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Vathana v. EverBank

United States Court of Appeals, Ninth Circuit

October 31, 2014

EK VATHANA, individually and on behalf of all others similarly situated, Plaintiff-Appellant,
v.
EVERBANK, AKA EverBank Direct, AKA EverBank Federal Savings Association; EVERBANK FINANCIAL CORP.; EVERBANK WORLD MARKETS, Defendants-Appellees

Argued and Submitted February 14, 2014, San Francisco, California

Page 1273

Appeal from the United States District Court for the Northern District of California. Richard Seeborg, District Judge, Presiding. D.C. No. 5:09-cv-02338-RS.

SUMMARY[*]

Florida Law

The panel affirmed in part and reversed in part the district court's summary judgment in favor of EverBank on a breach of contract claim brought by a certified class of Everbank customers who purchased EverBank WorldCurrency certificates of deposit denominated in Icelandic króna.

The class alleged that EverBank breached the terms and conditions of the WorldCurrency CDs by closing the WorldCurrency CDs without the class members' consent, and delivering the value of the closed CDs in U.S. dollars at the exchange rate that EverBank obtained in the wholesale market.

Under Florida law, the panel held that no reasonable jury could find that EverBank acted in bad faith when it exercised its discretion to close the WorldCurrency CDs to limit losses to itself or its customers. The panel also held that a reasonable jury could find that the terms and conditions were silent with respect to the currency conversion rate that applied when the WorldCurrency CDs were closed and the proceeds from the CDs returned to the class members. The panel reversed on this ground, and remanded to the district court to resolve whether EverBank breached the terms and conditions when it returned the value of the WorldCurrency CDs to the class members.

Michael Millen (argued), Law Office of Michael Millen, Los Gatos, California, for Plaintiff-Appellant.

Deborah S. Birnbach (argued), Goodwin Procter LLP, Boston, Massachusetts; Robert B. Bader, Goodwin Procter LLP, San Francisco, California; William M. Jay, Goodwin Procter LLP, Washington, D.C., for Defendants-Appellees.

Before: Alex Kozinski, Chief Judge, and Diarmuid F. O'Scannlain and Mary H. Murguia, Circuit Judges.

OPINION

Page 1274

MURGUIA, Circuit Judge.

Ek Vathana and a certified class of EverBank customers purchased EverBank WorldCurrency certificates of deposit (CDs) denominated in Icelandic króna (ISK), which matured between October 8, 2008, and December 31, 2008. They appeal the district court's order granting summary judgment for EverBank on their breach of contract action. We have jurisdiction under 28 U.S.C. § 1291. We affirm in part and reverse in part.

BACKGROUND

A. EverBank's WorldCurrency CD

Unlike traditional certificates of deposit, an EverBank WorldCurrency CD is denominated in foreign currency. This means that, in addition to earning interest, the principal itself may rise or fall in value over the maturity period of the CD, depending on the strength of the foreign currency relative to U.S. dollars.

When a customer opens a WorldCurrency CD, EverBank adds the customer's investment to its treasury and credits the customer's WorldCurrency CD in a foreign currency of the customer's choice. Under paragraph 2.7.1 of the terms and conditions applicable to the WorldCurrency CDs (the " Terms and Conditions" ), the exchange rate that EverBank uses to convert the customer's initial investment into the foreign currency is a rate " within 1% of the wholesale spot price we pay for your currency." The " wholesale spot price" is the currency's price in the wholesale currency market when the customer opens the CD.[1]

This conversion occurs only as a book transaction: EverBank does not actually exchange the currency invested for the physical currency in which the CD is denominated. Instead, in separate transactions, EverBank purchases " forward contracts" to hedge the risks associated with its foreign currency liabilities to its WorldCurrency CD customers. The forward contracts allow EverBank to acquire a set amount of foreign currency on a specified date and at a set price, or exchange rate, that is based on the currency's wholesale spot price when EverBank purchases the contract. By entering into forward contracts for the foreign currency in its WorldCurrency CDs, EverBank is assured delivery of the currency from which to pay its customers on the date the CDs mature, should its customers choose to liquidate their investments. Id. The forward contracts protect EverBank from the risks of exchange rate fluctuation before the CDs' maturity dates.

Paragraph 2.7.10 of the Terms and Conditions sets out the WorldCurrency CD's renewal policies upon maturity. It provides in relevant part,

Renewal Policies: Except as provided in the Lock-In Alternative section above, your WorldCurrency CD is automatically renewable; however, you may

Page 1275

do one of the following options by providing instructions to the Trading Desk at least one week prior to the ...

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