Federal Deposit Insurance v. Hamilton

Doe, entities, Even if we were not separate bound we with it as and not as a would reach the same result. As single the Su- unit. That is argument not an ad- Bank, preme any particular Court stated Citizens dressed to unfairness about Bankruptcy preserves rights pos- particular Code case. disputes Rather it by parties bankruptcy sessed outside of the “single governmental wisdom of the unit” context. nonbankruptcy Because the Accordingly, rule rule itself. we hold that permits involving government setoff of claims BAP did not in awarding abuse its discretion agencies pursuant unitary principle, to a equitable remedy of setoff to the various Congress, must assume that drafting agencies of the United States. Code,

Bankruptcy adopt did not intend contrary approach. language While the CONCLUSION 101(27) § may ambiguous, certainly it Bankruptcy Appellate Panel was cor- does not Congression- demonstrate the clear in holding rect that agencies the various al require intent we would for such drastic government the federal single constitute a change policy. “governmental unit” purposes of setoff only that We also note other circuit to Setoff, § Bankruptcy under 553 of the Code. question interagency consider the setoff equitable which is an remedy, properly was § under 553 reached the same conclusion we awarded this ease. reach. In Turner v. Small Business Admin- AFFIRMED. istration, (10th Cir.1996) (en 84 F.3d 1294 bane), the Small Business Administration setoff,

sought 553, § money under owed Department

to the debtors Agricul-

ture. /d.at 1295-96. In holding that “the

United unitary States is a pur- creditor for

pose bankruptcy” permitting setoff §

under among agencies, the Tenth Doe, Circuit observed analysis FEDERAL DEPOSIT INSURANCE directly addressing while the issue of wheth- CORPORATION, acting in its er the United unitary States was a creditor corporate capacity, Plaintiff, § clearly under applicable §for v. purposes as well. Id. at 1296. We find the reasoning Tenth Circuit’s irrefutable and Sandra B. HAMILTON and adopt it here. Hamilton, individuals, L.G. Defendants-Appellees, III. v. Hawaiian argues Airlines also BANK, NCNB TEXAS NATIONAL lawfully permissible even setoff were NationsBank, Successor in Interest Code, Bankruptcy equitable is an rem Bank, NCNB Texas National Defen edy that should not have been awarded Party Defendant-Appellant. dant-Third the United States. The decision to award squarely setoff rests within the discretion of No. 96-6104. Bankruptcy Court. In re Cascade United States Appeals, Court of Roads, Cir.1994). 34 F.3d We Tenth Circuit. have held that permitted “[s]etoff will not be inequitable when it would be contrary or July public policy to do so.” FDIC Bank of America Nat’l Savings, Trust and (9th Cir.1983). Hawaiian Airlines

concedes that the United States did not en

gage inequitable conduct. It does however,

argue, agencies negotiated (Rus- Neville,

Drew Neville of Linn & P.C. sell A. Cook and Brinda K. White of Linn & Neville, P.C., and L. Connor Helms of Wos- ka, Hasbrook, Dowd, Helms, Underwood & briefs), OK, with him on City, Oklahoma for Defendants-Appellees.

Kirk Barnes, D. Fredrickson Bright & (Douglas Thomas, P.C. N. Gould of Gould & Nix, brief), with him City, OK, for Party Defendant-Third Defendants Appellant. ANDERSON, BALDOCK,

Before and EBEL, Judges. Circuit BALDOCK, Judge, Circuit delivering the Opinion II, of the Court as to Parts ANDERSON, concurs, which Judge, Circuit III, and as tо Part in which ANDERSON EBEL, Judges, Circuit concur. EBEL, Judge, Circuit delivering the Opinion IV, of the Court as to Part in which ANDERSON, Judge, Circuit concurs. This case is before us a second time. Deposit Federal Corp. Insurance v. Hamil- ton, (10th Cir.1995), we, 58 F.3d 1523 inter alia, reversed the district court’s award of actual puni- tive on Defendant Hamiltons’ Okla- homa state against Third-Party fraud claim Defendant NationsBank. The facts of this case are opinion set forth in that and need not be except restated here to the extent necessary to our discussion of the issues. say Suffice it to in Hamilton we re- manded the case to the district court reconsider its of fraud Nati- light onsBank in which facts the district apparently explained: overlooked. We Here, the district court found that Nati- onsBank committed fraud Warren, by making improper purpose; ma- knowingly dam agent, re- representations regarding grossly teriаlly age false award is excessive. Nations- 1991. March and October pairs requests judg between reversal Bank of the fraud record that Nations- or, alternative, reflects ment thé a remittitur on spent excess Bank jurisdiction award. Our during period in which § arises under 28 U.S.C. We review a conduct. court found fraudulent district court’s determination of state law de from Unfortunately, Russell, we cannot discern Regina College novo. Salve con- whether the district court 225, 231, 1217, 1221, the record effect, $20,000 in any, sidered Similarly, L.Ed.2d 190 we review the claim expenditures on Hamiltons’ fraud propriety award de ... law of Oklahoma even Corp., novo. Patton v. TIC 77 United F.3d — issue as to whether the Hamil- though the (10th 1235, Cir.), denied, 1243 cert. fraud to recover on their tons ‍​​​‌‌​​​‌‌​‌​​‌‌‌‌​‌‌​​‌‌‌‌​​‌‌​‌​​‌‌​‌‌‌‌‌​‌​​​‍are entitled -, 2525, 1049 135 L.Ed.2d clearly presented. claim was (1996). We will not disturb a district court’s Hamilton, fact, rejected, however, findings 58 F.3d at 1529. We of unless those find however, clearly NationsBank’s claim that Oklahoma ings giving regard are due erroneous award prohibits an of law opportunity to the district court’s to deter We arising out of contract. case credibility. witnesses’ mine the Fed.R.Civ.P. might recover 52(a). that the Hamiltons standards, concluded Applying these affirm if, remand, “on part. part and reverse commit- again finds NationsBank court independent willful tort of fraud” ted I. re- law. Id. at 1530. On

