Justia Contracts Opinion Summaries

Articles Posted in Banking
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Plaintiffs in two putative class actions took out home mortgage loans from Bank of America, N.A. (“BOA”), one before and the other after the effective date of certain provisions of the DoddFrank Wall Street Reform and Consumer Protection Act (“DoddFrank”). The loan agreements, which were governed by the laws of New York, required Plaintiffs to deposit money in escrow accounts for property taxes and insurance payments for each mortgaged property. When BOA paid no interest on the escrowed amounts, Plaintiffs sued for breach of contract, claiming that they were entitled to interest under New York General Obligations Law Section 5-601, which sets a minimum 2% interest rate on mortgage escrow accounts. BOA moved to dismiss on the ground that GOL Section 5-601 does not apply to mortgage loans made by federally chartered banks because, as applied to such banks, it is preempted by the National Bank Act of 1864 (“NBA”). The district court disagreed and denied the motion.   The Second Circuit reversed and remanded. The court held that (1) New York’s interest-on-escrow law is preempted by the NBA under the “ordinary legal principles of pre-emption,” Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 37 (1996), and (2) the Dodd-Frank Act does not change this analysis. GOL Section 5-601 thus did not require BOA to pay a minimum rate of interest, and Plaintiffs have alleged no facts supporting a claim that interest is due. View "Cantero v. Bank of Am., N.A." on Justia Law

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OneMain, a non-bank finance company, loaned Zirpoli $6,200.08, to be repaid at a rate of 26.91% (total $11,364.35). The loan was issued under the Consumer Discount Company Act (CDCA), a consumer protection statute, which creates an exception to Pennsylvania’s usury law. The loan is governed by a disclosure statement, a security agreement, and an arbitration agreement. Later, OneMain sold delinquent accounts to Midland, including Zirpoli’s loan. Midland sued Zirpoli but later dismissed the suit and undertook collection efforts.Zirpoli filed a class action, alleging that Midland’s collection activities constituted an unlawful attempt to collect the loan because Midland does not have a CDCA license and never obtained nor requested approval from the Department of Banking. Midland was, therefore, not lawfully permitted to purchase the loan. Midland moved to compel arbitration. The court denied the motion, focusing on the validity of the assignment from OneMain and Midland. The Third Circuit vacated. The ultimate illegality of a contract does not automatically negate the parties’ agreement that an arbitrator should resolve disputes arising from the contract. The parties to the loan clearly agreed to arbitrate the issue of arbitrability. The arbitration agreement provides that an arbitrator shall resolve the arbitrability of defenses to enforcement, including alleged violations of state usury laws. View "Zirpoli v. Midland Funding LLC" on Justia Law

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Appellants lost over $850,000 when an alleged BB&T employee and a co-conspirator impersonated them, changed their passwords, and transferred the money out of their BB&T bank accounts. Appellants sued BB&T under contract and tort theories. The district court dismissed the tort claims as duplicative of the contract claim, concluding that Appellants’ demand was time-barred because BB&T’s standard bank account contract limited the time to assert a demand from the statutory one-year period to just 30 days. In the alternative, the district court entered summary judgment for BB&T because it concluded the bank had and had followed commercially reasonable security procedures.The Eleventh Circuit vacated (1) the district court’s order dismissing the complaint and (2) the district court’s order entering summary judgment for BB&T on the remaining counts in the Fourth Amended Complaint, finding, as a matter of law, that Appellants’ claim for statutory repayment is not time-barred. View "Jesus Alonso Alvarez Rodriguez, et al v. Branch Banking & Trust Company, et al" on Justia Law

