Justia Banking Opinion SummariesArticles Posted in US Court of Appeals for the Second Circuit
United States v. Kahn
The Second Circuit affirmed the district court's judgment in favor of the government against defendants as co-executors of the estate of Harold Kahn, in the principal penalty amount of $4,264,728, plus statutory additions and interest, for Kahn's undisputedly willful failure, in violation of 31 U.S.C. 5314, to file in 2009 a Report of Foreign Bank and Financial Accounts ("FBAR") for his two foreign bank accounts whose balances, at the time of his failure to file, totaled $8,529,456. The Estate contends that the district court erred in refusing to limit the per-willful-violation maximum penalty for failure to file an FBAR to the $100,000-per-account maximum set by the 1987 Treasury Department Regulation, 31 C.F.R. 1010.820(g)(2).The court concluded that the district court correctly ruled that the penalty limitation provided in the 1987 regulation, which had tracked the penalty provision enacted in a prior version of the statute, was superseded by the 2004 statutory amendment to 31 U.S.C. 5321 increasing the penalty maximum. View "United States v. Kahn" on Justia Law
Lacewell v. Office of the Comptroller of the Currency
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
Maddox v. Bank of New York Mellon Trust Co.
The Second Circuit affirmed the district court's order denying the Bank's motion for judgment on the pleadings. The court held that state legislatures may create legally protected interests whose violation supports Article III standing, subject to certain federal limitations. The court also decided that the New York law violations alleged here constitute a concrete and particularized harm to plaintiffs in the form of both reputational injury and limitations in borrowing capacity over the nearly ten-month period during which their mortgage discharge was unlawfully not recorded and in which the Bank allowed the public record to reflect, falsely, that plaintiffs had an outstanding debt of over $50,000.The court further concluded that the Bank's failure to record plaintiffs' mortgage discharge created a material risk of concrete and particularized harm to plaintiffs by providing a basis for an unfavorable credit rating and reduced borrowing capacity. The court explained that these risks and interests, in addition to that of clouded title, which an ordinary mortgagor would have suffered (but plaintiffs did not), are similar to those protected by traditional actions at law. Therefore, plaintiffs have Article III standing and they may pursue their claims for the statutory penalties imposed by the New York Legislature, as well as other relief. Accordingly, the court affirmed and remanded. View "Maddox v. Bank of New York Mellon Trust Co." on Justia Law
Weiss v. National Westminster Bank PLC
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
Lehman Brothers Special Financing Inc. v. Bank of America N.A.
The Second Circuit affirmed the district court's judgment affirming the bankruptcy court's grant of defendants' motion to dismiss in an action arising out of the Chapter 11 bankruptcy of Lehman Brothers Holdings Inc. The bankruptcy court held that, in the context of synthetic collateralized debt obligations, certain "Priority Provisions" that subordinated LBSF's payment priority to claims of the Noteholder defendants are enforceable by virtue of section 560 of the Bankruptcy Code, which exempts "swap agreements" from the Code's prohibition of "ipso facto clauses."Like the district court, the court held that, even if the Priority Provisions were ipso facto clauses, their enforcement was nevertheless permissible under the section 560 safe harbor. The court explained that the Priority Provisions are incorporated by reference into the swap agreements and thus, for the purposes of section 560, are considered to be part of a swap agreement; the contractual right to liquidate included distributions made pursuant to Noteholder priority; the Trustees exercised a contractual right to effect liquidation when they distributed the proceeds of the sold Collateral; and, in doing so, the Trustees exercised the rights of a swap participant. Because the Priority of Payments clauses are enforceable under the Code, the court held that LBSF's state-law claims also fail. Finally, the district court and bankruptcy court correctly concluded that LBSF is not entitled to declaratory relief. View "Lehman Brothers Special Financing Inc. v. Bank of America N.A." on Justia Law
1077 Madison Street, LLC v. March
