Northwest Bank & Trust Company v. First Illinois National Bank

• Decision Date: 13 September 2002
• Docket Number: No. 3-00-CV-90023.,3-00-CV-90023.
• Parties: NORTHWEST BANK & TRUST COMPANY, Plaintiff, v. FIRST ILLINOIS NATIONAL BANK and Christopher L. Bryant, Defendants.
• Court: U.S. District Court — Southern District of Iowa

221 F.Supp.2d 1000

NORTHWEST BANK & TRUST COMPANY, Plaintiff, v. FIRST ILLINOIS NATIONAL BANK and Christopher L. Bryant, Defendants.

No. 3-00-CV-90023.

United States District Court, S.D. Iowa, Davenport Division.

September 13, 2002.

Hayward L. Draper, Nyemaster Goode Voights West Hansell & O'Brien PC, Des Moines, IA, for Plaintiff.

Fred E. Beaver, Thomas D. Hanson Hanson Bjork & Russell LLP, Des Moines, IA, for Defendants.

MEMORANDUM OPINION AND ORDER

PRATT, District Judge.

For the third time since this case was removed from the Iowa District Court for Scott County, this Court has before it one of the various incarnations of Defendants' Motion For Summary Judgement. To characterize the matter as fully submitted is a gross understatement, but such will suffice for now. The Court also has before it Plaintiff's Request for Leave to File Notice of Non-Waiver and Notice of Non-Waiver. The motion is granted, and the Court has noted Plaintiff's Notice of Non-Waiver. With reference to the discussion below, Defendants' motion for summary judgment is also granted on all claims.

I. BACKGROUND

This case begins with a dispute over a loan participation agreement between two sophisticated banks from the Quad Cities area of eastern Iowa and western Illinois. Plaintiff, Northwest Bank and Trust (Northwest) is a federal savings bank with its principal place of business in Scott County, Iowa. Defendant First Illinois National Bank (FINB) was at all material times a national bank with its principal place of business in Savannah, Illinois. Due to a merger subsequent to the transactions involved here, FINB has a new name, THE National Bank. The second Defendant, Christopher Bryant, was President of FINB during the times relevant to this lawsuit.

In the fall of 1998, FINB's commercial banking customers included several corporate entities owned and controlled by Thomas Jager, a Quad Cities area entrepreneur. Jager's affiliated corporations involved a number of business activities including real estate ventures, manufacturing and the sale and servicing of Government National Mortgage Association (GNMA) mortgage backed securities, as well as participating in U.S. Department of Housing and Urban Development coinsurance loans. Jager operated his businesses through a highly complex corporate structure of parent-subsidiary and affiliate corporate entities. New Uchtorff Company was a manufacturer of component and replacement parts for agricultural machinery. In its manufacturing business, New Uchtorff Company leased equipment and real estate from Whitehall Funding, Inc. Whitehall funding was owned by Heartland Funding Inc., which conducted various businesses ancillary to Whitehall. Heartland Funding, Inc. was in turn owned by R.P., Inc., a corporation owned in toto by Jager.

Before November 1998, Plaintiff Northwest had no business dealings with Thomas Jager. FINB's relationship with Mr. Jager, however, was multiplex. FINB had lending relationships with R.P., Inc., Heartland, Whitehall, New Uchtorff, as well as other Jager related entities. In addition to having various checking accounts for these entities, Whitehall had numerous escrow and borrower deposit accounts for its GNMA business at FINB as well as deposit and other banking relationships. The integrated relationship between FINB and the Jager companies was such that numerous deposits and withdrawals, including transfers between and among the several accounts, occurred on a daily basis.

In the fall of 1998, Jager approached FINB to obtain additional financing for the New Uchtorff Company. FINB prepared an internal credit request for its own use, identifying the purpose of the loan, the collateral, etc. FINB, however, was nearing to its legal lending limit and could not advance the entire amount requested. In November, with Thomas Pastrnak, one of Jager's attorneys, acting as an early intermediary, FINB contacted Northwest regarding the purchase of a loan participation agreement for the proposed additional financing of Whitehall Funding, Inc.'s affiliate, the New Uchtorff Company. Northwest's internal policy, as well as safe and sound banking practices, required it to make its own investigation and underwrite a loan in the same fashion and using the same standards it would use if initiating the loan. Thus, at Northwest's request, FINB prepared and submitted certain documents regarding the proposed financing, the client, and the loan participation agreement.