under Oklahoma mand, just again found the district court NationsBank asserts Oklahoma that, its ac- reinstated award of finding precludes a of fraud because the law dam- tual actions in of its con Bank took furtherance against NationsBank. The district ages repair prop obligation to the rental tractual expenditures found that erty. argument NationsBank advanced this opinion prior we referred in to which our Hamilton, appeal in its first as well. 58 F.3d “part good ongoing of a faith effort were not agree with inter at 1528. We NationsBank’s promises to the fulfill Mr. Warren’s false to Indeed, pretation in Furr of Oklahoma law. repair and the total obli- Hamiltons Bank’s Thomas, (Okla.1991), P.2d Lease, part as gations under the but instead Supreme held that to the Oklahoma Court deceptive Aplt. Warren’s scheme.” of Mr. independent of a claim for the tort avoid at 897.1 Supp.App. contract, arising of subse fraud in a case out promisor to quent of the “must be actions claim again appeals

NationsBank a (1) promise.” the fulfillment of Because ward recognize law does not ing that Oklahoma promisor that his sub in Furr the admitted a entering into a cause of action fraud for actions were not in furtherance of sequent where perform with no intention to contract contract, (2) perform occur; promise to under the performance his of acts in furtherance question of concluded that support the the court was insufficient to the evidence jury. fraud; properly to the finding was submitted court’s the dis fraud district imposed punitive damages for an trict court Id. purchase price adjustment to the for the as fol- fair

1. The district court described the scheme (b) expenditures; a lows: value of the Hamiltons' significantly plan on terms less advanta- goal Mr. deceitful was new lease of Warren’s repairs repair respect geous to induce the Hamiltons to make the Hamiltons to with expense obligated (c) Bank was their own obligations; or eviction and maintenance hoped under the Mr. Warren to make Lease. they property had after the Hamiltons from Bank to benefit from the Hamiltons' for the expenditures improve- significаnt made repair assumption costs and maintenance property. ments (a) possible three one of scenarios: Aplt.Supp.App. at 897. to the Hamiltons without sale Although properly in trict fraud. To establish law, terprets problem with requires proponent Oklahoma law argument convincing to show clear and evidence “a court did not find that the Bank’s undertak representation posi false material made as a ing of certain was in furtherance of tive assertion which is either known to be its contractual obli false, recklessly or knowledge made without gations contrary, to the Hamiltons. To the truth, with the intention that expressly the district court found remand upon party acted to his or her detri that— ment.” Rainbow Travel Serv. v. Hilton Ho part The Bank undertook this work not as Corp., tels Cir. good ongoing faith to fulfill Mr. effort Tice, In Tice v. P.2d promisеs Warren’s false to the Hamiltons (Okla.1983), the Oklahoma repair obligations and the un- Bank’s total set forth basis for a fraud claim based on Lease, part der the but as of Mr. instead promise: fulfill failure to deceptive gesture Warren’s scheme. This predicated upon promise Fraud can be faith,” “good like the moratorium on thing promi- do a in the future when the payments unilaterally rent Mr. im- Warren sor’s intent is otherwise. The basis of posed April designed string misrepresentation fraudulent is the cre- along the Hamiltons until he could either impression ation of a false buy property convince them to or probable sustained as a natural and conse- sign coerce them to a new lease. quence charged. of the act The fraudulent Aplt.Supp.App. (emphasis origi- 897-98 representation need not be the sole induce- nal). party ment which causes a to take the Oklahoma, parties’ purpose injury action from which the ensued. The disputed and intent to a ques contract is a key representation is that without the Gas, tion of fact. See Continental Natural party liability would not have acted. The Gas, Inc., Inc. v. Midcoast Natural 935 P.2d misrepresentation depends upon (Okla.Civ.App.1996). prior In our person relying whether the thereon was in opinion, recognized question fact deceived. part performance whether of a contract was promise” “toward the fulfillment of a In this the district court ex law question was a of fact which pressly necessary found all the elements the district court must decide on remand. establish fraud under Oklahoma law. The Hamilton 58 F.3d at 1529-30. If Oklahoma NationsBank, court found that absolutely law barred the Hamiltons’ fraud Warren, representations made сlaim, a remand would have been unneces the Bank repairs would make certain which sary. Because our review of the record re Warren knew to be false. The court also veals that the district court’s as to found that NationsBank did this with the in undertaking motive certain intent that the Hamiltons would detrimental property clearly of the is not errone ly rely representations. on such The court ous, subject upon but is a which reasonable found: might given minds differ the conflicting testi mony parties, of the we will not disturb the Beginning in March continuing 1991 and finding. Accordingly, NationsBank’s 2, 1991, until October Mr. Warren re- argument first must fail.2 peatedly'made promises false that all nec- essary repairs would be made and that

