The U.S. Court of Appeals for the Eleventh Circuit recently held that a noncustomer pleaded sufficient facts to bring state law negligence and fraud causes of action against a bank when a bank customer engaged in the fraud.
The U.S. Court of Appeals for the Eighth Circuit recently held that a secured party’s foreclosure did not discharge an otherwise valid security interest in the proceeds of the collateral, nor did it preclude the creditor from pursuing its rights to such proceeds. A copy of the opinion in Bayer CropScience, LLC v. Stearns Bank National Association is available at: Link to Opinion. The borrower settled a lawsuit. Two of the borrower’s creditors claimed priority over the settlement funds. One creditor (“Initial Creditor”) made a $2.62 million loan to the borrower on Sept. 13, 2002, which was secured by all fixtures,…
The U.S. District Court of the Central District of California recently dismissed a borrower's putative class action complaint against a non-bank that supposedly was the "true lender" for allegedly usurious student loans that were extended in the name of a bank.
The U.S. Court of Appeals for the Second Circuit recently confirmed that, in the Second Circuit, an arbitration agreement is no longer binding where the intent of the parties was to arbitrate with only a specific arbitrator and that arbitrator is unavailable. A copy of the opinion in Moss v. First Premier Bank is available at: Link to Opinion. The borrower took out payday loans from an online payday lender. The payday lender relied on banks to serve as middlemen to debit the customer’s account. Two banks each debited the borrower’s account for one payday loan. When the borrower applied for…
The Appellate Court of Illinois, Second District, recently rejected the arguments of two loan guarantors that a bank’s current claims against them were barred by res judicata because the current claims arose out of the same guaranty that the bank used to sue them in a prior action. In so ruling, the Court held that where a single guaranty contemplates multiple loan transactions, each loan transaction constitutes a distinct transaction implicating the guaranty. Therefore, the operative “transaction” for purposes of res judicata is each of the loans. A copy of the opinion in BMO Harris Bank, N.A., v. K & K…
As you may recall from our prior updates, the U.S. Court of Appeals for the Second Circuit recently reversed a district court’s ruling that federal National Bank Act preemption applicable to the loan originator allowed a non-bank consumer debt buyer to charge interest in excess of state usury limits. In so ruling, the Second Circuit noted that, “[a]lthough it is possible that usury laws might decrease the amount a national bank could charge for its consumer debt in certain states (i.e., those with firm usury limits, like New York), such an effect would not ‘significantly interfere’ with the exercise of…
Reversing a bankruptcy court order in favor of the debtor, the U.S. District Court for the District of Maryland recently held that a bank that had allowed amounts to be withdrawn from a home equity credit line after the HELOC had been frozen could still recover those amounts from the debtor. A copy of the opinion in Cardinal Bank, NA v. Rusnack is available at: Link to Opinion. During 2006, the bankruptcy debtor and his former wife underwent divorce proceedings, and the debtor instructed the creditor bank holding his home equity line of credit (HELOC) to freeze the HELOC. On June…
The U.S. Court of Appeals for the Eighth Circuit recently held that a bank was entitled to recover its cybertheft losses under its financial institution bond, despite its employee’s violation of the bank’s internal policies and procedures, and despite the bank’s failure to update its antivirus software, holding that Minnesota’s “concurrent causation” doctrine applies to financial institution bonds. A copy of the opinion in State Bank of Bellingham v. BancInsure, Inc. is available at: Link to Opinion. A computer at the plaintiff bank became infected with malware, which allowed a criminal third party to transfer nearly half a million dollars to…
The U.S. Court of Appeals for the Fifth Circuit recently held that, although a bank had actual notice of an heir’s claim to her decedent father’s account funds, the bank’s compliance with the post-death affidavit provisions of California Probate § 13106(a) rendered the bank immune from liability for wrongful disbursement of the funds. In any event, the Court also held, the decedent’s surviving spouse who withdrew the funds had a probate claim that was statutorily superior to the heir’s claim. A copy of the opinion in Angelo v. Wells Fargo Bank is available at: Link to Opinion. Plaintiff heir’s father died…
The U.S. Court of Appeals for the Sixth Circuit recently affirmed a district court’s dismissal of a qui tam action alleging that a bank violated the federal False Claims Act when it certified that it had engaged in loss mitigation and sought FHA insurance payments on defaulted loans, holding that because the factual basis of the claim was publicly disclosed before suit was filed, only the government could pursue the action in its own name. A copy of the opinion in United States ex rel. ABLE v. U.S. Bank, N.A. is available at: Link to Opinion. The defendant bank participated in…
The U.S. Court of Appeals for the Seventh Circuit recently affirmed the dismissal of a breach of contract claim brought by a group of investors against a bank that purchased the assets of a failed bank in receivership, because there was no writing memorializing the alleged agreement, as required by the federal Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the Illinois Credit Agreement Act (ICAA). A copy of the opinion in United Central Bank v. Davenport Estate LLC is available at: Link to Opinion. A bank extended loans to a group of real property investors in 2008 and also agreed…
The U.S. Court of Appeals for the Seventh Circuit recently affirmed a district court’s refusal to enjoin a bank’s state court action to collect on a promissory note and related guaranties, holding that the borrower’s appeal was frivolous and that sanctions were appropriate under Federal Rule of Appellate Procedure 38. A copy of the opinion in CFE Group, LLC v. FirstMerit Bank, NA is available at: Link to Opinion. A bank sued a corporate borrower and related parties in federal district court in 2012 to collect on a promissory note and enforce guaranties. The defendants moved to dismiss, arguing that because…
