Lender Liability - 4th Edition

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About the Book:
Lender Liability is the leading one-volume work on the subject. This area of the law has grown and matured significantly over the years and is now recognized as a distinct body of law that is the basis of thousands of lawsuits filed over the last decade. Written for both lenders' and borrowers' attorneys, Lender Liability discusses the basics and more advanced issues relating to lender liability. Topics include 1) an extended analysis of where and how lender liability problems arise, 2) common law and statutory theories of liability, 3) bankruptcy concerns and 4) lawsuits against failing or failed financial institutions. A sample complaint, request for production of documents, interrogatories and jury instructions are included as well as tables of state and federal cases and statutes, rules and regulations.

This handy reference work is ideal for either the experienced practitioner or the neophyte involved in representing an institution or client whose interests involve bank liability.

Part I   WHERE PROBLEMS ARISE

Chapter 1:   INTRODUCTION
§ 1.01   Overview
§ 1.02   Suggestions for Lenders
§ 1.03   Suggestions for Borrowers

Chapter 2:   LOAN APPLICATIONS
§ 2.01   Overview
§ 2.01A Predatory Lending
§ 2.02   Processing of Loan Applications
§ 2.03   Failure to Obtain Insurance
§ 2.04   False Statements on Loan Applications

Chapter 3:   LOAN COMMITMENTS
§ 3.01   Overview
§ 3.02   Binding Loan Commitments
§ 3.03   Written Commitments
§ 3.04   Oral Commitments
§ 3.05   Addition of Conditions After Acceptance
§ 3.06   Enforcement of Commitment by Lender
§ 3.07   Commitment Fees

Chapter 4:   CONTENTS OF LOAN DOCUMENTS
§ 4.01   Overview
§ 4.02   Acceleration Clauses
§ 4.03   Jury Trial Waivers
§ 4.04   Arbitration Clauses
§ 4.05   Dragnet Clauses
§ 4.06   Prepayment Penalty Provisions

Chapter 5:   GUARANTEES
§ 5.01   Overview
§ 5.02   Enforceability of Guarantees
§ 5.03   Duties Owed to Guarantors
§ 5.04   The Duty to Disclose and the Duty of Good Faith
§ 5.05   Guarantors' Rights
§ 5.06   Right of Subrogation and Anti-Deficiency Rights
§ 5.07   "True" Guarantors
§ 5.08   Exoneration of Guarantors

Chapter 6:   ADMINISTRATION OF LOANS
§ 6.01   Overview
§ 6.02   Refusal to Disburse Funds
§ 6.03   Line of Credit
§ 6.04   Construction Loans
§ 6.05   Crop Loans
§ 6.06   Termination of Funding
§ 6.07   Revoking Line of Credit
§ 6.08   Calculation of Rates and Charges
§ 6.09   Interest Rates
§ 6.10   Other Charges
§ 6.11   Loan Participations
§ 6.12   Letters of Credit
§ 6.13   Finance Leases

Chapter 7:   CONFLICTS OF INTEREST
§ 7.01   Overview
§ 7.02   Duty of Confidentiality
§ 7.03   Duty to Disclose
§ 7.04   Use of Confidential Information for Lender's Benefit
§ 7.05   Responding to Requests for Credit References
§ 7.06   Conflicting Duties

Chapter 8:   DEFAULT AND ACCELERATION
§ 8.01   Overview
§ 8.02   Notice of Default
§ 8.03   Improper Declaration of Default
§ 8.04 "Technical" Default Versus "Material" Breach
§ 8.05   Inadequate Notice
§ 8.06   Demand Notes
§ 8.07   Cases Upholding Right to Immediate Payment upon Demand
§ 8.08   Cases Requiring Good Faith and Reasonable Notice
§ 8.09   Improper Acceleration
§ 8.10   Deviating from Established Course of Dealing and Waiver

Chapter 9:   LOAN WORKOUTS AND SETTLEMENT NEGOTIATIONS
§ 9.01   Overview
§ 9.02   Good Faith Negotiations
§ 9.03   Standstill and Forbearance Agreements
§ 9.04   Releases of Liability and Waivers
§ 9.05   Breach of Workout or Settlement Agreement

