LNV Corporation v. Branch Banking and Trust Company
16-14801
| 11th Cir. | Jan 11, 2018Background
- In 2005 a lead bank made two loans (Owls Head and JLD) to a Florida real-estate venture; a participant held a 23.08% interest in the Owls Head loan. Market collapse led to borrower defaults.
- In 2009 BB&T acquired the lead bank’s loan portfolio; LNV bought the 23.08% participation in the Owls Head loan for $197,345.
- BB&T sued the defaulting borrowers/guarantors and charged down the loans’ book values (Owls Head to $1.47M; JLD to $2.48M).
- At mediation in Aug. 2011 BB&T and guarantor Duncan agreed to a $10M assignment of both loans to Duncan’s company; BB&T allocated $2.5M to Owls Head and $7.5M to JLD. BB&T paid LNV $577,000 (23.08% of $2.5M). LNV sued for breach of the participation agreement.
- The district court found BB&T breached but awarded LNV zero damages because LNV failed to prove damages with reasonable certainty; the Eleventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (LNV) | Defendant's Argument (BB&T) | Held |
|---|---|---|---|
| Whether LNV proved contract damages with required certainty | LNV argued it was entitled to expectation damages (pointing to loan face value and ¶14(b)) and that once causation was shown burden to prove reduction shifted to BB&T | BB&T argued LNV failed to show what it reasonably expected to receive, failed to account for litigation success and collectability contingencies | Held: LNV failed to prove damages to a reasonable certainty; zero damages affirmed |
| Interpretation of ¶14(b) (repurchase provision) | ¶14(b) establishes a concrete buy-out price tied to loan unpaid advances (implying significant remedy if BB&T modified loan without consent) | BB&T: ¶14(b) grants a discretionary right, not an obligation to repurchase; it does not mandate full face-value payout | Held: ¶14(b) gives BB&T an option, not an obligation; no entitlement to face-value repurchase |
| Whether district court erred by using malpractice-style probabilistic discounting | LNV: analogy to malpractice is improper and reduced its burden to prove damages | BB&T: probabilistic discounting of expected recovery (litigation success and collectability) is appropriate to value expectation damages | Held: Court may discount expected recovery by probability of winning/collecting; malpractice analogy was instructive and permissible |
| Whether allocation of $10M settlement between loans or collateral values entitled LNV to alternate damages | LNV argued allocations and collateral valuations support some positive damages | BB&T argued LNV never established an expectation benchmark or demonstrated collectability to show the $577,000 was inadequate | Held: Alternative theories fail because LNV still did not prove what it reasonably expected or were the likely recoverable amounts |
Key Cases Cited
- Simmons v. Boros, 335 S.E.2d 662 (Ga. Ct. App. 1985) (plaintiff must prove both breach and damages; damages must be shown with reasonable certainty)
- Norton v. Budget Rent A Car System, Inc., 705 S.E.2d 305 (Ga. Ct. App. 2010) (elements of breach of contract include breach and resultant damages)
- McCannon v. McCannon, 499 S.E.2d 684 (Ga. Ct. App. 1998) (damages must be proved to a reasonable certainty)
- Al & Zack Brown, Inc. v. Bullock, 518 S.E.2d 458 (Ga. Ct. App. 1999) (damages should place plaintiff in the position it would have been had contract been performed)
- Gainesville Glass Co., Inc. v. Don Hammond, Inc., 278 S.E.2d 182 (Ga. Ct. App. 1981) (injured party cannot be placed in a better position than full performance)
- In re Advanced Telecomm. Network, Inc., 490 F.3d 1325 (11th Cir. 2007) (expected-value approach: discount judgments by probability of occurrence)
- Bobby v. Bies, 556 U.S. 825 (U.S. 2009) (unnecessary trial-court findings have no preclusive effect)
- Benchmark Builders, Inc. v. Schultz, 711 S.E.2d 639 (Ga. 2011) (Georgia law bars awarding attorneys’ fees absent monetary or affirmative relief)