Federal Deposit Insurance v. Stahl

alternative, conditionally granting them BLACK, and Circuit Before HATCHETT judgment as to trial. We reverse the new CLARK, Judge. Judges, and Senior Circuit for further those claims and remand case proceedings. BLACK, Judge: Circuit Corpora- Deposit Insurance The Federal I. BACKGROUND3 (FDIC) former

tion filed this action against of Broward Federal officers directors savings Broward was a and loan associa- (Broward), al- Savings and Loan Association Stahl, who had opened tion which 1978. alia, negligence in relation to leging, inter banking experience, as chairman of no served target approved the directors. seven loans board, and Allen and Beckerman served dismiss, and Defendants filed a motion to Later, promoted directors. Broward as summary judgment contend- also moved for position of chief executive officer Stahl to the rеspect all ing claims with that the FDIC’s lending Cheplak, who had limited and hired two, seven, alternatively, target or president. experience, as its These motions were loans were time-barred. ratified, Cheplak approved, and the board denied. in this the seven loans issue case. proceeded against to trial four The case Stahl, Ralph Cheplak, regulators Federal warned Broward Angelique directors: rapid George Allen.1 1983 of the risks associated with Ross Beckerman and W. trial, growth strategy adopted. it Broward Following jury general had entered paying high interest rates in order to amount of million favor was verdict $18.6 growth placed against Cheplak, depositors, attract but such of the FDIC to reinvest these liability pressure for Beckerman on the institution returned no verdicts trial, court set aside the vеr FDIC settled with three 3.Since the district 1. On the eve of Hatch, original defendants: Ira Al- judgment of the len Baer and Ronald seven as a matter of law in dict and entered Bergeron. directors, presented we have favor of the light inferences in a evidence and construed all opinion, In this we address the FDIC's claims v. Tennes most favorable to the FDIC. See Miles only Cheplak. chal- to Stahl and The FDIC's Co., Pulp Paper River see judgment lenge in favor of to the district court's (11th Cir.1989). merit and does Allen and Beckerman is without require Cir.R. 36-1. discussion. See 11th policies such as commercial ed but before the new high-yield actually funds in assets were loans in order to cover costs. real estate implemented which agree- violated both the portfo- rapidly expanding its real estate loan procedures. ment and the nеw loan Croft lio, risky large made a volume of Broward prepared concluded Broward was not loans. time, make those loans at that exposed The Federal Home Loan Bank Board high degree itself to a doing risk so. (FHLBB), agency regulat- which the federal Six of the loans issue this ease were thrifts, periodically ed reviewed Broward’s Supervisory made Agreement after the compliance financial condition to ensure with executed. Hess reviewed these loans and Roslyn regulations policies. FHLBB prudent found numerous violations of loan Hess, years’ expe- an examiner with over 13 practices, Supervisory Agreement the and rience, Paradice, agent and Debra an with 19 lending policies.5 Broward’s new years’ began Hess did experience, regulatory their oversight in of Broward 1983. Bаsed on not review one of the seven loans in this a lawsuit, 1982 and 1983 reviews of number of Bro- approved expected but as it was not loans, major regulators ward’s federal found produce positive years to cash flow for five underwriting in ap- deficiencies its loan and required and a million $1.6 re- interest/loss praisal procedures. 15, 1985, serve. On November the FHLBB In insolvent, these deficiencies worsened. Con- concluded that Broward was in sequently, regulators required the federal part ap- due to loan losses. Broward lost Supervisory Broward’s board to execute a proximately million on the $34 seven loans Agreement promising to action elimi- take to sought which the FDIC to in recover this Supervisory nate the weaknesses. The action.6 Agreement provided extending that before credit, preсau- Broward would take certain II. ISSUES PRESENTED Thereafter, tions.4 the board Broward adopted lending guidelines policies new by parties There are four issues raised the Supervisory Agreement. as out in set the in appeal/cross-appeal this which merit our regulatory problems, In addition to the (1) consideration: whether the district court reports internal audit also revealed deficien- determining erred in that an care lending practices. cies in Broward’s Even governed standard the actions of the di- acknowledged Beckerman these underwrit- (2) rectors; whether district court erred ing July in deficiencies a letter to Stahl dated entering judgment Cheplak in for Stahl and Associates, In 1985. October MCS a (3) verdict; notwithstanding the whether the firm, consulting lending thrift reviewed the conditionally granting district court erred policies adopted Broward with the execution Cheplak a new trial on the bases of Supervisory Agreement. MCS noted incompetent use of FDIC’s evidence and policies if Broward’s would be successful (4) prejudicial closing argument; and wheth- implemented, but did not review Broward’s er Stahl and are entitled to a new lending practices. managing actual di- ground relating