Bank of America Debt Securitization Case is Actually Round Two

Yesterday insideARM reported on a putative class action lawsuit filed against Bank of America alleging that the bank’s practice of filing lawsuits on their accounts violated the FDCPA since the accounts were previously “securitized.”

After that article was published we heard from two longtime insideARM contributors, Don Maurice from the Maurice Wutscher LLP law firm and Joann Needleman from the ClarkHill PLC law firm. Both wanted insideARM to be aware of a previous case involving the same Plaintiff’s attorney and similar (though not exactly the same) facts, but basically the same allegations and same legal theory. Maurice & Needleman PC was counsel for one of the defendants in the prior case.

The prior case, (Scott v. Bank of America, United States Court of Appeals for the Third Circuit, Case No. 13-4689) was a Court of Appeals decision from November 3, 2014.  In that case the facts were only slightly different.  Bank of America had securitized the account. After the account went into default the account in question was sold to a debt buyer and the debt buyer had initiated a collection lawsuit on the account. Plaintiff then sued the bank and the debt buyer.   Plaintiff’s underlying theory was that Bank of America had nothing to transfer to debt buyer once it securitized the receivables.

In the District Court proceeding Bank of America and the debt buyer had moved to dismiss Scott’s Amended Complaint, arguing that the critical premise on which Scott’s claims rely—that once a credit card company securitizes the receivables of a credit card account, it no longer retains an ownership interest in the account—was incorrect. The District Court granted the motion to dismiss with prejudice.

Scott appealed that dismissal. In a “non-precedential opinion” the Court of Appeals affirmed the dismissal in all respects.

Editor’s Note: Generally, non-precedential opinions may not be cited in briefs submitted to the Court. 

The decision can be found here.

insideARM Perspective

As noted in yesterday’s article, it will be interesting to track this case.  The non-precedential nature of the earlier opinion only means that defendants in the current case cannot cite the Scott opinion in any briefs they might submit to the court in this action. The defendants can, however, cite all of the cases they previously cited in their earlier briefs in the Scott case. The defendant’s arguments succeeded once. One wonders whether plaintiff’s counsel will make new and/or different arguments in an effort to obtain a different result.

insideARM asked Maurice for his perspective on this latest case.  He responded, “The problem with the plaintiff’s theory, at least in Scott, was that it ignored the terms of the securitization documents. First, only the receivable rights to an account are securitized, not the entire rights to the account. Thus, the creditor remains the owner of the account, but not the receivable rights. Second, once an account becomes in default, the receivables are ejected from the securitization and revert back to the creditor. So when the creditor goes to collect (or sell) a defaulted account, it has all rights, title and interest to the account.”