Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

A company operating as a mortgage lender applied for and received a Paycheck Protection Program (PPP) loan during the COVID-19 pandemic. The company’s PPP loan was later forgiven. A private party, acting as a qui tam relator under the False Claims Act (FCA), alleged that the company and its chief executive officer made several false statements in their loan application and forgiveness process. The key allegations were that the company was ineligible for PPP funds as a financial business primarily engaged in lending, that it misrepresented its use and need for the loan, and that it falsified the number of employees to increase the loan amount. The relator argued that these misrepresentations led the government to approve and forgive the loan improperly.Previously, the United States District Court for the Southern District of California dismissed the relator’s amended complaint. The district court found that the FCA’s public disclosure bar applied, reasoning that the necessary information supporting the ineligibility allegation was already publicly available on a government website, specifically concerning the company’s business classification. The district court also concluded that the relator’s allegations regarding the inflated employee count were speculative. The relator was denied leave to further amend the complaint, on the basis that amendment would be futile.The United States Court of Appeals for the Ninth Circuit reviewed the case and held that the public disclosure bar did not apply because the information on the government website was not “substantially the same” as the relator’s allegations, and the company’s own website did not qualify as “news media” under the statute. The appellate court agreed that the relator’s claim regarding the number of employees was not sufficiently pleaded but found the district court abused its discretion by denying leave to amend. The Ninth Circuit reversed the dismissal and remanded for further proceedings. View "RELATOR, LLC V. ERSKINE" on Justia Law

A group of borrowers in California brought a class action against Flagstar Bank, alleging that the bank failed to pay interest on their mortgage escrow accounts as required by California Civil Code § 2954.8(a). Flagstar did not pay interest on these accounts, arguing that the National Bank Act (NBA) preempted the California law, and therefore, it was not obligated to comply. The plaintiffs sought restitution for the unpaid interest.The United States District Court for the Northern District of California, relying on the Ninth Circuit’s prior decision in Lusnak v. Bank of America, N.A., granted summary judgment for the plaintiffs. The court ordered Flagstar to pay restitution and prejudgment interest to the class. Flagstar appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed the district court’s decision, holding that Lusnak foreclosed Flagstar’s preemption argument. However, the Ninth Circuit remanded the case to the district court to correct the class definition date and the judgment amount due to errors in the statute of limitations tolling and calculation of damages.On remand from the United States Supreme Court, following its decision in Cantero v. Bank of America, N.A., the Ninth Circuit reviewed whether it could overrule Lusnak in light of Cantero. The court held that Cantero did not render Lusnak “clearly irreconcilable” with Supreme Court precedent, and therefore, the panel lacked authority to overrule Lusnak. The Ninth Circuit affirmed the district court’s holding that the NBA does not preempt California’s interest-on-escrow law, but vacated and remanded the judgment and class certification order for modification of the class definition date and judgment amount. View "KIVETT V. FLAGSTAR BANK, FSB" on Justia Law

Andrew King, a customer of Navy Federal Credit Union (NFCU), was charged a $15 returned-check fee despite not being at fault for the check's failure to clear. King argued that this fee constituted an "unfair" and "unlawful" business practice under California's Unfair Competition Law (UCL) and violated the federal Consumer Financial Protection Act (CFPA). He filed a lawsuit in state court, which NFCU removed to federal court.The United States District Court for the Central District of California dismissed King's state law claims, ruling that they were preempted by federal law. Specifically, the court found that 12 C.F.R. § 701.35(c), which governs federal credit unions, expressly preempted King's UCL claim. The court concluded that state laws regulating account fees are not applicable to federal credit unions, and thus, King's claim was preempted.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's dismissal. The Ninth Circuit held that the plain language of 12 C.F.R. § 701.35(c) expressly preempts state laws regulating account fees for federal credit unions. The court rejected King's arguments that the UCL transcends the preemption clause, stating that all state laws regulating account fees, whether general or specific, have no application to federal credit unions. The court emphasized that the regulation's preemption clause operates independently of whether a fee complies with federal law. Thus, the Ninth Circuit affirmed the district court's decision to dismiss King's UCL claim on preemption grounds. View "KING V. NAVY FEDERAL CREDIT UNION" on Justia Law

