| The September 20, 2007 decision by Judge
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| | Lumber/the Davises against Branch Banking
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| Barker of the United States District
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| | in which the plaintiffs alleged that
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| Court for the Southern District of
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| | Branch Banking should be liable for
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| Indiana in Midwest Lumber v. Branch
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| | misrepresentation, breach of the covenant
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| Banking, 2007 U.S. Dist. LEXIS 69924
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| | of good faith and fair dealing,
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| (S.D. Ind. 2007) involves the dismissal
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| | interference with business relationships,
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| of borrowers' lender liability claims,
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| | breach of fiduciary duty, undue control,
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| but it also specifically addresses a
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| | economic duress and business coercion and
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| release provision in a forbearance
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| | negligent misrepresentation.
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| agreement. Even though lender liability
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| | Significantly, Midwest Lumber/the Davises
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| is not my primary focus, certainly
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| | initiated the lawsuit after they had
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| forbearance agreements are pertinent.
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| | executed the forbearance agreements
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| And the workout industry should be aware
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| | containing the release.
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| of Judge Barker's holding.
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| | Midwest Lumber filed a motion to dismiss
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| Parties. The plaintiff was borrower
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| | the claims based in part upon the
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| Midwest Lumber, a lumber supplier. Mr.
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| | releases in the forbearance agreements.
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| and Mrs. Davis, the principals of Midwest
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| | Branch Banking argued that the
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| Lumber and guarantors in the subject
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| | forbearance agreements released it of any
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| transactions, also were plaintiffs. The
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| | liability toward Midwest Lumber and the
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| loans in question involved working
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| | Davises. Judge Barker agreed. Midwest
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| capital for the business secured by
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| | Lumber and the Davises made a variety of
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| accounts receivable, inventory and real
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| | arguments against the enforceability and
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| estate. The named defendant was Branch
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| | effectiveness of the releases, but Judge
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| Banking and Trust Company, the lender,
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| | Barker concluded on page 18:having
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| which refinanced Midwest Lumber's working
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| | determined that the releases clearly and
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| capital loan facility.
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| | unambiguously released [Branch Banking]
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| Defaults/forbearance agreements. Midwest
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| | from any claim by [Midwest Lumber and the
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| Lumber couldn't make its payments, so it
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| | Davises] arising out of their banking
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| and the Davises entered into a series of
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| | relationship and having further found
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| loan modifications and, ultimately,
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| | that [Midwest Lumber and the Davises]
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| forbearance agreements with Branch
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| | were not under economic duress when they
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| Banking. As an inducement for Branch
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| | signed the releases and that [Midwest
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| Banking to agree to the terms set out in
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| | Lumber and the Davises] have not returned
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| the forbearance agreements, Midwest
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| | the consideration they received from
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| Lumber and the Davises gave comprehensive
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| | [Branch Banking] in exchange for signing
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| written releases to Branch Banking in
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| | the releases, all of [Midwest Lumber and
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| each forbearance agreement that stated in
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| | the Davises] claims in the Second Amended
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| pertinent part:
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| | Complaint must be DISMISSED.
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| [Midwest Lumber and the Davises] hereby
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| | Message. The Midwest Lumber case begs
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| release and forever discharge [Branch
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| | the question of whether lenders should
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| Banking], its officers, directors,
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| | demand general releases in all of their
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| attorneys, employees, predecessors and
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| | forbearance agreements. Most workout
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| successors (the "Released Parties") of
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| | scenarios will not involve questionable
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| and from any claims, demands,
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| | conduct on the part of the lender or
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| obligations, actions, causes of action,
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| | allegations of lender liability. So,
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| damages, costs (including without
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| | such a release might not directly apply
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| limitation court costs and attorneys' and
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| | in many situations. But there is no
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| paralegals' fees and expenses), expenses
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| | downside from the aspect of the lender to
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| and compensation of any nature whatsoever
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| | include such general releases in the
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| (collectively, "Claims"), known or
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| | forbearance agreements. Indeed, there is
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| unknown, whether based in tort, contract
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| | only upside: protection. The time the
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| or any other theory of recovery, or which
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| | parties forbear is the time to get a
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| may exist or might be claimed to exist at
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| | release - even if you don't think you'll
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| or prior to the date of this Letter
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| | ever need it. Midwest Lumber generally
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| Agreement on account of or in any way
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| | supports the proposition that such a
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| arising out of the Banking relationship
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| | release should be effective to bar future
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| between [Midwest Lumber], [Branch
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| | lender liability claims brought by the
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| Banking] and its successors . . ..
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| | borrowers or guarantors, so releases of
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| Id. at 15.
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| | liability probably should be negotiated
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| Midwest Lumber/Davises Lawsuit. The suit
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| | into most if not all forbearance
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| giving rise to the opinion originated
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| | agreements, if possible.
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| with the filing of a complaint by Midwest
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|
