Claims and Bad Faith Law Blog

LOOK AT THE LENDER, NOT THE CARRIER.

The insurmountable bar of "third-party beneficiary" status in homeowners' actions against force-placed insurance carriers, is obvious now if ever it was in doubt.  These are lawsuits filed by homeowners who are forced to  pay insurance premiums without a corresponding legally recognized right to receive benefits under the policy when there is a loss.

In Zabala v. Integon Nat'l Ins. Co., No. 20-22221-Civ-Scola, 2020 WL 3977380 (S.D. Fla. July 14, 2020), the Court dismissed such a homeowner's complaint with prejudice because the lender and the carrier did not intend to benefit the homeowner when the lender ordered a force-placed insurance policy from the carrier, even though they charged the homeowner for the premiums.

(Parenthetically, Westlaw released the Zabala decision in the middle of September, 2023.)

The Court said that its decision derived in the first place from Florida law, which requires an intent of contracting parties to benefit the party claiming the right to sue as an intended or third-party beneficiary.  Zabala, 2020 WL 3977380, at *2.  This represents the general trend of the federal case law to deny homeowners who are forced to pay insurance premiums the right to sue when the insurance is denied, as was the case for example in Zabala.  See the article posted here on December 7, 2022, for example, WHEN DEFENDANTS, NOT JUDGES, SAY WHO CAN SUE.

In Zabala, as in most of these cases, the judge wrote that the Court's decision was based on the law, although the force-placed insurance policy also declared that the homeowner was not an intended beneficiary.  Zabala, 2020 WL 3977380, at *3. 

The reality is, however, that a lender and an insurance carrier can force a homeowner to pay premiums for an insurance policy that benefits only the lender simply by declaring that they do not intend to benefit the party paying the premiums.

The Zabala Court made this clear when it expressly rejected the homeowner's argument "that he has standing to pursue this action as a third-party beneficiary to protect his own interest as a homeowner for the insured property."  Zabala, 2020 WL 3977380, at *4.  This Southern District of Florida  Court then went on to reject reliance on contrary Middle District of Florida case law as "misplaced."  Moreover, the Middle District cases in question "did not involved policies" like the one at bar, the Zabala Court said.  Zabala, 2020 WL 3977380, at *4. 

That is certainly one view of the situation, and the result in Zabala exemplifies it.  A different view is available, however, which Zabala and its predecessors and progeny have left uncited and untouched.

The different view is the flip-side of the situation exemplified in Zabala where the homeowner sued only the carrier and not the lender.  The difference involves, rather, suing the lender, not the insurance carrier. 

When the lender's alleged failure to include the homeowner on the force-placed insurance policy is alleged as a breach of the lender's fiduciary duty, the homeowner-mortgagor's claims have been allowed:

Instead, the mortgagors alleged that the lender force-placed insurance (LFPI) was objectionable on the basis of two allegations:  (1) they were forced to pay excessive premiums under the  LFPI policy and (2)  the lender failed to include them on the policy.  On these two allegations, they claimed that the lender acted in bad faith and breached fiduciary obligations under Florida law as a result.

The case is Meyer v. Bank of Am., N.A., No. 3:21-cv-1088-HES-JRK, 2022 WL 18492520 (M.D. Fla. Aug. 18, 2022).  This decision and its implications were addressed in an article posted here on February 1, 2023, EXCESSIVE PREMIUMS & NOT INCLUDING MORTGAGORS ON LFPI POLICY:  CLAIMS ALLOWED.

The lesson from the case law is clear, it seems:  Before any lawsuit is filed by or on behalf of a homeowner forced to pay insurance premiums in such situations, look at the lender, rather than at the carrier; look at the mortgage contract rather than the force-placed insurance contract.

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

EXCESSIVE PREMIUMS & NOT INCLUDING MORTGAGORS ON LFPI POLICY: CLAIMS ALLOWED.

 

Mortgagors alleged that their lender placed insurance on their mortgaged property by force after the insurance lapsed that they had agreed in their mortgage agreement to keep in place on the property.  The Court had no problem with this.

The mortgagors alleged that their lender breached their mortgage agreement, apparently not just because the lender force-placed insurance which, as the Court noted, the lender had a right to do under the circumstances.

Instead, the mortgagors alleged that the lender force-placed insurance (LFPI) was objectionable on the basis of two allegations:  (1) they were forced to pay excessive premiums under the  LFPI policy and (2)  the lender failed to include them on the policy.  On these two allegations, they claimed that the lender acted in bad faith and breached fiduciary obligations under Florida law as a result.

In an opinion that is published at less than one page in Westlaw, the Court agreed.  The lender's motion to dismiss was denied.

The case has just been reported on Westlaw.  It is Meyer v. Bank of Am., N.A., No. 3:21-cv-1088-HES-JRK, 2022 WL 18492520 (M.D. Fla. Aug. 18, 2022).

Please read the disclaimer.  ©2023 Dennis J. Wall.  All rights reserved.

GOOD HEAVENS, BEING A CAPTIVE DOES NOT MEAN BAD FAITH!

In  Episcopal Church in S.C. v. Church Ins. Co. of Vt., ___ F.3d ___, No. 20-1143, 2021 WL 1823279 (4th Cir. May 7, 2021), the Fourth Circuit Court of Appeals affirmed a District Court's ruling rejecting the standing of the Episcopal Church to sue its captive insurance company.

  Central to this decision is the Court's clear definition of "captive insurance companies":

Captive insurance companies operate just like ordinary insurers in nearly every respect. However, their distinguishing feature—what makes them “captive”—is that they may only cover the risks of their parent companies and related entities.

Episcopal South Carolina Church, 2021 WL 1823279, at *1.

Church Insurance Company of Vermont is the captive insurance company of the Mother Episcopal Church and it provides coverage for a number of parishes that broke away and formed their own, new Episcopal Diocese of South Carolina (known to the Court in this case as "the Disassociated Parishes").  This insurance company  is "wholly owned by the Church Pension Fund, a freestanding nonprofit affiliated with the Mother Church."  Episcopal South Carolina Church, 2021 WL 1823279, at *1.

         As a result of its coverage duties to the breakaway Episcopalian parishes who held certificates, i.e., policies of insurance which the Church Insurance Company had issued, the Church Insurance Company reimbursed some of the defense fees of the breakaway Episcopalians.  Since it was doing its duties under the policies (certificates) of insurance it issued including to the breakaways, the Mother Church (the original Episcopal Diocese of South Carolina) has no standing to sue the carrier for the claims it alleged against the carrier for breach of contract, bad faith and unfair dealing, or breach of fiduciary duty and aiding and abetting breach of fiduciary duty, the Federal Courts in South Carolina held.

    Sometimes it pays for a captive to be independent, after all.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

"THOSE WHO HAVE EARS TO HEAR, LET THEM HEAR."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books. This will be the second of two posted articles addressing these answers. The first article was posted here on Tuesday, December 3, 2019.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions. Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman. Both of them were physically injured in a motor vehicle accident. Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers. Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.  The first question, the one posed by the claims of Krista Peoples' class, were discussed here on Tuesday, December 3, 2019.

    Joel Stedman presented the second question.  He alleged that his insurance carrier, Progressive, impermissibly interjected a condition into the statutorily required availability of Personal Injury Protection (PIP) benefits.  This issue has reverberations beyond the boundaries of the State of Washington.

    In Washington State, as in most States, PIP benefits are required to be provided in policies like Stedman's.  The condition challenged in Stedman's action was Progressive's termination of required benefits whenever a claimant reached "Maximum Medical Improvement," or MMI, which it determined.  MMI is not a limitation authorized by the PIP Statute on the receipt or payment of PIP benefits.

    In Stedman's case, filed as a class action, Stedman alleged "that by terminating benefits on the basis of 'Maximum Medical Improvement,' Progressive routinely fails to pay all reasonable medical expenses for treating an insured’s injuries arising from a covered event, in violation of" Washington State Statutes.  Peoples, 2019 WL 6336407, at *1, ¶ 4.

    The Federal judge certified the question whether Progressive's reliance on MMI to terminate PIP benefits satisfied the Consumer Protection Act requirement of an injury to business or property, where an insured like Mr. Stedman was physically injured in a motor vehicle accident and whose PIP benefits were terminated.

    The Washington Supreme Court's short answer is "yes," such claims satisfy the requirement of an injury to business or property.  The Court's reasoning was applied both to the Joel Stedman class claims and to the Krista Peoples class claims discussed in this space on Tuesday, December 3, 2019:

[T]he plaintiffs here do not allege the defendants caused their personal injuries. Their CPA suits do not seek to vindicate their right to be free of bodily harm but, rather, their property interest in the benefits they bargained for in their insurance contracts. When parties enter an insurance contract, the insured obtains a legal right to benefits upon the happening of a particular event. [Citation omitted.]  An insurance contract also gives rise to a quasi-fiduciary relationship between the parties, which requires them to deal in good faith. [Citation omitted.]  An insured, therefore, has a legally protected property interest in benefits due under the contract and a related right to insurance dealings free from bad faith. Claims mishandling and wrongful denial of benefits invade this property interest, regardless of the type of event that triggers coverage.

