Justia U.S. 5th Circuit Court of Appeals Opinion SummariesArticles Posted in Banking
Whitney Bank v. SMI Companies Global, Inc.
Whitney Bank filed suit against SMI and its president and loan guarantor in order to collect under two loan agreements upon which SMI allegedly defaulted. SMI filed several counterclaims.The Fifth Circuit held that SMI's breach of contract claim against Whitney Bank failed for two reasons: first, under basic contract interpretation principles, the mere recital of the purpose of the loan, when read in conjunction with the rest of the document, did not require Whitney Bank to continue to provide funding to SMI until that purpose was fulfilled, regardless of SMI's default and failure to make payment as required under the loans; and second, the remainder of SMI's breach claims are based on unwritten purported oral agreements between Whitney Bank employees and SMI.Therefore, the court affirmed the magistrate judge's ruling in favor of Whitney Bank on its main demand for recovery under Loan 1; reversed the magistrate judge's ruling against Whitney Bank on its main demand for recovery on Loan 2; and remanded and rendered judgment in favor of Whitney Bank on the Loan 2 claim. The court reversed and remanded for the magistrate judge to render judgment in favor of Whitney Bank on SMI's counterclaims for breach of contract, negligent misrepresentation, tortious interference with business relations, and breach of duty to deal in good faith. However, the court affirmed the magistrate judge's ruling that Whitney Bank was not entitled to recover from SMI for attorneys' fees and costs. View "Whitney Bank v. SMI Companies Global, Inc." on Justia Law
Collilns v. Mnuchin
Shareholders filed suit against the Agencies after the FHFA placed Fannie Mae and Freddie Mac in conservatorship. In 2012, FHFA and Treasury adopted a Third Amendment to their financing agreements wherein Fannie and Freddie give Treasury nearly all their net worth each quarter as a dividend. Shareholders contend that the arrangement exceeded FHFA's statutory powers and that FHFA lacked authority to adopt the Third Amendment.The court held that shareholders plausibly alleged that the Third Amendment exceeded FHFA’s conservator powers by transferring Fannie and Freddie’s future value to a single shareholder, Treasury. Therefore, a majority of the en banc court held that this claim survived dismissal under Federal Rule of Civil Procedure 12(b)(6). A majority of the en banc court held that the Director's "for cause" removal protection was unconstitutional and therefore FHFA lacked authority to adopt the Third Amendment. The court explained that FHFA's design, an independent agency with a single Director removable only "for cause," violates the separation of powers. Finally, a different majority of the en banc court held that prospective relief was the proper remedy. Accordingly, the court reversed in part, affirmed in part, and remanded for further proceedings. View "Collilns v. Mnuchin" on Justia Law
JP Morgan Chase Bank, N.A. v. Datatreasury Corp.
The Fifth Circuit affirmed the district court's denial of JMPC's motion to compel certain post-judgment discovery. The court held that, although the district court's reliance on the June 2011 date as relevant to DTC's knowledge of any potential claims by JPMC was clearly erroneous, the error was harmless. The court also held that the district court did not abuse its discretion by tying discovery to a time period associated with the Cathay agreement; the district court did not abuse its discretion by limiting discovery to the 2012 breach and the amount of the judgment specifically tied to that one breach; and the district court's proportionality determination was reasonable. View "JP Morgan Chase Bank, N.A. v. Datatreasury Corp." on Justia Law
Zepeda v. Federal Home Loan Mortgage Corp.
The Fifth Circuit certified the following question of law to the Supreme Court of Texas: Is a lender entitled to equitable subrogation, where it failed to correct a curable constitutional defect in the loan documents under section 50 of the Texas Constitution?The court also held that a secondary lender is not entitled to contractual subrogation without a valid contract. In this case, without a signature, Freddie Mac has no ability to enforce the contract itself or its subrogation provision. Therefore, the court affirmed the district court's denial of Freddie Mac's contractual subrogation claim. View "Zepeda v. Federal Home Loan Mortgage Corp." on Justia Law
SEC v. Stanford International Bank, Ltd.
