Banking and Commercial Finance Disputes

Our Banking and Commercial Finance Disputes attorneys are uniquely adept at handling lawsuits (known as “adversary proceedings”) that can be filed within the scope of a pending federal bankruptcy case when at least one of the litigants is a debtor in bankruptcy. Although many of the Federal Rules of Civil Procedure apply in a bankruptcy adversary proceeding, our team members, in tandem with our Bankruptcy and Creditors’ Rights Practice Team, help navigate the critical procedural differences between the Federal Rules of Bankruptcy Procedure and the Federal Rules of Civil Procedure, including chief distinctions related to limitations on discovery, timing of the litigation and finality of orders. In addition, our attorneys help counsel litigants on intricate jurisdictional issues that arise in the context of bankruptcy adversary proceedings.

The increasing imposition (and aggressive enforcement) of international sanctions by the U.S. and others (the UK and the EU) has become a significant risk concern in commercial finance. The broad scope of potential liability for any unlicensed dealings with sanctioned countries, entities or individuals—or with entities in which they have an interest—can result in substantial and unexpected exposure for lenders, requiring an ever-higher degree of diligence regarding all parties to a commercial transaction (for example, U.S. Department of the Treasury’s Financial Crimes Enforcement Network issued specific guidance warning of efforts of sanctioned persons attempting to make disguised investments in U.S. real estate).

Phillips Lytle attorneys have substantial experience in providing timely sanctions counsel, confidentially overseeing diligence efforts, crafting compliance measures to mitigate risk, and in appropriate cases, representing lenders and other parties in dealing with the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), including seeking licenses in appropriate cases.

Commercial lenders are well accustomed to investigating and assessing financial and market risks attached to parties and transactions with which they are asked to engage. But conducting business with parties in foreign countries and cultures carries additional regulatory risk for U.S. lenders and investors of running afoul of rigorous U.S. laws (such as the Foreign Corrupt Practices Act) applicable to payments, often disguised through intermediaries, to foreign government-related persons for the purpose of influencing or obtaining business. Lenders, even if not directly involved, can be exposed to such risk through their customers’ own carelessness (or worse), or—if publicly traded—failure to keep adequate records.

Phillips Lytle attorneys have experience in guiding commercial lenders and other investors in strategies to minimize exposure to corruption risk (i.e., focused investigations, customer training, contractual provisions and requirement of specialized audit protocols) and where necessary, to engage with the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice to contest or mitigate any alleged liability.

We have successfully defended many suits brought by borrowers and prospective borrowers alleging failure to fund loans or commitments to lend, failure to properly administer loans or collateral, implied amendments of loan agreements, and breach of the covenant of good faith and fair dealing in a lending relationship, among other theories of lender liability.

Our attorneys have represented banks and financial institutions in various capacities in complex cross-border disputes involving letters of credit governed by the Uniform Commercial Code’s letter of credit provisions (UCC Article 5), and the International Chamber of Commerce (ICC) Uniform Customs & Practice for Documentary Credits (UCP) rules.

We have obtained dismissal of a high-profile suit filed against a national bank in the United States District Court for the Southern District of New York alleging that it failed to honor a verbal agreement to assign the proceeds of a letter of credit to facilitate the sale of tens of thousands of tons of Mexican iron ore to China. Our attorneys also successfully defended and obtained dismissal of a suit against an issuer of a letter of credit seeking damages and an injunction to prevent it from honoring a draw on a letter of credit in relation to personal protective equipment (PPE) gloves being manufactured in Asia.

Our attorneys have experience litigating all of the wide variety of claims that are asserted against or by financial institutions and their customers (commercial and consumer) concerning negotiable instruments and electronic payment transactions, including claims arising under the UCC’s provisions (Articles 3, 4, 4-A) and state and federal statutes. Our attorneys have defended and prosecuted claims by, against and among financial institutions on notes and other paper payment instruments as well as electronic funds transfers (wire transfers, Automated Clearing House [ACH] payments and other electronic transfers).

A lender may have a duty to maintain real property and address environmental conditions even though the lender merely holds a security interest in the property as opposed to title. We are familiar with these requirements and can offer strategies for mitigating against potential liability.

Loan collateralization is only as valuable as a lender’s ability to recover and monetize its collateral upon default. We have vast experience in assisting our clients in obtaining possession of collateral of all types, and across multiple jurisdictions, through peaceable self-help and judicial proceedings in state and federal courts in multiple jurisdictions, resolving lien priority claims of competing creditors, and ensuring commercially reasonable dispositions of collateral as necessary to preserve claims for deficiencies after the liquidation of secured assets.

Controversies among lenders joined in syndicated or participated credits are not uncommon. In resolving disputes among lenders in a multi-lender credit structure, we bring to bear our vast knowledge of the industry standards and developed law necessary to bring clarity to the gray areas regarding the respective rights and responsibilities of lead and participating lenders.