trial on the that claims MCS, Croft, rector of D. James discovered target two of the loans were barred that Broward had made several loans after Supervisory Agreement had been exeeut- statute of limitations. included, alia, (1) obtaining: reports proof 4.These included financial 5. These deficiencies inter no equity, demonstrating ability borrower/guaran- of borrower financial statements demon- an loans, strating inability repay loan; and a lack of (2) repay equity tor to of the borrower feasibility studies. (3) security property; specifications for real (4) development projects; feasibility estate stud- agreement, Fed- Pursuant an assistance showing project securing ies the loan could Savings Corporation eral (FSLIC) and Loan Insurance loan; generate enough capital repay acquired the institution that reimbursed (5) appraisal meeting requirements an of R Broward for losses on the seven loans. The 41b, guideline an FHLBB for loans secured rights and obli- FDIC succeeded to gations FSLIC's real estate. agreement. this imposed gross bur- would have OF REVIEW III. STANDARD basis, proof upon the FDIC. On this den of reviewing judgment as a matter In trial Cheplak contend a new is Stahl standard as the apply the same Cheplak argue in the warranted. Stahl and deciding motion. Miles district proper if it that even alternative Co., Pulp Paper Tennessee River v. establishing simple neg- utilize Florida law Cir.1989). (11th judgment 1525, 1528 A F.2d liability, Florida’s busi- ligence standard of (JNOV) should notwithstanding the verdict (BJR) judgment rule still elevates the ness if, viewing all the evidence only be entered gross negligence. standard to the level light most inferences in a construing all scenario, maintain the nonmoving party, the court favorable protection af- failed to overcome the juror reached could have finds no reasonable BJR, and con- to directors under the forded Id.; v. verdict returned. Rosenfield judgment a mat- the district court’s tend Prods., Inc., F.2d Wellington Leisure law should therefore be affirmed. ter of Cir.1987) (quoting Reyn 1494-95 analysis, we will first determine whether our Corp., olds CLP governs the standard of or state law federal Cir.1987)). liability. we will ex- care for director Then a new triаl is ruling A on a motion for has, any, if interplay the BJR amine what for abuse of discretion. generally reviewable appropriate standard. relation Conway (citing Rosenfield, F.2d at 1498 827 Cheplak contend Stahl Lines, Inc., 610 Leaman Tank v. Chemical against claims the directors in this FDIC’s Cir.1980)). (5th 360, When a new F.2d 362 dictating law governed case are federal however, employ a more we granted, trial is negligence of director liabili gross standard of the same standard. stringent application ty. argument Their is best viewed Ctr., Health Care v. Pleasant Grove Jackson streamlined, First, step-by-step fashion. Cir.1993) (11th 692, (citing 695 980 F.2d Cheplak note that Broward was a Stahl and 1554, Co., F.2d B.F. 732 Hewitt v. Goodrich chartered, federally regulated, insured (11th Cir.1984)). 1556 Second, they savings loan association. the Home Owners’ Loan Act contend IV. DISCUSSION (HOLA)8 banking dictates that all federal A. care7 Standard of respect to feder preempts law state law with 212(k) § Finally, they argue case is what al institutions. question this The threshold Reform, Recov actions of the of the Financial Institutions governed care standard of (FIRREA), argues ery district and Enforcement Act of 1989 directors. The 1821(k) (1994), § 12 established a jury that the U.S.C. properly instructed governing gross negligence standard the ac of under Florida law applicable standard care Combining alleged tions of directors. these three misconduct was at the time care, elements, Cheplak that fed mischarac- Stahl and reason ordinary or reasonable but banking preempts law state law under requirements of the due care eral terized the HOLA, gross negligence setting jury verdict. and therefore a aside the standard only to establish the federal standard should be used counter proof pursuant standard of FDIC’s burden of law have dictated the should 1821(k).9 directors, which, they argue, § liability for the dismiss, simple negligence ruling whether is in must determine 7.In on Defendants' motion negli- simple appropriate apply that a district court determined of care to fact the standard gence governed the directors' actions in standard this case. this case. order aside its verdict, this earlier determi- the court considered 1461, (1994). etseq. § 8. 12 U.S.C. case.” This is nation to be "the law of the Defendants’ mo- incorrect. Since the denial of alleged district court found that the acts of The judgment, tion to not a final dismiss was between Octo- in this case occurred regarding care was not decision the standard of States, Januaiy 1986. FIRREA was ber 1984 law the case. See Vintilla v. United 101-73, 1, Thus, 1444, Cir.1991). (11th § No. 103 enacted until 1989. Pub.L. 931 F.2d 1447 Fidelity Cheplak cite Fed. Sav. at 3025 n. S.Ct. Stahl and Cuesta, Ass’n v. de la 458 U.S. themselves concede & Loan courts have not found (1982), in occupies 73 L.Ed.2d 664 102 S.Ct. federal law the entire field argument pursuant support regulation of their federal thrifts under HOLA, only governs law the stan- federal HOLA.10 in this

