First Union Nat. Bank v. Pictet Overseas Trust

• Decision Date: 22 January 2007
• Docket Number: No. 05-2932.,05-2932.
• Citation: 477 F.3d 616
• Parties: FIRST UNION NATIONAL BANK, as Trustee of the Southeast Timber Leasing Statutory Trust, Appellant, v. PICTET OVERSEAS TRUST CORP., LTD., Trustee of Henrietta Y. Jones Trust, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

477 F.3d 616

FIRST UNION NATIONAL BANK, as Trustee of the Southeast Timber Leasing Statutory Trust, Appellant, v. PICTET OVERSEAS TRUST CORP., LTD., Trustee of Henrietta Y. Jones Trust, Appellee.

No. 05-2932.

United States Court of Appeals, Eighth Circuit.

Submitted: September 25, 2006.

Filed: January 22, 2007.

Elizabeth C. Carver, argued, St. Louis, MO, for appellant.

Philip E. Kaplan, argued, Little Rock, AR, for appellee.

Before WOLLMAN, BRIGHT, and BOWMAN, Circuit Judges.

WOLLMAN, Circuit Judge.

This case is once again before us. In our prior ruling, we reversed and remanded for further proceedings. First Union Nat'l Bank v. Pictet Overseas Trust Corp., Ltd., 351 F.3d 810, 816 (8th Cir.2003) (Pictet I) (hereinafter we refer to the parties as First Union and Pictet). On remand, the district court entered summary judgment in favor of Pictet, holding that First Union breached a fiduciary duty it owed in its individual capacity to Pictet. First Union appeals, contending that the district court erred in holding that the law of the case doctrine requires a finding of fiduciary duty, urging us to hold that no fiduciary duty existed, and further requesting that we remand with instructions to grant it summary judgment on the basis of a statutory defense barring individual liability that was not addressed by the district court. We hold that the law of the case doctrine does not apply and that the defense has been constructively pled, and we thus reverse and remand for further proceedings.

I. Facts and Posture

The factual and procedural background of this case is detailed in Pictet I, and we recount and supplement that background as follows. On May 1, 1998, the Southeast Timber Leasing Statutory Trust (Trust) was formed as a business trust organized under the Connecticut Statutory Trust Act, see Conn. Gen.Stat. Ann. § § 34-500 et seq., with First Union as trustee. The Trust was formed to purchase First Land and Timber (FLT), an Arkansas corporation, and then, through a series of mergers with other entities, merge the surviving entity into the Trust itself and distribute its assets to the Trust beneficiaries. The trust agreement narrowly circumscribed the trustee's control of trust assets.

Pictet, in its capacity as trustee of the Henrietta Y. Jones Trust, held shares of FLT at the time of the merger. Pictet exercised its statutory right to dissent from the merger and recover fair value for its shares by following the procedures enumerated in the Arkansas Business Corporation Act (Arkansas Act). See Ark.Code Ann. § 4-27-1301 et seq. This included notifying First Union of its dissent, tendering its shares, and providing its own estimate of fair value-$5.1 million.

First Union set $3.8 million aside in a Golden Gate Bank account, which represented the pro rata value of Pictet's shares under the merger agreement. The remaining merger consideration, including money placed in a holdback escrow account intended to indemnify or reimburse "loss parties," was distributed to the non-dissenting shareholders in accordance with the merger agreement and associated exchange agreement. At specified intervals, in accordance with the exchange agreement, the holdback monies were released by the escrow agent to another bank for distribution to former shareholders. The last such distribution occurred in December 1999.

In March 1999, First Union filed suit against Pictet in an Arkansas state court to determine the fair value of Pictet's shares. Pictet removed the case to federal court and filed a counterclaim alleging that First Union's untimely lawsuit fixed the value of Pictet's shares at $5.1 million plus interest. On May 8, 2000, by consent order, First Union was required to pay Pictet the $3.8 million held for it in the Golden Gate Bank account. Upon realizing that First Union no longer had sufficient assets to pay the $5.1 million plus interest Pictet sought, Pictet amended its counterclaim to include claims for conversion and breach of fiduciary duty. On February 9, 2001, the district court issued a judgment in the appraisal action in Pictet's favor for $5.1 million. On March 15, 2002, the district court held that First Union also owed 6% interest on the money due to Pictet (Interest Rate Decision). Pictet moved for reconsideration, arguing that the court had not disposed of its breach of fiduciary duty claim. In response to the motion, First Union specifically cited § 34-523(b) of the Connecticut Statutory Trust Act (Connecticut Act) as barring Pictet from holding First Union individually liable for the alleged breach of fiduciary duty. Although the court mentioned in its Interest Rate Decision that "First Union owed a duty," in its subsequent order denying Pictet's motion for reconsideration the court stated that it would not reach Pictet's breach of fiduciary duty claim because it did not believe that First Union had been sued in its individual capacity. Following the denial of the motion for reconsideration, Pictet appealed, arguing that First Union in its individual capacity was a proper party to the action. First Union again asserted its Connecticut Act defense in its appellee's brief. We held that First Union had been individually sued on the conversion and breach of fiduciary duty claims and remanded the case for further proceedings.¹ Pictet I, 351 F.3d at 815.

