Landry v. Thibaut
| Decision Date | 06 April 1988 |
| Docket Number | No. 87-CA-309,87-CA-309 |
| Citation | 523 So.2d 1370 |
| Parties | Dr. W.B. LANDRY, et al. v. Charest THIBAUT, Jr., et al. 523 So.2d 1370 |
| Court | Court of Appeal of Louisiana — District of US |
Sessions, Fishman, Rosenson, Boisfontaine, Nathan & Winn, Robert E. Winn, Jerome K. Lipsich, Joy G. Braun, New Orleans, for plaintiffs/appellees.
Cleveland, Barrios, Kingsdorf and Casteix, Carl W. Cleveland, Bruce S. Kingsdorf New Orleans, for defendants/appellants.
Before CHEHARDY, GRISBAUM and GOTHARD, JJ.
This case originated with the sale of large blocks of St. Charles Bank and Trust Company stock to each of the three plaintiffs and other investors, including some of the defendants. Later, examinations by federal and state regulatory authorities revealed inadequacies and deficiencies in the bank's financial structure. The value of the bank's stock dropped drastically in less than two years, causing the three plaintiffs to seek legal counsel and eventually to file suits in both state court and federal court. The appeal before us is from judgment awarding damages to the plaintiffs under two Louisiana statutes, LSA-R.S. 12:91, concerning the fiduciary duty of a corporate officer, and the Louisiana Blue Sky Law, R.S. 51:715.
The parties before this court are the plaintiffs-appellees, Dr. W.B. Landry, Bryan Zeringue, and Curtis Chauvin, purchasers of stock, and the defendant-appellant, Charest Thibaut, Chairman of the Board. The stock purchases were made in the summer of 1974, for $60 per share. After the regulatory examinations and the determination that the Bank was undercapitalized, in January, 1976 the Bank issued a proxy statement disclosing its precarious financial position and announcing a stock offering at $4 per share. The plaintiffs filed suit in the 29th Judicial District against Thibaut and eighteen other defendants on December 6, 1976. The federal suit was filed on January 26, 1977 in the District Court for the Eastern District of Louisiana against Thibaut and others. The record of the ten-year litigation is replete with allegations of mismanagement, fiduciary irresponsibility, and self-dealing on the part of those in control of the bank, which resulted in a decline in the value of the stock, with counter charges of scapegoating and misplaced blame for problems caused by a slow economy.
Federal suit. The plaintiffs elected to pursue the federal suit first, letting the state suit remain inactive. In their first complaint, filed January 26, 1977, they alleged violations of Sec. 10(b) of the Security Exchange Act of 1934 and Rule 10b-5 by All American Assurance Company, Republic Securities Corporation, 1 Thibaut, Remy F. Gross, and C. Therral Ransome. On January 29, 1979, the plaintiffs filed an amended complaint to add as defendants the Bank, Royal American Corporation, Henry Friloux, and Alcide J. Laurent. The causes of action were broadened to include claims under Sec. 17(a) of the Securities Act of 1933, LSA-R.S. 12:91, and LSA-R.S. 51:701 et seq., the Louisiana Blue Sky Law. Prior to trial the court dismissed the claims under Sec. 17(a) of the Securities Act of 1933 and LSA-R.S. 12:91 on grounds that there was no private cause of action under either statute; that court also dismissed the Louisiana Blue Sky claim on grounds that the cause had perempted. At trial the court found that the Bank, Friloux, and Laurent had violated Sec. 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 but the plaintiffs could not recover because of their failure to exercise due diligence in buying the stock. (The opinion was not published.)
Upon appeal, in Landry v. All American Assur. Co., 688 F.2d 381 (5 Cir.1982), the Fifth Circuit affirmed the trial court's dismissal of the complaints under Sec. 17(a) of the Federal Securities Act of 1933 and under LSA-R.S. 12:91, but reversed the dismissal of the Blue Sky complaint. Holding that the two-year limitation for suit under the statute was one of prescription rather than peremption, it remanded to the district court for it to determine whether to decide the Blue Sky claim or to relegate the parties to the Louisiana State courts. The appellate court also affirmed the trial court's judgment as to the claim under Sec. 10(b) of the Securities and Exchange Act of 1934. On November 30, 1982 the federal district court ordered that the state law claim (the Blue Sky claim) be relegated to the state courts, as all other matters before the federal court had been resolved.
