Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

A mortgage conveys an interest in real property as security. Lenders often require borrowers to maintain hazard insurance that protects the property. If the borrower fails to maintain adequate coverage, the lender may buy the insurance and force the borrower to cover the cost (force-placed coverage). States generally require insurers to file their rates with an administrative agency and may not charge rates other than the filed rates. The filed-rate is unassailable in judicial proceedings even if the insurance company defrauded an administrative agency to obtain approval of the rate.Borrowers alleged that their lender, Nationstar, colluded with an insurance company, Great American, and an insurance agent, Willis. Great American allegedly inflated the filed rate filed so it and Willis could return a portion of the profits to Nationstar to induce Nationstar’s continued business. The borrowers paid the filed rate but claimed that the practice violated their mortgages, New Jersey law concerning unjust enrichment, the implied covenant of good faith and fair dealing, and tortious interference with business relationships; the New Jersey Consumer Fraud Act; the Truth in Lending Act, 15 U.S.C. 1601–1665; and RICO, 18 U.S.C. 1961–1968.The Third Circuit affirmed the dismissal of the suit. Once an insurance rate is filed with the appropriate regulatory body, courts have no ability to effectively reduce it by awarding damages for alleged overcharges: the filed-rate doctrine prevents courts from deciding whether the rate is unreasonable or fraudulently inflated. View "Leo v. Nationstar Mortgage LLC of Delaware" on Justia Law

Wolfington brought a claim under the Truth in Lending Act, 15 U.S.C. 1601, stemming from reconstructive knee surgery he received from Reconstructive Orthopaedic Associates (the Rothman Institute). Wolfington alleged that Rothman failed to provide disclosures required by the Act when it permitted him to pay his deductible in monthly installments following surgery. The district court entered judgment, rejecting Wolfington’s claim because it determined he had failed to allege that credit had been extended to him in a “written agreement,” as required by the Act’s implementing regulation, Regulation Z. The court also sua sponte imposed sanctions on Wolfington’s counsel. The Third Circuit affirmed in part, agreeing that Wolfington failed to adequately allege the existence of a written agreement, but concluded that counsel’s investigation and conduct were not unreasonable. In imposing sanctions, the district court placed emphasis on the statement by Rothman’s counsel, not Wolfington’s. The statement by Wolfington’s counsel did not amount to an “unequivocal” admission that there was no written agreement. View "Wolfington v. Reconstructive Orthopaedic Associates II, PC" on Justia Law

Consumer banks Hudson and M&T merged. Hudson’s shareholders claimed they violated the Exchange Act, 15 U.S.C. 78n(a), and SEC Rule 14a-9, by omitting facts concerning M&T’s regulatory compliance from their joint proxy materials: M&T’s having advertised no-fee checking accounts but later switching those accounts to fee-based accounts (consumer violations) and deficiencies in M&T’s Bank Secrecy Act/anti-money laundering compliance program. They argued that because the proxy materials did not discuss M&T’s noncompliant practices, M&T failed to disclose significant risk factors facing the merger, rendering M&T’s opinion statements regarding its adherence to regulatory requirements and the prospects of prompt approval of the merger misleading under Supreme Court precedent (Omnicare). The Third Circuit reversed, in part, the dismissal of the suit. The shareholders pleaded actionable omissions under the SEC Rule but failed to do so under Omnicare. The joint proxy had to comply with a provision that requires issuers to “provide under the caption ‘Risk Factors’ a discussion of the most significant factors that make the offering speculative or risky.” It would be reasonable to infer the consumer violations posed a risk to regulatory approval of the merger, despite cessation of the practice by the time the proxy issued. The disclosures were inadequate as a matter of law. View "Jaroslawicz v. M&T Bank Corp" on Justia Law

