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Federal Deposit Insurance Corp. v. Ching

United States District Court, E.D. California

June 28, 2016

FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR BUTTE COMMUNITY BANK, Plaintiff,
v.
ROBERT CHING, et al. Defendants. Joint Ex. No. Bates No./Other Identifier Document Date Description Of Exhibit Ex. No. Bates No./Other Identifier Document Date Description Of Exhibit Ex. No. Description and Identifying Information

          AMENDED FINAL PRETRIAL ORDER

         On June 3, 2016, the court held a final pretrial conference. Jean-Paul Cart appeared for the Federal Deposit Insurance Corporation (FDIC-R), acting as receiver for Butte Community Bank (the Bank). Kevin Hughes appeared for the defendants, Robert Ching, Eugene Even, Donald LeForce, Luther McLaughlin, Robert Morgan, James Richards, Gary Strauss, Hubert Townsend, John Coger, and Keith Robbins. The court issued a final pretrial order and allowed the parties to object within fourteen days. ECF No. 190. The parties objected and proposed a number of corrections and additions, ECF Nos. 191-93, which the court has considered. The court now issues the following amended order, which incorporates the parties' proposals, including the scheduling of a hearing on the parties' motions in limine for October 7, 2016, at 10:00 a.m. in Courtroom No. 3.

         JURISDICTION AND VENUE

         Jurisdiction is predicated on 12 U.S.C. § 1811, et seq., 12 U.S.C. § 1819(b)(1) and (2), and 28 U.S.C. §§ 1331, 1345, and 1367. Jurisdiction and venue are not contested.

         JURY

         Both parties demand a jury trial. The jury will consist of eight jurors and two alternates.

         UNDISPUTED FACTS

         The following core facts are undisputed by the Parties:

1. The Bank was incorporated under the laws of the State of California on May 11, 1990.
2. At all times relevant to this action, the Bank was wholly owned by Community Valley Bancorp (the "Holding Company").
3. At all times relevant to this action, Defendant John Coger was a member of the Bank's Board of Directors and the Bank's Chief Financial Officer. Additionally, Coger was the Bank's President from April 17, 2007 until August 20, 2010.
4. At all times relevant to this action, Coger was a member of the Holding Company's Board of Directors, and the Holding Company's Executive Vice President, Chief Financial Officer, and Chief Operating Officer. Additionally, Coger was the Holding Company's President and Chief Executive Officer beginning in January 2010.
5. At all times relevant to this action, Defendant Keith Robbins was a member of the Bank's Board of Directors. Robbins was the President of the Bank until April 17, 2007 and the Bank's Chief Executive Officer until his retirement on December 31, 2009, and at all times prior that are relevant to this action.
6. At all times relevant to this action, Robbins was a member of the Holding Company's Board of Directors. Additionally, Robbins was the Holding Company's President and Chief Executive Officer until his retirement on December 31, 2009, and at all times prior that are relevant to this action.
7. Defendant Robert Ching was a member of the Bank's Board of Directors and the Holding Company's Board of Directors until June 2010, and at all times prior that are relevant to this action.
8. At all times relevant to this action, Defendant Eugene Even was a member of the Bank's Board of Directors and the Holding Company's Board of Directors.
9. At all times relevant to this action, Defendant Donald Leforce was a member and Chairman of both the Bank's Board of Directors and the Holding Company's Board of Directors.
10. At all times relevant to this action, Defendant Luther McLaughlin was a member of the Bank's Board of Directors and the Holding Company's Board of Directors.
11. At all times relevant to this action, Defendant Robert Morgan was a member of the Bank's Board of Directors and the Holding Company's Board of Directors.
12. At all times relevant to this action, Defendant James Rickards was a member of the Bank's Board of Directors and the Holding Company's Board of Directors.
13. Defendant Gary Strauss was a member of the Bank's Board of Directors and the Holding Company's Board of Directors until June 2010, and at all times prior that are relevant to this action.
14. Defendant Hubert Townshend was a member of the Bank's Board of Directors and the Holding Company's Board of Directors until June 2010, and at all times prior that are relevant to this action.
15. In February 2008, the Bank completed the sale of seven of its branch buildings and properties for approximately $15, 300, 000 and concurrently leased back the branch buildings by entering into long term leases with the purchaser (the "Sale-Leaseback").
16. On March 13, 2008, the Holding Company publicly announced an offer to purchase up to 1, 000, 000 shares of Holding Company stock at $13.00 per share (the "Tender Offer"). The Tender Offer Statement the Holding Company filed with the Securities and Exchange Commission stated that several of its directors intended to participate in the Tender Offer and disclosed the number of shares those directors intended to tender.
17. As of March 2008, the Holding Company held $4.2 million in cash that was later used to fund the Tender Offer in May 2008. On May 5, 2008, the Bank transferred $8, 800, 000 to the Holding Company in order to fund the remainder of the Tender Offer.
18. On or about May 5, 2008, the Holding Company consummated the Tender Offer and distributed a total of $12, 999, 207 to shareholders who tendered and sold shares in the Tender Offer. As the Tender Offer was oversubscribed, tendering shareholders were permitted to sell only their pro rata share of the 999, 939 shares repurchased by the Holding Company.
19. Directly or indirectly, ten of the Bank's thirteen directors participated in the Tender Offer. Defendants McLaughlin and Rickards did not tender or sell any shares in the Tender Offer. At the time of the Tender Offer, there were 7, 662, 715 shares of Holding Company common stock outstanding, of which, 2, 120, 164 shares were beneficially owned by the Bank's directors.
20. Ching's medical practice 401k plan tendered 111, 844 shares in the Tender Offer, and 70, 889 of those shares were accepted for purchase by the Holding Company. Ching's medical practice 401k plan received $921, 557 in payment for those 70, 889 shares.
21. Coger tendered 45, 000 shares in the Tender Offer, and sold 28, 522 shares. Coger received $370, 786 in payment for those 28, 522 shares.
22. Even tendered 20, 044 shares in the Tender Offer, and sold 12, 704 shares. Even received $165, 152 in payment for those 12, 704 shares.
23. Leforce tendered 20, 000 shares in the Tender Offer, and sold 12, 676 shares. Leforce received $164, 788 in payment for those 12, 676 shares.
24. Morgan tendered 73, 916 shares in the Tender Offer, and sold 46, 849 shares. Morgan received $609, 037 in payment for those 46, 849 shares.
25. Robbins tendered 75, 000 shares in the Tender Offer, and sold 47, 537 shares. Robbins received $617, 981 in payment for those 47, 537 shares.
26. Strauss tendered 45, 000 shares in the Tender Offer, and sold 28, 522 shares. Strauss received $370, 786 in payment for those 28, 522 shares.
27. Townshend tendered 25, 000 shares in the Tender Offer, and sold 15, 845 shares. Townshend received $205, 985 in payment for those 15, 845 shares.

