Justia Banking Opinion Summaries

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.

Joseph (Joe) Mandolfo sued his brother Mario and American National Bank (ANB). At one time, Joe owned several businesses, some of which had accounts with ANB. After his brother Mario lost his job as a teacher, Joe hired Mario to work for him. Joe alleged that Mario had, with the help of ANB, wrongfully deposited checks intended for Joeâs business, into his own account. From 1995 until 2000, Joe contended that Mario embezzled about $1.2 million. The district court granted summary judgment to Joe against Mario. The court however, also granted summary judgment to ANB, concluding that a statute of limitations barred Joeâs claims against the bank. Joe appealed the grant of summary judgment to the bank. The Supreme Court concluded that Joeâs claims were governed by the Uniform Commercial Code, and as a result, were subject to a three-year statute of limitations. Joe did not discover Marioâs misappropriations until 2003. Accordingly, the Court affirmed the lower courtâs decision to dismiss Joeâs claims against the bank as untimely.

Plaintiff, a former Nelnet, Inc. ("Nelnet") loan advisor, alleged that certain Nelnet marketing practices were continuing violations of the Federal Family Education Loan Program ("FFELP") established under Part B of the Higher Education Act of 1965, 20 U.S.C. 1071, that rendered Nelnet liable under the False Claims Act ("FCA"), 31 U.S.C. 3729(a). Plaintiff joined JPMorgan Chase & Co. and Citigroup, Inc. as defendants alleging they were knowing participants in a conspiracy to submit false claims. At issue was whether the district court properly dismissed plaintiff's third amended complaint. The court affirmed the dismissal and held that there was no abuse of discretion in dismissing plaintiff's claims where plaintiff failed to plead fraud with sufficient particularity and for failure to state a claim under Federal Rule of Civil Procedure 9(b).

Homeowners fell behind on their mortgage and the bank initiated foreclosure. The homeowners filed a Chapter 13 bankruptcy. The judge denied their motion for rescission of the mortgage and for damages, based on noncompliance with state laws. The district court and First Circuit affirmed. The homeowners signed right-to-cancel forms required under the Massachusetts Consumer Credit Cost Disclosure Act, modeled after the federal Truth in Lending Act (15 U.S.C. 1635); technical flaws in the form cannot serve as a basis for invalidating a transaction five years later. Similarly, a slight delay in receipt of a required high-cost loan disclosure did not justify rescission five years later.