Justia Banking Opinion Summaries

Articles Posted in Labor & Employment Law
by
This case arose from a dispute between Gregory Garrabrants, the CEO of BofI Federal Bank (BofI), and Charles Matthew Erhart, a former internal auditor at BofI who acted as a whistleblower. Erhart copied, transmitted, and retained various documents he believed evidenced possible wrongdoing, some of which contained Garrabrants' personal and confidential information. Garrabrants sued Erhart for accessing, taking, and subsequently retaining his personal information. A jury awarded Garrabrants $1,502 on claims for invasion of privacy, receiving stolen property, and unauthorized access to computer data.However, the Court of Appeal, Fourth Appellate District, Division One, State of California, reversed the judgment and remanded the case. The court found that the trial court made prejudicial errors in its jury instructions. Specifically, the trial court erred in instructing the jury that bank customers have an unqualified reasonable expectation of privacy in financial documents disclosed to banks. The trial court also erred in instructing the jury that Erhart's whistleblower justification defense depended on proving at least one legally unsupported element. The instructions given for Penal Code section 496 misstated the law by defining “theft” in a manner that essentially renders receiving stolen property a strict liability offense. Furthermore, the special instruction on Penal Code section 502 erroneously removed from the jury’s consideration the foundational issue of whether Garrabrants “owned” the data about him residing in BofI’s computer systems such that he could pursue a civil action under the statute. The court concluded that, in light of the record evidence, there is a reasonable possibility a jury could have found in Erhart’s favor on each of Garrabrants’ claims absent the erroneous instructions, making them prejudicial. View "Garrabrants v. Erhart" on Justia Law

by
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

by
After its appointment as receiver for Valley Bank Illinois, the Federal Deposit Insurance Corporation (FDIC) disaffirmed a benefits agreement between Valley Bank and Bunn, a bank executive. Bunn sued the FDIC to recover a “change of control termination benefit” he claims he is entitled to receive pursuant to that agreement. The district court granted the FDIC summary judgment, finding the benefit Bunn sought was a “golden parachute payment” prohibited by federal law, 12 U.S.C. 1828(k)(4)(A)(i). The Seventh Circuit affirmed. The benefit is a contingent payment that Bunn could only receive upon his termination of employment with Valley Bank; any payment of the benefit would be after a receiver was appointed for Valley Bank. Bunn presented no evidence sufficient to establish the benefit qualifies for the bona fide deferred compensation plan exception to such a golden parachute payment. View "Bunn v. Federal Deposit Insurance Corp." on Justia Law

by
Federal law bars “any person who has been convicted of any criminal offense involving dishonesty or a breach of trust” from becoming or continuing as an employee of any institution insured by the Federal Deposit Insurance Corporation (FDIC), 12 U.S.C. 1829(a)(1)(A) (Section 19) without regard to the age of the convictions. Disqualified persons may apply to the FDIC for waivers. Banking institutions may sponsor waiver applications. Wells Fargo, an FDIC-insured bank, requires job applicants to answer whether they had a conviction of a crime involving dishonesty. In 2010, Wells Fargo instituted a fingerprint-based background check for current and potential employees, which returns all criminal convictions. In 2012, Wells Fargo re-screened its entire Home Mortgage division, then terminated employees verified to have Section 19 disqualifications, without informing them of the availability of waivers or offering to sponsor waivers. Wells Fargo terminated at least 136 African Americans, 56 Latinos, and 28 white employees because of Section 19 disqualifications, and withdrew at least 1,350 conditional job offers to African Americans and Latinos and 354 non-minorities. In a suit, alleging race-based employment discrimination under Title VII of the Civil Rights Act, the court granted Wells Fargo summary judgment. The Eighth Circuit affirmed. Even if Wells Fargo’s policy of summarily terminating or not hiring any disqualified individual creates a disparate impact, the bank’s decision to comply with the statute’s command is a business necessity under Title VII. View "Williams v. Wells Fargo Bank, N.A." on Justia Law

by
Plaintiff requested payment for the one year remaining on his employment contract, but the FDIC advised that the payment was a prohibited “golden parachute,” under 12 U.S.C. 1828(k) and 12 C.F.R. 359.1, which the bank could not make without prior agency approval. Plaintiff, a former executive at Reliance Bank, filed suit against the bank and the FDIC, alleging a breach of contract under Missouri law and sought a declaration that federal law does not prohibit the payment. The district court upheld the FDIC determination and granted summary judgment to the bank. The court rejected plaintiff's argument that the agency determination is not worthy of deference because it is inconsistent with FDIC positions taken elsewhere. Rather, the court concluded that Chevron and Auer deference is irrelevant because the agency treats the word "contingent" as unambiguous and relies on its dictionary meaning. The court concluded that one could reasonably characterize the payment obligation as contingent on either plaintiff’s termination or his continued employment. In this case, plaintiff alleged the bank came to owe the payment because of his termination, not because of services he rendered. Therefore, the agency determined the payment was contingent on termination, and the court found this finding was neither arbitrary nor capricious. The court concluded that the bank’s obligation to pay plaintiff was rendered impossible when the FDIC determined the payment was a golden parachute. The court rejected plaintiff's remaining claims and affirmed the judgment. View "Rohr v. Reliance Bank" on Justia Law

