Now Updating
In re: DIANN MARIE CATES

Summarizing by Lars Fuller

El Camino Resources Ltd. v. Huntington National Bank

Citation:
Case No.12-1254
Tag(s):
Ruling:
The Sixth Circuit affirmed the district court's order of summary judgment in favor of Huntington National Bank, holding that (i) the plaintiffs could not establish the requisite level of knowledge to sustain claims against the bank for aiding abetting fraud, aiding and abetting conversion and conversion and (ii) a subsequent order from the bankrutpcy court regarding fraudulent conveyance claims agaisnt the bank was not binding on the district court and irrelvant to the issue of whether the the bank had actual knowledge of it's borrower's fraudulent activities.
Procedural context:
The plaintiffs appealed (i) the district's order of summary judgment in favor of the bank and (ii) the district court's refusal to reconsider its summary judgment order in light of a subsequent bankrutpcy court order regarding fraudulent conveyance claims against the bank. The Sixth Circuit affirmed.
Facts:
The plaintiffs executed equipment leases with Cyberco, a corporation that purported to be in the computer sales and consulting business. Unbeknownst to the plaintiffs, Cyberco operated under numerous names and was engaged in fraudulent activity. At the time, Huntington had a comprehensive banking relationship with Cyberco. After a number of red flags about Cyberco were raised at the bank, Huntingon terminated its relationship with Cyberco and agreed to a number of credit extensions while Cyberco made a "gradual migration" to another banking institution. Cyberco's web of fraud unraveled shortly thereafter, leading to FBI search warrants, arrests and the bankruptcy of one of Cyberco's affiliates. The plaintiffs brought claims against Huntington in the district court in an effort to recover damages associated with the loss of certain leased equipment. The district court ruled in favor of Huntington, finding that the plaintiffs could not establish the requisite level of knowledge to sustain claims of aiding abetting fraud, aiding and abetting conversion and conversion against the bank. Thereafter, the bankruptcy trustee brought fraudulent conveyance claims against Huntington in the bankruptcy court, which ruled that Huntington "did not accept in good faith" several payments from Cyberco. Based on the bankruptcy court's rejection of Huntington's "good faith" defense, the plaintiffs asked the district court to reconsider its ruling regarding Huntington's level of knowledge in support of its claims against the bank for aiding and abetting fraud and conversion. The district court rejected the motion for reconsideration, noting that (i) the issue of "good faith" is distinct from the issue of actual knowlege and (ii) the district court is not required to follow the bankrutpcy court's finding, even if that finding was, in fact, related to the issue of the bank's actual knowledge.
Judge(s):
Siler, Sutton and McKeague

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