Peoples, 2019 WL 6336407, at *4, ¶ 12.

    After placing its reasoning in a place where causation of the alleged Consumer Protection Act damages is not a part of the equation at hand, i.e., "regardless of the type of event that triggers coverage," the Court turned its attention to the question of recoverable damages for the alleged injury in fact.

    Stedman and his class sought "to recover excess premiums paid for the PIP coverage," together with "the costs of investigating the unfair acts, and/or the time lost complying with the insurer's unauthorized demands[.]"  Peoples, 2019 WL 6336407, at *2, ¶ 5.  The Washington Supreme Court unanimously spent very little time on the issue of damages recoverable by the Stedman class.

    To begin with, the Supreme Court declined to reach "the portion of the question that asks about excess premiums."  The Court devoted a footnote to Peoples' -- not Stedman's -- use of the phrase as "an alternative way of characterizing unpaid benefits."  Accordingly, in the Court's view, "it is unnecessary to address Peoples' alternative theory about 'excess premiums.'"  Peoples, 2019 WL 6336407, at *4, n.2.  What was good for the Peoples was good for Stedman, too, as the Court declined to address the issue of recovery of any "excess premiums" for unpaid PIP coverage.

    With respect to Stedman's remaining alleged damages, "the costs of investigating the unfair acts" and "the time lost complying with the insurer's unauthorized demands," the Supreme Court answered succinctly that "when a CPA claim is predicated on an insurer’s mishandling of a PIP claim, ordinary CPA principles govern whether investigation costs or time lost are injuries to business or property."   Peoples, 2019 WL 6336407, at *4, ¶ 14.  In answering the questions certified by the Federal court, the Washington State Supreme Court felt no compulsion to hold further whether the actual damages alleged by the Stedman class would if proven be recoverable under the Consumer Protection Act, but it did offer guidance from Washington State case law.

    The Court pointed to its own precedents to note that "we have we have continued to recognize that expenses incurred to investigate a deceptive act or practice are cognizable injuries and damages under the CPA."  Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court then turned to precedent from the Washington lower courts concerning the allegation of lost time as a recoverable item of damage under the CPA.  "The Court of Appeals has also held that taking time away from business to respond to unfair practices may satisfy the injury requirement." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    The Court was satisfied that this was all the guidance that litigants would need in cases like the present one:  "The principles articulated in these cases apply when a CPA claim is predicated on an insurer’s mishandling of a PIP claim." Peoples, 2019 WL 6336407, at *4, ¶ 14.

    To summarize what was summarized before, the key issue in the Peoples case was standing to sue.  The key to resolving the standing issue, in turn, was that the alleged 'injury to business or property' in both the Peoples' claims and the Stedman claims was "the deprivation of contracted-for insurance benefits." That was their injury. That conferred their standing to sue.

Please Read The Disclaimer. ©2019 Dennis J. Wall.  All Rights Reserved.

"THOSE WHO HAVE EYES TO SEE, LET THEM SEE."

In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books.  This will be the first of two posted articles addressing these answers.  The second article will be posted here later.

    In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions.  Both were certified by a U.S. District Court for answers under Washington State law.

    The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman.  Both of them were physically injured in a motor vehicle accident.   Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers.  Both of them were denied PIP benefits.

    Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.

    That is where the questions posed by their separate claims diverged.

    Krista Peoples presented the first question.  She alleged that USAA routinely denied PIP claims based on a "practice of algorithmic review[.]"  Peoples, 2019 WL 6336407, at *1, ¶ 3:

    Specifically, Peoples alleges that USAA refuses, without any individualized assessment, to pay medical provider bills whenever a computerized review process determines that the bill exceeds a predetermined limit. According to Peoples, USAA’s failure to investigate or make an individualized determination regarding the reasonableness or necessity of a provider’s charges before denying payment[.]

Peoples's claim was alleged as a class action.  But that was not important to the outcome of her question.  She and the class prayed for "actual damages, including unpaid medical bills and expenses incurred to investigate USAA's wrongful conduct." Peoples, 2019 WL 6336407, at *1, ¶ 3.

    But Peoples and the class emphatically did not sue for their personal injuries incurred in the accident.  Nor did they sue simply because the benefits for which they contracted related to payment of treatment for their personal injuries.

    Rather, they sued because they were deprived of contract benefits, the benefits of statutorily required PIP coverage.  That was their alleged injury to property or business, and that is what conferred standing upon them to sue under the Washington State Consumer Protection Act.

    Stripped to its simplest elements, their question was whether "the wrongful denial of PIP benefits is an injury to 'business or property' under" the CPA.  It bears repeating that "they seek to hold their insurance companies liable for benefits owed under contract. We conclude that the deprivation of contracted-for insurance benefits is an injury to 'business or property'” and that the type of contracted-for insurance benefits does not matter.  Peoples, 2019 WL 6336407, at *3, ¶ 9.

    Beyond contracted-for insurance benefits, the Court answered that policyholders also have "a related right to insurance dealings free from bad faith," that this "protected property interest" is invaded by "[c]laims handling and wrongful denial of benefits, ... regardless of the type of event that triggers coverage." Peoples, 2019 WL 6336407, at *4, ¶ 12.

    In other words, the "algorithmic review" challenged by Krista Peoples and her class may have been the alleged cause of contract benefits being denied here, but it was the wrongful denial of benefits that was important to the outcome.  What was important to the Supreme Court in this decision was the result and not the cause. 

    For all these reasons, the Washington Supreme Court's answer to the Krista Peoples's certified question was in the affirmative:

Therefore, to the extent proved, the plaintiffs may recover actual damages, including out-of-pocket medical expenses that should have been covered, and can seek injunctive relief to compel the payment of benefits to medical providers.

Peoples, 2019 WL 6336407, at *4, ¶ 13.

    To summarize, the key to alleged 'injury to business or property' in the Peoples' class claims was "the deprivation of contracted-for insurance benefits."  That was their injury.  That conferred their standing to sue.

In the next article arising from the Peoples case, the second certified question will be addressed along with the question of whether "injuries to business or property" can ever include "investigative costs or time lost."

Please Read The Disclaimer.   ©2019 Dennis J. Wall.  All Rights Reserved.

JPMORGAN, NIGERIA'S MONEY, LONDON LAWSUIT. BAD FAITH? NOT APRIL FOOL'S!

A British case raises an intriguing question for American insurance bad faith litigation.

Under British law, a bank has a duty to act in the best interests of its customers.  The Nigerian government is suing JPMorgan Chase on the ground that the bank allegedly obeyed the instructions of corrupt former officials to transfer some $900 Million to them from a Nigerian government bank account maintained at JPMorgan Chase in London.  The Nigerian government is of the opinion that this was against the best interests of the bank's customers, the people of Nigeria.

JPMorgan Chase is defending this complicated case on many grounds.  One of its defenses raises the intriguing question that may have some resonance in American insurance bad faith lawsuits:  JPMorgan Chase is defending on the basis that its contract setting up the Nigerian government account provided that JPMorgan Chase could act against the best interests of the bank's customers, the people of Nigeria.

Does this mean that an insurance carrier in the United States could insert a provision in its insurance policy that, effectively, it could act in bad faith and deal unfairly with its insureds?

Well, returning to the lawsuit in the U.K. for a moment, the British judge so far is allowing the Nigerian government's lawsuit to proceed against JPMorgan Chase.  Its contract provision has not prevented that, at least so far.  See Emily Flitter, Nigeria Sues JPMorgan to Recoup $900 Billion, New York Times, Monday, April 1, 2019, p. B1 (no online version found; when posted online the New York Times may charge for online access to this article).

As for the question of an American insurance carrier inserting a provision in its insurance policy to disavow any duty of good faith and fair dealing, there is some authority on that.  We will take a look in future articles posted here.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

FOLLOW THE MONEY 2018.

This is what follow the money looks like in 2018.

Hurricanes are coming to the United States from the East and from the West, from the Atlantic and from the Pacific.  One of those storms, Florence, is about to strike the Carolinas and Virginia, the federal government is pretty certain.  (Many other people are certain, too, but this is a tale of how the federal government spends our money in 2018.)

The coming of hurricanes means that the Federal Emergency Management Administration (FEMA), the United States Coast Guard, and other agencies will have a lot to do to save lives and protect property.

With hurricanes on the horizon, the federal government's Department of Homeland Security has secretly taken some $10 Million from FEMA.

They have surreptitiously taken $29 Million from the Coast Guard.

All told, without any public announcement they have reportedly taken $200 Million from other agencies to build prison camps for immigrant children and their families.

Saving lives and protecting property vs. prisons for children.

What sort of people would choose building prisons in the face of hurricanes?

Follow the money.  The answer is at the end of the rainbow, where we always heard it would be.

