Justia Banking Opinion Summaries

After the the defendants defaulted on $39 million in loans the bank began post-judgment enforcement proceedings. Defendants were "sluggish" in responding to citations and the bank learned that they had transferred about $20 million to accounts in India. The district court ordered defendants to surrender their passports pending return of the funds. The Seventh Circuit affirmed. The district court had the power to impose a minimal seizure on the defendants until they abided by the asset production order or explained why they could not.

Plaintiffs filed a purported class action as an adversary proceeding before the bankruptcy court alleging that their mortgage lender, Wells Fargo Bank N.A. ("Wells Fargo"), violated various provisions of the Bankruptcy Code and Bankruptcy Rules by failing to disclose certain fees on the proof of claim it filed in plaintiffs' Chapter 13 bankruptcy case. At issue was whether the district court erred in affirming the bankruptcy court's grant of summary judgment in favor of Wells Fargo on plaintiffs' claims that Wells Fargo violated the automatic stay provisions in 11 U.S.C. 362; their claims that Wells Fargo violated 11 U.S.C 506(b) and Bankruptcy Rule 2016 by failing to disclose the fees; and their objection to the proof of claim. The court considered each of plaintiffs' automatic stay violations under section 362 and held that Wells Fargo was entitled to summary judgment on each claim. The court concluded that bankruptcy courts have not uniformly reached a conclusion supporting the proposition that pursuant to section 506(b), Rule 2016, or both of these provisions, a secured creditor must disclose and obtain court approval of post-petition legal expenses. Therefore, the court held that these provisions were not violated when a creditor merely recorded costs it had incurred in association with a mortgagee's bankruptcy for internal bookkeeping purposes and made no attempt to collect the fees or otherwise add them to the debtor's balance. Accordingly, to the extent plaintiffs' disclosure claims relied on events that have occurred during the course of their Chapter 13 case, the district court did not err in affirming the bankruptcy court's order granting summary judgment. The court further held that Wells Fargo's failure to include the proof of claim fees on the proof of claim did not provide a valid basis for an objection; and as to this amount, plaintiffs have identified no reason why such amount was unenforceable. Therefore, Wells Fargo was entitled to summary judgment on this claim.

Plaintiffs Steven Thomas and Thomas Properties, Inc. brought a contract-related claim against New Frontier Bank. The Bank had been placed in receivership. Defendant Federal Deposit Insurance Corporation (FDIC), in its capacity as receiver of the bank, moved to dismiss Plaintiffs' claims for lack of subject matter jurisdiction, citing Plaintiffs' failure to exhaust administrative remedies under the Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA). Upon review, the Supreme Court found that Plaintiffs received proper notice of the administrative procedures under FIRREA, but failed to comply with them. Accordingly, the Court affirmed the lower court's dismissal of Plaintiffs' claim.

Appellant submitted a request pursuant to the Freedom of Information Act ("FOIA"), 5 U.S.C. 552, to the Board of Governors of the Federal Reserve System ("Board") seeking information related to the Board's March 14, 2008 decision to authorize the Federal Reserve Bank of New York to provide a temporary loan to The Bear Stearns Companies, Inc. through an extension of credit to JPMorgan Chase & Co. The Board produced documents in response to appellant's request but withheld others pursuant to FOIA Exemptions 4, 5, 6, and 8. Appellee filed suit in district court to compel disclosure of the withheld documents and subsequently appealed the district court's entry of summary judgment in favor of the Board. At issue was whether the district court properly withheld documents under FOIA Exemption 5 or, in the alternative, Exemption 8, and granted summary judgment in favor of the Board. The court affirmed summary judgment and held that the withheld materials constituted "intra-agency memorandum or letters" under FOIA Exemption 5 and that disclosure of the type of information withheld here would, under the deliberative process privilege, impair the Board's ability to obtain necessary information in the future and could chill the free flow of information between the supervised institutions and the Board and Reserve Bank. The court also held that a document withheld under Exemption 5 pursuant to the attorney work product privilege was prepared in anticipation of litigation and therefore, the Board properly withheld the document. Accordingly, the court affirmed summary judgment in favor of the Board.

Petitioner filed an arbitration claim against respondent with the Financial Industry Regulatory Authority ("FINRA") raising federal claims of securities fraud under section 10(b)(5) of the Securities and Exchange Act of 1934 ("SEC"), 15 U.S.C. 78a et seq., and SEC Rule 10b-5, as well as state-law claims. When respondent lost the FINRA arbitration, respondent appealed the arbitration order asserting various improprieties and asked the district court, and now this court, to undo the award. The court upheld confirmation of the award in full after giving careful attention to respondent's arguments and found them to be without merit. The court did hold, however, that the district court's judgment should credit respondent for approximately $75 million that petitioner received in exchange for selling some of the failed auction rate securities at issue and should have reduced respondent's liability for interest accordingly. Therefore, the court vacated the district court's judgment on that point and remanded for modification in light of the partial satisfaction of the award. The court rejected, however, respondent's attempt to alter the award's scheme for distributing interest earned on the securities portfolio.

