Justia Banking Opinion Summaries

African-American and Hispanic borrowers under National City Bank mortgages, 2006-2007, sued, alleging violation of the Fair Housing Act, 42 U.S.C. 3605, and the Equal Credit Opportunity Act, 15 U.S.C. 1691, by an established pattern or practice of racial discrimination in the financing of home purchases. They cited National’s “Discretionary Pricing Policy,” under which brokers and loan officers could add a subjective surcharge of points, fees, and credit costs to an otherwise objective, risk-based rate, so that minority applicants were “charged a disproportionately greater amount in non-risk-related charges than similarly-situated Caucasian persons.” During discovery, National provided data on more than two million loans issued from 2001 to 2008. After mediation, the parties reached a proposed settlement: National did not concede wrongdoing, but would pay $7,500 to each named plaintiff, $200 to each class payee, $75,000 to two organizations for counseling and other services for the class, and $2,100,000 in attorneys’ fees. After granting preliminary approval and certification of the proposed class, the district court considered the Supreme Court’s 2011 decision, Wal-Mart Stores, Inc. v. Dukes, and held that the class failed to meet Rule 23(a)’s commonality and typicality requirements and denied certification. The Third Circuit affirmed, noting that the proposed class is national, with 153,000 plaintiffs who obtained loans at more than 1,400 branches; significant disparity in one branch or region could skew the average, producing results indicating national disparity, when the problem may be more localized. View "Rodriguez v. Nat'l City Bank" on Justia Law

Lamesa filed suit against Liberty Mutual alleging that Liberty Mutual was liable under a federally-required surety bond for the alleged misconduct of its principal, a trustee in a Chapter 7 bankruptcy proceeding. On appeal, Liberty Mutual appealed the district court's decision to affirm the bankruptcy court's judgment that the trustee had committed gross negligence and Liberty Mutual, as the trustee's surety, was liable for damages under the terms of the bond. The court held that the controlling limitations period in this case was provided by 11 U.S.C. 322(d). Because Liberty Mutual did not contest that Lamesa's claim was timely under that provision, the court affirmed the bankruptcy court's conclusion that Lamesa's suit was not time-barred. On the merits, the court concluded that the bankruptcy court's finding that the trustee was grossly negligent in performing her duties was not clearly erroneous; expert testimony was not necessary to establish that the trustee failed to meet her standard of care; and Liberty Mutual failed to demonstrate that the district court's damage award was clearly erroneous. Accordingly, the court affirmed the judgment of the district court. View "Liberty Mutual Ins. Co. v. USA by Lamesa National Bank" on Justia Law

This case concerned the Home Affordable Modification Program (HAMP), a government program created to help distressed homeowners with delinquent mortgages. At issue was whether Wells Fargo was contractually required to offer plaintiffs a permanent mortgage modification after they complied with the requirements of a trial period plan (TPP). Following the Seventh Circuit, the court held that Wells Fargo was required to offer the modification. The district court should not have dismissed plaintiffs' complaints when the record showed that Wells Fargo had accepted and retained the payments demanded by the TPP, but neither offered a permanent modification, nor notified plaintiffs they were not entitled to one, as required by the terms of the TPP. Accordingly, the court reversed and remanded. View "Corvello v. Wells Fargo Bank N.A." on Justia Law

Greenblatt, the “bad boy of Chicago arbitrage” became involved in litigation concerning use of his “web of corporations,” including Loop Corporation and Banco. In 2000, Banco extended a $9.9 million line of credit in exchange for a blanket lien over Loop’s assets. Loop defaulted; nevertheless, Banco expanded the line of credit by several million dollars in 2002 and continued lending Loop money until 2004. Banco lost senior creditor status when the district court voided the lien in an earlier case. In 2001 Loop purchased millions of shares of EZ Links stock from Golf Venture, giving a promissory note. Loop defaulted; Golf Venture won a judgment of $1.2 million. Also in 2001, a failed margin transaction left Loop indebted to its brokerage firm, Wachovia, in the amount of $1,885,751. Wachovia took Loop to arbitration and won a $2,349,000 award in 2005. Wachovia is still trying to collect. Loop had transferred almost all of its valuable assets to another Greenblatt company, leaving only the EZ Links stock, in possession of Banco, and Banco claimed to have creditor priority over Wachovia. The district vourt pierced Loop’s corporate veil, allowing Wachovia to reach Greenblatt’s assets, and voiding Banco’s lien, and ordered the sale of Loop’s only asset, EZ Links stock. Banco attempted to contest the d decisions. The Seventh Circuit dismissed Banco’s appeal for lack of standing. View "Wachovia Sec., LLC v. Loop Corp." on Justia Law

Bank of America lost approximately $34 million when the Knight companies went bankrupt. BOA sued, claiming that Knight’s directors and managers looted the firm and that its accountants failed to detect the embezzlement. The district court dismissed. The accountants invoked the protection of Illinois law, 225 ILCS 450/30.1, which provides that an accountant is liable only to its clients unless the accountant itself committed fraud (not alleged in this case) or “was aware that a primary intent of the client was for the professional services to benefit or influence the particular person bringing the action” The court found that BOA did not plausibly allege that the accountants knew that Knight’s “primary intent” was to benefit the Bank in alleging that the accountants knew that Knight would furnish copies of the financial statements to lenders. The Seventh Circuit affirmed, noting BOA’s choice not to pursue its claims in the bankruptcy process. View "Bank of America, N.A. v. Knight" on Justia Law