See, e.g., Isaac Stanley-Becker, "Trump Administration Diverted Nearly $10 Million From FEMA to ICE Detention Program, According to DHS Document" (Washington Post Online, posted on Wednesday, September 12, 2018).   "This is nothing to play with."  That is how the coming of Hurricane Florence was reportedly described by William "Brock" Long, the current FEMA Administrator, quoted in Reis Thebault, "'Nothing to Play With:'  FEMA Chief's Hurricane Florence Alarm Draws on Vivid Memories of Hugo" (Washington Post Online, posted on Tuesday, September 11, 2018).

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

HOLDING INSURANCE AGENTS "FIDUCIARIES" IS AGAINST THE LAW, JUDGE DECLARES.

In an opinion written by the Hon. Edith Jones, a panel of the federal Fifth Circuit declared that it is against the law to hold insurance agents to be "fiduciaries."  That is just too far to go interpreting the Employee Retirement Income Security Act, the opinion declared.

The opinion was officially released on March 15, 2018.  The consolidated case was CHAMBER OF COMMERCE OF the UNITED STATES OF AMERICA; Financial Services Institute, Incorporated; Financial Services Roundtable; Greater Irving-Las Colinas Chamber of Commerce; Humble Area Chamber of Commerce, doing business as Lake Houston Chamber of Commerce; Insured Retirement Institute; Lubbock Chamber of Commerce; Securities Industry and Financial Markets Association; Texas Association of Business, American Council of Life Insurers; National Association of Insurance and Financial Advisors; National Association of Insurance and Financial Advisors—Texas; National Association of Insurance and Financial Advisors—Amarillo; National Association of Insurance and Financial Advisors—Dallas; National Association of Insurance and Financial Advisors—Fort Worth; National Association of Insurance and Financial Advisors—Great Southwest; National Association of Insurance and Financial Advisors—Wichita Falls; Indexed Annuity Leadership Council; Life Insurance Company of the Southwest; American Equity Investment Life Insurance Company; Midland National Life Insurance Company; North American Company for Life and Health Insurance, Plaintiffs–Appellants

v.

UNITED STATES DEPARTMENT OF LABOR; R. Alexander Acosta, Secretary, U.S. Department of Labor, Defendants–Appellees,

reported at 885 F.3d 360 (5th Cir. 2018).

Please Read The Disclaimer.  © 2018 Dennis J. Wall.  All Rights Reserved.

TOO MANY HATS UNDER THE ARIZONA SUN, TOO LITTLE COVERAGE.

A mortgage broker's errors and omissions (E&O) policy did not provide coverage as interpreted under Arizona law in 11333 Incorporated v. Certain Underwriters at Lloyd's, London, ___ F. Supp. 3d ___, No. CV–14–02001–PHX–NVW, 2017 WL 2556755 (D. Ariz. June 13, 2017), appeal docketed, No. 17-16331 (9th Cir. June 28, 2017).

The coverage claim in this case was based on a bank's losses from a defaulted mortgage.  The mortgage broker was the policyholder of the E&O Policy.  The broker claimed that its E&O policy covered it for the alleged losses of its client, the lender.  The lender's losses in particular were allegedly caused by the broker's failure to secure fire or flood insurance coverage for property that a borrower put up as collateral for the mortgage loan when the borrower defaulted and the lender foreclosed.  Parenthetically, the amount of the mortgage loan was $18 Million and the borrower was a subdivision land developer. 

In that case, the broker was not merely wearing the hat of a mortgage broker, but it also put on the hat of a mortgage servicing agent for the loan and it put on the additional hat of a legal fiduciary as manager of the same lender's assets generally.  There was apparently a strong relationship between this particular mortgage lender and this particular mortgage broker-servicer-fiduciary.

However, the Insuring Agreement of the insurance policy in question provided coverage only for “[l]oss to the Insured's Mortgagee interest or Owner interest, including when acting as a mortgage servicing agent or in a legal fiduciary capacity, in real property[.]”   Although there was certainly a "loss" in the sense that the borrower had previously defaulted on the mortgage and the lender had previously foreclosed on the collateralized property, the mortgage broker was the "Insured" under this policy and the mortgage broker did not have a mortgagee or ownership interest in property so that the "loss" was not a covered loss under this policy language.

Moreover, the mortgage broker's client, the lender who suffered the alleged loss, was not named as an additional insured in the E&O policy.  In this case, the Court pointed out, only the lender had a mortgagee's interest while the mortgage was in place and only the lender (through a subsidiary it invented) had an ownership interest when it foreclosed.  At no time did the broker have either a "mortgagee interest or an owner interest."

Judgment against the mortgage broker:  No E&O coverage under this policy.

Dennis Wall is at work on a book about concealed evidence and secret settlements that take our money, foreclose on our homes, and change our lives.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

CLAWBACKS AND THE LAW OF LIABILITY FOR BREACH OF DUTY.

Part Two.

Want to change the "clawback" policies of corporations in which you or your clients hold shares?

This year, both Verizon and Caterpillar are putting shareholder proxy proposals to a vote that would write new rules.  Apparently many corporate executives and their boards of directors have had a problem writing rules on this subject for at least the past 7 years.  This year, many shareholders at many corporations again take the rule-writing pens into their own hands, so to speak.  This year's shareholder proposals at Verizon and Caterpillar, for example, would expand the potential for recovering money back from executives who allegedly cost the company money or weaken the value of your shares.

Want to know when and why the boards of directors at corporations in which you or your clients hold shares, either pursue recoupment or decline to get the corporation's money back from executives?

This year, shareholders have proposed that Verizon "must disclose details of any clawbacks to shareholders as well as decisions not to pursue recoveries."

Want to make your views known even if you hold stocks only through mutual funds who vote your shares?

[W]rite to the fund's executives and tell them how you want them to vote your shares.  They may not do as you say, but at least they'll know where you stand.

 Gretchen Morgenson, "Fair Game / Shareholder Proxies Could be the New Regulators" (New York Times Online, posted on Friday, March 24, 2017) (online at www.nytimes.com, subscription may be required).

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

Related articles

Mutual Funds' Fiduciary Issues for Investors, Investments.

Enforcing Directors' Duties of Communication: Fiduciary Law Can Provide Means.

Insurance Claims and Bad Faith Law Blog: CLAWBACKS AND THE LAW OF LIABILITY FOR BREACH OF DUTY.

CLAWBACKS AND THE LAW OF LIABILITY FOR BREACH OF DUTY.

PART ONE.

"Clawbacks" is another word to describe recouping executive pay.  The ability to take some of the executives' pay package back to the bank accounts of the corporation and its shareholders is very limited, however.  Basically clawbacks are only possible because of misuse of corporate funds or other improper activities of corporate executives that hurt the bottom line and so reduce shareholder value.

As anyone knows who follows excuses for corporate behavior in the 21st Century, the bottom line and shareholder value are the only goals corporate executives say they pursue.

Except when they don't.  When corporate executives act for their own interests at the expense of the corporation and the corporation's shareholders, then and only then do clawbacks become possible.

At one large company, shareholders want to change the current recoupment standard from just "'willful misconduct' that causes significant financial or reputational harm to the company."  They want to "also cover wrongdoing that arose because of negligence or a supervisory failure."  See Gretchen Morgenson, "Fair Game / Shareholder Proxies Could be the New Regulators" (New York Times Online, posted on Friday, March 24, 2017), available through www.nytimes.com (subscription may be required).

So, the key is tangible, real damage to the corporation's coffers and to the value of its shares.  Yet, companies reportedly oppose shareholder proxies like this one as a general rule.  Presumably, when it is reported that "companies" generally oppose these shareholder proxies, the reporting really means the boards of directors or perhaps smaller units of the boards such as compensation committees.

Yet directors have fiduciary duties toward the corporation and arguably to the corporation's shareholders.  Their duties include a duty of loyalty and a duty to avoid self-dealing, among other duties.  If it is a fiduciary breach or other breach of duty for a director to oppose shareholder proxies like these, is the directors' opposition covered by insurance?

We are talking after all about shareholder proxies that are proposed to make it easier to recoup money for the corporation and its shareholders.  It may be inconvenient for wayward directors or officers to pay money for their alleged breaches of duties, but would any such alleged breaches be covered by insurance?  D&O coverages, paid for by the shareholders, perhaps?

It seems that there is a pretty clear argument that it is a breach of duty to oppose shareholder proxies which, if adopted, could only benefit the corporations and their shareholders while at the same time adversely affecting only the directors and officers themselves.

Do you think differently?

To be continued ....

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.  

Related articles

Mutual Funds' Fiduciary Issues for Investors, Investments.

Enforcing Directors' Duties of Communication: Fiduciary Law Can Provide Means.

Orwellian Fiduciaries.

STAY! HOW JUDGES JUDGE, A CASE EXAMPLE FROM NORTHERN CALIFORNIA.

An officially unpublished opinion issued by the Northern District of California offers a case study in how judges judge.  And so the opinion offers a case study in how successful practitioners practice.

According to Westlaw and Keycite, the decision is not cited by any other court in any other case.  Officially unreported and uncited.  A perfect example for our case study of a decision which nobody but the parties and their lawyers were watching.  We may be the only other people to review this decision.  The lessons it offers to practitioners are potentially priceless.

