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Federal Deposit Insurance Corp. v. Ching

United States District Court, E.D. California

May 22, 2017

ROBERT CHING, et al., Defendants.


         On November 17, 2016, the jury returned a verdict in this case, finding all defendants guilty of negligence and a breach of the fiduciary duty of care in connection with an $8, 800, 000 dividend they caused Butte Community Bank to issue. Jury Verdict, ECF No. 270. The Federal Deposit Insurance Corporation (FDIC), as receiver for Butte Community Bank, is the plaintiff in this case. The jury awarded the FDIC $2, 640, 000 in damages for the defendants' conduct giving rise to the negligence claim, and $880, 000 in damages for the defendants' conduct giving rise to the breach of duty of care claim. Id. at 1, 3. Three disputes regarding the entry of judgment are now pending before the court: (1) whether the damages the jury awarded are duplicative; (2) whether pre-judgment interest should be included in the judgment award; and (3) whether the judgment should be split equally among defendants, or defendants should be held jointly and severally liable.

         For the reasons discussed below, the court determines defendants are jointly and severally liable for a baseline judgment award of $2, 640, 000, in addition to both pre-judgment and post-judgment interest at a rate of 0.77 percent.

         I. BACKGROUND

         This order dispenses with a general background section, as the court has reviewed the facts and procedural history of this case at length in its prior orders. See, e.g., Order May 27, 2016, ECF No. 168; Order July 27, 2015, ECF No. 86; Order July 8, 2014, ECF No. 39.

         As related to the particular issue of a judgment award, the procedural history is as follows. On November 17, 2016, the jury found all ten named defendants guilty on claims one (breach of fiduciary duty of care) and three (negligence). ECF No. 270. On November 22, 2016, the FDIC filed a request for an award of pre-judgment and post-judgment interest, ECF No. 268, which defendants opposed on November 23, 2016, ECF No. 274. In opposition, defendants argue for the first time that the two damages awards are duplicative. Id. On November 28, 2016, the FDIC filed a reply brief on its request for pre-judgment interest, and in this filing the FDIC rebutted defendants' claim that the jury awards are duplicative. ECF No. 275. On November 29, 2016, defendants filed an unauthorized sur-reply addressing the FDIC's duplicative awards argument. ECF No. 276. Because defendants did not seek court approval before filing their sur-reply, the court does not consider the sur-reply in this order.

         On December 2, 2016, the court directed the parties to brief the additional issue of whether the jury's award of damages for $880, 000 and $2, 640, 000 should be evenly divided among the ten defendants, or whether the defendants should be jointly and severally liable for the full amount. Min. Order, ECF No. 277. In response, the FDIC filed a brief in favor of joint and several liability, ECF No. 280, and defendants argued for an even division of the award, ECF No. 279. The court addresses each dispute below.


         As noted, the jury handed down two separate damage awards: an award of $880, 000 on the FDIC's breach of fiduciary duty claim and one of $2, 640, 000 on the FDIC's negligence claim. ECF No. 270. The FDIC argues the jury's two separate damages awards should be treated as cumulative, totaling $3, 520, 000, ECF No. 275 at 2, while defendants argue the awards were duplicative because they were based on the same conduct, and therefore total only $2, 640, 000, ECF No. 274 at 2.

         Federal courts have repeatedly established the general proposition that a plaintiff may not enjoy “double recovery” for a single injury. See, e.g., Pac. Fuel Co., LLC v. Shell Oil Co., 416 F. App'x 607, 610 (9th Cir. 2011); Ambassador Hotel Co. v. Wei-Chuan Inv., 189 F.3d 1017, 1031-32 (9th Cir. 1999); Kissell Co. v. Gressley, 591 F.2d 47, 50-51 (9th Cir. 1979); Duran v. Town of Cicero, Ill., 653 F.3d 632, 642 (7th Cir. 2011) (“A judgment that can be read to allow a plaintiff to recover twice for the same injury contains a manifest error of law.”); Nada Pac. Corp. v. Power Eng'g & Mfg., Ltd., 73 F.Supp.3d 1206, 1218 (N.D. Cal. 2014) (“Double or duplicative recovery for the same items of damage amounts to overcompensation and is therefore prohibited.”) (citation and internal quotation marks omitted).