         DISPUTED FACTUAL ISSUES

         The FDIC Lists the Following Disputed Factual Issues

         1. The defendants failed to exercise reasonable care by causing the Bank to issue an extraordinary $8, 800, 000 dividend in May 2008 (the "Dividend"), followed by additional dividends, at a time when the Bank's income was falling, its classified assets were increasing, it was excessively concentrated in commercial loans and the real estate market was deteriorating.

         2. The defendants engaged in an extreme departure from reasonable care by causing the Bank to issue the Dividend, followed by additional dividends, at a time when the Bank's income was falling, its classified assets were increasing, it was excessively concentrated in commercial loans and the real estate market was deteriorating.

         3. The defendants violated their duties of loyalty to the Bank when they caused the Bank to distribute the Dividend and any subsequent dividends.

         4. Each defendant was motivated by self-interest either by manipulating the price of his Holding Company stock or selling it at an above-market profit.

         5. The defendants failed to conduct adequate due diligence, analyze the financial implications of the Dividend, or obtain or review information provided by the Bank's outside advisors or consultants prior to causing the Dividend to be distributed.

         6. The Dividend violated the Bank's Capital, Earnings and Dividend Policy.

         7. The Dividend violated the Bank's Asset/Liability Management Policy.

         8. The Dividend violated the written agreement between the Bank and the Holding Company with respect to the distribution of dividends.

         9. At the time the Dividend was issued, the defendants knew, or should have known, that the Bank's financial condition had deteriorated and was facing a substantial risk of continuing financial decline.

         10. At the time the Dividend was issued, the defendants knew, or should have known, that there was a material downturn taking place in the national, state and local real estate markets and there was a real risk of an historic decline.

         11. The defendants failed to follow proper internal procedures and industry custom in causing the payment of the Dividend.