The District Judge in Perryman v. Litton Loan Servicing, LP, No. 14-cv-02261-JST, 2016 WL 1258584 (N.D. Cal. March 30, 2016) clearly followed established law in this opinion.  The judge's decision addressed Southwest Business Corporation's (SWBC's ) motion to stay a "putative class action" presenting lender force-placed insurance (LFPI) practices claims under a Second Amended Complaint.  Parenthetically, the court does not mention it in this opinion, but LFPI claims typically include alleged breaches of contract, breaches of fiduciary duties, and alleged "bad faith" claims usually including alleged breaches of the implied covenant of good faith and fair dealing.  So, SWBC's motion to stay the entire case may fairly be taken as a motion to stay these claims against all the defendants involved in the alleged practices involving insurance that was force-placed by a lender on a homeowner in this case.

SWBC filed motions to dismiss the original complaint and the First Amended Complaint before the Second Amended Complaint was filed.  Both previous times, the court granted SWBC's motion to dismiss.  Instead of filing a motion to dismiss the Second Amended Complaint, however, this time SWBC departed from its winning track record to file instead a motion to stay the entire case.

The judge approached SWBC's motion to stay with settled principles of law.  A motion to stay a case is discretionary with the trial judge.  As the court in this case summarized the law of stays, she or he is supposed to weigh the equities in the balance, evaluating the hardships on the party opposing the stay and on the party requesting the stay, and whether a stay would "simplify or complicate" the probable "issues, proof, and questions of law" that would result from a stay.  Perryman v. Litton Loan Servicing, LP, No. 14-cv-02261-JST, 2016 WL 1258584, at *1 (N.D. Cal. March 30, 2016).  This last factor seems to mean, in reality, whether the court as well as the parties would be prejudiced.

So, there's the background of deciding a motion to stay a case.  Here is how the district judge decided the motion in this particular case.  Unreported, uncited, yet available to the public.  But now, perhaps, more available to the public than ever before.

By examining the four factors of discretion which this District Judge wrote about in deciding a motion to stay a case, I do not mean to suggest in any way that the judge's conclusions were wrong.  As for the particular decision in this case, right or wrong the judge's conclusions govern the outcome of course.  I mean rather to take a look at the different factors involved from a distance, so to speak.  It may be that in other cases, perhaps in the same jurisdiction or perhaps even on the docket of the same judge, other answers may be suggested.

1. "First, it is unclear to the Court how Plaintiff will be prejudiced by a stay." It is true that weighing a court's discretion whether to grant a motion to stay an action involves considering hardship to the party opposing the motion if the case was stayed.  That certainly appears to be the governing law in the Circuit where this case was decided.  The District Judge was following that law in this case.

However, is that the right question?  Shouldn't the question be instead whether the party requesting a stay has shown good cause for getting one? 

In some sense, every case can be stayed because a plaintiff will hardly ever be in a position to prove that it would "not be prejudiced" if its claims were stayed.  Except of course that the claims would never see a courtroom if this reasoning were carried to that extreme.

2. "Second, continuing this action against SWBC solely because Plaintiff wishes to obtain discovery from SWBC regarding another defendant would prejudice SWBC by requiring SWBC to devote resources to respond to plaintiff's discovery requests, which resources SWBC would otherwise not be required to devote."

The plaintiff opposed SWBC's motion to stay her entire LFPI practices case because the claims she alleged included claims she presented in that case against one Litton Loan Servicing, LP.  She pointed out that Litton "'is not a party'" to either one of two settlement agreements, one in New York and one in Florida, which SWBC urged as reasons for a stay of this case in California.  The effect of granting SWBC's motion to stay the case in California on the basis of two cases in other jurisdictions which did not involve Litton, would mean that the plaintiff's claims against Litton would not be subject to discovery.  Instead, they would be deferred in the California case.   Even though Litton was not a party to either one of the settlements pending in New York and in Florida at the time.

Note that it was SWBC, not Litton, that filed a motion to stay the Second Amended Complaint in California.

With all respect, "devotion of resources" to respond to discovery requests seems like a lame justification, on the face of it, to stay an entire case.  Candidly, every civil case involves the prospect of "devoting resources" to discovery, yet that is not a good reason to dismantle any case.  It ought not to be a reason to support a stay of any case, either.

Finally, why do you suppose that SWBC changed its winning ways from successfully filing motions to dismiss the LFPI claims against it in this case, to filing instead a motion to stay?  The difference of course is that if SWBC prevailed on yet another motion to dismiss the LFPI claims alleged against it, then in that event SWBC would be dismissed (perhaps, this time, with prejudice) but Litton Servicing would remain in the case.

On the other hand, after SWBC's motion to stay the case including against Litton was granted, the claims against Litton theoretically were still in place but they were going nowhere.  One wonders why the result of a motion for stay was "better" for SWBC than being dismissed from the California case yet again, perhaps this time with prejudice.

3. "Third, as Plaintiff herself admits, 'it would be inefficient to continue this litigation against [SWBC] pending the resolution of settlement proceedings'" in the cases in New York and Florida.

Perhaps this statement was taken out of context a little.  Or perhaps I misunderstand it.  If I understand it correctly, what the Plaintiff was saying is that it would be inefficient to grant the stay motion, effectively granting a continuance in the case, and not that it would be inefficient to deny the stay motion.

The court quoted another statement of the Plaintiff in a footnote:  "While 'Plaintiff does not concede that SWBC is released under the [Florida] settlement[,] ... for the purposes of this motion, Plaintiff does not oppose staying this case as to SWBC (with the exception of discovery relevant to Litton)....'"  Perryman v. Litton Loan Servicing, LP, No. 14-cv-02261-JST, 2016 WL 1258584, at *2 n.1 (N.D. Cal. March 30, 2016).

This further statement may present a cautionary tale to practitioners.  The Plaintiff's attorneys were clearly attempting to offer a compromise in making this statement, yet this attempt may have been viewed instead as an "admission."

4. "Finally, as SWBC notes in its motion, 'if a legitimate need for discovery arises in the future ... [the Plaintiff] is free to present good cause to the Court for relief from the stay.'"

It is legitimate to ask, it seems, why should the party opposing a stay in the first place, be required as a matter of law to "present good cause" to lift the stay in the future?  Why should not the burden of proof, if proof is indeed involved, not be placed on the party that sought the stay in the first place, to keep it in place, as a matter of law?

The fact is, of course, that in this case as in many cases, practitioners will note how judges may judge, and therefore how practitioners may successfully practice.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall.  All Rights Reserved.

ERISA IMMUNITY FOR TEXAS OIL AGAINST SPOUSE'S UNCOVERED DEATH.

Kenneth Lindsay's wife died.  Her name was Linda.  Lindsay made a claim on what he thought was a life and accidental death and dismemberment insurance policy maintained and administered by his oil company employer.

The insurance carrier denied Lindsay's claim.  It seems that the oil company employer allegedly let the policy lapse.  So there was no coverage to help Kenneth pay his wife's death bills.

Mr. Lindsay sued his employer in Texas State court, alleging breach of fiduciary duties among other things for missing the renewal date and so not keeping the policy in force.  The Texas oil company removed the Texas case to federal court.  Mr. Lindsay filed a motion to remand back to Texas State court where he filed his claim.

The federal judge denied Lindsay's motion and, despite huge federal court dockets, kept this case on its docket in an order that illustrates the adage, "Timing is everything."  The order was entered two days before Christmas.  ERISA provided the immunity that could not be denied in this case:  Lindsay v. Logan Oil Tools, Inc., No. H–16–3010, 2016 WL 7426404 (S.D. Tex. December 23, 2016).

For more on many aspects of ERISA, see the coverage given to it by the Health Affairs Blog at www.healthaffairs.org.  See also this informative and well-researched blog post by Matthew H. Hawes and Patrick Rehfield, "Fiduciary Risk in Data Privacy and Cybersecurity?  You Bet!" (April 7, 2016).  The article by Hawes and Rehfield explores fiduciary risk under ERISA, in part.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall.  All Rights Reserved.

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IDAHO: ASK NICE, BEFORE BANK GIVES AWAY YOUR INSURANCE MONEY.

 

Image courtesy of New York Public Library.

In Idaho, a bank which gave a homeowner's insurance payout without looking to a contractor for allegedly shoddy work, was held not to have control over the payout it made.  Aliens made them do it, do you think, is that why they did not have "control?"

The "deed of trust" or mortgage which the bank received from the homeowners contained a standard provision allowing the bank to inspect the state of construction during "restoration and repairs."  So, was the bank prevented from having "control" over the insurance proceeds during the repairs and restoration period, which was when it paid out the money without an inspection in this case?

No, said the Idaho Supreme Court, the bank did not have control over that money because the homeowner did not ask the bank to inspect the work it paid for, before the bank paid for it.

And since the homeowner was at fault because the homeowner did not ask, the bank was not in control of the insurance proceeds as the loss payee when the homeowner's house burned down.

