Justia Banking Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
United States v. Bases
Pacilio and Bases were senior traders on the precious metals trading desk at Bank of America. While working together in 2010-2011, and at times separately before and after that period, they engaged in “spoofing” to manipulate the prices of precious metals using an electronic trading platform, that allows traders to place buy or sell orders on certain numbers of futures contracts at a set price. It is assumed that every order is bona fide and placed with “intent to transact.” Spoofing consists of placing a (typically) large order, on one side of the market with intent to trade, and placing a spoof order, fully visible but not intended to be traded, on the other side. The spoof order pushes the market price to benefit the other order, allowing the trader to get the desired price. The spoof order is canceled before it can be filled.Pacilio and Bases challenged the constitutionality of their convictions for wire fraud affecting a financial institution and related charges, the sufficiency of the evidence, and evidentiary rulings relating to testimony about the Exchange’s and bank prohibitions on spoofing to support the government’s implied misrepresentation theory. The Seventh Circuit affirmed. The defendants had sufficient notice that their spoofing scheme was prohibited by law. View "United States v. Bases" on Justia Law
County of Cook v. Bank of America Corp.
In a suit filed in 2014 under the Fair Housing Act, 42 U.S.C. 3601–19, Cook County claimed that the banks made credit too readily available to some borrowers, who defaulted, and then foreclosed on the loans in a way that injured the County. The County alleged the banks targeted potential minority borrowers for unchecked or improper credit approval decisions, which allowed them to receive loans they could not afford; discretionary application of surcharge of additional points, fees, and other credit and servicing costs above otherwise objective risk-based financing rates; higher cost loan products; and undisclosed inflation of appraisal values to support inflated loan amounts. When many of the borrowers could not repay, the County asserts, it had to deal with vacant properties and lost tax revenue and transfer fees.The Seventh Circuit affirmed summary judgment for the defendants. Entertaining suits to recover damages for any foreseeable result of an FHA violation would risk “massive and complex damages litigation.” Proximate cause under the FHA requires “some direct relation between the injury asserted and the injurious conduct alleged.” Cook County seeks a remedy for effects far beyond “the first step.” The directly injured parties are the borrowers, who lost both housing and money. The banks are secondary losers. The County is at best a tertiary loser; its injury derives from the injuries to the borrowers and banks. View "County of Cook v. Bank of America Corp." on Justia Law
Amory Investments LLC v. Utrecht-America Holdings, Inc.
Consolidated suits claimed that many firms in the broiler-chicken business formed a cartel. Third-party discovery in that ongoing suit turned up evidence that Rabobank, a lender to several broiler-chicken producers, urged at least two of them to cut production. Some plaintiffs added Rabobank as an additional defendant.The Seventh Circuit affirmed the dismissal of those claims. The Sherman Act, 15 U.S.C. 1, bans combinations and conspiracies in restraint of trade and does not reach unilateral action. Here, all the plaintiffs allege is that Rabobank tried to protect its interests through unilateral action. The complaint does not allege that Rabobank served as a conduit for the producers’ agreement, helped them coordinate their production and catch cheaters, or even knew that the producers were coordinating among themselves. A flurry of emails among managers and other employees at Rabobank observing that lower output and higher prices in the broiler-chicken market would improve the bank’s chance of collecting its loans and a pair of emails from the head of Rabobank’s poultry-lending section, to executives at two producers indicated nothing but unilateral action. The intra-Rabobank emails could not have promoted or facilitated cooperation among producers and the two messages only reminded the producers that as long as demand curves slope downward, lower output implies higher prices. Advice differs from agreement. View "Amory Investments LLC v. Utrecht-America Holdings, Inc." on Justia Law
Guerrero v. Bank
On O’Sucha’s death, the property, in a land trust, was to be divided equally among her four children, including Lesko. In 2009, Lesko caused her mother to make her the sole beneficiary upon O’Sucha’s 2010 death and to grant her sole power of direction over the trust. Her siblings sued Lesko in state court for undue influence. While an appeal was pending, Lesko sought a loan from Howard Bank, using the property as collateral. Because of Lesko’s poor credit and the state court decision, Howard approved a loan only when Lesko transferred ownership of the property to her daughter, Amorous. Amorous later conveyed a mortgage to Howard, securing a $130,000 loan, which Howard recorded.On remand, the Illinois court entered a money judgment against Lesko and declared a constructive trust; it later conveyed all interests of Amorous and Lesko to the plaintiffs, who unsuccessfully demanded that Howard release the mortgage.Plaintiffs sued Howard in federal court, then sold the property for $700,000, and paid the mortgage balance. Howard unsuccessfully sought to dismiss the case. In an amended complaint, the plaintiffs asserted slander of title and unjust enrichment. The Seventh Circuit affirmed the dismissal of the case. Howard held a valid mortgage and did not publish a falsity by recording it. Howard was not required to release the mortgage and did not continue to publish a falsity, nor did it unjustly retain a benefit by not releasing the mortgage. View "Guerrero v. Bank" on Justia Law
Frazier v. Dovenmuehle Mortgage, Inc.
