The U.S. Court of Appeals for the Ninth Circuit recently held that the National Bank Act (NBA) did not preempt California’s state escrow interest law, which requires financial institutions to pay at least 2 percent simple interest per annum on escrow account funds. In so ruling, the Court also held that the federal Truth in Lending Act provisions for escrow accounts, at 15 U.S.C. § 1639d, did not apply to loans originated before the 2013 effective date of the provisions. A copy of the opinion in Lusnak v. Bank of America is available at: Link to Opinion. In July 2008, the…
Posts published in “Banking”
The U.S. Court of Appeals for the Eleventh Circuit recently held that a bank could not enforce an arbitration clause inserted into an amended customer account agreement during the pending litigation incident to the sale and acquisition of the bank, because the plaintiff was actively opposing arbitration and the bank failed to notify the plaintiff’s counsel and the court of the purportedly “court-evicting” amendment. In so ruling, the Eleventh Circuit concluded that the bank “failed to demonstrate the requisite meeting of the minds to support a finding that the parties agreed through the February 2013 amendment to arbitrate their then-pending…
The Court of Appeal of California, First District, recently held that an assignee of the original beneficiary of a deed of trust, as the current holder of an obligation, has the right under California Civil Code § 2941(b)(6) to prove damages against the title company that allegedly recorded a release of the deed of trust in error. A copy of the opinion in SMS Financial XXIII, LLC v. Cornerstone Title Company is available at: Link to Opinion. In 2004, a bank made a business loan to an investment company. The loan was guaranteed by the investment company’s principals (“guarantors”) and secured…
The U.S. Court of Appeals for the Seventh Circuit recently affirmed the dismissal of a bank’s lawsuit against its insurer for breach of contract and bad faith denial of coverage, holding that the insurance policy’s exclusion for any claim based upon or arising from fees or charges applied to the facts alleged. The bank argued that the primary sources of the claims against it concerned the bank’s policies and procedures, which were not the subject of a policy exclusion. However, the Court held the insurer was not required to defend or indemnify the bank for the underlying $24 million settlement…
9th Cir. Limits Subsequent Good-Faith Transferee Exception in Bankruptcy Fraudulent Transfer Actions
9th Cir. Limits Subsequent Good-Faith Transferee Exception in Bankruptcy Fraudulent Transfer Actions
The U.S. Court of Appeals for the Ninth Circuit recently held that a debtor corporation’s sole shareholder and third parties who sold real property and services to the sole shareholder could be liable for fraudulent transfers. In so ruling, the Ninth Circuit held that the third parties were initial transferees of the debtor corporation’s funds because the sole shareholder paid the third parties with checks directly from a corporate account, even though the third parties did not have a pre-existing relationship or an ongoing relationship with the sole shareholder, his family, or any of his businesses. A copy of this…
The U.S. Court of Appeals for the Ninth Circuit recently affirmed final judgments against corporate borrowers and guarantors in three separate cases, holding that: (a) the Nevada statute limiting the amount of the deficiency recoverable in a foreclosure action was preempted by federal law as applied to transferees of the Federal Deposit Insurance Corporation (FDIC); (b) the plaintiff bank had standing to enforce the loans it acquired from the FDIC; (c) the bank was not issue-precluded from showing that the subject loans had been transferred to it; (d) the bank did not breach the implied covenant of good faith and…
The U.S. Court of Appeals for the Second Circuit recently remanded a federal False Claims Act lawsuit based upon alleged misrepresentations made by a bank when it applied to borrow funds from the Federal Reserve System’s discount window. The Second Circuit remanded the case to the trial court to determine whether the relators adequately alleged the materiality of the bank’s alleged misrepresentations. In so doing, the Second Circuit held that the Supreme Court of the United States had abrogated both the express designation requirement for implied false certification claims, and the particularity requirement for express false certification claims, in its…
The U.S. Court of Appeals for the Ninth Circuit recently held that, where husband and wife debtors fraudulently transferred assets, the creditor was entitled to the full sum the creditor would have recovered and was not limited to the amount of the collateralized debt. In so ruling, the Ninth Circuit reversed a bankruptcy court and trial court judgment in the creditor’s favor that the debt was non-dischargeable due to the debtor’s fraud, but improperly limiting the non-dischargeable debt to only the collateralized amount. A copy of the opinion in DZ Bank AG Deutsche Zentral-Genossenschaft Bank v. Meyer is available at: Link to Opinion.…
The U.S. Court of Appeals for the Eighth Circuit recently rejected a debtor’s attempt to hold a bank liable for allegedly faulty advice provided in connection with various lending transactions, holding that the debtor could not claim reliance on the bank’s advice when the debtor had an ability to investigate the details of the transaction for itself, and the agreement between parties stated that the debtor was not relying on any of the bank’s representations in entering into the transaction. A copy of the opinion in Bank of America, NA v. JB Hanna, LLC is available at: Link to Opinion. In…
The U.S. Court of Appeals for the Sixth Circuit recently reversed the dismissal of a class action lawsuit filed by a bank account holder who asserted that the bank violated the Uniform Commercial Code 4-401 and 4-103(a), dealing with liability for fraudulent checks. The account holder experienced check fraud and the bank refused liability because the master services agreement for the account contained a liability waiver for failure to purchase fraud protection products, which the account holder had not done. A copy of the opinion in Majestic Building Maintenance, Inc. v. Huntington Bancshares Inc. is available at: Link to Opinion. The…
The U.S. Court of Appeals for the Ninth Circuit recently held that mortgage underwriters were not exempt under the federal Fair Labor Standards Act (FLSA) and were therefore entitled to overtime compensation for hours worked in excess of 40 per week. After analyzing the specific details of the underwriters’ responsibilities, the Ninth Circuit panel concluded that, because the underwriters’ primary job duty did not relate to their employer bank’s management or general business operations, the administrative employee exemption to the FLSA’s overtime requirements did not apply. Recognizing that there was a split between the Second Circuit and Sixth Circuit as…
In a bankruptcy preferential transfer dispute, the U.S. Court of Appeals for the Eighth Circuit recently held that the bankruptcy trustee could recover true overdraft covering deposits, while deposits covering intra-day overdrafts were not recoverable. A copy of the opinion in Joseph Sarachek v. Luana Savings Bank is available at: Link to Opinion. A company filed for bankruptcy and, 90 days before filing, wired funds to its bank to cover overdrafts. The bankruptcy trustee argued that those funds were avoidable transfers that could be recovered from the bank. The bankruptcy court agreed as to some of the deposits but not others. The…