Each year, a research team at Super Lawyers undertakes an independent, statewide survey of lawyers, compiles peer reviews and makes good-standing and disciplinary checks of thousands of attorneys. Only attorneys receiving the highest marks qualify as a Super Lawyer.

Noël represents plaintiffs in lender liability matters, complex business litigation, class actions and catastrophic personal injury cases. Noël has co-tried most of the firm’s largest cases, and has obtained jury verdicts and settlements in excess of $200 million on behalf of her clients. In 2011, she was named one of the “Top 75 Women Litigators” in California by the Los Angeles and San Francisco Daily Journals.

Noël joins firm partner A. Barry Cappello as a Super Lawyer. Cappello has received the honor every year since 2007.

The pledge came during a gathering at a Legal Aid Foundation luncheon last week. A. Barry challenged an audience of more than 150 people to invest in the stability of the foundation. “The Legal Aid Foundation plays a critical role in Santa Barbara County,” said Cappello, “Those of us in the legal community should do everything we can to support the foundation’s efforts to help the less fortunate receive legal representation.”

“The need for assistance is growing as economic conditions force families and individuals into legal situations they never could have imagined,” says Leila J. Noël, partner at Cappello & Noël. “Our firm is a strong believer in the foundation’s good work and its steadfast commitment to giving equal legal access to all.”

Cappello & Noël, LLP is one of the preeminent litigation law firms in the country. The Santa Barbara firm has a successful history of representing individuals and small business owners who take on large corporations and their powerful law firms. In particular, Cappello & Noël is acknowledged as the pioneer in lender liability law, where borrowers seek justice against lender misconduct. It also represents plaintiffs in complex business litigation, catastrophic injury and wrongful death cases, and plaintiffs’ class actions. The firm is a strong proponent of equal access to the legal system and professional legal representation regardless of an individual’s financial circumstances.

Legal Aid Foundation of Santa Barbara County provides free civil legal services to victims of domestic violence, seniors and low-income individuals throughout the county. Last year, the foundation assisted over 5,100 residents of the county in matters of family law, senior law, housing and eviction defense, consumer law and benefits assistance.

For more information, contact Legal Aid’s development director Niki Richardson at 805.963.6754, ext. 109.

SANTA ANA, Calif. (CN) (Dec. 19, 2011)– The City of Tustin sued Keybank and other lenders to a developer who was hired redevelop a former U.S. Marine base, borrowed $70 million against the project, then failed to complete the work and defaulted on the loans.

The city had ambitious plans for property, which would “create a significant enhancement to the city and to Orange County,” according to the Superior Court complaint.

So massive was the envisioned project that the city says it would take more than two decades for it to be fully built out.

The city contracted with a group called Tustin Legacy Community Partners, to whom it conveyed a significant portion of the project site.

“The sole consideration for this phase of the conveyance was the developer’s promise to perform specific, identified infrastructure development work under specific budgets,” according to the complaint.

But “Only months later, the city was … asked if it would allow the developer to finance a portion of its development costs via a loan from the instant lender defendants, with the real property to secure the purported development loan.”

The city says that in presenting the loan to the city, the defendants – Keybank, U.S. Bank, and First American Title Insurance – “failed to disclose what they knew or should have known, given their enmeshed lending relationship with the developer/borrower entities: that, after obtaining the land for free, and securing a $70 million loan with that land to provide itself with funds, the developer would not perform, and the city would be left with an unconstructed project. In Solyndra-like fashion, that is what occurred.

“The lenders’ loan package had contained numerous provisions to reassure the city that the lender would act as a reputable construction lender for a long-term construction project. These included requirements for lender inspections and vetting of costs before advancing funds, restrictions of the funds to development costs, restriction of funds based on availability formulae, the promise that the property and the loan would not cross-collateralize or secure other obligations, and others. Despite these and other provisions on which the city relied, the lenders then apparently ignored the provisions and made over $50 million in advances under the loan, although the project was in its infancy and the amounts released to the developer bore no relation to any development completed. Had the lenders actually done due diligence, and properly administered the loan as represented, such draws would not have been allowed: the lenders would have seen that less than three plans were ever deemed complete by the city, of the over 100 plans which were required for Phase I of the development, and that the developer had only just begun grading.

