Commercial Banking, Collections, and Bankruptcy

Bankruptcy Ct. did not err in denying creditor’s motion for relief of judgment under Rule 9024 that essentially sought to reopen creditor’s adversary proceeding seeking declaration that $400,000 debt was non-dischargeable under 11 USC section 523(a)(2)(A) where debt represented obligation involving fraud upon creditor. While creditor argued that “newly discovered” evidence established that debtor had perjured himself at trial to determine whether debt was dischargeable, Bankruptcy Court could properly find that said evidence was always available through PACER, and thus was not newly discovered evidence for purposes of supporting any revisit of Bankruptcy Ct. order finding that creditor had failed to establish that debtor had misused creditor’s money or had obtained it fraudulently. Also, creditor could not appeal Dist. Ct.’s order dismissing without prejudice creditor’s appeal on merits of Bankruptcy Ct. order finding that said debt was not dischargeable since, although said order was final and appealable despite “without prejudice” notation by Bankruptcy Ct., creditor had failed to file timely notice of notice of appeal from said order. Fact that Bankruptcy Ct. had erroneously dismissed without prejudice creditor’s appeal of merits of section 523(a)(2)(A) issue due to misunderstanding that the creditor’s appeal of denial of his Rule 9024 motion had raised same issues, or that Dist. Ct. had lulled creditor into erroneously believing that he could raise merits of section 523(a)(2)(A) issue in appeal of denial of creditor’s Rule 9024 motion did not require different result.

Dist. Ct. erred in dismissing plaintiffs’ class action alleging that they incurred damages arising out of defendant-book store’s failure to detect third-parties who compromised defendant’s data base that contained plaintiffs’ personal information that caused plaintiffs to temporarily lose use of their funds while waiting for banks to reverse unauthorized charges, as well as force plaintiffs to spend their own time to re-establish accounts with merchants and to spend money on credit-monitoring services. While Dist. Ct. based dismissal on finding that complaint failed to adequately plead damages, plaintiffs’ allegations regarding loss of use of funds, lost time, inability to make purchases using compromised accounts and expenditure of funds to purchase credit-monitoring services were compensable damages under either California or Illinois law. Ct., though, questioned whether plaintiffs could obtain any remedy under either California or Illinois statutes, where neither statute expressly made merchants liable for failure to crime proof their point of sale systems.

Dist. Ct. did not err in dismissing action by plaintiffs-credit card-holders’ banks against defendant-retail merchant who suffered data breach, where plaintiffs that made good on customer claims for fraudulent use of their credit cards stemming from said breach sought damages above and beyond remedies provided to plaintiffs by network of contracts that linked defendant, card-processors, plaintiffs and card brands that enabled electronic card payments. While plaintiffs alleged that they were entitled to assert common law negligence claims, as well as Illinois consumer protection statutes to recover losses not covered by instant contract network, Ct. of Appeals found that plaintiffs were limited to recoveries set forth in instant network of contracts. Fact that plaintiffs had no direct contractual relationship with defendant did not require different result, where plaintiffs and defendant were part of same network of contracts that tied all participants in same card payment system, and where plaintiffs’ participation in network meant that they would incur some risk of not being fully reimbursed for costs associated with another party’s mistake. Also, Ct. found that: (1) Illinois Supreme Ct. would not either impose common law data security duty that plaintiffs would require in instant lawsuit or apply any exception to economic loss rule that would otherwise bar instant recovery; and (2) plaintiffs could not recover under either unjust enrichment, implied contract or third-party beneficiary theories.

Dist. Ct. did not err in dismissing instant action under Real Estate Settlement Procedures Act (Act) arising out of defendant-bank’s alleged failure to send plaintiff timely response to her inquiry regarding the status of her home loan with defendant. Dist. Ct. could properly find that plaintiff could not establish any damages arising out of any non-receipt of information regarding status of her loan, where: (1) plaintiff claimed difficulties that she experienced while attempting to repair her home occurred prior to date she made request for status of her loan; (2) plaintiff’s financial inability to make said repairs were not related to non-receipt of status report, since Act does not require that defendant pay money in response to written request for status; and (3) plaintiff failed to demonstrate how earlier receipt of status report would have helped her.

Dist. Ct. did not err in dismissing on res judicata grounds plaintiffs’ RICO action arising out of defendants’ administration of construction loan agreement that allegedly caused delays in distribution of loan proceeds, where plaintiffs had been losing parties in defendants’ prior state-court foreclosure and loan guaranty actions arising out of said construction loan, as well in plaintiffs’ prior state court fraud and breach of contract actions. All elements of res judicata had been met, where: (1) at time of dismissal there had been final judgments in all prior state-court actions; (2) there had been identity of parties or their privies in said prior actions and in instant federal action; and (3) all state and instant federal actions involved single group of operative facts that formed parallel allegations of misconduct in prior state-court actions and in instant federal action. Fact that plaintiff had unsuccessfully attempted to file instant RICO action in prior state-court proceeding did not preclude application of res judicata, where plaintiffs had failed to comply with timeline to file said action in prior state-court proceeding. Ct. further rejected plaintiffs’ claims that: (1) state-court decision in Wilson, 981 N.E. 2d 971, allowed them to proceed with instant RICO action, even though other theories of relief had been rejected in prior state-court proceedings; and (2) Dist. Ct. had improperly stayed instant case under Colorado River abstention principles so as to allow plaintiffs’ pending appeal in prior state-court action to become final, and then applying res judicata doctrine based, in part, on said final decision.