Justia Banking Opinion Summaries

Plaintiffs filed suit seeking a declaratory judgment that the FDIC's repudiation of a residential construction loan agreement relieved them of any obligation to continue making loan payments. The FDIC then assigned its interest in the loan to Multibank and plaintiffs amended their complaint to add Multibank as a defendant. The court affirmed the district court's dismissal of plaintiffs' claim against Multibank for lack of subject matter jurisdiction because the claim was subject to the administrative exhaustion requirements pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 183. View "Westberg, et al. v. FDIC, et al." on Justia Law

IMCC loaned Harbins $60 million to buy Georgia land to construct a shopping center. In addition to a mortgage, IMCC obtained a guaranty from Chivas, providing that if IMCC “forecloses … the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.” Harbins defaulted; IMCC foreclosed in a nonjudicial proceeding, involving a public auction conducted by the sheriff after public notice. IMCC successfully bid $7 million and filed a petition to confirm the auction. Unless such a petition is granted, a mortgagee who obtains property in a nonjudicial foreclosure cannot obtain a deficiency judgment if the property is worth less than the mortgage balance owed. A Georgia court denied confirmation. Chivas refused to honor the guaranty. A district court in Chicago awarded IMCC $17 million. The Seventh Circuit affirmed, noting that the Georgia statute “is odd by modern standards,” but does not prevent a suit against a guarantor. The agreement guaranteed IMCC the difference between what it paid for the land and the unpaid balance of the loan, even if the land is worth more than what IMCC paid for it. The agreement is lawful under Georgia and Illinois law. View "Inland Mortg. Capital Corp v. Chivas Retail Partners, LLC" on Justia Law

This dispute arose out of a complicated bankruptcy proceeding. On appeal, Lender challenged the district court's judgment which, in relevant part, disallowed Lender's claim for a contractual prepayment consideration. Applying Colorado law, a lender was not entitled to a prepayment penalty when the lender chooses to accelerate the note. Absent a clear contractual provision to the contrary or evidence of the borrower's bad faith in defaulting to avoid a penalty, a lender's decision to accelerate acts as a waiver of a prepayment penalty. In this instance, the plain language of the contract plainly provided that no Prepayment Consideration was owed unless there was an actual prepayment, whether voluntary or involuntary. Accordingly, the acceleration of the Note due to GCMM's default by nonpayment under Article 4 did not trigger the obligation to pay the Prepayment Consideration under Article 6. View "Bank of New York Mellon v. GC Merchandise Mart, L.L.C., et al." on Justia Law

Plaintiff filed suit against Wells Fargo in state court, raising claims related to Wells Fargo's foreclosure and Freddie Mac's attempts to evict plaintiff. Wells Fargo then removed the case to federal court where the district court dismissed all of plaintiff's claims. At issue on appeal was whether Wells Fargo could move for attorney's fees pursuant to Federal Rules of Civil Procedure 54(d)(2). Here, the deed of trust at issue provided for attorney's fees to compensate Wells Fargo, inter alia, for the prosecution or defense of a claim. The language of the contract and the nature of the claim were the dispositive factors concerning whether the fees were an element of damages or collateral litigation costs. In this instance the court concluded that the motions for attorney's fees provided by contract were permissible under Rule 54(d)(2). Accordingly, the court reversed and remanded. View "Richardson v. Wells Fargo Bank, N.A., et al." on Justia Law

Beginning in 1998, consumer class actions were filed against Trans Union alleging violation of the Fair Credit Reporting Act, 15 U.S.C. 1681, by selling consumer information to target marketers and credit and insurance companies. The court approved a settlement. Trans Union agreed to give all class members “basic” credit monitoring services. Class members could also either claim cash from a $75 million fund or claim “enhanced” in-kind relief consisting of additional financial services. Trans Union was to provide $35 million worth of enhanced relief. The class was estimated at 190 million people. The Act authorizes damages of between $100 and $1000 per consumer for willful violations, so Trans Union faced theoretically possible liability of $190 billion. To persuade the court to approve the settlement, the parties agreed to an unusual provision that preserved substantive claims after settlement. Instead of releasing their claims, class members who did not get cash or enhanced in-kind relief retained the right to bring individual claims. Trans Union also partially waived the limitations period. The settlement authorized reimbursements from the fund to Trans Union itself “equal to any amounts paid to satisfy settlements or judgments arising from Post-Settlement Claims,” not including defense costs. There have been more PSCs than expected, depleting the fund. In a second appeal, the Seventh Circuit affirmed the orders authorizing disbursement of the remainder of the fund. View "Wheelahan v. Trans Union LLC" on Justia Law

