United States District Court, E.D. California
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 ...