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The United States Court of Appeals for the District of Columbia Circuit reversed the judgment of the district court declining to reach the merits of Plaintiffs' complaint challenging a determination of the Federal Deposit Insurance Corporation (FDIC) as unlawful under the Administrative Procedure Act (APA), 5 U.S.C. 706(2), holding that the district court erred in concluding that the FDIC exceeded its authority in making the determination.Plaintiffs, two bank executives, were fired after a proposed merger because they refused to accept a reduction in the amount of a payment that was contractually provided for them. Plaintiffs sued the bank that terminated them and the bank with which it merged, alleging that they were entitled to the full payments. The banks, in turn, sought guidance from the FDIC as to whether the relief sought by Plaintiffs would constitute a statutorily-restricted "golden parachute" payment. The FDIC responded that the payment would constitute a golden parachute. Plaintiffs then brought this action challenging the FDIC's determination as unlawful under the APA. The district court declined to reach the merits, concluding that the FDIC lacked authority to render a golden parachute determination at all. The Court of Appeals reversed and remanded the case, holding that the district court erred in concluding that the FDIC lacked authority to render its golden parachute determination. View "Bauer v. Federal Deposit Insurance Corp." on Justia Law

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Triller Inc., a social media company was being sold to a group of owners, including Carnegie Technologies, Inc. Prior to the sale, Triller executed a promissory note in favor of Carnegie and then immediately assigned the note to a group of “legacy” owners—including Carnegie—as part of the deal’s closing. After the note was defaulted, Carnegie sued Triller to collect the amounts due. Triller claimed that it had no obligations under the note because it had been assigned, resulting in novation. The district court rejected Triller's novation defense and Triller appealed.The Fifth Circuit affirmed, finding that the plain meaning of the agreement was silent on the extinction of any obligation between Triller and Carnegie. The laws of both California and Texas require clear evidence illustrating the parties' intent to replace an earlier agreement, and the agreement's merger clause precludes evidence of a contemporaneous or earlier agreement. Thus, the court held that Triller failed to raise an issue of material fact regarding whether its obligations under the note were extinguished. View "Carnegie Technologies. v. Triller" on Justia Law

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Plaintiff Bainbridge Fund Ltd. is the beneficial owner of bonds issued by the Republic of Argentina. Argentina defaulted on these bonds back in 2001, but Bainbridge didn’t sue to recover them until 2016. The district court dismissed Bainbridge’s claims as untimely under New York’s six-year statute of limitations for contract actions and the Second Circuit’s nonprecedential decisions. Bainbridge appealed, asking the Second Circuit to reconsider those decisions. Specifically, Bainbridge argues that (1) the twenty-year statute of limitations for recovery on certain bonds under N.Y. C.P.L.R. 34 Section 211(a) applies to its claims against Argentina; and (2) even if the six-year limitations period for contract actions applies, it was tolled under N.Y. Gen. Oblig Law Section 17-101 because Argentina “acknowledged” this debt when it publicly listed the bonds in its quarterly financial statements (the “Quarterly Reports”).   The Second Circuit rejected Plaintiff’s arguments. First, the twenty-year statute of limitations does not apply to claims on Argentine bonds because a foreign sovereign is not a “person” under N.Y. C.P.L.R. Section 211(a). Second, tolling under N.Y. Gen. Oblig. Law Section 17-101 is inapplicable because the Quarterly Reports did not “acknowledge” the debt at issue in a way that reflected an intention to pay or seek to influence the bondholders’ behavior. To the contrary, Argentina repeatedly stated that the bonds “may remain in default indefinitely.” Bainbridge’s claims are thus time-barred. View "Bainbridge Fund Ltd. v. The Republic of Argentina" on Justia Law