Chapter 10:   FORECLOSURE AND REPOSSESSION
§ 10.01   Overview
§ 10.02   Foreclosure of Real Property
§ 10.03   Notice and Sale
§ 10.04   Environmental Concerns
§ 10.05   Right to Recover Deficiency
§ 10.06   Wrongful Foreclosure
§ 10.06A Miscellaneous Concerns
§ 10.07   Repossession of Personal Property
§ 10.08   Notice of Sale and Disposition of Property
§ 10.09   Commercially Unreasonable Sales
§ 10.10   Wrongful Repossession
§ 10.11   Mixed Collateral
§ 10.12   Right of Offset

Chapter 10A: ENFORCEMENT ISSUES AND FOREIGN LENDERS
§ 10A.01 Overview
§ 10A.02 The Foreign Sovereign Immunities Act

Part II   COMMON LAW THEORIES OF LIABILITY

Chapter 11:   INTRODUCTION

Chapter 12:   BREACH OF CONTRACT
§ 12.01   Overview
§ 12.02   Breach of Contract— General Principles
§ 12.03   Written Contracts and Statutes of Frauds
§ 12.04   Oral Contracts and Parol Evidence Rule
§ 12.05   Loan Commitments
§ 12.06   Damages for Breach of Contract
§ 12.07   Promissory Estoppel
§ 12.08   Specific Performance

Chapter 13:   BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
§ 13.01   Overview
§ 13.02   General Principles
§ 13.03   Bad Faith Breach
§ 13.04   Recovery in Contract
§ 13.05   Recovery in Tort
§ 13.06   Duty of Good Faith
§ 13.07   Cases in Which Duty Recognized
§ 13.08   Cases in Which No Duty Found

Chapter 14:   BREACH OF FIDUCIARY DUTY
§ 14.01   Overview
§ 14.02   General Principles
§ 14.03   Public Policies at Stake
§ 14.04   When Fiduciary Relationship Will Arise
§ 14.05   Lender's Role as Financial Advisor
§ 14.06   Lender's Role as Borrower's Agent
§ 14.07   Lender's Control Over Borrower
§ 14.07A Lender's Role as Seller
§ 14.08   Other Situations
§ 14.09   Nullification of Fiduciary Relationship
§ 14.10   Fiduciary Duties
§ 14.11   Breach of Fiduciary Duties
§ 14.12   Self-Dealing and Overreaching
§ 14.13   Using One Borrower to Cover Another Borrower's Debt
§ 14.14   Tricking the Borrower
§ 14.15   Exploiting Confidential Information
§ 14.16   Failure to Disclose/Constructive Fraud
§ 14.17   Other Breaches
§ 14.18   Termination of Fiduciary Relationship

Chapter 15:   FRAUD
§ 15.01   Overview
§ 15.02   Types of Fraud
§ 15.03   Intentional Misrepresentation
§ 15.04   Statement of Fact
§ 15.05   Justifiable Reliance
§ 15.06   Examples
§ 15.07   Negligent Misrepresentation
§ 15.08   Nondisclosure and Concealment
§ 15.09   False Promises
§ 15.10   Common Fraudulent Practices
§ 15.11   Promises to Induce Benefits
§ 15.12   False or Groundless Threats
§ 15.13   Misrepresenting the Effect of Documents
§ 15.14   Improper Advice
§ 15.15   Other Practices
§ 15.16   Remedies for Fraud
§ 15.17   Recovery of Damages
§ 15.18   Rescission
§ 15.19   Fraudulent Conveyances
§ 15.20   Bankruptcy Fraud

