Citizens Bank Lawsuit

Plaintiffs’ Challenge of Bank of America Reversed

There was an interesting article recently in the Chicago Daily Law Review by attorney Michael J. Webster III concerning Citizens Bank v. RBS, Citizens Bank of America v. N.A. (N.A.). I’d like to comment on this, but first I’d like to ask you a question. If you agree with my comments, please sign up for my email list so that I can send you any new articles I write.

Webster contends that the lawsuit is still pending because plaintiffs have yet to file their complaint. He states: “Plaintiffs did not file their complaint until Jan. 8, the date that the lawsuit was supposedly commenced. Plaintiffs did not direct the defendants to state their claim or admit their errors until after they filed their complaint.”

According to Webster III, “It is ironic that plaintiffs state their class action lawsuit complaint is still pending.” In another article in this series, he goes on to say, “The court did not deny class certification. Rather, the court did not deny classwide certification.”

Webster is correct that a class action lawsuit is not necessarily still pending, but he is incorrect in asserting that the plaintiffs have yet to file their complaint.

The fact is that they have and the court has found that the class is indeed legitimate. The plaintiffs have submitted discovery evidences which are consistent with the facts set forth in their complaint and which reveal conduct by the defendants which support a finding that they engaged in monetary mismanagement. Plaintiffs have not moved for a certificate of class. It is up to the courts, whatever decision they might ultimately make, to certify the class and allow the parties to move forward together toward a just and appropriate resolution of the issues surrounding the claims.

Plaintiffs contend that the Class Certification statute and case law require that they first file their initial class action lawsuit complaint and then wait for a certain amount of time (five days) to receive a certificate of class.

The District Court denied their motion, stating that it was irrelevant whether plaintiffs received a certificate of class or not at the time they filed their complaint. Thereafter, the Court entered what is known as an expedited order. That is, the case was transferred from the District of Columbia to the Federal Circuit, and plaintiffs were directed to submit new amended complaints with amended claims and new deadlines for filing. At this point, it appears that plaintiffs would have been required to again file their original class action lawsuit complaint with the courts.

One issue currently pending before the courts pertains to whether plaintiffs may properly institute a claim for additional capital to remedy their current financial predicament.

In this regard, the parties have filed their answer in opposition, claiming that the District of Columbia’s original ruling granting additional capital to plaintiffs was arbitrary and capricious. Specifically, the question is whether the District of Columbia’s erroneous conclusion that Liberty Capital Group LLC was owed $1.1 million by plaintiffs’ members was designed to benefit defendant Bank of America and improperly awarded to Liberty Capital.

At present, the parties appear to be evenly divided on this question. Moreover, it appears that the District of Columbia is deadlocked on the issue of additional capital, and the Court has yet to rule on the merits.

Assuming that the District Court’s order granting additional capital to Liberty Capital did not properly apply the statute of limitations requirement in Sec. 1366(c) or (d), it is not clear that the Court could have the additional capital. For instance, in both parties’ initial lawsuit, the District Court instructed the parties that Liberty Capital could not raise the amount of the claim beyond “the greater of either its cash or the amount of the net surplus [defendant’s] profits” at the time of the filing of the complaint. Based on that instruction, there is no way for the parties to distinguish between the parties’ claims for additional capital on the basis of the term “net surplus.”

Further, in considering the merits of the lawsuit, the ultimate issue is whether plaintiffs have standing to bring the lawsuit after the date of the order granting additional capital to Bank of America.

The Court’s opinion that plaintiffs have such a basis is clearly wrong in my view. In this case, as in the others before it, Liberty Capital simply did not owe Bank of America any additional funds at all, and did not owe any surplus funds at all. Therefore, there is no reason to hold Liberty accountable for additional losses at the hands of Bank of America – in this case, simply because the bank itself did not advance funds to Liberty Capital and could not make good on that advance when it did. Accordingly, we hold that the lawsuit should be dismissed for lack of subject matter jurisdiction.