I’m not making this up, as they say.  See Skinner v. U.S. Bank Home Mortgage, No. 42065, 2016 WL 275312 (Idaho Jan. 22, 2016).

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

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RETIREMENT FIDUCIARIES BREACH BY INVESTING YOUR MONEY WITH HEDGE FUNDS?

Image by Shepard's/McGraw-Hill.

What kind of E&O coverage might they have?

Christopher M. Sulyma filed a lawsuit because his 401(k) was being invested in "hedge funds and private equity".  He sued his employer, Intel Corporation, and its board of directors alleging that when they invested his 401(k) in "hedge funds, private equity portfolios and commodities," they breached their fiduciary duties in managing his money in his retirement plan.  Mr. Sulyma's lawsuit was filed recently, so we do not have much of a record at this time.  Previous lawsuits filed over 401(k) investing represent "an increasingly successful line of actions brought against companies offering 401(k) plans to their workers."  The new wrinkle presented by Mr. Suylma's lawsuit is reportedly because "[a]t its heart is this question:

Should hedge funds, private equity portfolios and commodities be anywhere near a 401(k) plan?

See Gretchen Morgenson, "Business Day / Fair Game / Intel Lawsuit Questions Place of Hedge Funds in Retirement Plans" (New York Times Online, posted November 20, 2015).

Other questions arise, questions which all have implications for the kinds of insurance that Directors and Officers and 401(k) investors and managers might buy, if they need to buy any:

• What is the status of claims against people responsible for investing public employees' pension funds in hedge funds?
• What is the standard of liability, if any, which such people must meet while investing public pension funds? Fiduciary?  Negligence?  Any?
• Do they succeed in claiming immunity from liability, these investors of other people's pension money in hedge funds?

I looked and found the Sulyma lawsuit style, Case Number, and Court.  The lawsuit is Sulyma v. Intel, Case No. 5:15-cv-049777, Northern District of California.  I plan to follow it.  I will let you know what happens as it happens in that case (more or less).

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements).  All rights reserved. Here is a Podcast on Thomson Reuters Legal Currents of the Author reading excerpts from "Litigation and Prevention of Insurer Bad Faith".  In it is a link to a YouTube video and 68 Powerpoint slides on "Lender Force-Placed Insurance Practices" and links to handouts of the Sections of the Book which are featured on the Podcast.

PENSION FUNDS, HEDGE FUNDS: IS ANYONE AWAKE AT THE SWITCH?

 

Image provided by NASA.

The recent economic catastrophe which has come to be called the Great Recession by some of us, is still with many of us.  Before and during the Great Recession, local government bodies (known collectively as "munis") lost a lot of taxpayer money by making poorly understood investments.  Right after the Great Recession began, a wise observer of investing habits by poorly trained municipal employees who were given the unenviable task of making money in a financial market without any experience in it, made this critical observation of how exotic investment schemes came to be sold to munis by what can only be called predator investors:

If it is too complicated for most of us to understand in 10 to 15 minutes, then we probably shouldn't be doing it.

Christopher Whalen of Institutional Risk Analytics, quoted in "Sunday Business" Section of New York Times National Edition on Sunday, March 23, 2008 and in 1 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith, § 3:109 "The New 'Credit Insurance?'?  Credit Default Swaps" (3d ed. Thomson Reuters West in Two Volumes, with 2015 Supplements).

Times may have changed but practices have not, it seems.  Another report in the "Sunday Business" Section of the New York Times seven-and-one-half years later addresses similar investing practices by pension funds holding the pension money of muni public employees:

The [hedge fund] manager is being paid upfront 2 percent with certainty, and the client is given 80 percent of the net return, after the fact, with uncertainty.  I think it's unconscionable in the context of taxpayers who get to foot the bill if something goes wrong.

Howard Crane, a former trustee of the Colorado Public Employees' Retirement Association, quoted by Gretchen Morgenson, "Fair Game / A Sales Pitch Casts a Spell on Pensions," p. 1, col. 1 ("Sunday Business" Section of New York Times Nat'l ed., Sunday, November 8, 2015).

The report is not limited to one size of pension fund or one area of the country, mentioning instead a wide variety of funds which have experienced the same deeply disappointing results.  The funds mentioned in the report include:

• The Kentucky Retirement System.
• The Teacher Retirement System of Texas.
• The Employees' Retirement System of Rhode Island.

These widely separated pension funds actually have many things in common, as it turns out:

• The pension funds have chosen to invest their pension money with hedge funds.
• The hedge funds have worse returns and higher expenses than the market as a whole, including the reported results of market performance studies by the Office of the Utah Legislative Auditor General and by the American Federation of Teachers.
• The AFT report reveals that hedge funds lost investment revenue of $8 Billion for the pension funds over "a total of 88 fiscal years studied" combined, while during the same time periods the hedge funds managers collected an estimated $7.1 Billion in fees from the pensions.  (Talk about symmetry there; they lose $8 Billion and pocket $7.1 Billion, according to the report.)
• The administrators of these pension funds have a fiduciary duty to the muni public employees whose pension money the administrators are investing.

Parenthetically, the California Public Employees' Retirement System began winding down its investments in hedge funds because of the funds' demonstrated track records over a year ago.

Generally breaches of fiduciary obligations are excluded from insurance coverage under many policies of insurance, but insurance can be purchased specifically to cover them.  Do you think that the persons responsible for administering muni employee pension funds have coverage for fiduciary breach?

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with 2015 Supplements).  All rights reserved.

ORWELLIAN FIDUCIARIES.

                Investment advisers a/k/a stock brokers have a huge financial incentive to keep things as they are.  Their present average bonus alone is reportedly $172,860.  Robert Trigaux, “Wall Street Wants Big Profits, ‘Good Enough’ Advice” (posted on Tampa Bay Times March 13, 2015).

               There is an ongoing struggle over the standard of behavior which these professionals ought to meet.  The current standard of conduct which governs the way advisers/brokers treat their customers is “suitability,” i.e., whether the advice they give or the investment they recommend is “suitable.”  Some call this the “suitability or ‘good enough’ standard”.  Robert Trigaux, “Wall Street Wants Big Profits, ‘Good Enough’ Advice” (posted on Tampa Bay Times March 13, 2015).

               One alternative is to hold the conduct of advisers/brokers to a fiduciary standard.  The fiduciary standard is recommended by the president and consumer groups.  Their proposed change to a fiduciary standard is not going anywhere.  The current suitability standard is unlikely to change any time soon.  The fiduciary standard is perhaps understandably opposed by Wall Street.  Robert Trigaux, “Wall Street Wants Big Profits, ‘Good Enough’ Advice” (posted on Tampa Bay Times March 13, 2015).

               Ms. Barbara Roper, the director of investor protection for the Consumer Federation of America put it this way, as quoted by the Wall Street Journal and the Tampa Bay Times:

This is as Orwellian as it gets.  They will serve their clients best by defeating a regulation that would require them to do what’s best for their clients?

 Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015).  All Rights Reserved.

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MUTUAL FUNDS’ FIDUCIARY ISSUES FOR INVESTORS, INVESTMENTS.

               Two of the larger mutual funds, Fidelity and Vanguard, reportedly vote against proxy access for their investors as shareholders in the corporations in which the funds invest the shareholders’ money.  Proxy access is shorthand for shareholders having the opportunity to nominate directors.

               Fidelity in particular confirmed to a reporter through a spokesperson that its policy against having its investors nominate directors is so entrenched, that it opposes shareholder access even when shareholder access is supported by a given company’s management.  Gretchen Morgenson, “Fair Game / The Giants That Keep Insiders In,” p. 1, col. 4 (New York Times Nat’l ed., “SundayBusiness” Section, Sunday, May 31, 2015).

               A position against shareholder access raises issues concerning fiduciary duties:

Institutions that vote against proxy access, some investors say, are preserving the status quo in corporate boardrooms, where there is little accountability on outsize executive pay, director diversity and other governance issues.  And such a position is even more troubling when it is taken by an institution that has a fiduciary duty to do the right thing by its investors.

Id.  [Emphasis added.]

               There may be a reason that supports the funds’ position against shareholder access, however.  It would be good to ask the funds this question:

How is it in the interest of your investors to deny them the opportunity to nominate directors in the corporations in which you invest their money?

              

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015).  Mutual funds purchase commercial paper of all kinds including mortgage loans.  Fiduciary claims are among the claims usually alleged in forced placement practices cases involving mortgage loans.

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ENFORCING DIRECTORS’ DUTIES OF COMMUNICATION: FIDUCIARY LAW CAN PROVIDE MEANS.

    The New York Times’ Gretchen Morgenson considers “Time to Coax The Directors Into Talking” in her “Fair Game” column in today’s New York Times.  Ms. Morgenson compares and contrasts the behavior of directors in American corporations and in their European counterparts.

