Justia Banking Opinion SummariesArticles Posted in Class Action
Cantero v. Bank of Am., N.A.
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
N.J. Carpenters Health Fund v. NovaStar Mortgage, Inc.
Objectors challenged the district court's judgment approving a class action settlement that includes Freddie Mac, with FHFA as its conservator, as a member of the plaintiff settlement class and enjoins FHFA from further pursuing Freddie Mac claims that were at issue in the action. The Second Circuit rejected FHFA's contention that the Housing and Economic Recovery Act of 2008 (HERA) deprived the district court of subject matter jurisdiction to treat FHFA or Freddie Mac as a member of the settlement class or to rule that conservatorship assets were within the scope of the settlement.However, the court concluded for other reasons that the district court's March 8, 2019 prejudgment ruling that FHFA is a member of the settlement class was erroneous. The court explained that the Settlement Class, as certified by the district court, consists of persons and entities who purchased or otherwise acquired interests in the NovaStar bonds "prior to May 21, 2008." However, because FHFA did not succeed to the interests of Freddie Mac until September 6, 2008, it acquired no interest in Freddie Mac's NovaStar bonds until that date. Therefore, FHFA is not a member of the Settlement Class and the court modified the judgment to reflect the court's ruling. View "N.J. Carpenters Health Fund v. NovaStar Mortgage, Inc." on Justia Law
Leszanczuk v. Carrington Mortgage Services, LLC
In 2010, Leszanczuk executed a mortgage contract, securing a loan on her Illinois residence. The mortgage was insured by the FHA. After Carrington acquired the mortgage, Leszanczuk contacted Carrington by phone in December 2016 to make her December payment. Leszanczuk asserts that Carrington told her that her account was not yet set up in their system and that her account was in a “grace period.” In early 2017 Carrington found Leszanczuk to be in default and conducted a visual drive-by inspection of Leszanczuk’s property. Carrington charged Leszanczuk $20.00 for the inspection and disclosed the fee in her March 2017 statement. Leszanczuk claims Carrington knew or should have known that she occupied her property because of the phone conversation and Carrington mailed monthly mortgage statements to the property’s address.Leszanczuk sued Carrington for breach of the mortgage contract and for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, on behalf of putative nationwide and Illinois classes. She alleged that a HUD regulation limits the fees Carrington may charge under the contract and that the inspection fee was an unfair practice. The Seventh Circuit affirmed the dismissal of the complaint. The mortgage contract expressly permits the disputed fee. Leszanczuk has failed to adequately allege that the inspection fee offended public policy, was oppressive, or caused substantial injury. View "Leszanczuk v. Carrington Mortgage Services, LLC" on Justia Law
Calon v. Bank of America Corp.
After plaintiff obtained a home equity loan from Countrywide, he filed a pro se complaint alleging five causes of action against Bank of America, the company that acquired Countrywide. The Eighth Circuit affirmed the district court's dismissal of two claims based on Bank of America's failure to honor plaintiff's alleged early payoff right. In this case, plaintiff's claims were barred by the doctrine of res judicata because he had been a member of a global class action settlement that included a broad release of claims by all class members. The court also held that the district court did not abuse its discretion by promptly setting the remaining claims for trial. The court explained that, at minimum, Bank of America failed to establish that the statute of frauds barred these claims as a matter of law on the record. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Calon v. Bank of America Corp." on Justia Law
Community Bank of Trenton v. Schnuck Markets, Inc.
In 2012, hackers infiltrated the computer networks at Schnuck Markets, a large Midwestern grocery store chain based in Missouri, and stole the data of about 2.4 million credit and debit cards. By the time the intrusion was detected and the data breach was announced in 2013, the financial losses from unauthorized purchases and cash withdrawals had reached the millions. Financial institutions filed a class action, having issued new cards and reimbursed customers for losses as required by 15 U.S.C. 1643(a). They asserted claims under the common law and Illinois consumer protection statutes (ICFA). The Seventh Circuit affirmed the dismissal of the suit. The financial institutions sought reimbursement for their losses above and beyond the remedies provided under the credit-debit card network contracts; neither Illinois or Missouri would recognize a tort claim in this case, where the claimed conduct and losses are subject to these networks of contracts. Claims of unjust enrichment, implied contract, and third-party beneficiary also failed because of contract law principles. The plaintiffs did not identify a deceptive guarantee about data security, as required for an ICFA claim, nor did they identify how Schnucks’ conduct might have violated the Illinois Personal Information Protection Act. View "Community Bank of Trenton v. Schnuck Markets, Inc." on Justia Law
Holtz v. J.P. Morgan Chase Bank, N.A.
