ABA Banking Journal - November/December 2015 - (Page 66)
> LEGAL BRIEFS
BY DAWN CAUSEY
to Watch on the Supreme
Court's Fall Docket
FALL BRINGS AUTUMNAL colors, football and, for those of us following
litigation, the fall term of the U.S. Supreme Court. While banking rarely has
the headline cases, there are several ABA is watching, including one-Hawkins
v. Community Bank of Raymore-argued on the Court's opening day.
Hawkins v. Community Bank of Raymore
presents the issue of whether spousal
guarantors aree applicants for purposes
of the Equal Credit Opportunity Act.
The case involves the spouses of two
owners of a failed real estate company.
The spouses claimed that the bank
unlawfully required them to guarantee
loans made by their husbands, arguing
that the bank violated ECOA and an
implementing Regulation B requirement
that prohibits discrimination by a creditor
against an "applicant" on the basis of
marital status. Regulation B defines
"applicant" to include guarantors.
The Eighth U.S. Circuit Court of
Appeals ruled that guarantors are not
applicants unless they are seeking credit
themselves. The court concluded that
the text of ECOA unambiguously explains
that a guarantor is not an applicant,
and gave the Regulation B definition no
deference because it conflicted with the
plain language of ECOA. Unfortunately,
the Eighth Circuit decision directly
conflicts with a Sixth Circuit ruling that
reached the opposite conclusion. The
clear split in the circuits is now ripe
for resolution by the Supreme Court.
ABA, the Missouri Bankers Association
and others filed a brief in support of the
bank arguing that including guarantors
as applicants under ECOA would expose
banks to increased litigation costs
and potentially encourage banks to
ABA BANKING JOURNAL | NOVEMBER/DECEMBER 2015
avoid adding guarantors when making
loans. Neither result is beneficial.
The two other cases on ABA's watch
list deal with access to the courts.
Merrill Lynch v. Manning will examine
whether claims filed under the Security
and Exchange Commission's regulation
that governs "short sales," Regulation
SHO, should be filed in federal or
state court. The district court held that
Regulation SHO established federal
jurisdiction. However, the Third Circuit
disagreed, holding that the standards
and duties required by Regulation SHO
should be interpreted by state courts.
The Merrill Lynch plaintiffs countered
that allowing state courts to rule on
an SEC regulation flies in the face of
nationwide application of the Securities
Exchange Act of 1934. Again, several
circuit courts of appeal have differed
in their findings. The Fifth and
Ninth held for federal jurisdiction;
the Second and now the Third gave
authority to the states. The answer
awaits a Supreme Court ruling.
The last case, Spokeo v. Robins,
focuses on "standing" and the definition
of harm. Generally, a plaintiff must
demonstrate harm to file a successful
lawsuit. Robins sought damages from
Spokeo, a company that operates a
data aggregation website using public
information about individuals. Robins'
class action alleged that information on
Spokeo's website was inaccurate and
those errors caused actual harm to his
employment prospects. The district
court held in favor of Spokeo stating
that the alleged harm was "speculative,
attenuated and implausible" and that
mere violation of the Fair Credit Reporting
Act did not confer standing where no
injury in fact was properly pled.
Unfortunately, a three-judge panel of
the Ninth Circuit reversed, holding the
allegation of violations without proof of
harm was sufficient for the plaintiff to
have standing and for the case to go
forward. In July, ABA and other financial
trades filed a brief with the Supreme
Court urging reversal of the Ninth Circuit's
reasoning. The ABA brief argued that
injury-in-fact requirements promote
accountability and prevent spurious
claims. And, as most cases involving class
action lawsuits, the financial industry and
others would be faced with countless
claims based on simple allegations
of statutory or regulatory violation.
As these cases illustrate, it will be yet
another important term for banking
before the Supreme Court.
DAWN CAUSEY is general
counsel at ABA.
Table of Contents for the Digital Edition of ABA Banking Journal - November/December 2015
A Conversation With the Comptroller
Cover Story Doing the Right Thing
Big Data and Predictive Analytics: A Big Deal, Indeed
Stress Testing: Feeling the Pressure?
ABA Compliance Center Inbox
Cybersecurity Self-Assessment Tool Helps Combat Risk
Real Estate Lending
Banker Recommended Reading
From the States
Corporate Social Responsibility
Index of Advertisers
ABA Banking Journal - November/December 2015