dard of care for the directors case. Supreme clearly Court has held that Cuesta, Supreme that a la Court held de concerns, because of federalism greater evi directly in state conflict an statute with congressional required dence of intent is finding regulation preempted, FHLBB preempt law than state federal common law. regulation pre- the federal “was meant ” City Michigan, Milwaukee v. Illinois and empt conflicting state limitations.... 304, 316, 1784, 1792, 451 U.S. 101 S.Ct. Against 102 S.Ct. at 3025. U.S. (1981). L.Ed.2d 114 Chep While Stahl and 1821(k), § background, we examine which holding lak cite gross negli cases that the part: states in relevant 1821(k) gence § standard established in depos- A or officer of an insured director displace should be used to common federal itory may personally institution be held law, Frates, see RTC v. gross negligence liable ... ... as such (10th Miramon, Cir.1995); ‍​‌‌‌‌‌​​​‌​​​​‌​‌​​‌​​​​‌‌​​‌​‌​​​​‌‌‌‌‌​​‌‌​​​‌‍RTC v. F.3d terms are defined and determined under Bates, Cir.1994); FDIC v. applicable Nothing para- in this State law. (6th Cir.1994); RTC Galla graph impair any right shall or affect gher, Cir.1993), Corporation applicable under other majority of our sister circuits have either law. specifically question declined to reach the 1821(k). § 12 U.S.C. 1821(k) preempts whether state common see, Miramon, e.g., 2; 22 F.3d at 1821(k) 1359 n. provides §While that a director 424, Gallagher, 10 F.3d at or have held it may gross negligence, be held liable for does not. McSweeney, See FDIC v. 976 F.2d Congress FDIC contends that enacted the (9th 532, Cir.1992), denied, 537 cert. 508 U.S. permit last sentence of the statute courts (1993).11 950, 2440, 113 S.Ct. 124 L.Ed.2d 658 apply to decide whether to state law feder- particulаrly Frates is ally illustrative of this dis- chartered financial institutions. We Frates, is, tinction. the Tenth reach the same That Circuit held conclusion. we find 1821(k) § supersedes “saving language” that the in federal common the last sen- liability predicating upon simple negli- law tence of the statute enables claims under law,” i.e., applicable gence, specifically reaffirming “other law for sim- while its hold- state 443, ple negligence, ing Canfield, to survive the enactment in v. of 967 F.2d 448 (en Indeed, Cir.) banc), dismissed, Supreme FIRREA. in Court de cert. 506 993, 516, specifically la Cuesta declined to hold that 113 121 U.S. S.Ct. L.Ed.2d 527 1821(k) (1992), regulations preempt § federal would all state in which it concluded does laws, Cuesta, 14, preempt simple de la 458 at n. U.S. 159 102 not state law Thus, (1989). finding Stat. 183 Stahl and are affairs doctrine in that national law must