Timberly Hughes, a U.S. citizen, failed to report her foreign bank accounts for the years 2010 through 2013, as required under the Bank Secrecy Act of 1970. Hughes owned two companies in New Zealand and had financial interests in their accounts. The United States assessed penalties against her for willful failure to file the required Reports of Foreign Bank and Financial Accounts (FBARs) for 2012 and 2013, totaling $678,899. Hughes did not pay, leading the United States to file suit in federal court.The United States District Court for the Northern District of California held a bench trial and found that Hughes willfully failed to file FBARs for 2012 and 2013 but not for 2010 and 2011. The court concluded that "willfulness" for civil FBAR penalties could be shown through recklessness or willful blindness, following the Supreme Court's reasoning in Safeco Insurance Co. of America v. Burr. The court entered a final judgment against Hughes for $238,125.19 in substantive penalties but denied the United States' request for prejudgment interest and late payment penalties.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's decision. The Ninth Circuit agreed that "willfulness" for civil FBAR penalties includes both knowing and reckless violations, aligning with the reasoning in Safeco and the consensus of other circuits. The court found that Hughes's failure to file was willful for 2012 and 2013, as she had acknowledged the requirement on her tax returns but failed to comply. The Ninth Circuit upheld the district court's judgment and rejected Hughes's argument that subjective intent was necessary to establish willfulness. View "USA V. HUGHES" on Justia Law

The case under review is an appeal regarding the resentencing of Vivian Tat, who was involved in a money-laundering scheme. At her initial sentencing, Tat was convicted on several counts and sentenced to 24 months imprisonment. However, she appealed and the higher court vacated her conviction on one count and her sentence, remanding for de novo resentencing. At the resentencing hearing, Tat received an 18-month sentence.Her appeal to this court is her second one, and she argues that the lower court erred in applying sentencing enhancements related to her role as an organizer/leader and her abuse of trust, improperly considered "cost" in dismissing her community-service proposal at sentencing, and violated Federal Rule of Criminal Procedure 32 by failing to make factual findings about certain parts of her presentence report.The United States Court of Appeals for the Ninth Circuit held that a criminal defendant’s failure to challenge specific aspects of her initial sentence on a prior appeal does not waive her right to challenge comparable aspects of a newly imposed sentence following de novo resentencing. The court found that the lower court had erred in applying an organizer/leader enhancement under U.S.S.G. § 3B1.1, as Tat’s status as a mere member of the criminal enterprise did not bear on whether she was an organizer, leader, manager, or supervisor of the criminal activity, and the criminal conduct was not “otherwise extensive.” However, the district court did not err in applying an enhancement for abuse of trust under U.S.S.G. § 3B1.3, where Tat’s position as a manager at the bank gave her the discretion to carry out transactions like the one at issue here without oversight, and where her position of trust facilitated her role in the underlying offense. The court also found that the lower court did not improperly consider “cost” in dismissing Tat’s community-service proposal. The court vacated Tat’s sentence and remanded to the district court for resentencing consistent with this opinion. View "United States v. Tat" on Justia Law

In its prior decision, the Ninth Circuit rejected Optional’s contention that DAS should be held in contempt for allegedly failing to comply with the May 2013 final judgment that was entered in these forfeiture proceedings. Optional filed a Fed. R. Civ. P. 60(a) motion to amend the May 2013 judgment to provide that (1) the $12.6 million that DAS had received “is impressed with a constructive trust in favor of Optional” and that (2) “DAS is directed to return that $12,602,824.09, with interest, to Optional’s counsel.” Optional argued that the May 2013 judgment’s failure to specifically award the $12.6 million to Optional was a “scrivener’s error” that should be corrected under Rule 60(a). The district court denied Optional’s Rule 60(a) motion.   The Ninth Circuit granted DAS Corporation’s motion to summarily affirm the district court’s decision. First, the panel denied Optional’s motion to strike DAS’s papers, which alleged that DAS was not a proper party in this matter. The panel held that this contention was frivolous. The panel held that DAS had standing to object to the proposed entry of a subsequent final judgment that, in its view, did not correctly reflect the court’s earlier rulings that finally disposed of the matter as to DAS. The panel granted DAS’s motion for summary affirmance. Finally, the panel held that despite being warned in the prior decision that its prior litigation maneuvers had gone too far, Optional filed this utterly meritless appeal and filed a frivolous motion contesting DAS’s right even to be heard in this appeal. View "OPTIONAL CAPITAL, INC. V. DAS CORPORATION, ET AL" on Justia Law