II. they timely would be made fashion. promises NationsBank next asserts that the He made these with the intent support them, evidence was insufficient to the dis not to but with the knowl- nates, 2. Even if we were requiring apply clearly lo view the district court's us to erroneous regarding Richard, determination NationsBank’s motive standard of review. See United States law, question (10th Cir.1992) quintes- (internal as a mixed of fact and “the quo- sentially question predomi- omitted). factual of intent” tations and citation the Hamiltons that NationsBank assured specifically nonperformance, edge they executed the lease that the Bank making when items or repair critical failure necessary repairs all would make repairs, would be disastrous untimely Aple.App. at The Bank property. Mr. War- plan. business Hamiltons’ placed per year limit on the even only a was to take care true intent ren’s required to amount the Hamiltons were ex- delay immediately mak- items few Aplt.App. pend property. to maintain the necessary to were that he knew ing repairs Yet, not autho- Vol. at 6. did integrity functional restore the preserve or any repairs Aple.App. in 1992. rize By delay, Mr. Warren property. February As of needed repair incurring avoid additional hoped to $109,860. Aple. repairs costing a total of until he succeeded maintenance costs 1-7, Hamilton de- App. at 234. Sandra onerous the Bank from its extricating problems some of the which arose: scribed repair and the Lease to obligation under [Wjhen in, bullet we moved there were property.” “all functions of maintain everywhere, ... none of the doors holes put pressure on intended to He also open, falling cabinet were doors Hamiltons. utility room. off ... the kitchen and the Aplt.Supp.App. at 896-97. just kept just thing Plumbing was one —it evidence conflicted Unquestionably, fixed, get another. You’d a toilet after to believе court chose case. The district this break; the sink would another toilet would NationsBank. rather than the Hamiltons break; up kept backing be- the sewers rejected testi- expressly Warren’s just full of from they cause stuff never intended to deceive mony that he long.... electric sitting [T]he there so unbelievable: Hamiltons as really problem, there were live wires Bank, acting finding that the The Court’s Light the house. fix- everywhere inside Warren, fraudulently is through Mr. acted Ceiling wouldn’t were broken. fans tures observa- large part in on the Court’s based work, they just up____ frozen We had and man- demeanor tion of Mr. Warren’s my everywhere. shorts The Jacuzzi had him, testifying. Watching the Court ner out, up the flames flicked room shorted firmly that he was a deceit- convinced bumped my I arm one of the wall. ful, dealings calculating opportunist in his my bathroom and light switches was well aware of the Hamiltons. He with рoint. room at one me across the knocked exploited the Hamiltons’ purposefully and out, point, range kitchen shorted Another vulnerability. becoming After particular everywhere. The kitchen stove fumes situation, Mr. with the Hamiltons’ familiar literally up. and burned caught on fire points in capitalized on the weak Warren air con- every appliance broke. The Most namely, they plan, business their anoth- out at one time or ditioners all went Bank to ill afford to wait for the could fixed, got After the air conditioner er. repairs nor abandon numerous basic make spent the the heaters broke---- then they al- had considerable investment and the entire winter winter of ’91 entire starting up their business ready made working in a coat with a following year property. somebody fireplace, when had fire one, go get logs to build because that сould at Aplt.Supp.App. 898-99. two whole absolutely no heat for we had Hamilton, 58 F.3d prior appeal, As in its for nine had no oven winters. We 1528-30, argues that its ex- at falling scorpions were months.... $20,000 in 1991 to penditure of over June fixtures, we of course light and out of sprin- security system, repair property’s place problem____ The wasp still had the guest floor illustrates system, house kler wasps. it was one And was infested with deceive did not intend to that NationsBank be- things specifically addressed agree that this evidence Hamiltons. We moved in. fore we even way. view- may viewed in that Aple.App. at 89-90. to light most favorable ing the evidence court’s must, supports the district Rain- The evidence party as we see prevailing nec- not make the that the Bank did bow, at the evidence showed 896 F.2d lease, essary repairs sufficiently compensate in accordаnce with the Hamil- by plaintiff and refused to do so unless the Hamiltons tons for their treatment party agreement entered into a more definite lease third defendant and for hard- advantageous ships they under terms more Bank. suffered as a result. 214; Aple.App. Aplt.App. at I at Vol. 103-04. 45-A, Aplt.App. Vol. I. at 3—4. the lease NationsBank admitted had good “not turned out to be a deal for the authority The district court’s to im Aplt.App. out.” want[ed] bank and we Vol. pose punitive damages in this case arose II in the at 268. The Hamiltons meantime 1987) (West § 9A Okla.Stat.Ann. improvements made over worth of 1995). (repealed Section 9A allows an award lease, property during the term of the under Oklahoma law Aple.App. and as a result are now broke. example, by way “for the sake of 251-52, 319. defendant,” punishing the an exceed award of actual where appeal, inquiry On our is limited convincing finds “that there is clear and evi contains whether record evidence to guilty dence that the defendant is of conduct support findings, the district court’s and we evincing disregard a wanton or reckless for amply believe this record does. How we another, rights oppression, fraud or might this case in the first decide instance is ” malice, presumed.... actual or The Okla review, import. of no Under our standard emphasized homa Court has findings we will overturn the district court’s although damages may award of “only if our review of the record leaves us plaintiff, in a pur result windfall to the firm with definite and that a conviction pose of such in Oklahoma is to mistake has been made.” ITT Ins. Life punish the offender and deter others from Corp. Farley, wrongs society. Day like the benefit Cir.1986). exclusively It is within the district Corp. ton Hudson v. American Mutual Lia (1) (2) province aрpraise credibility, (Okla. Co., bility Ins. 621 P.2d weight determine the to be afforded testimo (3) ny, draw reasonable inferences from the facts, evidence, resolve conflicts assuming deciding Even without (5) ultimately findings set forth of fact district court’s comments to which Nations- empow and conclusions of law. We are not objects improper, Bank these com- ered to undertake a review of the evidence ments cannot be viewed in isolation. In its which would amount to a trial de novo. Ac Entry Judgment prior Journal to Nations- cordingly, uphold we the district court’s find appeal, Bank’s first the district court ex- ing against of fraud NationsBank. stated, pressly consistent with Oklahoma law, punitive damages the award of III. against example NationsBank was to set an up NationsBank claims that if we punish by the Bank: “The fraud Na- hold the district court’s we Warren, agent, tion’s by Ward was shown still reducing must issue а remittitur convincing ‍​​​‌‌​​​‌‌​‌​​‌‌‌‌​‌‌​​‌‌‌‌​​‌‌​‌​​‌‌​‌‌‌‌‌​‌​​​‍clear and evidence and was so $1,200,000punitive damage award be egregious, puni- wanton and malicious that cause the improperly district court awarded damages ... tive should be awarded punitive damages compensate the Hamil example Nations to punish set and to punish tons rather' than NationsBank. Ac public.” Nations for the Aplt. benefit of the NationsBank, cording to the district court remand, App. IVol at 50. On the district warranting committed error a remittitur previous finding: court reiterated “Mr. when the court stated on the record: egre- Warren’s fraudulent conduct was so purpose

