SunTrust Banks Inc. (STI:US) isn’t liable for losses connected with the bankruptcy of LandAmerica Financial Group Inc., a federal appeals court ruled.
A three-judge panel in Richmond, Virginia, today upheld a lower court ruling that dismissed claims by about 400 former clients of LandAmerica who allege SunTrust “aided and abetted” misconduct and engaged in a fraud conspiracy.
The plaintiffs invested money in LandAmerica 1031 Exchange Services Inc., or LES, in order to avoid having to pay capital gains taxes on properties that sold for profit. They allege Atlanta-based SunTrust continued to assist LES in processing investor transactions after learning that LES was facing “major” liquidity problems.
“The fact that SunTrust allowed LES to continue to make deposits into and withdrawals from the 3318 account is a far cry from the concerted action necessary to evince a decision to conspire in the defrauding of the exchangers,” according to the court’s opinion.
Clients of LandAmerica were able to avoid capital gains because the company bought their property and then put the money into other similar investments. SunTrust handled LandAmerica’s accounts.
LandAmerica owned what had been the third-largest group of title insurance companies in the U.S. It filed for Chapter 11 protection in November 2008 and confirmed a plan one year later. The plan created a trust designed to bring lawsuits.
Michael McCoy, a SunTrust spokesman, didn’t immediately respond to an e-mail message seeking comment on the ruling.
The lead case is Terry v. SunTrust Banks Inc., 11-1704, U.S. Court of Appeals for the Fourth Circuit (Richmond).
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