"WAMU collapsed in 2008 in the biggest bank failure in American history." FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *2 (S.D. Fla. September 3, 2014). In an action for reimbursement filed by the FDIC as receiver of Washington Mutual Bank, a Federal Court made rulings on the substance and on procedure and evidence that are very much worth noting.
In this action, the FDIC, as receiver for Washington Mutual Bank (“WaMu”), seeks reimbursement from Attorney's Title Insurance Fund (“ATIF”) for WaMu's losses on 14 defaulted residential mortgages. ATIF's agents and authorized attorneys served as closing agent for each of the transactions. The FDIC now asserts that the agent's malfeasance caused WaMu to lend money to unqualified borrowers under false pretenses, and ultimately, causing a loss of more than nine million dollars when the borrowers defaulted and the loans were written down and sold.
FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *1 (S.D. Fla. September 3, 2014).
The action was based on indemnity agreements known in the real estate industry as "Closing Protection Letters" or "CPLs," the Court said:
WaMu and ATIF had a separate indemnity agreement for each closing where ATIF agreed to reimburse WaMu for losses arising out of its closing agent's (a) fraud or dishonesty in handling the bank's funds or closing documents or (b) the agent's failure to follow the bank's closing instructions. These agreements are known in the real estate industry as Closing Protection Letters (“CPL”). As WaMu's receiver after its collapse, the FDIC made claims on each of the CPLs. When ATIF refused to honor them, this action followed.
FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *1 (S.D. Fla. September 3, 2014).
The Court held in this case that for various reasons FDIC's claims on eight of the fourteen indemnity agreements were time-barred. Of the remaining six indemnity agreements and closing transactions, the Court granted summary judgment for the FDIC (read: the FDIC standing in the shoes of WAMU) on all of them. The Court held that in each case, the attorneys-title agents violated WAMU's closing instructions or committed "fraud or dishonesty in handling the bank's funds or closing documents," or both. In one egregious example, the Court noted that an attorney-title agent was supposed "to receive no more than $1,645.00 for performing the closing," but the record reflected to the Court that the attorney's office disbursed $11,905.00 to itself, reflecting in the eyes of the Court that the attorney acted "dishonestly handl[ing] WAMU's funds". FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *14 (S.D. Fla. September 3, 2014).
The total damage award for "which Plaintiff is entitled to summary judgment equals $4,910,973.54," the Court further ruled. FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *15 (S.D. Fla. September 3, 2014).
In addition to its rulings on substance in this opinion, the Court made a procedural ruling and a couple of evidentiary rulings that are well worth noting. Procedurally, the Court observed that when the Plaintiff FDIC filed and supported its motion for summary judgment, it was incumbent on the defendants to come forward with record evidence tending to support their affirmative defenses. At that point, the plaintiff's motion for summary judgment would, unless rebutted, overcome the sufficiency of the defendant's affirmative defenses. That is exactly what happened in this case. The defendant did not come forward with record, admissible evidence in rebuttal of the plaintiff's motion for summary judgment and summary judgment was entered in favor of the plaintiff including in the plaintiff's favor on the defendant's affirmative defenses -- which were not supported by record evidence tending to reflect any genuine issue of material fact. See FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *8 n.8 (S.D. Fla. September 3, 2014).
The two evidentiary rulings to note are that this Court held, first, that when the various attorneys-title agents took the Fifth Amendment and refused to answer a given question on the ground that it might tend to incriminate them, their refusals to answer by "taking the Fifth" raised an evidentiary presumption in this case that in effect the witnesses did not answer because the answers would have been adverse to them. "The Eleventh Circuit recently held that a non-party witness's invocation of the Fifth Amendment in a civil case warrants an adverse inference on a case-by-case basis depending on four, non-exclusive factors.... Accordingly, [a particular non-party witness's] invocation of the Fifth Amendment warrants an adverse inference as to everything pertaining to the transactions about which he refused to answer questions." FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *11 (S.D. Fla. September 3, 2014).
The Court's second noteworthy evidentiary ruling was to allow the admission of a spreadsheet into evidence to reflect the damages claimed by the Plaintiff in this case. The Court followed a Sixth Circuit ruling "in a CPL case that admission of a similar spreadsheet was proper because the source data were business records that were selfauthenticating under Fed. R. Evid. 902(11) and exempted from the prohibition on hearsay under Fed. R. Evid. 803(6)." FDIC v. Attorneys' Title Insurance Fund, Inc., 2014 WL 4384270 *15 n. 19 (S.D. Fla. September 3, 2014).
Holdings from the Financial Fiasco concerning the conduct of attorneys and indemnity for that conduct, and rulings on procedure and evidence: What more can a lawyer or banker want in a case like this one?
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