The puni- gious, oppressive Court’s award of wanton and as to warrant damages grant recompense punitive tive was to damages an award of as determined by previous findings.” Aplt. Hamiltons where the standard dam- the Court’s ages Supp.App. reject calculations not. Accordingly, The amount at 900. we quantum awarded was the the Court felt claim that the district court upheld an award that was 526 improper Court later damages for an imposed punitive compensatory greater times than the dam law. under Oklahoma purpose Corp. v. Alliance Resources ages, TXO Production IV. p., Cor 509 U.S. S.Ct. (1993), 125 L.Ed.2d 366 the BMW Court damage award Whether by stating up “in explained that award ques is a the Federal Constitution violates TXO, in holding the million award we $10 state apart from Oklahoma separate tion figure relied on the difference between Therefore, States we look to United law. and the harm to the victim that would have addressing limits of cases Supreme Court plan ensued if the tortious had succeeded. pro under the due damage awards that the relevant suggested That difference Amendment. of the Fourteenth cess clause ,— 10 to 1.” ratio was not more than BMW cases, it is neces we believe Based on these OXY, at-, In 116 S.Ct. at 1602. we U.S. substantially sary to reduce that in interpreted these decisions to mean court. imposed damage award are injury “economic cases pu in awarded The detect, significant injury and the not hard to compared as with the damages, nitive harm punitive damages ratio of Ham damages awarded the compensatory generally cannot exceed a ten one ratio.” ratio be fraud claim. The iltons on their OXY, 101 F.3d at 639. This is an economic punitive and actual tween case, appear injury do not to be and there 27:1, awards, is un approximately which Hamil any “hard to detect” elements of the Supreme constitutionally excessive under the damages, actual tons’ as the America, North BMW Cоurt’s decision by the award reflects the costs incurred — Gore, U.S.-, 116 S.Ct. Inc. v. bank’s relying Hamiltons (1996), subsequent our 134 L.Ed.2d Thus, OXY, repairs. Resources, Trend decision Continental is unconstitution the 27:1 ratio at issue here USA, Inc., 101 F.3d 634 Inc. v. OXY excessive, should at least ally and the award — denied, -, Cir.1996), cert. U.S. ratio. be reduced to a 10:1 L.Ed.2d uncon- even a 10:1 ratio will be constitutionally Selecting the maximum stitutionally range in a broad excessive given ratio in a permissible punitive proper ratio cases. To determine process. guidelines is a difficult case must consider what the Su- given in this to date offered im- “[p]erhaps the most preme Court called Nonetheless, murky. regard are somewhat portant of the reasonableness indicium clear. relevant criteria are several of the award,” degree “the of re- BMW, “guide identified three the Court conduct.” prehensibility of the defendant’s сonstitutionality of posts” evaluating the - at-, BMW, “reprehensi award: OXY, reprehensibility assessing Under conduct; the ratio bility” of the defendant’s conduct, we ask whether of a defendant’s damages and the actual or punitive between harm rather than “causes economic conduct: suffered; harm and the difference potential harm; unlawful physical would be considered punitive damage award and between the states; repeated acts rather involves in all penalties available for com civil and criminal intentional; one; involves single a is than BMW,—U.S. - at parable conduct. See rather than omis- false statements deliberate --, at 1599-1601. 116 S.Ct. sions; target.” aimed at a vulnerable and is matter, As a threshold ask whether at 638. We also there is a ratio above has indicated that engaged in violent behavior. defendant damage rarеly will be punitive awards which - at-, BMW, at 1600. 116 S.Ct. U.S. that a 4:1 upheld. has stated The Court OXY, reprehen- of the relevant As in some punitive damages actual is between ratio Na- present in this case. sibility factors are Mut. Ins. Co. “close to the line.” Pacific committed to have 1, 23, 24, was found tionsBank Haslip, 499 U.S. every state. The by recognized a tort 1046-47, 113 Although the L.Ed.2d Instead, by the Hamiltons’ court found that NationsBank made NationsBank. alleged statements, fraud claim arises out of an breach of that its false conduct deliberate which, law, will contract under Oklahoma intentional, bank and that the knew the only rarely of action. sustain a tort cause financially Hamiltons were a vulnerable not on suggests This that NationsBank was position the statements were made. when give that could rise to notice conduct hand, case, OXY, like in- On the other this liability. non-compensatory Ac- substantiаl only economic harm rather than harm volves cordingly, us to con- this factor also drives safety to the health or of individuals. constitutionally per- maximum clude that the causing only injury [are] economic “[T]orts punitive damages ratio of to actual is missible worthy large damage awards less fairly low in this ease. injuries inflicting than torts to health or safe- however, way, A factor that cuts the other OXY, injury ty.” 101 F.3d at 638. When the relatively of the actual is the small size dam- economic, particularly when it arises comparison age award of relationship out of a contractual where the — BMW, at size of the defendant. contractually protect parties can and should -, Although have by providing explicit themselves for remedies been cautioned that the size of the defendant breach, permissible in the event of ratio ordinarily very significant should not be a damages damages actual factor, it is not we have also concluded that Further, relatively should be modest. OXY, irrelevant either. 101 F.3d at 641. fact that NationsBank’s conduct here was undeniably large NationsBank is financial reprehensible. it non-violent makes less institution, damages in fraud addition, In NationsBank’s treatment of expected much cannot be to serve as single arose from a the Hamiltons contractu- Hence, any deterrent future misconduct. whereby proper- al event the bank leased the constitutionally, higher ratio of ty Although dispute to the Hamiltons. than actual is warranted here concerning performance the bank’s of its compensatory if be the case the base level of time, promises stretched out over some significantly higher figure were a alleged making act of fraud —the aof con- relative to the size of the defendant. repairs— tractual to make certain OXY, In we held that the “maximum con- single arising single was a event from a stitutionally permissible” punitive damage to OXY, relationship. Compare contractual actual ratio was 6:1 under the facts (noting “coercing that F.3d weaker light case. F.3d at 643. competitors” was “OXY’smethod of conduct- higher we believe that no ratio can business”). Thus, ing reprehensibility constitutionally sustained this case. against punitive factor here militates dam- Accordingly, puni- we reverse the ages represent multiple a substantial tive award entered compensatory damages. court, $264,000, and order a remittitur to representing amount six times the actual Second, we look to see whether the state damages suffered the Hamiltons.3 provided penalties has for civil or criminal PART, comparable AFFIRMED IN сonduct that would alert a REVERSED IN PART, REMANDED. might defendant that it face substantial lia- beyond compensatory damages bilities mere EBEL, Judge, dissenting: Circuit Here, engages in such conduct. no one suggests that there were civil or criminal respectfully dissent from Parts & II of penalties applicable engaged opinion to the conduct the court’s in this ease because argues 3. NationsBank also that the size the courts have observed that the Oklahoma punitive damage award violates Oklahoma law. strictly statute "shall be construed.” Oklahoma has not hesitated to strike down or ‍​​​‌‌​​​‌‌​‌​​‌‌‌‌​‌‌​​‌‌‌‌​​‌‌​‌​​‌‌​‌‌‌‌‌​‌​​​‍We believe that would determine that order remittitur in cases where the award here was excessive Denton, have been excessive. v. Chandler 741 and it would order remittitur down to a constitu- (Olda.1987); P.2d 868 American National level, tional which we have found here not to Corp., Bank v. & Trust BIC 880 P.2d 427 6:1, $264,000. excеed a ratio of or cases, (Okla.App. In those the Oklahoma

