This afternoon, the Illinois House voted to pass (PDF) HB3636, a bill to amend the Illinois Mechanics Lien Act and overturn the Illinois Supreme Court’s Cypress Creek v. LaSalle Bank (PDF) on the priority of construction mortgages vs. mechanics liens.
Already passed by the Illinois Senate, this bill now goes to Governor Quinn for him to consider—the last stop before it can become law.
Want more on what HB3636 does, why, and how it might affect you? Navigate to this video and press play.
Jurors awarded this $169M verdict (PDF) against three former IndyMac Bank executives for originating dubious construction and development loans. It happened last Friday in Los Angeles at the US District Court for the Central District of California.
$169M Verdict Against Former Indyac Bank Executives
In their original complaint (PDF), the FDIC alleged:
- That the former bank executives were too permissive in underwriting and originating a host of development and construction loans
- Their permissiveness was negligent
- And their permissiveness breached the fiduciary duty of care each executive owed to the bank before it failed
The jurors agreed with the FDIC on the 21 loans that went to trial. The result: a verdict for the FDIC on every count—and, in one combination or another, against each former executive respectively—totaling about $169M in damages.
The US Supreme Court just issued another decision reaffirming that the Federal Arbitration Act compels state—as well as federal—courts to recognize and enforce contractual arbitration provisions, even when the focus of the litigants’ dispute is violation of state law. The decision: Nitro-Lift v. Eddie Lee.
Do you get a headache trying to navigate through the Illinois Supreme Court’s Cypress Creek decision on mechanic lien vs. mortgage priority and Illinois House Bill 3636 to seeking to overturn that decision? Here’s relief.
The Illinois House Judiciary Committee held hearings on House Bill 3636 yesterday in Chicago. At hearings last spring the committee asked stakeholders and witnesses to return later and explain—simply—what the Cypress Creek decision does, what House Bill 3636 proposes to change, and the effect those changes would have. And because it’s impossible to simply explain using only words, the Illinois Bankers Association produced and presented this video at yesterday’s hearing…..
Personal disclaimer: I worked on production of this video and presented in testimony before the committee yesterday.
In Episode 1 of Fraud Claim Killer we talked about how the contractual non-reliance clause just became a lot more potent in the Schrager v. Bailey (PDF) decision. And at the end I promised to fill you in on:
- Limits on non-reliance clauses
- When judges are reluctant to enforce them
- What makes them reluctant
- Tips to make your non-reliance clause useful and enforceable
Non-Reliance clauses: language in a contract where one (or more) of the parties affirms that in making their decision to enter into the contract, they’re relying exclusively on what’s written on the paper in the contract, and nothing else. Why have them? To cut off claims. Particularly the kind that involve a lot of “he said, she said” About what one side said they’d do, or wouldn’t do, but what they’re alleged to have said didn’t make it into the contract. It’s a situation that comes up most often in misrepresentation claims.
Judges have long enforced non-reliance clauses to nip misrepresentations claims in the bud and early in a case. But that’s usually been in securities fraud cases. Recently though, a panel of Illinois Appellate Court judges expanded non-reliance clause enforcement far beyond securities cases, in a way that suggests they’ll be just as potent in contracts used in the design and construction industries. The decision: Schrager v. Bailey (PDF), where the judges applied a non-reliance clause to summarily dismiss misrepresentation claims in a legal malpractice case.
The recent trouble surrounding banks in Greece got NPR’s Planet Money team to produce piece on how to stop a bank run. There’s 3 traditional tools. To learn about them we have to go back to the bank failures in the Great Depression and before. The story starts at this laundromat, once the Bronx branch of the Bank of the United States, site of a 1930 bank and continues in this podcast…….
A federal court in Milwaukee recently decided that the subsidiary of a failed bank, not the receiver for the failed bank itself, may also use the D’Oench, Duhme doctrine and 12 USC § 1823(e) to stop claims by a borrower and developer fostered by a construction loan that went very badly. The decision: SJ Properties Suites v. Specialty Finance Group, LLC (PDF).
Backstory: SJ Properties Suites v. Specialty Finance Group, LLC
Silverton Bank in Atlanta, Georgia had a wholly owned subsidiary called Specialty Finance Group, LLC (the “Lender”). The Lender focused on acquisition, development, and construction lending to hotel and other hospitality developers. One borrower was SJ Properties Suites for a project in Milwaukee, Wisconsin.
An architect, an engineer, and a consultant sued the US Green Building Council in federal court in Manhattan. They claim that LEED building certification and professional accreditation is deceptive and violates racketeering, trademark, and consumer protection laws.
A few days ago, the judge hearing the case, Hon. Leonard B. Sand, dismissed the lawsuit in this order (PDF).
My colleagues Scott Smith, David Eisenberg, and I just published a short article about the Illinois Supreme Court’s controversial LaSalle Bank, N.A. v. Cypress Creek 1, LP decision. It focuses on three things:
- A summary of who was involved, what their respective stakes were, the positions they took, and how the Justices reacted to them to decide the case
- How this decision affects construction industry stakeholders, particularly construction lenders and anyone who may claim a mechanics lien (e.g., prime contractors, subcontractors, material and equipment suppliers, architects, engineers, and other design professionals)
- Initiatives in the Illinois General Assembly to amend the Mechanics Lien Act to change the results in future cases
And it’s a wrap-up on Construction Law Today coverage that started back here: Mechanics Lien Priority: Contractor vs. Lender – Part 1. Click this link to navigate on to our article.
Also in the same Litigation & Counseling Alert, some of our other colleagues also wrote these companion articles that may interest you too:
- Insurance and Due Diligence in the Business Transaction
- Can a Forbearance Agreement Actually Help a Lender Collect from Its Debtor?