Justia Banking Opinion Summaries

Spring Hill owned a 240-apartment complex in a Chicago suburb. In 2007, the owner converted the apartments into condominiums and attempted to sell them. Ginsberg recruited several people to buy units in bulk, telling them they would not need to put their own money down and that he would pay them after the closings. The scheme was a fraud that consisted of multiple components and false statements to trick financial institutions into loaning nearly $5,000,000 for these transactions. The seller made payments through Ginsberg that the buyers should have made, which meant that the stated sales prices were shams, the loans were under-collateralized, and the “buyers” had nothing at stake. The seller paid Ginsberg about $1,200,000; Ginsberg used nearly $600,000 to make payments the buyers should have made, paid over $200,000 to the buyers and their relatives, and kept nearly $400,000 for himself. The loans ultimately went into default, causing the financial institutions significant losses.The Seventh Circuit affirmed Ginsberg’s bank fraud conviction, 18 U.S.C. 1344. The evidence was sufficient for the jury to conclude Ginsberg knew that the loan applications, real estate contracts, and settlement statements contained materially false information about the transactions, including the sales prices, the down payments, and Ginsberg's fees. The court rejected a challenge to the admission of testimony by a title company employee. View "United States v. Ginsberg" on Justia Law

Six Delaware statutory Trusts acquired student loans, issued notes for the acquisitions, and pledged the student loans as collateral for the notes. This “securitization” works well when the students do not default. The Trusts initially did not provide for servicing delinquent loans; under a subsequent “Special Servicing Agreement,” U.S. Bank became the Indenture Trustee and the “Special Servicer” but allegedly failed to collect hundreds of millions of dollars in delinquent loans. The holders of the Trusts’ equity ownership interests hired an additional loan servicer, Odyssey, and submitted invoices from Odyssey for payment from the trust estate.The district court held that the Trust documents were not violated by hiring Odyssey and Odyssey’s invoices were payable. The Third Circuit reversed in part. Several provisions of the Odyssey Agreement violate the Trust documents by impermissibly transferring to the Owners of the Trusts rights reserved for the Indenture Trustee. The Odyssey Agreement supplements and modifies several provisions of the Trust documents, requiring consent not obtained from the Indenture Trustee. The court remanded for a determination of whether the Odyssey invoices are nonetheless payable, which may include reconsideration os a self-dealing issue. View "In re: National Collegiate Student Loan Trusts" on Justia Law

In 2002, Edella and Eric Johnson executed a $74,000 mortgage and associated promissory note, secured by property in Pittsburgh. The instrument was recorded and later assigned to the Bank of New York Mellon Trust Company (“Mellon”). Six years later, the Johnsons defaulted on their mortgage. In March 2009, Mellon, through its debt-collection counsel Phelan Hallinan & Schmieg, LLP (“Phelan”), filed a complaint in mortgage foreclosure. In that complaint, Phelan included a claim for attorneys’ fees of $1,300. Following a non-jury trial, the court entered judgment for Mellon. In March 2012, while the underlying mortgage foreclosure case was still ongoing, the Johnsons filed the instant class action against Phelan. When the Pennsylvania Loan Interest and Protection Law ("Act 6") was enacted in 1974, a “residential mortgage” was defined as “an obligation to pay a sum of money in an original bona fide principal amount of fifty thousand dollars ($50,000) or less.” In 2008, however, the General Assembly amended Act 6’s definition of a “residential mortgage” to increase the principal-amount ceiling to $217,873 - a base figure that automatically was adjusted for inflation annually. This appeal centered on whether that increased principal-amount ceiling should apply to mortgages that were executed before the 2008 amendment to Act 6. Specifically, the question presented was whether the $74,000 mortgage the Johnsons executed should have been considered a "residential mortgage" under Act 6, given that when Appellants' lender initiated foreclosure proceedings in 2009, the increased principal-amount ceiling had gone into effect. Because the Pennsylvania Supreme Court concluded that nothing in the 2008 legislation amending Act 6 demonstrated that the revised figure should have applied retroactively, the Supreme Court affirmed the Superior Court's order. View "Johnson v. Phelan Hallinan & Schmieg" on Justia Law

