Justia U.S. 10th Circuit Court of Appeals Opinion Summaries

Articles Posted in Banking
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The Barnes Banking Company (the "Bank") had been placed into Federal Deposit Insurance Corporation ("FDIC") receivership in 2010. Three shareholders in Barnes Bancorporation (the "Holding Company"), parent of the failed bank, brought suit against the Holding Company and its officers and directors. The district court’s dismissal of their suit was on the basis that most of the claims advanced by the plaintiffs were owned solely by the FDIC under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), and the remaining allegations were insufficient to state a claim. The shareholders appealed the district court's decision, but the Tenth Circuit agreed: because almost all of the plaintiffs’ claims asserted injury to the Holding Company that was derivative of harm to the Bank, those claims belonged to the FDIC. Furthermore, the one theory of recovery advanced by plaintiffs that identified claims not owned by the FDIC under FIRREA (which involves the alleged misappropriation of $265,000), was pled in too conclusory a fashion. View "Barnes v. Harris" on Justia Law

Posted in: Banking
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Plaintiff-appellant National Credit Union Administration Board ("NCUA") appealed the district court's order dismissing as untimely its complaint against defendants-appellees Barclays Capital Inc., BCAP LLC, and Securitized Asset Backed Receivables LLC. This case arose from the failure of two of the nation's largest federally insured credit unions: U.S. Central Federal Credit Union and Western Corporate Federal Credit Union. The NCUA was appointed conservator and later as their liquidating agent. The NCUA determined that the Credit Unions had failed because they had invested in residential mortgage-backed securities ("RMBS") sold with offering documents that misrepresented the quality of their underlying mortgage loans. The NCUA set out to pursue recoveries on behalf of the Credit Unions from the issuers and underwriters of the suspect RMBS, including Barclays, and began settlement negotiations with Barclays and other potential defendants. As these negotiations dragged on through 2011 and 2012, the NCUA and Barclays entered into a series of tolling agreements that purported to exclude all time that passed during the settlement negotiations when "calculating any statute of limitations, period of repose or any defense related to those periods or dates that might be applicable to any Potential Claim that the NCUA may have against Barclays." Significantly, Barclays also expressly made a separate promise in the tolling agreements that it would not "argue or assert" in any future litigation a statute of limitations defense that included the time passed in the settlement negotiations. After negotiations with Barclays broke down, the NCUA filed suit, more than five years after the RMBS were sold, and more than three years after the NCUA was appointed conservator of the Credit Unions. Barclays moved to dismiss for failure to state a claim on several grounds, including untimeliness. Barclays initially honored the tolling agreements but argued that the NCUA's federal claims were nevertheless untimely under the Securities Act's three-year statute of repose, which was not waivable. While Barclays's motion to dismiss was pending, the district court in a separate case involving different defendant Credit Suisse, granted Credit Suisse's motion to dismiss a similar NCUA complaint on the grounds that contractual tolling was not authorized under the Extender Statute. Barclays amended its motion to dismiss asserting a similar Extender Statute argument. The district court dismissed the NCUA's complaint, incorporating by reference its opinion in Credit Suisse. The NCUA appealed, arguing that its suit was timely under the Extender Statute. The Tenth Circuit reversed and remanded: "while it is true that the NCUA's claims are outside the statutory period and therefore untimely, that argument is unavailable to Barclays because the NCUA reasonably relied on Barclays's express promise not to assert that defense." View "National Credit Union v. Barclays Capital" on Justia Law