Until 2001, the federal Truth in Savings Act (TISA), 12 U.S.C. 4310 et seq., allowed civil damages to be sought for failure to comply with its requirements. The provision authorizing lawsuits was later repealed, however. After Congress's repeal of section 4310, Plaintiffs filed a class action against Bank of America, alleging unlawful and unfair business practices based on violations of TISA disclosure requirements. The trial court sustained the Bank's demurrer, and the court of appeal affirmed, concluding that Congress's repeal of section 4310 reflected its intent to bar any private action to enforce TISA. The Supreme Court reversed, holding that TISA posed no impediment to Plaintiffs' claim of unlawful business practice under California's unfair competition law, where by leaving TISA's savings clause in place, Congress explicitly approved the enforcement of state laws such as the unfair competition law. View "Rose v. Bank of Am., N.A." on Justia Law

Plaintiff filed putative class actions under the Electronic Fund Transfer Act (EFTA), 15 U.S.C. 1693, alleging that Mutual First and First National violated the Act because defendants' ATM machines did not have "on machine" notice of a transaction fee. The district court dismissed for lack of standing. The court concluded, however, that plaintiff's claim of statutory damages was sufficiently related to his injury to confer standing where defendants did not provide him with the required "on machine" notice and then charged him a prohibited fee following an ATM transaction that he initiated and completed. Further, plaintiff's injury was fairly traceable to defendants' conduct where, if defendants had not violated the Act's notice requirement, plaintiff would not have been forced to choose between engaging in a transaction without the required notice and walking away. Accordingly, the court reversed and remanded for further proceedings. View "Charvat v. Mutual First Fed. Credit Union" on Justia Law

abiu worked as a bank teller, 2003-2007. He searched account records for account holders with balances exceeding $100,000, then stole their information and, along with codefendants, compromised that information to divert money into fraudulently opened bank accounts. Postal inspectors lawfully searched his home and seized notes containing names, Social Security numbers, and account information of 86 customers, and an unspecified number of fake driver’s licenses and Social Security cards bearing the names of some of those customers, but only 17 customers suffered a loss. The losses were reimbursed by the banks. Rabiu pleaded guilty to bank fraud and aggravated identity theft, 18 U.S.C. 1344, 1029(a)(2), 1028A(a)(1), admitting participation in the scheme, but insisting that some of the names and identifying information on the phony driver’s licenses and Social Security cards were fictitious and not from customers. The government successfully sought a four-level upward sentencing adjustment under U.S.S.G. 2B1.1(b)(2)(B) based on 50 or more victims. The government cited a definition of “victim,” which, for offenses involving identity theft, was broadened in 2009, after Rabiu’s arrest, to include “any individual whose means of identification was used unlawfully or without authority.” The Seventh Circuit affirmed. Although the court overstated the number of victims, it was clear that the judge would have imposed the same sentence even had he accepted Rabiu’s calculation; the error was harmless. View "United States v. Rabiu" on Justia Law

BNY, as Trustee of an investment portfolio of collateralized loan obligations, initiated an interpleader action to resolve a contract dispute between certain shareholders and the manager of that portfolio, Franklin. At issue were the terms of the indenture and, specifically, terms governing distribution of a Contingent Collateral Management Fee, which was payable to Franklin only if distributions reached a twelve percent internal rate of return (IRR). The court granted the partial summary judgment to Franklin and the denial of summary judgment to the Shareholders, as well as the award of attorneys fees and costs. The court vacated, however, the award of statutory prejudgment interest with instruction to award prejudgment interest actually accrued on the fee owed to Franklin, to be paid from the court's account. View "Franklin Advisers, Inc. v. CDO Plus Master Fund, Ltd." on Justia Law

Dayton Title brokered real estate closings and had a trust account at PNC Bank for clients’ funds. In 1998-1999, Dayton facilitated bridge loans from defendants to Chari, from $1.9 million to $3.2 million, for commercial real estate purchases. Defendants would deposit funds into Dayton’s PNC account, which Dayton would transfer to Chari. Chari’s loan payments would pass through Dayton’s account. The first six bridge loans were paid, but not always on time. Defendants provided Chari another bridge loan, for $4.8 million. After the due date, Chari deposited a $4.885 million check into Dayton’s account. The PNC teller did not place a hold on the check. On the same day, Dayton “pursuant to Chari’s instructions” issued checks to defendants. PNC extended a provisional credit for the value of Chari’s check, as is standard for business accounts. After the checks were paid, PNC learned that Chari’s check was a forgery drawn on a non-existing account, exercised its right of “charge back” on the Dayton account, and regained about $740,000 of the provisional credit. Dayton was forced into bankruptcy. Chari declared bankruptcy and was convicted of racketeering, fraud, and forgery. Dayton’s bankruptcy estate and PNC sued, seeking to avoid the $4.885 million transfer to defendants as fraudulent under 11 U.S.C. 548 and Ohio Rev. Code 1336.04(A)(2). The bankruptcy court held that all but $722,101.49 of the transfer was fraudulent. The district court held that all but $20,747.13 of the transfer was not fraudulent. The Sixth Circuit reversed the district court, reinstating the bankruptcy court holding. Dayton did not hold the provisional credit funds in trust; the funds were not encumbered by a lien at the time of transfer. The funds were “assets” held by Dayton, so the transfer satisfied the statutory definition of “fraudulent.” View "In re: Dayton Title Agency, Inc." on Justia Law