Comeau v. Rupp

• Decision Date: 29 December 1992
• Docket Number: Civ. A. No. 86-1531-MLB.
• Parties: Roger L. COMEAU; David L. Comeau; Charles G. Comeau; Rooks County Savings Association; and Federal Savings and Loan Insurance Corporation (as successor in interest to Rooks County Savings Association); and Rupp Financial Corporation, Plaintiffs, v. Terry RUPP; C.F. Rupp; Farmers National Bank; Alexander Grant & Co.; Grant Thornton (formerly Alexander Grant & Co., a partnership); and Fox & Company, a partnership, Defendants.
• Court: U.S. District Court — District of Kansas

810 F. Supp. 1172

Roger L. COMEAU; David L. Comeau; Charles G. Comeau; Rooks County Savings Association; and Federal Savings and Loan Insurance Corporation (as successor in interest to Rooks County Savings Association); and Rupp Financial Corporation, Plaintiffs, v. Terry RUPP; C.F. Rupp; Farmers National Bank; Alexander Grant & Co.; Grant Thornton (formerly Alexander Grant & Co., a partnership); and Fox & Company, a partnership, Defendants.

Civ. A. No. 86-1531-MLB.

United States District Court, D. Kansas.

December 29, 1992.

COPYRIGHT MATERIAL OMITTED

A.J. Schwartz, Donald E. Schrag, Ken M. Peterson, Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, for Roger L. Comeau, David L. Comeau, Charles G. Comeau, Rupp Financial Corp.

Byron J. Beck, Mary L. Barrier, Theresa L.F. Levings, Zoe Ann K. Holmes, Morrison & Hecker, Kansas City, MO, John C. Nettels, Jr., Morrison & Hecker, Wichita, KS, for F.D.I.C.

Robert F. Lytle, Patrick D. Gaston, Bennett, Lytle, Wetzler, Winn & Martin, Prairie Village, KS, for Terry Rupp, C.F. Rupp.

Robert J. Roth, William R. Smith, Hershberger, Patterson, Jones & Roth, Wichita, KS, Don C. Staab, Hays, KS, for Farmers Nat. Bank.

Ron C. Campbell, John T. Conlee, Fleeson, Gooing, Coulson & Kitch, Wichita, KS, Theodore A. Livingston, Jr., Mayer, Brown & Platt, Chicago, IL, for defendants Grant Thornton and Fox & Co.

Roger L. Bainbridge, Office of Thrift Supervision, Shawnee Mission, KS, James R. Bloss, Office of Thrift Supervision, Atlanta, GA, for Office of Thrift Supervision.

Robert C. Brown, Smith, Shay, Farmer & Wetta, Wichita, KS, for Jack Curtis, Bryan Ronck.

Jana D. Abbott, Ken M. Peterson, Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, for A.J. Schwart.

MEMORANDUM AND ORDER

BELOT, District Judge.

This matter is before the court on the motion of Defendants Grant Thornton ("Grant") and Fox & Company ("Fox") (collectively, "the Accountants") for reconsideration; the Accountants' motion in limine to exclude evidence on damages (Doc. 1012); and the Accountants' motion in limine to exclude evidence of prejudgment interest. The facts of this case have already been discussed, 810 F.Supp. 1127 (D.Kan.1992), and will not be repeated.

I. Motion for Reconsideration

The standards governing motions to reconsider are well established. A motion to reconsider is appropriate where the court has obviously misapprehended a party's position or the facts or applicable law, or where the party produces new evidence that could not have been obtained through the exercise of due diligence. Anderson v. United Auto Workers, 738 F.Supp. 441, 442 (D.Kan.1990); Taliaferro v. City of Kansas City, 128 F.R.D. 675, 677 (D.Kan. 1989). "Revisiting the issues already addressed `is not the purpose of a motion to reconsider,' and `advancing new arguments or supporting facts which were otherwise available for presentation when the original summary judgment motion was briefed' is likewise inappropriate." Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 89, 121 L.Ed.2d 51 (1992).

The Accountants ask the court to reconsider its ruling of October 29, 1992, in which the court denied the Accountants' motion for summary judgment against plaintiff Federal Deposit Insurance Corporation ("FDIC"). In denying the motion, the court followed the rationale and rule announced in FDIC v. O'Melveny & Meyers, 969 F.2d 744 (9th Cir.1992), where the court, under federal common law, refused to impute to the FDIC the wrongful actions and knowledge of the former officers and directors of a failed savings and loan association.