863 credibility, account court failed to Warren’s believe general promise complete repairs reluc only for Oklahoma’s to was adequately are part “deceptive Aplt. tort remedies in what of a tance to award scheme.” my actions. In essentially Supp.App. majority, breach of contract Unlike the do view, expenditures by in the over not believe that findings the district court’s clearly subsequent actions were regarding subjective the bank’s motivations promise” under “toward the fulfillment dispositive, long are so as the bank took Supreme in Court’s decisions the Oklahoma objective steps toward fulfillment of its (Okla. Thomas, Furr v. 817 P.2d promise, contractual as it did. 1991), Lyon, Realtors v. and Citation Co. distinguishes The Oklahoma ease law be- (Okla.1980). 788, 790-91 P.2d tween situations where the defendant has matter, remedies, such as general As a tort objective steps completion taken toward damages, are not available in breach contract, steps of the and cases where such Ill E. Farns- of contract actions. Allan not In have been taken. the former situa- worth, § 12.8 Farnsworth Contracts tion, any barred, completely fraud claim is hand, Oklahoma, the other like On whereas the latter situation a claim fraud states, recovery in situations most allows tort plaintiff will lie can show the other conduct amounts to an where defendant’s Thus, Citation, elements of such a claim. tort, opposed as independent such as plaintiff alleged realty when the that a com- simple Specifically, contract.1 to a breach of pany fraudulently misrepresented its intent claim is available where a fraud units, to sell cеrtain condominium the Okla- promise to act in the future is accom- Supreme homa Court affirmed trial panied by an intention not to grant summary judgment in favor with intent to promise is made brokerage of the defendant based on the promisee acting into where he deceive the “simple company attempted fact” that the to not have so. The otherwise would done sell the condominium units at issue. gist prom- rule not the breach of of the attempts P.2d at 790. The to sell the units promi- ise but the intent of the fraudulent concept the issue from the “remove[d] pledge not to sor at the time the is made promise fraud a to execute a future promise thereby perform the so made and relegate[d] act made mala fide and the fail- promisee. deceive the perform simple nonperformance ure to promise.” Notably, affirming Id. Citation, 610 P.2d at 790. Okla- grant summary judgment, did important placed homa has limitation on engage any analysis company’s not rule, recovery only in allowing this situations subjective attempting to sell motivations performed where the defendant has not sub- units, any attempt or make whatever to sequent actions “toward the fulfillment of the quality of those efforts. evaluate the Furr, promise.” 817 P.2d at 1272. Furr, hand, majority affirms the district court’s on the other the Oklahoma recognized a that NationsBank defrauded the valid fraud

