Federal Deposit Ins. Corp. v. WR Grace & Co.

• Citation: 691 F. Supp. 87
• Decision Date: 06 June 1988
• Docket Number: No. 84 C 5031.,84 C 5031.
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, a federal corporation, Plaintiff, v. W.R. GRACE & COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

691 F. Supp. 87

FEDERAL DEPOSIT INSURANCE CORPORATION, a federal corporation, Plaintiff, v. W.R. GRACE & COMPANY, et al., Defendants.

No. 84 C 5031.

United States District Court, N.D. Illinois, E.D.

June 6, 1988.

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Jay Erens, Paul K. Vickrey, William E. Rattner, Erens, Hallock & Miller, William E. Rattner, Paul K. Vickrey, Thomas M. Dethlefs, Hopkins & Sutter, Chicago, Ill., for plaintiff.

W. Donald McSweeney, Allan Horwich, Ann Rae Heitland, Schiff Hardin & Waite, Gary L. Prior, McDermott Will & Emery, Chicago, Ill., Denis McInerney, Charles A. Gilman, Jerome Sheinman, Cahill, Gordon & Reindel, New York City, for defendants.

MEMORANDUM OPINION AND ORDER

LEINENWEBER, District Judge.

On October 20, 1987 the jury returned a verdict in favor of plaintiff, Federal Deposit Insurance Corporation ("FDIC"), and against defendants, W.R. Grace & Company, et al. (collectively referred to as "Grace"), setting compensatory damages in the sum of twenty-five million dollars and punitive damages in the sum of seventy-five million dollars. On the same date the court entered judgment in favor of the FDIC, which judgments were docketed on October 22, 1987. Grace has now filed a motion for a judgment notwithstanding the verdict ("JNOV") pursuant to Rule 50(b) and in the alternative a motion pursuant to Rule 59(a)(1), Fed.R.Civ.P., to set aside the verdict of the jury and the judgment entered thereon and to grant a new trial, or in the further alternative for remittitur.

MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT STANDARD

Initially the parties dispute whether the Illinois standard or the federal standard for entertaining a JNOV applies. Defendant argues for an Illinois standard in a case such as this which involves a state law fraud claim. The FDIC however claims that a federal standard governs the disposition of motions for JNOV in federal courts. Although neither party has discussed the difference between the Illinois standard and the federal standard, if any, it does appear that the Seventh Circuit has dictated the Illinois standard be used in diversity cases. Ill. State Trust Co. v. Terminal R Assn. of St. Louis, 440 F.2d 497, 500 (7th Cir.1971). Jurisdiction here is based on diversity at least in part. Therefore the court will apply the Illinois standard as enunciated in Pedrick v. Peoria & Eastern RR, 37 Ill.2d 494, 510, 229 N.E.2d 504, 513-514 (1967). This standard is:

"in our judgment verdicts ought to be directed and judgments notwithstanding the verdict entered only in those cases in which all of the evidence, when viewed in its aspect most favorable to the opponent, so overwhelmingly favors movant that no contrary verdict based on that evidence could ever stand."

Stated another way, the motion for a JNOV presents the question whether there is in the record any evidence which, standing alone and taken with all intendments most favorable to the party resisting the motion, tends to prove the material elements of the case. Only the evidence favorable to the plaintiff may be considered and if it makes out a prima facie case sufficient in itself for the jury the motion must be denied. 23 ILP "Judgments" § 152, 372. In ruling on a motion the court may not determine any controverted questions of fact or pass on the credibility of witnesses or consider any purported impeachment. Ruling on the admission and exclusion of evidence is outside the function of the motion as are considerations of jury instructions or other procedural aspects of the trial. Id., pp. 368-369.

MOTION FOR A NEW TRIAL STANDARD

Under Illinois law a new trial should be granted only where it appears that there has been a miscarriage of justice and that the granting of such relief will be in the interest of justice. New trials may be granted when the verdict returned by the jury appears to be the result of passion, prejudice, partiality or other improper motive and where errors and irregularities occurred during the course of the trial which might have affected the result. 28 ILP "New Trial" § 11, pp. 580-581. On a motion for a new trial, unlike the motion for a JNOV, the court must weigh the evidence and set aside the verdict and order a new trial if the verdict is contrary to the manifest weight of the evidence. Lynch v. Bd. of Ed. of Collinsville, 82 Ill.2d 415, 45 Ill.Dec. 96, 103, 412 N.E.2d 447, 454 (1980); Heideman v. Kelsey, 414 Ill. 453, 466, 111 N.E.2d 538 (1953); Mizowek v. DeFranco, 64 Ill.2d 303, 1 Ill.Dec. 32, 356 N.E.2d 32 (1976). The inquiry is whether the result reached was one which is reasonable on the facts in evidence and not whether other conclusions might also have been reached. Lynch, 45 Ill.Dec. at p. 103, 412 N.E.2d at p. 454.

