All items from Florida Banking Law Blog

Authored by Scott St. Amand and J. Ellsworth Summers, Jr. and Scott St. Amand and J. Ellsworth Summers, Jr. of Rogers TowersAs we mentioned in our previous posts regarding document preservation, establishing a written document retention and destruction policy is essential to any company, large or small.  As with the Pradaxa case out of the Southern District of Illinois, a recent case out of the Northern District of New York, Research Foundation of SUNY v. Nektar Therapeutics, exemplifies the pivotal role such a policy has in the event of litigation.  RF SUNY brought complex breach of contract and breach of the implied duty of good faith and fair dealing actions against Nektar, but it was the defendant, Nektar which filed the instant spoliation motion.
Nektar alleged that the RF SUNY was grossly negligent for failing to preserve documents which “may have been relevant to future litigation” as well as being grossly negligent “in its efforts to preserve documents.” Nektar also alleged that RF SUNY failed to “to timely issue written litigation-hold notices,” “preserve all relevant backup-tape data,” and “suspend its auto-delete practices.”



Posted 17 hours 29 min ago

Authored by Adam B. Brandon of Rogers TowersIn addition to ensuring compliance with the federal Fair Debt Collection Practices Act (FDCPA), lenders should take precautions to limit its exposure to claims under the Florida Consumer Collection Practices Act (FCCPA).  For example, lenders should:
 

  • Ensure that loan accounting systems accurately track the terms of loan modifications, forbearance agreements, and other loan documents at the time those documents are executed.

 

  • Establish written policies and procedures to reduce errors and to verify the accuracy of accounting systems.  Loan officers should ensure that the policies and procedures are routinely followed by all employees at all levels of a lender’s operations.

 

  • Periodically review the terms of loan documents to ensure that they are fully reflected in accounting systems.

 

  • Ensure that correspondence with debtors accounts for all loan modifications.  Be aware that automatically generated notices have greatest risk of not being accurate or up to date.

 

  • Avoid direct communication with borrowers whose loans are in default and who are also represented by counsel regarding the debt.

 



Posted 5 days 19 hours ago

Authored by Armando Nozzolillo and Michael S. Waskiewiczand Armando Nozzolillo and Michael S. Waskiewicz of Rogers TowersIn the last 2 years, three judges of the Middle District of Florida (Judges Funk, Delano and Williamson) have each issued opinions finding 11 U.S.C. § 707(b)(2) inapplicable in cases converted from a Chapter 13 to a Chapter 7.  These Courts have based their findings on the “plain language” of the provision.
11 U.S.C. § 707(b)(1) generally provides that a Court may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts if the Court finds that granting relief would constitute an abuse of the Bankruptcy Code.  11 U.S.C. § 707(b)(2) generally provides that a Court shall presume that a Chapter 7 case is abusive if the debtor’s current monthly income, when reduced by expenses or payments determined under the provision, is greater than a specified threshold amount set forth therein.  The above-referenced judges all held § 707(b) is inapplicable to converted cases because the cases are converted to a Chapter 7 from another chapter, and thus, are not originally filed under Chapter 7.



Posted 1 week 18 hours ago

Authored by Douglas L. Waldorf, Jr. of Rogers TowersThe Florida Bar News, in its September 15, 2014 edition, reported that Florida foreclosure volume has declined with the number of filings in the first half of 2014 about 50% of filings for the same period the year prior.  The backlog has also been reduced to about one half that of the prior year.  Some attribute the reduction in filings to the new foreclosure laws passed in July of 2013.  Generally, the new law requires more front-end due diligence by lenders to ensure that they have the legal right to foreclose.  This may, in fact, have caused an increase in internal scrutiny of loan documents resulting in the delay or postponement of foreclosure filings.  Overall, we have an improved economy and corresponding willingness of banks to modify loans rather than foreclosing them and this may also be a factor in the reduction in foreclosures.  It should be noted that Florida is still at the top in comparison to other states in pending foreclosure cases with a backlog still at some 185,000 cases.



Posted 1 week 5 days ago

Authored by Scott J. Kennelly and Janet C. Owens and Scott J. Kennelly and Janet C. Owens of Rogers TowersThere are two “tiers” of penalties for violation of the Florida usury statutes, one civil and the other criminal, and both are severe.  Civil penalties usually involve forfeiture of the entire interest charged (or contracted to be charged), such that only the principal balance may be enforced. If a court determines that unlawful usurious interest charges have actually been received by the lender, then double the amount of usurious interest taken or received must be returned to the borrower. Moreover, a lender may forfeit the right to collect the entire debt, including the principal, if a court determines that it has violated the criminal usury statute. Lenders who have committed criminal usury may also face jail time and fines.