“The city ultimately negotiated a termination of the development agreements, and the developer reconveyed the property to the city. However, the city’s property is saddled with record encumbrances related to the lenders’ deeds of trust, which secured the sham construction loan. The city therefore seeks to quiet title to the property, and to obtain damages and other relief for the lenders’ fraud, breaches of contract, and other improper conduct,” according to the 30-page complaint.

Tustin alleges fraudulent nondisclosure, intentional misrepresentation, negligent misrepresentation, concealment, aiding and abetting fraud, breach of contract, and breach of implied covenant of good faith and fair dealing.

It is represented by A. Barry Cappello with Cappello & Noel of Santa Barbara

The luncheon is a fundraiser for the foundation. Cappello & Noël’s managing partner, A. Barry Cappello, will take to the podium to urge those in attendance to donate to this important legal service.

The mission of the Legal Aid Foundation of Santa Barbara County is to provide high-quality legal services in order to ensure that low-income persons and seniors have access to the civil justice system in times of crisis – to secure safe, habitable shelter, adequate income, and protection from domestic violence and elder abuse.

For more information about the Legal Aid Foundation, go to http://www.lafsbc.org/.

Lenders often demand far more security than they need when a business borrower seeks a loan. While this may be a prudent and cautious lending strategy for banks, it can prove disastrous for a business borrower or guarantor who pledges personal collateral for the loan.

For example, a lender may ask for a deed of trust or mortgage on the business borrower’s personal home in addition to a security interest in the business inventory, receivables or other intangibles of the borrower’s business. It may also demand a guarantee by a corporate officer and insist on a deed of trust of the guarantor’s house to secure the guarantee. In such situations, both the borrower and guarantor are at risk of losing their homes if the loan defaults.

Guarantors must understand that a guarantee is a legally binding agreement that in effect could make the guarantor just as liable as the borrower for repayment of the loan. While most guarantors believe that the lender will come after them only after failing to get satisfaction from the borrower and the borrower’s collateral, that is NOT SO.

Years ago, guarantors had the right to make the lender proceed first against the borrower, but most standard guarantees today include a waiver of that right. This means that the lender may legally go after the guarantor and any collateral posted by the guarantor FIRST before the lender sues the borrower or forecloses on the borrower’s collateral.

It doesn’t matter whether the lender tells the borrower or guarantor: “Don’t worry–we would never foreclose on your home–we just need the security for bookkeeping,” or uses some other pretense to induce the borrower or guarantor to put up their home as collateral for a business loan. Be assured that the lender will deny these oral reassurances and insist the lender’s written unconditional rights are spelled out in the loan documents. Those documents will often trump any oral statements.

Day of Reckoning Has Arrived For Commercial Real Estate Lenders

SANTA BARBARA, CALIF.–A collapse of the commercial real estate sector will be catastrophic to financial institutions and the economy so lenders must act now to avoid such a financial debacle, says A. Barry Cappello, nationally renowned attorney specializing in lender liability law.

“With the exception of prime properties in large cities such as Los Angeles and New York, commercial real estate has been an unmitigated disaster,” says Cappello, managing partner in the Santa Barbara, Calif.-based Cappello & Noël and author of Lender Liability. “TARP helped banks survive the housing mortgage meltdown. That money won’t be there when commercial loans start to fall apart, which we’re already seeing.”

Unlike residential housing borrowers, commercial borrowers can have tens of millions of dollars tied up in a single property. “Banks are beginning to foreclose on commercial properties, but that is the absolutely wrong way out,” says Cappello.

Cappello suggests that instead of foreclosing, lenders should renegotiate interest rates and principal or even arrange short sales with borrowers. “These are unique times and they call for creative action,” says Cappello. “Banks need to be flexible. This is especially true when lender liability is an issue. When banks become nervous, and we are in very nervous times, some lenders overreach and breach their loan agreements with their borrowers–whether the borrowers are behind in their loan payments or not. History shows that whenever the economy is hurting, there are always a percentage of lenders who behave badly and literally drive a borrower into default.”