conclusion perform repairs actions taken the defen- promising Hamiltons claim where the intending to com- dant after the contract was entered into without repairs, despite the fulfillment of the plete performance of those not directed toward promises in In that performed fact that the bank in excess of the contract. defendant, developer, promised after the was real estate “to construct a two mile all-weather smooth made. The district court’s conclusion development.” Mr. to serve the based on its assessment of Warren’s service road theory recovery to extend the tortious breach 1. Oklahoma has also allowed for tor declined Bank, contract, only settings. Rodgers v. Tecumseh breach of but in the insur other tious (Okla.1988) (refusing recog pay context for a bad refusal to P.2d ance faith agree commercial loan policy. v. American Assurance nize tortious breach of Christian Home Co., (Okla.1977); liability noting impose "[t]o tort 577 P.2d McCorkle ment 583, Co., (Okla. every breach of contract would 637 P.2d 588 on a bank for Great Atlantic Ins. transactions”). Supreme only serve to chill commercial The Oklahoma Court has so far representеd building the bank in this case over one- such P.2d at 1269. Instead $37,955.51 road, defendant, repair who conceded he had half of the estimated total the promised road be- reasonably not to build the performance decided Half cannot cost. lots, gravel selling the built performance. fore he finished token Accord- be considered was no 1272. Because there road. Id. at judg- ingly, I would reverse the district court any by “to- showing of action the defendant in ment favor of the Hamiltons fraud promise” to build the fulfillment of the ward claim, punitive damages and conclude road, smooth, the Oklahoma all-weather only the Hamiltons’ that on these facts valid the fraud Court concluded claim the bank was on a breach jury. properly claim was submitted to the majori- theory.2 since the contract Id. ty has concluded that fraud and conclude, apprоpriate, part dámages are undisputed that Nations- In this is opinion, of the Court IV completed worth of re- Bank over constitutionally awarded are exces- property during the pairs to the Hamiltons’ period, that the re- sive and must be reduced on remittitur. relevant time items among specifically men- paired were those repairs prepared on list of needed tioned BALDOCK, Judge, dissenting Circuit as to by