JPMorgan offers to manage clients’ securities portfolios. Its affiliates sponsor mutual funds in which the funds can be placed. Plaintiffs in a putative class action under the Class Action Fairness Act, 28 U.S.C. 1332(d)(2), alleged that customers invested in these mutual funds believing that, when recommending them as suitable vehicles, JPMorgan acts in clients’ best interests (as its website proclaims), while JPMorgan actually gives employees incentives to place clients’ money in its own mutual funds, even when those funds have higher fees or lower returns than third-party funds. The Seventh Circuit affirmed dismissal under the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which requires the district court to dismiss any “covered class action” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” Under SLUSA, securities claims that depend on the nondisclosure of material facts must proceed under the federal securities laws exclusively. The claims were framed entirely under state contract and fiduciary principles, but necessarily rest on the “omission of a material fact,” the assertion that JPMorgan concealed the incentives it gave its employees. View "Holtz v. J.P. Morgan Chase Bank, N.A." on Justia Law
Goldberg v. Bank of America, N.A.
If a LaSalle Bank custodial account had a cash balance at the end of a day, the cash would be invested in (swept into) a mutual fund chosen by the client. The Trust had a custodial account with a sweeps feature. After LaSalle was acquired by Bank of America, clients were notified that a particular fee was being eliminated. The trustee, who had not known about the fee, brought a putative class action in state court, claiming breach of the contract (which did not mention this fee) and violation of fiduciary duties. The bank removed the suit to federal court, relying on the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which authorizes removal of any “covered class action” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” The statute requires that such state‑law claims be dismissed. The district court held that the suit fit the standards for removal and dismissal. The Seventh Circuit affirmed. The complaint alleged a material omission in connection with sweeps to mutual funds that are covered securities; no more is needed. The Trust may have had a good claim under federal securities law, but chose not to pursue it; the Act prohibits use of a state-law theory. View "Goldberg v. Bank of America, N.A." on Justia Law
Dutcher v. Matheson
Richard and Gwen Dutcher and their co-plaintiffs (collectively, “plaintiffs”) brought suit in Utah state court on behalf of a putative plaintiff class against ReconTrust, a national bank that served as the substitute trustee for class members’ deeds of trust over properties located in Utah. The suit alleged that ReconTrust illegally non-judicially foreclosed on the plaintiffs’ properties because depository institutions like ReconTrust did not have the power of sale over properties secured by trust deed. The plaintiffs also sued B.A.C. Home Loans Servicing (“BAC”) and Bank of America, N.A. (“BOA”), as the former trustees who transferred trusteeship to ReconTrust, as well as Stuart Matheson and his law firm, as the agents who conducted the foreclosure sale on behalf of ReconTrust. ReconTrust and the other defendants removed the case to federal court. They maintained that ReconTrust’s acts were lawful. The district court denied a motion by plaintiffs to remand the case to state court and agreed with ReconTrust on the merits, which led the court to grant the defendants’ pending motion to dismiss. On appeal to the Tenth Circuit Court of Appeals, plaintiffs sought reversal of the court’s order denying remand to Utah state court, and reversal of the order granting dismissal of the case. The Tenth Circuit concluded, however, that the district court properly decided that it had jurisdiction under the Class Action Fairness Act (“CAFA”); accordingly, it correctly denied the plaintiffs’ motion for remand. On the merits, the Court concluded that ReconTrust was authorized to conduct the challenged foreclosures under federal law, and the plaintiffs had relatedly failed to state a claim on which relief could be granted. The Court therefore affirmed the district court’s judgment as to both issues. View "Dutcher v. Matheson" on Justia Law
Bickerstaff v. SunTrust Bank