Frazier obtained a home mortgage loan for which Dovenmuehle served as sub-servicer. Beginning in October 2015, Frazier failed to make her monthly payments. Frazier successfully negotiated and settled her debt through a short sale of her home, which closed in January 2016. Frazier was later denied a new mortgage loan because her Equifax credit report reflected late payments on her previous mortgage in months following the short sale. She disputed the information to several credit reporting agencies. To confirm the accuracy of its records, Equifax sent Dovenmuehle four Automated Consumer Dispute Verification forms in 2019-2020. Frazier contends the amended codes Dovenmuehle gave Equifax for Pay Rate and Account History were inaccurate, pointing to how Equifax interpreted and reported the amended data in her credit reports.Frazier sued under the Fair Credit Reporting Act, 15 U.S.C. 1681, claiming that Dovenmuehle failed to conduct a reasonable investigation of disputed data and provided false and misleading information to credit reporting agencies. She relied on evidence about persisting inaccuracies in Equifax’s credit reports produced using the amended data. The district court granted Dovenmuehle summary judgment. The Seventh Circuit affirmed. Given the full record, no reasonable jury could find that Dovenmuehle provided patently incorrect or materially misleading information. View "Frazier v. Dovenmuehle Mortgage, Inc." on Justia Law
Page v. Alliant Credit Union
Page sued Alliant Credit Union under the Electronic Fund Transfers Act, 15 U.S.C. 1693–1693r, and state law on behalf of herself and other similarly situated customers, alleging that Alliant charged fees in violation of its contract. Alliant charges a nonsufficient fund (NSF) fee when it rejects an attempted debit because an account lacks sufficient funds to cover the transaction. Page argued that the contract requires Alliant to assess NSF fees using the “ledger-balance method” and only allowed one NSF fee per transaction, while Alliant claimed that the contract permits it to use the “available-balance method.”The district court dismissed Page’s claim. The Seventh Circuit affirmed. Analyzing the contract under Illinois principles of construction, it is not ambiguous and it does not prohibit Alliant from using the available-balance method to charge NSF fees. Alliant does not promise not to charge multiple fees when a transaction is presented to it multiple times. View "Page v. Alliant Credit Union" on Justia Law
Hovde v. ISLA Development LLC
Riegel, seeking to build a condominium development in Isla Mujeres, formed ISLA and borrowed millions of dollars from the Hovdes. The project failed. More than 10 years later, the Hovdes sued ISLA and Riegel.The district court granted the defendants summary judgment on the claim based on the Mortgage Note, citing the 10-year limitations period, and later holding that the limitations defense could be asserted against Riegel as the guarantor. The Seventh Circuit affirmed. An acceleration clause provided that if a Default occurred, the outstanding unpaid principal and interest would automatically become immediately due, triggering the 10-year limitations period. One such “Default” was an “Act of Bankruptcy,” defined to include admitting in writing the inability to pay debts as they mature. Two emails sent by Riegel to the Hovdes constituted an admission in writing of inability to pay debts: an August 7, 2008 email, asking for an advance to pay a tax bill, and a subsequent email indicating that all construction workers had been suspended. The language does not require actual insolvency; it merely requires an admission of an inability to pay the debts, whether or not true. The terms “continuing, absolute, and unconditional” are terms of art when used in guarantees and do not waive the limitations defense. View "Hovde v. ISLA Development LLC" on Justia Law
Foster v. PNC Bank, National Association