The Supreme Judicial Court affirmed the judgment entered by the superior court denying U.S. Bank Trust, N.A.'s motion to extend the time to file a notice of appeal as to its foreclosure complaint against James D. Keefe, holding that the trial court did not err in denying the motion as untimely.In denying U.S. Bank's motion seeking an extension of time to file its notice of appeal the trial court determined determined that U.S. Bank had shown good cause for the trial court to grant its motion to extend but that its authority to grant an extension of time had expired, and therefore, the motion was untimely. The Supreme Judicial Court affirmed, holding that the trial court did not err in its interpretation of the pertinent Rules of Appellate Procedure or in denying U.S. Bank's untimely motion for an extension of time. View "U.S. Bank Trust, N.A. v. Keefe" on Justia Law

The Second Circuit affirmed the district court's judgment affirming the bankruptcy court's grant of defendants' motion to dismiss in an action arising out of the Chapter 11 bankruptcy of Lehman Brothers Holdings Inc. The bankruptcy court held that, in the context of synthetic collateralized debt obligations, certain "Priority Provisions" that subordinated LBSF's payment priority to claims of the Noteholder defendants are enforceable by virtue of section 560 of the Bankruptcy Code, which exempts "swap agreements" from the Code's prohibition of "ipso facto clauses."Like the district court, the court held that, even if the Priority Provisions were ipso facto clauses, their enforcement was nevertheless permissible under the section 560 safe harbor. The court explained that the Priority Provisions are incorporated by reference into the swap agreements and thus, for the purposes of section 560, are considered to be part of a swap agreement; the contractual right to liquidate included distributions made pursuant to Noteholder priority; the Trustees exercised a contractual right to effect liquidation when they distributed the proceeds of the sold Collateral; and, in doing so, the Trustees exercised the rights of a swap participant. Because the Priority of Payments clauses are enforceable under the Code, the court held that LBSF's state-law claims also fail. Finally, the district court and bankruptcy court correctly concluded that LBSF is not entitled to declaratory relief. View "Lehman Brothers Special Financing Inc. v. Bank of America N.A." on Justia Law

Coinbase is an online digital currency platform that allows customers to send, receive, and store certain digital currencies. Archer opened a Coinbase account to purchase, trade, and store cryptocurrency. On October 23, 2017, a third party launched a new cryptocurrency, “Bitcoin Gold,” Coinbase monitored and evaluated Bitcoin Gold’s network and informed its customers via its website: “ ‘At this time, Coinbase cannot support Bitcoin Gold because its developers have not made the code available to the public to review. This is a major security risk.’ ” In 2018, the Bitcoin Gold network was attacked by hackers who stole millions of dollars of funds from trading platforms and individuals on its network.Archer sued Coinbase, based on Coinbase’s failure and refusal to allow him to receive his Bitcoin Gold currency and Coinbase’s retention of control over his Bitcoin Gold. The trial court rejected his claims of negligence, conversion, and breach of contract on summary judgment. The court of appeal affirmed. Archer failed to establish the existence of an agreement by Coinbase to provide the Bitcoin Gold to him and failed to demonstrate Coinbase acted in any way to deprive him of his Bitcoin Gold currency. View "Archer v. Coinbase, Inc." on Justia Law

A request for judicial relief under Nevada's Foreclosure Mediation Rules is the exclusive remedy under Nevada law for challenging a lender's conduct in the foreclosure mediation process.Plaintiffs filed suit alleging contractual and tortious breaches of the implied covenant of good faith and fair dealing against BNYM and its agents, Sables and Bayview. The Ninth Circuit affirmed the district court's dismissal of the complaint for failure to state a claim, holding that plaintiffs' claims rest on defendants' asserted failure to comply with the various requirements of the foreclosure mediation program, and these claims could have been raised in a timely request for review under the Foreclosure Mediation Rules. The panel explained that plaintiffs' exclusive remedy under Nevada law for addressing these deficiencies was a timely request for judicial review filed within the applicable 10-day period set forth in Nevada F.M.R. 20(2). Therefore, the district court correctly held that plaintiffs' state common-law claims and related requests for declaratory and injunctive relief failed to state a claim upon which relief could be granted. View "Tobler v. Sables, LLC" on Justia Law