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Plaintiff-Appellant, Security Service Federal Credit Union (“SSFCU”), appealed a district court’s summary judgment in favor of Defendants- Appellees, including First American Mortgage Funding, LLC (“FAM”) and First American Mortgage, Inc.; and Stewart Title of California, Inc., Orange Coast Title Company of Southern California, and Lawyers Title Company (together, the “Closing Agents”). In August 2003, SSFCU’s predecessor in interest, New Horizons Community Credit Union, entered into a Funding Service Agreement with FAM, under which FAM originated 26 loans to individual borrowers for the purchase and construction of residential properties in Colorado and California. The Closing Agents performed closing procedures. SSFCU maintained that the FAM Defendants and Closing Agents, through a variety of acts and omissions, wrongfully induced New Horizons to fund these loans to straw borrowers. SSFCU further contended that the loan transactions were a vehicle to misappropriate some $14 million in loan proceeds. The issue this appeal presented for the Tenth Circuit's review centered on whether SSFCU had the right to pursue those claims pursuant to a 2007 Purchase and Assumption Agreement (“PAA”) between SSFCU and the National Credit Union Administration (“NCUA”), as the liquidating agent for New Horizons. Both the NCUA and SSFCU argued that under the terms of the PAA, the NCUA transferred the “right, title and interest” in the loans and various other assets to SSFCU, including the claims at issue. As the parties to the agreement, the NCUA and SSFCU both understood that a transfer of “the right, title and interest” in the loans was intended to transfer any and all claims relating to those loans. On the other hand, the PAA also provided that “except as otherwise specifically provided” the NCUA retained the “the sole right to pursue claims . . . and to recover any and all losses incurred by the Liquidating Credit Union prior to liquidation.” According to the Defendants, absent a valid assignment from the NCUA, SSFCU could not sue on the claims contained in its Fourth Amended Complaint. The district court agreed with the Defendants. According to the district court, the NCUA retained all claims associated with New Horizons’ losses, it could rely upon the cooperation of SSFCU in pursuing those claims, and, therefore, SSFCU was not a proper party to pursue those claims. The district court did not address an affidavit from the NCUA (through its agent) that cast considerable doubt on its interpretation. The district court held that SSFCU was not a proper plaintiff to assert the claims set forth in its Fourth Amended Complaint and dismissed those claims with prejudice. The Tenth Circuit reversed, finding that the Defendants were neither parties to (or in privity with any party to) nor third-party beneficiaries of the PAA. "The PAA reflects no intent to benefit the Defendants, let alone allow them to enforce it. Essentially, the Defendants are seeking to enforce a right they contend the NCUA has—an exclusive right to the claims asserted by SSFCU3—which is contrary to the doctrine of prudential standing." View "Security Services v. First American Mortgage" on Justia Law

Posted in: Banking, Business Law
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In August 2007, C.W. Mining, an entity operating a coal mine in Utah, deposited $362,000 with the Bank of Utah; in turn, the Bank issued a certificate of deposit to C.W. Mining for that same amount. In January 2008, creditors filed an involuntary Chapter 11 bankruptcy petition against C.W. Mining. The Chapter 11 proceeding was converted to a Chapter 7. The Bank liquidated the certificate of deposit, which then had a value of $383,099. Utilizing its common-law right of offset, it applied the proceeds to the balance owing on two of three promissory notes executed by C.W. Mining in favor of the Bank in 2005, 2006, and 2007. Although the Bank knew of the bankruptcy proceeding when it liquidated the certificate of deposit, it did not inform the Trustee. The Trustee became aware of the transfer after the Bank assigned its remaining secured interest in the promissory notes and loan agreements to a third party and the third party sought payment from the Estate. The Trustee then commenced an adversary proceeding seeking to recover $383,099 from the Bank. The parties filed cross-motions for summary judgment. In his motion, the Trustee argued the transfer should be avoided under 11 U.S.C. 549 as an unauthorized post-petition transfer and he should have been permitted to recover the $383,099 pursuant to 11 U.S.C. 550. In the alternative, he sought a declaration the transfer was void as a violation of the automatic stay under 11 U.S.C. 362(a) and an order for turnover pursuant to 11 U.S.C. 542. After considering all of these arguments, the bankruptcy court entered summary judgment in favor of the Bank. Finding no reversible error, the Tenth Circuit affirmed the grant of summary judgment to the Bank. View "C.W. Mining Company, et al v. Bank of Utah, et al" on Justia Law