         12. At the time the Dividend was issued, the defendants knew or should have known that the distribution of the Dividend would result in the Bank no longer being a well-capitalized bank in violation of Bank policy.

         The Defendants List the Following Disputed Factual Issues

         1. The defendants exercised more than the "scant care" required in making the decision to approve the Dividend.

         2. The defendants exercised such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use in making the decision to approve the Dividend.

         3. The defendants engaged in adequate due diligence before deciding to approve the Dividend.

         4. The defendants acted in good faith in approving the Dividend.

         5. In approving the Dividend, the defendants acted in what they believed to be the best interests of the Bank.

         6. The defendants derived no benefit from the Dividend to the exclusion of other Holding Company shareholders.

         7. The Bank does not deserve to recover "compensation" for paying out a portion of its retained earnings to its sole shareholder.

         8. Neither the Bank nor its sole shareholder deserve "compensation" to replace the sum of money the Bank previously paid out to its sole shareholder.

         9. The Dividend did not cause the Bank to be inadequately capitalized.

         10. The Dividend complied with the income, retained earnings, balance sheet and liquidity requirements set forth in California Corporations Code Section 501 and California Financial Code Section 1132.

         11. The $4 million recovered by the Bank from the Holding Company on or about June 30, 2008 must be offset against any damages claimed by the Bank.

         12. The $5.6 million net gain from the Sale-Leaseback must be offset against any damages claimed by the Bank.

         13. The sum total amount of the retirement benefits and deferred director compensation relinquished by the defendants must be offset against any damages claimed by the Bank.

         14. The Bank's retention of the benefit of the aforementioned $4 million recovery, $5.6 million net gain from the Sale-Leaseback, or relinquished retirement benefits and deferred director compensation would constitute a double recovery or unjust enrichment if the Bank and the Holding Company were to also recover the monetary relief the FDIC-R seeks in this action.

         SPECIAL FACTUAL INFORMATION

         None applicable.

         DISPUTED EVIDENTIARY ISSUES AND MOTIONS IN LIMINE

         The FDIC-R moves in limine to preclude the defendants from presenting evidence or argument referencing the following matters:

1. Evidence about the "Great Recession."
2. Evidence of reasons for failure of Bank and/or the decision to close the bank.
3. Evidence regarding FDIC-R's marketing, negotiation, and sale of Bank assets to Rabobank or the consideration therefor (deposits at a premium).
4. Evidence regarding number of FDIC receiverships after May 5, 2008 and any reference to other D&O lawsuits brought by FDIC.
5. FDIC or state examination reports issued after May 5, 2008.
6. Evidence of actions taken by Defendants after May 5, 2008 to allegedly remedy the financial problems of the Bank.
7. Evidence of subsequent purchase of Holding Company stock after June 30, 2008.
8. Documents not timely produced in discovery.
9. Witnesses not timely identified in discovery.
10. Evidence regarding any lost retirement benefits and deferred director compensation allegedly lost by the Defendants as a result of the failure of the Bank.
11. Evidence regarding the financial condition of the Defendants after June 30, 2008 and how much money they lost from the failure of the Bank.
12. Evidence of the FDIC-R's settlement with the Holding Company of tax claims.
13. Evidence of the bankruptcy by Ellis Matthews.
14. Opinions contained in the expert reports of Steven Clinton and Joe Hargett.
* * *

         The defendants move in limine to preclude the FDIC from presenting evidence or argument referencing the following matters:

1. The opinions contained in the expert reports of Christopher Thornberg, Charles D. Kenny and D. Paul Regan.
2. Any item of damages other than those expressly identified by Susan Salerno, Plaintiff's designated 30(b)(6) witness on the subject of damages, in her September 3, 2015 deposition.
3. Any risk of harm to or claim of harm suffered by (i) a creditor or depositor or former employee of the Bank, (ii) the FDIC in its corporate capacity, (iii) the FDIC as receiver; or (iv) the deposit insurance fund.
4. Any claim for relief or for damages allegedly arising from a dividend other than the May 5, 2008 $8.8 million dividend identified in paragraph 4 of the Complaint.
5. The closure of the Bank, the purported "failure" of the Bank, and any liabilities or losses ultimately incurred by the Bank subsequent to the time period relevant to this action.
6. Inadmissible opinion testimony of witnesses who express lay opinions on matters they have not personally observed or expert opinions on matters for which they have neither been qualified or properly designated as an expert in this action, including such testimony of Richard Tuohey, Adam Keefer, Peter Buck, Murray Bodine, Gary Findley and Robert Hartline.
7. The political cartoon depicting a lemonade stand in front of a house forwarded via email by Defendant Keith Robbins on or about May 6, 2008.
8. Luther McLaughlin's October 11, 2009 email re Some Additional Thoughts.
9. How the FDIC-R might distribute any potential recovery of monetary relief in this action.
10. Any facts or documents not timely produced in discovery.
11. Any deposition testimony given outside the presence of Defendants or their counsel.
* * *