Cappello cautions, “Unless lenders are willing to work with their commercial borrowers, they may be faced with unmanageable REO portfolios as well as protracted multi-million-dollar lender liability litigation. Commercial borrowers will fight to keep ownership of their property. If there are violations of due process in the foreclosure procedure or illegal banking practices, you can be sure commercial borrowers will seek legal redress.”

Do not expect a commercial real estate disaster to drag on like the housing fiasco. “Banks can’t count on another government bailout. They’re on their own when it comes to commercial loans,” says Cappello. “It’s in their best interest to work out financing solutions with their commercial borrowers. If they don’t, some banks simply won’t survive and they will drag the economy down with them.”

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For copies of the Cooperative Agreement and our response, click below.

Cooperative Agreement

Letter to Santa Barbara County Supervisors

By Editorial Staff of FindLaw

SANTA BARBARA, CALIF. — Business borrowers are beginning to feel the ripple effects of the financial crisis as lenders tighten commercial lending in a cautionary attempt to stop further erosion of capital and assets, says lender liability expert A. Barry Cappello, managing partner with the Santa Barbara law firm of Cappello & Noel, LLP. He says the coming commercial credit crunch will be hard felt–especially by small businesses and borrowers in certain industries.

Cappello, author of Lender Liability (Juris Publishing) and nationally recognized as the pioneer in lender liability law, says the lending contraction in the commercial sector will be more severe than that which occurred in the late 1980s and early 1990s when the savings and loan meltdown and lender misconduct resulted in multi-million dollar jury verdicts and settlements for business borrowers.

“National lenders are writing off hundreds of millions, even billions of dollars in subprime and ARM loans,” explains Cappello.” They are bloodied by their ill-conceived collateralized debt obligation forays. They are now turning to their commercial portfolio to see where they can cut to stop new bleeding. Lenders are in write-down mode.”

Cappello says commercial borrowers should not feel relief on news that banks are swallowing up investment banks. “These banks are getting in over their head and the buyouts just mean less available funds for borrowers,” cautions Cappello.

Credit is already tight in the transportation, housing and manufacturing sectors, notes Cappello. “Even if your business is healthy, if you’re in one of these sectors, you can be sure your lender is reviewing your file and deciding whether it wants to continue the relationship. I’m getting calls to my office from business borrowers whose commercial lending relationship is souring,” he says.

Cappello advises business borrowers to turn to regional banks for their borrowing needs and avoid national lenders altogether. “Regional banks, for the most part, didn’t gamble with their home loans so financially they are in better shape. They aren’t jeopardizing their viability by buying financially troubled investment banks,” says Cappello. “On the other hand, national lenders are hunkering down. They are less likely to extend new credit. Their primary concern now is to wipe their losses from the books so they can show their shareholders a profit in the next year or two.”

Cappello represents business borrowers who feel their lenders have overstepped their legal authority. “When a bank decides it wants to stop lending to certain types of businesses that’s when lender liability usually occurs,” says Cappello. “Lenders are tempted to arbitrarily change loan terms with current customers, grab collateral and make unrealistic payment demands. There are laws that forbid them to do that.”

Besides reading the fine print of your loan agreement and getting every verbal promise in writing, Cappello suggests, “Avoid using personal guarantees to secure a business loan. If you must use a personal guarantee, require language in the loan documents that state the bank has to go against business collateral first. Some lenders also seek to collaterize intellectual property. I can’t think of any bank loan that would be worth the risk of losing your rights to the intellectual property that built your business.”

Cappello warns businesses to be cautious if their lender is bought out by another bank. “A lending relationship is a personal relationship,” notes Cappello. “If your loan officer is suddenly replaced by a new loan officer, you lose an important ally who knew your business and could stand up for you.”

Note: This article appeared in the Letters to the Editor column of the Los Angeles Daily Journal, Sept, 20, 2011

This letter responds to “Reality check: A bank’s liability is not that simple,” by Jill Switzer (Sept. 1). In cautioning the reader not to assume that bank liability for depositor claims is “a snap,” Switzer states that “[t]he only situation in which a bank is a fiduciary is when the bank acts as a fiduciary, e.g., its trust department. In all other situations, the relationship between a bank and its depositor is simply one of debtor-creditor, founded on a contract – the deposit agreement. Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465.”

