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From Banking and Finance Law Daily, October 7, 2013

Supreme Court prunes docket on first day of term

By Richard A. Roth, J.D.

On the first day of its October 2013 term, the U.S. Supreme Court denied petitions for review in a number of financial services-related cases. Most notably, it rejected requests that it consider whether a grand jury subpoena seeking records of an individual’s foreign bank accounts violated that individual’s right against self-incrimination and whether a failed bank’s lessor could sue the acquirer of the bank’s assets for breach of the lease.

Bank Secrecy Act. The bank account records appeal, In re: Grand Jury Proceedings, No. 4-10, Dkt. No. 12-1409, arose under provisions of the Bank Secrecy Act and Treasury Department regulations requiring persons with interests in foreign financial accounts to keep specified records and produce those records when necessary. When a grand jury for the U.S. District Court for the Northern District of Georgia subpoenaed the records of an individual and his wife, they refused to comply, claiming that the subpoena violated their Fifth Amendment right not to be compelled to incriminate themselves. Their argument was that producing the records could provide evidence of tax law violations, while admitting they had not maintained the records would provide evidence of BSA violations.

The U.S. Court of Appeals for the Eleventh Circuit rejected their arguments, relying on the Required Records Exception to the privilege against self-incrimination. According to the court, production of the records could be compelled because they were essentially regulatory in nature, were of a type a person customarily would keep, and had public aspects (In re: Grand Jury Proceedings, No. 4-10, Feb. 7, 2013, Hull, Circuit Judge).

Receiverships. The breach of lease appeal, Interface Kanner, LLC v. JP Morgan Chase Bank, N.A., Dkt. No. 12-1465, began when Washington Mutual Bank signed a lease for property where it intended to locate a branch, then failed before the branch opened. On the same day that WaMu failed, the Federal Deposit Insurance Corporation used its authority as the bank’s receiver to sell many of the bank’s assets to JP Morgan Chase Bank, N.A., under a Purchase and Assumption Agreement (P&A). The P&A included a clause that explicitly disclaimed any intent to benefit any other parties.

The P&A gave JP Morgan the right to decide which bank premises leases it would assume, and the bank soon told the lessor and the FDIC that it would not assume this lease. Shortly thereafter, the FDIC told the lessor that it was exercising its statutory right to disaffirm the lease. The lessor then sued both JP Morgan and the FDIC, claiming both that it was a third-party beneficiary of the P&A and that it was in privity of contract with JP Morgan.

According to the Eleventh Circuit, both arguments failed. The lessor could assert either theory of recovery only if it first could establish that the P&A showed a clear intent to benefit the lessor. Given the disclaimer, that was not possible (Interface Kanner, LLC v. JP Morgan Chase Bank, N.A., Jan. 10, 2013, Dubina, Chief Circuit Judge).

Other rejected petitions. The Court also rejected a series of other petitions for certiorari, including requests that it review:

  • the rejection of claims under the Equal Credit Opportunity Act against the Department of Agriculture (Wise v. Vilsack, Dkt. No. 12-1193);
  • state law claims arising from mortgage foreclosures (Sembly v. US Bank National Association, Dkt No. 12-1359, and Priester v. JP Morgan Chase Bank, NA, Dkt. No. 12-1481);
  • the applicable statute of limitations for a demand that a U.S. bank pay deposits made to a branch in Saigon that were lost when the communist government seized them (Nguyen v. JP Morgan Chase Bank, NA, Dkt. No. 12-1382);
  • the denial of a certificate of appealability to a national bank president given a 30-year sentence of imprisonment after he was convicted of improperly accounting for transactions in foreign debt instruments (Massferrer v. U.S., Dkt. No. 12-1426); and
  • a decision that an arbitration agreement in a consumer loan contract was unconscionable and therefor unenforceable under West Virginia law (Beneficial West Virginia Inc., v. Britton, Dkt. 13- 106).

Companies: Beneficial West Virginia Inc.; Interface Kanner, LLC; JP Morgan Chase Bank, N.A.; US Bank National Association; Washington Mutual Bank

LitigationEnforcement: AlabamaNews BankSecrecyAct BankingOperations ConsumerCredit CrimesOffenses EqualCreditOpportunity FloridaNews GeorgiaNews Loans Mortgages Receiverships StateBankingLaws SupremeCourt

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