Articles Posted in Banking

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Shareholders lacked standing to challenge, as an illegal exaction, U.S. government’s acquisition of AIG stock as loan collateral. In 2008, during one of the worst financial crises of the last century, American International Group (AIG) was on the brink of bankruptcy and sought emergency financing. The Federal Reserve Bank of New York granted AIG an $85 billion loan, the largest such loan to date. The U.S. Government received a majority stake in AIG’s equity under the loan, which the Government eventually converted into common stock and sold. One of AIG’s largest shareholders, Starr, filed suit alleging that the Government’s acquisition of AIG equity and subsequent actions relating to a reverse stock split were unlawful. The Claims Court held that the Government’s acquisition of AIG equity constituted an illegal exaction in violation of the Federal Reserve Act, 12 U.S.C. 343, but declined to grant relief for either that or for Starr’s reverse-stock-split claims. The Federal Circuit vacated in part, holding that Starr and the shareholders it represented lack standing to pursue the equity acquisition claims directly, as those claims belong exclusively to AIG, rendering the merits of those claims moot. The court affirmed as to Starr’s reverse-stock-split claims. View "Starr International Co. v. United States" on Justia Law

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In 2002, BB&T, a North Carolina financial holding company, entered into a transaction with Barclays, which is headquartered in the United Kingdom. The Structured Trust Advantaged Repackaged Securities transaction (STARS) was in effect for five years. The original version of STARS was marketed to enhance investment yield for cash-rich U.S. corporations by taking advantage of differences between the U.S. and the U.K tax systems by having a U.K. trustee and paying U.K. taxes. The U.S. participant would realize an economic benefit by claiming foreign tax credits for U.K. taxes paid by the trust. Combining the STARS structure with a loan component attracted banks and was marketed as a “low cost financing” program. When the IRS reviewed BB&T’s tax treatment of STARS, it disapproved benefits that BB&T had claimed based on the transaction: foreign tax credits ($498,161,951.00); interest deductions ($74,551,947.40); and certain transaction cost deductions ($2,630,125.05). It imposed taxes on certain payments from Barclays ($84,033,228.20) and imposed $112,766,901.80 in penalties. The Claims Court denied BB&T’s claim for a refund. The Federal Circuit affirmed in part and remanded, upholding imposition accuracy-related penalties on BB&T. The amount of the penalties requires reassessment, as BB&T is entitled to deductions for interest it paid on the STARS Loan. View "Salem Fin., Inc. v. United States" on Justia Law

Posted in: Banking, Tax Law

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CET owns the asserted patents, which share substantially the same specification. The four patents contain a total of 242 claims. The claims generally recite a method of extracting data from hard copy documents using an automated digitizing unit such as a scanner, recognizing specific information from the extracted data, and storing that information in a memory. This method can be performed by software on an automated teller machine (ATM) that recognizes information written on a scanned check, such as the check’s amount, and populates certain data fields with that information in a computer’s memory. CET asserted infringement by banking entities. Diebold, the manufacturer of ATMs used by the banking entities, sought a declaratory judgment that its ATMs did not infringe CET’s asserted patents and that CET’s patents were invalid and sought injunctive and monetary relief for tortious interference and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) arising from CET’s act of filing allegedly baseless infringement suits against its customers. The district court dismissed CET’s infringement action, holding that the claims of the asserted patents are invalid as patent-ineligible under 35 U.S.C. 101 and dismissed Diebold’s claims. The Federal Circuit affirmed. View "Content Extraction & Transmission, LLC v. Wells Fargo Bank" on Justia Law

Posted in: Banking, Patents

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In the 1950s and ’60s, to encourage private developers to construct, own, and manage housing projects for low- and moderate-income families, the government insured mortgages on those projects in exchange for provisions, such as a 40-year mortgage term, an agreement to maintain affordability restrictions for the duration of the mortgage, and prepayment limitations or prohibitions. The Emergency Low Income Housing Preservation Act of 1987 and the Low-Income Housing Preservation and Resident Homeownership Act of 1990 instituted a process to request the right to prepay mortgages. There were substantive restrictions on HUD granting prepayment requests, limiting its discretion, 12 U.S.C. 4108(a)). Prepayment is one step toward renting at market prices. The Acts permit HUD to grant incentives rather than permission to prepay. Owners claimed that the Acts constituted an as-applied taking. The Claims Court granted the government’s motions: for summary judgment that the takings claims for some properties were unripe for failure to exhaust administrative remedies; for summary judgment that no taking occurred for properties for which mortgages did not include a prepayment right; and for summary judgment of collateral estoppel as to one owner. The Federal Circuit affirmed as to ripeness and prepayment, but reversed as to collateral estoppel. View "Biafora v. United States" on Justia Law

