The recent willingness of many courts and juries to impose liability on financial institutions has prompted an increasing number of customers to bring suits against their banks and creditors. These suits often involve claims for millions of dollars in both compensatory and punitive damages for alleged bank or creditor misconduct. For example, the Sixth Circuit recently affirmed a jury award of seven and one half million dollars to a borrower whose lender suddenly refused to advance funds under a line of credit agreement. In similar cases involving a bank's refusal to lend money under credit agreements, a California jury awarded approximately twenty-two million dollars in actual and punitive damages to an aggrieved borrower and a Maine jury awarded fifteen million dollars in compensatory damages to a borrower.
One reason for the increasing number of awards in suits against financial institutions is the expansion of bases for liability in situations involving banks and creditors. Both the Uniform Commercial Code (UCC or Code) and extensive federal banking regulations provide specific forms of redress for borrowers, debtors,and bank customers. In addition, traditional legal theories such as breach of contract, fraud, and duress" are available in actions against financial institutions. The new generation of suits against banks and creditors combine reliance on traditional legal theories with allegations based on innovative or "emerging" theories of liability. The plaintiffs in a recent case, for example, not only charged their bank with fraud, but also claimed damages for breach of fiduciary obligation and excessive interference with the business of the debtor.
Patricia A. Milon,
Implied Covenants of Good Faith and Fair Dealing: Loose Cannons of Liability for Financial Institutions?,
40 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol40/iss5/5