Chapter 16:   IMPROPER CONTROL
§ 16.01   Overview
§ 16.02   General Principles
§ 16.03   Acts Constituting Improper Control
§ 16.04   Interference with Right to Govern
§ 16.05   Running Day-to-Day Operations
§ 16.06   Takeover of Troubled Borrower
§ 16.07   Joint Business with Borrower
§ 16.08   Checklist of Control Factors
§ 16.09   Ramifications of Improper Control
§ 16.10   Special Bankruptcy Concerns
§ 16.11   Special Environmental Concerns
§ 16.11A Special Labor Concerns
§ 16.12   Control Theories
§ 16.13   Fiduciary Relationship
§ 16.14   Alter Ego and Instrumentality
§ 16.15   Agency
§ 16.16   Joint Venture and Partnership
§ 16.17   Other Theories
§ 16.18   Common Defenses

Chapter 17:   INTERFERENCE
§ 17.01   Overview
§ 17.02   General Principles
§ 17.03   Interference with Contract
§ 17.04   Interference with Prospective Economic Advantage
§ 17.05   Interference with Right of Corporate Governance
§ 17.06   Common Defenses

Chapter 18:   NEGLIGENCE
§ 18.01   Overview
§ 18.02   General Principles
§ 18.03   Common Negligent Practices
§ 18.04   Processing of Loan Applications
§ 18.05   Appraisals
§ 18.06   Failure to Obtain Insurance
§ 18.07   Administration of Loans
§ 18.08   Disbursement of Funds
§ 18.09   Supervision of Construction Loans
§ 18.10   Responding to Credit Inquiries
§ 18.11   Gross Negligence

Chapter 19:   DURESS
§ 19.01   Overview
§ 19.02   General Principles
§ 19.03   Duress as Affirmative Tort
§ 19.04   Duress as Defense to Contract or Basis for Rescission

Chapter 20:   CONVERSION
§ 20.01   Overview
§ 20.02   General Principles
§ 20.03   Common Applications of Theory
§ 20.04   Wrongful Repossession
§ 20.05   Wrongful Offset
§ 20.06   Refusal to Return Deposit
§ 20.07   Other Applications

Chapter 21:   MISCELLANEOUS THEORIES
§ 21.01   Overview
§ 21.02   Defamation and Related Torts
§ 21.03   Actionable Conduct
§ 21.04   Defenses to Claim
§ 21.05   Infliction of Emotional Distress
§ 21.06   Actionable Conduct
§ 21.07   Defenses to Claim
§ 21.08   Prima Facie Tort
§ 21.09   Unjust Enrichment
§ 21.10   Equitable Estoppel
§ 21.11   Intrusion

Chapter 22:   VICARIOUS AND JOINT LIABILITY
§ 22.01   Overview
§ 22.02   Conspiracy
§ 22.03   Aiding and Abetting
§ 22.04   Inducing and Participating in Breach of Fiduciary Duty
§ 22.05   Colluding with Disloyal Fiduciary
§ 22.06   Other Theories

PART III   STATUTORY THEORIES OF LIABILITY

Chapter 23:   INTRODUCTION

Chapter 24:   FEDERAL LAWS
§ 24.01   Overview
§ 24.02   RICO
§ 24.03   General Principles
§ 24.04   Use of RICO by Borrowers Against Lenders
§ 24.05   Securities Laws
§ 24.06   CERCLA and Other Environmental Laws
§ 24.07   Anti-Tying Provisions of Bank Holding Act
§ 24.08   Tax Laws
§ 24.09   Equal Credit Opportunity and Anti-Discrimination Laws
§ 24.10   Truth-in-Lending Laws
§ 24.10A Usury and the National Bank Act
§ 24.11   Labor and Miscellaneous Other Laws
§24.12   RESPA

Chapter 25:   STATE LAWS
§ 25.01   Overview
§ 25.02   Consumer Protection Laws
§ 25.03   Prohibitions Against Usury
§ 25.04   Environmental Laws
§ 25.05   Miscellaneous

PART IV BANKRUPTCY CONCERNS

Chapter 26:   INTRODUCTION

Chapter 27:   PRE-FILING CONSIDERATIONS FOR THE BORROWER
§ 27.01   Overview
§ 27.02   Benefits to Borrower
§ 27.03   Risks to Borrower
§ 27.04   Other Concerns

