Friday Frivolity: Trump v. JPMorgan Chase Bank

Usually, we call our Friday feature “Frivolity” because it is about something light or orthogonal to contracts law. Today, we are posting about a frivolous law suit filed by POTUS. These things end in two ways: quietly and ignominiously with a dismissal, or loudly and more ignominiously with a shameful payment, part bribe, part extortion.

It’s really quite simple. Banks make loans to people based on their creditworthiness. Sometimes, banks refuse to make loans to people, regardless of the creditworthiness because there are credible allegations that the borrower is engaged in criminal conduct. The bank could face sanctions for financing criminal activity.

The plaintiff in this action clearly fell into the latter category. At the time of the actions alleged in the Complaint, plaintiff was being investigation in connection with two sets of federal crimes and two sets of state crimes. His business was subject to a high-profile civil suit for bank fraud, and he was also subject to a civil suit for lying about having sexually assaulted a woman. His charitable foundation was shut down due to massive fraud. Does that make him a bad credit risk? Not necessarily. Might a bank reasonably conclude that doing business with him was a bad look, regardless of the outcome of those various lawsuits? Absolutely.

After some bluster about JPMorgan Chase Bank’s (JPMC) empty rhetoric about “trust,” the Complaint alleges that JPMC “without notice” informed plaintiffs that their JPMC accounts would all be closed in two months. Isn’t that notice? The Complaint alleges that JPMC had political, indeed “woke,” motivations for this move.

Perhaps worse, plaintiffs allege that JPMC put plaintiffs’ names on a “black list” available to other financial institutions, inducing other banks, causing them to refuse to do business with the plaintiffs, resulting in financial and reputational harm. The Complaint alleges that JPMC’s Chair, Jamie Dimon, specifically authorized the blacklisting of plaintiffs. Plaintiffs claim that they only learned of this blacklisting recently. I wonder how they learned of it. Would it matter to the courts if the plaintiffs learned of it because the blacklist was shared with federal agencies that now answer to the unitary executive?

This sounds bad, of course, unless the reason for the “blacklist,” assuming it exists and is actually a blacklist, is that there were good reasons to think that plaintiffs were engaged in criminal wrongdoing. If all JPMC and Jamie Dimon did was throw up a red flag and tell other financial institutions to proceed with caution, that may have been more like a public service. In any case, did other financial institutions lack independent bases on which to conclude that it might be a bad idea to do business with a man accused of having led an insurrection and the entities he runs?

A bit confusingly, this is all the fault of Barack Obama (below). President Obama launched an initiative in 2009 called the Financial Fraud Task Force. In 2013, the Task Force launched Operation Choke Point, which sought to exclude mass-marketing fraudsters from access to banking institutions. According to the Complaint, citing to a few news articles from 2018, some legitimate businesses ended up in the regulators’ crosshairs.

But all of that ended when Obama left office. The Complaint does not even allege that Operation Choke Hold was revived under the Biden administration. Rather, it alleges that the banks themselves started debanking persons of whose politics it disapproved. The remainder of the Complaint narrates the sad story of other entities debanked for the political views, the good work of red states to combat the practice, and the determination of the current administration to end it. Thank you for your service.

The Complaint alleges trade libel and breach of the implied covenant of good faith and fair dealing against JPMC, and violations of Florida’s statute prohibiting deceptive trade practices against Jamie Dimon. It seeks declaratory relief against JPMC and $5 billion in damages, which is . . . a number.

But here’s the thing. The law firms that shamefully paid to settle similar lawsuits did so because they lived from work involving federal agencies. They could not continue to represent their clients effectively if they were on the outs with the current administration. The law firms that did not work much with federal agencies told the government to pound sand. JPMC is likely in the former camp, but it is also too big to fail.

But not too big to settle.