Justia Banking Opinion Summaries

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

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

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

In 2008, State Bank, a Fentura subsidiary, hired Wollschlager to deal with “problem loans.” Wollschlager’s contract provided a golden parachute worth $175,000 if the Bank fired him early. In 2009, the FDIC deemed the Bank “troubled.” In 2010, Wollschlager negotiated an amended agreement worth $245,000. Wollschlager's 2011 separation agreement provided that the $245,000 payment would comprise $138,000 (one year’s salary) within 60 days of Wollschlager’s departure; $107,000 plus his base compensation through the end of the year ($28,000) would be paid once the Bank’s conditions improved. Fentura did not seek FDIC prior approval. The FDIC and the Federal Reserve subsequently approved the $138,000 installment. FDIC regulations “generally limit payments to no more than one year of annual salary.” In 2013, Fentura sought approval to pay the remainder, acknowledging that the agreements required prior approval. The FDIC refused, citing 12 U.S.C. 1828(k).The district court granted the FDIC judgment on the record. The Sixth Circuit affirmed The statute says that the agency should withhold golden parachute payments for misconduct and should also consider whether the employee “was in a position of managerial or fiduciary responsibility,” the “length of” the employment, and whether the “compensation involved represents a reasonable payment for” the employee’s services. The FDIC reasonably found that the payment would result in a windfall of two years’ salary for an employee who worked for just three years and that the Bank never sought initial approval. View "Wollschlager v. Federal Deposit Insurance Corporation" on Justia Law

The Greens opened a Union Bank of Switzerland (UBS) account around 1980, with their daughter, Kimble, as a joint owner. Kimble directed UBS to maintain the account as a numbered account and to retain all correspondence at the bank. Kimble married an investment analyst who agreed to preserve the secrecy of the account. The couple’s joint federal tax returns did not report any income derived from the UBS account nor disclose the existence of the foreign account. After the couple divorced, Kimble's tax returns were prepared by a CPA, who never asked whether she had a foreign bank account. In 2003-2008, Kimble’s tax forms, signed under penalty of perjury, represented that she did not have a foreign bank account.In 2008, Kimble learned of the Treasury Department’s investigation into UBS for abetting tax fraud; she retained counsel. UBS entered into a deferred prosecution agreement that required UBS to unmask numbered accounts held by U.S. citizens. Kimble was accepted into the Offshore Voluntary Disclosure Program (OVDP) and agreed to pay a $377,309 penalty. Kimble withdrew from the OVDP without paying the penalty.The IRS determined that Kimble’s failure to report the UBS account was willful and assessed a penalty of $697,299, 50% of the account. Kimble paid the penalty but sought a refund. The Federal Circuit affirmed summary judgment against Kimble, finding that she violated 31 U.S.C. 5314 and that her conduct was “willful” under section 5321(a)(5). The IRS did not abuse its discretion in setting a 50% penalty. View "Kimble v. United States" on Justia Law

Wilmington Trust financed construction projects. Extensions were commonplace. Wilmington’s loan documents reserved its right to “renew or extend (repeatedly and for any length of time) this loan . . . without the consent of or notice to anyone.” Wilmington’s internal policy did not classify all mature loans with unpaid principals as past due if the loans were in the process of renewal and interest payments were current, Following the 2008 "Great Recession," Wilmington excluded some of the loans from those it reported as “past due” to the Securities and Exchange Commission and the Federal Reserve. Wilmington’s executives maintained that, under a reasonable interpretation of the reporting requirements, the exclusion of the loans from the “past due” classification was proper. The district court denied their requests to introduce evidence concerning or instruct the jury about that alternative interpretation. The jury found the reporting constituted “false statements” under 18 U.S.C. 1001 and 15 U.S.C. 78m, and convicted the executives.The Third Circuit reversed in part. To prove falsity beyond a reasonable doubt in this situation, the government must prove either that its interpretation of the reporting requirement is the only objectively reasonable interpretation or that the defendant’s statement was also false under the alternative, objectively reasonable interpretation. The court vacated and remanded the conspiracy and securities fraud convictions, which were charged in the alternative on an independent theory of liability, View "United States v. Harra" on Justia Law