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In an effort to save Quartz Mountain Aerospace, some of its investors and directors took out large loans from First State Bank of Altus for the benefit of the company. The Bank failed, and the Federal Deposit Insurance Corporation (FDIC) took over as receiver and filed suit to collect on the loans. The Borrowers raised affirmative defenses to the FDIC’s claims and brought counterclaims, alleging that the Bank’s CEO had assured them that they would not be personally liable on any of the loans. The district court granted summary judgment for the FDIC because the CEO’s alleged promises were not properly memorialized in the Bank’s records. The Borrowers appealed on two grounds: (1) that the district court should not have granted summary judgment before allowing them to conduct discovery, and (2) that the district court should have set aside the summary judgment because they presented newly discovered evidence of securities fraud by the Bank. The Tenth Circuit affirmed the district court on both of the Borrowers' claims. View "FDIC v. Arciero, et al" on Justia Law

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The Federal Depository Insurance Corporation (FDIC), acting as receiver of the New Frontier Bank, used proceeds from the sale of cattle belonging to a limited liability company (LLC) to pay down a loan of one of the two LLC members. According to the complaint, the FDIC had no authority to do so because the payment was contrary to the members' agreement. Ignoring the separate entity status of an LLC, the other LLC member brought suit in its own name against the United States under the Federal Tort Claims Act (FTCA) for what it claimed to be the FDIC's wrongful disbursement of the proceeds. The LLC sued the government under the Fifth Amendment Takings Clause. The district judge dismissed the suit for failure to state a claim. The Tenth Circuit agreed dismissal was appropriate, the Appellate Court concluded dismissal should have been for lack of jurisdiction as to the member's claims and as to the LLC's claim because the United States Court of Federal Claims had exclusive jurisdiction. View "ECCO Plains, LLC., et al v. United States" on Justia Law

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The National Credit Union Administration (NCUA) placed two credit unions, U.S. Central Federal Credit Union and Western Corporate Federal Credit Union (WesCorp), into conservatorship. Then, as liquidating agent, NCUA sued 11 defendants on behalf of U.S. Central, alleging federal and state securities violations.In a separate matter, NCUA sued one defendant on behalf of U.S. Central and WesCorp, alleging similar federal and state securities violations. The United States District Court for the District of Kansas consolidated the cases. All defendants moved for dismissal, arguing that NCUA’s claims were time-barred. The district court denied the motion, concluding that the "Extender Statute" applied to NCUA’s claims. Defendants moved for an interlocutory appeal for the Tenth Circuit to determine whether the Extender Statute applied to NCUA's claims. Finding that it did, the Tenth Circuit affirmed. View "National Credit Union Admin. v. Nomura Home Equity Loan, et al" on Justia Law

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Plaintiffs filed a class-action lawsuit in state court, alleging that the defendants had conducted non-judicial foreclosure sales that did not comply with Utah law. After removal, the district court dismissed the complaint for failure to state a claim, concluding that whether federal law “incorporates Utah or Texas law, Recon[Trust] had not operated beyond the law by acting as a foreclosure trustee in Utah.” On the limited record presented on appeal, the Tenth Circuit concluded that the district court erred in determining it had jurisdiction to hear this case. View "Dutcher, et al v. Matheson, et al" on Justia Law

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Plaintiffs-Appellants Bryan and JoLynne Toone executed a promissory note secured by a deed of trust on their home. The note was assigned several times. After the Toones defaulted on the Note, their home was scheduled to be sold at a trustee’s foreclosure sale. They filed suit to halt the foreclosure and to obtain damages and declaratory relief based on alleged violations of statutory and common-law duties by numerous parties who had current or prior interests in the Note and Trust Deed or were involved in the foreclosure efforts. The district court denied relief and the Toones appealed. Finding no abuse of the district court's discretion in denying the Toones relief, the Tenth Circuit affirmed the lower court's decision. View "Toone v. Wells Fargo Bank, N.A." on Justia Law

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Plaintiffs-Appellants Theodore L. Hansen, Interstate Energy Corp. and Triple M, L.L.C., appealed a district court’s judgment in favor of Defendant-Appellee PT. Bank Negara Indonesia (Persero) Tbk. ("BNI"). Plaintiffs sued BNI and various other defendants based on BNI's refusal to honor certain bank guaranties and letters of credit. Eventually, the district court granted BNI's motion for summary judgment for lack of jurisdiction under the Foreign Sovereign Immunities Act of 1976. Finding no error or abuse of the district court's discretion, the Tenth Circuit affirmed. View "Hansen, et al v. PT Bank Negara Indonesia, et al" on Justia Law