Plaintiffs received letters from defendants that stated: Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office within 30 days from receiving this notice, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such judgment or verification. The Fair Debt Collection Practices Act, 15 U.S.C 1692g(a) requires the debt collector to include “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector” and a “statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector.” Plaintiffs claimed noncompliance because the notice omits the phrase “that the debt, or any portion thereof, is disputed.” One letter referred to “your just debt;” the recipient alleged that the phrase suggests that the debt’s validity has been confirmed. Four trial courts dismissed. The Seventh Circuit affirmed, stating that any written request for verification constitutes a dispute for purposes of the Act. The reference to “just debt” was mere puffery. View "Borucki v. Vision Fin. Corp." on Justia Law

Plaintiffs, a class of cardholders who paid credit card penalty fees, challenged those fees on constitutional grounds. Plaintiffs argued that the fees are analogous to punitive damages imposed in the tort context and are subject to substantive due process limits described in BMW of North America, Inc. v. Gore. The court concluded that the due process analysis developed in the context of jury-awarded punitive damages was not applicable to contractual penalty clauses. Further, there was no derivative liability under the Unfair Competition Law. Accordingly, the district court did not err in dismissing the complaint where constitutional due process jurisprudence did not prevent enforcement of excessive penalty clauses in private contracts and the fees were permissible under the National Bank Act, 12 U.S.C. 85-86, and the Depository Institutions Deregulation and Monetary Control Act (DIDMCA), 12 U.S.C. 1831d(a). View "In re: Late Fee & Over-Limit Fee Litigation" on Justia Law

These appeals challenged two orders entered in the district court holding that the separate entity rule precludes a court from ordering a garnishee bank with branches in New York to turn over or restrain assets of judgment debtors held in foreign branches of the bank. Because these appeals presented unresolved questions that implicate significant New York state interests and were determinative of these appeals, the court reserved decision and certified two questions to the New York Court of Appeals: (1) whether the separate entity rule precluded a judgment creditor from ordering a garnishee bank operating branches in New York to turn over a debtor's assets held in foreign branches of the bank; and (2) whether the separate entity rule precludes a judgment creditor from ordering a garnishee bank operating branches in New York to restrain a debtor's assets held in foreign branches of the bank. View "Tire Eng'g and Distrib., L.L.C., et al. v. Bank of China Ltd." on Justia Law

Acting as receiver, the FDIC conveyed substantially all of WaMU's assets and liabilities to JPMorgan Chase, including certain long-term real-estate leases. At issue was whether the owners of the leased tracts could enforce the leases against Chase by virtue of the FDIC's conveyance. The court held that, in the interest of maintaining uniformity in the construction and enforcement of federal contracts, the landlords did not qualify as third-party beneficiaries. The court concluded, however, that the landlords have "standing" to prove the content of the Agreement and that the Agreement, properly construed, was a complete "assignment" sufficient to create privity of estate under Texas law. Accordingly, the court affirmed the judgment of the district court. View "Excel Willowbrook, L.L.C., et al. v. JPMorgan Chase Bank, N.A., et al." on Justia Law

Empire Bank appealed from the bankruptcy court's order and judgment declaring that Arvest Bank's judicial lien was superior to the liens asserted by Empire Bank and directing judgment in favor of debtors on their preferential transfer claim against Empire Bank. The panel concluded that Arvest Bank and debtors failed to meet their burden of proof and the bankruptcy court erred in holding that the Empire Bank deed of trust was invalid for a lack of consideration; the "unsecured" language in the guaranty documents was true when they were executed and the status of the guaranties as unsecured changed when the deed of trust was signed but that change in the status of the guaranties was not a latent ambiguity in the Empire Bank deed of trust; the bankruptcy court erred in holding that a latent ambiguity existed where the Empire Bank deed of trust was subject to more than one interpretation; and, after addressing remaining arguments, the panel reversed and remanded for further proceedings. View "Arvest Bank v. Empire Bank" on Justia Law