really asking retroactively apply this Court to govern federally-char- the internal affairs of a l(k) gross negligence § standard of under 182 uniformity. tered institution in order to achieve preempt Florida law in the area of director liabil- Second, 29 F.3d at Stahl and 1122-23. issue, ity. finding We decline to this resolve argue minority that a of courts have held that application ap- even if retroactive FIRREA is (k) just preempts § 1821 state law claims not for propriate, question still remains as to wheth- institutions, federal but for state institutions as may bring er the FDIC a claim Florida law well. These claims are without merit and do not utilizing simple negligence. a standard of warrant discussion. Independent preemption, of HOLA Stahl and 10. Cityfed Corp., Fin. See also RTC Cheplak put forth two alternative bases under (3d Cir.1995) (k) (holding § 1249 1821 does which -this Court could find that federal law law), preempt not state or federal common governs liability сorporate either alone First, directors. -U.S.-, granted, cert. 116 S.Ct. 134 Chapman, in RTC v. 29 F.3d 1120 dismissed, -, Cir.1994), upon L.Ed.2d and cert. -U.S. Circuit Seventh relied (1996). principle 134 L.Ed.2d 684 choice of law known as the internal 116 S.Ct. governed by Frates, ty corporate directors was at for against directors. claims 607.111(4)(1987). in § As set forth Fla.Stat. 296-97. Johns, F.Supp. Ins. Co. v. International specifically, More Canfield (S.D.Fla.1988), aff'd, 874 F.2d 1447 1821(k) § does found that McSweeney courts (11th Cir.1989), provided that this standard establishing a lesser law preempt state “in perform their duties directors were to gross negligence. fault than standard of faith, reasonably ... ... in a manner good 447; McSweeney, Canfield, F.2d to be in the best interests believe[d] legislative history of at 539. care as an ordi corporation, and with such 1821(k) theory, stating that supports this § person position narily prudent in like 1821(k) preempt § Congress intended circumstances.” would use under similar insulating statutes applicability of state supplied) F.Supp. (emphasis at 1237 corporate manage- effectively shielded which 607.111(4)). § (quoting We find Fla.Stat. liability grossly negli- for personal ment from 607.111(4), § in time effect Fla.Stat. (daily Cong.Rec. S4278-79 gent actions. alleged negligent acts were committed 1989) (statement Rie- Apr. of Senator ed. case, clearly established an Further, Supreme has gle). while the Court liability.12 negligence standard of director 1821(k) permits § claims determined Cheplak argue that even if a negligence “re- gross against directors liability pre- simple negligence standard of require law gardless whether state would 607.111(4) § O’Melveny Myers v. vailed Florida under Fla.Stat. greater culpability,” & FDIC, 79, -, prior Florida’s BJR elevates such a S.Ct. 512 U.S. ‍​‌‌‌‌‌​​​‌​​​​‌​‌​​‌​​​​‌‌​​‌​‌​​​​‌‌‌‌‌​​‌‌​​​‌‍(1994) gross negligence. sup- to the level of (emphasis standard 129 L.Ed.2d 67 to mean the fol- Congress intend- The BJR has been defined found also plied), it has not liability lowing: imposing preempt laws ed to state i.e., culpability, sim- upon directors for lesser directors liable for law will not hold [T]he Congress had intended to negligence. If ple errors, judgment, honest for mistakes gross negligence stan- a uniform establish they corrupt act without motive and when 1821(k), certainly liability § it dard of faith_ good order to come with- [I]n clearly. more Based have done so could rule, directors must be in the ambit reasoning, we are satisfied upon the above performing diligent and careful (k) preempt laws does not state undertaken; they they must duties have liability gross than standards