   Directors of U.S. corporations often do not, for example, communicate with the corporations’ shareholders.  The directors of U.S. corporations are apparently concerned that they will be overwhelmed with what they see as “frivolous” shareholder communications.  Less than half of the directors in a recent poll had communicated with shareholders about how the shareholders can approach them to discuss corporate business.  In fact, a recent series of reforms to the bylaws of several major U.S. corporations will expand the shareholders’ opportunity to nominate directors at the corporations’ annual meetings – so long as the shareholders hold at least 3% of the corporations’ shares for at least 3 years.  Id.

   In contrast, some European corporations are required by law to invite their five largest stockholders to become members of the corporations’ committees which nominate the corporations’ directors.  In another European country, a corporation’s chairman of the board is required by law to “supervise the communication process with shareholders.”  Id.

   It is difficult to reconcile U.S. director silence with adequately fulfilling fiduciary law’s requirements of good faith and fair dealing.  Fiduciary duties generally also include duties of information, i.e., keeping the corporation informed of significant developments which affect the corporation.  It will be interesting however to see how directors reconcile these two seeming opposites under applicable fiduciary law.

   It will be equally interesting to see whether and to what extent the directors’ fiduciary duties including the duty of information are extended to the corporation’s shareholders.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All rights reserved.

 

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A MODEST PROPOSAL: COMMENTS TO NEW FLOOD INSURANCE RULES--

PART TWO. 

            Yesterday I submitted Comments to proposed joint rulemaking by five (5) Federal agencies.  Flood Insurance is the topic of their proposed Rules.  The period for public Comments closes one week from today, on December 29, 2014.

          Specifically, the five agencies jointly requested Comments on their proposed Rules regarding “Loans in Areas Having Special Flood Hazards”.  What follows is the first of my Comments.

          If you disagree with my Comments I urge you to tell the agencies so, by leaving your own Comments.  If you agree with my Comments I urge you to tell the agencies so, by leaving your own Comments.

          Everything you need is here.  You can leave your Comments at the Federal eRulemaking Portal.  The web address is given below.  Or you can send a joint EMail to the five agencies.  Their EM Addresses are listed below too.  In either case, the “subject line” or “re clause” information that you need for your Comments is also set out below for your ease of use.

 

December 22, 2014

BY FEDERAL eRULEMAKING PORTAL AND VIA EMAIL

 

Federal eRulemaking Portal:

www.regulations.gov

 

OCC EMail Add.:       [email protected]

Board EM Add.:         [email protected]

FDIC EM Add.:          [email protected]

FCA EM Add.:           [email protected]

NCUA EM Add.:        [email protected]

 

Re:      “Loans in Areas Having Special Flood Hazards”.

            OCC:               Docket ID OCC-2014-0016

            Board:             Docket No. R-1498

                                    RIN 7100-AE22

            FDIC:              “Loans in Areas Having

                                     Special Flood Hazards”.

            FCA:               “Law & Regulations”/“FCA Regulations”

                                    /“Public Comments”

            NCUA:            RIN 3133-AE40

 

To the Agencies:

 

            SUMMARY OF MY COMMENTS IN THIS LETTER:

* * *

(2)  My second Comment adds a provision which would clarify the standard which a lender or servicer must meet in complying with the proposed escrow requirement.  The standard which such a lender or servicer must meet is the standard of conduct of a fiduciary in its dealings with the borrower’s flood insurance escrow account which the proposed Rule will now require.

  

* * *

 

             (2)  My second Comment concerns the new escrow requirement.  I would add a new provision to the proposed Rule, as follows:

The escrow account required in the first paragraph of this section, and by the Flood Disaster Protection Act, as amended, of all premiums and fees for any flood insurance required under these Rules and by the FDPA, as amended, shall be maintained by the mortgage lender or servicer as a fiduciary of the funds of the borrower.

            This provision would establish the responsibility required by the escrow requirement in a single standard of performance.  The FDPA, as amended, and the proposed Rule establish the required escrow account.  It clearly sets out the measure of behavior which must be met by any mortgage lender or servicer which is thereby required to manage the newly required escrow account.

            This provision set out in my second Comment would set forth a new provision in the following Rules of the five (5) respective joint Agencies involved:

 

1. OCC:       This would add a new 12 CFR § 22.5(a)(4).
2. Board:     This would add a new 12 CFR § 208.25(e)(1)(iv). 
3. FDIC:      This would add a new 12 CFR § 339.5(a)(4).
4. FCA:        This would add a new 12 CFR § 614.4935(a)(4).
5. NCUA:    This would add a new 12 CFR § 760.5(a)(4).

 

The third and final Part of “A Modest Proposal: Comments to New Flood Insurance Rules” will be published tomorrow on Insurance Claims and Issues Blog.  Please Read The Disclaimer.  ©2014 by Dennis J. Wall.  All rights reserved.

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DAVID BOIES, HANK GREENBERG PREEMPTED AND DISMISSED TOGETHER.

          In a case with Hank Greenberg's Starr corporation as the plaintiff, and with David Boies as the plaintiff's attorney, a Federal District Court entered its Judgment dismissing Starr's "claims against the Federal Reserve Bank of New York ('FBNY') for breach of fiduciary duty in its rescue of American International Group, Inc. ('AIG') during the fall 2008 financial crisis."  Starr International Co. v. Federal Reserve Bank of N.Y., 742 F.3d 37, 38 (2d Cir. 2014).

          On appeal, the Federal Second Circuit Court of Appeals affirmed the District Court's Judgment of dismissal on the ground that Delaware's law of fiduciary duties, which in other circumstances would govern the FBNY's conduct, was preempted by Federal law in this case.  Starr International Co. v. Federal Reserve Bank of N.Y., 742 F.3d 37, 41-42 (2d Cir. 2014).

          Not even a highly publicized lawyer and a famous client in this case could overcome the presumption of preemption, or to put it another way, the cloak of immunity which has been protecting financial decision-makers since at least 2008.

 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 Please Read The Disclaimer.

No Peaceful Coexistence: Fiduciary Breach, Bad Faith Claims Held Redundant.

   In the case of Tanaka v. GEICO General Ins. Co., 2013 WL 3323242 (M.D. Fla. July 1, 2013)(Presnell, J.), a case frequently posted in this space, the injured-claimant and Bad-Faith Plaintiff requested the Court "to reinstate a claim for breach of fiduciary duty against the Defendant, GEICO General Insurance Company ("GEICO"), which was dismissed in January 2012."  Tanaka v. GEICO General Ins. Co., 2013 WL 3323242 *1 (M.D. Fla. July 1, 2013).

   The Court refused to reinstate the breach of fiduciary duty claim in that case.  The Plaintiff already alleged a bad faith claim.  The breach of fiduciary duty claim would be redundant under the circumstances, and the Plaintiff's request to reinstate that claim was denied:

     Thus, to the extent that Florida law recognizes the existence of a fiduciary relationship between insured and insurer, Florida law has provided a cause of action—the bad faith claim, which Tanaka has already asserted. Allowing Tanaka to also assert a claim for breach of fiduciary duty would be redundant. Accordingly, Count III will not be reinstated.

Tanaka v. GEICO General Ins. Co., 2013 WL 3323242 *2 (M.D. Fla. July 1, 2013).

Please Read The Disclaimer.  Copyright  2013 by Dennis J. Wall.  No claim to original U.S. Government works.

 

NEW YORK COURT REQUIRES LENDER, SERVICER TO ANSWER FPI COMPLAINT.

   In Casey v. Citibank, N.A., 915 F. Supp. 2d 255 (N.D.N.Y. 2013) the Court was confronted with motions to dismiss by all defendants.  The case was based on claims alleging force-placed insurance.  Specifically, the plaintiffs complained that the defendants committed a variety of wrongs by forcing the plaintiffs to pay premiums for flood insurance policy limits that went way beyond their remaining loan balances.

   The Federal Court agreed.  The claims were upheld at the pleading stage with respect to all defendants except defendant Citigroup, Inc.  The claims against that defendant were dismissed but without prejudice.  The remaining motions to dismiss were all denied and the claims upheld as against all the remaining defendants:  Citibank, N.A.; Citimortgage, Inc.; MidFirst Bank, N.A.; and FirstInsure, Inc.

   The Court summarized its holdings as follows:

   The parties dispute whether the mortgage agreements give defendants the discretion to set and change the amount of flood insurance required. Making all reasonable inferences in plaintiffs' favor at this early stage of the litigation, their interpretation of the contract language is plausible. Plaintiffs thus state plausible causes of action for breach of contract, conversion, and breach of the implied covenant of good faith and fair dealing.

   Similarly, plaintiffs sufficiently allege that defendants' receipt of commissions and/or kickbacks related to the force-placed flood insurance was neither disclosed in the mortgage agreements nor permitted by federal law. They also adequately allege that defendants mismanaged their escrow funds. Therefore, plaintiffs state plausible causes of action for unjust enrichment and breach of fiduciary duty.

   Finally, the amended complaint contains clear allegations that defendants misrepresented the amount of flood insurance required under the mortgage agreements, initially accepted a lesser amount of coverage, and failed to provide proper notice and disclosure before force-placing unauthorized and excessive flood insurance on plaintiffs' properties. Plaintiffs thus state plausible claims for violations of the NYDPA [New York Deceptive Practices Act] and TILA [the Federal Truth in Lending Act].