On remand, Pictet moved for summary judgment. In its response and renewal of its own summary judgment motion, First Union incorporated by reference its Connecticut Act defense. The district court granted Pictet's motion for summary judgment on the breach of fiduciary duty claim (Fiduciary Duty Decision). It held, inter alia, that it had already ruled that First Union owed Pictet a fiduciary duty, and that it would not reconsider its position because the existence of a fiduciary duty was the law of the case. It further held that because First Union knew that Pictet valued its shares at $5.1 million, First Union breached its fiduciary duty by allowing disbursements that encroached upon that amount. The decision said nothing of the Connecticut Act defense.

II. Discussion

We review the district court's grant of summary judgment de novo, applying the same standards as the district court. Schwan's IP, LLC v. Kraft Pizza Co., 460 F.3d 971, 974 (8th Cir.2006). We view the facts in the light most favorable to the nonmoving party and will affirm if the record demonstrates that there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id. at 975.

We address on appeal two central issues: whether the law of the case doctrine requires a finding of fiduciary duty, and whether the Connecticut Act was sufficiently pled to preclude a summary judgment in the absence of additional legal determinations. We address each in turn.

A. The Law of the Case

Pictet contends that the law of the case doctrine mandates a holding that First Union owed a fiduciary duty in its individual capacity. We conclude that the law of the case doctrine does not apply because the existence of the fiduciary duty was never previously established.

We have described the law of the case doctrine as providing that "when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case." Morris v. American Nat'l Can Corp., 988 F.2d 50, 52 (8th Cir.1993) (quoting Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983)). The underlying intent of the doctrine is to "prevent[ ] the relitigation of settled issues in a case, thus protecting the settled expectations of parties, ensuring uniformity of decisions, and promoting judicial efficiency." Little Earth of the United Tribes, Inc. v. United States Dep't of Hous. & Urban Dev., 807 F.2d 1433, 1441 (8th Cir.1986). The doctrine applies to appellate decisions, see Mosley v. City of Northwoods, 415 F.3d 908, 911 (8th Cir. 2005), as well as to final decisions by the district court that have not been appealed. Little Earth, 807 F.2d at 1441 (citing In re Design Classics, Inc., 788 F.2d 1384, 1386 (8th Cir.1986)). It does not apply to interlocutory orders, however, "for they can always be reconsidered and modified by a district court prior to entry of a final judgment." United States v. Hivley, 437 F.3d 752, 766 (8th Cir.2006) (citing Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1070 (8th Cir. 1995)).

In its Fiduciary Duty Decision, the district court established First Union's fiduciary duty in part based on its determination that the law of the case doctrine applied.² Implicitly, this would require the district court to have already issued a final order in which it had held that First Union owed a fiduciary duty in its individual capacity. We see no evidence of such an order in the court's Interest Rate Decision, and the district court's "postjudgment interpretation of [its prior] judgment is irrelevant to an appellate court's determination of the judgment's meaning." Kerndt v. Ronan, 236 Neb. 26, 458 N.W.2d 466, 471 (1990); see also Neujahr v. Neujahr, 223 Neb. 722, 393 N.W.2d 47, 49 (1986); Crofts v. Crofts, 21 Utah 2d 332, 445 P.2d 701, 702-03 (1968).

The district court's introductory remarks in its Interest Rate Decision summarized its holding and said that First Union owed a duty, but the court never mentioned the word "fiduciary," specified the capacity in which First Union may have owed the duty, or described the basis for finding the existence of such duty. Accordingly, the district court's reference to First Union's duty was irrelevant to Pictet's breach of fiduciary duty claim against First Union. Ambiguous orders are to be construed by examining the record and proceedings, the findings and opinion of the court, and the respective contentions of the parties. See Oklahoma v. Texas, 256 U.S. 70, 88, 41 S.Ct. 420, 65 L.Ed. 831 (1921). Pictet contends that the words the district court...