This past June, in Barnes v. U.S. National Bank, No. 2180699, the Alabama Court of Civil Appeals held that a mortgagee’s notice of acceleration failed to strictly comply with the notice provisions contained in Paragraph 22 (“Paragraph 22”) of the Fannie Mae/Freddie Mac Uniform Mortgage. As a result, the Court held that the foreclosure sale was void.

Continue Reading Alabama Court of Civil Appeals Doubles Down on “Strict Compliance” with Notice Provisions of Standard Mortgage’s Paragraph 22

Earlier this year, Balch & Bingham reported on the dismissal of one of the first class actions challenging financial institutions for charging multiple “overdraft” or not sufficient funds (“NSF”) fees for the same transaction or “item.” In these cases, Plaintiffs allege financial institutions may only charge an overdraft fee once for each “item” – be it a debit, check, draft, withdrawal, ACH payment request, etc. – no matter how many times merchants represent the transaction or item to the bank for payment. Last week, the Tennessee Court of Appeals became the first appellate court to affirm the dismissal of one of these cases. Continue Reading Tennessee Court of Appeals Becomes First Appellate Court to Affirm Dismissal of Class Action Challenging Multiple “Overdraft” or NSF Fees for Same Transaction or “Item.”

The federal courts have been struggling for several years to clarify Article III standing law. Is it enough that a plaintiff satisfy the elements of a federal consumer protection statute? Is it enough that a data breach have happened? Or, must the plaintiff show that they have actually been damaged or that there is a substantial risk that they will be damaged? On October 28, 2020 the Eleventh Circuit handed down a sharply split en banc decision applying the U.S. Supreme Court’s Article III standing decision, Spokeo Inc. v. Robins, 136 S. Ct. 1540 (2016). The court held directly held that it is not enough that a statutory violation have occurred. Even though defendant Godiva Chocolates violated the Fair and Accurate Credit Transactions Act (“FACTA”), the Court held that the named class plaintiff lacked standing to bring the action because he did not allege any concrete injury.

Continue Reading Giving Teeth to Article III Standing Requirements in the Eleventh Circuit.

Earlier this year, Balch & Bingham reported on the wave of “Agent Fee” class actions against lenders who made PPP loans under the CARES Act. At one point, there were over sixty such lawsuits, spread across the federal courts, alleging that banks were required to pay CPAs and others who assisted borrowers with loan applications.  Since then, however, virtually every ruling has been in favor of the banks, and now there is real reason to question whether these suits will continue.

Continue Reading RETREAT! “Agent Fee” Class Actions Moving Against Plaintiffs

In a landmark decision Monday, the United States District Court for the Northern District of Florida dismissed a putative class action involving “agent fees” for Paycheck Protection Program (“PPP”) loans under the federal Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. This lawsuit, Sport & Wheat CPA, PA v. Servisfirst Bank et al., No. 3:20-cv-05425-TKW-HTC (N.D. Fla.) claimed to represent a class of accounting firms and other consultants that allegedly worked as agents on behalf of applicants for PPP loans – typically small business clients. Plaintiff contended the CARES Act and implementing regulations required lenders to pay them “agent fees” for preparing loan applications.

Continue Reading Florida Judge Dismisses First-Filed PPP Agent Fee Class Action, Holds the CARES Act Contains No Requirement Agents be Paid

On Wednesday, the Judicial Panel on Multidistrict Litigation rejected consolidation of 62 class actions involving Paycheck Protection Program (“PPP”) loans under the federal Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in a multidistrict litigation (“MDL”).  These actions claim to represent a class of accounting firms (and other consultants) that allegedly worked as agents on behalf of applicants for PPP loans – typically small business clients. Plaintiffs contend the CARES Act and implementing regulations require lenders to pay them “agent fees” for preparing loan applications.

Continue Reading Lenders Gain Big Win Resisting MDL Consolidation in PPP Agent Fees Class Action Litigation

Recently the Alabama Court of Civil Appeals held that a mortgagee’s notice of acceleration failed to strictly comply with the mortgage’s notice provisions when it informed the borrower only that she “may” have right to assert defenses against foreclosure, rather than apprising her that she had an affirmative right to bring an action against the mortgagee. This case serves as a cautionary tale for lenders and mortgage servicers who are considering foreclosure.

