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Case Note -- Preemption; Host State Usury Laws: Madden v. Midland Funding LLC
(2d Cir. May 22, 2015)
. In a decision that has roiled market place lenders, a panel of the Second Circuit Court of Appeals ruled that the National Bank Act's pre-emption of host state usury laws does not protect nonbank purchasers of loans originated by a national bank. The court distinguished cases in which the originating national bank retained servicing rights or some other ownership interest in the debt being sold.
Case Note -- Golden Parachute: Hill v. TD Bank, N.A.
In a "not precedential" opinion, the U.S. Court of Appeals for the Third Circuit affirmed a district court judgment rejecting the golden parachute/breach of contract claims of Vernon Hill II, former Chairman and CEO of Commerce Bancorp, LLC and Commerce Bank, N.A. The case turned on whether Commerce Bank, N.A., which was subject to an OCC cease and desist order addressing certain insider-related real estate transactions, was in a "troubled condition" when Hill's employment terminated. Hill contended that under the FDIC's regulations, the Bank was not in a "troubled condition" because the C&D Order did not address the Bank's financial condition. The Court rejected that argument, concluding that because the Bank was a national bank, the OCC's broader definition of "troubled institution" controlled, and Commerce could not pay Hill's contractual severance benefit without prior regulatory approval. (No. 13-3595, Sept. 24, 2014).