with lesser fraudulently, oppres- illegally, not or act negligence. sively, faith. or bad (quoting (emphasis supplied) at 1238 3A Id. must look to the state law We now 1039, Fletcher, Corporations, § Cycloрedia negligent at the time the acts that controlled 1986)). (perm. at 45 ed. in order to deter allegedly were committed liability applicable of mine the standard argument, support of their in this case. The district directors Mintz, F.Supp. cite FDIC v. jury appropriate that the stan instructed the (S.D.Fla.1993), in which the court inter- ordinary negligence, and dard of care was preted the as follows: BJR that care was an element of Florida’s due diligence act Although directors must with below, the reasons detailed we BJR. For (seemingly setting out a and due care sim- agree. standard), only they are ple negligence they fraudulently, illegally, ‘act alleged negligence of occurred liable when acts January oppressively, or in bad faith’.... 1984 and or between October 1987, liability terms indicate that will at- the Florida standard of liabili- These Prior to 1, Johns, F.Supp. July legislature passed 1987. See Fla.Stat. on or after 12. The Florida (1987), 30, 1987, 245, presently § §§ codified at Fla.Stat. (citing 607.1645 n. 4 Act of June ch. 607.0830, (1989), corpo- 166; 607.0831 to afford repealed by § § Act Act of ch. greater protection rate officers directors 189). Thus, legislation § ch. such however, heightened liability liability; these from standards inapplicable to the case at bar. is only accruing apply to causes of action gross negligence? only to acts which constitute There no conflict tach is between say Be- they and intentional conduct. the two. When courts that will judg- courts will not substitute their judg- cause interfere matters of business directors, ment, corporation’s place presupposed judgment— ment in of a it is simple negligence diligence of a director cannot reasonable in fact been ex- —-has ercised. A be reviewed.... durector cannot [sic] close his eyes going to what is on about him in the application The result of the conduct of the corporation business in Florida is that the standard of [BJR] and have it exercising said that he is liability corporate ‘gross busi- for directors is judgment. ness properly Courts have negligence.’ de- give cided to directors a wide latitude (citations omitted). F.Supp. at 1546 management corpo- of the affairs of a What the Mintz court is com- has done provided always judgment, ration pletely ignore requirement the threshold honest, judgment, means an unbiased ordinary the exercise of care under Fla.Stat. is reasonable exercised [sic] them. 607.111(4) necessary § “to within come 49 N.Y.S.2d at 643. [BJR],” Johns, F.Supp. ambit of the see Fletcher, (quoting Cyclopedia rationale, at 1238 3A foregoing accordance with the 1986)), § Corporations, (perm. at 45 ed. properly conclude the district court in- premise under the that courts must not “sub- structed the that due care was an ele- judgment” stitute their for that of directors. is, pre-1987 ment of the BJR. That under Mintz, F.Supp. at 1546. We are not Florida directors must have acted with persuaded the decision in Mintz. for apply. care the BJR to See Johns, 874 n. (recognizing 1461 & 27 judicial policy “The is a restraint [BJR] pre-1987 ordinary Florida’s care statute as are, recognition bom of the that directors BJR). applying the basis If due care cases, qualified most more to make business was in fact required exercised as under Fla. judges.” decisions than are International 607.111(4), protected by Stat. directors are Johns, Ins. 1458 n. 20 Co. BJR, poor no matter how their business (11th Cir.1989). light, may In this the BJR judgment, they fraudulently, unless acted il- preventing be viewed as method of a fact- legally, oppressively, or in bad faith. See id. finder, hindsight, second-guessing from differently, long Said so care as due the decisions of directors. For directors to exercised, protects “good the BJR director” protection be entitled to the cloak of (one fraudulently, illegally, who did not act judgments on the BJR merits their faith) oppressively, inor bad who made an law, however, pre-1987 they Florida still judgment, honest error or mistake in but not making must have exercised due care in (one fraudulently, a “bad director” who acted World, Inc., them. See Schein v. Caesar’s faith) illegally, oppressively, or in bad who (5th Cir.) (finding if amade bad decision. care, they directors exercise due “incur then liability ... they no ... issues resolve above, Consistent with the we hold the through the merе of exercise their business application in of the BJR Florida does not denied, 838, judgment”), cert. 419 95 U.S. require gross negli- that the FDIC establish 67, (1974);13 42 L.Ed.2d S.Ct. 65 AmeriFirst gence to sustain its burden in this case. Bomar, 1365, Bank F.Supp. v. 757 1376 While some courts such as Mintz have held (S.D.Fla.1991) (same). clearly As articulated simple negligence the BJR elevates stan- Casey Woodruff, in the court v. 49 607.111(4) § dard under Fla.Stat. to one of (N.Y.Sup.Ct.1944): N.Y.S.2d 625 Mintz, 1546; gross negligence, F.Supp. at 816 asked, question frequently Banking Corp., The is how does see also In re Southeast 827 (S.D.Fla.1993) operation F.Supp. (holding of the ‘business that so-called judgment concept pre-1987 gross neg- rule’ tie in with of Florida law a establishes Prichard, City prior 13. In v. Bonner former Fifth Circuit handed down of Cir.1981) (en banc), this Court September close of business on binding adopted precedent as all decisions of the Supervisory Agreement nor an standard), grounds, 69 nеither on other rev’d ligence 41b, a guideline, “established tort (11th Cir.1995), FHLBB R disagree.14 See we F.3d 1539 care,” district court mischar- Gonzalez-Gorrondona, F.Supp. standard v. apparently (“[P]rior due care standard acterized the (S.D.Fla.1993) July 1545, 1556 that this was “not a upon its conclusion based liability imposed on the law of Florida indifference to there was total case where simple officers for and corporate directors underwriting practices.” While it standard Haddad, F.Supp. v. negligence”); FDIC may very true the directors did well be (“Defendants’ (S.D.Fla.1991) posi- in the “total indifference” exercise not exhibit is no cause of general in there tion that they judgment, need business not of their corporate directors against action to be found liable under the have done so un- ‘simple negligence’ is Florida law for applica- ordinary negligence of care standard founded.”) in this case. ble change does not court-made BJR point statutory simple negli- Only if the and inferences facts pre-1987 Florida’s overwhelmingly in favor strongly and gross negligence so to a gence standard that this believes that rea standard; Defendants Court merely protects directors who it persons not arrive at con sonable could diligence in the first exercised reasonable trary may we find the district conclusion liability on the merits of instance from jury properly aside the verdict. court set they judgment, unless acted business their Reynolds Corp., CLP See oppressively, or fraudulently, illegally, Cir.1987). hand, the other if On Thus, upon our above faith. bad based quality weight “evidence of such 1821(k) there is does conclusion fair-minded men that reasonable and establishing a law lesser preempt state impartial judgment might reach exercise gross negligence, than of fault standard conclusions,” Michigan (quoting id. different properly deter- hold the district Poole, Co., Abrasive Inc. v. governing of care that the standard mined (11th Cir.1986)), this Court should find directors this case the actions of the entering judgment the district court erred Only if the di- negligence. was a matter of law'in favor of Defendants. they enti- were rectors met standard protection of the BJR. tled to the reweigh A court is not free judgment for and substitute its evidence B. JNOV This, jury. id. 674-75. howev See above, er, noted the district court court did precisely is what the district As jury mischaracterizing in this case that properly instructed After the stan this case. dard, appropriate of care was ordi the stan standard the district court concluded care was nary negligencе, upon that due an its own view of dard was satisfied based upon Based the evi Specifically, element of the BJR. the district court the evidence. trial, jury presented testimony regula concluded persuaded dence Croft, tory attorney failed exercise due both Stahl had who stated therefore, care; they Cheplak, were not entitled to the good policies, had who Broward their protection presented “very on the merits of BJR the court found credible judgment. Finally, determining after defense.” appropriate satisfied verdict, however, aside the care, the district court found standard improperly the district court characterized of the they were entitled to the benefits BJR reweighed then the the standard of care and verdict. jury and set aside the satisfy in an at- the standard evidence just jury apparently in this did tempt bring the within the ease directors ambit testimony regulatory Curiously pointing out not find this of the of the BJR. Said, F.Supp. Cheplak rely corporation v. on Delaware and Dis 14. Stahl and (D.D.C.1993). pre-1987 gross negligence Florida applying a Unlike of Columbia law trict Lewis, however, general had a neither of states the BJR. See Aronson v. these standard under (Del.1984); Washington forth care standard. Ban- statute an 473 A.2d attorney, Cheplak convincing in entering judgment Croft and as as district court erred as a court, appears the district and there to matter of law in favor Cheplak, did of Stahl and justify ample support jury be the record to and reinstate the verdict in favor of the such a conclusion. While Croft characterized FDIC. management average

