Banking Cases to Watch on the Supreme Court's Fall Docket

By Causey, Dawn | ABA Banking Journal, November-December 2015 | Go to article overview

Banking Cases to Watch on the Supreme Court's Fall Docket


Causey, Dawn, ABA Banking Journal


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 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. …

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