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Before You Comment on My Haircut, Think Again

Back in 2008 and 2009 Eddie Liles lent around $102,000 to his brother Dallas to purchase rental properties at 554 South Shore Drive and 540 South Shore Drive in Greenup County, Kentucky, as well as a 2008 Ford 4×4 truck.  The brothers signed a Loan Agreement that provided the loan would be interest free and that the loan for 554 South Shore Drive to be repaid first, followed by the loan for the truck, and finally the loan for the 540 South Shore Drive. The Loan Agreement called for Dallas to make payments of “ [a] minimum of $600.00 per year,” which it specified could be “multi-payments or one payment of $600.00.” It was also clear that Dallas could pay more than $600 per year towards the indebtedness, if he so desired.

The Loan Agreement also provided that if Dallas died, any outstanding balance would be forgiven. If, however, Dallas survived Eddie and the loan remained unsatisfied, the property would revert to Eddie. If both men died at the same time, and before satisfaction of the loan, the property was to pass to John B. Liles, II, or his estate. Eddie filed the Loan Agreement for record with the Greenup County Clerk and Dallas began making payments. As of early 2011 when the brothers had a falling out, Dallas had reduced the indebtedness to $89,400.

According to an affidavit filed by Dallas, the impetus for the falling out was an argument the two had in January of 2011 about a haircut. The argument was bad enough that the two were no longer communicated except for filing legal pleadings. Eddie refused to accept any more installment payments from Dallas and demand payment in full. Dallas refused but continued to make installment payments into an escrow account. Eddie filed suit and later sought summary judgment on the basis that he had full rights to demand payment in full. The circuit court determined that the loan was not a demand obligation and Eddie appealed.

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Georgia Supreme Court Weighs in On Guarantor Liability for Deficiencies

On April 17, 2017, the Supreme Court of Georgia made yet another critical decision in a line of cases which together, create the framework for a guarantor’s liability for a deficiency after a foreclosure has been conducted. The case styled York et al. v. Res-GA LJY, LLC came before the Supreme Court in consideration of the questions of (i) the extent and limitations of guarantor waiver of rights under O.C.G.A. §44-14-161; and (ii)  whether a creditor may pursue a guarantor for a deficiency after judicial denial of confirmation of a foreclosure sale.

In York et al., the lender sought to confirm the foreclosure sale of real property located in three different counties in Georgia, which properties were used to secure five promissory notes evidencing loans made to several entities and guaranteed by individual guarantors affiliated with such entities. The court in each of the three counties denied the confirmation of the respective sale citing as the basis for such denial, the lender’s failure to prove that the sale garnered fair market value, as is required under O.C.G.A. § 44-14-161. Despite its lack of success at the confirmation proceedings, the lender pursued deficiency actions against the guarantors. The trial court in awarding judgment against the guarantors, concluded that the waiver provisions of the guaranties executed by the guarantors served to waive any defense that the guarantors may have had as a result of lender’s failure to successfully seek confirmation. On appeal, the trial court’s judgment against the guarantors was affirmed.

In Georgia, to pursue a borrower for a deficiency after a foreclosure, a lender is required to file a confirmation action within thirty (30) days after foreclosure and present (i) evidence that the successful bidder at the foreclosure sale bid at least the “true market value” for the property and (ii) evidence regarding the legality of the notice and advertisement and regularity of the sale.  See O.C.G.A. § 44-14-161.

The Georgia Court of Appeals issued its decision in HWA Properties, Inc. v. Community & Southern Bank, 322 Ga. App. 877 (746 SE2d 609) (2013) in July of 2013, finding that a creditor’s failure to obtain a valid confirmation of a foreclosure sale did not impair its authority to obtain a deficiency judgment against the loan’s personal guarantor if the guarantor waived the defenses otherwise available to the guarantor under O.C.G.A. § 44-14-161.  In 2016, the Georgia Supreme Court addressed two questions regarding this issue certified to it by the United States District Court for the Northern District of Georgia and agreed with the Court of Appeals in its reasoning, holding that Georgia’s confirmation statute “is a condition precedent to the lender’s ability to pursue a guarantor for a deficiency after foreclosure has been conducted, but a guarantor retains the contractual ability to waive the condition precedent requirement”.  See PNC Bank National Ass’n v. Smith, 298 Ga. 818, 824 (758 SE2d 505) (2016).

