FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for the Buckhead Community Bank, Plaintiff - Appellee,
R. CHARLES LOUDERMILK, SR., HUGH C. ALDREDGE, DAVID B. ALLMAN, MARVIN COSGRAY, LOUIS J. DOUGLASS, III, GREGORY W. HOLDEN, LARRY P. MARTINDALE, DARRYL L. OVERALL, Defendants-Appellants.
from the United States District Court for the Northern
District of Georgia, No. 1:12-cv-04156-TWT
TJOFLAT, MARTIN, and ANDERSON, Circuit Judges.
directors of Buckhead Community Bank wanted to make Buckhead
a "billion dollar bank." So, they set out to
execute an aggressive growth strategy. To implement the
growth strategy, the directors expanded the Bank's loan
portfolio. Many of these loans failed, costing the Bank
millions. In late 2009, the Georgia Department of Banking and
Finance closed the Bank, and the Federal Deposit Insurance
Corporation was appointed as the Bank's receiver.
receiver, the FDIC sued several of the Bank's former
directors and officers. (We will refer to them as "the
directors" for convenience.) The FDIC alleged the
directors were negligent and grossly negligent in approving
ten risky loans. The case went to trial, and a jury found
that the directors were negligent (and thus liable) in
approving four of the ten loans. The District Court refused
to instruct the jury on apportionment, so the negligent
directors were held jointly and severally liable for the
appeal, the directors make three arguments. First, they claim
that the District Court erred when it refused to instruct the
jury on apportionment. Second, they argue that a director can
only be on the hook for a loan if he attended the meeting
where the loan was presented and affirmatively voted to
approve that loan. Thus, they say the District Court erred by
not instructing the jury accordingly. Third, they argue that
the District Court abused its discretion when it did not
allow them to introduce evidence about the Great Recession,
which the directors claim was an intervening cause that
should absolve them of liability. We reject all three
arguments and affirm.
the Bank's policy, the Directors' Loan Committee had
to approve all loans above a certain amount, and it did so at
weekly meetings. The Directors' Loan Committee was made
up of several members, but a quorum of three voting members
could approve a loan. Despite this
quorum-approval policy, any one member of the Committee could
veto a loan all on his own-even if he didn't attend the
meeting. Thus, if a member wanted to kill a loan, he had two
options. He could veto the loan before it was discussed and
voted on at a meeting, or he could attend the meeting and
cast his no vote there. By contrast, if a member neither
objected before the meeting nor attended the meeting and
voted against a loan, he effectively voted to approve it.
Even if he didn't attend the approval meeting and cast a
yes vote on the record, he still approved the loan by not
using his veto power at any point during the approval
approval process itself went something like this. The lending
officer originated a loan and compiled a packet of
information about it. The packet included a credit memorandum
and a loan submission sheet. As it turns out, the information
in the loan packets wasn't always reliable. For example,
one of the loans at issue was a loan to buy land; the loan
packet for this loan included an appraisal of the land, and
the appraisal assumed the land had been rezoned. But this was
nothing more than an assumption because the land was not
rezoned at the time of the appraisal. A packet for another loan included
irrelevant information about the borrowers (such as country
club membership) but left out information related to
credit-worthiness. After the lending officer compiled the
packet, he sent it to the members of the Directors' Loan
Committee a day or so before the Committee met.
Loan Committee meeting, the lending officer presented the
loan to the Committee members who were present. There could
have been as many as eight members present or as few as three
due to the quorum-approval policy.
the Bank closed and the FDIC took over as receiver, the FDIC
sued the former directors. The FDIC alleged that the directors rubber
stamped risky loans without properly researching them; the
directors were then uninformed when they approved these
loans, the FDIC said. As a result, the FDIC argued that the
directors were negligent and grossly negligent in approving
ten risky loans. The FDIC also alleged that the directors
"pursued a common plan or design, or otherwise acted in
a common or concerted manner."
directors-jointly represented by the same lawyers-moved to
dismiss, arguing that Georgia's business judgment rule
bars claims for ordinary negligence. The District Court
certified that question to the Supreme Court of Georgia, and
the Supreme Court held that the business judgment rule bars
some but not all claims against directors. FDIC v.
Loudermilk, 761 S.E.2d 332, 338 (Ga. 2014)
("Loudermilk I"). Specifically, it held
the business judgment rule . . . forecloses claims against .
. . directors that sound in ordinary negligence when the
alleged negligence concerns only the wisdom of their
judgment, but it does not absolutely foreclose such claims to
the extent that a business decision did not involve
"judgment" because it was made in a way that did
not comport with the duty to exercise good faith and ordinary
case moved through discovery and pretrial motion practice.
