Justia Banking Opinion Summaries

The district court held defendant in contempt after finding him in violation of a consent order limiting his participation in the mortgage industry. The district court ordered the disgorgement of over half-a-million dollars of defendant's contemptuous earnings.The Fourth Circuit affirmed the district court's contempt decision, holding that the district court cited several proper reasons for holding defendant in contempt. However, the district court based its disgorgement sanction on an erroneous legal interpretation of the terms of the underlying consent order. Accordingly, the court vacated the disgorgement order and remanded for further proceedings. View "Consumer Financial Protection Bureau v. Klopp" on Justia Law

Ahmed co‐owned an LLC that owned a condominium building. Ahmed recruited individuals to pose as buyers for the building's units and to submit fraudulent loan applications to lenders, including Fifth Third. The participants split the loan proceeds; no payments were made on the loans. Kaufman was the seller's attorney for every closing. The closings were conducted by Traditional Title at Kaufman’s law office. Traditional received closing instructions from Fifth Third to notify it immediately of any misrepresentations and to suspend the transaction if “the closing agent has knowledge that the borrower does not intend to occupy the property.” Kaufman concealed the buyers’ misrepresentations and instructed closing agents to complete closings even when buyers were purchasing multiple properties. Ahmed and Kaufman extended the scheme to other buildings. Although Kaufman testified that he was not aware of the fraud, Ahmed testified that Kaufman knew the buyers were part of the scheme. Two closing agents testified that they informed Kaufman about misrepresentations in loan applications. The Seventh Circuit affirmed a fraud judgment for Fifth Third. Kaufman participated individually in each closing as counsel and personally directed Traditional’s employees to conceal the fraud from Fifth Third, for his personal gain. The judgment against Kaufman was not derived solely from Traditional’s liability, based on his membership in the LLC, so the Illinois LLC Act does not bar his liability. Kaufman is not shielded by being the attorney for the seller in the fraudulent transactions. View "Fifth Third Mortgage Company v. Kaufman" on Justia Law

This case came to the Georgia Supreme Court by way of three certified questions from the United States Court of Appeals for the Eleventh Circuit. As the receiver of the Buckhead Community Bank, the Federal Deposit Insurance Corporation (FDIC) sued nine former directors and officers of the Bank in federal district court, alleging that the former directors and officers were negligent and grossly negligent under Georgia law for their approval of ten commercial real-estate loans. At the conclusion of the trial, the jury found that some of the former directors and officers were negligent in approving four of ten loans at issue, and awarded the FDIC $4,986,993 in damages. The district court entered a final judgment in that amount and held the former directors and officers jointly and severally liable. They timely appealed to the Eleventh Circuit, arguing the district court erred by failing to instruct the jury on apportionment, which, they say, was required by OCGA 51-12-33 because purely pecuniary harms (such as the losses at issue here) were included within “injury to person or property” under Georgia’s apportionment statute. Concluding that these arguments required answers to questions of law that “have not been squarely answered by the Georgia Supreme Court or the Georgia Court of Appeals,” the Eleventh Circuit certified questions of Georgia law to the Georgia Supreme Court. The Georgia Court concluded OCGA 51-12-33 did apply to tort claims for purely pecuniary losses against bank directors and officers, but did not abrogate Georgia’s common-law rule imposing joint and several liability on tortfeasors who act in concert insofar as a claim of concerted action invokes the narrow and traditional common-law doctrine of concerted action based on a legal theory of mutual agency and thus imputed fault. View "Federal Deposit Insurance Corporation v. Loudermilk" on Justia Law

The Chois consulted in 2003 with defendants, who advised the Chois that an IRC 412(i) Plan retirement account would provide tax advantages, asset protection, and steady income. It required several steps including the purchase of “whole life” insurance for eventual exchange for American General Universal Life “Platinum” policies. The initial purchase was $1,275,000; a second purchase cost $439,000. The policies comprised 70-75 percent of the Plan portfolio. The IRS audited the Chois in 2006. Defendants changed their advice. Plaintiffs sued, alleging cash losses attributable to loss in value and that they were required to pay $440,000 in back taxes and interest, plus $60,000 in penalties, and faced future payments to the Franchise Tax Board of California and anticipated IRS penalties of $600,000. Defendants cross-complained for indemnity and comparative fault against American General. The trial court found the claims time-barred. The court of appeal affirmed, upholding a determination that the limitations period began to run in September 2007, when plaintiffs were “on notice” that the IRS would impose penalties, not in 2010 when penalties were assessed; the court declining to consider any tolling effect created by the ongoing fiduciary relationship; and application of the 2007 “notice” date as a bar to all claims. View "Choi v. Sagemark Consulting" on Justia Law

This appeal arose out of a $17 million verdict rendered in favor of Francis Maybank for claims sounding in contract, tort, and the South Carolina Unfair Trade Practices Act (UTPA). Maybank brought this action alleging he received faulty investment advice from Branch Banking and Trust (BB&T - the Bank) through BB&T Wealth Management (Wealth Management) and BB&T Asset Management (Asset Management), all operating under the corporate umbrella of BB&T Corporation (collectively, Appellants). Appellants appealed on numerous grounds, and Maybank appealed the trial court's denial of prejudgment interest. After review, the Supreme Court reversed as to an award of punitive damages based on a limitation of liability clause. The Court affirmed on all other grounds. View "Maybank v. BB&T" on Justia Law