A mandatory arbitration clause is contained in each deposit agreement for customers of appellee SunTrust Bank. The clause permits an individual depositor to reject the agreement’s mandatory arbitration clause by giving written notice by a certain deadline. SunTrust claimed it drafted the arbitration clause in such a way that only an individual depositor may exercise this right to reject arbitration on his or her own behalf, thereby permitting that individual to file only an individual lawsuit against the bank. But SunTrust asserted that even if, as it has been determined here, the filing of a lawsuit prior to the expiration of the rejection of arbitration deadline operated to give notice of the individual plaintiff’s rejection of arbitration, the complaint could not be brought as a class action because the filing of a class action could not serve to reject the arbitration clause on behalf of class members who have not individually given notice. Jeff Bickerstaff, Jr., who was a SunTrust Bank depositor, filed a complaint against SunTrust on behalf of himself and all others similarly situated alleging the bank’s overdraft fee constitutes the charging of usurious interest. At the time Bickerstaff opened his account (thereby agreeing to the terms of SunTrust’s deposit agreement), that agreement included a mandatory arbitration provision. In response to the ruling of a federal court in an unrelated action finding the arbitration clause in SunTrust’s deposit agreement was unconscionable at Georgia law, and after Bickerstaff’s complaint had been filed, SunTrust amended the arbitration clause to permit a window of time in which a depositor could reject arbitration by sending SunTrust written notification that complied with certain requirements. SunTrust had not notified Bickerstaff or its other customers of this change in the arbitration clause of the deposit agreement at the time Bickerstaff filed his complaint, but the complaint, as well as the first amendment to the complaint, was filed prior to the amendment’s deadline for giving SunTrust written notice of an election to reject arbitration. It was only after Bickerstaff’s complaint was filed that SunTrust notified Bickerstaff and its other existing depositors, by language printed in monthly account statements distributed on August 24, 2010, that an updated version of the deposit agreement had been adopted, that a copy of the new agreement could be obtained at any branch office or on-line, and that all future transactions would be governed by the updated agreement. SunTrust appealed the order denying its motion to compel Bickerstaff to arbitrate his claim, and the Court of Appeals affirmed the trial court, finding that the information contained in the complaint filed by Bickerstaff’s attorney substantially satisfied the notice required to reject arbitration. Bickerstaff appealed the order denying his motion for class certification, and in the same opinion the Court of Appeals affirmed that decision, holding in essence, that the contractual language in this case requiring individual notification of the decision to reject arbitration did not permit Bickerstaff to reject the deposit agreement’s arbitration clause on behalf of other putative class members by virtue of the filing of his class action complaint. The Georgia Supreme Court reversed that decision, holding that the terms of the arbitration rejection provision of SunTrust’s deposit agreement did not prevent Bickerstaff’s class action complaint from tolling the contractual limitation for rejecting that provision on behalf of all putative class members until such time as the class may be certified and each member makes the election to opt out or remain in the class. Accordingly, the numerosity requirement of OCGA 9-11-23 (a) (1) for pursuing a class complaint was not defeated on this ground. View "Bickerstaff v. SunTrust Bank" on Justia Law
In re Payment Card Interchange Fee and Merchant Discount Antitrust
In an antitrust class action brought on behalf of approximately 12 million merchants against Visa and Mastercard, as well as other various banks, plaintiffs alleged conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C. 1. After the parties agreed to a settlement releasing all claims, the district court certified two settlement-only classes and approved the settlement. Numerous objectors and opt‐out plaintiffs appealed and argued that the class action was improperly certified and that the settlement was unreasonable and inadequate. The court concluded that class members of the (b)(2) class were inadequately represented in violation of both FRCP 23(a)(4) and the Due Process Clause. The court also concluded that procedural deficiencies produced substantive shortcomings in this class action and the settlement. Consequently, the court concluded that the class action was improperly certified and the settlement was unreasonable and inadequate. The court vacated the district court's certification of the class action and reversed the approval of the settlement. The court remanded for further proceedings. View "In re Payment Card Interchange Fee and Merchant Discount Antitrust" on Justia Law