The citation to Price v. Wells Fargo, a lender case, suggests that a bank, as lender, can never be liable for fiduciary breach. As a litigator who has tried, settled, and written about lender liability cases for over three decades, I disagree with that suggestion.

Abundant case law supports imposing fiduciary liability against a lender in situations where the bank, as often occurs, acts as more than an arms’-length lender. Some examples are giving the borrower financial advice or related financial services, acting as agent of the borrower, exercising undue control over the borrower, or situations where the borrower clearly reposed trust and confidence in the lender. (See Rutherford v. Rideout Bank (1938) 11 Cal.2d 479 (confidence reposed in bank manager to provide business and financial advice); Credit Managers Ass’n. v. Superior Court (1975) 51 Cal.App.3d 352 (bank controlled business activities of borrower through compelled use of consultant); Frydman & Co. v. Credit Suisse First Boston Corp., 708 N.Y.S.2d 77 (N.Y.App.Div. 2000) (lender negotiated for borrower); Capital Bank v. MVB Inc., 644 So.2d 515 (Fla.Ct.App. 1994) (advising borrower to acquire defective assets from another of bank’s borrowers); Scott v. Dime Savings Bank, 866 F.Supp. 1073 (S.D.N.Y. 1995) (advising borrower to invest borrowed funds with bank’s investment arm); McFate v. Bank of America (1932) 125 Cal.App.683 (bank acted as agent for mortgagor, mortgagee, and escrow holder for plaintiff in mortgagor-plaintiff exchange); see also, Tate v. Saratoga Sav. & Loan Ass’n. (1989) 216 Cal.App.3d 843 (bank as joint venturer is a fiduciary); see, generally, A. Barry Cappello, “Lender Liability” (Juris Publishing 4th Edition).)

A litigator is well advised to consider fiduciary breach in any case where the lender has engaged in self-dealing, used one borrower to cover another borrower’s debt, tricked the borrower, exploited confidential information, or failed to disclose material information. These are facts that might ground a credible claim for fiduciary breach under existing case law. While lender liability for breach of fiduciary duty is not “a snap,” it is alive and well as a potential option in the right case.

Santa Barbara Independent  – By Tyler Hayden

Attorney Says Deputy at Fault for 2009 Accident Involving DUI Driver

Judge James Brown decided earlier this month to let a wrongful-death lawsuit against Santa Barbara County and the Sheriff’s Department proceed to trial. The complaint, in short, accuses a deputy dispatched to chase a DUI motorist speeding down the wrong side of Highway 101 in 2009 of inadvertently causing a head-on accident between the drunk driver and 18-year-old Marcos Arredondo, who was killed along with one of his passengers in the wreck. Two of Arredondo’s sisters sitting in the back seat of the car — they were all returning from a wedding in Lompoc — were left with permanent, debilitating injuries. They didn’t have insurance, and their Medicare just ran out.

The suit was filed in March by attorney Barry Cappello on behalf of Arredondo’s surviving family members. The judge’s recent ruling allows the case to move forward, though slightly amended. Cappello’s final allegations against the county and Sheriff’s Department include negligence, negligence per se, wrongful death, and negligent infliction of emotional distress. Judge Brown threw out the accusation of negligent supervision and training, giving Cappello the opportunity to rework that specific complaint. Cappello explained to The Independent, however, that he decided not to, and he earlier dismissed the case against the deputy himself but reserves the right to bring it back. The trial is scheduled to begin September 21. The case has been merged with a lawsuit the Arredondos brought against Rodriguez and his family. Rodriguez, though, reportedly isn’t insured and his parents only minimally insured.

The crash took place in the very early morning hours of November 8, 2009, on the highway just south of Storke Road in Goleta. According to police reports, Tustin resident Richard Rodriguez, then 20 years old, was under the influence of cocaine and alcohol when he began driving north in southbound highway lanes. Rodriguez didn’t get far down the road before the accident occurred. He suffered only minor injuries and was sentenced last year to 13 years in state prison for vehicular manslaughter and causing great bodily injury.

