Jo Ann Howard & Assocs., P.C. v. Cassity

Decision Date20 November 2015
Docket NumberCase No. 4:09CV01252 ERW
Citation146 F.Supp.3d 1048
CourtU.S. District Court — Eastern District of Missouri
Parties Jo Ann Howard & Associates, P.C., et al., Plaintiffs, v. J. Douglas Cassity, et al., Defendants.

Clare S. Pennington, Daniel M. Reilly, Farrell A. Carfield, Larry S. Pozner, Michael T. Kotlarczyk, Michael P. Robertson, Robert Joseph Kelly, Sean Connelly, Ashley Daly Morgan, Dru Ruth Nielsen, Glenn E. Roper, Lauren G. Jaeckel, Randolph A. Robinson, II, Wendy B. Fisher, Reilly Pozner, LLP, Denver, CO, Maurice B. Graham, Morry S. Cole, Gray and Ritter, P.C., St. Louis, MO, for Plaintiffs.

Firmin A. Puricelli, Puricelli and Associates, LLC, Clayton, MO, for Defendants.




This matter comes before the Court on PNC Bank's Renewed Motion for Judgment as a Matter of Law, or, in the Alternative, for New Trial [ECF No. 2382].


This litigation arose out of proceedings instituted by the Texas Department of Insurance in Travis County, Texas, in which National Prearranged Services, Inc. (“NPS”), Lincoln Memorial Life Insurance Company (“Lincoln”), and Memorial Service Life Insurance Company (“Memorial”) were placed in receivership and subsequently liquidated. Plaintiffs in this litigation are Jo Ann Howard and Associates, P.C., acting on behalf of NPS, Lincoln, and Memorial, as Special Deputy Receiver (“SDR”) in connection with the Texas receivership proceedings; the National Organization of Life and Health Guaranty Associations (“NOLHGA”)1 ; and the individual state life and health insurance guaranty associations of Arkansas, Illinois, Kansas, Kentucky, Missouri, Oklahoma, and Texas.

On May 3, 2012, Plaintiffs herein filed their Third Amended Complaint, asserting a wide variety of claims against various defendants, including, but not limited to, claims for violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, 18 U.S.C. §§ 1961

-1968, violations of the Lanham Act, 15 U.S.C. §§ 1051 -1141n, state law claims concerning intentional and negligent fraudulent misrepresentations, negligence and gross negligence, breach of fiduciary duties, and violations of the Texas Receivership Act, Tex. Ins. Code §§ 443.202-443.205 [ECF No. 916].

There were over forty defendants named in Plaintiffs' Third Amended Complaint, with varying degrees of alleged involvement in what Plaintiffs characterized as a scheme to defraud individual consumers and funeral homes in the sale of NPS's pre-need funeral contracts. All but two of these defendants were dismissed prior to trial. After an approximately five-week jury trial, on March 9, 2015, the jury returned a verdict for Plaintiffs and against Defendant PNC Bank2 and Forever Enterprises [ECF No. 2301]. The jury awarded Plaintiffs' $355,500,000 in compensatory damages and $35,550,000 in punitive damages against PNC Bank and $100,000,000 in compensatory damages against Forever Enterprises. PNC Bank now seeks judgment as a matter of law, or in the alternative, a new trial, on several different issues.

A. Judgment as a Matter of Law Standard
Under Federal Rule of Civil Procedure (FRCP) 50

, if “the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for [a] party on [an] issue, the court may...grant a motion for judgment as a matter of law against the party.” Fed. R. Civ. P. 50(a). “Judgment as a matter of law is appropriate only when all of the evidence points one way and is susceptible of no reasonable inference sustaining the position of the nonmoving party.” Howard v. Mo. Bone & Joint Ct., Inc. , 615 F.3d 991, 995 (8th Cir.2010). The Court must “view the evidence in the light most favorable to the prevailing party and must not engage in a weighing or evaluation of the evidence or consider questions of credibility.” Douglas County Bank & Trust Co. v. United Fin. Inc. , 207 F.3d 473, 477 (8th Cir.2000) (internal quotations omitted).

B. New Trial Standard

Following a jury trial resulting in an adverse judgment, a party may move for a new trial under Federal Rule of Civil Procedure 59(a)(1)(A)

. Under this Rule, [a] new trial is appropriate when the first trial, through a verdict against the weight of the evidence, an excessive damage award, or legal errors at trial, resulted in a miscarriage of justice.” Gray v. Bicknell , 86 F.3d 1472, 1480 (8th Cir.1996). A miscarriage of justice does not result whenever there are inaccuracies or errors at trial; instead, the party seeking a new trial must demonstrate that there was prejudicial error. See

Buchholz v. Rockwell Int'l Corp. , 120 F.3d 146, 148 (8th Cir.1997). Errors in evidentiary rulings or in jury instructions are only prejudicial, and therefore only represent a miscarriage of justice that requires a new trial, where the error likely affected the jury's verdict. See Sherman v. Winco Fireworks, Inc. , 532 F.3d 709, 720 (8th Cir.2008)

; Diesel Mach., Inc. v. B.R. Lee Indus., Inc. , 418 F.3d 820, 833 (8th Cir.2005).