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Bank Website ADA Litigation Update

Court Dismisses Website Accessibility Case as Violating Due Process, Since DOJ Still Has Not Issued Regulations

Recent court decisions from California and Florida may provide ammunition to retailers battling claims that their websites and mobile applications are inaccessible in violation of Title III of the Americans With Disabilities Act (the “ADA”). As we reported in a previous blog post, banks and other businesses have faced a wave of such demand letters and lawsuits.  Most of these claims settled quickly and confidentially.

However, a California district court recently granted Dominos Pizza’s motion to dismiss under the primary jurisdiction doctrine, which allows courts to stay or dismiss lawsuits pending the resolution of an issue by a government agency. In Robles v. Dominos Pizza LLC, U.S. Dist. Ct. North Dist. Cal. Case No. CV 16-06599 SJO, the court held it would violate Domino’s due process rights to hold that its website violates the ADA, because the Department of Justice still has not promulgated regulations defining website accessibility – despite issuing a notice of proposed rulemaking back in 2010.

The court stated that the DOJ’s application of an industry standard, the Website Content Accessibility Guidelines 2.0 (WCAG 2.0), in statements of interest and consent decrees in other cases does not impose a legally binding standard on all public accommodations. It also noted that those consent decrees indicated flexibility to choose an appropriate auxiliary aid to communicate with disabled customers, and suggested that Domino’s provision of a telephone number for disabled customers may satisfy this obligation. Retailers that do not have an accessible website should therefore provide a toll-free number serviced by live customer service agents who can provide all the information and services available on the website.

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CFPB Customer Complaint Data: Seeing What the Plaintiffs’ Bar Sees

CFPB watchers know that since 2013 customer complaints have been solicited and complaint data has been made available on the CFPB website. January is ubiquitous with New Year’s resolutions (perhaps you’ve already broken all of yours, but hopefully not). It is a great time to review the 2016 customer complaint data and see what the Plaintiffs’ Bar sees about your customers and your institution.

Undoubtedly, in due course, the CFPB has contacted your compliance and legal teams directly about these consumer complaints on an individualized basis. And undoubtedly, you have investigated the issue and provided responsive information to the CFPB and the consumer. Hopefully, each individual customer complaint matter is resolved and closed.

As a class action litigator, however, it is important to highlight that there is more here than just each individual complaint. We are living in an age of big data. The CFPB knows it. Your institution knows it. And, guess what, the Plaintiffs’ Bar knows it. The individual complaints posted to the CFPB database may be only the tip of the iceberg, or the issues may not have been fully resolved.

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Reduce Potential ADA Liability by Making ATMs and Websites Accessible

Banks and credit unions are among the most recent targets of a wave of demand letters and lawsuits alleging violation of the Americans With Disabilities Act of 1990 (the “ADA”). The most common allegations concern inaccessible ATMs and websites, despite the fact that the ADA and its implementing regulations do not yet address website accessibility.

Title III of the ADA prohibits discrimination against individuals “on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of any place of public accommodation,” 42 U.S.C. § 12182(a), which includes banks and credit unions.

In 2010, the federal regulations implementing the ADA were revised, and expressly addressed ATMs for the first time. Banks and credit unions were given until March 2012 to become fully compliant, and most litigation targeted institutions that failed to comply by that date.

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Pointers for Bank Recipients of Demand Letters Asserting ADA Non-Compliance

Community banks have recently been on the receiving end of demand letters from plaintiffs law firms alleging that the banks’ websites are in violation of the Americans With Disabilities Act of 1990 (the “ADA”).  Interestingly, there are currently no specific federal standards for websites under the ADA. The Department of Justice (“DOJ”) is in the process of developing regulations for website accessibility, but has announced it will not finalize these regulations until 2018 at the earliest. Even so, the DOJ has emphasized that businesses should make websites accessible to the disabled. While the regulations are being developed, many businesses have been applying the Web Content Accessibility Guidelines (WCAG) 2.0 Level AA with the understanding that the DOJ has made clear that it considers a website accessible if it complies with these guidelines.

When a bank receives a demand letter the first thing they need to do is hire counsel to advise them about their various options, including mitigating any damages by curing website defects, litigation or settlement. As a practical matter, the best defense to such claims is making sure that the bank’s website is compliant with the WCAG 2.0 Level AA Guidelines. That may involve the use of internal resources as well as external consultants.  While it is impossible to tell whether suit will be filed in any given situation, banks should take note that the firms sending demands have previously been engaged in filing over 100 of these types of suits against various non-financial defendants over the past year.

Bryan Cave has put together a resource that provides generally accepted recommendations for website accessibility and federal ADA standards for ATM accessibility to help you review how your banks stands.

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