by
While living in Maryland, Petitioner opened a personal line of credit and a credit card account with Respondent. Respondent later filed two complaints against Petitioner in a Maryland district court, one for the outstanding balance on the credit card account and the other for the amount owed on the line of credit. At the time of the filings, Petitioner was living and working in Texas. Respondent was awarded default judgments. Respondent subsequently secured two writs of garnishment in the same actions from the district court. The writs were served on the resident agent of Petitioner’s employer. Petitioner moved to quash the writs, arguing that his wages earned solely for work he performed in Texas were not subject to garnishment in Maryland. The district court denied the motions to quash. The Court of Appeals affirmed, holding that the district court in its continuing and ancillary jurisdiction properly ordered Petitioner’s wages earned in Texas to be subject to garnishment served upon Petitioner’s employer because of the employer’s continuous and systematic business in Maryland. View "Mensah v. MCT Fed. Credit Union" on Justia Law

by
Scott Harvard was a former senior executive officer of Shore Bank and Hampton Roads Bankshares (HRB). During the 2008 financial crisis, HRB elected to participate in the federal Troubled Assets Relief Program (TARP). The TARP agreement required HRB to comply with the limits on executive compensation set forth in the Emergency Economic Stabilization Act (EESA) and its implementing regulations. In 2009, Harvard terminated his employment. Thereafter, Harvard filed a breach of contract action against Shore Bank and HRB alleging that HRB breached the parties’ employment agreement by refusing to make a “golden parachute payment” pursuant to the agreement. HRB filed a plea in bar, arguing that the prohibition on golden parachute payments in EESA section 111, as implemented by the June Rule, barred it from paying Harvard pursuant to the employment agreement. The circuit court rejected HRB’s argument and awarded Harvard $655,495 plus interest. The Supreme Court reversed and vacated the award of damages in favor of Harvard, holding that EESA section 111, as implemented by the June Rule, prohibited the golden parachute payment under the circumstances of this case. View "Hampton Roads Bankshares, Inc. v. Harvard" on Justia Law

by
Bell alleged that her former employer, PNC Bank, failed to pay her overtime wages in violation of the Fair Labor Standards Act, 29 U.S.C. 201, and the Illinois Minimum Wage and Wage Payment and Collection Acts, and that the failure was not an isolated incident, but rather part of a PNC policy or practice that affected other employees. Bell claimed that she was evaluated, in part, based on how many new accounts she brought into the bank, and in order to generate new accounts she needed to spend “significant” time outside of her regular work hours visiting prospective clients. Some of the assignments to visit prospective clients came from a PNC vice president who did not work at the Bell’ branch. According to Bell, when she submitted time cards reflecting overtime work, her branch manager and a PNC regional manager told her that “PNC would not permit... overtime for the branch,” and “PNC expected its employees to handle their outside-the-branch work on their own time, without reporting any extra hours that they worked.” The Seventh Circuit affirmed certification of a class of plaintiffs. Many issues remain unanswered and the district court was correct to conclude that a class action would be an appropriate and efficient pathway to resolution. View "Bell v. PNC Bank" on Justia Law

by
Falco sold insurance for Farmers, under a 1990 Agent Agreement, which provided that Falco would be paid Contract Value upon termination of the Agreement. As a Farmers agent, Falco was entitled to borrow money from the Credit Union. In 2006, Falco obtained a $28,578.00 business loan and assigned his interest in his Agreement receivables—including Contract Value—as security. The loan document gave the Credit Union authority to demand payments that Farmers owed Falco; it could tender Falco’s resignation to levy on Falco’s Contract Value. Falco failed to make payments and filed a Chapter 7 bankruptcy petition, listing the loan on his schedules. Falco received a discharge in February 2011, covering his liability under his Credit Union loan. In April 2011, the Credit Union notified Farmers that Falco had defaulted and exercised the power of attorney to terminate his Agent Agreement. Farmers notified Falco that the resignation had been accepted, calculated Contract Value as $104,323.30, paid the Credit Union $29,180.92, and paid the balance to Falco. The Eighth Circuit affirmed summary judgment in favor of defendants, finding that the Credit Union’s secured interest survived bankruptcy; it did not tortuously interfere with Falco’s Agreement because it had a legal right to terminate the Agreement; and Falco failed to show an underlying wrongful act or intentional tort as required under civil conspiracy. View "Falco v. Farmers Ins. Grp." on Justia Law

by
This case concerned the withdrawal liability for a pro rata share of unfunded vested benefits to a multiemployer pension fund of Scott Brass, Inc. (SBI), a bankrupt company. SBI had withdrawal pension obligations to the multiemployer pension fund (TPF), which sought to impose the obligations on two private equity funds (Plaintiffs). Plaintiffs asserted they were passive investors that indirectly controlled SBI and sought a declaratory judgment against the TPF. The TPF counterclaimed and sought payment of the withdrawal liability at issue. The district court entered summary judgment for Plaintiffs. The First Circuit Court of Appeals affirmed in part, reversed in part, and vacated in part, holding (1) at least one of the private equity funds that operated SBI sufficiently operated and was advantaged by its relationship with SBI, and further factual development was necessary as to the other equity fund; (2) the district court erred in entering summary judgment for Plaintiffs under the "trades or businesses" aspect of a two-part "control group" test under 29 U.S.C. 1301(b)(1); and (3) the district court correctly entered summary judgment for Plaintiffs on TPF's claim of liability on the ground that the funds had engaged in a transaction to evade or avoid withdrawal liability. Remanded. View "Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund" on Justia Law