Daniel Hewitt v. Capital One Bank, N.A.

── Daniel Hewitt v. Capital One Bank, N.A. ── Court: Court of Appeals for the Seventh Circuit Date: April 08, 2026 Category: General In the United States Court of Appeals For the Seventh Circuit ____________________ No. 25-1974 DANIEL HEWITT and LYNNE THOMPSON, Plaintiffs-Appellants, v. CAPITAL ONE, N.A., Defendant-Appellee. ____________________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:24-CV-04839 — Edmond E. Chang, Judge. ____________________ ARGUED FEBRUARY 10, 2026 — DECIDED APRIL 8, 2026 ____________________ Before EASTERBROOK, SCUDDER, and KIRSCH, Circuit Judges. EASTERBROOK, Circuit Judge. Capital One resigned as cus- todian of the funds in plaintiffs’ individual retirement ac- counts (IRAs) and told them that, unless they specified other- wise, their money would be transferred to Inspira Financial Trust (then known as Millennium Trust Company). Plaintiffs concede that their contracts with Capital One gave it every right to resign. After ample time had passed without action on plaintiffs’ behalf, Capital One sent the money to Inspira— which told plaintiffs that, unless they instructed it to invest the money in some other way, it would stay in a “sweeps” 2 No. 25-1974 account based on bank deposits. Plaintiffs did not direct In- spira to act otherwise. The sweeps account paid interest at only 0.02% annually, which for plaintiffs came to less than the management fees that Inspira charged. They eventually sued both Capital One and Inspira for breach of contract, invoking the diversity jurisdiction of 28 U.S.C. §1332. Plaintiffs contend that Capital One acted imprudently in choosing, as successor custodian, an institution that would pay them so licle (which was less than their investments had earned at Capital One). Plaintiffs do not deny that Inspira is a reputable financial institution, but they complain that it too violated its duties by providing such a low return. The district judge did not resolve plaintiffs’ claims against Inspira, for they had promised to arbitrate with it. The judge resolved the claims against Capital One on the merits, dis- missing the complaint under Fed. R. Civ. P. 12(b)(6). 2025 U.S. Dist. LEXIS 60482 (N.D. Ill. Mar. 31, 2025). The judge relied principally on a clause exculpating Capital One from liability for any loss caused by a successor’s decisions. We do not con- sider that clause, however, and we bypass other liability-lim- iting clauses, because Capital One did not break any promise it made to plaintiffs, even viewing the contractual language in the way plaintiffs want us to read it. Plaintiffs’ appeal is lim- ited to Capital One, authorized by a partial final judgment un- der Fed. R. Civ. P. 54(b). Capital One’s power to resign and transfer the assets stems from this clause: We can resign as custodian at any time effective 30 days after we send wriMen notice of our resignation to you. Upon receipt of that notice, you must make arrangements to transfer your IRA to an- other financial organization. If you do not complete a transfer of your IRA within 30 days from the date we send the notice to you, No. 25-1974 3 we have the right to transfer your IRA assets to a successor IRA trustee or custodian that we choose in our sole discretion … . Capital One gave plaintiffs more than 30 days’ notice and added (going beyond the required notice) that unless they elected otherwise Inspira would put the funds in a sweeps ac- count. Plaintiffs insist that Capital One should have chosen a different successor whose offered rate of return was higher. For this proposition they rely on a principle of state law re- quiring contracting parties to engage in good faith and fai