Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

The United States Court of Appeals for the Sixth Circuit ruled in favor of the United States in a case involving civil penalties for failure to file a Report of Foreign Bank and Financial Accounts (FBAR). The defendant, James J. Kelly Jr., was a U.S. citizen who had a bank account in Switzerland with a balance exceeding $10,000, which required him to file an FBAR with the U.S. Department of the Treasury. Failure to do so risks civil penalties. The government sued Kelly for willfully failing to timely file FBARs for 2013, 2014, and 2015. The district court granted summary judgment to the government.The Court of Appeals affirmed the lower court's decision, finding that Kelly's failure to comply with his FBAR obligations was reckless, if not knowing. The court argued that Kelly had taken steps to intentionally evade his legal duties and acted with objective recklessness. Despite being aware of his FBAR obligations and participating in the IRS Offshore Voluntary Disclosure Program (OVDP), Kelly failed to ensure that the FBARs were submitted. His failure to consult with any professionals about his tax obligations and his considerable efforts to keep his account secret were further evidence of his willful violation of the Bank Secrecy Act. Thus, the court concluded that Kelly's failure to satisfy his FBAR requirements for the years 2013, 2014, and 2015 was a willful violation of the Bank Secrecy Act. View "United States v. Kelly" on Justia Law

Goodman dealt with Martinek of Southern Risk to obtain crop insurance and later discovered that portions of his property could not be farmed. Southern denied his claim. Goodman accused Martinek and Southern of failing to obtain proper coverage. Based on a perceived moral obligation, Martinek provided Goodman with checks drawn from Southern’s Commercial Bank account–for $100,000 and $200,000. Southern’s account had insufficient funds to cover the draws. Goodman gave Martinek nothing in consideration for the checks; they never discussed a lawsuit. Goodman twice unsuccessfully attempted to cash the checks. Months later, after exchanging text messages with Martinek, Goodman was heading to Commercial Bank when Martinek sent an “everything stopped” message. Goodman asked for cashier’s checks in exchange for the Southern checks, without mentioning his past attempts to negotiate the checks. The teller did not check the balance in Southern’s account but printed “teller’s checks” payable to Goodman for $100,000 and $200,000. When the teller realized the account lacked sufficient funds, the Bank issued a stop payment order.Goodman sued to enforce the checks. The Bank counterclaimed for restitution. Under Tennessee’s Commercial Code, if Commercial Bank paid the checks by “mistake” and Goodman had taken those checks in “good faith” and “for value,” the Bank was not entitled to restitution. The district court held that Commercial Bank paid the checks by mistake and that Goodman did not give value. The Sixth Circuit affirmed summary judgment for Commercial Bank. View "Goodman v. Commercial Bank & Trust Co." on Justia Law

In 1973, the brothers’ father, Marvin, purchased property in Sequatchie County. In 1997, he obtained a $200,000 home equity line of credit. A Deed of Trust was recorded. The terms of the loan required monthly interest payments until the maturity date—May 2007—when a final balloon payment of the entire outstanding balance would become due. The loan’s maturity date passed but Regions did not demand payment of the entire balance, refinance the loan, or foreclose on the property, but continued to accept monthly interest payments. After Marvin’s death, the brothers used the property for their trucking business and made payments on the loan through the business account. Regions learned of Marvin’s death in 2011 but continued to accept payments. In 2017, the brothers realized that Regions was sending statements demanding payment of the entire debt. A Regions representative informed them that the property would be foreclosed on with “no further discussion.” In 2018, Regions filed a foreclosure action, requesting a declaration that the loan’s maturity date had been extended. Based on an apparent tax lien, the IRS removed the case to federal court.The Sixth Circuit affirmed summary judgment in favor of the brothers. Tennessee law provides a 10-year statute of limitations for the enforcement of liens. The maturity date of the loan was never extended; Tennessee law requires a written instrument, “duly executed and acknowledged,” and “filed for record with the register of the county.” View "Regions Bank v. Fletcher" on Justia Law

Mohamad and Ahmed Hammoud, father and son, each filed a Chapter 7 bankruptcy petition, just over a year apart using the same attorney. The petitions contained their similar names, identical addresses, and—mistakenly—Ahmed’s social security number. Although the attorney corrected the social security number on Mohamad’s bankruptcy petition the day after it was filed, Experian failed to catch the amendment and erroneously reported Mohamad’s bankruptcy on Ahmed’s credit report for nine years. Ahmed learned of the uncorrected mistake while attempting to refinance his mortgage. He sued Experian and Equifax, alleging that each had violated the Fair Credit Reporting Act by failing to “follow reasonable procedures to assure maximum possible accuracy” of his reported information, 15 U.S.C. 1681e(b). Equifax and Ahmed settled.The district court granted Experian summary judgment. The Sixth Circuit affirmed. Ahmed had standing to sue but cannot establish that Experian’s procedures were unreasonable as a matter of law. Viewing the facts in the light most favorable to Ahmed, his cognizable injury was fairly traceable to Experian’s actions. A credit reporting agency’s reliance on information gathered by outside entities is reasonable if the information is not “obtained from a source that was known to be unreliable” and is “not inaccurate on its face” or otherwise inconsistent with information already had on file. Experian was not required to implement additional procedures for collecting and verifying corrected information from bankruptcy proceedings. View "Hammoud v. Equifax Information Services, LLC" on Justia Law

