Justia Banking Opinion Summaries

If a LaSalle Bank custodial account had a cash balance at the end of a day, the cash would be invested in (swept into) a mutual fund chosen by the client. The Trust had a custodial account with a sweeps feature. After LaSalle was acquired by Bank of America, clients were notified that a particular fee was being eliminated. The trustee, who had not known about the fee, brought a putative class action in state court, claiming breach of the contract (which did not mention this fee) and violation of fiduciary duties. The bank removed the suit to federal court, relying on the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which authorizes removal of any “covered class action” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” The statute requires that such state‑law claims be dismissed. The district court held that the suit fit the standards for removal and dismissal. The Seventh Circuit affirmed. The complaint alleged a material omission in connection with sweeps to mutual funds that are covered securities; no more is needed. The Trust may have had a good claim under federal securities law, but chose not to pursue it; the Act prohibits use of a state-law theory. View "Goldberg v. Bank of America, N.A." on Justia Law

Builders Bank is insured and regulated by the Federal Deposit Insurance Corporation (FDIC), which conducts a “full‐scope, on‐site examination” every 12-18 months, 12 U.S.C. 1820(d). After a 2015 examination, the FDIC assigned the Bank a rating of four under the Uniform Financial Institutions Rating System, which has six components: capital, asset quality, management, earnings, liquidity, and sensitivity (CAMELS). The highest rating is one, the lowest five. The Bank claims that its rating should have been three and that the lower rating was arbitrary and capricious. The Seventh Circuit vacated the district court’s dismissal. The presence of capital as one of the CAMELS components does not necessarily mean that the rating as a whole is committed to agency discretion for the purposes of 5 U.S.C. 701(a)(2). The FDIC has discretion to set appropriate levels of capital for each institution, 12 U.S.C. 3907(a)(2), but the Bank argued that it takes the FDIC’s capital requirements as given and challenged only its application of the “asset quality, management, earnings, liquidity, and sensitivity” factors. The court did not determine whether other components of a CAMELS rating may be committed to agency discretion. View "Builders Bank v. Federal Deposit Insurance Corp." on Justia Law

Plaintiffs’ Indianapolis home had a mortgage serviced by J.P. Morgan Chase. In 2011 plaintiffs accused Chase of paying the wrong homeowner’s insurer using $1,422 from their escrow account. They had switched insurers without telling Chase. When Chase learned of the change, it promptly paid the new insurer and informed plaintiffs that their old insurer would send a refund. Chase told them to forward the refund to replenish the depleted escrow. When the refund came, plaintiffs kept the money. Chase adjusted their mortgage payment to make up the shortfall. When plaintiffs refused to pay the higher amount, the mortgage went into default. Instead of curing, they requested information under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2601–2617, which requires the bank to correct account errors and disclose account information. They demanded that Chase reimburse their escrow. Chase sent a complete account history. Plaintiffs divorced, ending their 25-year marriage. They sued Chase, claiming that its response was inadequate under RESPA and caused more than $300,000 in damages—including the loss of their marriage— and claiming breach of the implied covenant of good faith and fair dealing. The Seventh Circuit affirmed summary judgment for Chase. Chase’s response complied with its RESPA duties. To the extent that any requested information was missing, plaintiffs suffered no actual damages. Nor did Chase breach the duty of good faith and fair dealing, assuming that Indiana would recognize the implied covenant in this context. View "Perron v. J.P. Morgan Chase Bank, N.A." on Justia Law

At issue in this case was whether, under Connecticut law, after a judgment debtor’s wages have been garnished, the remaining wages are exempt from execution, and whether the transfer of those wages to a third party constitutes a fraudulent transfer. Pursuant to two state court judgments, The Cadle Company was Terry Fletcher’s judgment creditor, Fletcher owing the company more than $3 million. Since at least 2005, Terry has transferred more than $300,000 of his residual wages to the bank account of his wife, Marguerite Fletcher. The Cadle Company sued the Fletchers in federal district court, alleging, inter alia, that the transfer violated the Connecticut Uniform Fraudulent Transfer Act (CUFTA). The district court granted the Fletchers’ motion for partial summary judgment, granted The Cadle Company’s motion for partial summary judgment, and ultimately rendered judgment for The Cadle Company in the amount of $401,426 on its CUFTA claim. The Fletchers appealed to the Second Circuit Court of Appeals. The Second Circuit subsequently certified a question to the Supreme Court, which the Court accepted. The Supreme Court answered that Terry’s residual wages would not have been exempt from execution if he had retained possession of them, and therefore, they were subject to execution after Terry transferred them to his wife’s account. View "Cadle Co. v. Fletcher" on Justia Law

Plaintiffs were affiliated commercial entities that sought to enforce the auction sale of a syndicated loan against Bank. When Bank accepted Plaintiffs’ bid and then refused to transfer the loan, Plaintiffs brought this action alleging breach of contract and breach of the implied covenant of good faith and fair dealing. In response, Defendant argued that it had no obligation to transfer the loan because the parties never executed a written sales agreement and Plaintiffs failed to submit a timely cash deposit. Supreme Court granted Plaintiffs’ motion for summary judgment on the breach of contract cause of action. The Appellate Division reversed. The Court of Appeals reversed, holding that Plaintiffs established their entitlement to summary judgment because the prerequisites of executing a written sales agreement and submitting a timely cash deposit were not conditions precedent to formation of the parties’ contract and did not render their agreement unenforceable. View "Stonehill Capital Mgt., LLC v. Bank of the West" on Justia Law