In 2008, the U.S. government strove to rescue the collapsing economy, including by enacting the Housing and Economic Recovery Act, which authorized the government to act as conservator for Fannie Mae and Freddie Mac, government-sponsored enterprises with critical roles in the home mortgage market. Under that conservatorship, Fannie and Freddie made a deal with the Department of Treasury, guaranteeing those agencies access to hundreds of billions of dollars; they had to give their net profits to the Treasury—in perpetuity. Fannie’s and Freddie’s junior shareholders had expected to share in those future profits. The agreement wiped out that expectation. The Third Circuit rejected challenges by those junior shareholders. The Recovery Act gave the government broad, discretionary power to enter into the deal and the deal complies with the requirements of the Act, as well as Delaware and Virginia corporate law. In addition, the relief sought would “restrain or affect the exercise of [the government’s] powers” as conservator, which the Recovery Act forbids, 12 U.S.C. 4617(f). View "Jacobs v. Federal Housing Finance Agency" on Justia Law

The day Krieger fell victim to a credit card scam and discovered a fraudulent $657 charge on his bill, he contacted his card issuer, Bank of America (BANA), and was told that the charge would be removed and that, pending “additional information,” BANA considered the matter resolved. Krieger’s next bill reflected a $657 credit. Over a month later Krieger learned that BANA was rebilling him for the charge. He disputed it again, in writing. After BANA replied that nothing would be done, he paid his monthly statement and then filed suit, citing the Fair Credit Billing Act (FCBA), 15 U.S.C. 1666, which requires a creditor to take certain steps to correct billing errors, and the Truth in Lending Act (TILA), 15 U.S.C. 1601, which limits a credit cardholder’s liability for the unauthorized use of a credit card to $50. The Third Circuit reversed dismissal by the district court, first rejecting a claim that Krieger’s complaint was untimely. Only when BANA decided to reinstate the charge did the FCBA again become relevant, so that the 60-day period began to run. A cardholder incurs “liability” for an allegedly unauthorized charge when an issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge; the issuer must then comply with the requirements of section 1643, and when a cardholder alleges those requirements were violated, those allegations may state a claim under TILA section 1640. View "Krieger v. Bank of America NA" on Justia Law

More than 10 years ago, Tatis incurred a debt of $1,289.86 to Bally Fitness. Allied, a debt collector, sent Tatis a letter dated May 18, 2015 stating: “[The creditor] is willing to accept payment in the amount of $128.99 in settlement of this debt. You can take advantage of this settlement offer if we receive payment of this amount or if you make another mutually acceptable payment arrangement within 40 days.” The six-year New Jersey limitations period for debt-collection actions had already run. Tatis filed a class action, alleging that Allied’s letter violated the Fair Debt Collection Practices Act (15 U.S.C. 1692) because Tatis interpreted the word “settlement” to mean that she had a “legal obligation” to pay and the letter “[f]alsely represent[ed] the legal status of the debt" made “false threats to take action that cannot legally be taken,” and used “false representations and/or deceptive means to collect or attempt to collect." The Third Circuit reversed the dismissal of the suit. Collection letters may violate the FDCPA by misleading or deceiving debtors into believing they have a legal obligation to repay time-barred debts even when the letters do not threaten legal action. The least-sophisticated debtor could plausibly be misled by the specific language used in Allied’s letter. View "Tatis v. Allied Interstate LLC" on Justia Law

More than 10 years ago, Tatis incurred a debt of $1,289.86 to Bally Fitness. Allied, a debt collector, sent Tatis a letter dated May 18, 2015 stating: “[The creditor] is willing to accept payment in the amount of $128.99 in settlement of this debt. You can take advantage of this settlement offer if we receive payment of this amount or if you make another mutually acceptable payment arrangement within 40 days.” The six-year New Jersey limitations period for debt-collection actions had already run. Tatis filed a class action, alleging that Allied’s letter violated the Fair Debt Collection Practices Act (15 U.S.C. 1692) because Tatis interpreted the word “settlement” to mean that she had a “legal obligation” to pay and the letter “[f]alsely represent[ed] the legal status of the debt" made “false threats to take action that cannot legally be taken,” and used “false representations and/or deceptive means to collect or attempt to collect." The Third Circuit reversed the dismissal of the suit. Collection letters may violate the FDCPA by misleading or deceiving debtors into believing they have a legal obligation to repay time-barred debts even when the letters do not threaten legal action. The least-sophisticated debtor could plausibly be misled by the specific language used in Allied’s letter. View "Tatis v. Allied Interstate LLC" on Justia Law