Chapter 28:   EQUITABLE SUBORDINATION
§ 28.01   Overview
§ 28.02   General Principles
§ 28.03   Fraud and Inequitable Conduct by Lender
§ 28.04   Lender Control

Chapter 29:   PREFERENCES
§ 29.01   Overview
§ 29.02   General Principles
§ 29.03   "Insider" Liability
§ 29.04   Exceptions to Avoidance Power
§ 29.05   Application to Lenders

Chapter 30:   FRAUDULENT TRANSFERS
§ 30.01   Overview
§ 30.02   General Principles
§ 30.02   Application to Lenders

Chapter 30A:   MISCELLANEOUS ISSUES
§ 30A.01 Overview
§ 30A.02 Judicial Abuse

PART V   LAWSUITS AGAINST FAILING OR FAILED FINANCIAL INSTITUTIONS

Chapter 31:   INTRODUCTION

Chapter 32:   AVAILABILITY OF LENDER LIABILITY CLAIMS AND DEFENSES IN LITIGATION WITH THE FEDERAL GOVERNMENT
§ 32.01   Overview
§ 32.02   Impediments to Lender Liability Claims and Defenses
§ 32.03   D'Oench, Duhme Doctrine
§ 32.04   12 U.S.C. § 1823(e)
§ 32.05   Combined Effects of D'Oench, Duhme and § 1823(e)
§ 32.06   Federal Holder-in-Due-Course Doctrine
§ 32.07   Failure to Exhaust Administrative Claims Process and Other Issues
§ 32.08   Borrower's Strategies to Avoid Impediments

APPENDICES
Appendix A   Fact Pattern for Sample Complaint
Appendix B   Sample Complaint
Appendix C   Sample Request for Production of Documents
Appendix D   Sample Interrogatories
Appendix E   Sample Jury Instructions
Appendix F   Truth in Lending Act
Appendix G   Equal Credit Opportunity Act
Appendix H   Fair Debt Collection Practices Act

Table of Cases General
Table of Cases (Federal Jurisdiction)
Table of Cases (State Jurisdiction)
Table of Statues, Rules, and Regulations
Table of Authorities
Index

A. Barry Cappello, Managing Partner, of the Santa Barbara law firm of Cappello & Noël, LLP. Mr. Cappello, who founded the firm in 1977, is recognized as one of the nation's leading trial lawyers and authorities on complex commercial litigation specializing in lender liability. He has represented both large and small businesses against most of the nation's major banks in litigation nationwide.

Mr. Cappello has contributed numerous articles on complex business litigation, lender liability andadvanced trial techniques to business, legal, accounting and trade publications.

Before entering private practice, Mr. Cappello served a seven-year tenure as City Attorney of Santa Barbara. He was the chief litigator against the oil companies that caused the massive 1969 Santa Barbara Channel oil spill. Prior to being appointed City Attorney of Santa Barbara, he was Assistant District Attorney and Chief Trial Deputy in the Santa Barbara County District Attorney's Office. Mr. Cappello also served as a Deputy Attorney General for the State of California assigned to the Special Trials and Investigations Division.

Mr. Cappello has been listed in Best Lawyers in America since 1992 and in Who's Who in America. He was named a "Super Lawyer" in 2007 - 2009, and he was selected as one of the Top 100 Trial Attorneys in California for 2007 by the American Trial Lawyers Association.

Praise for Lender Liability - 4th Edition

"Lender Liability by Barry Cappello, one of the greatest trial attorneys of our age, could not come at a more auspicious moment. Once the economy stabilizes and the current credit crisis subsides, lawyers throughout the nation will seek justice for many of the people who have been harmed. Some of these people will be shareholders who have lost everything; some will be borrowers who have lost their homes or businesses because they were enticed to borrow under terms that virtually guaranteed that they would default. In the fourth edition of Lender Liability, Barry Cappello provides an exhaustive, authoritative and illuminating analysis of the legal claims and theories that members of the bar will work with for decades to come."

Michael Schill, Dean and Harry N. Wyatt Professor of Law, University of Chicago Law School; Former Dean and Professor of Law, UCLA School of Law