Bank Holding Company Act

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7^th Circuit Court of Appeals

Case Name: McGarry  McGarry, LLC v. Rabobank, N.A.

Case No.: 16-3164

Officials: POSNER, MANION, and WILLIAMS, Circuit Judges

Focus: Bank Holding Company Act

Eugene Crane, the trustee in the bankruptcy of a company named Integrated Genomics, Inc., hired BMS to provide a variety of services in Integrated’s bankruptcy proceeding. The parties’ contract required the trustee to hire Rabobank to provide banking services to him in the proceeding and to deposit with the bank substantially all of the funds in any bankruptcy estate in which the trustee uses BMS’s services. A separate contract between the trustee and the bank, to which BMS was not a party, authorized Rabobank to with‐ draw from the funds a monthly fee for the services it renders in the bankruptcy proceeding. These contracts may have been the product of a prior agreement between BMS and Rabobank in which BMS promised Rabobank that it would require trustees who used its services to hire Rabobank and Rabobank promised BMS that it would remit to BMS a portion of the fees it obtained. The plaintiff, a law firm, was a modest creditor of Integrated and filed a claim in the bankruptcy proceeding, at the conclusion of which it received a distribution of $12,472.55. It would have received $12,666.90 had not the trustee de‐ ducted $194.35 to pay for a small part of Rabobank’s fee for providing banking services to him, and even more had Ra‐ bobank paid interest on the bankruptcy estate’s deposits, which it did not. The plaintiff alleges that the three contracts—between Rabobank and BMS, between the trustee and BMS, and be‐ tween the trustee and Rabobank—violated 12 U.S.C. § 1972(1)(E), a section of the Bank Holding Company Act that states that “a bank shall not in any manner extend cred‐ it, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement … that the customer shall not obtain some other credit, property, or service from a compet‐ itor of such bank, a bank holding company of such bank, or any subsidiary of such bank holding company, other than a condition or requirement that such bank shall reasonably impose in a credit transaction to assure the soundness of the credit.” The plaintiff argues that by requiring the trustee in the Integrated bankruptcy to obtain banking services exclu‐ sively from Rabobank, the bank conditioned its provision of services on the trustee’s not obtaining equivalent services from a competitor of that bank, and so violated the Act.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.