the team as above and done, lending policies thе well he still new C. New trial implementation criticized Broward’s of the closing argument. 1. Evidence and regulatory attorney policies. The never even underwriting, Chep- Broward’s and reviewed alternative, In the the district court condi- course, testimony, by lak’s could be viewed tionally granted a new jury self-serving. grounds they trial on preju- the were recognized, court summation, As the district itself this diced the FDIC’s and the persons, “a case where is on different sides erroneous incompetent admission of evi- dispute, disagreed ‍​‌‌‌‌‌​​​‌​​​​‌​‌​​‌​​​​‌‌​​‌​‌​​​​‌‌‌‌‌​​‌‌​​​‌‍of a toas whether Bro- dence. portions There are two the underwriting practices ward[ ]’s were ade- closing argument FDIC’s which the district ” But, quate negli- .... “the determination of impairing maintains “had the effect of gence ordinarily province within is jury’s dispassionate consideration of the fact,” case, trier of Decker v. Gibson Prods. Co. prejudice and caused unfair to the de- Inc., Albany, Cir. portion fendants.” The first relevant is as 1982), upon present- and based the evidence follows: trial, ed we are not convinced that no you What have here is the directors juror Chep-

reasonable could find Stahl and they were negligent breached their lak for liable failure to exercise due care. fiduciary obligation to the bank.... Send yearly reports examination from 1982 right message to the directors around through regulators criticized Broward’s country. They have to be accountable underwriting appraisal loan commercial for their actions. procedures, ultimately required Broward they If are held accountable for their sign Agreement Supervisory obligat- mess, get .conduct we’ll never out of this ing prudent lending, it to exercise standards. banking country this mess has Hess, years’ expe- an examiner with over 13 found itself in. rience, testified that her examination of six (em- case, R23-168-24; target Transcript Trial loans at issue this 169-1 she phasis supplied). underwriting found numerous deficiencies standards, industry Super- which violated Vineyard The district court cited v. Coun visory Agreement, appraisal FHLBB stan- Ga., ty Murray, (R 41b), lending dards and Broward’s new Cir.), denied, cert. 510 U.S. 114 S.Ct. believed, policies. If this evidence could cre- 636, 126 (1993), example L.Ed.2d 594 as an ate an inference the directors failed to message” a case in which a similar “send the accelerating origi- exercise due care loan closing argument Vineyard, made. nation, loans, approving subject and com- whether, analyzed light this Court of “the plying Supervisory Agreement with the remarks, argument, entire the context of the R 41b. raised, objection and the instruc curative tion,” Viewing light the facts in a most favorable the statement at issue was “such as to FDIC, impair gravely dispassionate we find substantial evidence of the calm and quality ju- weight jury.” such that fair-minded consideration of the case exercising impartial judgment (quoting rors could rea- F.2d at 1213 Allstate Ins. Co. (11th Cir.1988)). James, sonably have concluded Stahl F.2d. “[Rjeluetant respect failed to exercise due care with aside a verdict be set target entering argument by-counsel seven loans. The cause of an dur basis made judge’s ing closing arguments,” JNOV should not id. at be determina- party Vineyard tion of which has the in the district better ease. Court affirmed Reynolds, 812 F.2d at of motion for 674. We conclude the court’s denial the mistrial. as an court cited Allstate the case. The in this case maintains court