         A hearing on these motions is set for October 7, 2016 at 10:00 a.m. If a party wishes to contest a pretrial ruling, it must do so through a proper motion or objection, or otherwise forfeit appeal on such grounds. See Fed.R.Evid. 103(a); Tennison v. Circus Circus Enters., Inc., 244 F.3d 684, 689 (9th Cir. 2001) ("Where a district court makes a tentative in limine ruling excluding evidence, the exclusion of that evidence may only be challenged on appeal if the aggrieved party attempts to offer such evidence at trial.") (alteration, citation and quotation omitted). In addition, challenges to expert testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), are denied without prejudice. Should a party wish to renew a Daubert challenge at trial, it should alert the court, at which point the court may grant limited voir dire before such expert may be called to testify.

         STIPULATIONS AND AGREED STATEMENTS

         The Parties have not entered into any stipulations relevant at this time for pretrial or trial purposes.

         The Parties do not believe that it would be feasible or advisable to present all or part of the action to the jury by way of an agreed statement of facts.

         RELIEF SOUGHT

         The FDIC-R claims $10, 915, 786.61 in damages, plus applicable pre-judgment interest. This figure is comprised of the $8, 800, 000 the Bank transferred to the Holding Company on May 5, 2008, and $2, 115, 788.61 in subsequent transfers in 2008 and 2009.

         POINTS OF LAW

         The parties have provided the following summary points of law. Trial briefs of no more than ten pages addressing these points more completely shall be filed with this court no later than seven days prior to the date of trial in accordance with Local Rule 285.

         The FDIC-R's Points of Law

         In its Complaint for Negligence, Gross Negligence, Breach of Fiduciary Duties, Plaintiff pled four claims for relief: (1) common law negligence; (2) violation of 12 U.S.C. § 1821(k); (3) violation of Cal. Corp Code § 309; and (4) common law breach of fiduciary duties. (Dkt. No. 1.) The Court dismissed Plaintiff's common law claims in its July 8, 2014 Order granting in part and denying in part Defendants' first motion for summary judgment, finding that such claims are "preempted by statute and must be brought under the applicable statute." (Dkt. No. 40 at 7:19-21.)

         Plaintiff intends to set forth the full factual and legal basis for its claims in its forthcoming trial brief; however, Plaintiff's claims are based on allegations that Defendants caused the Bank to issue an extraordinary $8.8 million dividend, and subsequent dividend that substantially benefited each of the Defendants in violation of Bank policies and without considering their impact on the safety and soundness of the institution at a time when the Defendants recognized that Bank had declining income, overwhelmingly excessive loan concentration, increasing classified loans and was operating in a turbulent and uncertain economic environment.

         1. Cal. Corp. Code § 309

         In its July 8, 2014 Order, the Court denied summary judgment on Plaintiff's claim under California Corporations Code section 309 claim and held that the statute "codif[ies] common law principles . . . [and] provides a statutory basis for preexisting common-law liability." Order July 7, 2014, at 9-10, ECF No. 40. The Court later reaffirmed this holding in its July 27, 2015 Order denying Defendants' second motion for summary judgment. See Order July 27, 2015, at 12, ECF No. 86. Accordingly, Plaintiff's cause of action under California Corporations Code section 309 encompasses claims for negligence, gross negligence (to the extent necessary to defeat certain of Defendants' affirmative defenses), and breach of the fiduciary duties of care and loyalty.