jointly both the Hamiltons and bank. Part IV. 1991, April repairs As of the list needed agree not that the do by prepared jointly the Hamiltons and the constitutionally imperm award this case estimated that the total cost of bank issible.1 Mutual Insurance Pacific Life $37,955.51. repairs completed would be The 1, Haslip, v. Co. U.S. S.Ct. objective steps bank were toward the (1991), upheld an Ala L.Ed.2d Court promise, contractual fulfillment of the bank’s bama state court’s award court did not otherwise. and the district find greater than four times the actual Citation, Consequently, as no fraud claim stated, award. however: “We undisputed is available under the facts of this not, cannot, need and indeed draw a mathe case. bright matical line between the constitution Further, prog- in view of the substantial ally acceptable constitutionally unac completing ress the bank made toward every ceptable that would fit ease.” Id. at repair obligations, clearly I believe it was Nevertheless, 111 S.Ct. at 1043. this erroneous for the district court to character- attempts just to do that. performance “spuri- ize that as “token” and any Illustrating difficulty drawing assuming that a token act will ous.” Even lines, satisfy Corp. clear in TXO Production v. Alli- requirement not Citation/Furr promise, Corp., 509 acts toward the fulfillment of a ance Resources repairs actually cоmpleted by (plurality), over 125 L.Ed.2d 366 matter, Contrary majority's assertion that "a 1. As an initial I do not that we believe unnecessary” have been remand would reach the need issue of the absolutely Hamiltons' fraud claim barred award’s excessiveness under the Federal Consti- law, prior opinion clearly our indi- opinion tution. Footnote three of the court’s necessary cates that a remand was because we plainly states that the award is excessive under ‍​​​‌‌​​​‌‌​‌​​‌‌‌‌​‌‌​​‌‌‌‌​​‌‌​‌​​‌‌​‌‌‌‌‌​‌​​​‍could not from the record whether the "discern Why Oklahoma law. then do we need to deter- effect, any, district court considered the $20,000 mine that the award is also excessive under the expenditures on the Hamiltons' fraud Service, Spector Federal Constitution? See Motor claim under the law of Oklahoma as stated in 101, 105, McLaughlin, Inc. v. 323 U.S. Hamilton, Furr.” Citation and FDIC 152, 154, (1944) ("If 89 L.Ed. 101 there is one (10th Cir.1995). At the time of оur deeply more rooted than other in doctrine decision, prior Hamiltons continued dis- process adjudication, of constitutional it is pute performed any whether the bank had re- pass ought questions that we not to on of consti- If, remand, pairs. Id. n. 3. the district court adjudication tutionality ... unless such is un- repairs performed by had concluded avoidable.”). objective bank were not acts toward the fulfill- promise, ment of the bank's the Hamiltons' fraud Thus, claim would have been valid. a remand necessary. course, consistently rejected Of we have damage award of upheld punitive a Court the notion that the constitutional line is damage of $10,000,000 an actual award simple marked a mathematical formu- Rejecting to 1. $19,000 ratio of 526 —a therefore, appropriate, la. ... It is to reit- punitive damage argument TXO’s rejection categоrical ap- erate our excessive, the stat grossly Court award was proach. again, Once “we return to what punitive “imposing a a fact finder ed that not, Haslip: we said ... We need qualitative a as must make damage award cannot, bright indeed draw a mathematical facts and cir on a host of sessment based constitutionally accept- line between the case unique particular to the be cumstances constitutionally unacceptable that able and truly no two cases are fore it. Because TXO, every fit ease....’” U.S. identical, of such meaningful comparisons 458, (quoting Haslip, at at 2720 S.Ct. at to make.” Id. awards are difficult 18, In 499 U.S. at 111 S.Ct. at most Thus, take from TXO must S.Ct. at 2720. cases, the ratio will be within a constitu- damage of punitive that a award the lesson tionally acceptable range, and remittitur per actual is not se over 500 times justifiеd this basis. will not unconstitutional, propriety (em- at---, Id. 116 S.Ct. at 1602-03 very fact damage requires award punitive added). phasis analysis. case specific, case assert, In not this case NationsBank does Supreme Court decided BMW In asserting, and has no basis for that the dis , America, Inc. v. —U.S North Gore sought protect trict court other than Okla .-, 134 L.Ed.2d 809 116 S.Ct. punitive awarding homa interests in dam decision, Court, in a 5 to 4 reversed and ages. argue Nor that it does damage punitive remanded not have fair that fraudulent con did notice greater than the actual award 500 times might give punitive rise to duct Oklahoma In damage award of BMW. Trend Re measures. See Continental attempted provide doing, the Court so sources, Inc., Inc. v. OXY USA pu determining when a guidelines some 1996) (“It long Cir. has been estab pro afoul of due damage nitive award runs ... that tortious behavior lished Oklahoma The Court first “grossly cеss as excessive.” particularly egregious will warrant is — imposes denied, sanction the state explained that punitive damages.”), cert. U.S. designed pro- -, upon a tortfeasor must be 137 L.Ed.2d 1049 117 S.Ct. (1997). Instead, economy, principle rather ar tect its own consumers and accepts, gument, of other which the court is that than the consumers and economies damage at-, punitive court’s award at 1597. Sec- states. Id. S.Ct. excessive,” the award is ond, “grossly because fair notice that the tortfeasor must have twenty-seven greater than the times subject may give punitive rise to conduct disagree. actual award.2 -, measures. Id. at Third, tortfeasor must have fair notice as BMW, degree focused on the Court potential magnitude of such measures. conduct reprehensibility of the tortfeasor’s guideline, the identi- Under the third “[pjerhaps important the most indicium as (1) degree of re- guideposts: fied three reasonableness of a (2) conduct; prehensibility of tortfeasor’s more that deceit is award.” The Court noted potential disparity the harm or between “in- negligence and that reprehensible than award; especially harm and injury, when fliction of economic between the dam- intentionally through difference affirmative acts of done penalties. misconduct, target civil is finan- age award and the authorized ... or when the vulnerable, Court, however, rejected again can warrant a substantial cially Id. The —BMW, at-, applicable categorical approach penalty.” notion of a are echoed concerns Similar all cases: damages. The in- the court’s award continues to assert that the 2. NationsBank also however, evidence, propo- sufficiеncy is a support does not evidence opinion. throughout rejected support we have turn cannot sition which in TXO, personally injured. 509 U.S. at 113 S.Ct. at was The court’s conclu- TXO. See ease, posed 2722-23. In this the district court sion that NationsBank’s conduct no NationsBank, Warren, safety found that threat to the health or of the Hamil- Hamiltons, intentionally seriously. deceived the had tons cannot be taken they financially knowing that vulnera Moreover, forget we must not Aplt.Supp.App. Compare ble. at 896-99. punitive damages. nature of The wealth of — BMW, at-, at 1601 impor- the tortfeasor remains a relevant and (“[T]he record in this case discloses no delib determining propri- tant consideration in statements, erate false acts of affirmative TXO, ety punitive damage aof award. conduct, or concealment of evidence of im 464,113 2723-24; USA, U.S. at S.Ct. at OXY TXO, ”), proper motive.... with 509 U.S. at at 641. The F.3d record indicates (stating large puni at 2722-23 NationsBank’s net worth is in excess of $8.7 supported by damage tive award was tortfea $1,200,- Aplt.App. billion. III at 689. A Vol deceit”). “fraud, trickery sor’s As we represents only 000 award of one 14/1000 said, previously supports have the record percent of NationsBank’s net worth. I con- findings. these reprehensibility degree clude that the purely The court states that in cases of conduct, degree of diffi- injury, economic the ratio of dam- culty in estimating the Hamiltons’ actual ages to actual harm cannot 1. exceed damages,4 significant and NationsBank’s language Aside from the fact that the justify are sufficient to the district worth support Constitution contains no for this con- punitive damage award Nati- precedent specifi- clusion and judgment onsBank. affirm cally prescribe rigid refuses to mathematical respects. the district court in all ratios,3 this case is much than more one of purely injury. economic Sandra Hamilton that, among problems,