Casey v. Citibank, N.A., 915 F. Supp. 2d 255, 267 (N.D.N.Y. 2013).

 

Please Read The Disclaimer.  Copyright © 2013 Dennis J. Wall.  No claim to original U.S. Government works.

ATTEMPTING TO NEGOTIATE SETTLEMENT IS A FIDUCIARY DUTY.

          Applying Florida law, the District Court in Tanaka v. GEICO General Ins. Co., 2013 WL 3323242 (M.D. Fla. July 1, 2013), denied a motion to reinstate a "breach of fiduciary duty" count against a liability carrier which allegedly failed to settle the underlying case against its insured.

          The plaintiff also alleged a count for bad faith based on the same allegations.  The breach of fiduciary count did not survive the previous disposition of a motion to dismiss.  The Court previously granted the motion to dismiss and dismissed the breach of fiduciary duty count.  Tanaka v. GEICO General Ins. Co., 2013 WL 3323242 *1 (M.D. Fla. July 1, 2013).

          In the course of denying the plaintiff's motion to reinstate that count, the Court examined the history of insurer bad faith causes of action in Florida, noting that the fiduciary duty of a third-party carrier "did not extend to all facets of the relationship between insurer and insured....  Thus, to the extent that Florida law recognizes the existence of a fiduciary relationship between insured and insurer, Florida law has provided a cause of action -- the bad faith claim, which Tanaka has already asserted.  Allowing Tanaka to also assert a claim for breach of fiduciary duty would be redundant.  Accordingly, Count III [the breach of fiduciary duty claim] will not be reinstated."  Tanaka v. GEICO General Ins. Co., 2013 WL 3323242 *2 (M.D. Fla. July 1, 2013)(Presnell, J.).

Please Read The Disclaimer.

THE FDIC'S PURSUIT OF BAD FAITH.

          Case law reflects the lines being drawn by the Federal Deposit Insurance Corporation in its pursuit of recoveries while standing in the shoes of banks in its receivership.

          In Federal Deposit Ins. Corp. v. Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., 2013 WL 1830806 *1 (M.D. Fla. May 1, 2013), the FDIC alleged claims of legal malpractice and breach of fiduciary duties.  The defendants are a law firm and a lawyer who advised a bank regarding a closing which involved $5,300,000.00 in a "real estate acquisition and development loan" to a development company.

          Parenthetically, the issue presented to the Court which resulted in this particular decision was the Defendants' Motion in Limine to Exclude Expert Testimony by one of the FDIC's Experts, a nonlawyer who was proffered to testify about "'commercial lending and underwriting practices, bank management, bank operations and procedures, and the standards of care in the banking industry.'"  Federal Deposit Ins. Corp. v. Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., 2013 WL 1830806 *1 (M.D. Fla. May 1, 2013).  The Court denied the motion.

Please Read The Disclaimer.    

INVESTMENTS IN MORTGAGE-BACKED SECURITIES Continued ... The Third Judge Speaks.

This continues an article begun here on Sunday, April 28, 2013.

      One Judge, Judge Straub, dissented in part and concurred in part.  Judge Straub pointed out that previous ERISA case law had consistently followed an objective "prudent person" standard; "it focuses on the process of the fiduciary's conduct preceding the challenged decision."[1]  The focus of the prudent person standard of fiduciary liability under ERISA "asks whether the fiduciary, at the time he engaged in the challenged transaction," used methods which were appropriate both to investigate, and if the investigation turned up good results, to set up the investment.[2]

      Anyone who has had the experience of writing a pleading, whether it be a complaint, an answer and affirmative defenses, or all of these, knows that in drafting a client's allegations of fact it is good pleading practice to frame the available facts based on the prevailing law.  Given the potential of a later motion being filed by the opposing party or parties to challenge whether these factual allegations are properly framed either as a claim or as a defense under the applicable law, the pleader tries to frame the client's allegations accordingly, applying law to fact because that is what the Court will do if the legal sufficiency of the allegations is attacked.  If the pleader can match factual allegations available in the given case to read in a similar way to legal quotations which she or he will argue from relevant case law or statutes at the hearing, so much the better.

      That is precisely what the attorneys for the plaintiffs tried to do in this case, match their clients' factual allegations to the applicable law -- or at least to the law which applied at the time the complaint was filed.  Recall that that ERISA case law extant at the time that the complaint in this case was filed, had consistently followed an objective "prudent person" standard; "it focuses on the process of the fiduciary's conduct preceding the challenged decision."[3]  The focus of the prudent person standard of fiduciary liability under ERISA "asks whether the fiduciary, at the time he engaged in the challenged transaction," used methods which were appropriate both to investigate, and if the investigation turned up good results, to set up the investment.[4]

      In this case, the plaintiffs pleaded that the defendant breached its fiduciary obligations under ERISA "by making 'high-risk investments ... at precisely the time when defaults of subprime mortgages were skyrocketing and numerous subprime lenders were facing insolvency.'"  That is what they specifically alleged, for example, in paragraph 29 of their Amended Complaint.[5]

      The one Judge in the minority on this panel pointed out that although the Amended Complaint did not contain factual allegations that "specifically detail" how the defendant perpetrated its  alleged mismanagement, the plaintiffs did sufficiently "allege that [defendant] acted imprudently by maintaining investments in high-risk mortgage securities, at a time when [defendant] knew or should have known that the market for such securities was collapsing."[6]  Regardless of whether the plaintiffs would ultimately prevail at the end of this case, the plaintiffs at the beginning of this case sufficiently alleged a breach of fiduciary duties under ERISA against Wall Street, in the eyes of the Judge who was in the minority on this panel.

      There you have it.  Two Judges applied what amounted to a summary judgment or directed verdict standard, both dependent on evidence of record, to a motion to dismiss an amended complaint and concluded not that proof was lacking but that allegations were lacking (even though, at least arguably, they were there).  It is respectfully submitted that the Judge who wrote in the minority on this panel was the one who got it right in this case.

 

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[1] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *19 (2d Cir. April 2, 2013)(Straub, J., dissenting and concurring in part).

 

[2] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *19 (2d Cir. April 2, 2013)(Straub, J., dissenting and concurring in part).  [Emphasis added.]

 

[3] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *19 (2d Cir. April 2, 2013)(Straub, J., dissenting and concurring in part).

 

[4] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *19 (2d Cir. April 2, 2013)(Straub, J., dissenting and concurring in part).  [Emphasis added.]

 

[5] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *20 (2d Cir. April 2, 2013)(Straub, J., dissenting and concurring in part).  [Emphasis added.]

 

[6] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *20 (2d Cir. April 2, 2013)(Straub, J., dissenting and concurring in part).  [Emphasis added.]

 

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INVESTMENTS IN MORTGAGE-BACKED SECURITIES CANNOT ALLEGEDLY VIOLATE FIDUCIARY DUTIES.

INVESTMENTS IN MORTGAGE-BACKED SECURITIES CANNOT ALLEGEDLY VIOLATE FIDUCIARY DUTIES, two Judges say.

           Two Judges on the Second Circuit Court of Appeals stressed the lack of "factual detail" in a group of pension funds' allegations that the defendant investment bank, Morgan Stanley, violated "its fiduciary duties under the Employee Retirement Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq." by investing in mortgage-backed securities ("RMBS").[1]  The two Judges did not say that investing in residential-mortgage back securities, which in this case included a wide assortment of RMBS including subprime mortgages, was a good thing.  They said that the plaintiffs did not support their claims of "imprudence" with "well-pleaded factual allegations" that investments backed by subprime mortgages were a breach of the defendant's fiduciary duties.

          Here is what the two Judges said:

     In sum, viewing the allegations in the Amended Complaint as a whole, and drawing every reasonable inference in favor of Saint Vincent's, the Amended Complaint does not allege facts plausibly showing that Morgan Stanley knew, or should have known, at the relevant times, that the securities held in the fixed-income Portfolio were imprudent investments. Instead, the Amended Complaint alleges imprudence by association, reasoning that because the Portfolio contained nonagency mortgage-backed securities—of which subprime mortgage-backed securities are now the most infamous type—and because the whole world knows (in hindsight) that many subprime mortgages turned out to be disastrous investments, the Portfolio's concentration in mortgage-backed securities generally and nonagency securities in particular was imprudent. The relevant pleading standards do not permit such general accusations of imprudence, unsupported by well-pleaded factual allegations.[2]

      The two Judges shared the view, then, that the plaintiffs' allegations of breach of fiduciary duties were based on nothing more specific than "imprudence by association".  Everyone knows now, they said, that subprime mortgages are risky investments and poor collateral, but that is hindsight.

      That is not what the plaintiffs alleged.  Their allegations are reproduced more or less verbatim in the third Judge's opinion, and they will be examined in detail not only in the third Judge's opinion, but in the next post continuing this article.  Suffice it to say now that the plaintiffs were much more specific than the majority described.  The plaintiffs alleged that at the time it engaged in the RMBS transactions, the defendant fiduciary used methods of investigation inadequate to the task, and that even the investigation conducted by the defendant turned up bad results which did not dissuade the fiduciary from making the investments, to the detriment of the plaintiffs.

