In the Seventh Circuit, Rabobank NA beat back an attempt at busting up its exclusive banking arrangement with Bankruptcy Management Solutions, Inc., or BMS.
According to the Jan. 26 opinion by Circuit Judge Richard A. Posner, BMS says it is the largest supplier of software and services to bankruptcy professionals. BMS and the bank evidently agreed that anyone hiring BMS must also use the bank.
BMS had an agreement with an individual who serves as a bankruptcy trustee. The contract required the trustee to hire Rabobank and deposit all estate funds with that bank in any case where the trustee uses BMS’ services.
A creditor in one of the trustee’s cases sued, claiming that the contracts violated the Bank Holding Company Act, 12 U.S.C. § 1972(1)(E). That section states that a bank cannot provide services to a customer on the condition that the customer deal with no other bank, except to assure the soundness of a credit transaction.
Upholding the district court’s dismissal of the suit, Judge Posner said that the creditor-plaintiff failed to “distinguish between exclusive dealing and a single transaction.”
Had the bank precluded the trustee from using any other bank in future cases, that would have been exclusive dealing, Judge Posner said. There was no exclusive dealing because the trustee can use another bank when a new case comes along, although the trustee would not be able to use BMS in that case.
In a new case, the trustee’s decision would be based on the trustee’s needs, “not based on a commitment made before the new case existed,” Judge Posner said.
As authority for his conclusion, Judge Posner cited a 1985 decision on the same statute written by Seventh Circuit Judge Frank Easterbrook. That decision, Exchange National Bank of Chicago v. Daniels, held that the Act prohibits exclusive dealing practices that prevent customers from dealing with other banks. Regarding the trustee, Judge Posner said, “No one forced him to deal with BMS and Rabobank.”