Continue Reading You’re on Notice: Alabama Court of Civil Appeals Bears Down on Foreclosure “Strict Compliance” in Barnes v. U.S. National Bank, No. 2180699.

In In Re: Bay Circle Properties, LLC., No. 1812536, 2020 WL 1696303 (Ala. April 8, 2020), the Eleventh Circuit dismissed an appeal by a guarantor alleging a wrongful foreclosure, because the guarantor did not own the foreclosed property and therefore lacked Article III standing.  Here are the facts:  Debtor owed for two loans, both secured by real property.  Debtor then declared bankruptcy.  Guarantor (an affiliate of debtor) had also guaranteed both loans.  Creditor then foreclosed on both properties, although both debtor and guarantor allegedly stated their desire to tender the amount owed prior to the sale.

Guarantor then sued the creditor (and added the debtor as a plaintiff in an amended complaint), alleging that creditor did not have a right to foreclose on both properties because the value exceeded the debt balance and because creditor improperly rejected the purported “tender” prior to the sale.  The bankruptcy court entered a judgment on the pleadings in favor of the creditor and both the debtor and guarantor appealed. Debtor ultimately settled with creditor and was dismissed from the case. Guarantor remained the lone appellant.

The Eleventh Circuit dismissed the appeal, finding that the guarantor failed to allege the “actual injury personal to him” required for Article III standing. Specifically, the Court noted that the debtor—not the guarantor—was the property owner, therefore any alleged loss by the debtor stemming from the sale of property was purely speculative.  The guarantor argued that he was injured because he personally guaranteed the loans at issue and the property could have satisfied or decreased his personal liability to the creditors.  The Court found the personal guarantee irrelevant, since the foreclosures satisfied the debt. Even if that were not the case, the Court noted that even if recovery of the lost property value were appropriate, the property was owned by the debtor, and therefore it was unclear how any such recovery would pay off guarantor’s alleged personal liability on creditors’ judgments against him individually. The Court also held that the guarantor failed to meet the more stringent “person aggrieved doctrine” standard for appealing a bankruptcy court order.

This holding should serve as a cautionary warning to any personal guarantors of debt who do not also hold an interest in the property that secures the debt. Personal guarantors should consider obtaining an interest in the property or, at the very least, ensure that they are satisfied with the terms of any loan or repayment agreement  on the front end, as they will have little legal recourse should they have later grievances concerning creditors rights and resources in the event of default.

At least two class actions filed in the wake of the COVID-19 pandemic by disgruntled accounting firms allege some of the nation’s largest banks never paid “agent fees” to entities assisting small businesses apply for Paycheck Protection Program (“PPP”) loans under the federal Coronavirus Aid, Relief, and Economic Security (“CARES”) Act – and never intended to.

These lawsuits allege plaintiffs represent a class of financial services and accounting firms that prepared PPP applications on behalf of eligible small business clients. Plaintiffs contend the CARES Act and implementing regulations require lenders to pay them “agent fees” for preparing loan applications. Fees are calculated by tiers according to the amount of the loan – a one percent fee for loans of $350,000 or less, a .50 percent fee for loans of more than $350,000 and up to $2 million, and a .25 percent fee on loans over $2 million.

Continue Reading Second Wave of CARES Act Litigation Filed Against Banks; Accounting Firms Seek “Agent Fees” for Preparing PPP Loan Applications.

In Forbes v. Platinum Mortgage, Inc., No. 1180985, 2020 WL 746533 (Ala. Feb. 14, 2020), the Alabama Supreme Court upheld the validity of a home mortgage.  There, the husband borrowed $175,000, securing the loan with a mortgage on the couple’s home.  The husband signed the mortgage for himself and signed on behalf of his wife – pursuant to a Power of Attorney from his wife.  Later, the wife was declared incompetent and ultimately died.  The conservator sued, seeking to nullify the loan and contending that the Power of Attorney was forged.

Continue Reading A Properly Notarized Power of Attorney Provides Authority to Execute Mortgages