Articles Posted in US Court of Appeals for the Third Circuit

by
Consumer banks Hudson and M&T merged. Hudson’s shareholders claimed they violated the Exchange Act, 15 U.S.C. 78n(a), and SEC Rule 14a-9, by omitting facts concerning M&T’s regulatory compliance from their joint proxy materials: M&T’s having advertised no-fee checking accounts but later switching those accounts to fee-based accounts (consumer violations) and deficiencies in M&T’s Bank Secrecy Act/anti-money laundering compliance program. They argued that because the proxy materials did not discuss M&T’s noncompliant practices, M&T failed to disclose significant risk factors facing the merger, rendering M&T’s opinion statements regarding its adherence to regulatory requirements and the prospects of prompt approval of the merger misleading under Supreme Court precedent (Omnicare). The Third Circuit reversed, in part, the dismissal of the suit. The shareholders pleaded actionable omissions under the SEC Rule but failed to do so under Omnicare. The joint proxy had to comply with a provision that requires issuers to “provide under the caption ‘Risk Factors’ a discussion of the most significant factors that make the offering speculative or risky.” It would be reasonable to infer the consumer violations posed a risk to regulatory approval of the merger, despite cessation of the practice by the time the proxy issued. The disclosures were inadequate as a matter of law. View "Jaroslawicz v. M&T Bank Corp" on Justia Law

by
In 2008, the U.S. government strove to rescue the collapsing economy, including by enacting the Housing and Economic Recovery Act, which authorized the government to act as conservator for Fannie Mae and Freddie Mac, government-sponsored enterprises with critical roles in the home mortgage market. Under that conservatorship, Fannie and Freddie made a deal with the Department of Treasury, guaranteeing those agencies access to hundreds of billions of dollars; they had to give their net profits to the Treasury—in perpetuity. Fannie’s and Freddie’s junior shareholders had expected to share in those future profits. The agreement wiped out that expectation. The Third Circuit rejected challenges by those junior shareholders. The Recovery Act gave the government broad, discretionary power to enter into the deal and the deal complies with the requirements of the Act, as well as Delaware and Virginia corporate law. In addition, the relief sought would “restrain or affect the exercise of [the government’s] powers” as conservator, which the Recovery Act forbids, 12 U.S.C. 4617(f). View "Jacobs v. Federal Housing Finance Agency" on Justia Law

by
The day Krieger fell victim to a credit card scam and discovered a fraudulent $657 charge on his bill, he contacted his card issuer, Bank of America (BANA), and was told that the charge would be removed and that, pending “additional information,” BANA considered the matter resolved. Krieger’s next bill reflected a $657 credit. Over a month later Krieger learned that BANA was rebilling him for the charge. He disputed it again, in writing. After BANA replied that nothing would be done, he paid his monthly statement and then filed suit, citing the Fair Credit Billing Act (FCBA), 15 U.S.C. 1666, which requires a creditor to take certain steps to correct billing errors, and the Truth in Lending Act (TILA), 15 U.S.C. 1601, which limits a credit cardholder’s liability for the unauthorized use of a credit card to $50. The Third Circuit reversed dismissal by the district court, first rejecting a claim that Krieger’s complaint was untimely. Only when BANA decided to reinstate the charge did the FCBA again become relevant, so that the 60-day period began to run. A cardholder incurs “liability” for an allegedly unauthorized charge when an issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge; the issuer must then comply with the requirements of section 1643, and when a cardholder alleges those requirements were violated, those allegations may state a claim under TILA section 1640. View "Krieger v. Bank of America NA" on Justia Law

by
More than 10 years ago, Tatis incurred a debt of $1,289.86 to Bally Fitness. Allied, a debt collector, sent Tatis a letter dated May 18, 2015 stating: “[The creditor] is willing to accept payment in the amount of $128.99 in settlement of this debt. You can take advantage of this settlement offer if we receive payment of this amount or if you make another mutually acceptable payment arrangement within 40 days.” The six-year New Jersey limitations period for debt-collection actions had already run. Tatis filed a class action, alleging that Allied’s letter violated the Fair Debt Collection Practices Act (15 U.S.C. 1692) because Tatis interpreted the word “settlement” to mean that she had a “legal obligation” to pay and the letter “[f]alsely represent[ed] the legal status of the debt" made “false threats to take action that cannot legally be taken,” and used “false representations and/or deceptive means to collect or attempt to collect." The Third Circuit reversed the dismissal of the suit. Collection letters may violate the FDCPA by misleading or deceiving debtors into believing they have a legal obligation to repay time-barred debts even when the letters do not threaten legal action. The least-sophisticated debtor could plausibly be misled by the specific language used in Allied’s letter. View "Tatis v. Allied Interstate LLC" on Justia Law