In March 2021, Riverside County, California District Attorney sued Credit One Bank in Riverside County Superior Court. The lawsuit (the “state action”) alleged that Credit One, a national bank, violated California law by employing a vendor to make extensive harassing debt collection phone calls to California residents. In a related federal case (the “federal action”), Credit One requested that the United States District Court for the Central District of California enjoin the state action on the ground that it was an unlawful exercise of “visitorial powers,” which the National Bank Act (“NBA”) and its associated regulations grant exclusively to the Office of the Comptroller of the Currency (“OCC”). The district court ultimately decided to abstain under Younger v. Harris, 401 U.S. 37 (1971), in favor of the state action and dismissed the federal action. Credit One appealed that dismissal.   The Ninth Circuit affirmed. The panel held that the district court correctly abstained because all four Younger factors were met. First, the state action qualified as an “ongoing” judicial proceeding because no proceedings of substance on the merits had taken place in the federal action. Second, the state court action implicated the important state interest of protecting consumers from predatory business practices. The panel held that the state court action was not an exercise of “visitorial powers,” and nothing in federal law prevents a district attorney from vindicating a state interest in consumer protection by suing a national bank. Third, Credit One had the ability to raise a federal defense under the National Bank Act. And fourth, the injunction Credit One sought would interfere with the state court proceeding. View "CREDIT ONE BANK, N.A. V. MICHAEL HESTRIN" on Justia Law

Plaintiff filed suit under the Electronic Fund Transfer Act (EFTA) against JPMorgan Chase Bank, alleging that she was the victim of unauthorized electronic fund transfers from her checking account at Chase. Chase reimbursed plaintiff for some of those losses, but refused to repay $300,000 of the funds stolen from her account. The district court dismissed plaintiff's complaint at the pleading stage on the ground that her lengthy delay in reporting the unauthorized withdrawals to Chase barred her claims as a matter of law.The Ninth Circuit concluded that the district court misinterpreted the relevant provision of the EFTA and reversed the dismissal of plaintiff's EFTA claim. The panel concluded that, under 15 U.S.C. 1693g(a), a consumer may be held liable for unauthorized transfers occurring after the 60-day period only if the bank establishes that those transfers "would not have occurred but for the failure of the consumer" to timely report the earlier unauthorized transfer reflected on her bank statement. In this case, plaintiff met her pleading burden by alleging facts plausibly suggesting that even if she had reported an unauthorized transfer within the 60-day period, the subsequent unauthorized transfers for which she sought reimbursement would still have occurred. The panel affirmed the district court's dismissal of plaintiff's state law claims, concluding that plaintiff's claim for breach of contract failed because a Privacy Notice appended to her Deposit Account Agreement did not impose any substantive duties on Chase. Furthermore, plaintiff's claim for breach of the implied covenant of good faith and fair dealing failed because the Deposit Account Agreement expressly permitted Chase to close plaintiff’s accounts. View "Widjaja v. JPMorgan Chase Bank, N.A." on Justia Law

Heine and Yates, bank executives, were convicted of conspiracy to commit bank fraud (18 U.S.C. 1349) and 12 counts of making a false bank entry (18 U.S.C. 1005). The government told the jury that the two conspired to deprive the bank of accurate financial information in its records, the defendants’ salaries, and the use of bank funds.The Ninth Circuit vacated. There is no cognizable property interest in the ethereal right to accurate information. Distinguishing between a scheme to obtain a new or higher salary and a scheme to deceive an employer while continuing to draw an existing salary, the court held that the salary-maintenance theory was also legally insufficient. Even assuming the bank-funds theory was valid, the government’s reliance on those theories was not harmless. The court instructed the jury that it could find the defendants guilty of making false entries as co-conspirators, so the court also vacated the false-entry convictions. The court noted that insufficient evidence supported certain false entry convictions. View "United States v. Yates" on Justia Law

The City of Oakland sued under the Fair Housing Act, claiming that Wells Fargo’s discriminatory lending practices caused higher default rates, which triggered higher foreclosure rates that drove down the assessed value of properties, ultimately resulting in lost property tax revenue and increased municipal expenditures. In 2020, the Ninth Circuit affirmed the denial of Wells Fargo's motion to dismiss claims for lost property-tax revenues and affirmed the dismissal of Oakland's claims for increased municipal expenses.On rehearing, en banc, the Ninth Circuit concluded that all of the claims should be dismissed. Under the Supreme Court’s 2017 holding, Bank of America Corp. v. City of Miami, foreseeability alone is not sufficient to establish proximate cause under the Act; there must be “some direct relation between the injury asserted and the injurious conduct alleged.” The downstream “ripples of harm” from the alleged lending practices were too attenuated and traveled too far beyond the alleged misconduct to establish proximate cause. The Fair Housing Act is not a statute that supports proximate cause for injuries further downstream from the injured borrowers; the extension of proximate cause beyond that first step was not administratively possible and convenient. Oakland also failed sufficiently to plead proximate cause for its increased municipal expenses claim. View "City of Oakland v. Wells Fargo & Co." on Justia Law