In 2004, Foster, a real estate investor, purchased Florida property, with a $1.1 million loan secured by a PNC mortgage. Foster and PNC had multiple disputes. PNC acquired force‐placed insurance. While the parties disputed that issue, Foster only made payments in the amount originally specified in a 2010 modification although the payments had increased as a result of the force‐placed insurance policies. In 2012, PNC began returning Foster’s payments as incomplete payments. As of May 2019, PNC claimed Foster owed more than $1.75 million. PNC reported delinquent payments to credit agencies; Foster’s credit score dropped.Foster’s lawsuit included a claim under the Fair Credit Reporting Act (FCRA) for PNC’s failure to investigate the two credit reporting disputes; a breach of contract claim regarding the force‐placed insurance policies; a breach of the implied duty of good faith and fair dealing claim for the insurance; and a breach of fiduciary duty claim for the alleged mishandling of the escrow account. PNC counterclaimed to seek judgment on the loan. After determining that Foster’s affidavit was conclusory and speculative as to proof of insurance and his loan payments and that his evidence of damages was too general and conclusory, the district court granted PNC judgment. The Seventh Circuit affirmed but found that the FCRA claim should be dismissed for lack of standing. Foster did not establish an injury-in-fact fairly traceable to PNC’s conduct. View "Foster v. PNC Bank, National Association" on Justia Law
Webster v. Receivables Performance Management, LLC
Ewing and Webster disputed debts they allegedly owed to debt‐collection companies. Under the Fair Debt Collection Practices Act, debt‐collection companies must report such disputes to credit reporting agencies, 15 U.S.C. 1692e(8), but the companies failed to do so. The plaintiffs sued separately, seeking damages. The companies prevailed at summary judgment. Both district courts determined that the companies’ mistakes were bona fide errors.In consolidated appeals, the Seventh Circuit first held that the plaintiffs suffered intangible, reputational injuries, sufficiently concrete for purposes of Article III standing; they have shown that their injury is related closely to the harm caused by defamation. The court affirmed as to Ewing and reversed as to Webster. In Ewing’s case, a receptionist accidentally forwarded Ewing’s faxed dispute letter to the wrong department. The company had reasonably adapted procedures; if its step‐by‐step fax procedures had been followed, the error would have been avoided. Unlike the one‐time misstep in Ewing, a lack of procedures invited the Webster error. Until debtors and their attorneys knew that the collection company no longer accepted disputes by fax, it was entirely foreseeable that it would continue receiving faxed disputes. There were no procedures to avoid the error that occurred. View "Webster v. Receivables Performance Management, LLC" on Justia Law
Leszanczuk v. Carrington Mortgage Services, LLC
In 2010, Leszanczuk executed a mortgage contract, securing a loan on her Illinois residence. The mortgage was insured by the FHA. After Carrington acquired the mortgage, Leszanczuk contacted Carrington by phone in December 2016 to make her December payment. Leszanczuk asserts that Carrington told her that her account was not yet set up in their system and that her account was in a “grace period.” In early 2017 Carrington found Leszanczuk to be in default and conducted a visual drive-by inspection of Leszanczuk’s property. Carrington charged Leszanczuk $20.00 for the inspection and disclosed the fee in her March 2017 statement. Leszanczuk claims Carrington knew or should have known that she occupied her property because of the phone conversation and Carrington mailed monthly mortgage statements to the property’s address.Leszanczuk sued Carrington for breach of the mortgage contract and for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, on behalf of putative nationwide and Illinois classes. She alleged that a HUD regulation limits the fees Carrington may charge under the contract and that the inspection fee was an unfair practice. The Seventh Circuit affirmed the dismissal of the complaint. The mortgage contract expressly permits the disputed fee. Leszanczuk has failed to adequately allege that the inspection fee offended public policy, was oppressive, or caused substantial injury. View "Leszanczuk v. Carrington Mortgage Services, LLC" on Justia Law