Developer intended to develop real property into single-family residential lots and secured financing through Bank. Insurer provided a surety bond to the Planning and Zoning Commission. Insurer executed three Bond Agreements as surety for Developer. Developer later defaulted in its loan. In lieu of foreclosure, Developer deed the property to Bank’s property management company. Bank transferred the property to another internal holding company. The Commission subsequently complied with Bank’s request for the Commission to call Developer’s bonds and place the proceeds in escrow for the purpose of reimbursing Bank for completion of the necessary infrastructure projects required by Developer’s approved plat. Developer filed a declaratory judgment action alleging that the bonds were not callable and that payment on the bonds would result in Bank receiving an unjust enrichment. The trial court granted summary judgment for Defendants. The Supreme Court affirmed, holding (1) Developer was liable under the bond; and (2) Developer’s claims of error during discovery were unavailing. View "Furlong Development Co. v. Georgetown-Scott County Planning & Zoning Commission" on Justia Law

After Appellants went bankrupt, Appellees foreclosed on their home. Appellants each received an IRS Form 1099-A in the mail at the end of the tax year stating that the foreclosure might have tax consequences. The mortgage debt, however, was discharged during Appellants’ Chapter 7 bankruptcy proceedings. Appellants sued Appellees, claiming that the Forms were a coercive attempt to collect on the mortgage debt, which Appellees had no right to collect. The bankruptcy court found the Forms gave Appellants “no objective basis” to believe Appellees were trying to collect the discharged mortgage debt. The district court affirmed. The First Circuit affirmed, holding that the evidence in the record showed that the Forms were not objectively coercive. View "Bates v. CitiMortgage, Inc." on Justia Law

The California Supreme Court's narrow ruling on a borrower's standing to challenge the validity of the chain of assignments involved in the securitization of her loans in "Yvanova v. New Century Mortgage Corp." (62 Cal.4th 919 (2016)) clarified what was the dispositive issue in this appeal, but expressly did not decide how to resolve it. In "Yvanova," the Court held a borrower had standing to allege that an assignment of the promissory note and deed of trust to the foreclosing party is void, not voidable; yet it did not decide whether a post-closing date transfer into a New York securitized trust is void or voidable. New York law, as interpreted by an overwhelming majority of New York, California, and federal courts, however, provided that defects in the securitization of loans can be ratified by the beneficiaries of the trusts established to hold the mortgage-backed securities and, as a result, the assignments are voidable. Following this precedent, the Court of Appeal concluded plaintiff Maria Mendoza did not have standing to challenge the alleged irregularities in the securitization of her loan. Therefore, the trial court's dismissal of the second amended complaint for wrongful foreclosure, declaratory relief, and quiet title was affirmed. View "Mendoza v. JPMorgan Chase Bank" on Justia Law

The underlying dispute in this case concerned a mortgage purported granted by Andrew and Maureen DeMore to the predecessor in interest to HSBC Bank, USA, N.A. on a parcel of property owned by the DeMores. This appeal came by way of bankruptcy court after each of the DeMores filed separate voluntary petitions for bankruptcy under Chapter 7 of the Bankruptcy Code. Donald Lassman, as trustee for the DeMores’ bankruptcy cases, filed adversary actions against HSBC to avoid the mortgage, arguing that the mortgage on the DeMores’ property was voidable under Massachusetts state law because the certificate of acknowledgment was “materially defective.” Specifically, Lassman asserted that the certificate failed to make clear that the DeMores executed the mortgage as their free act and deed. The Bankruptcy Court granted summary judgment to Lassman. The district court reversed. The First Circuit affirmed, holding that the certificate of acknowledgment was not materially defective because it made clear that the DeMores had executed the mortgage as their free act and deed. View "HSBC Bank USA, N.A. v. Lassman" on Justia Law

Shaw used identifying numbers of Hsu's bank account in a scheme to transfer funds from that account to accounts at other institutions from which Shaw was able to obtain Hsu’s funds. Shaw was convicted under 18 U.S.C. 1344(1), which makes it a crime to “knowingly execut[e] a scheme . . . to defraud a financial institution.” The Ninth Circuit affirmed. A unanimous Supreme Court vacated and remanded for consideration of whether the district court improperly instructed the jury that a scheme to defraud a bank must be one to deceive the bank or deprive it of something of value, instead of one to deceive and deprive. The Court rejected Shaw’s other arguments. Subsection (1) of the statute covers schemes to deprive a bank of money in a customer’s account. The bank had property rights in Hsu’s deposits as a source of loans from which to earn profits or as a bailee. The statute requires neither a showing that the bank suffered ultimate financial loss nor a showing that the defendant intended to cause such loss. Shaw knew that the bank possessed Hsu’s account, Shaw made false statements to the bank, Shaw believed that those false statements would lead the bank to release from that account funds that ultimately, wrongfully ended up with Shaw. Shaw knew that he was entering into a scheme to defraud the bank even if he was not familiar with bank-related property law. Subsection (2), which criminalizes the use of “false or fraudulent pretenses” to obtain “property . . . under the custody or control of” a bank, does not exclude Shaw’s conduct from subsection (1). View "Shaw v. United States" on Justia Law