Justia Banking Opinion Summaries

Plaintiff filed a putative class action against Comenity to recover statutory damages for violations of the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. The district court concluded that plaintiff failed, as a matter of law, to demonstrate that four billing-rights disclosures made to her by Comenity in connection with plaintiff's opening of a credit card account violated the TILA. The court concluded that plaintiff failed to demonstrate the concrete injury required for standing to pursue two of her disclosure challenges and thus dismissed those two claims for lack of jurisdiction. The court concluded that, although plaintiff established standing to pursue the two remaining claims, those challenges fail as a matter of law. In this case, Comenity’s notice that certain TILA protections applied only to unsatisfactory credit card purchases that were not paid in full is substantially similar to Model Form G–3(A) and, therefore, cannot as a matter of law demonstrate a violation of 15 U.S.C. 1637(a)(7). Furthermore, because neither the TILA nor its implementing regulations require unsatisfactory purchases to be reported in writing, Comenity’s alleged failure to disclose such a requirement cannot support a section 1637(a)(7) claim. Accordingly, the court affirmed the district court's grant of summary judgment to Comenity on those TILA claims. The court also affirmed the district court's denial of her cross-motion for class certification as moot. View "Strubel v. Comenity Bank" on Justia Law

Plaintiffs sued Defendants in a New York state court for concealing ill-gotten money from a scheme orchestrated by three of Plaintiff’s employees. Defendants moved to dismiss the complaint for lack of personal jurisdiction. Supreme Court granted the motion to dismiss for lack of jurisdiction. The Appellate Division affirmed, concluding that Defendants did not purposefully avail themselves of the privilege of conducting activities in New York. Plaintiffs appealed, alleging that the defendant-bank’s repeated use of New York correspondent accounts to receive and transfer millions of dollars in illicit funds constituted the transaction of business substantially related to their claims against Defendants sufficient to confer personal jurisdiction. Defendants argued in response that personal jurisdiction cannot depend on third party conduct and requires purposeful availment by Defendants that was lacking in this case. The Court of Appeals reversed, holding that Defendants’ use of the correspondent bank accounts was purposeful, that there was an articulable nexus between the business transaction and the claim asserted, and that the maintenance of suit in New York does not offend traditional notions of fair play and substantial justice. View "Rushaid v. Pictet & Cie" on Justia Law

Attorney Goodson received an email from “Fumiko Anderson,” stating that she wanted to hire Goodson to recover money that she was owed in a divorce. Fumiko later stated that her ex-husband had agreed to settle and would mail a check to cover Goodson’s fee plus the settlement amount. The check was drawn on the First American account of an Illinois manufacturer. Goodson deposited the $486,750.33 check in his Citizens Bank client trust account. Fumiko told Goodson she needed the money immediately. Goodson directed the bank to transfer it to a Japanese entity that he believed to be Fumiko. It actually was an Internet-based fraudulent scheme: the “Fumiko Bandit.” When the fraud was discovered First American reimbursed its depositor and sought recovery from Citizens Bank, Goodson, and the Federal Reserve Bank. The Seventh Circuit affirmed judgment for the defendants, rejecting a breach of warranty argument. First American had received a “truncated” electronic image from the Federal Reserve but could have demanded a “substitute check” or could have refused to honor the check. First American was the victim of a mistake, but Illinois law provides no remedy for such a victim against “a person who took the instrument in good faith and for value.” The lawyer and the banks reasonably believed that they were engaged in the commonplace activity of forwarding a check; they did not fall below “reasonable commercial standards of fair dealing.” There was no “negligent spoliation of evidence” in Citizens Bank’s destruction of the original paper check. Goodson owed no professional duty to First American. View "First American Bank v. Federal Reserve Bank of Atlanta" on Justia Law

Charles and Melissa Dalton obtained a loan from Household Finance Corporation II that was secured by a mortgage on their property. The Daltons received a trial period plan pursuant to a Trial Period Plan Agreement. The Daltons’ loan was later sold to LSF9 Master Participation Trust, and the servicing of the Daltons’ loan was transferred to Caliber Home Loans, Inc. The Daltons filed this action against LSF9 and Caliber alleging, inter alia, breach of the Trial Period Plan Agreement and seeking a preliminary and permanent injunction enjoining LSF9 and Caliber from terminating the Daltons’ loan modification. The Court of Chancery dismissed all claims against LSF9 and Caliber, holding (1) LSF9 and Caliber were not parties nor successors in interest to the Trial Period Plan Agreement; (2) LSF9 and Caliber were not parties to the consent orders between Household Finance and the United States Department of the Treasury; (3) the Daltons failed to state a claim for unjust enrichment; and (4) the Daltons failed to allege a reasonable probability of success on the merits or imminent threat of irreparable injury. View "Dalton v. Household Finance Corp., II" on Justia Law

In 2010, EFIH borrowed $4 billion at a 10% interest rate, issuing notes secured by its assets; the Indenture states that EFIH may redeem the notes for the principal amount plus a “make-whole premium” and accrued, unpaid interest. It contains an acceleration provision that makes “all outstanding Notes . . . due and payable immediately” if EFIH files for bankruptcy. Interest rates dropped. Refinancing outside of bankruptcy would have required EFIH to pay the make-whole premium. EFIH disclosed to the Securities and Exchange Commission a “proposal [whereby] . . . EFIH would file for bankruptcy and refinance the notes without paying any make-whole amount.” EFIH later filed Chapter 11 bankruptcy petitions, seeking leave to borrow funds to pay off the notes and to offer a settlement to note-holders who agreed to waive the make-whole. The Trustee sought a declaration that refinancing would trigger the make-whole premium and that it could rescind the acceleration without violating the automatic stay. The Bankruptcy Court granted EFIH’s motion to refinance. EFIH paid off the notes and refinanced at a much lower interest rate; the make-whole would have been approximately $431 million. The Bankruptcy Court and district court concluded that no make-whole premium was due and that the noteholders could not rescind acceleration. The Third Circuit reversed. The premium, meant to give the lenders the interest yield they expect, does not fall away because the full principal amount becomes due and the noteholders are barred from rescinding acceleration of debt. View "In re: Energy Future Holdings Corp." on Justia Law

