Justia Banking Opinion Summaries

A group of borrowers in California brought a class action against Flagstar Bank, alleging that the bank failed to pay interest on their mortgage escrow accounts as required by California Civil Code § 2954.8(a). Flagstar did not pay interest on these accounts, arguing that the National Bank Act (NBA) preempted the California law, and therefore, it was not obligated to comply. The plaintiffs sought restitution for the unpaid interest.The United States District Court for the Northern District of California, relying on the Ninth Circuit’s prior decision in Lusnak v. Bank of America, N.A., granted summary judgment for the plaintiffs. The court ordered Flagstar to pay restitution and prejudgment interest to the class. Flagstar appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed the district court’s decision, holding that Lusnak foreclosed Flagstar’s preemption argument. However, the Ninth Circuit remanded the case to the district court to correct the class definition date and the judgment amount due to errors in the statute of limitations tolling and calculation of damages.On remand from the United States Supreme Court, following its decision in Cantero v. Bank of America, N.A., the Ninth Circuit reviewed whether it could overrule Lusnak in light of Cantero. The court held that Cantero did not render Lusnak “clearly irreconcilable” with Supreme Court precedent, and therefore, the panel lacked authority to overrule Lusnak. The Ninth Circuit affirmed the district court’s holding that the NBA does not preempt California’s interest-on-escrow law, but vacated and remanded the judgment and class certification order for modification of the class definition date and judgment amount. View "KIVETT V. FLAGSTAR BANK, FSB" on Justia Law

Andrew King, a customer of Navy Federal Credit Union (NFCU), was charged a $15 returned-check fee despite not being at fault for the check's failure to clear. King argued that this fee constituted an "unfair" and "unlawful" business practice under California's Unfair Competition Law (UCL) and violated the federal Consumer Financial Protection Act (CFPA). He filed a lawsuit in state court, which NFCU removed to federal court.The United States District Court for the Central District of California dismissed King's state law claims, ruling that they were preempted by federal law. Specifically, the court found that 12 C.F.R. § 701.35(c), which governs federal credit unions, expressly preempted King's UCL claim. The court concluded that state laws regulating account fees are not applicable to federal credit unions, and thus, King's claim was preempted.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's dismissal. The Ninth Circuit held that the plain language of 12 C.F.R. § 701.35(c) expressly preempts state laws regulating account fees for federal credit unions. The court rejected King's arguments that the UCL transcends the preemption clause, stating that all state laws regulating account fees, whether general or specific, have no application to federal credit unions. The court emphasized that the regulation's preemption clause operates independently of whether a fee complies with federal law. Thus, the Ninth Circuit affirmed the district court's decision to dismiss King's UCL claim on preemption grounds. View "KING V. NAVY FEDERAL CREDIT UNION" on Justia Law

The Ninth Circuit filed an amended opinion affirming in part and vacating in part the dismissal of plaintiff's action for failure to state a claim, holding that the trustee of a California deed of trust is a "debt collector" under the Fair Debt Collection Practices Act (FDCPA).Actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect "debt" as that term is defined by the FDCPA; enforcement of a security interest will often involve communications between the forecloser and the consumer; and when these communications are limited to the foreclosure process, they do not transform foreclosure into debt collection. The panel explained that, because the money collected from a trustee's sale is not money owed by a consumer, it is not "debt" as defined by the FDCPA. In this case, the notices at issue did not request payment from plaintiff, but merely informed her that the foreclosure had begun, explained the timeline, and apprised her of her rights. Therefore, the panel held that ReconTrust's activities fell into the category of enforcement of a security interest, rather than general debt collection. View "Vien-Phuong Thi Ho v. ReconTrust" on Justia Law