         California courts are in accord. Under California law, “[r]egardless of the nature or number of legal theories advanced by the plaintiff, he is not entitled to more than a single recovery for each distinct item of compensable damage supported by the evidence.” Tavaglione v. Billings, 4 Cal.4th 1150, 1158 (1993) (internal quotation marks omitted); Shell v. Schmidt, 126 Cal.App. 2d 279, 291 (1954) (where a party “ha[s] alleged the existence of but one primary right, and but one violation of that right, ” the “complaint states but one cause of action, even though two or more theories of recovery are alleged.”) (citation omitted); see also Plotnik v. Meihaus, 208 Cal.App.4th 1590, 1613 (2012) (reversing an award for intentional infliction of emotional distress because the injury had been compensated in awards conferred on other claims for the same conduct); Roby v. McKesson Corp., 47 Cal.4th 686, 702-03 (2009) (remanding for a new trial due to the potential of duplicative noneconomic damages where jury was instructed to assess damages separately but given no direction on how to avoid the possibility of overlapping damages).

         Here, nothing in the record before the court indicates defendants' negligence in authorizing the dividend caused an injury distinct from, or in addition to, defendants' breach of their fiduciary duty of due care in authorizing that same dividend. The FDIC's two claims relate to the same event, namely defendants' conduct that caused the authorization of the dividend. As such, regardless of how many legal theories the FDIC has advanced, it cannot recover more than once for this single injury under California law. Tavaglione, 4 Cal.4th at 1158; Shell, 126 Cal.App. 2d at 291.

         The verdict form, based on the FDIC's proposal, instructed the jury to identify the “total damages” it awarded the FDIC “for the conduct of defendant(s)” “in connection with Butte Community Bank's May 5, 2008 dividend, ” and specifically instructed the jury not to “consider whether or not such damages will be cumulative with damages awarded for other claims.” ECF No. 270 at 2, 4. Thus, the verdict form called for a separate award of damages on each claim even if separate claims were based on the same wrongdoing. The verdict form expressly instructed the jury to consider each claim in isolation and in doing so make an award of “total damages” as if the FDIC would not receive any other compensation. Absent evidence to the contrary, the court assumes the jury did as instructed and awarded “total damages” to compensate for defendants' negligence without regard for the damages the jury awarded for defendants' breach of fiduciary duty of care, and vice versa.

         The FDIC argues that by instructing the jury not to consider whether damages would be cumulative, the verdict form left the jury “with the reasonable impression that its damages could be added together.” ECF No. 275 at 2:25-3:1-2. The FDIC asserts the jury “allocated 25% of its damages award to the breach of fiduciary duty claim and 75% to the negligence claim.” Id. at 3:2-4. The FDIC offers no support for this assumption. The FDIC claims its interpretation is the “logical and probable” outcome because $3, 520, 000 is “almost exactly that portion of the $8, 800, 000 dividend that ultimately went into the pockets of the bank directors.” Id. at 2:13-15. To support its argument, the FDIC cites Schutzky Distributors, Inc. v. Kelly, 643 F.Supp. 57 (N.D. Cal. 1986).

         Schutzky, however, is distinguishable in several important respects. In this case, the ten defendants were found equally liable on each claim and the conduct complained of and the resulting injury for each claim is the same. In Schutzky, in contrast, the jury awarded damages based on the “countless misrepresentations” two defendants had separately made, and the court therefore found each award of damages should be partitioned based on each defendant's individual conduct. Schutzky, 643 F.Supp. at 59, 61-62. The Schutzky court explained that if the two damages awards were not aggregated, they would have been inconsistent with the jury's finding of liability. Id. at 59. This was especially true considering the verdict form in Schutzky, unlike in this case, did not instruct the jury to determine “total damages” for each separate cause of action. The Schutzky court found it “entirely logical” that the jury awarded separate damages based on the separate harm each ...

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