The district re- way in which this Court example case the of a case Vineyard decided the the court denying the cura- a motion for a new only it was satisfied an order because versed it did any sufficiently closing argument. In eliminated of a trial on the basis tive instruction Here, Allstate, company argued from the remark. resulting prejudice the insurance contrast, only procured the defendant a by Allen was caused or fire the insured had remark, none of the other object proceeds, the in clos- even insurance and stated collect instruction, curative requested “somebody” jurors defendants who ing that the were give it did not admits higher and the district court something prevent could do one, instruction that a curative “certain typically which result premiums insurance cura- While a Allstate, have bеen ineffective.” would 845 F.2d at 319. such cases. from always remedy the instruction does tive that the further stated summation Allstate closing argument, see improper harm of an all the jurors treat the case “with should Birmingham, 906 F.2d City McWhorter responses.” personal emotional attendant (11th Cir.1990), it is curious how closing concluded that such a Id. This Court that one be so certain district court could implied for the verdict argument a “basis here, given that ineffective would have been presented,” impair- than the evidence other influence of the has found “the this Court jury’s dispassionate consid- ing calm and properly necessarily and judge trial ‘is Id. eration of the case. lightest word or intima- great weight and his examining summation as a whole In deference, may and tion is received with ” remarks, Vine- the context of the see Allstate, F.2d at prоve controlling.’ F.2d at we find that yard, 990 States, Quercia (quoting v. United made the FDIC’s counsel statements 698, 699, 77 L.Ed. 53 S.Ct. U.S. unfairly prejudice closing did not Stahl (1933)). Further, again, Cheplak. here Allen was summation, the con- light of the entire object “taxpayer” only defendant to remarks, objections the lack of text of the remark, re- none of the other defendants give not to and the district court’s decision instruction, and the dis- quested a curative instruction, we conclude the “send curative give light trict court did not one. unfairly not so message” remark did “taxpay- foregoing, conclude the FDIC’s prejudice as to warrant prejudicial to was not so Defen- er” reference new trial. trial. dants as to warrant a new summa- portion of the FDIC’s The second trial, ground ordering a new As its final for maintains unfair- the district court tion which erroneously contends it аd- the district court ly prejudiced is as follows: Defendants transcript of a tele- into evidence a mitted only way that our we can insure The Cheplak and phone conversation between responsibly depository will be institution^] Burnham in which the employees of Drexel run if that the directors con- is we insist Broward’s un- employees criticized Drexel reasonably discharge duct themselves derwriting practices. transcript had diligently. their duties to a pursuant into evidence been admitted disaster not To do otherwise will invite parties pretrial stipulation which the only banking system but for the deposi- agreed that all exhibits identified at ultimately taxpay- insurance fund transcript be used at trial. The tion could er. to im- at trial the FDIC both was used (emphasis Transcript Trial at R23-169-16 peach Cheplak and summation. supplied). jury requestеd to see the Only when the found the FDIC’s “tax- The district court during its deliberations did the transcript payer” prejudicial to Stahl reference closely it and deter- jurors examine grounds that it asked district on the incompetent to be on four potential mine the document identify with the FDIC (1) decision, grounds: Defendants had not seen implied the or adverse effect (2) authenticity had not been transcript, its jurors in the outcome of had a financial stake Cir.1991). suggest (3) Finding no evidence to demonstrated, recording of the conversa- (4) authorized, contained in the tran- the that the conversation not been tion had transcript anything violated the hear- a script was but routine business admission instructed the underwriting court say regarding rule. The district deficien- discussion document, disregard requested Broward, the jury to the we conclude consent tо cies at it the doubts in its Order necessary. but states was not recordation return of any given effect the had instruction disagree Finally, we with Stahl shortly thereafter. verdict court Cheplak’s that the district contention grounds of incom the first two As to hearsay transcript the on properly excluded Cheplak were on peteney, we find Stahl transcript Finding the was offered grounds. transcript’s existence the notice of knowledge of Cheplak’s to show Broward’s by agreeing authenticity claims any waived not to establish underwriting problems, and stipulation first in pretrial the asserted, intrinsic of the matter the truth binding has affirmed the This Court stance. was See conclude the document admissible. have stipulations which pretrial nature of Parry, 649 F.2d v. United States voluntarily and to submitted been entered 1981). (5th B June Cir. Unit Orlando, 931 Busby City v. court. the Cir.1991). (11th n. 4 2. Statute limitations. stipulation pretrial that this Cheplak counter court nev binding they the district is not because claim also pretrial nor a final conference ground er conducted trial on the are entitled to a new order; pretrial stipulation in a approved the relating target two of the loans claims however, are manda pretrial conferences not were barred the statute limitations. when, here, opts to 1821(d)(14)(A) (B) the district court tory as § & Pursuant to U.S.C. call. proceed by calendar S.D.Fla.Local (1994), must determine whether this Court 16.1(E) (1994). Rules, Rule brought claims the FDIC were the viable applicable the statute of limitations under effectively adopted the The district acquired the claims. See time the FDIC by conducting the trial pretrial stipulation Artley, v. RTC Thus, it. after consistent with proceedings 95.11(3)(a) Cir.1994). Florida Statute rely upon the tran- the FDIC to permitting (1995) four-year statute of limita provides during stipulation, script pretrial negligence. founded on tions for actions summation, im- we conclude it was trial and Thus, precise issue here is whether to strike the proper the district court target loans regarding two of the claims gone had after the ease document December known made before alleged the FDIC no defects on the basis loans, Cypresswood and Mason Center to cure. longer opportunity an had FDIC ac at the time the were still viable incompeten ground third As to the years more than four quired these claims transcript be cy, was inadmissible 31,1988. later, on December authorized, this was not cause its recordation limi- the statute of court held The district all that under found Florida Court has begin run on the did tations record need not cоnsent to the participants into date the loans went claims until the if is such recordation ing of a conversation Cheplak counter that default.15 Stahl of business. See course done statute of limita- held the Servs., several courts have Inc. v. Royal Health Care Jefferson- negligent loan is run when Co., begins tions Pilot Ins. Life damage com- so, determined the distinguished because it doing sion the district court In hand, Johnson, 68, 40 the case at plete 251 U.S. time. Id. Nat'l Bank Corsicana Corsicana, (1919). however, L.Ed. 141 that Defen- S.Ct. court reasoned district money damage bank loaned director violation cumulative negligence caused dants' Act, Supreme Court held and the Bank National fully accrue did not until Broward which against the accrued of action director the cause or default or the knew loans were in U.S. at loаn was made. 251 on the date agree. negligence. We have known of should conclu- at 90. The Court reached this 40 S.Ct. 1522 fails;

made, support any contrary not when it but of this We find such decisions jur- they rely authority on from proposition, spirit discovery of Florida’s last element and See, e.g., Florida. isdictions ‍​‌‌‌‌‌​​​‌​​​​‌​‌​​‌​​​​‌‌​​‌​‌​​​​‌‌‌‌‌​​‌‌​​​‌‍other than id. rules. law, Georgia (recognizing that under damage in until this case did not occur begins to run statute of limitations when repaid, the loans issue were not at which made).

