Post Updated March 2018. Currently we are litigating a bad faith, wrongful default claim against eight major banks; household names such as Wells Fargo, PNC and Huntington Bank. We believe these banks that wrongfully declared a default and thereafter squeezed a successful trucking business for tens of millions in late fees, default interest, consulting fees, legal fees and any other fees they could conjure. Thankfully our client was able to survive and avoid laying off hundreds of workers. Not all businesses are successful when faced with dishonest lenders.
In fact, many businesses simply fold. Years of hard work wiped away by a trumped up technical default. Businesses that wind up closing their doors even though they never missed a payment.
Last year a jury in Missoula, Montana was faced with a similar situation. How they reacted to a local bank that falsely setoff funds from an otherwise solvent customer is a story worth repeating.
Kelly Logging Inc. was a family run logging business in Montana. Started in the 1950’s, it once was one of Montana’s largest loggers and employed 50 people. Having lived in the Maine woods for years, I know that tree cutting is dangerous and back breaking work. For 6 decades and two generations, Kelly Logging survived in a tough business… that is, until they became customers of First Interstate Bank.
Like many small businesses, the Kelly family business needed operating capital to help acquire equipment and grow the business. Kelly borrowed from First Interstate Bank. Like most loan documents, the loan from First Interstate gave the bank the right to offset funds from other accounts in the event of default. Somewhere along the way, the bank got nervous and simply took $762,000 from the company’s checking account. They did so, however, even though the note was current and had not yet matured.
Why would a bank do this? Ironically, if the business was broke and had no assets banks are more likely to work collaboratively with the borrower. If the borrower has cash or collateral worth taking, however, all bets are off.
First Interstate took the funds in 2009. Having little money to continue in business, the company limped along for a few years before finally closing its doors in 2013. Unlike many businesses, Jerry Kelly, the son of the company’s founder, decided to fight back and file suit against the bank. After a weeklong trial, a 12 citizen jury awarded the company approximately $17 million.
Surprised? We aren’t. Juries around the country are issuing judgments against banks for their pattern and practice of completely disregarding human dignity and the rights of their customers. Rights that are sacrosanct and embedded in the fiber of our democracy.
By the numbers, the jury awarded Kelly Logging $286,550 in compensatory damages and $16.7 million in punitive damages.
Of course the bank appealed, further delaying the ability of the Kelly family to rebuild their business and provide employment to folks in rural Montana. Even after being paid, however, the company may never get back some of its former customers and employees. It took 60 years to great family business and just minutes to tear the business apart.
A story in the Missoulian suggests the bank tried to escape responsibility for its action by filing a “blizzard of paper.” In our experience, banks have deep pockets and can almost always outspend their opponents in the courtroom. Last night I had dinner with a fellow plaintiff’s lawyer. His legal bills in a major case were $300,000. The bank’s bill? Over $2 million!
Despite their ability to outspend most bank fraud victims, the “blizzard of paper” doesn’t work if you can navigate the case to a jury. In fact, that blizzard of paper may have hurt First Interstate Bank and resulted in the huge punitive damage award. Unfortunately, many businesses simply can't hang on that long. They get discouraged, run out of money or their lawyers feel overwhelmed.
As one of the lawyer’s said, “Let this be a reminder of the great leveling that occurs in a court of law when a huge corporation must come to its heels upon the judgment of 12 honest citizens.”
Another First Interstate Bank customer sued the bank over a personal guaranty issue. The borrower said the bank grabbed $2.6 million of his personal funds and then decided to pursue the actual corporate borrower. The way personal guaranties are supposed to work is that the bank should foreclose on the collateral first and get the corporate borrower to pay. If there are not enough assets to pay the debt, only then does the banks begin to look to the personal guaranties.
In that case the borrower said, "This case is about abuse of power, bully tactics, nothing more, nothing less."
Lawyers that Sue First Interstate Bank
If you have been defrauded by a bank, lender, servicer or fiduciary, give us a call. We sue banks. It’s that simple. We are one of the few law firms specializing in lender liability and bank fraud cases and our fees are incredibly reasonable. Often we can work out alternative fees.
We have a special interest in cases against First Interstate Bank. They are one of the dominant lenders in Montana and Wyoming but also have locations in Idaho, South Dakota, Washington and Oregon.
Why our interest in First Interstate Bank ("FIB")? We think the bank is interested in acquiring land and mineral rights and will do so by manufacturing false or technical non payment defaults in cases where they believe there is a great deal of equity. The borrower loses everything and the bank gets valuable drilling rights or a nice ranch.
Need more information? Give us a call. There is never a charge for the consultation. For more information, contact attorney Christopher Katers at [hidden email] or by telephone at (414) 777-0778. The author of this post, attorney Brian Mahany, can also be reached at [hidden email] or by telephone at (414) 704-6731 (direct).
MahanyLaw – America’s Lender Liability and Bank Fraud Lawyers