      The majority ignored these allegations and attempted to re-label them.

      There is a saying which is familiar in many parts of the United States.  If you take a cow, and hang a sign around its neck that says, "Horse," if it has horns and an udder, it is still a cow.

To be continued ....

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[1] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *1 (2d Cir. April 2, 2013).

 

[2] Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgt., Inc., 2013 WL 1296481 *12 (2d Cir. April 2, 2013).

 

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FIRREA IS NOT A FURRY CREATURE FOR D&O INSURER DJA.

          The Federal Deposit Insurance Corporation became the Court-appointed Receiver for Habersham Bancorp in Georgia.  In that capacity, the FDIC sued certain Habersham Directors and Officers to get back over $4 Million in losses based on "allegedly improper dividends" approved by the underlying defendants-Directors-and-Officers in violation of their Fiduciary Duties.  OneBeacon Midwest Insurance Co. v. Federal Deposit Insurance Corp., 2013 WL 1337193 *1 (N.D. Ga. March 28, 2013).

          The Plaintiff issued a Management and Professional Liability Insurance Policy to Habersham under which the Directors and Officers could claim Coverage.  The Liability Insurance Company filed a Declaratory Judgment Action as a preemptive strike to obtain a declaration of no coverage for various reasons.  The D&O Defendants filed a Motion to Dismiss the DJA based on lack of Subject Matter Jurisdiction.  OneBeacon Midwest Insurance Co. v. Federal Deposit Insurance Corp., 2013 WL 1337193 *2 (N.D. Ga. March 28, 2013).

          The Federal Court GRANTED the D&O Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction, and here's why.  The ruling is potentially significant to D&O Insurers seeking DJ's of no Coverage for bank Directors and Officers, as in this case.

          The D&O Defendants in this DJA based their no-subject-matter-jurisdiction argument on a Federal Statute which, of course, applies throughout the jurisdictions of the United States (and not just Georgia, where this case was filed):

D & O Defendants assert that Plaintiff's claim is precluded by Section 1821(j) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). (Def.s' MTD, Dkt. [33] at 7.) Under § 1821(j), “no court may take any action, except at the request of the Board of Directors by regulation or order, to restrain or affect the exercise of powers or functions of the [FDIC] as a conservator or a receiver.” At issue here is the FDIC's power to “collect all obligations and money due the institution” that has been placed into receivership. See 12 U.S.C. § 1821(d)(2)(B)(ii). The so-called “anti-injunction provision” (§1821(j)) was “intended to permit the FDIC to perform its duties as conservator and receiver promptly and effectively without judicial interference.”

OneBeacon Midwest Insurance Co. v. Federal Deposit Insurance Corp., 2013 WL 1337193 *2 (N.D. Ga. March 28, 2013).

           Following the holding in a 2010 decision by the Northern District of Illinois, the Federal Judge in the Northern District of Georgia held in this case that a "preemptive determination of rights with respect to the D & O policy was jurisdictionally barred by Section 1821(j).  OneBeacon Midwest Insurance Co. v. Federal Deposit Insurance Corp., 2013 WL 1337193 *3 (N.D. Ga. March 28, 2013).  The Federal Judge in Georgia elaborated:

   The FDIC Claim seeks to recover sums owed to the bank because of the D & Os' alleged wrongful conduct; if the FDIC succeeds, the D & O Coverage would help satisfy any judgment for the bank.  Section 1821(j)'s language is broad: “no court may take any action ... to restrain or affect the exercise of powers or functions of the [FDIC].” (emphasis added). According to the Eleventh Circuit, “[t]he exceptions to § 1821(j)'s jurisdictional bar are extremely limited.”  [Citation to Eleventh Circuit decision omitted here.] The Court finds that issuing a declaratory judgment on Plaintiff's claims would affect the FDIC's ability to collect money due to Habersham. Consequently, the claim is barred by § 1821(j).

OneBeacon Midwest Insurance Co. v. Federal Deposit Insurance Corp., 2013 WL 1337193 *4 (N.D. Ga. March 28, 2013).

          The Plaintiff D&O Liability Insurer is not left without a remedy by this holding, however.  "Plaintiff's claims can be pursued through FIRREA's administrative process' authorized by Section 1821(d).  OneBeacon Midwest Insurance Co. v. Federal Deposit Insurance Corp., 2013 WL 1337193 *5 (N.D. Ga. March 28, 2013).

          FIRREA is not a furry woodland creature for certain D&O Liability Insurance Companies.  This decision applies to bar DJA's apparently whenever the FDIC sues "insured" bank Directors and Officers to get the defunct banks' money back as an alleged result of the D&O Defendants' "Bad Faith" Breach of Fiduciary Duties.

Please Read The Disclaimer.

 

 

Related articles

Regulators, Like People, Matter.

Bad Faith in Florida: Southern District "subsumes" and "Dictas" Too.

    In Government Employees Insurance Co. v. Prushansky, 2012 WL 6103220 (S.D. Fla. December 7, 2012), GEICO filed a Declaratory Relief Action based on an alleged Release.  The Federal Court's Opinion recites that GEICO sued the injured claimant, i.e., the Personal Representative of a person who was allegedly killed by a person GEICO insured under an Automobile Liability Policy.

    The injured claimant counterclaimed in three counts:  Alleged Bad Faith in settlement of the underlying lawsuit which was filed against GEICO's Insured; Breach of Contract; and Breach of Fidcuiary Duties.  The Court in this case granted GEICO's Motion to Dismiss both the Breach of Contract Count and the Breach of Fiduciary Duties Count, ruling that under Florida law both claims are "subsumed" under a Bad Faith Claim under the circumstances alleged in this case.  Government Employees Insurance Co. v. Prushansky, 2012 WL 6103220 *3 (S.D. Fla. December 7, 2012).  That was enough to decide the Motion to Dismiss.  However, the Federal Court did not stop there.

    The Federal Court's Opinion in support of this decision swept broadly, caught up in some generalizations, apparently.  Until some recent decisions, in the Federal Court's Opinion the Supreme Court of Florida "had begun to view both first-party and third-party bad faith insurance claims similarly."  In particular, the Federal Judge noted that Florida Statutory Bad Faith Claims are often treated the same way in important respects.  However, one of those respects does not necessarily include damages, although the Federal Judge apparently took that view. 

    As a source for the proposition that damages are identical under First-Party Bad Faith Claims, and under all Claims for Third-Party Bad Faith, the Federal Court quoted from Fla. Stat. § 627.727(10), under which the damages recoverable from an Uninsured Motorist Carrier under Florida's Bad Faith Statute "shall include the total amount of the claimant's damages, including the amount in excess of the policy limits ...."  Fla. Stat. § 627.727(10), quoted by Government Employees Insurance Co. v. Prushansky, 2012 WL 6103220 *4 n. 3 (S.D. Fla. December 7, 2012).

    What the Federal Court did not acknowledge in this dictum, however, is that not all First-Party Policies are Uninsured Motorist Policies.  Moreover, the Insurance Policy before the Court in that case is an Automobile Liability Insurance Policy and, in the context of the Motion to Dismiss before the Court, First-Party Insurance Coverages apparently had nothing to do with the issues.

Please Read The Disclaimer.    

Mortgage Servicers, Mortgage Settlement: Dealing Fairly in Financial Good Faith.

     It appears that Mortgage Servicers may have had the tools all along to modify Mortgages including to forgive principal.  See Statement of Hon. Sheila C. Bair, Chair of the Federal Deposit Insurance Corporation, reported by Martin Crustinger in an Associated Press copyrighted story, "Fed Urges Loan Companies to Help Prevent Mortgage Defaults," p. A5, col. 3 (Times-News, Twin Falls, Idaho, Wed., September 5, 2007) available on page 5 of this pdf posted online through twinfallspubliclibrary.org). 

    If that is so, then there was never any need for the Mortgage Servicing Fraud Settlement earlier this year -- except that the investment banks who were also the Mortgage Servicers, or who acquired the Mortgage Servicers, wanted immunity.

UPDATE ON JULY 27, 2012 ARTICLE HERE, "SHAME ON YOU, SHAUN. THAT'LL BE TEN HAIL MARYS, ... One Our Father, and One Glory Be.  Now say a Good Act of Contrition."

    In the article, I wrote:

One further note of, frankly, what is either fantasy or more stuff for Mr. Donovan to confess the next time he unburdens himself in the Confessional.  He says that the settlement agreement "also provides an additional $334 million in state aid" that Pamela Bondi, Florida Attorney General, will use "to help homeowners through proven tools like housing counseling."...  And if you believe that, Mr. Donovan and Ms. Bondi have some swamp land to sell you in South Florida as they say.

It is only now being widely reported that the Florida Legislature has other plans for that money, regardless of what Ms. Bondi says.

 Please Read The Disclaimer.