NC Court Rejects Another Lender Liability Case

Charlotte, North Carolina is to home to many banks including Bank of America. Talk to anyone there and chances are pretty good that multiple members of their family are employed in the banking industry. It comes as no surprise, then, that the North Carolina Business Court and N.C. Supreme Court have a reputation for being “banker friendly.” A recent Supreme Court case dismissing a number of lender liability claims against BB&T bank therefore didn’t surprise us.


In that case approximately 150 investors claimed that BB&T conspired with property appraisers and a developer to inflate the value of several coastal developments in the years leading up to the 2008 financial crunch. The buyers say they never would have purchased lots had they been told of the property’s true value.


The owners came together and filed a number of lender liability cases against the bank including a violation of the state’s RICO (Racketeer Influenced and Corrupt Organizations Act), deceptive trade practices and breach of the duty of good faith.


The investors say the bank should have told them that the properties they were acquiring were overvalued. The state’s Business Court, however, took a different position. The court dismissed the claims after finding the bank had no to disclose the details of any appraisals.


Not happy with the result, the investors appealed. Unfortunately, the Supreme Court just affirmed the Business Court’s decision meaning the case is over. The investors lost.


The decision is significant because the court ruled that the debtor – creditor relationship (borrower – lender) does not create a special relationship or fiduciary duty. That means the bank had no duty to disclose information about the appraisals or value of the property.


In North Carolina, unless a borrower can find specific authority in the loan documents, banks have no special duties to their borrowers. That means borrowers must fend for themselves. Unless they can prove the bank lied to them, the bank has no duty to provide important information about properties to borrowers.


Suing banks is difficult. Loan documents typically favor the lender and never the borrower. The threshold for suing a bank is quite high but these cases can be won. Making these cases even more difficult are clauses within loan agreements that often specify where the case must be brought. These provisions typically require that suits against the bank be brought in a very bank friendly jurisdiction.


If you have potential lender liability claims against your bank give us a call. Unlike most business law firms that handle a broad range of commercial law, we concentrate on representing borrowers against banks. Because we are a boutique shop, our rates are far more competitive than the larger firms that typically handle these cases.


For more information, please contact attorney Chris Katers at [hidden email] or by phone at (414) 777-0778. The author of this post, attorney Brian Mahany can also be reached at [hidden email] or at (414) 704-6731 (direct).


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