Quail's 47,480-square-foot unincorporated Sonoma County property contained two houses, garages, and several outbuildings. In 2013, a building with hazardous and unpermitted electrical wiring, hazardous decking and stairs, unpermitted kitchens and plumbing, broken windows, and lacking power, was destroyed in a fire. Two outbuildings, unlawfully being used as dwellings, were also damaged. One report stated: “The [p]roperty . . . exists as a makeshift, illegal mobile home park and junkyard.” After many unsuccessful attempts to compel Quail to abate the conditions, the county obtained the appointment of a receiver under Health and Safety Code section 17980.7 and Code of Civil Procedure section 564 to oversee abatement work. The banks challenged a superior court order authorizing the receiver to finance its rehabilitation efforts through a loan secured by a “super-priority” lien on the property and a subsequent order authorizing the sale of the property free and clear of U.S. Bank’s lien.The court of appeal affirmed in part. Trial courts enjoy broad discretion in matters subject to a receivership, including the power to issue a receiver’s certificate with priority over pre-existing liens when warranted. The trial court did not abuse its discretion in subordinating U.S. Bank’s lien and confirming the sale of the property free and clear of liens so that the receiver could remediate the nuisance conditions promptly and effectively, but prioritizing the county’s enforcement fees and costs on equal footing with the receiver had no basis in the statutes. View "County of Sonoma v. U.S. Bank N.A." on Justia Law

In 2005-2007, the borrowers obtained residential home mortgages on California properties. California law would normally have entitled them to “at least 2 percent simple interest per annum” on any funds held in escrow, California Civil Code Section 2954.8. The lender, a federal savings association organized and regulated under the Home Owners’ Loan Act of 1933 (HOLA), 12 U.S.C. 1461, did not pay interest because HOLA preempts California law. In a suit against the lender’s successor, Chase, a national bank organized and regulated under the National Bank Act, 12 U.S.C. 38, the district court denied the lender’s motion to dismiss; the Ninth Circuit has held that there is no “conflict preemption” between the National Bank Act and the California law.The Ninth Circuit reversed. HOLA field preemption principles applied to the claims against Chase even though its conduct giving rise to the complaint occurred after it acquired the loans in question. Because California’s interest-on-escrow law imposed a requirement regarding escrow accounts; affected the terms of sale, purchase, investment in, and participation in loans originated by savings associations; and had more than an incidental effect on the lending operations of savings associations, it was preempted by 12 C.F.R. 560.2(b)(6) and (b)(10), and 560.2(c). View "McShannock v. JP Morgan Chase Bank NA" on Justia Law

A mortgage conveys an interest in real property as security. Lenders often require borrowers to maintain hazard insurance that protects the property. If the borrower fails to maintain adequate coverage, the lender may buy the insurance and force the borrower to cover the cost (force-placed coverage). States generally require insurers to file their rates with an administrative agency and may not charge rates other than the filed rates. The filed-rate is unassailable in judicial proceedings even if the insurance company defrauded an administrative agency to obtain approval of the rate.Borrowers alleged that their lender, Nationstar, colluded with an insurance company, Great American, and an insurance agent, Willis. Great American allegedly inflated the filed rate filed so it and Willis could return a portion of the profits to Nationstar to induce Nationstar’s continued business. The borrowers paid the filed rate but claimed that the practice violated their mortgages, New Jersey law concerning unjust enrichment, the implied covenant of good faith and fair dealing, and tortious interference with business relationships; the New Jersey Consumer Fraud Act; the Truth in Lending Act, 15 U.S.C. 1601–1665; and RICO, 18 U.S.C. 1961–1968.The Third Circuit affirmed the dismissal of the suit. Once an insurance rate is filed with the appropriate regulatory body, courts have no ability to effectively reduce it by awarding damages for alleged overcharges: the filed-rate doctrine prevents courts from deciding whether the rate is unreasonable or fraudulently inflated. View "Leo v. Nationstar Mortgage LLC of Delaware" on Justia Law

In 2012, Seaway Bank sued J&A to collect on loans secured by a mortgage on Chicago property. In 2013, the court entered a judgment of foreclosure. The court approved the sale of the mortgaged property and entered a $116,381 deficiency judgment against the guarantor. In 2017, Illinois regulators closed Seaway. The FDIC was appointed as receiver, set a claims bar date, and published notice. J&A filed no timely claims. Months later, J&A filed a Petition to Quash Service in the 2012 state-court lawsuit. J&A argued that once relief was granted, it was entitled to the property.The FDIC removed the proceeding to federal court and moved to stay the proceedings to allow J&A to exhaust the mandatory claims process under the Financial Institutions Reform, Recovery, and Enforcement Act, 12 U.S.C. 1821(d). The court granted the stay; J&A did not submit any claims by the submission deadline. The FDIC moved to dismiss for failure to exhaust the Act's claims process. J&A asserted that the jurisdiction-stripping provision applied only to claims seeking payment from a failed bank and that J&A did not seek payment but only to quash service and vacate void orders; only if the court granted that non-monetary relief could they pursue “possessory relief,” so that the FDIC’s motion was not ripe because they were not yet seeking the return of the property or monetary relief. The Seventh Circuit affirmed dismissal. The district court lacked jurisdiction over the Petition because J&A failed to exhaust administrative remedies. View "Seaway Bank & Trust Co. v. J&A Series I, LLC, Series C" on Justia Law