Justia Banking Opinion Summaries

The title company provided real estate closing services. From 1984 through 1995, it served as exclusive agent for defendant and managed an escrow account that defendant contractually agreed to insure. The title company was not profitable and its managers used escrow funds in a "Ponzi" scheme. In 1989, there was a $26 million shortfall. To fill the hole, the managers began looting another business, Intrust, to pay defendant's policyholders ($40.9 million) and to pay defendant directly ($27 million), so that defendant was a direct and indirect beneficiary of the title company's arrangement with Intrust. In 2000 the state agency learned that the funds were missing, took control of Intrust and placed it in receivership. In July 2010, the Receiver filed suit for money had and received, unjust enrichment, vicarious liability), aiding and abetting breach of fiduciary duty, and conspiracy. The district court dismissed based on the statute of limitations. The Seventh Circuit affirmed. The Illinois doctrine of adverse domination does not apply. That doctrine tolls the statute of limitations for a claim by a corporation against a nonboard-member co-conspirator of the wrongdoing board members.

Defendant, an immigrant, cleaned houses. She formed a cleaning service in 1992. Defendant would deposit customers' checks in the business checking account, keep some money as a fee, and withdraw the remaining amount to pay individual cleaners. The bank informed her of the requirement (31 C.F.R. 103.22(b)(1)) that it document and report transactions involving withdrawals of cash greater than $10,000. After being informed of the requirement, defendant would often withdraw more than $10,000 over the course of two days, but less than 24 hours; she withdrew amounts over $9,000 and less than $10,000 on 244 occasions in about six years. She was convicted of 23 counts of structuring transactions to avoid bank reporting, 31 U.S.C. 5324(a)(3). The court gave an "ostrich" instruction, concerning defendant's knowledge. The jury returned a special verdict subjecting $279,500 to forfeiture; the court imposed a sentence of three years of probation as well as an additional judgment of $4,800. The Seventh Circuit affirmed, finding no constitutional violation in weighing the forfeiture against the severity of the crime. Any error in giving the ostrich instruction was harmless.

Plaintiff sued individual defendants and a bank alleging violations of Wisconsin Statute section 134.01, which prohibits conspiracies to willfully or maliciously injure the reputation, trade, business or profession of another. Defendants had caused appointment of a receiver for plaintiff's business and had sued, claiming that plaintiff "looted" the business. A jury verdict against plaintiff was reversed. The receivership is still on appeal. The district court dismissed plaintiff's subsequent suit for failure to state a claim. The Seventh Circuit affirmed. While plaintiff did plead malice adequately to support a claim, the claim was barred by issue preclusion. Plaintiff was attempting to relitigate whether the imposition and ends of the receivership were proper.

A provision of the Truth-in-Lending Act, 15 U.S.C. 1601, requires that consumers receive clear and conspicuous notice of the right to rescind within three days. Regulation Z requires that the consumer be given two copies of the notice at closing; failure to comply extends the time to rescind to three years, 13 C.F.R. 226.23(a)(3). When plaintiff closed the refinancing of his home in 2007 he signed a receipt for the notices, but he claims that he discovered, two years later, that he had only one copy. The district court entered summary judgment in favor of the lender and title company. The Seventh Circuit reversed and remanded, holding that plaintiff presented enough evidence to survive summary judgment.

Husband and wife operated a mortgage fraud scheme that bought residential properties and sold those properties to nominee buyers at inflated prices. They provided lenders with false information about buyers' finances, sources of down payments, and intentions to occupy the residences. The scheme involved 37 separate transactions and resulted in net loss of more than $700,000 to various lenders. After the scheme collapsed, they went bankrupt but were not immediately prosecuted. Wife worked as a nurse in a pediatric intensive care unit. Husband worked as a installer and technician. They raised their three children and became fully engaged in their community. On the day before the ten-year statute of limitations would have expired, the government charged them with wire fraud, 18 U.S.C. 1343, and two counts of bank fraud, 18 U.S.C. 1344. They pled guilty to a single count of wire fraud, and were sentenced based on the 2010 USGS, wife to 41 months in prison, and husband to 63 months, and ordered to pay more than $700,000 in restitution. The Seventh Circuit remanded, stating that the sentencing judge failed to consider adequately unusually strong evidence of self-motivated rehabilitation. For this reason, we vacate their sentences

