All items from Florida Banking Law Blog

Authored by Adam B. Brandon of Rogers TowersThe Florida Consumer Collection Practices Act (“FCCPA”) prohibits anyone attempting to collect a debt from using certain types of abusive, deceptive, and misleading tactics.  In a recent decision, Florida’s Second District Court of Appeals ruled that the FCCPA applies not just to “debt collectors” but also to banks that send demand letters to borrowers whose loans are in default.
In Gann v. BAC Homes Loan Services, LP, a bank agreed to permanently modify a loan.  The borrower then timely made payments in accordance with the modification agreement.  However, the bank sent the borrower a letter which claimed that she was in default under the original terms of the loan.  The bank threatened to foreclose its mortgage unless the borrower paid the amount which the bank claimed she owed.  In response, the borrower sued the bank for violating the FCCPA by ignoring the terms of the loan modification and attempting to enforce an illegitimate debt.

Posted 2 days 14 hours ago

Authored by J. Ellsworth Summers, Jr.and Scott St. Amand of Rogers TowersIn numerous previous posts, we have noted that the purpose of the Bankruptcy Code is to help the “honest but unfortunate debtor.”  Like gerrymandering, certain “creative” debtors have attempted to classify their non-dischargeable debt as a separate, special class of unsecured creditors.  In a recent case out of the Eighth Circuit, In re Copeland, the court summarily dismissed the debtors’ argument that they had not unfairly discriminated against their other unsecured creditors.

Posted 4 days 15 hours ago

Authored by Douglas L. Waldorf, Jr. of Rogers TowersLegal standing to foreclose a note and mortgage continues to be an issue that frustrates plaintiffs and delights defense counsel.  Florida courts have consistently held that standing must exist when the lawsuit is filed and the lack of standing cannot be “cured” absent a dismissal and refiling of the case.  At a minimum this adds to the time and expense of a foreclosure.  In situations where a statute of limitations prevents refiling, it could spell disaster.

Posted 1 week 2 days ago

Authored by Heather S. Nason of Rogers TowersCommercial mortgage lenders of non-owner occupied property need to be adept at reviewing leases to protect themselves from risk.  Although the rent roll is a useful tool, some lenders learned during the economic downturn that it was a mistake to rely solely on the rent roll for a picture of the future income stream of a commercial property.  Lease agreements of retail space, in particular, carry some unique terms that could impact the lender in ways a typical office or industrial lease may not.  A thorough review of the lease agreements not only helps to protect the lender from risks in the borrower’s ability to meet its debt service, but also can help identify provisions that might negatively impact the lender in the event of a default.   A lender should be wary of the following:

Posted 1 week 4 days ago

Authored by Scott J. Kennellyand Janet C. Owens of Rogers TowersWhen borrowers default under the terms of their loans, lenders often, in accordance with the loan documents, can assess late fees against the borrower.  When lenders assess late fees around the time of or after a loan matures or is accelerated, however, the imposition of late fees has the potential to become usurious under Florida law.  Because the penalties for violation of the Florida usury statutes are severe, lenders should tread carefully when dealing with transactions that have the potential to become usurious, and should take proactive steps to become informed as to which lending practices will or will not run afoul of Florida’s usury laws.

Posted 2 weeks 2 days ago

Authored by Scott St. Amandand J. Ellsworth Summers, Jr. of Rogers TowersTwenty-seven years ago the Second Circuit was faced with a debtor who proposed to use the Bankruptcy Code to avoid her student loan debt – only five months after graduation.  The Second Circuit came down harshly on Ms. Brunner and established an “undue hardship” test, which few debtors have passed since the decision in the Brunner case.  Eleven of the federal circuit courts, including the Eleventh Circuit, have adopted the Brunner “undue hardship” test, and there have been few significant challenges to the standard over the nearly three decades of its existence.
Since Brunner was decided, however, the Bankruptcy Code has changed significantly and the nation’s student loan debt has risen at an astonishing rate.  In 1987, educational debt was approximately $42 billion.  Fast forward twenty-seven years later, and there is nearly $1 trillion in outstanding educational debt – an increase of 2281%.  This dramatic increase has led some commentators to argue that Brunner is outdated, and changes need to be made to bankruptcy courts’ approach to student loan forgiveness.

