Fleur Bresler v. Wilmington Trust Company
855 F.3d 178
| 4th Cir. | 2017Background
- Charles (“Charlie”) and Fleur Bresler entered a premium-financing estate plan through an ILIT: Wilmington agreed to loan $5.5M per year to pay premiums and overfund three second‑to‑die policies (combined face $50M); Charlie posted $3.7M initial collateral in 2004 and later $1.3M in 2005.
- Dispute arose when Wilmington demanded additional ongoing collateral in 2005 and refused thereafter to make the planned overfunding loans; Wilmington continued to pay only minimum premiums intermittently and later stopped.
- Charlie sued; after his death plaintiffs (as co-personal representatives) tried two consolidated breach‑of‑contract actions concerning Wilmington’s failure to overfund and Wilmington’s refusal to return collateral upon Charlie’s death.
- At trial a jury found Wilmington breached (no ongoing collateral obligation; agreement to lend/overfund), accepted plaintiffs’ expert Pugh’s damages model, and awarded roughly $23M plus return of about $5M collateral; district court ordered specific performance to pay minimum premiums until Fleur’s death.
- Wilmington appealed, challenging (1) admissibility of Pugh’s testimony (Rule 26 and Daubert), (2) sufficiency of the evidence for contract formation and breaches, (3) damages calculations and collateral-return order. Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility under Rule 26 (untimely/supplemental expert disclosure) | Pugh disclosed core methodologies earlier and PX174 was a permissible supplement; any belated material was harmless and reduced damages estimates. | PX174 and Pugh’s net‑in‑trust calculations were not in his report, were disclosed late, deprived Wilmington of deposition/rebuttal, and required exclusion under Rule 37. | Court: plaintiffs violated Rule 26 but district court did not abuse discretion in admitting Pugh’s testimony because the late disclosure was harmless (minimal surprise, defendant had cure opportunities, updates reduced damages). |
| Admissibility under Daubert (methodology reliability) | Pugh used reasonable actuarial/mortgage‑style present‑value methods and assumptions; challenges go to weight not admissibility. | Pugh’s methodology improperly borrowed unreliable inputs (costs-of-insurance, interest spreads, discounting) and was analytically invalid. | Court: district court acted within its gatekeeping discretion; methodological disputes affected weight/credibility, not admissibility under Daubert/Kumho. |
| Existence/terms of contract (no ongoing collateral; obligation to overfund $5.5M/yr) | Plaintiffs: oral agreement (Ianni as Wilmington VP) limited collateral to initial $3.7M and required Wilmington to make $5.5M annual loans to overfund. | Wilmington: documents and industry practice showed ongoing collateral was contemplated; Ianni lacked authority to bind Wilmington to no‑collateral term. | Court: substantial evidence supported jury’s findings that Wilmington (through Ianni) agreed no ongoing collateral was required and agreed to overfund $5.5M/yr; credibility and agency findings for jury. |
| Damages and collateral return (net‑in‑trust shortfall; replacement policies; return of posted collateral) | Plaintiffs: Pugh’s present and future net‑in‑trust calculations (accepted by jury) establish expectation damages with reasonable certainty; replacement policy costs were foreseeable consequential damages; contract required return of collateral on Charlie’s death. | Wilmington: damages speculative (depend on Fleur’s future death and variable inputs); replacement costs were self‑imposed; collateral belonged to Wilmington under agreements. | Court: damages award affirmed—expectation damages may be estimated reasonably despite assumptions (mortality tables, rates); $3.9M for replacement policies foreseeable; investment management agreement required return of collateral and district court rightly ordered return (~$5M). |
Key Cases Cited
- Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993) (trial courts act as gatekeepers to ensure expert testimony is relevant and reliable)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (Daubert gatekeeping applies to all expert testimony; district courts have leeway in reliability assessment)
- Southern States Rack & Fixture, Inc. v. Sherwin‑Williams Co., 318 F.3d 592 (4th Cir. 2003) (factors for assessing harmlessness/substantial justification under Rule 37)
- Wilkins v. Montgomery, 751 F.3d 214 (4th Cir. 2014) (untimely expert disclosures and harmlessness analysis)
- Siga Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108 (Del. 2015) (Delaware law on expectation damages—nonbreaching party’s entitlement and reasonable certainty standard)
- Paul v. Deloitte & Touche, LLP, 974 A.2d 140 (Del. 2009) (contract interpretation under Delaware law; give unambiguous terms their ordinary meaning)
- Myrick v. Prime Ins. Syndicate, Inc., 395 F.3d 485 (4th Cir. 2005) (standard for reviewing denial of judgment as a matter of law; view evidence in light most favorable to verdict)