• To state a claim for negligence, Plaintiff must prove that: (1) Defendants were negligent; (2) Plaintiff was harmed; and (3) Defendants' negligence was a substantial factor in causing Plaintiff's harm. See Judicial Counsel of California, Civil Jury Instructions (Spring 2016) ("CACI") No. 400. Negligence under California Corporations Code section 309 is determined based on an "ordinarily prudent person" standard. See Order July 7, 2014, at 8; Order July 27, 2015, at 12; Cal. Corp. Code §309(a); Lehman v. Superior Court, 145 Cal.App.4th 109, 120 (2006); F.D.I.C. v. Castetter, 184 F.3d 1040, 1044 (9th Cir. 1999).
• To state a claim for gross negligence, Plaintiff must prove that: (1) Defendants were grossly negligent; (2) Plaintiff was harmed; and (3) Defendants' gross negligence was a substantial factor in causing Plaintiffs harm. See CACI Nos. 400, 425. Gross negligence is a "lack of any care or an extreme departure from what a reasonably careful person would do in the same situation." CACI No. 425; City of Santa Barbara v. Superior Court, 41 Cal.4th 747, 754 (2007). The business judgment rule is not a defense to gross negligence. Katz v. Chevron Corp., 22 Cal.App.4th 1352, 1366 (1994) ("Under the business judgment rule[, ] director liability is predicated upon concepts of gross negligence.").
• To state a claim for breach of the fiduciary duty of care, Plaintiff must prove that: (1) Defendants were officer and/or directors of the Bank; (2) Defendants acted on the Bank's behalf in connection with the conduct and/or transactions at issue in this case; (3) that each Defendant failed to act as a reasonably careful director and/or officer would have acted under the same or similar circumstances; (4) the Bank was harmed; and (5) Defendants' conduct was a substantial factor in causing the Bank's harm. See CACI Nos. 4100, 4101; Lehman, 145 Cal.App.4th at 121 (discussing fiduciary duties in the context of Cal. Corp. Code § 309).
•To state a claim for breach of the fiduciary duty of loyalty, Plaintiff must prove that: (1) Defendants were officers and/or directors of the Bank; (2) Defendants acted against the Bank's interests; (3) the Bank did not give its informed consent to Defendants' conduct; (4) the Bank was harmed; and (5) Defendants' conduct was a substantial factor in causing the Bank's harm. See CACI Nos. 4100, 4202; Lehman, 145 Cal.App.4th at 121 (discussing fiduciary duties in the context of Cal. Corp. Code § 309); Berg & Berg Enters., LLC v. Boyle, 178 Cal.App.4th 1020 (2009) (stating that Cal. Corp. Code § 309 reflects common law duties of honesty, loyalty and good faith).

         2. 12 U.S.C. § 1821(k)

         12 U.S.C. § 1821(k) sets a floor of gross negligence governing the conduct of directors and officers, which applies only as a substitute in the event that there are more relaxed state standards. Atherton v. FDIC, 519 U.S. 213, 227 (1997); Castetter, 184 F.3d at 1043. In its July 8, 2014 Order, the Court found that California's "simple negligence standard is stricter than the gross negligence floor stated in 12 U.S.C. § 1821(k), " and held that Plaintiffs 12 U.S.C. § 1821(k) claim is "analyzed under the same standard as its claim under [California Corporations Code section 309]." Order July 8, 2014, at 8. The Court reiterated this holding in its July 27, 2015 Order. Order July 27, 2015, at 12-13. Accordingly, Plaintiffs 12 U.S.C. § 1281(k) claim encompasses the breach of fiduciary duty of care, negligence, and gross negligence claims described above with respect to California Corporations Code section 309.

         3. Business Judgment Rule

         4. Injury in Fact and Damages

         With regard to the issue of injury in fact, "[b]ecause all rights of the Bank and other stakeholders are vested in the FDIC as receiver, injury to any of them constitutes injury to the FDIC." Order July 27, 2015, at 6 (citing 12 U.S.C. § 1821(d)(2)(A) and Pareto v. FDIC, 139 F.3d 696, 700 (9th Cir. 1998)). This Court has ruled that Plaintiff's claims, if proven, are sufficient to establish injury in fact. Id. ("These transactions allegedly reduced the Bank's ability to respond to financial distress, prevented it from meeting its financial obligations, and eventually led to its failure."). The FDIC-Receiver stands in the shoes of various stakeholders in the Bank, including the Bank itself, that were harmed by Defendants' actions and can recover for damage to the Bank. See 12 U.S.C. § 1821(k); Order July 27, 2015, at 9-10.