Two of the District Court's pretrial rulings are relevant
on appeal. The first relates to one of the directors'
affirmative defenses. After discovery, the FDIC moved for
summary judgment on the directors' sixth affirmative
defense, which alleged that intervening causes or events
caused the alleged damages. In response, the directors
withdrew the affirmative defense, and the District Court
entered an order saying it would prevent the directors from
introducing evidence related to the withdrawn defense. Later,
the directors proposed introducing evidence on intervening
cause, and the Court granted the FDIC's pretrial motion
to exclude it.
second relevant pretrial ruling relates to the directors'
proposed jury instructions. Before trial, the directors asked
for a jury instruction that would require the jury to
apportion fault by percentage for any director that the jury
found was negligent and thus liable. The directors also asked
for an instruction that said a director could be held liable
for a loan only if he attended the meeting where that loan
was presented and approved. The District Court found that
apportionment did not apply and sustained the directors'
objection to that instruction. The Court did not make a
pretrial ruling on the proposed attendance instruction.
case went to trial, and the evidence reflected the approval
process that we described above. Although each member of the
Directors' Loan Committee had complete power to veto a
loan, none of them used this power to kill any of the loans
at issue here. At the close of evidence, the District Court
held an instruction conference. The directors again asked for
the apportionment instruction and the attendance instruction,
and the Court rejected both. The jury found that the
directors were negligent (and thus liable) in approving four
of the ten loans. The District
Court entered judgment and did not apportion the nearly $5
million in damages.
directors appealed and challenge three of the District
Court's decisions: (1) its decision rejecting their
proposed apportionment instruction, (2) its decision
rejecting their proposed attendance instruction, and (3) its
decision excluding evidence about the Great Recession.
review jury instructions de novo to determine
whether they misstate the law or mislead the jury" and
prejudice the objecting party. Morgan v. Family Dollar
Stores, Inc., 551 F.3d 1233, 1283 (11th Cir. 2008)
(alteration omitted) (quoting United States v.
Campa, 529 F.3d 980, 992 (11th Cir. 2008)). "We
review a district court's evidentiary rulings for abuse
of discretion." Proctor v. Fluor Enters., Inc.,
494 F.3d 1337, 1349 n.7 (11th Cir. 2007).
up each of the directors' arguments separately.
we consider whether the jury instructions-which did not allow
the jury to apportion damages based on percentage of
liability-misstated Georgia law or misled the jury. We hold
that it would have been impossible for the jury to divide
fault among the liable directors. Therefore, Georgia's
apportionment statute did not apply in this case, and the
jury instructions neither misstated Georgia law nor misled
relevant here, Georgia's apportionment statute says this:
"Where an action is brought against more than one person
for injury to . . . property, the trier of fact . . . shall .
. . apportion its award of damages among the persons who are
liable according to the percentage of fault of each
person." O.C.G.A. § 51-12-33(b). Whether the
apportionment statute applied was a major issue both before
and during trial. If it applied, the FDIC could not pursue
joint and several liability. If it did not apply, however,
the FDIC could pursue joint and several liability and
potentially hang the entire judgment on the liable director
who was most able to pay.
parties were preparing for trial, both sides submitted
proposed verdict forms. The directors' proposed verdict
form required the jury to assign a percentage of fault to
each liable defendant, while the FDIC's proposed verdict
form took an all-or-nothing approach and didn't allow the
jury to assign fault percentages. After the FDIC objected to
the directors' proposed verdict form, the District Court
took up the apportionment issue the week before trial.
clear guidance from the Georgia courts, the District Court
held that the apportionment statute did not apply. FDIC
v. Loudermilk, No. 1:12-CV-4156-TWT, 2016 WL 7364770, at
*2–3 (N.D. Ga. Oct. 6, 2016) (order denying
apportionment). The Court looked to another Georgia statute
that deals with director liability and concluded that
"Georgia law presumes that the directors of a bank are
acting in concert." Id. at *3. The District Court explained that the
directors are "tortfeasors acting in concert," and
it correctly pointed out that Georgia case law says
apportionment statutes don't apply to concerted action.
even putting this legal barrier to apportionment aside, the
District Court concluded that the jury would be left guessing
if it tried to apportion liability. The Court noted that the
directors' defense was that they "collectively did
not breach any duty to the Bank." Id. Based on
this defense, and the directors' own concession that they
would "offer no evidence or argument as to the relative
liability of the individual" directors, the Court found
that the jury would have no reasonable basis for apportioning
liability among the liable directors. Id. Thus, the
District Court held that apportionment did not apply.
instruction conference, the directors again requested their
proposed verdict ...