The Accountants argue that they "never had an opportunity to brief the `considerations of federal common law'" underlying the decision of this court and O'Melveny. The court finds otherwise. In its October 29 Order, the court adopted the rule of O'Melveny — a case of which both parties were aware and which both parties briefed.¹

Nor is the court persuaded that O'Melveny is distinguishable in any legally significant sense. The Accountants argue that O'Melveny only precluded the defendant from asserting estoppel against the FDIC. Thus, according to the Accountants, O'Melveny is limited to "equitable defenses" good against the bank, but not available against the FDIC. See 969 F.2d at 752. This argument, however, would allow a defendant to defeat the sound rationale of O'Melveny through the facile effort of artful pleading. In O'Melveny, the defendant argued that the wrongful conduct of former bank insiders should be imputed to the FDIC in order to "estop" the FDIC from maintaining suit against negligent third-parties. The Accountants herein urge precisely the same result that is based in equity — but have merely omitted any reference to "estoppel." Here again, the Accountants attempt to elevate form over substance.²

The Accountants contend that in the absence of congressional intent, federal courts have no authority to "override fundamental legal precepts" in FDIC litigation. But as the Accountants themselves must concede, federal common law ultimately governs the rights of the FDIC, see FDIC v. Bank of Boulder, 911 F.2d 1466, 1474-77 (10th Cir.1990) (en banc), Downriver Community Fed. Credit Union v. Penn Square Bank, 879 F.2d 754, 760 (10th Cir.1989), cert. denied, 493 U.S. 1070, 110 S.Ct. 1112, 107 L.Ed.2d 1019 (1990). And if a body of federal common law exists apart from state common law, it should come as no surprise that courts consider matters of policy — which have always informed the common law. Indeed, state common law itself recognizes that "there may be special reasons of policy in particular cases which will lead to the imputation of a third party's negligence to a defendant, but not to a plaintiff" against whom the defense of contributory negligence is asserted. W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 74, at 529 (5th ed. 1984).

The Accountants also support their argument with the recent case of FDIC v. Clark, 978 F.2d 1541, 1549 (10th Cir.1992), which relied on O'Melveny to prevent defendant attorneys from imputing the wrongful conduct of former bank officers to the FDIC. The Accountants contend that the Clark court allowed the defense of imputed contributory negligence against the FDIC (although the jury rejected it) and did not rely on federal common law to preclude the defense. Although this contention is correct as far as it goes, the court is unable to read so much into judicial silence on a point of law. In that case, the jury was permitted to reject the defense of imputed contributory negligence on state law grounds, and it was thus unnecessary for the Clark court to address further considerations. Nor is there any indication that the FDIC pressed such an argument in that case. If anything, the court reads Clarks favorable references to O'Melveny as support for its October 29 ruling.

Finally, the Accountants argue that the court failed to address their argument that the imputed knowledge (as distinct from the conduct) of the Rupps and the Comeaus defeats the FDIC's proof of causation. To the contrary, the court addressed this argument in the causation section of its order (I.A.2.), finding that genuine issues of fact preclude a summary finding "as to whether the RCSA Board as a whole relied upon the audits,...." (October 29 Order 810 F.Supp. at 1144; emphasis added). For purposes of either contributory negligence or causation, the court will impute neither "knowledge" nor "conduct" of former RCSA officers to the RCSA.

To clarify its earlier order, the court believes that knowledge chargeable to former officers and directors of RCSA (as opposed to RCSA) is relevant to the proof of causation. Because legal causation includes the concept of intervening, superseding causes, see, e.g., Schmeck v. City of Shawnee, 232 Kan. 11, 651 P.2d 585, syl. ¶ 6 (1982), the Accountants may attempt to establish that certain knowledge must be imputed to other actors, whose breach of duty was a superseding cause of the FDIC's injuries. See George v. Breising, 206 Kan. 221, 227, 477 P.2d 983 (1970) ("If the original actor should have reasonably foreseen and anticipated the intervening act causing injury in the light of the attendant circumstances, his act of negligence would be a proximate cause of the injury."). Because critical facts are in dispute, however, the issue of superseding causes — which includes the intervening negligence of third parties — will also be a matter for the jury to determine. See Prince v. Leesona Corp., 720 F.2d 1166, 1169 (10th Cir. 1983); St. Clair v. Denny, 245 Kan. 414, 420, 781 P.2d 1043, 1047 (1989).

II. Lack of Proof as to Damages

The court has allowed the Accountants to supplement their summary judgment motion with briefs addressing a dispositive matter raised in the pretrial order. According to the Accountants, the FDIC has no evidence that the Accountants' alleged negligence caused any of the FDIC's claimed damages.

The FDIC claims damages for losses sustained by RCSA on 19 specific participation loans that RCSA purchased from the Halle Mortgage Company. All of these loans were made after Fox conducted its 1984 audit. Only two of the loans were made after the 1985 audit by Grant. The FDIC alleges that properly prepared audits would have included, inter alia, a recommendation of substantial loan loss reserves. The FDIC's theory of causation is that the RCSA Board, if properly warned of the precarious financial state of RCSA as of August 1984, would have ceased purchasing additional Halle loans, and thus would have incurred no losses on these loans.

The Accountants argue that plaintiff must prove both: (1) "transaction causation," i.e., that the Accountants made representations that specifically "induced" RCSA to purchase additional Halle loans after 1984; and (2) "loss causation," i.e., that the Accountants caused the loans to suffer losses after they were purchased.

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