This case arose out of a failed development project undertaken by BRN Development, Inc. in Coeur d’Alene. The project was for the development of a high-end 325-unit residential and golf course community on the west side of Lake Coeur d'Alene known as "Black Rock North." American Bank was the lender for this project. The Bank ultimately brought a foreclosure action against BRN. BRN brought a cross-claim against Taylor Engineering, Inc., alleging negligence for its role in the development. Taylor recorded a lien against the development. BRN defaulted on the loan, and the Bank named BRN, Taylor, and any other entity claiming an interest in the development. Taylor made a demand on BRN for payment for services rendered. The demand stated that Taylor would "complete the necessary documents" and request the necessary signatures from the local government entities involved in the final PUD approval. Taylor advised BRN that "if the final subdivision approval is not completed and recorded by May 29, 2009, the PUD and preliminary plat approval will expire, the PUD and plat will not vest in the recorded ownership to the real property involved, and the property will revert to its prior zoning and density." This statement was erroneous; it was undisputed that the final plat did not need to be recorded by May 29 in order to vest the PUD. In BRN's cross-claim against Taylor, it alleged professional negligence, negligent and intentional misrepresentation, and failure to disclose based on the erroneous statement Taylor made in its demand letter. The district court separated the claims between Taylor and BRN from the remainder of the American Bank litigation and ultimately held that Taylor was not liable to BRN. BRN appealed. The Supreme Court found no reversible error with the district court's judgment that BRN failed to meet its burden of proving its claims against Taylor, and affirmed that court's judgment. View "American Bank v. BRN Dev." on Justia Law

Haddad bought his condominium in 1991 and lived in the unit until 2005, when he began renting it out. In 2008, a law firm, representing the association, sent Haddad a notice of delinquency, stating that Haddad owed $803 in unpaid condominium assessments, $40 in late charges, and $55 in legal fees and costs. Haddad notified the firm that he disputed the amount demanded, that he had never missed a monthly dues payment, but that he had been “singled out and charged with various violations” by the management company. Correspondence continued for several months, with the amount owed increasing each month and Haddad contesting the charges. The law firm ultimately recorded a Notice of Lien, which was discharged about six months later. Haddad sued under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692, and the Michigan Collection Practices Act, alleging use of a false, deceptive or misleading representation in the collection of a debt, and continuing collection of a disputed debt before verification of the debt. The district court rejected the claims on the ground that the debt was commercial because the unit was rented when collection began. The Sixth Circuit court reversed, holding that an obligation to pay assessments arose from the original purchase and constituted a “debt” under the FDCPA. On remand, the district court granted summary judgment, finding that the firm had properly verified the debt and that the collection efforts were not deceptive or misleading. The Sixth Circuit reversed and remanded, based on failure to properly verify the debt.View "Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC" on Justia Law

The U.S. District Court for the Northern District of Georgia certified a question of Georgia law to the Georgia Supreme Court. As the receiver of the Buckhead Community Bank, the Federal Deposit Insurance Corporation sued nine former officers and directors of the bank, alleging that they were negligent with respect to the making of loans, which, according to the FDIC, led the bank, to suffer nearly $22 million in losses. The defendants moved to dismiss the lawsuit, arguing that the business judgment rule relieved officers and directors of any liability for ordinary negligence. The FDIC responded that such a business judgment rule is no part of the common law in Georgia, and even if it were, it did not apply to bank officers and directors, insofar as the statutory law in Georgia explicitly requires bank officers and directors to exercise ordinary diligence and care. Unable to "discern clear and controlling precedent the federal district court asked: "[d]oes the business judgment rule in Georgia preclude as a matter of law a claim for ordinary negligence against the officers and directors of a bank in a lawsuit brought by the FDIC as receiver for the bank?" The Georgia Court answered that question in the negative. View "Fed. Deposit Ins. Corp. v. Loudermilk" on Justia Law

Plaintiff (the customer) filed suit against State Street (the custodian bank), alleging in essence that it had a duty to notify him that the securities in his account were worthless. The district court granted State Street's motion to dismiss the contract claims on the ground that State Street had a merely administrative role in managing plaintiff's accounts and thus owed him no duty to guard against his investment advisor's misconduct. The district court concluded that plaintiff's negligence claims were barred by Florida's economic loss rule and plaintiff had not sufficiently alleged knowledge on the part of State Street in regards to the aiding and abetting claims. The court affirmed, holding that, under these facts, the custodian bank breached no duty, contractual or otherwise, by accepting on behalf of its customer securities that later turn out to be fraudulent and listing those securities on monthly account statements issued to the customer. Plaintiff's allegations failed to state claims for breach of contract; plaintiff failed to establish that State Street owed him an independent duty to monitor the investments in his account, verify their market value, or ensure they were in valid form; therefore, he failed to state valid negligence claims; plaintiff's allegations were insufficient to state a claim for aiding and abetting; and plaintiff's claims for breach of fiduciary duty and negligent misrepresentation also failed. View "Lamm v. State Street Bank and Trust" on Justia Law

The Comptroller of the Currency found that petitioner, as the CEO and a director of the Bank, had engaged in a pattern of willfully misrepresenting the Bank's capital reserves to the OTS and the Bank's board of directors, and he issued orders prohibiting petitioner from participation in the affairs of any federally insured financial institution and assessing a civil penalty of one million dollars. Petitioner sought dismissal of the Comptroller's decision and orders, inter alia, on the grounds of legal error in relying on later-developed standards in the OTS New Directions Bulletin of 2009 when there were no clear standards at the relevant times, and in applying a "should have known" scienter standard in findings that required a more demanding level of scienter. The court concluded that petitioner failed to show that the stringent statutory requirements of 12 U.S.C. 1818 for an order of prohibition were not met. Accordingly, the court denied the petition for review. View "Dodge v. Comptroller of the Currency" on Justia Law