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Friday, June 21, 2024 | Back issues
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Claim Over Icelandic Conversion Rate Revived

(CN) - The 9th Circuit resurrected a class action challenging the handling of certificates of deposit denominated in Icelandic krona after that country's banking crisis.

California resident Ek Vathana filed a class action for breach of contract against Florida-based EverBank after it closed his "WorldCurrency" CD, over his protests, in response to the 2008 collapse of Iceland's banking system.

Vathana said he lost about $30,000 when EverBank liquidated his two CDs using a wholesale conversion rate for U.S. dollars far less than the rates in which he had bought in just a few months before.

The exchange rate had been 78.65 ISK and 88.05 ISK per U.S. dollar when Vathana opened the accounts in the summer of 2008. EverBank shut the CDs down later that year at 253 ISK and 217 ISK per U.S. dollar.

In the interim, Iceland's banking system, and most of the world's economies, had nearly collapsed. In October 2008 the prime minister said that Iceland's banks had liabilities that dwarfed its gross national product, and the government moved to take over the banks and stop the exchange of ISK into foreign currency.

U.S. District Judge Richard Seeborg in San Jose granted EverBank summary judgment on all of Vathana's claims, finding, among other things, that EverBank had the discretion to close the CDs because it would have been on the hook for some $12 million in losses had the currency not recovered.

Noting that EverBank had liquidated the class members' CDs "when they were least valuable," a three-judge appellate panel partly reversed on Friday, reviving one of the claims and remanding the case back to San Jose.

"In hindsight, the CDs would have regained value if EverBank had remained in the ISK market until Iceland's economy improved," Judge Mary Murguia wrote for the unanimous panel. "But paragraph 1.17 gave EverBank discretion to close the WorldCurrency CDs immediately to limit its or its customers' losses -discretion that was limited only by EverBank's obligation under Florida law to act in good faith. Vathana has not pointed to any facts demonstrating that no reasonable person would have made the same discretionary decision that EverBank made under the circumstances."

That said, "EverBank may have breached its agreement with the class members by returning the value of their WorldCurrency CDs using a currency conversion rate within 1 percent of the wholesale spot price," according to he ruling.

Summary judgment on this claim was improper because the financial product's terms and conditions are unclear as to which currency conversion rate applies when a CD is closed, the panel said.

"A reasonable jury could find that the terms and conditions are silent with respect to the currency conversion rate that applied when the WorldCurrency CDs were closed and the proceeds from the CDs returned to the class members," Murguia wrote.

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