The parties' dispute arose out of transactions originating from the savings and loan crisis during the 1970's and 1980's. Washington Mutual appealed a judgment entered in favor of the Government after a bench trial in a tax refund action. The Ninth Circuit affirmed, holding that Washington Mutual did not meet its burden of establishing a cost basis for its intangible assets. The panel concluded that the district court held Washington Mutual to the correct burden; did not make any clearly erroneous factual findings; permissibly determined that the cumulative fundamental flaws underlying the Grabowski Model rendered it incapable of producing a reliable value for the Missouri Branching Right; and was thus not required to sua sponte assign a value to that Right. Even assuming the Missouri Branching Right could be valued, Washington Mutual nonetheless failed to show reversible error as to the denial of its abandonment deduction. View "Washington Mutual v. United States" on Justia Law

The SBA guaranteed a loan between a private bank and Michael Bensal's company, BCI. The private bank filed suit against BCI as the borrower and Bensal as a personal guarantor after BCI defaulted on the loan. The private bank recovered a default judgment and assigned that judgment to the SBA. Bensal later received an inheritance from his father's trust that he did not accept and, instead, disclaimed. Bensal's disclaimer of the inheritance legally passed his trust share to his two children and prevented creditors from accessing his trust share under California law. The SBA filed suit seeking to satisfy the default judgment. The court held that the Fair Debt Collection Practices Act (FDCPA), 28 U.S.C. 3301-3308, displaces California's disclaimer law. In this case, the court concluded that Bensal's disclaimer constitutes a transfer of property under the FDCPA, and California disclaimer law did not operate to prevent the SBA from reaching Bensal's trust share. The court also concluded that the portion of the default judgment based on the second loan, which was guaranteed by the SBA, was a debt within the meaning of the FDCPA. Accordingly, the court affirmed the judgment. View "SBA v. Bensal" on Justia Law

Plaintiffs filed suit against Nationstar and others, asserting claims relating to defendants' servicing of plaintiffs' home loan. Plaintiffs alleged violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692-1692p; intentional infliction of emotional distress (IIED); and a violation of the Nevada Deceptive Trade Practices Act (DTPA), Nev. Rev. Stat. 598.0915–598.0925, 598.0934. The district court dismissed the complaint. The court concluded that the district court properly dismissed plaintiffs' claims of violations of sections 1692c(a)(2), 1692d, and 1692e pursuant to Ho v. ReconTrust Co. The court reasoned that Nationstar was not engaged in "debt collection" and thus defendants were not "debt collectors" when interacting with plaintiffs. The court concluded, however, that the district court erred in dismissing plaintiffs' claim under section 1692f(6) on the ground that Nationstar was not collecting a debt. The court explained that, unlike sections 1692c(a)(2), 1692d, and 1692e, the definition of debt collector under section 1692f(6) includes a person enforcing a security interest. In this case, plaintiffs alleged that Nationstar threatened to take non-judicial action to dispossess plaintiffs of their home without a legal ability to do so. The court noted that such conduct is exactly what section 1692f(6) protects borrowers against. Finally, the court concluded that the district court correctly dismissed plaintiffs' claims of IIED and of violation of the DTPA. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Dowers v. Nationstar Mortgage" on Justia Law

Plaintiff, pro se, filed suit against Chase, alleging claims for, inter alia, breach of contract, breach of implied covenant of good faith and fair dealings, and a violation of California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code 17200, as well as violation of the Truth in Lending Act (TILA), 15 U.S.C. 1601. Plaintiff's claims stemmed from damages allegedly suffered when she unsuccessfully attempted over a two-year period to modify the loan on her home. The district court granted summary judgment for Chase. The court concluded that the facts plainly demonstrated a viable UCL claim based on the ground that plaintiff was the victim of an unconscionable process. In this case, Chase knew that plaintiff was a 68 year old nurse in serious economic and personal distress, yet it strung her along for two years, kept moving the finish line, accepted her money, and then brushed her aside. During this process, plaintiff made numerous frustrating attempts in person and by other means to seek guidance from Chase, only to be turned away. The court also concluded that the district court erred in failing to acknowledge plaintiff's claim for breach of contract and remanded with instructions to permit plaintiff to amend if necessary and to proceed with her complaint. The court also remanded with instructions to permit plaintiff to amend her complaint to allege a right to rescind under Jesinoski v. Countrywide Home Loans, Inc. View "Oskoui v. J.P. Morgan" on Justia Law

