Category Archives: Litigation Developments

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Third Circuit Holds Bankruptcy Trustee May Relinquish Derivative “Asset Plundering” Causes of Action for Creditors to Pursue

Recently, in Artesanias Hacienda Real S.A. De C.V. v. North Mill Capital, LLC; Leisawitz Heller, the Third Circuit held that creditors can pursue claims of the bankruptcy estate that have been abandoned by the trustee. Although the plaintiff, Artesanias, had Article III standing to pursue certain claims, because these claims were derivative of harm to … Continue Reading

Alabama Bankruptcy Court Substantially Reduces Award of Attorney’s Fees

In practice, it is not uncommon for bankruptcy debtors to file suit against creditors or debt collectors for stay and discharge injunction violations. Often, they will do so before making any meaningful attempt to communicate with the creditor or debt collector to request that they stop their improper collection efforts. The Bankruptcy Court for the … Continue Reading

Lender Liability and False Claims Act Issues Under the Paycheck Protection Program

Among the most significant aspects of the CARES Act is the $660 billion small business forgivable loan program known as the Paycheck Protection Program (PPP), and it was perhaps inevitable that the administration of the program would be followed by a wave of related litigation. Already, the PPP application process has generated lawsuits over the … Continue Reading

CFPB Signals Renewed Enforcement of Tribal Lending

In recent years, the CFPB has sent different messages regarding its approach to regulating tribal lending. Under the bureau’s first director, Richard Cordray, the CFPB pursued an aggressive enforcement agenda that included tribal lending. After Acting Director Mulvaney took over, the CFPB’s 2018 five-year plan indicated that the CFPB had no intention of “pushing the … Continue Reading

A Good Day for Lenders: Texas Supreme Court Rules that Lenders Still Entitled to Equitable Subrogation for Non-compliant Home Equity Loans

On April 24, 2020, the Texas Supreme Court upheld a lender’s right to equitable subrogation for non-compliant home equity loans, ruling that lenders who fail to cure within the statutorily mandated 60-day period may recoup funds paid to satisfy prior liens. The court’s opinion in Federal Home Loan Mortgage Corp. v. Zepeda answered a certified … Continue Reading

Individual Employs New Small Business Bankruptcy Law to Modify Mortgage

Small businesses often struggle to reorganize in bankruptcy. To address this issue, Congress passed the Small Business Reorganization Act of 2019 (the SBRA). The SBRA took effect in February 2020 and makes small business bankruptcies faster and less expensive. The recent case of In re Ventura, 2020 WL 1867898 (E.D.N.Y. Apr. 10, 2020) addresses many … Continue Reading

Eleventh Circuit Endorses Narrow Definition of TCPA Autodialer Creating Circuit Split

On January 27, 2020, a federal court of appeals issued a significant decision interpreting the Telephone Consumer Protection Act (commonly referred to as the “TCPA”) in a way that limits the expansive potential liability companies face under the statute. In Glasser v. Hilton Grand Vacations Company, the U.S. Court of Appeals for the Eleventh Circuit … Continue Reading

Supreme Court Holds That an Order on a Motion for Relief from Stay Is a Final, Appealable Order

In a unanimous opinion released last week, the Supreme Court provided guidance as to how to determine the finality of an order in a bankruptcy case for purposes of an appeal under 28 U.S.C. § 158(a). The Court held that the adjudication of a creditor’s motion for relief from stay is properly considered a discrete … Continue Reading

The Split Widens: Third Circuit Joins Minority View Regarding Whether Secured Creditor Has Affirmative Obligation to Return Collateral to Debtor Upon Bankruptcy Filing

The circuit courts continue to wrestle over the duties imposed by the Bankruptcy Code’s automatic stay on creditors concerning turnover of a debtor’s impounded vehicle. Is a creditor required to automatically turn over the vehicle as soon as the bankruptcy petition is filed, or can it retain possession while awaiting an order of the bankruptcy … Continue Reading

Navigating ADA Compliance Issues in an Online World

The landscape remains murky as to whether and how Title III of the Americans with Disabilities Act (ADA) applies to websites. As the financial services industry moves increasingly and inexorably from a “bricks and mortar” presence to a virtual environment, these issues are likely to only become more prominent. With differing authority from courts across … Continue Reading

Stay of Litigation and Compliance Date Continued in Payday Lending Rule Lawsuit

Following the status report filed last week by the parties involved in the lawsuit challenging the CFPB’s Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule, the Texas district court faced with the case ordered that the stay of litigation and the stay of the compliance date for the rule’s payment provisions are continued. The … Continue Reading

Big Picture Loans Lands Big Win for Tribal Lenders in Sovereign Immunity Case

In a recent decision by the Fourth Circuit, Big Picture Loans, LLC, an online lender owned and operated by the Lac Vieux Desert Band of Lake Superior Chippewa Indians, a federally recognized Indian tribe (“Tribe”), and Ascension Technologies, LLC, the Tribe’s management and consultant company successfully established that they are each arms of the Tribe … Continue Reading

The City Has My Vehicle. What Now?