Fried bought a home in 2007 for $553,330; an appraisal estimated the home’s value at $570,000. Fried borrowed $497,950 at a fixed interest rate. Because the loan-to-purchase-price ratio was more than 80%, Chase, the servicer for Fried’s mortgage required her to obtain private mortgage insurance. Fried had to pay monthly premiums for that insurance until the ratio reached 78%; projected to happen around March 2016. After the housing market crashed in 2008, Fried had trouble making mortgage payments. Chase modified Fried’s mortgage under the Home Affordable Mortgage Program, part of the Emergency Economic Stabilization Act of 2008, by reducing the principal balance to $463,737. By reassessing the value of Fried’s home at the time of the modification, Chase extended Fried’s mortgage insurance premiums to 2026. The district court declined to dismiss Fried’s purported class action under the Homeowners Protection Act, 12 U.S.C. 4901. The Third Circuit affirmed, finding that the Act does not permit a servicer to rely on an updated property value, estimated by a broker, to recalculate the length of a homeowner’s mortgage insurance obligation following a modification; the Act requires that the ending of that obligation remain tied to the initial purchase price of the home. View "Fried v. JP Morgan Chase & Co" on Justia Law

In 2010, EFIH borrowed $4 billion at a 10% interest rate, issuing notes secured by its assets; the Indenture states that EFIH may redeem the notes for the principal amount plus a “make-whole premium” and accrued, unpaid interest. It contains an acceleration provision that makes “all outstanding Notes . . . due and payable immediately” if EFIH files for bankruptcy. Interest rates dropped. Refinancing outside of bankruptcy would have required EFIH to pay the make-whole premium. EFIH disclosed to the Securities and Exchange Commission a “proposal [whereby] . . . EFIH would file for bankruptcy and refinance the notes without paying any make-whole amount.” EFIH later filed Chapter 11 bankruptcy petitions, seeking leave to borrow funds to pay off the notes and to offer a settlement to note-holders who agreed to waive the make-whole. The Trustee sought a declaration that refinancing would trigger the make-whole premium and that it could rescind the acceleration without violating the automatic stay. The Bankruptcy Court granted EFIH’s motion to refinance. EFIH paid off the notes and refinanced at a much lower interest rate; the make-whole would have been approximately $431 million. The Bankruptcy Court and district court concluded that no make-whole premium was due and that the noteholders could not rescind acceleration. The Third Circuit reversed. The premium, meant to give the lenders the interest yield they expect, does not fall away because the full principal amount becomes due and the noteholders are barred from rescinding acceleration of debt. View "In re: Energy Future Holdings Corp." on Justia Law

After a foreclosure case, Davis filed various claims against an entity that he calls “Wells Fargo U.S. Bank National Association as Trustee for the Structured Asset Investment Loan Trust, 2005-11” as the purported holder of Davis’s mortgage. Davis also sued Assurant, believing it to be the provider of insurance on his home. His claims arise from damage that occurred to his house after Wells Fargo locked him out of it, which went unrepaired and worsened into severe structural problems. The district court dismissed Davis’s claims against Wells Fargo, on the grounds that claim preclusion and a statute of limitations barred recovery, and claims against Assurant for lack of subject matter jurisdiction. The Court reasoned that Davis lacked standing to bring those claims because he sued the wrong corporate entity, namely Assurant, when he should have sued Assurant’s wholly-owned subsidiary, ASIC. The Third Circuit affirmed dismissal of Wells Fargo, but vacated as to Assurant. Standing is a jurisdictional predicate, but generally focuses on whether the plaintiff is the right party to bring particular claims, not on whether the plaintiff has sued the right party. View "Davis v. Wells Fargo" on Justia Law