Appellants challenged the approval of a global settlement between the receiver for Stanford International Bank and related entities, and various insurance company underwriters, who issued policies providing coverage for fidelity breaches, professional indemnity, directors and officers protection, and excess losses.The Fifth Circuit vacated the district court's order approving the settlement and bar orders, holding that the district court lacked authority to approve the receiver's settlement to the extent it nullified the coinsureds' claims to the policy proceeds without an alternative compensation scheme; released claims the estate did not possess; and barred suits that could not result in judgments against proceeds of the underwriters' policies or other receivership assets. Accordingly, the court remanded for further proceedings. View "SEC v. Stanford International Bank, Ltd." on Justia Law
UMB Bank, NA v. Linn Energy, LLC
The Fifth Circuit affirmed the district court's denial of Linn Lender's post-petition default interest and held that a reasonable person would not understand the reference to Linn Lender Claims in Article III.B.3 of the bankruptcy plan and the definition of the term "Linn Lender Claims" in Article I.A.114 to incorporate by reference the post-default interest rates set forth in the proofs of claim and credit agreement. The court held that, given the availability of post-petition default interest was specifically reserved when the Final Cash Collateral Order was entered, and that the bankruptcy plan itself contained an Article entitled "No Postpetition or Default Interest on Claims," failure to make specific mention of "default interest" in Article III.B.3 indicated that the parties intended the omission. View "UMB Bank, NA v. Linn Energy, LLC" on Justia Law
Bank of Louisiana v. FDIC
The FDIC brought two enforcement proceedings against the Bank and three of its directors, and subsequently issued a final order penalizing the Bank. The Bank petitioned for review of both orders under 12 U.S.C. 1818(h)(2) and also filed suit in federal district court, alleging various constitutional violations arising out of the same enforcement proceedings.The Fifth Circuit held that the district court correctly dismissed the Bank's lawsuit for lack of subject matter jurisdiction. The court held that the Thunder Basin factors reinforced the district court's conclusion that the review scheme precluded district court jurisdiction over the Bank's claim. In this case, a finding that the review scheme precludes district court jurisdiction would not foreclose all meaningful judicial review of the Bank's constitutional claims; the Bank has not shown that its suit was wholly collateral to the agency proceedings; and the agency expertise factor pointed toward finding that the district court lacked subject matter jurisdiction. Accordingly, the court affirmed the judgment. View "Bank of Louisiana v. FDIC" on Justia Law
Jatera Corp. v. US Bank National Assoc.
Jatera filed suit against the Bank and SPS in state court, seeking a judgment declaring the lien on the property at issue void because defendants failed to initiate foreclosure proceedings within the four-year statute of limitations. After removal to federal district court, the district court held that the homeowner lacked standing as a plaintiff because she no longer retained an interest in the property. The district court also concluded that detrimental reliance runs to the benefit of the party asserting it, and Jatera had failed to show it detrimentally relied on the acceleration notice.The Fifth Circuit affirmed the district court's denial of Jatera's motion for summary judgment and granted defendants' summary judgment motion. The court held that detrimental reliance was not an exception to the lender's right to unilaterally withdraw an acceleration notice under Texas law. Therefore, in this case, the court need not determine whether there was such reliance, including whether Jatera was assigned the homeowner's detrimental-reliance claim, or whether the homeowner suffered such reliance. View "Jatera Corp. v. US Bank National Assoc." on Justia Law
Janvey v. GMAG, LLC
The Texas Uniform Fraudulent Transfer Act's good faith affirmative defense does not allow defendants to retain fraudulent transfers received while on inquiry notice of the Ponzi scheme. In this case arising out of the Stanford International Bank Ponzi scheme, the Fifth Circuit reversed the district court's judgment and rendered judgment in favor of plaintiff. Because the jury determined that defendants were on inquiry notice here when they received $79 million in fraudulent transfers, their TUFTA good faith defense was defeated. View "Janvey v. GMAG, LLC" on Justia Law
Posted in: Banking
Christiana Trust v. Riddle
The Fifth Circuit affirmed the district court's dismissal of plaintiff's claim that the bank was vicariously liable for the failure of the bank's loan servicer to comply with the Real Estate Settlement Procedures Act (RESPA). The court held that plaintiff did not plead an agency relationship between the bank and the loan servicer, an essential element of a vicarious liability claim. Furthermore, even if the bank had an agency relationship with the loan servicer, the bank cannot be held vicariously liable, as a matter of law, for the servicer's alleged RESPA violations. View "Christiana Trust v. Riddle" on Justia Law