Posted 2 weeks 4 days ago

Authored by Scott St. Amand of Rogers TowersAlthough a suit against a particular officer of a corporation for sexual harassment would clearly trigger a litigation hold, what must counsel do about less obvious players in a more abstract dispute?  The recent case of AMC Technologies, LLC v. Cisco Systems, Inc., presents just such an issue.
In AMC opinion, decided in the Northern District of California, AMC sued Cisco for breach of contract arising out of an alleged failure of Cisco to deliver a particular computer connector.  As part of AMC’s discovery, they requested data from the computer of an employee that had retired just four days prior to the filing of the lawsuit.  In accordance with a written document retention and destruction policy, the employee’s hard drive had been “wiped” thirty days after his departure.
The AMC case raises a number of novel issues.  Although the data was destroyed in accordance with an established document destruction plan, it was destroyed after an ever important “trigger event,” which in this case was the service of the complaint on the defendant, Cisco.  On its own, this destruction of data would support an adverse inference instruction; however, the court held that the identity of the custodian matters in determining whether the destruction of data falls within the scope of a spoliation motion.

Posted 3 weeks 4 days ago

Authored by Scott St. Amandand J. Ellsworth Summers, Jr. of Rogers TowersOn Friday July 25, 2014, the City of Detroit released a revised restructuring plan that provides for a reserve fund that may enhance the recovery for certain classes of unsecured creditors.  The plan also creates a post-bankruptcy “monitor” whose role and responsibility would be to evaluate the city’s ongoing compliance with the plan and confirmation order and to report to the bankruptcy court on such matters on a periodic basis.
The revision was the fifth such alteration since Detroit filed its $18 billion bankruptcy last year.  The reserve fund is structured as a litigation trust related to the lawsuit in which Detroit has sought to void nearly $1.5 billion in pension certificates sold between 2005 and 2006.  If Detroit prevails on the suit, and the certificates are voided, the city would divide the money in the trust: 65% going towards retiree health care costs and 20% going towards limited-tax general obligation bondholders.  The remaining 15% would be paid to a heretofore undetermined “miscellaneous” class.

Posted 4 weeks 2 days ago

Authored by Adam B. Brandon of Rogers TowersOn June 23, 2014, the U.S. Supreme Court issued its decision in Laughlin v. United States which defined what type of fraudulent activity is punishable under the federal bank fraud statute.  Posing as a Mormon missionary, Kevin Loughrin went door-to-door in a Salt Lake City neighborhood and rummaged through mailboxes looking for checks.  He then altered those checks and used them to buy merchandise from Target which he later returned in exchange for cash.  When he was caught, Mr. Loughrin was prosecuted (and convicted) in federal court for bank fraud.  He received a sentence that was higher than what he likely would have received if convicted in state court.
The federal bank fraud statute, 18 U.S.C. § 1344, criminalizes both schemes to directly defraud banks and schemes to fraudulently obtain money or property owned by or under the control of a bank.  Mr. Loughrin argued that he did not violate this statute because he only intended to defraud Target, not the banks on which the altered checks were drawn.  Mr. Loughrin further suggested that federal criminal law should not be interpreted so broadly as to cover run-of-the-mill schemes and minor frauds which are traditional prosecuted under state law.

Posted 4 weeks 4 days ago

Authored by Douglas L. Waldorf, Jr. of Rogers TowersThere have been several articles posted on this blog on the subject of standing – the legal right to enforce a promissory note and/or mortgage.  This continues to be a popular issue for defense counsel to raise and, as a result, relevant and current caselaw is abundant.
I have a couple of observations in this regard.  First, the majority of reported decisions involve appeals of entry of summary final judgment.  Florida attorneys understand that the standard for entry of summary judgment involves a finding that there are no disputed issues of material fact.  In many of the cases on standing, the plaintiff lender failed to establish this at the summary judgment hearing.  That does not mean that in all of these cases standing cannot be established.  It may ultimately be if the summary judgment preparation and hearing is done correctly with adequate evidence of standing presented.

Posted 5 weeks 2 days ago