Dr. Dominick Lembo employed Arlene Marchese in his dental practice as his office manager, and Karen Wright, a dental hygienist. Sometime before December 2011, Marchese and Wright unlawfully took possession of numerous checks totaling several hundred thousand dollars, forged Lembo’s indorsement on the checks, and deposited the proceeds from the forged checks into their personal accounts at TD Bank. In February 2015, Lembo filed a complaint against TD Bank, alleging that “TD Bank knew or should have known that Marchese and/or Wright were not permitted to negotiate checks made payable to [Lembo].” The complaint also alleged that by permitting them to negotiate checks with forged indorsements, TD Bank “aided and abetted Marchese and Wright in their fraudulent scheme and conduct.” The complaint did not assert that Lembo had a banking relationship with TD Bank. And Lembo did not file an action for conversion under the Uniform Commercial Code (UCC) within the three-year limitations period. Had Lembo done so, TD Bank would have been strictly liable for depositing or cashing those checks, subject to the defenses in N.J.S.A. 12A:3-405 or N.J.S.A. 12A:3-406. The trial court granted the Bank's motion to dismiss, finding that the UCC governed Lembo's remedies against the Bank, and “common law negligence is not such a remedy” in the absence of a “special relationship” between Lembo and the bank. The court also rejected Lembo’s argument that the Uniform Fiduciaries Law (UFL) provided an affirmative cause of action against the bank. The Appellate Division reversed, reading into the complaint the basis for an affirmative UFL claim, and remanded to allow Lembo to amend the complaint to assert such a claim. The New Jersey Supreme Court concluded the Appellate Division misconstrued the purpose of the UFL, finding the Legislature enacted the UFL not to create an affirmative cause of action against a bank but to provide a defense when the bank is sued for failing to take notice of and action on the breach of a fiduciary’s obligation. "The UFL confers a limited immunity on a bank, unless the bank acts in bad faith or has actual knowledge of a fiduciary breach." The Supreme Court found no affirmative cause of action arose under the statute; whether a UFL claim was adequately pled was therefore moot. Recognizing the predominant role the UCC plays in assigning liability for the handling of checks, the Supreme Court also found Lembo had no “special relationship” with the bank to sustain the common law causes of action. View "Lembo v. Marchese" on Justia Law

In 2006-2009,, Ghuman and Khan “flipped” 44 gas stations. Ghuman would recruit a buyer before they purchased the station. The buyers lacked the financial wherewithal to qualify loans. Ghuman and Khan's co-defendant, AEB loan officer Brahmbhatt, arranged loans based on fraudulent documentation. They also created false financial statements for the gas stations. Co-defendant Mehta, an accountant, prepared fictitious tax returns. The loans, which were guaranteed by the Small Business Administration, went into arrears. In 2008-2009 the SBA began auditing the AEB loans; the FBI began looking into suspected bank fraud. AEB ultimately incurred a loss in excess of $14 million.Khan cooperated and pled guilty to one count of bank fraud, 18 U.S.C. 1344, in connection with a $331,000 loan. Ghuman pleaded guilty to another count of bank fraud in connection with a $744,000 loan and to one count of filing a false tax return, 26 U.S.C. 7206. The district court denied Ghuman credit for acceptance of responsibility and imposed a below-Guidelines prison term of 66 months. The court ordered Khan to serve a 36-month prison term and ordered Ghuman to pay $11.8 million and Khan to pay $10.8 million in restitution. The Seventh Circuit affirmed the sentences with an adjustment to Ghuman’s term of supervised release. View "United States v. Khan" on Justia Law

The Supreme Court held that the entire amount of a homeowners' association's (HOA) yearly assessment can be included in the superpriority piece of an HOA's lien under Nev. Rev. Stat. 116.3116 so long as the assessment became due in the nine months preceding the HOA's recording of its notice of delinquent assessments.When Homeowners did not pay their 2011 yearly assessment, the HOA, in April 2011, recorded a notice of lien for delinquent assessments. A Bank, the beneficiary of the first deed of trust on the property, requested the super priority amount from the HOA's foreclosure agent and then tendered to the foreclosure agent an amount representing nine out of twelve months of assessments. The HOA continued with the foreclosure sale, and Appellants purchased the property. Appellants filed a complaint seeking to quiet title to the property. The district court granted summary judgment for the Bank, concluding that the Bank's tender cured the default on the superpriority portion of the HOA's lien and that the foreclosure sale did not therefore extinguish the Bank's deed of trust. The Supreme Court reversed, holding that because the Bank did not tender the entire superpriority amount before the HOA foreclosed on its lien, the foreclosure sale extinguished the Bank's deed of trust on the property. View "Anthony S. Noonan IRA, LLC v. U.S. Bank National Ass'n" on Justia Law