Posted 2 weeks 18 hours ago

Authored by Samantha Alves Orender of Rogers TowersIn a previous post, we considered whether guarantors are considered to be “applicants” under the Equal Credit Opportunity Act (the “ECOA”), and today, we will consider whether assignees who acquire debt would be subject to penalties under the ECOA. The question turns on whether assignees are considered to be “creditors” under the law. The ECOA defines “creditor” as “any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.”  15 U.S.C. § 1691a(e).  This definition is supplemented by ECOA’s implementation regulation (Regulation B) as follows, “[a] person is not a creditor regarding any violation of the act or this regulation committed by another creditor unless the person knew or had reasonable notice of the act, policy, or practice that constituted the violation, before becoming involved in the credit transaction.”  12 CFR 202.2(1).



Posted 2 weeks 4 days ago

Authored by Karl Gruss and Edward L. Kellyand Karl Gruss and Edward L. Kelly of Rogers TowersFlorida’s homestead exemption protects a married couple’s primary residence from forced sale to satisfy a judgment lien, but what happens when spouses retain two properties as their individual primary residences, claiming homestead protection on each?  The answer comes down to whether the spouses are “legitimately” separated, and creditors should take note of a recent decision out of the 4th DCA addressing Florida’s homestead tax exemption, Brklacic v. Parrish, that sheds light on what factors a court may consider in analyzing a couple’s separation and dual homestead protection claim.
When would a couple claim legitimate separation?



Posted 3 weeks 15 hours ago

Authored by Scott St. Amand of Rogers TowersIn April of 2010, the Office of the Comptroller of the Currency closed First National Bank Myrtle Beach, S.C., a wholly-owned subsidiary of Beach First National Bancshares, a bank holding company, and named the FDIC as its receiver.  As a consequence of the bank’s failure, Bancshares filed for Chapter 7 bankruptcy.  Shortly thereafter, the Trustee filed an adversary proceeding asserting a derivative claim for breach of fiduciary duty and negligence against the officers and directors of the subsidiary bank for injury allegedly caused to the subsidiary bank.
As some readers may know, a bankruptcy Trustee succeeds to all rights of the debtor, including the right to assert any cause of action belonging to the debtor.  Absent statutory modification, this power includes the right to assert the derivative claims of Bancshares (as the subsidiary bank’s sole shareholder) against the directors in their capacity as officers and directors of the subsidiary bank.  However, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), the FDIC, when appointed receiver of a bank, succeeds to all rights, titles, powers and privileges of the insured depository institution, and of any stockholder of such institution with respect to such institution and the assets of the institution.



Posted 3 weeks 5 days ago

Authored by Heather S. Nason and Jon Sacksand Heather S. Nason and Jon Sacks of Rogers TowersTo avoid foreclosure, a borrower might agree to execute a deed in lieu of foreclosure to be held in escrow.  In these circumstances, the borrower would execute a deed-in-lieu of foreclosure to the mortgaged property in favor of the lender.  The deed would be held by the lender or other third party in escrow for the remainder of the loan term or some other specified time period decided between the parties.  If the borrower defaults on payments or otherwise breaches the terms of the loan with the lender, the lender could then take the deed from escrow, record the deed, and effectuate a transfer of the property to the lender without foreclosing on the property or negotiating other workout possibilities with the borrower.
This practice was once considered an efficient alternative to a costly and time-consuming foreclosure.  However, challenges in the courts to the validity of these conveyances and the resistance of title companies to insure these transactions over the past few years generally preclude these conveyances from continuing to be viable workout options.



Posted 3 weeks 6 days ago

Authored by J. Ellsworth Summers, Jr. and Scott St. Amand and J. Ellsworth Summers, Jr. and Scott St. Amand of Rogers TowersIn Detroit’s ongoing restructuring effort, the city cleared a major hurdle last week by settling with its largest adversary, Syncora Guarantee, a New York based bond insurer.  The settlement was negotiated just a week into the bankruptcy trial and was so significant that Judge Steven Rhodes adjourned the trial for two days to allow the parties to work out the logistics of the deal.  Although the Syncora settlement was a huge step in the right direction for the beleaguered municipality, Detroit still faced a vexing requirement of the Chapter 9 process: feasibility.
In addition to being equitable and in the creditors’ best interest, the Chapter 9 plan must be feasible; however, the Bankruptcy Code fails to define feasibility.  On Monday, however, the court appointed financial expert tasked with determining feasibility concluded that the plan was in fact feasible.  In essence the expert found that the city’s exit strategy could actually work and succeed in placing Detroit on a financial course that avoids falling back into bankruptcy.



Posted 4 weeks 5 days ago