RL REGI North Carolina, LLC v. Lighthouse Cove, LLC
367 N.C. 425
| N.C. | 2014Background
- Regions Bank financed approximately $4,208,000 for acquisition and development of about 57 acres in Brunswick County, secured by real estate and guaranteed by the LC Entities' partners and spouses, including Connie S. Yow.
- The LC Entities defaulted by 2009, leading to a forbearance agreement on December 7, 2009 in which the lender would refrain from collection remedies and debt payments were deferred in exchange for the guarantors' waiver of claims.
- The forbearance agreement contains a broad waiver: each obligor releases the lender from any and all claims, defenses and causes of action, known or unknown, arising from pre-agreement circumstances, including usury.
- In September 2010 RL REGI North Carolina, LLC purchased Regions Bank’s interest in the LC Entities’ loans, and in March 2012 filed suit for indebtedness; Connie Yow asserted ECOA violations as an affirmative defense.
- The trial court granted summary judgment to RL REGI on all claims except those related to ECOA, finding a genuine issue of material fact as to ECOA violation; after trial, defendant won on ECOA (guaranty voided).
- The Court of Appeals affirmed, holding the forbearance waiver could not waive ECOA defenses; the North Carolina Supreme Court granted review to decide the waiver effect on ECOA claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ECOA claim can be waived by a forbearance agreement | RL REGI argues waiver extinguishes ECOA defenses. | Yow contends ECOA defenses cannot be waived in a loan-forbearance. | Waiver extends to ECOA claims; forbearance waiver bars ECOA defenses. |
| Whether the forbearance waiver is broad enough to include statutory claims | Waiver language is expansive, including ‘any claims’ and ‘whether known or unknown’. | Waiver should be limited to contract/ tort claims, not statutory claims unless clearly stated. | Waiver language is broad enough to include statutory claims, including ECOA. |
| Whether the waiver was enforceable given public policy concerns about ECOA violations | Public policy disfavors waiving anti-discrimination protections. | Contract rights may be waived as negotiated benefits without public policy defeat. | Public policy concerns do not defeat a valid contract-based waiver; enforceable as a negotiated settlement. |
Key Cases Cited
- Ballard v. Bank of Am., 734 F.3d 308 (4th Cir. 2013) (waiver of potential ECOA claims supported as negotiated settlement)
- Bank of the West v. Kline, 782 N.W.2d 453 (Iowa 2010) (guarantor may assert ECOA violation as defense in some circuits)
- Integra Bank/Pittsburgh v. Freeman, 839 F. Supp. 326 (E.D. Pa. 1993) (discusses ECOA defenses and waivers in lending context)
- Alexander v. Gardner–Denver Co., 415 U.S. 36 (U.S. 1974) (employee may waive EEOA claims as part of settlement)
- Clement v. Clement, 230 N.C. 636 (1949) (contract rights and waivers subject to general contract interpretation)
- Powers v. Travelers Ins. Co., 186 N.C. 336 (1923) (contract termination and waiver principles guiding interpretation)