CSY Liquidating Corp. v. Harris Trust and Sav. Bank

• Decision Date: 03 December 1998
• Docket Number: No. 98-2023,98-2023
• Citation: 162 F.3d 929
• Parties: CSY LIQUIDATING CORPORATION, Plaintiff-Appellant, v. HARRIS TRUST AND SAVINGS BANK, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 929

162 F.3d 929

CSY LIQUIDATING CORPORATION, Plaintiff-Appellant, v. HARRIS TRUST AND SAVINGS BANK, Defendant-Appellee.

No. 98-2023.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 30, 1998.

Decided Dec. 3, 1998.

Daniel R. Shulman (argued), Shulman, Walcott & Shulman, Minneapolis, MN, for Plaintiff-Appellant.

Daniel W. Weil, Chapman & Cutler, Chicago, IL, Christina L. Sciabica, Grippo & Elden, Chicago, IL, for Defendant-Appellee.

Before POSNER, Chief Judge, and EASTERBROOK and RIPPLE, Circuit Judges.

POSNER, Chief Judge.

Harris Bank issued an $8 million line of credit to CSY, a manufacturer of barges, on a secured basis. CSY defaulted, and Harris sold CSY's promissory notes to Trinity, a competitor of CSY, for the full amount that CSY owed the bank. Trinity demanded payment from CSY and threatened to foreclose on the security if payment was not forthcoming. The demand and threat precipitated negotiations that ended in CSY's selling its assets to Trinity. In this diversity suit against the bank, CSY (not the barge manufacturer, but the shell of CSY that remained after the assets were sold) claims that the bank violated Illinois law, mainly by conspiring with Trinity to bring about the sale of CSY's assets for less than their true value. The district court granted summary judgment for the bank.

Trinity had agreed to give the bank $250,000 for a two-week exclusive right to decide whether to buy CSY's promissory notes, contingent however on Trinity's success in acquiring control of CSY. To facilitate the takeover and thus earn the $250,000, the bank gave Trinity financial information about CSY that the bank had acquired in the course of its relationship with its borrower, including a loan history and an appraisal of CSY's assets. Armed with this information, Trinity was able (so CSY argues, we may assume correctly) to drive a hard bargain with CSY for the purchase of its assets. CSY does not question the bank's right to sell the promissory notes; the sale of a defaulted loan is a conventional method of collection. And since the objective was proper, the sale agreement was actionable as a conspiracy only if the implementation of the agreement involved an unlawful act, Adcock v. Brakegate, Ltd., 164 Ill.2d 54, 206 Ill.Dec. 636, 645 N.E.2d 888, 894 (Ill.1994); Buckner v. Atlantic Plant Maintenance, Inc., 182 Ill.2d 12, 230 Ill.Dec. 596, 694 N.E.2d 565, 571 (1998); Kunik v. Racine County, 946 F.2d 1574, 1580 (7th Cir.1991); Hechler Chevrolet, Inc. v. General Motors Corp., 230 Va. 396, 337 S.E.2d 744, 748 (1985), such as threatening to break the borrower's kneecaps if he didn't pay off the loan. Nothing so garish is involved here; rather, CSY argues that the bank, to induce Trinity to pay it the full amount of its promissory notes, violated the Illinois Banking Act.

The Act, so far as it bears on this case, forbids a bank to "disclose to any person, except to the customer or his duly authorized agent, any financial records relating to that customer of that bank unless ... the bank is attempting to collect an obligation owed to the bank and the bank complies with the provisions of Section 2I of the Consumer Fraud and Deceptive Business Practices Act." 205 ILCS 5/48.1(c). Section 2I forbids any person to "attempt to collect an obligation by communicating in any way with an employer with regard to the obligation owing by one of his employees" unless the employee has been in default for at least 30 days and the creditor has given the employee at least 5 days' notice of its intention to communicate with the employer. 815 ILCS 505/2I. CSY reads the Banking Act in light of the Consumer Fraud Act to forbid a bank to disclose a borrower's financial records to anyone other than the borrower's employer, and then only if the 30-day and 5-day limitations in the Consumer Fraud Act are observed.

The Banking Act does not create a private right to damages for a violation of the privacy section; the only remedies for such a violation that are specified in the Act are criminal penalties and other public penalties. See 205 ILCS 5/48(7), (9), 5/48.1(e), (f). And a careful analysis in Stern v. Great Western Bank, 959 F.Supp. 478, 484-85 (N.D.Ill.1997), concludes that the Illinois courts would not construe the Act to imply such a right either. This raises the interesting question whether the tort of conspiracy can be used to create the very remedy for a statutory violation that the legislature did not want created, provided only that the defendant committed the violation in concert with someone else. Certainly the orthodox definition of the tort ("a combination of two or more persons, by some concerted action, to accomplish some criminal or unlawful purpose, or to accomplish some purpose, not itself criminal or unlawful, by criminal or unlawful means," Hechler Chevrolet, Inc. v. General Motors Corp., supra, 337 S.E.2d at 748; see also Adcock v. Brakegate, Ltd., supra, 206 Ill.Dec. 636, 645 N.E.2d at 894; Operation Rescue-National v. Planned Parenthood of Houston & Southeast Texas, Inc., 975 S.W.2d 546, 553 (Tex.1998); Marshak v. Marshak, 226 Conn. 652, 628 A.2d 964, 970-71 (1993)) allows for this possibility. But we cannot find a case that actually discusses the propriety of using the conspiracy tort to create a private damages remedy for the violation of a statute that contains no private remedies without considering whether the addition of such a remedy would promote the policy of the statute rather than interfere with a carefully calibrated system of remedies or upset a legislative compromise. We doubt that the tort has so ambitious an office, which would put it on a collision course with legislative intent. But we need not run this particular hare to the ground. CSY must lose even if a concerted violation of the privacy provision of the Banking Act is actionable as a civil conspiracy. It must lose because the Banking Act does not say--and could not mean--that a bank may disclose a borrower's financial records only to the borrower's employer.

The Act authorizes the bank to disclose a borrower's financial records if the bank is trying to collect a loan, except that disclosure to the borrower's employer must comply with the provisions of the Consumer Fraud Act. Those provisions did not come into play here because Trinity was not CSY's employer. Read as CSY would have us read it, the Banking Act provides less protection to employees than to other debtors, for on that reading it totally forbids disclosure (without the borrower's consent, which is likely to be withheld...