testified other she had winters,

no heat in the house for two electri- out, repeatedly

cal units in the house shorted an electric shock threw her across the bath- RICHMOND, Billie Leon room, and the house was with infested scor- Petitioner-Appellee, pions wasps. Aple.App. 89-90. any wonder whether would make differ- ence to this court the Hamiltons had Larry EMBRY, Superintendent/Warden, caught pneumonia, electrocuted, been or seri- Respondent-Appellant. ously stung. Does a substantial award of No. 96-1380. punitive damages require that we await such tragic Surely occurrence? A hot! Appeals, United States Court damage exposure award should based on Tenth Circuit. to harm rather than actual harm. Nations- Aug. 1997. exposed Bank’s wanton conduct the Hamil- anyone tons and else on personal injury.

unwarranted risk of It is nobody

not due to the Bank’s conduct that part opinion, 3. I view the recent trend in the federal courts IV of the the court states that setting arbitrary ratios to decide the constitution- appear “there do not to be 'hard to detect' ality awards as unwarranted $44,- damages, elements of the Hamiltons’ as the judicial perhaps conservative a lesser activism— 000.00 actual award reflects the costs than, as, every menacing known evil but bit as relying incurred the Hamiltons in judicial first liberal cousin activism. If a court's repairs.” ‍​​​‌‌​​​‌‌​‌​​‌‌‌‌​‌‌​​‌‌‌‌​​‌‌​‌​​‌‌​‌‌‌‌‌​‌​​​‍bank's This purportedly applicable construction of the consti- directly contrary statement provision, tutional here the Due Process Clause court’s conclusion that standard calcula- Amendment, support of the Fourteenth has no adequately compen- tions in this case would not history, apply its text or it is difficult to damages they sate the Hamiltons for the in- yields unprincipled generally results. See Wech- 45-A, Aplt.App. curred. Vol I at 3-4. sler, Principles Toward Neutral Constitutional Law, 73 Harv.L.Rev. 1

Case Details

Case Name: Federal Deposit Insurance v. Hamilton

Court Name: Court of Appeals for the Tenth Circuit

Date Published: Jul 28, 1997

Citation: 122 F.3d 854

Docket Number: 96-6104

Court Abbreviation: 10th Cir.