THE ASSIGNMENT BY CONTINENTAL BANK ("BANK") TO THE FDIC

The first point relied upon by Grace is its contention that the FDIC failed to prove that the claim against Grace was assigned to it and that, even if it did prove the assignment, claims for punitive damages are not assignable (defendant's memorandum, p. 13). The FDIC responds that the point was waived by Grace's failure to raise it in its motion for a directed verdict or in its statement of contested issues in the joint pre-trial order. In addition the FDIC pointed out that Grace in its answer admitted the fact of the assignment while disputing the legal effect. (See Answer to Second Amended Complaint)

The legal effect of the assignment was raised and determined in pre-trial motions in this case in which Grace contended that the fraud claim was not assignable. On September 17, 1987 the court held that the fraud claim clearly was assignable to the FDIC. The court therefore finds that the fact of, as opposed to the legal effect of, the assignment was admitted by Grace. Accordingly, it was unnecessary for the FDIC to prove the facts of the assignment at trial.

More difficult is the question of the assignability of the claim for punitive damages. The FDIC claims that the matter was waived by Grace's failure to include the point in its motion for a directed verdict. However the Seventh Circuit has held that a point that is purely legal, and not within the province of the jury, is not waived by failure to include it in the directed verdict motion. Benson v. Allphin, 786 F.2d 268, 274 (7th Cir.1986) cert. denied, 479 U.S. 848, 107 S.Ct. 172, 93 L.Ed.2d 109. Grace's main argument is that under Illinois law punitive damages may not be recovered by an assignee of a claim for fraud. Grace contends that the claim is assignable only if it would survive the death of the injured party and that claims for punitive damages will not survive the death of the injured party under Illinois law, citing Mattyasovszky v. West Towns Bus Co., 61 Ill.2d 31, 330 N.E.2d 509 (1975), and cases following, such as In re Air Crash Disaster near Chgo., Ill., 644 F.2d 594, 605-606 (7th Cir.) cert. denied, 454 U.S. 878, 102 S.Ct. 358, 70 L.Ed.2d 187 (1981). However Mattyasovszky and the other cases cited by defendant are causes of action for torts to the person which ordinarily are not assignable under Illinois law. On the other hand causes of action for torts to property ordinarily may be assigned, 3 ILP "Assignments" § 15, p. 439. Specifically actions for fraud or deceit survive by statute. Ill.Rev.Stat., ch. 110½, § 27-6. Accordingly, it has been held in Illinois that a cause of action for fraud or deceit is assignable. Brown v. State Farm Mutual Auto Ins. Assn., 1 Ill.App.3d 47, 272 N.E.2d 261; Browning v. Heritage Ins. Co., 33 Ill.App.3d 949, 338 N.E.2d 912. Further, Illinois follows the majority rule which holds that punitive damages are a type of relief which is part and parcel of the underlying cause of action and do not constitute an independent basis of recovery. Ghiardi & Kircher, Punitive Damages Law & Practice § 66.16, p. 67. Therefore the case cited by both parties, 1st Fed. Savings & Loan v. Oppenheim, 629 F.Supp. 427 (S.D.N.Y.1986) at pp. 446-447, which involved the Federal Savings and Loan Insurance Corporation, a similar agency to the FDIC, is directly on point:

"New York permits the assignment of essentially all tort claims other than those involving recovery for personal injury (citation omitted). Once a cause of action is determined to be assignable, a punitive damage claim based upon the cause of action may also be brought by the assignee (citation omitted)."

Accordingly, the court again finds that the punitive damage claim was properly assigned to the FDIC.

WHETHER THE BANK WAS IRREVOCABLY BOUND TO MAKE THE LOAN BEFORE THE ALLEGED FRAUD

Grace's primary argument for a JNOV is its contention that Continental had issued a binding loan commitment prior to the time that Grace had learned about the "bad news."¹ The FDIC's position is that the loan commitment by its very terms was "subject to satisfactory final loan documentation" and thus was not binding.

Conditions in a contract may be precedent or subsequent depending upon the intent of the parties. 12A, ILP "Contracts" § 321, p. 166. A determination of the intent of the parties to a contract may be a question of law or a question of fact depending upon the documents presented. Interway, Inc. v. Alagna, 85 Ill.App.3d 1094, 41 Ill.Dec. 117, 407 N.E.2d 615. As in Alagna the resolution of the issue depends upon the characterization of the "subject to" language in the letter. If the language is ambiguous the determination of its meaning is a question of fact for the jury but if it is unambiguous its meaning is a question of law for the court. Id. at 121. When used in connection with contracts "subject to" usually indicates a condition for a party's duty of performance and suggests that mere negotiation was contemplated. Id. at 121. As stated in 17 Am. Jur.2d Contract, § 320 at 749:

"Proviso in a contract creates a condition, in the absence of anything in the contract to show that such was not the intention of the parties, and the employment of such

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