Lightning, a Delaware start-up company that owns intellectual property protecting designs for a pallet used for transporting cold foods, sought $26 million in outside funding to retire debt, cover operational expenses, and purchase equipment to begin production. GrowMI, an entity created by the Michigan Economic Development Corporation, agreed to loan Lightning $5 million and used its relationship with Flagstar Bank to secure an additional $7 million loan. GrowMI and Flagstar conditioned their loans on Lightning’s securing the rest of the $26 million by selling equity and securing lines of credit from Lightning shareholders. Lightning’s creditor LT sent GrowMI a letter indicating that Lightning owed LT $3.3 million, secured by an interest in Lightning’s intellectual properties. GrowMI allowed Lightning to use a portion of GrowMI’s loan to repay LT, ensuring GrowMI’s first secured position on Lightning’s intellectual properties.GrowMI subsequently became aware of wrongdoing at Lightning, which defaulted on its debt to GrowMI. GrowMI sued LT and its principals, Lightning shareholders, Lightning employees, and a consulting company, alleging violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962, by a pattern of racketeering activity that included bank fraud, transactions involving money derived from that bank fraud, trade secrets misappropriation, and wire fraud. The Sixth Circuit affirmed the dismissal of the suit. GrowMI’s claims rest on its status as Lightning’s creditor, making its injury derivative of the harm incurred by Lightning. GrowMI does not plausibly allege that it was directly injured by reason of the alleged racketeering activities. View "Grow Michigan, LLC v. LT Lender, LLC" on Justia Law

Fannie Mae purchases mortgage loans from commercial banks, which enables the lenders to make additional loans, finances those purchases by packaging the mortgage loans into mortgage-backed securities, then sells those securities to investors. In 1968, Fannie Mae became a publicly-traded, stockholder-owned corporation. Freddie Mac also buys mortgage loans and securities and sells those mortgage-backed securities to investors. In 1989, Freddie Mac became a publicly traded, stockholder-owned corporation. In the 2008 recession, both entities suffered precipitous drops in the value of their mortgage portfolios. The Federal Housing Finance Agency (FHFA) was established and authorized to undertake extraordinary measures to resuscitate the companies, 12 U.S.C. 4511(b)(1).Fannie Mae and Freddie Mac shareholders sought to nullify an agreement (the “third amendment”) between FHFA and the Treasury Department that “secured unlimited funding" from Treasury in exchange for "almost all of Fannie’s and Freddie’s future profits.” The third amendment was authorized by FHFA’s Acting Director, who was serving in violation of the Appointments Clause. Shareholders also claimed that they are entitled to retrospective relief because the Supreme Court held in 2021 that FHFA’s enabling statute contained an unconstitutional removal restriction. The district court dismissed the complaint. The Sixth Circuit reversed, holding that the Acting Director was not serving in violation of the Constitution when he signed the third amendment. The court remanded for determination of whether the unconstitutional removal restriction inflicted harm on shareholders. View "Rop v. Federal Housing Finance Agency" on Justia Law

Hurst sought a loan modification in 2018. Caliber notified Hurst that her application was complete as of April 5, 2018, that it would evaluate her eligibility within 30 days, that it would not commence foreclosure during that period, and that it might need additional documents for second-stage review. On May 1, Caliber requested additional documents within 30 days. Although Hurst responded, she did not meet all of Caliber’s requirements. On May 31, Caliber informed Hurst that it could not review her application. Hurst sent some outstanding documents on June 7, but her application remained incomplete. Caliber filed a foreclosure action on June 18. Hurst spent $13,922 in litigating the foreclosure but continued working with Caliber. Caliber again denied the application as incomplete on August 31 but eventually approved her loan modification and dismissed the foreclosure action.Hurst filed suit under the Real Estate Settlement Procedures Act (RESPA), alleging that Caliber violated Regulation X’s prohibition on “dual tracking,” which prevents a servicer from initiating foreclosure while a facially complete loan-modification application is pending, 12 C.F.R. 1024.41(f)(2); failed to exercise reasonable diligence in obtaining documents and information necessary to complete her application, section 1024.41(b)(1); and failed to provide adequate notice of the information needed to complete its review (1024.41(b)(2)). The district court granted Caliber summary judgment. The Sixth Circuit reversed with respect to the “reasonable diligence” claim. Hurst identified communications where Caliber employees provided conflicting information and had trouble identifying deficiencies. View "Hurst v. Caliber Home Loans, Inc." on Justia Law