Chicagoans have found a new avenue through which to regain possession of their vehicle after it has been impounded by the City:  file a chapter 13 bankruptcy case. In 2018, 17,603 new chapter 13 bankruptcy cases were filed in the Northern District of Illinois. By comparison, in 2018, the Middle District of Florida, one of … Continue Reading

Student Loan Servicers’ Fight over Federal Preemption of State Regulation May End Up in the Supreme Court

In courts across the country, servicers are facing off against states and borrowers over the extent to which federal laws preempt state regulation of federal student loan servicers. Numerous states have stepped up their enforcement activity against student loan servicers and begun enacting new laws aimed at regulating student loan servicing, partially in response to … Continue Reading

First Federal Legislation Proposed Relating to Protection of Biometrics

Amidst privacy concerns and booming technological innovation, Sens. Roy Blunt (R-Mo.) and Brian Schatz (D-Hawaii) have introduced a bill proposed as the “Commercial Facial Recognition Privacy Act of 2019” (CFRPA) targeting arguably the most “personal” biometric identifier—our face. While several states have enacted legislation relating to protection of biometric identifiers, this is the first federal … Continue Reading

Safe Streets Alliance v. Hickenlooper Provides Good News, Bad News, and Instructions to the Cannabis Industry and the Financial Institutions Serving It

For years, the “legal” cannabis industry – operating in states that have legalized cannabis under state law despite its long-standing prohibition under federal law – and the financial institutions that serve the industry have closely watched Safe Streets Alliance v. Hickenlooper. In Hickenlooper, Safe Streets Alliance, a “nonprofit organization devoted to reducing crime and illegal … Continue Reading

Eleventh Circuit Rules Reverse Mortgage Companies Not Prohibited from Foreclosing on Non-Borrowing Spouses

Mortgagees of Home Equity Conversion Mortgages (“HECMs,” more commonly known as reverse mortgages) obtained a significant victory in an important federal appellate court, which ruled last month that non-borrowing spouses are not protected from foreclosure by the statute authorizing the HECM program. In Estate of Jones v. Live Well Financial, Inc., the United States Court … Continue Reading

Florida Third District Court of Appeal’s Ruling in Favor of Reverse Mortgage Lender Signals New Positive Outlook for Non-Borrowing Spouse Issue

Reverse mortgage lenders received a significant victory in Florida’s Third District Court of Appeal last week when the court issued its decision in OneWest Bank, FSB v. Palmero. After previously ruling in Smith v. Reverse Mortgage Solutions, Inc. and Edwards v. Reverse Mortgage Solutions, Inc. that the surviving spouses of borrowers who had taken out reverse mortgage … Continue Reading

New Decision from the D.C. Court of Appeals Recognizes Additional Defenses to HOA Super-Priority Lien Statute

As we noted in last week’s blog post, the District of Columbia Court of Appeals issued a decision on March 1, 2018, that created a new wave of uncertainty for lenders with loans secured by deeds of trust on condominium units in the District of Columbia. In the Liu decision, the court held that a … Continue Reading

HOA Super-Priority Lien Law Preempted by Federal Statute

Given the significant role Fannie Mae and Freddie Mac have in the national housing market, it is unsurprising that both have become embroiled in the Nevada HOA super-priority lien litigation. Since July 2008 – well before the Nevada Supreme Court held that an HOA’s foreclosure on its super-priority lien could extinguish a first deed of … Continue Reading

Supreme Court Narrowly Interprets “Whistleblower” under Dodd-Frank, Foreclosing Protections for Those Who Fail to Report Issues to SEC

The Supreme Court has resolved a circuit split on whether Dodd-Frank’s whistleblower protections apply only to employees who report their concerns to the Securities and Exchange Commission (SEC). On Wednesday, in Digital Realty Trust, Inc. v. Somers, the Supreme Court ruled 9-0 in favor of limiting the Dodd-Frank Act’s definition of whistleblower to those who … Continue Reading

Fourth Circuit Asked to Rule on Whether Mortgage Retroactively Incorporates Federal Servicing Requirements

A recent appeal to the Fourth Circuit may shed light on whether Virginia borrowers can assert federal mortgage servicing requirements as a defense to foreclosure when the mortgage instrument pre-dates the federal requirement. In Stansbury v. Federal National Mortgage Association, borrower Hollie Stansbury argues that a 2011 consent order between her mortgage servicer and the … Continue Reading

Would the 7th Circuit Have Changed Its FCA Standard but for Peer Pressure?

The Seventh Circuit finally abandoned its “but-for” causation standard for False Claims Act (FCA) damages. The decision comes 25 years after the Seventh Circuit first adopted its controversial standard requiring only a showing that an injury would not have occurred if not for the conduct. The Seventh Circuit has long been the lone outlier among … Continue Reading

Jury Verdict Expands to $298 Million in False Claims Act/FIRREA Case as Court Assesses Treble Damages and Penalties

A federal court in Texas recently entered a massive judgment against a mortgage originator for financial crisis conduct, transforming an already severe $93 million jury verdict into a $298 million punishment, and issuing one of the first judicial opinions regarding how to assess penalties under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 … Continue Reading
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