Supreme Court Refuses to Review MB Financial, InBank Class Action Lawsuit

The Supreme Court said Monday that it won’t review a ruling by the U.S. Seventh Circuit Court of Appeals that said a lender’s successor should not be held accountable to borrowers who were charged a higher interest rate than agreed upon before the bank was shut down.

Borrowers initially filed a class action lawsuit in 2009 against Interstate Bank, also known as InBank, because they believed that the lender had deceived them when they failed to base their interest rates on an index rate that the bank had promised.

However, the state of Illinois shut down InBank in 2009, right after the class action lawsuit against the lender had been filed, and made the Federal Deposit Insurance Corp. (FDIC) the receiver, meaning that it was now responsible to the borrowers.

InBank’s successor, MB Financial Bank, asked that the FDIC replace MB Financial as the defendant in the class action lawsuit, a request that the Illinois state court granted. At that point, the FDIC asked that the case be moved to a federal court and that the lawsuit be dismissed “due to the borrowers’ failure to state a plausible claim for relief.” The class action lawsuit was dismissed in January 2011.

The federal judge who issued the dismissal said that it was unclear how InBank had been deceitful, since the documents provided clearly explained how the bank’s index affected the interest rate charged, and he would not allow the Class Members to change the class action lawsuit and make MB Financial the sole target.

The Class Members appealed the case because they said “they always intended to sue their lender’s successor rather than the FDIC or, in the alternative, because MB Financial assumed its predecessor’s liabilities.”

However, the Seventh Circuit ruled on Feb. 5 that even though MB Financial is InBank’s successor, their class action lawsuit was based on actions that InBank made, not MB Financial.

The borrowers’ “claims relate to the lender’s alleged acts and omissions, not the successor’s, and there is no evidence to support their assumption of liability argument,” wrote Judge Ann Claire Williams on behalf of the three judge panel that includes Diane P. Wood and John Daniel Tinder.

The circuit court said that the borrowers were supposed to use the FDIC claims process to remedy the problem, which was the FDIC’s argument — mainly that suing MB Financial wasn’t the way to avoid the administrative process.

The borrowers argued that they had intended to go after MB Financial, since it was now the owner of their loans, which didn’t require the FDIC.

The borrowers asked the Supreme Court to review the ruling, but the high court denied their petition.

The plaintiffs are represented by James A. Karamanis of Barney & Karamanis LLP and by Lloyd J. Brooks of Brooks Law Firm.

The MB Financial, InBank Class Action Lawsuit is Farnik, et al. v. FDIC, Case No. 13-295 in the U.S. Supreme Court.