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Deutsche Bank filed its 1999 Form 1120F (U.S. Income Tax Return of a Foreign Corporation), reporting total tax of $105,725,463, total payment of $188,256,721, including credit for taxes withheld at the source ($13,256,721), and a resulting overpayment of $82.5 million. Form 1120F does not itemize withholding credits, which were derived from Forms 8805 (Foreign Partner’s Information Statement of Section 1446 Withholding Tax) and 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding) received from withholding agents. Deutsche Bank did not attach those forms . The IRS returned the filing, unprocessed, requesting documentation of the withholding credit. In its amended return, Deutsche Bank stated that it discovered an overstatement of the withholding credit by $11,240 and that the correct amount was $13,245,481. The IRS processed the resubmitted return without correcting the error and credited the overpayment to the 2000 tax year. Later, Deutsche Bank filed an amended 1999 return claiming an additional refund of $59 million based on a valuation adjustment. The IRS issued the refund and $5 million in overpayment interest for January 1, 2001 to November 14, 2002. The IRS denied its request for additional interest for March 15 to December 31, 2000. The Claims Court agreed. The Federal Circuit affirmed, stating that the return was not filed by the extended return filing due date in processible form to commence the accrual of overpayment interest. View "Deutsche Bank AG v. United States" on Justia Law

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Meritor Bank failed in 1992 after the Federal Deposit Insurance Corporation (FDIC) breached a capital agreement with Meritor. The Federal Circuit affirmed that the government was liable for breach of contract, and awarding $276 million in “lost value” damages. On remand, the Claims Court applied 12 U.S.C. 1821(d)(11), the statute governing the distribution of a receivership surplus by the FDIC acting in its capacity as a receiver, and held that current Meritor shareholders are the proper recipients of the $276 million award. The court also denied a motion to intervene filed by McCarron, a former Meritor employee, on the grounds of lack of subject matter jurisdiction and issue and claim preclusion. Intervenors, former shareholders who owned shares of Meritor at the time of its failure but later sold their shares, appealed from an order directing the FDIC-Receiver to distribute the receivership surplus to current shareholders. McCarron appealed denial of his motion to intervene. The Federal Circuit affirmed. View "Slattery v. United States" on Justia Law

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Alice Corporation owns three patents covering a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk.” Settlement risk is the risk that only one party’s obligation will be paid, leaving the other party without its principal. The trusted third party eliminates this risk by either exchanging both parties’ obligations or exchanging neither obligation. CLS sought a declaration of invalidity; Alice counterclaimed infringement. The district court ruled in favor of CLS, holding that each asserted claim of the four patents is invalid for failure to claim patent eligible subject matter. The Federal Circuit reversed. The system, method, and media claims at issue are not drawn to mere “abstract ideas” but are directed to practical applications of invention falling within the categories of patent eligible subject matter defined by 35 U.S.C. 101. View "CLS Bank Int'l v. Alice Corp. Pty. Ltd." on Justia Law

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The Army and Air Force Exchange Service issues credit cards to military personnel to purchase uniforms and other merchandise from post-exchange stores on military bases. During the relevant period balances for uniforms were interest-free. Plaintiff opened an account in 1997 and became delinquent in 2000. In 2009 He filed suit claiming that the interest rate on delinquent debt exceed that specified in the agreement. The Exchange the conducted an audit and adjusted the accounts of 46,851 individuals, including plaintiff, who received a refund. A second audit resulted in adjustments to accounts of an additional 103,320 individuals. The district court dismissed plaintiff's claim as moot and denied class certification. The Federal Circuit vacated. While plaintiff's individual claim was moot, it is unclear whether the claims of all class members were satisfied. View "Russell v. United States" on Justia Law