Edythe Dyer executed a promissory note to Dreamhouse Mortgage Corporation and granted a mortgage on her property in Boston, Massachusetts to Mortgage Electronic Registration Systems, Inc. (MERS). MERS assigned the mortgage to U.S. Bank. Wells Fargo was U.S. Bank’s servicer of the loan. U.S. Bank later notified Dyer that it intended to foreclose on the property by utilizing the statutory power of sale provided for in Mass. Gen. Laws ch. 183, 21. Dyer filed suit naming U.S. Bank and Wells Fargo as defendants, arguing, inter alia, that U.S. Bank was not a proper party to utilize the statutory power of sale. The case was removed to federal court, where the parties consented to a proceeding before a magistrate judge. The magistrate judge granted Defendants’ motion for judgment of the pleadings and dismissed all of Dyer’s claims. The First Circuit affirmed, holding (1) U.S. Bank was authorized to exercise the statutory power of sale; and (2) the magistrate judge correctly dismissed Dyer’s Massachusetts General Laws Chapter 93A claim against Wells Fargo. View "Dyer v. Wells Fargo Bank, N.A." on Justia Law

Robert Perry was issued a Citibank MasterCard account in 1998. The terms and conditions of the Citibank Card Agreement governing Perry’s account included an arbitration agreement. In 2010, Citibank filed a debt collection action against Perry seek to recover the balance owed on Perry’s account. In 2015, Perry filed an answer to Citibank’s complaint and a class counterclaim alleging that Citibank had violated the West Virginia Consumer Credit and Protection Act. Thereafter, Citibank filed a motion asking the court to compel arbitration of the parties’ claims. The circuit court concluded that Citibank had implicitly waived its right to arbitration by filing suit in circuit court and waiting nearly five years before seeking to invoke its contractual right to arbitrate. Citibank appealed. The Supreme Court reversed, holding that Citibank did not waive its right to compel arbitration in this matter. Remanded. View "Citibank, N.A. v. Perry" on Justia Law

Plaintiff appeals the district court’s denial of his motion for reconsideration of its earlier order denying on futility grounds plaintiff's motion for leave to amend his complaint. Plaintiff asserted in his motion that he had developed facts in discovery which showed that (1) a Bank employee knew that Charles Gordon, the chief executive officer of OPT Title and Escrow, Inc., had assisted Gordon in opening a bank account called an “escrow account” into which funds were to be wired by third parties with the expectation that the funds would be held in escrow by OPT Title; (2) the Bank employee knew that Gordon was stealing from the account; (3) the Bank employee assisted Gordon in committing the fraud; and (4) the Bank received at least a short-term financial benefit from allowing Gordon to use OPT Title’s account as a vehicle for his fraud. The court held that the district court erred in denying plaintiff's motion for reconsideration on the basis that even considering his new allegations set forth in his motion for reconsideration, he failed to state claims for relief. Accordingly, the court reversed and remanded for further proceedings. View "Hsi Chang v. JPMorgan Chase Bank, N.A." on Justia Law

An employee of a nonprofit serving disabled adult clients used her position to embezzle more than half a million dollars held by the nonprofit for its clients. After the embezzlement was discovered, Travelers Casualty & Surety Company, the nonprofit's insurance company, made the nonprofit whole. Travelers then sought contribution from the bank in federal court. By submitting certified questions of Washington law, that court has asked the Washington Supreme Court to decide, among other things, whether a nonpayee's signature on the back of a check was an indorsement. Furthermore, the Court was also asked whether claims based on unauthorized indorsements that are not discovered and reported to a bank within one year of being made available to the customer are time barred. The Supreme Court answered yes to both questions. View "Travelers Cas. & Sur. Co. v. Wash. Trust Bank" on Justia Law

Petitioner loaned Debtors, including Darren Badger, approximately $10,000,000. Debtors defaulted on the loan. A California court issued a judgment against Debtors in the amount of $2,497,568. Pacific Western later domesticated the judgment in Nevada. In order to collect on the judgment, Petitioner served Wells Fargo Advisors (WFA), a company that administered three financial accounts under 26 U.S.C. 529 (529 accounts) on behalf of Badger, with a writ of execution and garnishment. Badger claimed that the 529 accounts were outside of the Nevada district court’s jurisdiction because they were located in New Mexico and that the funds held in the 529 accounts were completely exempt under New Mexico law. The district court quashed the writs of execution and garnishment served upon WFA, ruling that Petitioner must attempt to execute upon Badger’s 529 accounts in New Mexico. The Supreme Court entertained Petitioner’s petition for a writ of mandamus and granted the petition in part, holding (1) funds contained in 529 accounts are a debt, not a chattel; and (2) accordingly, the district court had the power to garnish the debt through device of a writ of garnishment upon WFA. View "Pacific Western Bank v. Eighth Judicial District Court" on Justia Law