Kellie Ballard v. Bank of America, N.A.
2013 U.S. App. LEXIS 22100
| 4th Cir. | 2013Background
- Michael Ballard (FoodSwing) obtained a $4.1M loan from Bank of America in 2008; Kellie Ballard, his wife, signed as an unlimited guarantor and waived redemption rights in property securing the loan.
- FoodSwing defaulted repeatedly (2009, 2010, 2011); Bank and the Ballards entered successive loan-restructuring agreements in which Kellie again guaranteed the debt and executed broad waivers of “any and all” claims after consulting counsel.
- Kellie alleges she played no role in FoodSwing, that her counsel had conflicts of interest, and that she was required to guarantee the loan without the Bank first assessing Michael’s independent creditworthiness, violating ECOA.
- The Bank recorded liens on co-owned collateral (a Maryland home and a California winery) securing the loan; Kellie concedes a signature limited to clearing title to co-owned collateral would be permissible.
- The district court dismissed Kellie’s ECOA claims, unjust enrichment claim, and declaratory-judgment claim with prejudice; on appeal the Fourth Circuit affirmed, holding her claims were waived.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether requiring Kellie to sign an unlimited guaranty violated ECOA’s marital-status protections | Ballard: Bank forced her to guarantee the full loan without first assessing husband’s creditworthiness; ECOA forbids spousal signature unless exceptions apply | Bank: Kellie’s status as co-owner of collateral (or de facto joint applicant) permitted requiring her signature, including an unlimited guarantee | Court: It may have been an ECOA violation if Bank required unlimited guarantee without first determining husband uncreditworthy, but the court did not decide the issue because of waiver |
| Whether a spouse who co-owns collateral is a de facto joint applicant permitting unlimited guarantees | Ballard: Co-ownership of collateral does not make spouse a de facto joint applicant for the business loan | Bank: Co-ownership of collateral (or related precedents) allows treating spouse as de facto joint applicant and requiring guarantee | Court: Precedents do not support such a broad rule; co-ownership of the entity benefiting from the loan (not mere collateral) supports de facto joint-applicant status |
| Whether broad waivers in the restructuring agreements foreclose ECOA and related claims | Ballard: Waivers were coerced or ineffective because they would permit lenders to evade ECOA; counsel conflicts made waivers involuntary | Bank: Waivers were knowingly and repeatedly executed after consultation with counsel in exchange for restructuring concessions | Court: Waivers were knowing and voluntary; she expressly confirmed counsel review and negotiation participation, so claims are waived |
| Whether unjust enrichment and declaratory relief survive despite waiver or statute-of-limitations defenses | Ballard: These claims are distinct and should proceed | Bank: They are barred by the same waivers and, alternatively, by limitations | Court: Those claims are also waived; no need to reach statute-of-limitations question |
Key Cases Cited
- Moran Foods, Inc. v. Mid-Atl. Mkt. Dev. Co., LLC, 476 F.3d 436 (7th Cir. 2007) (discusses whether guarantors qualify as ECOA “applicants”)
- Midlantic Nat’l Bank v. Hansen, 48 F.3d 693 (3d Cir. 1995) (spouse who co-owns entity benefiting from loan can be a de facto joint applicant)
- Riggs Nat’l Bank of D.C. v. Linch, 36 F.3d 370 (4th Cir. 1994) (permitted unlimited personal guarantee where lender first determined borrower was not creditworthy)
- Silverman v. Eastrich Multiple Investor Fund, L.P., 51 F.3d 28 (3d Cir. 1995) (treats guarantors as applicants under ECOA regulations)
- Gardner-Denver Co. v. Gardner-Denver Employees, 415 U.S. 36 (1974) (prospective waivers of statutory nondiscrimination rights differ from voluntary waivers in settlement contexts)
- Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697 (1945) (a waiver cannot stand if it would thwart the statute’s remedial purpose)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: complaint must state a plausible claim; courts draw reasonable inferences for plaintiff)