Banking litigation is a little different from the standard types of commercial litigation.
Banking litigation is unique from other types of commercial litigation for many reasons. Some of the reasons are fair, others not. Below are a few of the more notable differences.
At Least One of the Parties in the Litigation Is Rich
When a lawsuit involves a bank, chances are good that the bank has the financial means to litigate the case all the way to trial and appeal. It also means the bank has the money to pay out any monetary judgments against it. But many instances of commercial litigation involve small businesses that have little cash and few resources to spend years in litigation. This means commercial litigation not involving banks is sometimes more likely to settle and avoid trial.
People Hate Banks
This isn’t always true, but if you have a lawsuit where it’s a bank versus a “little guy,” (such as a small business or individual), the average juror will start the case pulling for the little guy. This doesn’t mean the juror will always have the little guy beating the “big bad bank,” but this is usually the initial bias the juror will have. This bias is similar to how most people feel about insurance companies.
The reasons for these biases are many but can stem from the recent memories of the Great Recession and the predatory lending of many banks. The bias can also be a result of perceived differences in money; most jurors think the bank plenty of cash. Unless the little guy is evil or clearly in the wrong, a juror might feel that the little guy should win simply because the bank can afford to lose the case. This may not be ethical or fair, but that’s how many jurors think.
Banks Don’t Always Negotiate a Settlement
Banks are usually large institutions with rules and guidelines for its employees, including its lawyers. These rules come from higher-ups (such as a CEO, president or the board of directors) and don’t always make sense in certain situations, like in a single lawsuit.
For example, it might make financial sense for a bank to settle a foreclosure lawsuit for less than what the homeowner owes the bank. This could be because the cost of litigation and the state of the real estate market means the bank will bleed cash (and lose a lot of money) getting the house back from the homeowner and taking care of it until they can sell it. However, the bank doesn’t want to get a reputation of settling cases for less than what a homeowner owes. Therefore, the bank is willing to pass on negotiating a settlement to keep its reputation of getting paid no matter what. The bank believes that in the long run, it will collect more money maintaining its no-settlement reputation.