After plaintiff began missing loan payments on a house she bought in Long Beach, ReconTrust initiated a non-judicial foreclosure. In this case, the lender was Countrywide, the borrower was plaintiff and the trustee was ReconTrust. Plaintiff subsequently filed suit alleging that ReconTrust violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692e(2)(A), by sending her notices that misrepresented the amount of debt she owed. Plaintiff also sought to rescind her mortgage transaction under the Truth in Lending Act (TILA), 15 U.S.C. 1635(a), on the ground that defendants had perpetrated fraud against her. The district court twice dismissed plaintiff's rescission claim without prejudice and then granted ReconTrust's motion to dismiss the FDCPA claims. The court held that actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect “debt” as that term is defined by the FDCPA; the court's holding affirms Hulse v. Ocwen Federal Bank; the court acknowledged that the Fourth and Sixth Circuit declined to follow Hulse; and the notices at issue in this case didn’t request payment from plaintiff, they merely informed plaintiff that the foreclosure process had begun and explained the foreclosure timeline. Therefore, the court affirmed the dismissal of the FDCPA claim. The court also concluded where, as here, the district court dismisses a claim and instructs the plaintiff not to refile the claim unless he includes certain additional allegations that the plaintiff is unable or unwilling to make, the dismissed claim is preserved for appeal even if not repleaded. Therefore, the court remanded to the district court to consider plaintiff's TILA rescission claim in light of Merritt v. Countrywide Fin. Corp. View "Vien-Phoung Thi Ho v. ReconTrust Co." on Justia Law

This case arises out of an action to quiet title to real property purchased at a homeowners’ association foreclosure auction in North Las Vegas, Nevada. Nevada Revised Statutes section 116.3116 et seq. strips a mortgage lender of its first deed of trust when a homeowners’ association forecloses on the property based on delinquent HOA dues. The court held that the Statute’s “opt-in” notice scheme, which required a homeowners’ association to alert a mortgage lender that it intended to foreclose only if the lender had affirmatively requested notice, facially violated the lender’s constitutional due process rights under the Fourteenth Amendment to the Federal Constitution. Accordingly, the court vacated and remanded for further proceedings. View "Bourne Valley Court Trust v. Wells Fargo" on Justia Law

This case concerns a dispute between the parties over who has priority ownership of property located in Las Vegas. Nevada has a statute that gives a homeowners’ association lien priority over “all other liens and encumbrances” (subject to some limited exceptions) for up to nine months of unpaid HOA fees. NEV. REV. STAT. 116.3116(2)–(3). After the HOA foreclosed on property that Ashley Spencer bought, Weeping Hollow purchased the property at the foreclosure sale. Just over two months after the HOA foreclosure sale, Wells Fargo attempted to foreclose on the property under its 2008 deed of trust. Weeping Hollow filed suit in state court against Spencer, Wells Fargo, and a title insurance company. Wells Fargo removed to federal court. The district court then granted Wells Fargo’s motion to dismiss Weeping Hollow’s complaint. After the district court issued its ruling, the Nevada Supreme Court issued an opinion that expressly abrogates the district court’s interpretation of the HOA statute. Under the Nevada Supreme Court’s holding, a foreclosure on an HOA lien extinguishes an earlier-recorded security interest even though the HOA lien was recorded later. The court held that the district court erred in applying the fraudulent-joinder doctrine to this case. Because Spencer was not shown to be fraudulently joined, her presence in the action divests the district court of diversity jurisdiction and the district court must remand the case to state court. Since this case should never have made it into federal court, the court has no reason to address Wells Fargo’s constitutional and state-law arguments. View "Weeping Hollow Ave. Trust v. Spencer" on Justia Law