In the civil filing, Cappello gives a play-by-play account of what happened, pointing out specifically where he says the deputy erred in his response. The deputy was near the Glen Annie/Storke Road overpass when he got the call from dispatch of a wrong-way driver. He responded, but “acted negligently in doing so,” the lawsuit reads. “Sheriff’s Deputies are not trained to respond to wrong-way drivers on the freeway, and are not supposed to apprehend them as a general rule.” Cappello states the freeway is CHP territory, and that agency has its own set of guidelines to deal with such a situation.

The deputy drove down the Glen Annie/Storke Road on-ramp onto southbound 101, but “apparently not knowing how to proceed,” the suit reads, “he slowed down dramatically and began to merge into the slow lane.” (This section of the highway is only two lanes wide in both directions.) The deputy not only merged so slowly that he endangered other drivers traveling at normal freeway speeds, alleges Cappello, but he also failed to turn on his left-hand turn signal, emergency lights, or sirens.

As the deputy crept onto the highway, Jose Arredondo — Marcos’s father — was traveling southbound in the slow lane in his own car. Marcos was following directly behind him. Seeing the deputy creep into his lane, Jose swerved into the fast lane to avoid hitting the cruiser. Marcos followed his father, but this put them both directly in the path of Rodriguez, who was barreling down the road in the same lane but in the opposite direction.

Confused by the deputy’s move, the complaint reads, Jose signaled to the deputy as he passed by but got no response. At this point, the deputy — now behind Jose and Marcos, but in the slow lane — flipped on his flashing lights, but this further befuddled Jose, who thought he was being pulled over. He switched back into the slow lane in front of the cruiser, but as he was doing this, Rodriguez reached the Arredondos in the fast lane. Rodriguez barely missed hitting Jose, but plowed straight into Marcos, who had no time to react. In the aftermath of the accident, the deputy reportedly remained on the scene and apologized to Jose for how he handled the incident.

In the lawsuit, Cappello claims that the deputy’s decision to engage Rodriguez in the first place, coupled with his failure to properly warn the Arrendondos of the oncoming danger — in fact, putting them directly in the path of it — constituted negligence. His actions, Cappello claims, directly contributed to Marcos’s death and his sisters’ injuries. “Had [the deputy] not breached his duty of care, or simply not entered the freeway at all, the accident would not have occurred,” Cappello sums up.

The Santa Barbara Sheriff’s Department, said Deputy County Counsel Kelly Scott, is unable to comment on the specifics of the case while involved in litigation. Scott also said she couldn’t talk about how deputies deal with wrong-way drivers in general – what kind of training they receive, when they’re ordered to engage or stand down, their degree of coordination with CHP or other law enforcement agencies, and so on – saying only, “We are defending this case and deny any wrongdoing by [the deputy].”

Sheriff’s Department spokesperson Drew Sugars offered the following statement via email: “Our condolences are with each person affected by the crash. Richard Rodriguez’s decision to drive the wrong way on Highway 101 with cocaine and alcohol in his system ultimately claimed two innocent lives, injured two others and resulted in a 13-year state prison sentence. It’s important to note that this tragedy is the result of a severely intoxicated individual who chose to drive impaired… The Sheriff’s Office denies any fault on the part of the Sheriff’s deputy who responded to the emergency call of a wrong-way driver on the 101 freeway.”

When asked how its officers are trained to respond to wrong-way drivers, the CHP was initially reticent about offering any information. “We don’t entertain hypotheticals,” said spokesperson Erin Komatsubara from the agency’s Sacramento headquarters. “If ya’ll don’t run, we ain’t gonna chase ya,” she repeated again and again. A few days later, however, Komatsubara faxed the CHP’s pursuit policy, which offers general guidelines on how best to conduct chases — including wide-ranging discussions of siren/emergency light use, appropriate times to call air support, termination strategies (roadblocks, spike strips) — to keep situations as controlled and safe as possible. There is no specific mention of wrong-way driving incidents in the 27-page document.