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Plaintiff took out a home equity loan on a house in Texas (“Property”). Deutsche Bank National Trust Company (“Deutsche Bank”) is the trustee of the loan. Deutsche Bank sought a non-judicial foreclosure order on the Property.   Plaintiff sued Deutsche Bank in Texas state court, alleging violations of the Texas Debt Collection Act (“TDCA”), breach of the common-law duty of cooperation, fraud, and negligent misrepresentation. Despite the stipulation, Deutsche Bank removed the case to federal district court. Plaintiff then moved to remand the case back to Texas state court because, in his view, the amount in controversy could not exceed the stipulated maximum of $74,500. The district court denied Plaintiff’s motion to remand.   The Fifth Circuit reversed and concluded that the district court erred in denying Plaintiff’s motion to remand, and it lacked subject-matter jurisdiction when it entered final judgment. The court reasoned that Deutsche Bank failed to establish that the amount in controversy exceeds the jurisdictional floor of $75,000.   The court first noted that the bank points out that Plaintiff’s suit requested relief which might be read to suggest Plaintiff also sought injunctive relief. But the bank makes that argument only to establish that Plaintiff’s initial pleading seeks nonmonetary relief not to establish that the requested nonmonetary relief put the house in controversy. Whatever the merit of that latter contention might otherwise be, the court held that Deutsche Bank forfeited it. Moreover, the mere fact that Plaintiff pleaded a demand for specific damages cannot support bad faith. View "Durbois v. Deutsche Bank Ntl Trust" on Justia Law

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Plaintiff experienced financial difficulties and applied for a loan modification. In response, CitiMortgage mailed Plaintiff an offer to participate in a Trial Period Plan (“TPP”). The TPP provided that “the terms of your  TPP are effective on the day you make your first trial period payment, provided you have paid it on or before the last day of [January 2019].” Plaintiff effectively accepted the terms of the TPP when he made the first trial period payment of $1,293.66. CitiMortgage sent him a letter informing him that he was “ineligible” for the loan modification and then posted Plaintiff’s property for foreclosure.   Plaintiff filed suit against CitiMortgage in state court, asserting claims for breach of contract. The district court granted summary judgment to CitiMortgage concluding that Plaintiff failed to comply with the TPP’s payment deadlines.   The Fifth Circuit reversed finding that Plaintiff met his obligations under the TPP by making timely payments. CitiMortgage, by contrast, violated its obligations by refusing to grant the permanent loan modification and proceeding with foreclosure. The court explained that the TPP establishes a grace period. It accepts payment so long as it is made “in the month in which it is due.” Neither the TPP nor the parties use the term “grace period” to describe this language. But that is plainly what the text contemplates. And no one disputes that Plaintiff’s payments comply with the governing grace periods. CitiMortgage has offered no reason why favoring the monthly deadlines and ignoring the grace period would “do the least damage” to the text of the TPP. View "Burbridge v. CitiMortgage" on Justia Law

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The First Circuit affirmed the judgment and order of the district court granting summary judgment for Lender and denying Borrowers' motion for reconsideration in this lawsuit brought by Lender seeking repayment and foreclosure of a loan, holding that the district court did not err.Borrowers defaulted on a loan extended by Lender. The loan was subject to the Farm Credit Act, 12 U.S.C. 2001 et seq., which sometimes requires the lender to restructure the loan rather than foreclose. Borrowers applied to restructure the distressed loan, but Lender rejected the application. Lender eventually brought this action, and the district court ultimately granted summary judgment for Lender. The First Circuit affirmed, holding (1) a lender need not accept a plan of restructuring that the borrower cannot perform; and (2) the district court did not err in finding that Lender properly considered and rejected the requested restructuring. View "Puerto Rico Farm Credit, ACA v. Eco-Parque del Tanama Corp." on Justia Law

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The Supreme Court reversed the judgment of the court of appeals affirming the decision of the trial court granting summary judgment in favor of Roy Elizondo and dismissing this action brought by Cadence Bank, N.A. for breach of a deposit agreement, breach of warranty under the Uniform Commercial Code (UCC), and common-law torts, holding that the lower courts erred.In response to a stranger's email for legal assistance, Elizondo, an attorney, deposited a cashier's check in his bank account then wired most of the funds to an overseas account. The check was dishonored, and the bank charged the transfer back to Elizondo, as allowed by the UCC and the parties' deposit agreement. When Elizondo refused to pay the overdrawn funds Cadence brought this action. The trial court granted summary judgment for Elizondo, and the court of appeals affirmed. The Supreme Court reversed, holding that the wire-transfer form failed to create the contractual duty urged by Elizondo. View "Cadence Bank, N.A. v. Elizondo" on Justia Law