposed RICO claims.   The Second Circuit affirmed. The court explained that fraudulent submissions to an organization based in London that set a benchmark rate related to a foreign currency—occurred almost entirely overseas. Here Plaintiff failed to allege any significant acts that took place in the United States. Plaintiff’s CEA claims are based predominantly on foreign conduct and are thus impermissibly extraterritorial. As such, the district court also correctly concluded that Plaintiff lacked antitrust standing because he would not be an efficient enforcer of the antitrust laws. Finally, Plaintiff failed to allege proximate causation for his RICO claims. View "Laydon v. Coöperatieve Rabobank U.A., et al." on Justia Law

Plaintiffs in two putative class actions took out home mortgage loans from Bank of America, N.A. (“BOA”), one before and the other after the effective date of certain provisions of the DoddFrank Wall Street Reform and Consumer Protection Act (“DoddFrank”). The loan agreements, which were governed by the laws of New York, required Plaintiffs to deposit money in escrow accounts for property taxes and insurance payments for each mortgaged property. When BOA paid no interest on the escrowed amounts, Plaintiffs sued for breach of contract, claiming that they were entitled to interest under New York General Obligations Law Section 5-601, which sets a minimum 2% interest rate on mortgage escrow accounts. BOA moved to dismiss on the ground that GOL Section 5-601 does not apply to mortgage loans made by federally chartered banks because, as applied to such banks, it is preempted by the National Bank Act of 1864 (“NBA”). The district court disagreed and denied the motion.   The Second Circuit reversed and remanded. The court held that (1) New York’s interest-on-escrow law is preempted by the NBA under the “ordinary legal principles of pre-emption,” Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 37 (1996), and (2) the Dodd-Frank Act does not change this analysis. GOL Section 5-601 thus did not require BOA to pay a minimum rate of interest, and Plaintiffs have alleged no facts supporting a claim that interest is due. View "Cantero v. Bank of Am., N.A." on Justia Law