         Transactions motivated by director self-interest are also actionable for resulting damages. See Faigin, 2013 WL 3389490 at *13 (noting a transaction otherwise permissible under applicable law may constitute corporate waste where motivated by a director's personal stake in the transaction); Sinclair Oil Corp. v. Levien, 280 A.2d 717, 722 (Del. 1971) (applying Delaware law) (recognizing that a dividend from a company to its corporate parent may call for an accounting and damages if "the dividend payments resulted from improper motives and amounted to waste"); In re Se. Banking Corp., 855 F.Supp. 353, 358-59 (S.D. Fla. 1994) (denying motion to dismiss despite technical compliance with dividend requirements, since plaintiff alleged that dividends were not grounded in a reasonable business purpose, but rather were issued for the improper purpose of concealing defendants' mismanagement of the bank.). California law does not permit corporate directors to siphon money out of a corporation to themselves. See Order July 27, 2015, at 7 (citing Kruss v. Booth, 185 Cal.App.4th 699, 714 (2010)).

         The Defendants' Points of Law

         1. The Business Judgment Rule Defense In performing the duties of a director, defendant shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following: (a) One or more officers or employees of the Bank whom the defendant believes to be reliable and competent in the matters presented. (b) Counsel, independent accountants or other persons as to matters which the defendant believes to be within such person's professional or expert competence. (c) A committee of the board upon which the defendant does not serve, as to matters within its designated authority, which committee the defendant believes to merit confidence, so long as, in any such case, the defendant acts in good faith, after reasonable inquiry when the need therefor is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted.

         If the trier of fact finds that a defendant complied with the above and also performed his duties to the Bank in good faith, in a manner the defendant believes to be in the best interests of the Bank and its shareholder THE HOLDING COMPANY, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances, then the defendant cannot be found liable. Cal. Corp. Code Section 309(a), (b) and (c).

(a) The phrase "under similar circumstances" is intended to make sure that the director's performance is judged based on the circumstances at the time and not judged with the benefit of hindsight. Legislative Committee Comments to Cal. Corp. Code Section 309.
(b) The business judgment rule is intended to protect a director from liability for a "mistake in business judgment which is made in good faith and in what he or she believes to be the best interest of the corporation, where no conflict of interest exists." Castetter, 184 F.3d at 1044.
(c) "Under California law, a ‘prima facie showing of good faith and reasonable investigation is established when a majority of the board is comprised of outside directors and the board' has received the advice of independent consultants." Id. at 1045 (quoting Katz v. Chevron Corp., 22 Cal.App.4th 1352 (1994)).
(d) A director's personal interest in a corporate distribution to shareholders will disqualify the director from the business judgment rule's protection only if the director derives some benefit from the distribution to the exclusion of other shareholders. Rich v. Shrader, 2010 WL 3717373, *7 (S.D. Cal. 2010); Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720-21 (Del. 1971); Metro. Cas. Ins. Co. v. First State Bank of Temple, 54 S.W.2d 358, 360 (Tex. Civ. App. 1932), rev'd. on other grounds, 79 S.W.2d 835 (Tex. 1935).

         2. Standard of Care

(a) A plaintiff may not use hindsight to substitute a new, more stringent standard of care at trial to replace the standard of care known by defendant to be applicable to defendant's conduct at the time of the alleged injury. N.N.V. v. Am. Ass'n of Blood Banks, 75 Cal.App.4th 1358, 1384-85 (1999).
(b) "The circumstances to be considered in deciding defendant's negligence are those which the evidence shows may reasonably be supposed to have been known to such person, and to have influenced his mind and actions at the time. . . . Negligence is not to be determined by hindsight nor by what a party subsequently learns." Scarano v. Schnoor, 158 Cal.App.2d 612, 622 (1958).

