U.S. District Court Allows Suit Against UDFI For Allegedly Illegally Seizing America West Bank to Proceed

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Principal Officers Report Vindication Regarding 2009 Alleged Unlawful Seizure of America West Bank


Nearly a decade ago, several local banks were closed by the Utah Department of Financial Institutions (UDFI). The owners of one of these banks, America West Bank, sued the state of Utah via the UDFI and the Commissioner of Financial Institution asserting that seizure of the Bank was unlawful and done without sufficient cause and evidence. UFDI and the Commissioner asked the U.S. District Court to dismiss the case on numerous grounds. (Case No. 2:16-cv-326-CW-EJF)

On February 6, 2018, the U.S. District Court, Judge Clark Waddoups denied the Motion of UFDI and the Commissioner. The Court ruled that America West Bank Members (“AWBM”), the owners of the Bank, had sufficiently alleged in their Complaint that prior to the seizure of America West Bank’s assets in 2009, the Bank should have received a non-arbitrary, fair and impartial hearing. Judge Waddoups found that AWMB’s Complaint properly alleged that constitutionally guaranteed rights of due process had not been upheld by the government at the time of seizure. (Case No. 2:16-cv-326-CW-EJF)

Bruce R. Baird, co-counsel for AWMB who argued against the UFDI/Commissioner’s Motion, said: “The Court’s decision is extraordinarily thorough in its legal analysis and we are grateful that the Court has given us a chance to further prove our case, including damages."

Judge Waddoups ruled, after reviewing the Commissioner’s ex parte seizure petition, that “at this stage, the Amended Complaint contains sufficient non-conclusory allegations to support a reasonable inference that Commissioner Leary knowingly violated the law in acting to seize the bank when he did. The Court cannot conclude at this time that the statutory requirements were met on non-arbitrary grounds.” (Case No. 2:16-cv-326-CW-EJF)

Further, the Court ruled that the AWB could proceed in its civil suit against Commission Leary “because it was clearly established [in well-plead allegations of the Amended Complaint] that [Commissioner Leary] could not act without reasonable justification to seize the bank under the guise of the state authorizing statute, and because the complaint contains sufficient allegations that he acted arbitrarily out of political pressure and motive, rather than legitimate government interest.” (Case No. 2:16-cv-326-CW-EJF)

Finally, because the Court concluded that the alleged conduct if proven would violate the federal Constitution, the Court also found that AWB had sufficiently made well-plead and unrebutted factual allegations, which the Court accepted as true, allowing the Court to also conclude that a due process violation may have occurred and could also be prosecuted under the Utah Constitution as well. (Case No. 2:16-cv-326-CW-EJF)

For more information about America West Bank, the recent Federal Court ruling and ongoing proceedings, please visit http://www.illegalbankseizure.com.

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Tara Alvey

Bruce R. Baird

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