Justia Banking Opinion SummariesArticles Posted in Government & Administrative Law
JPMorgan Chase Bank, N.A. v. Superior Court
A qui tam plaintiff alleged that two banks violated the California False Claims Act (CFCA) by failing to report and deliver millions of dollars owing on unclaimed cashier’s checks to the State of California as escheated property. The trial court denied the banks’ motions to dismiss. The banks sought writ relief.The court of appeal denied relief, upholding the denial of the motions to dismiss. The court rejected the banks’ argument that a qui tam plaintiff may not pursue a CFCA action predicated on a failure to report and deliver escheated property unless the California State Controller first provides appropriate notice to the banks under Code of Civil Procedure section 1576. For pleading purposes, the complaints adequately allege the existence of an obligation as required under the CFCA: the plaintiff adequately alleged that the banks were obligated to report and deliver to California the money owed on unredeemed cashier’s checks, Allowing this action to proceed does not violate the banks’ due process rights. View "JPMorgan Chase Bank, N.A. v. Superior Court" on Justia Law
Rop v. Federal Housing Finance Agency
Fannie Mae purchases mortgage loans from commercial banks, which enables the lenders to make additional loans, finances those purchases by packaging the mortgage loans into mortgage-backed securities, then sells those securities to investors. In 1968, Fannie Mae became a publicly-traded, stockholder-owned corporation. Freddie Mac also buys mortgage loans and securities and sells those mortgage-backed securities to investors. In 1989, Freddie Mac became a publicly traded, stockholder-owned corporation. In the 2008 recession, both entities suffered precipitous drops in the value of their mortgage portfolios. The Federal Housing Finance Agency (FHFA) was established and authorized to undertake extraordinary measures to resuscitate the companies, 12 U.S.C. 4511(b)(1).Fannie Mae and Freddie Mac shareholders sought to nullify an agreement (the “third amendment”) between FHFA and the Treasury Department that “secured unlimited funding" from Treasury in exchange for "almost all of Fannie’s and Freddie’s future profits.” The third amendment was authorized by FHFA’s Acting Director, who was serving in violation of the Appointments Clause. Shareholders also claimed that they are entitled to retrospective relief because the Supreme Court held in 2021 that FHFA’s enabling statute contained an unconstitutional removal restriction. The district court dismissed the complaint. The Sixth Circuit reversed, holding that the Acting Director was not serving in violation of the Constitution when he signed the third amendment. The court remanded for determination of whether the unconstitutional removal restriction inflicted harm on shareholders. View "Rop v. Federal Housing Finance Agency" on Justia Law
Bauer v. Federal Deposit Insurance Corp.
The United States Court of Appeals for the District of Columbia Circuit reversed the judgment of the district court declining to reach the merits of Plaintiffs' complaint challenging a determination of the Federal Deposit Insurance Corporation (FDIC) as unlawful under the Administrative Procedure Act (APA), 5 U.S.C. 706(2), holding that the district court erred in concluding that the FDIC exceeded its authority in making the determination.Plaintiffs, two bank executives, were fired after a proposed merger because they refused to accept a reduction in the amount of a payment that was contractually provided for them. Plaintiffs sued the bank that terminated them and the bank with which it merged, alleging that they were entitled to the full payments. The banks, in turn, sought guidance from the FDIC as to whether the relief sought by Plaintiffs would constitute a statutorily-restricted "golden parachute" payment. The FDIC responded that the payment would constitute a golden parachute. Plaintiffs then brought this action challenging the FDIC's determination as unlawful under the APA. The district court declined to reach the merits, concluding that the FDIC lacked authority to render a golden parachute determination at all. The Court of Appeals reversed and remanded the case, holding that the district court erred in concluding that the FDIC lacked authority to render its golden parachute determination. View "Bauer v. Federal Deposit Insurance Corp." on Justia Law
Calcutt v. Federal Deposit Insurance Corp.
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
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
1st Alliance Lending, LLC v. Department of Banking
The Supreme Court affirmed the judgment of the trial court dismissing Plaintiff's appeal from the decision of the Commissioner of Banking revoking Plaintiff's license to serve as a mortgage lender in the state, holding that the Commissioner had the legal authority to suspend and revoke Plaintiff's mortgage lender license.Plaintiff filed an administrative appeal from the Commissioner's decision to revoke Plaintiff's mortgage lender license, arguing that the governing statutory scheme precluded the Department of Banking from suspending its license. The trial court affirmed the Commissioner's decision. The Supreme Court affirmed, holding that the trial court properly affirmed the Commissioner's decision. View "1st Alliance Lending, LLC v. Department of Banking" on Justia Law
City of Oakland v. Wells Fargo & Co.