State Suit. The original petition, filed December 6, 1976 by Landry, Zeringue, and Chauvin, named as defendants Thibaut, and eighteen other defendants alleged to be members of the board of directors, of whom several were officers and/or members of the executive committee. 2 The plaintiffs sought damages in the amount of the difference between the purchase price they paid for the bank stock in 1973 and 1974 and the diminished or actual value of their shares at time of trial or of an earlier disposition, plus any expenses such as interest on loans for their purchase, and also legal interest from date of demand and attorney's fees. The petition alleged breach of fiduciary duty, in causing or failing to prevent the waste of corporate assets, by mismanaging the Bank's business and other acts or omissions, directly damaging the plaintiffs as shareholders. The petition detailed unsound loans, including several to insiders, granted in 1974 and 1975, overline loans (exceeding the Bank's legal limit) in 1973 and 1974, and loans not properly reviewed or approved by the executive committee in 1973, 1974, and 1975. Because of these practices and the lost earnings which resulted, the stock held by the plaintiffs diminished drastically in value.
As noted above, the federal case was litigated in the intervening years and judgment of the U.S. Fifth Circuit became definitive on November 19, 1982. Following the order of the federal district court relegating the state claim to state courts on November 30, 1982, the plaintiffs filed an amending petition in the 29th Judicial District Court for the Parish of St. Charles on March 7, 1983, more than six years after the original petition was filed. The amending petition added as defendants the Bank, Republic Securities Corporation, and All American Assurance Company. It added a claim under LSA-R.S. 51:715, the Blue Sky Law, alleging that the defendants were persons who directly or indirectly offered, sold, or in some way had a part in the sale of Bank shares to plaintiffs, omitted certain material disclosures, made untrue statements of material fact, and "knew or should have known of the alleged untruths and/or omissions." The second amending petition, filed March 21, 1983 reiterated the allegations of violating the Blue Sky Law but dropped all but Republic, All American, Thibaut, Friloux and Laurent as defendants on the claim under LSA-R.S. 51:715.
Several important judgments were rendered on motions prior to trial: (1) On June 19, 1985 twelve defendants were dismissed on summary judgment as to claims under LSA-R.S. 12:91 because under the facts the "plaintiffs do not have a personal right of action against the directors and officers under 12:91, that their remedy is by means of a stockholder's derivative suit." Defendants Friloux, Laurent and Ransome were also dismissed as to 12:91 claims "on the basis of the law of the case and res judicata, since these same claims were previously decided adversely to plaintiffs in the federal Landry suit...." (2) On August 27, 1985, motions for summary judgment seeking to dismiss the 12:91 claims against Thibaut and Republic were denied, the judge ruling that, "there is a question of the use or misuse of certain insider information by said parties and as such plaintiffs may have a personal right of action against Charest Thibaut, Jr. and Republic Securities Corporation pursuant to Louisiana R.S. 12:91." (3) In the same hearing the court denied motions for dismissal of Blue Sky claims against Friloux and Laurent on prescription, ruling that adequate notice had been provided by the original petition and the amending petition related back. (4) Finally, on May 1, 1986, the plaintiffs having moved to sever the jury trial of Thibaut and Republic from trial of the remaining defendants (Friloux and Laurent) who elected to have claims against them tried by a judge, the trial court ordered severance of the trial against Thibaut on grounds that it would shorten the trial, obviate confusion of the jury, and "possibly obviate the need for trying the plaintiffs' claims against the other defendants, ..."
After a five-day trial on the issue of liability only, the jury found in favor of the three plaintiffs on both their claims against Charest Thibaut, Jr. It denied recovery to Dr. W.B. Landry on the Blue Sky claim, finding that he was contributorily negligent in purchasing the stock. On the LSA-R.S. 12:91 claim the jury found that Thibaut breached his fiduciary duty to the plaintiffs and that the breach caused a loss to the plaintiffs. The trial judge later granted Landry's motion for judgment notwithstanding the verdict as to the finding of contributory negligence.
In assessing damages, the court first listed separately its findings of the proper measures of damages for each of the plaintiffs under the Blue Sky law claims and under the breach of fiduciary duty claims. In rendering judgment the court awarded each plaintiff the amounts listed as appropriate under the LSA-R.S. 12:91 claims: the principal amount of $81,000 and interest of $68,040, plus 12% annual interest on the principal from November 13, 1986 (date of the hearing on quantum) until paid, pending tender of their shares of bank stock to Thibaut. The court awarded in addition total attorney's fees of $150,000, deemed proper under the Blue Sky law claims, with legal interest of 12% per annum from November 13, 1986 until paid, plus costs....
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