By December 14, 1998, Northwest had prepared a "Loan Analysis and Borrower Review" regarding the subject loan and borrower that reflected a high degree of confidence in Jager's management ability, and Whitehall's satisfactory credit history. Northwest's Internal Loan Committee approved the loan on December 22, 1998, and the Loan Committee of the Board of Directors approved the loan the following day. On December 29, 1998, FINB and Northwest executed the loan participation agreement on a customary form of which Northwest is familiar and had previously used. FINB's actions both before and after closing on the Loan Participation Agreement are now the subject of this lawsuit.

II. Plaintiff's Resistance Papers Fail to Conform to the Local Rules

In an Order dated July 16, 2002, this Court decided several procedural motions regarding Plaintiff's failure to comply with the Local Rules. Federal law and the Federal Rules of Civil Procedure grants each District Court the power to adopt rules governing its practice. 28 U.S.C. § 2071; Fed.R.Civ.P. 83. Once adopted, such rules of practice have the binding force and effect of law on both the parties and the Court that promulgated them. Weil v. Neary, 278 U.S. 160, 49 S.Ct. 144, 73 L.Ed. 243 (1929), Biby v. Kansas City Life Ins. Co., 629 F.2d 1289, 1293 (8th Cir.1980). Plaintiff's Amended Response Under Local Rule 56.1(b)(2), and Plaintiff's Statement of Material Facts and Disputed Issues for Trial failed to conform to the standards of LR 56.1(b). Local Rule 56.1(b) mandates that a party resisting a motion for summary judgment must file certain documents including:

2. A response to the statement of material facts in which the resisting party expressly admits, denies, or qualifies each of the moving party's numbered statements of fact;

3. A statement of additional material facts that the resisting party contends preclude summary judgment.

As it relates to Plaintiff's Response Under Local Rule 56.1(b)(2), Local Rule 56.1(b) states:

A response to an individual statement of material fact that is not expressly admitted must be supported by references to those specific pages, paragraphs, or parts of the pleadings, depositions, answers to interrogatories, admissions, exhibits, and affidavits that support the resisting party's refusal to admit the statement, with citations to the appendix containing that part of the record. The failure to respond to an individual statement of material fact constitutes an admission of that fact. (emphasis added)

The response this Court reviewed in its previous order, however, contained none of this. Rather, Plaintiff's response failed to expressly admit or deny much of anything, preferring instead to be simply argumentative. Where denials of Defendants' statements of fact did occur, Plaintiff failed to cite to any specific record facts contained in its appendix, instead citing to broad spans of its labyrinthian fifty-four page Statement of Material Facts. Such a document is not a proper response and does not comply with the local rules.

The same holds true for Plaintiff's Statement of Material Facts and Disputed Issues for Trial. The next paragraph of Local Rule 56.1(b) reads:

Each individual statement of additional material fact must be concise, numbered separately, and supported by references to those specific pages, paragraphs, or parts of the pleadings, depositions, answers to interrogatories, admissions, exhibits, and affidavits that support the statement, with citations to the appendix containing that part of the record.

The statement of additional material facts submitted by Plaintiff, in contrast, was a sprawling fifty-four page enigma of legal argument and allegation. Plaintiff's statement of additional facts offered eighty-nine paragraphs, many with sub-paragraphs up to i. Neither concision nor specificity were anywhere to be found within its pages. Accordingly, this Court found that such a document fell outside the boundaries of the Local Rules.

As neither of these submissions comported with the Local Rules, the Court ordered Plaintiff to resubmit both. In so doing this Court recognized that in finding violations of the Local Rules, the Court seeks to do justice and not simply to punish. The Court then denied Defendants' requests for the offending documents to be stricken from the record, to deem all of Defendants' stated facts admitted, and to sanction Plaintiff's counsel for violation of the local rules.¹ Justice is not served by taking a heavy-handed approach to violations of local procedural rules. Non-compliance by counsel slows the judicial process and is certainly frustrating to both opposing counsel and to the Court. Imposing Draconian sanctions for isolated rule violations, however, does far more than simply punishing the attorneys. Rather, such an approach destroys the vital right of the, most likely, innocent client to have her day in Court simply because her attorney mistakenly violates a local procedural rule. This Court will not be party to such an egregious offense of anyone's right to due process. Appropriately, a "District Court has considerable leeway in the application of its local rules." Martinez v. Union Pacific R.R. Co., 82 F.3d 223, 227 (8th Cir.1996). Patience, restraint, goodwill, and a desire for fair play, however, have their limits; both sides of a case deserve justice in proceedings before this Court.

In direct defiance of the Court's Order to resubmit resisting papers that comply with the Local Rules,...