Cohen v. United American Bank

Citations: 83 F.3d 1347; 1996 U.S. App. LEXIS 11797; 1996 WL 233267Docket: 95-2828, 95-2879

Court: Court of Appeals for the Eleventh Circuit; May 23, 1996; Federal Appellate Court

Original Court Document: View Document

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The United States Court of Appeals for the Eleventh Circuit addressed an appeal involving Murray I. Cohen, Jane Cohen, Harold Gene Artrip, Margaret F. Artrip, and K.C.B. Industries, Inc. against United American Bank of Central Florida. The appeal followed a partial summary judgment by the district court, which ruled that United American did not violate the Bank Holding Company Act Amendments of 1970 by conditioning a loan to the appellants on a third party's payment obligation. The appellate court affirmed this judgment, noting that the appellants had not demonstrated any genuine issues of material fact or met their burden for summary judgment.

The appellants sought damages and an injunction, claiming that United American had orally agreed to lend them $500,000 but only advanced $125,000 while requiring the payment of $50,000 from Andrea Ruff, an attorney involved with Lake Tech, Inc., which was in Chapter 11 bankruptcy. Ruff had approached the appellants about purchasing Lake Tech, which faced cash flow issues despite having a market niche supplying road signs. The appellants negotiated a deal where they would become stockholders in K.C.B. Industries, Inc. (KCB), which would bid on contracts formerly bid by Lake Tech and subcontract work to it, retaining a portion of the contract amount for itself.

Cohen and Artrip sought the loan from United American to enable KCB to provide capital to Lake Tech, thereby allowing it to fulfill existing contracts and generate revenue to repay Ruff, who had her own debt to United American. The court's ruling reaffirmed the bank's actions as compliant with the relevant banking regulations.

Cohen and Artrip proposed that 2.5% of any loan advances be paid directly to Ruff to reduce her debt, which would enable her to continue providing legal services to Lake Tech amid its bankruptcy. Cash assessed the implications of reducing Ruff's loan while considering extending credit to Cohen, Artrip, and KCB. Ruff agreed to pay down her loan, sending a $50,000 check to Cash, contingent upon it being held in escrow until KCB's loan from United American was funded. The district court found that even if United American conditioned its credit on Ruff's loan reduction, this did not constitute a "tying" arrangement under 12 U.S.C. 1972 because it lacked anticompetitive effects due to the interconnected business relationships. Consequently, the court granted summary judgment on the anti-tying claims and dismissed related claims without prejudice. United American's subsequent motion for attorney fees was denied. On appeal, the court affirmed the summary judgment but for different reasons than the district court. It outlined that summary judgment should be granted when there is no genuine issue of material fact, emphasizing that the moving party must demonstrate the absence of such an issue. Appellants argued that United American's requirement for Ruff to pay her loan violated 12 U.S.C. 1972(1)(C) by imposing an additional service for credit extension, which is prohibited unless related to standard banking practices. To prevail, a plaintiff must show that the condition is an unusual practice, an anticompetitive tying arrangement, and beneficial to the bank.

To avoid summary judgment, a plaintiff must provide evidence that creates a factual dispute regarding whether the loan conditions were unusual in the banking sector. In this case, the Appellants failed to meet this burden by not supplementing their complaint with affidavits, opposing the summary judgment motion, or complying with Rule 56(e) in a timely manner. Consequently, there is no genuine dispute regarding the material facts, and the court found United American entitled to final summary judgment. 

Regarding attorney's fees, United American argued that the 1972 action related to enforcing a promissory note was intrinsically linked to their counterclaim for enforcement of the same note, thus warranting a fee award under the loan agreement. However, it was determined that under Florida law, each claim and permissive counterclaim must be assessed separately. The court referenced previous cases to illustrate that the Appellants' claim regarding the promissory note's formation does not arise from the contract, and thus the counterclaim is deemed permissive and distinct. As a result, the contractual fee provision does not apply, leading the court to affirm the denial of attorney's fees to United American.