This case involved a residential construction scheme, which required the investor, the mortgage broker, the builder, and the bank providing the builder with the funds to construct the house to enter into certain independent contractual arrangements. Petitioners, investors whose builders went under and left them with unfinished houses or vacant lots, sought a writ of mandamus asking the court to order the district court to require respondent, the bank's executive vice-president for mortgage lending, to make a restitution in an amount equivalent to one point of their construction loans. The court held that the cause of petitioners' loss was not respondent, but the fact that the builders became insolvent and were unable or unwilling to complete their work. Therefore, the writ of mandamus was denied where petitioners assumed the risk that the builder might walk off the job; that if it did, the bank would declare the construction loan in default; and that, as the bank's borrower, they would be liable for the draws the builders had received plus interest.

The credit union provides indirect lending, which allows applicants to apply for loans at automobile dealerships. A third-party administrator compiles the applications and automatically approves low-risk loans. Higher-risk applications are forwarded to the credit union for further review using an eight-factor policy. After an audit disclosed hundreds of high-risk loans issued in violation of the policy, the credit union filed a claim under a fidelity bond that provided coverage for losses caused by an employeeâs "failure to faithfully perform his/her trust." The district court awarded $5,050,000 plus $2,730,415 in interest to be offset by prejudgment interest. The Sixth Circuit affirmed; there was sufficient evidence to support the juryâs finding that the lending policy was "established," "enforced," and "consciously disregarded" as described in the bond language. There was no evidence that the credit union board acquiesced in the violations. Although the court allowed an improper "golden rule" argument, the error does not require reversal; references to the insurer's ability to check the policies and to checklists were not errors.

Plaintiff filed a quiet title claim against Bank of New York ("BNY") after he failed to make payments on a loan for over a half of a year and BNY foreclosed on his property. At issue was whether BNY lacked authority to carry out the sale where plaintiff alleged that America's Wholesale Lender, the original lender, had authority to foreclose on the property. The court held that plaintiff's note plainly constituted a negotiable instrument under Va. Code. Ann. 8.3A-104 and that note was endorsed in blank. Therefore, BNY possessed the note at the time it attempted to foreclose on the property and once plaintiff defaulted on the property, Virgina law straightforwardly allowed BNY to take the actions that it did.

Washington residents who were consumers of allegedly illegal debt adjustment programs filed a class action lawsuit against Defendants Global Client Solutions, LLC (GCS) and Rocky Mountain Bank and Trust (RMBT). Defendants managed and held âspecial purpose accountsâ as part of their adjustment programs. Payments to consumersâ creditors were authorized from these accounts. When enough money accumulated in a consumerâs account, Defendants would attempt to use the funds to negotiate settlement with creditors on terms favorable to the consumer. Defendants charged consumers various fees for its services. GCSâ earnings came from the fees they charged directly to the special purpose account holders. RMBT did not receive fees, but benefited by holding Plaintiffsâ money without paying interest. In 2009, the Federal Deposit Insurance Corporation (FDIC) issued a cease and desist order that required a reformation of RMBTâs banking practices. GCS subsequently stopped opening new accounts at RMBT. Later that year, Plaintiffs filed a class action lawsuit against GCS and RMBT on behalf of all consumers who has special purpose accounts. The U.S. District Court for the Eastern District of Washington certified three questions to the state Supreme Court regarding interpretation of state law in the Plaintiffsâ case. In response, the Supreme Court concluded that GCS is a âdebt adjusterâ and as such, is not exempt from liability under state law. Furthermore, the Court concluded that debt settlement companies that worked with GCS and RMBT are likely subject to the stateâs debt adjusting statute fee limits, depending on whether they are debt adjusters providing debt adjustment services.

Plaintiff filed a class action suit against JP Morgan Chase Bank ("Chase") alleging violations of Fla. Stat. 655.85 and unjust enrichment where she was charged a fee to cash a check as a non-account holder at Chase. At issue was whether the district court properly granted Chase's motion to dismiss both plaintiff's claims as preempted by the National Bank Act ("NBA"), 12 U.S.C. 21 et seq. The court affirmed dismissal where Fla. Stat. 655.85 was preempted by the Office of Comptroller of the Currency's ("OCC") regulations promulgated pursuant to the NBA where Congress clearly intended that the OCC be empowered to regulate banking and banking-related services. The court also held that because plaintiff's unjust enrichment claim relied on identical facts as her claim under the state statute, it too was preempted.