Pub. 10 2015-2016 Issue 2

July/August 2015 27 Extraordinary Service for Extraordinary Members. important to clarify in emails and conversations that any ex- tension of credit remains subject to approval by a loan review committee or the bank’s board of directors. By being clear with current or potential borrowers that an additional level of review and approval is required before making any formal commitment to extend credit, the risk of misunderstandings leading to action based on reliance diminishes. The “you told me . . .” argument becomes much weaker when the need for additional approval is clearly communicated. Accordingly, ensuring potential borrowers are aware of an additional level of approval before any credit agreement or modification to any credit agreement becomes effective decreases the lender’s litigation risk arising from promissory estoppel arguments. Finally, do not make informal assurances in writing. This point—while largely based on common sense—is still impor- tant to emphasize, especially because it is easy to do when informally discussing business with long-standing customers. With many forms of written communication now commonly used, the potential for written evidence that could be used to legitimize a credit agreement misunderstanding only increases. Any email, text message, or note can potentially increase the risk of a successful promissory estoppel argu- ment. For that reason, it may be beneficial to remind bank employees of the potential liability or legal costs associated with a misunderstood text message or email thread, even when used in the most informal conversation. Lenders can take comfort knowing that in Nebraska, claims based upon oral statements or assurances regarding the extension of credit will be difficult for dissatisfied borrow- ers to pursue. That said, it is prudent always to be clear with your borrower about the nature and scope of the extension of credit the lender is willing tomake. Furthermore, to the extent that the amount of the credit sought by the borrower exceeds the authority of the credit officer, it is important to commu- nicate with potential borrowers about any additional credit approval needed before such a commitment can be made. Such communication should decrease the risk of litigation arising from a promissory estoppel argument. Finally, do not make informal assurances about the nature or scope of any commitment in writing unless the lender has fully approved such a commitment, and finally, always include the statutorily required language in any of your credit agreements. Keeping these three things in mind will allow you to more confidently continue to strengthen your close business relationships while not increasing your litigation risk.  For more information, contact Andrew Koszewski at (402) 437-8531 or akoszewski@woodsaitken.com . Koszewski is a partner in Woods & Aitken LLP's transactional group, focusing his practice on banking and financial institutions, real estate, business entity, and federal and state taxation. You also may contact James Kritenbrink at (402) 437-8539 or jkritenbrink@woodsaitken.com. Kritenbrink is law clerk at Woods & Aitken LLP and a student at the University of Nebraska College of Law. 1 “The principle that a promise made without consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promisee to rely on the promise and if the promisee did actually rely on the promise to his or her detriment.” ESTOP- PEL, BLACK’S LAW DICTIONARY (10th ed. 2014). 2 NEB. REV. STAT. § 45–1,113. 3 Synergy4 Enterprises Inc. v. Pinnacle Bank, 290 Neb. 241, 859 N.W.2d 552 (2015). 4 Darren A. Craig & Heidi G. Goebel, Write When? Statutes of Frauds Applicable to Credit Agreements, 50 No. 10 DRI for Def. 16 (October 2008). 5 Id. 6 Pappone, When a Proposal Becomes a Promise: Avoiding the Trap of the Unintended Com- mitment, 1 BANKING L. REV. 30, 30 (1989). 7 See, Penthouse Int’l Ltd. v. Dominion Fed. Sav. & Loan Ass’n, 665 F. Supp. 301 (S.D.N.Y. 1987) ($129 million award). 8 North Dakota, South Dakota, and Minnesota led the way by enacting statutes of frauds for credit agreements in 1985. John L. Culhane, Jr. & Dean C. Gramlich, Lender Liability Amend- ments to State Statutes of Frauds, 45 BUS. LAW. 1779, 1779-80 (1990). 9 Promoting certainty in agreements, reducing litigation over alleged oral contracts, and eliminating problems caused by “the natural tendency of people’s memories to contour the words they recall to fit their understanding of the agreement” Valdez Fisheries Development Ass’n Inc. v. Alyeska Pipeline Service Co., 45 P.3d 657, 669 (Alaska 2002). 10 NEB. REV. STAT. § 45–1,113. 11 290 Neb. 241, 859 N.W.2d 552 (2015). 12 Id. 13 Id. 14 Id. 15 Id. at 242. 16 Id. 17 Id. at 243. 18 Id. 19 Id. at 245. 20 “a contract, promise, undertaking, offer, or commitment to loan money or to grant or extend credit” NEB. REV. STAT. § 45–1,112.1.a.i. 21 Synergy4, 290 Neb. at 245–46 (emphasis added). 22 See Fortress Systems LLC v. Bank of West, 559 F.3d 848 (8th Cir. 2009) (holding a loan officer’s oral promise to lend money if the borrower settled its lawsuit with investors did not satisfy NEB. REV. STAT. § 45–1,113, because the alleged promise was neither in writing nor signed by both parties). 23 See Farmland Service Coop Inc. v. Klein, 196 Neb. 538, 224 N.W.2d 86 (1976) (holding that a buyer could not sue under the theory of promissory estoppel to enforce the oral agreement barred by the statute of frauds under the Uniform Commercial Code). 24 Synergy4, 290 Neb. at 247. 25 NEB. REV. STAT. § 45–1,113.2 (providing sample language) (“A credit agreement must be in writing to be enforceable under Nebraska law. To protect you and us from any misunder- standings or disappointments, any contract, promise, undertaking, or offer to forebear repay- ment of money or to make any other financial accommodation in connection with this loan of money or grant or extension of credit, or any amendment of, cancellation of, waiver of, or substitution for any or all of the terms or provisions of any instrument or document executed in connection with this loan of money or grant or extension of credit, must be in writing to be effective.”) 26 NEB. REV. STAT. § 45–1,113.1 Nebraska banks provide innovative financial solutions to the communities they serve. We are here to enhance your success. Loan Documentation and Negotiation Loan Participations Bank Mergers and Acquisitions Succession Planning for Owners Commercial Litigation Regulatory Consultation and Compliance Loan Default Remedies and Bankruptcy Representation Real Estate Purchase, Sale and Leasing General Business Representation Nathan J. 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