The City of Oakland sued under the Fair Housing Act, claiming that Wells Fargo’s discriminatory lending practices caused higher default rates, which triggered higher foreclosure rates that drove down the assessed value of properties, ultimately resulting in lost property tax revenue and increased municipal expenditures. In 2020, the Ninth Circuit affirmed the denial of Wells Fargo's motion to dismiss claims for lost property-tax revenues and affirmed the dismissal of Oakland's claims for increased municipal expenses.On rehearing, en banc, the Ninth Circuit concluded that all of the claims should be dismissed. Under the Supreme Court’s 2017 holding, Bank of America Corp. v. City of Miami, foreseeability alone is not sufficient to establish proximate cause under the Act; there must be “some direct relation between the injury asserted and the injurious conduct alleged.” The downstream “ripples of harm” from the alleged lending practices were too attenuated and traveled too far beyond the alleged misconduct to establish proximate cause. The Fair Housing Act is not a statute that supports proximate cause for injuries further downstream from the injured borrowers; the extension of proximate cause beyond that first step was not administratively possible and convenient. Oakland also failed sufficiently to plead proximate cause for its increased municipal expenses claim. View "City of Oakland v. Wells Fargo & Co." on Justia Law
Lexon Insurance Co., Inc. v. Federal Deposit Insurance Corp.
The Fifth Circuit affirmed the district court's grant of summary judgment to the FDIC receiver (FDIC-R) and the Federal Rule of Civil Procedure 12(b)(1) dismissal of Lexon's Federal Tort Claims Act (FTCA) claim against the FDIC in its corporate capacity. In this case, Lexon filed suit against the FDIC-R alleging violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).The court concluded that the district court did not err in sua sponte granting summary judgment. Although the district court erred in failing to notify the parties, that error was harmless. The court held that letters of credit are repudiable contracts for the purposes of 12 U.S.C. 1821(e)(1); the FDIC-R repudiated the letters of credit within a "reasonable period" under section 1821(e)(2); and Lexon lacks "actual direct compensatory damages" under FIRREA. The court also concluded that Lexon failed to establish an analogous private liability and the district court correctly dismissed Lexon's FTCA claim for lack of subject-matter jurisdiction. View "Lexon Insurance Co., Inc. v. Federal Deposit Insurance Corp." on Justia Law
Lacewell v. Office of the Comptroller of the Currency
The Superintendent of the New York State Department of Financial Services (DFS) filed suit against the Office of the Comptroller of the Currency and the U.S. Comptroller of the Currency (together, the "OCC"), challenging the OCC's decision to begin accepting applications for special-purpose national bank (SPNB) charters from financial technology companies (fintechs) engaged in the "business of banking," including those that do not accept deposits. The district court ultimately entered judgment in favor of DFS, setting aside OCC's decision.The Second Circuit reversed, concluding that DFS lacks Article III standing because it failed to allege that OCC's decision caused it to suffer an actual or imminent injury in fact. The court explained that the Fintech Charter Decision has not implicated the sorts of direct preemption concerns that animated DFS's cited cases, and it will not do so until OCC receives an SPNB charter application from or grants such a charter to a non-depository fintech that would otherwise be subject to DFS's jurisdiction. The court was also unpersuaded that DFS faces a substantial risk of suffering its second alleged future injury—that it will lose revenue acquired through annual assessments. Because DFS failed to adequately allege that it has Article III standing to bring its Administrative Procedure Act claims against OCC, those claims must be dismissed without prejudice.The court also found that DFS's claims are constitutionally unripe for substantially the same reason. Finally, the court lacked jurisdiction to decide the remaining issues on appeal. Accordingly, the court remanded to the district court with instructions to enter a judgment of dismissal without prejudice. View "Lacewell v. Office of the Comptroller of the Currency" on Justia Law
Weiss v. National Westminster Bank PLC
The Second Circuit affirmed the district court's dismissal of the operative amended complaints in two actions seeking to hold defendant bank liable under the Antiterrorism Act of 1990 (ATA), for providing banking services to a charitable organization with alleged ties to Hamas, a designated Foreign Terrorist Organization (FTO) alleged to have committed a series of terrorist attacks in Israel in 2001-2004. The actions also seek to deny leave to amend the complaints to allege aiding-and-abetting claims under the Justice Against Sponsors of Terrorism Act (JASTA).The court concluded that 18 U.S.C. 2333(a) principles announced in Linde v. Arab Bank, PLC, 882 F.3d 314 (2d Cir. 2018), were properly applied here. The court explained that, in order to establish NatWest's liability under the ATA as a principal, plaintiffs were required to present evidence sufficient to support all of section 2331(1)'s definitional requirements for an act of international terrorism. The court saw no error in the district court's conclusion that plaintiffs failed to proffer such evidence and thus NatWest was entitled to summary judgment dismissing those claims. The court also concluded that the district court appropriately assessed plaintiffs' request to add JASTA claims, given the undisputed evidence adduced, in connection with the summary judgment motions, as to the state of NatWest's knowledge. Therefore, based on the record, the district court did not err in denying leave to amend the complaints as futile on the ground that plaintiffs could not show that NatWest was knowingly providing substantial assistance to Hamas, or that NatWest was generally aware that it was playing a role in Hamas's acts of terrorism. The court dismissed the cross-appeal as moot. View "Weiss v. National Westminster Bank PLC" on Justia Law