The Second Circuit affirmed the district court's multiple orders granting summary judgment in favor of plaintiff and holding Defendant March liable for interest at a default rate of 24 percent per annum dating back to February 1, 2008. In this case, the court affirmed the district court's grant of summary judgment in favor of Madison Street; the district court's order confirming the interest calculations of the court-appointed referee; and the district court's denial of reconsideration or to adjust its award of per diem interest to Madison Street based on the delayed "entry of judgment." The court considered defendant's remaining arguments and concluded that they were either forfeited or without merit. View "1077 Madison Street, LLC v. March" on Justia Law
CIT Bank N.A. v. Schiffman
In a foreclosure action, the Second Circuit certified the following two questions to the New York Court of Appeals: (1) Where a foreclosure plaintiff seeks to establish compliance with RPAPL 1304 through proof of a standard office mailing procedure, and the defendant both denies receipt and seeks to rebut the presumption of receipt by showing that the mailing procedure was not followed, what showing must the defendant make to render inadequate the plaintiff's proof of compliance with section 1304? (2) Where there are multiple borrowers on a single loan, does RPAPL 1306 require that a lender's filing include information about all borrowers, or does section 1306 require only that a lender's filing include information about one borrower? View "CIT Bank N.A. v. Schiffman" on Justia Law
United States v. Wells Fargo
The Second Circuit vacated the district court's judgment granting Wells Fargo's motion to dismiss. Relators alleged that the district court erred in concluding that fraudulent loan requests knowingly presented to one or more of the Federal Reserve System's twelve Federal Reserve Banks (FRBs) are not "claims" within the meaning of the False Claims Act (FCA), and thus do not give rise to FCA liability.The court held that the FCA's definition of a "claim" is capacious. The court explained that, although FRB personnel are not officers or employees of the United States, the FRBs administered the Federal Reserve System's emergency lending facilities on behalf of the United States, using authority delegated by Congress and money provided by the Board of Governors of the Federal Reserve System. Therefore, the court concluded that the FRBs are agents of the United States within the meaning of 31 U.S.C. 3729(b)(2)(A)(i). The court also held that the money requested by defendants and other Fed borrowers is provided by the United States to advance a Government program or interest within the meaning of section 3729(b)(2)(A)(ii). View "United States v. Wells Fargo" on Justia Law
Oxford University Bank v. Lansuppe Feeder, Inc.
Intervenors, financial institutions that held junior notes issued by trust defendant Soloso, appealed the district court's grant of summary judgment in favor of plaintiff, the senior noteholder of Lansuppe. Intervenors also appealed the district court's denial of their cross-motion for summary judgment and the dismissal of their cross-claims.The Second Circuit held that the district court erred in finding that section 47(b) of the Investment Company Act of 1940 does not provide a private right of action. However, the court agreed with the district court that Lansuppe has demonstrated that it is entitled to summary judgment ordering distribution of Soloso's assets according to the terms of the indenture and that Intervenors' cross‐claims failed. Accordingly, the court affirmed the district court's order distributing the assets of the trust according to the terms of the trust's governing indenture. View "Oxford University Bank v. Lansuppe Feeder, Inc." on Justia Law
Benzemann v. Houslanger & Associates, PLLC
A Fair Debt Collection Practices Act (FDCPA) violation "occurs," for the purposes of the FDCPA's one‐year statute of limitations, when an individual is injured by the alleged unlawful conduct. The Second Circuit affirmed the district court's grant of summary judgment for defendants on plaintiff's FDCPA claim. The court held that plaintiff's claim was time-barred because plaintiff filed suit one year and one day after Citibank froze his accounts. Furthermore, even if the discovery rule applied to FDCPA claims as a general matter, plaintiff's claim was still time-barred. Finally, plaintiff was not entitled to equitable tolling because he did not diligently pursue his rights. View "Benzemann v. Houslanger & Associates, PLLC" on Justia Law