Plaintiff complained that defendant told credit agencies that she was behind in payments on a loan in violation of the Fair Credit Reporting Act, 15 U.S.C. 1681s–2(a). The district court dismissed the federal claim on the ground that the statute does not create a private cause of action and held that state common law claims are not preempted. The Seventh Circuit reversed, holding that the state claims should have been dismissed with prejudice. Allowing state common law claims would defeat the purpose of the statute.

Defendants were convicted of mail fraud and wire fraud (18 U.S.C. 1341, 1346) for participating in a fraudulent scheme to obtain mortgage loans. The scheme involved: recruiters, who enlisted buyers to buy properties with fraudulently obtained funds; financiers, who provided funds to buyers to facilitate the transactions; administrators, who bought fake documents to enable buyers to obtain mortgages; loan officers, who prepared fraudulent applications and sent them to lenders. Between 2003 and 2005, the group acquired more than 70 properties for which lenders provided $7.2 million in loans. Most of the properties went into foreclosure, resulting in losses to the lenders of $2.2 million. The Seventh Circuit affirmed the convictions and sentences. The use of the term "straw buyer" in the confession of a nontestifying co-defendant did not obviously refer to the defendant and violate his Sixth Amendment right of confrontation under the "Bruton" doctrine. The court properly applied a "sophisticated means" sentence enhancement and gave an "ostrich" instruction concerning defendant's knowledge.

Plaintiff, a plastics manufacturer, dealt with a container company that filed for bankruptcy in 2002, filed a creditor's claim for more than $7 million, and objected to the sale of assets and lien priorities. The debtor had pledged all of its assets as security for a line of credit with ANB, its primary lender. Plaintiff claimed that there was a fraudulent scheme under which the debtor would produce containers and not pay for them, so that that they would be part of inventory when a successor company, let by insiders, purchased the assets in bankruptcy. After its claims were rejected in the bankruptcy proceedings, plaintiff sued ANB and Gateway alleging violation of RICO (18 U.S.C. 1961) and common-law fraud. The district court dismissed as "res judicata" but denied Rule 11 sanctions. The Seventh Circuit affirmed the dismissal, citing collateral estoppel, issue preclusion. The court did not find that the claims were frivolous or designed to harass.

Plaintiffs, evicted from their home following a state court foreclosure judgment, sought relief in federal court. The district court rejected all claims. The Seventh Circuit affirmed. The district court correctly considered the Rooker-Feldman doctrine and concluded that the doctrine applied to only two of the 22 claims: those that claimed injury caused by the state-court judgment of foreclosure, as opposed to injury caused by the defendants’ actions in enforcing the judgment. Plaintiffs offered no evidence of discriminatory motive with respect to their race or disabilities and did not allege specific facts establishing that there were material facts in dispute.

Defendant is one of several investors (underwriters) in a mortgage bankers blanket bond issued to plaintiff to insure against financial loss resulting from employee misconduct. One of plaintiff's employees engaged in a scheme by which, for a kickback, he caused plaintiff to fund mortgages below its standards. Not knowing the loans were substandard, plaintiff sold them, warranting that they met its standards. Plaintiff was forced to repurchase the loans. The underwriters denied the claim. The district court dismissed a suit, finding that the bond did not cover the loss. The Seventh Circuit affirmed. The fidelity bond at issue contains direct-loss causation language. A financial loss resulting from contract liability to third parties is not directly caused by employee misconduct, even if employee misconduct is the source of the contract liability. Plaintiff's loss resulted from its contractual repurchase obligations; the employee misconduct did not directly cause the eventual financial loss. In addition, a specific exclusion in the bond bars coverage for losses resulting from loan-repurchase obligations.