         3. Damages

(a) When a corporate payment of funds is sued upon as "excessive, " the amount of recoverable damages is limited to that portion of the distribution that is established to be "excessive." See Rogers v. Hill, 289 U.S. 582, 592 (1933) (in action by corporation's shareholder against corporate president and vice presidents for excessive compensation, Supreme Court directed district court to determine to what extent payments constituted misuse of corporate funds); Albers v. Villa Moret, 46 Cal.App.2d 54, 58 (1941) (in suit by shareholder plaintiffs alleging excessive compensation, affirming judgment for defendants where there was a failure of proof as to what would have constituted reasonable salaries); Jara v. Suprema Meats, Inc., 121 Cal.App.4th 1238, 1259-60 (2004) (excessive compensation as akin to dividends).
(b) A plaintiff's successful efforts to mitigate its damages result in an offset of the amount recovered. Krusi v. Bear, Stearns & Co., 144 Cal.App.3d 664, 673 (1983).
(c) The general theory of compensatory damages bars double recovery for the same wrong. 6 Witkin, Summary of California Law 10th (2005) Torts §1550. The classic case of double recovery occurs where joint or concurrent tortfeasors or co-obligors are jointly and severally liable for the same wrong. Roby v. McKesson Corp., 47 Cal.4th 686, 702 (2009). Only one complete satisfaction is permissible, and if partial satisfaction is received from one, the liability of the other will be correspondingly reduced via the doctrine of offset. See Ash v. Mortensen, 24 Cal.2d 654, 658, 660 (1944). A shareholder can also be held liable to the corporation for an allegedly improper dividend and thus may be a joint tortfeasor. California Corporations Code §506(a) (a shareholder who receives a wrongful dividend with knowledge of the facts "indicating the impropriety thereof" is liable to the corporation for the amount of such dividend plus interest).

         4. Standing/Capacity to Sue

(a) The FDIC-R has no greater right to bring suit than the entities on whose behalf it is suing. O'Melveny & Myers v. FDIC, 512 U.S. 79, 86 (1994) ("[T]he FDIC as receiver ‘steps into the shoes' of the [bank], obtaining the rights ‘of the depository institution' that existed prior to receivership." (emphasis added)).
(b) The FDIC-R does not have the standing to sue on behalf of creditors other than accountholders or depositors. See 12 U.S.C. §1821(d)(2)(A)(i).
(c) Creditors, including depositors and other accountholders, are not entitled to bring claims under Section 309. See, e.g., Cal. Corp. Code §309(a); Copesky v. Superior Court 229 Cal.App.3d 678, 692 (1991) (the relationship between a bank and its depositor is debtor-creditor).
(d) A bank does not have a fiduciary duty to its depositors or other creditors. Copesky, 229 Cal.App.3d at 692, 694 (banks "are not fiduciaries for their depositors"); Roberts v. UBS AG, No. 12-0724, 2013 WL 1499341, at *11 (E.D. Cal. Apr. 11, 2013) (a bank is not in a fiduciary relationship with its depositors).
(e) So long as a bank is solvent, the bank's directors owe no fiduciary duties to the bank's creditors, including depositors or other accountholders, under California law. Berg & Berg, 178 Cal.App.4th at 1041; Pittelman v. Pearce, 6 Cal.App.4th 1436 (1992); see also In re Jacks, 266 B.R. 728, 738 (9th Cir. B.A.P. 2001) ("[A] director's fiduciary duties to creditors do not arise until the corporation is insolvent . . . .").

         5. Other Affirmative Defenses Subject to Pending Motions

         Negligence and gross negligence claims against corporate directors are governed by the two-year statute of limitations period set forth in Cal. Code of Civil Procedure §339(1). See, e.g., Burt v. Irvine, 237 Cal.App.2d 828, 865 (1965) (applying two year statute of limitations for action upon liability not founded upon an instrument of writing applies to action against corporate directors for negligence); Cooke v. Odell, 59 Cal.App.2d 820, 829 (1943). Once a claim is time-barred under state law, appointment of the FDIC-R as receiver cannot revive that claim. See McSweeney, 976 F.2d at 534.

         ABANDONED ISSUES

         In their February 12, 2016 opposition to the FDIC-R's motion partial summary judgment, ECF No. 128, the defendants withdrew their second (estoppel), third (waiver), fourth (laches), ninth (failure to mitigate), eleventh (contributory and comparative negligence), and fourteenth (supervening causation) affirmative defenses.

         WITNESSES

         The FDIC-R's witnesses are listed in Attachment A. The defendants' witnesses are listed in Attachment B. Each party may call any witnesses designated by the other.

         A. The court will not permit any other witness to testify unless:

(1) The party offering the witness demonstrates that the witness is for the purpose of rebutting evidence that could not be reasonably anticipated at the pretrial conference, or
(2) The witness was discovered after the pretrial conference and the proffering party makes the showing required in "B, " below.

         B. Upon the post pretrial discovery of any witness a party wishes to present at trial, the party shall promptly inform the court and opposing parties of the existence of the unlisted witnesses so the court may consider whether the witnesses shall be permitted to testify at trial. The witnesses will not be permitted unless:

(1) The witness could not reasonably have been discovered prior to the discovery cutoff;
(2) The court and opposing parties were promptly notified upon ...

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