The FDIC removed Calcutt, a bank executive and director, from his position, prohibited him from participating in the conduct of the affairs of any insured depository institution, and imposed civil money penalties. Calcutt challenged the conduct and findings in his individual proceedings and brought constitutional challenges to the appointments and removal restrictions of FDIC officials. His first hearing occurred before an FDIC ALJ in 2015. Before the ALJ released his recommended decision, the Supreme Court decided Lucia v. SEC (2018), which invalidated the appointments of similar ALJs in the Securities and Exchange Commission. The FDIC Board of Directors then appointed its ALJs anew, and in 2019 a different FDIC ALJ held another hearing in Calcutt’s matter and ultimately recommended penalties.The Sixth Circuit denied Calcutt’s petition for review, concluding that his 2019 hearing satisfied Lucia’s mandate. Even if he were to establish a constitutional violation with respect to FDIC Board of Directors and ALJs being shielded from removal by the President, he would not be entitled to relief. Any error by the ALJ in curtailing cross-examination about bias of the witnesses was harmless. Substantial evidence supports the FDIC Board’s findings regarding the elements of 12 U.S.C. 1818(e)(1). View "Calcutt v. Federal Deposit Insurance Corp." on Justia Law

In 2008, State Bank, a Fentura subsidiary, hired Wollschlager to deal with “problem loans.” Wollschlager’s contract provided a golden parachute worth $175,000 if the Bank fired him early. In 2009, the FDIC deemed the Bank “troubled.” In 2010, Wollschlager negotiated an amended agreement worth $245,000. Wollschlager's 2011 separation agreement provided that the $245,000 payment would comprise $138,000 (one year’s salary) within 60 days of Wollschlager’s departure; $107,000 plus his base compensation through the end of the year ($28,000) would be paid once the Bank’s conditions improved. Fentura did not seek FDIC prior approval. The FDIC and the Federal Reserve subsequently approved the $138,000 installment. FDIC regulations “generally limit payments to no more than one year of annual salary.” In 2013, Fentura sought approval to pay the remainder, acknowledging that the agreements required prior approval. The FDIC refused, citing 12 U.S.C. 1828(k).The district court granted the FDIC judgment on the record. The Sixth Circuit affirmed The statute says that the agency should withhold golden parachute payments for misconduct and should also consider whether the employee “was in a position of managerial or fiduciary responsibility,” the “length of” the employment, and whether the “compensation involved represents a reasonable payment for” the employee’s services. The FDIC reasonably found that the payment would result in a windfall of two years’ salary for an employee who worked for just three years and that the Bank never sought initial approval. View "Wollschlager v. Federal Deposit Insurance Corporation" on Justia Law

In 1989, the Plaintiffs opened Money Market Investment Accounts (MMIAs) with FNB. FNB guaranteed that the MMIAs’ annual rate of interest would “never fall below 6.5%.” The original contract did not limit an account holder’s right to enforce the agreement in court but stated: Changes in the terms of this agreement may be made by the financial institution from time to time and shall become effective upon the earlier of (a) the expiration of a thirty-day period of posting of such changes in the financial institution, or (b) the making or delivery of notice thereof to the depositor by the notice in the depositor’s monthly statement for one month.In 1997, FNB merged with BankFirst. In 2001, BankFirst merged with BB&T, which sent a Bank Services Agreement (BSA) to each account holder, which included an arbitration provision. A 2004 BSA amendment added a class action waiver. A 2017 Amendment made massive changes to the BSA, including an extensive arbitration provision and stating that continued use of the account after receiving notice constituted acceptance of the changes. The Plaintiffs maintained their accounts. In 2018, the Plaintiffs were notified that the annual percentage rate applicable to their accounts would drop from 6.5% to 1.05%.The Sixth Circuit reversed the dismissal of the Plaintiffs' breach of contract suit. Because there was no mutual assent, the 2001 BSA and its subsequent amendments are invalid to the extent that they materially changed the terms of the original agreement. BB&T gave the Plaintiffs no choice other than to acquiesce or to close their high-yield savings accounts. BB&T did not act reasonably when it added the arbitration provision years after the Plaintiffs’ accounts were established, thus violating the implied covenant of good faith and fair dealing. View "Sevier County Schools Federal Credit Union v. Branch Banking & Trust Co." on Justia Law