loans are point the FDIC should have been alerted negligence the existence of a of governs viability law the cause action. State Thus, claims, 1101; therefore, correctly we the district court FDIC’s see id. at conclude Cheplak’s reliance on non-Florida determined that the statute of Stahl and limitations did Florida, misplaced. begin law is cause of not to run until “[a] on these claims the Cheplak pre- action accrues when the last element consti loans failed. Since Stahl and tuting the cause of action occurs.” summary judgment Fla.Stat. sented no evidence show- 95.031(1)(1995). Accordingly, under Flori ing when the borrowers defaulted on the rule, negli loans, da’s “last element” actions for appropriately the district court denied gence plaintiff do not accrue until the suffers summary judgment.16 type damage. Wildenberg Eagle- some of v. Indus., Inc., F.Supp. Picher V. CONCLUSION (S.D.Fla.1986). Moreover, Florida courts reasons, foregoing For the we reverse the period have found that the limitations does judgment court the district aside begin plaintiff to run until a knew or and, the Cheplak verdict as to Stahl and See, injury. e.g., should known of have the alternative, conditionally in the granting (Fla.Dist.Ct.App.), Cook,

Lund v. 354 So.2d them a new trial. In all respects, other we (Fla. denied, t. 360 So.2d 1247 cer judgment. affirm the district court’s Accord- 1978). Indeed, Childers, in Jones v. ingly, pro- we remand the case for further (11th Cir.1994), we found: ceedings opinion. consistent with this broadly adopted Florida courts ... have discovery principle, holding part; AFFIRMED in variety in a REVERSED legal part; and contexts that the statute of limita- REMANDED. begins person tions to run when a has been

put right HATCHETT, on notice of his to a cause of Judge, concurring Circuit Generally action. under Florida a part dissenting part: party put is held to have been on notice Although agree I opinion with the law this discovers, reasonably when he or should reasoning opinion, announces and I discovered, alerting have him facts respectfully part. grant dissent in I would existence of his cause of action. trial new because the (footnote omitted). 18 F.3d at 906 pre-1987 Florida law on the standard of care Cheplak respond jurisdic- confusing. for directors was at best This “discovery opinion tions like Florida which follow govern announces a clear standard to rule” have fully nevertheless held cause of action directors in circuit. I concur in this standard; but, pertinent accrues loan is when made neither the district court nor See, e.g., parties rather than when it fails. RTC had the benefit of this standard at Farmer, (E.D.Pa.1994). F.Supp. light the trial of this case. of the confu- alleged variety perhaps 16. The FDIC also of circum- default or at some time before default.” Nevertheless, rule, purported discovery stances that to establish claims for under Florida's fiduciary duty. begin breach Actions for breach of statute of limitations did not run on actions, fiduсiary duty, fiduciary duty like do not claims until the knew or alleged accrue under Florida's last element rule until the should have known of the breaches. plaintiff type damage. suffers some Penthouse Since Stahl and make no reference to Lombardi, Assoc., fiduciaiy duty appeal, present- North Inc. v. 461 So.2d claims on (Fla.1984). alleged summary judgment regarding Since the FDIC such a ed no evidence claims, however, range fiduciary duty wide when the FDIC knew or should have known of breaches, pinpoint alleged district court was when the unable conclude district occurred, damages properly summary judgment in relation to each claim con- denied on this cluding it could have been "at the time of the issue as well. split in cir- and the circuit law in our sion of its the law

cuits, court followed the district a new I would order Consequently,

district. this stan- Cheplak with

trial for Stahl applied.

dard to be GONZALES, Administrator of

August Timothy Bourgeois,

the Estate Plaintiff-Appellant,

deceased, INC.; SERVICES, Willis FOOD

GARNER Corpo Administrative Services

Corroon Corporation

ration; Corroon Willis Defendants,

Georgia, Foods, Inc., Fast

Garner

Defendant-Appellee, Retired Persons

American Association

(AARP); Employment Opportuni Equal (EEOC);

ty Med American Commission ‍​‌‌‌‌‌​​​‌​​​​‌​‌​​‌​​​​‌‌​​‌​‌​​​​‌‌‌‌‌​​‌‌​​​‌‍Association, Public American

ical Association, Founda American

Health Gay Research, Men’s AIDS

tion for Crisis; American Civil Liberties

Health ARC, Gay

Union, Advo and Lesbian Inc., Defenders, Alli National

cates and Ill, Mentally National Asso for the

ance AIDS, People National

ciation of With Advocacy of Protection

Association Minority

Systems, AIDS Coun National Advisory Employment

cil, Equal Coun

cil, Amici Curiae.

No. 95-8533. Appeals, States Court

United

Eleventh Circuit.

Aug.

Case Details

Case Name: Federal Deposit Insurance v. Stahl

Court Name: Court of Appeals for the Eleventh Circuit

Date Published: Aug 2, 1996

Citation: 89 F.3d 1510

Docket Number: 94-4684

Court Abbreviation: 11th Cir.