At the close of Plaintiffs' case-in-chief, on March 2, 2015, PNC Bank moved for judgment as a matter of law under FRCP 50(a)

. PNC Bank argued judgment as a matter of law should be granted as to three categories of damages,3 and the damages should be limited to the amount of harm to the trusts. The Court denied the motion. At the close of all of the evidence, on March 5, 2015, PNC Bank renewed its notion for judgment as a matter of law under FRCP 50(a) and asserted two additional grounds. PNC Bank argued Plaintiff's negligence claim was actually a claim for breach of trust and Plaintiffs had not proven Allegiant owed any independent duty to establish the claim, and PNC Bank argued Plaintiffs had not proved Allegiant caused Plaintiffs' claimed losses. The Court denied the motion.

In its renewed post-verdict motion, PNC Bank asserts judgment as a matter of law, or in the alternative, a new trial, should be granted on four issues. First, PNC Bank argues Plaintiffs did not prove Allegiant Bank4 (“Allegiant”) caused Plaintiffs' damages. Next, PNC contends Plaintiffs did not establish Allegiant's conduct was so outrageous as to justify the punitive damages award. PNC Bank also argues Plaintiffs failed to prove facts sufficient to award certain categories of damages including growth payments owed by NPS to funeral homes, losses related to contracts and policies issued outside of Missouri, and losses related to contracts and policies issued after Allegiant's tenure. Lastly, PNC Bank asserts Plaintiffs' did not prove Allegiant owed an independent duty to the trust beneficiaries, distinct from its fiduciary duties, and thus, failed to prove their negligence claim. Each ground asserted by PNC Bank for judgment as a matter of law, or in the alternative, a new trial, is discussed as follows.

A. Causation of Plaintiffs' Losses

PNC Bank contends Plaintiffs failed to prove Allegiant caused Plaintiffs' losses. First, PNC Bank argues Plaintiffs did not prove the amount of harm to the trusts, which, according to PNC Bank, is the appropriate measure of damages under Missouri law. But even if Plaintiffs are permitted to recover a different measure of damages, according to PNC Bank, Plaintiffs did not prove Allegiant's conduct caused $355.5 million in losses because Plaintiffs did not establish actual or proximate causation. The Court disagrees with PNC Bank's assertions and will deny judgment as a matter of law, or a new trial, on these bases.

1. Breach of Trust v. Negligence and Breach of Fiduciary Duty

PNC Bank asserts Plaintiffs' claims cannot be properly brought under negligence or breach of fiduciary duty because they are claims for breach of trust. Further, PNC Bank argues damages for a breach of trust are limited to harm to the trust assets. This argument has been raised several times throughout this case and the Court, each time, has allowed Plaintiffs to proceed with their claims as pled. The Court will not rehash this argument and its reasoning again when no new case law or argument has been brought to its attention to change the decision. Instead, the Court refers the parties to its decision on this issue at summary judgment [ECF No. 2092]. Plaintiffs are permitted to bring negligence claims and breach of fiduciary duty claims, and their damages are not limited simply because Allegiant was a trustee.

The Court would like to address a quote cited by PNC Bank from Learned Hand: “The law ought not to make trusteeship so hazardous that responsible individuals and corporations will shy away from it.” PNC Bank uses this quote to support its position the damages against a trustee are limited to the damage to the trust and a trustee cannot be liable for negligence or breach of fiduciary duty. While this quote may have application to the facts of the case examined by Learned Hand, it is not persuasive when analyzing this case.

The actions of Allegiant in this case are particularly egregious and the Court will summarize a few of the harmful actions taken by Allegiant. Allegiant's trust department was created for marketing purposes, to represent to bank customers Allegiant was a full service bank, not to provide consumers qualified, reputable trust services. Regrettably for the consumers who relied on Allegiant to protect their money, Allegiant's accumulated failures to function under the rules and laws regulating trustees, opened its vault to the massive fraud committed by the Cassitys.5 Allegiant circumvented every protection created to prevent trusts, especially pre-need trusts, from losing their assets. Throughout its tenure, Allegiant wired millions of dollars to NPS through a system created to automatically execute wire transfer requests from David Wulf, the investment advisor of the trusts. Tr. Vol. 12, 42:11-14; Vol. 4A, 66:8-67:5, 67:24-68:19, 85:19-86:21, 90:9-20; Vol. 5A, 106:10-17, 108:24-109:3, 114:17-115:1, 116:5-16, 121:10-122:4. Allegiant did not deny a...

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