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The John Ernest Lucken Revocable Trust v. Heritage Bancshares Group, Inc.

United States District Court, N.D. Iowa, Western Division

August 22, 2018

THE JOHN ERNEST LUCKEN REVOCABLE TRUST, and JOHN LUCKEN and MARY LUCKEN, Individually and as Trustees, Plaintiffs,
v.
HERITAGE BANCSHARES GROUP, INC., HERITAGE BANK NATIONAL ASSOCIATION, and THOMAS GEIGER, GARY GEIGER, directors of Heritage Bank, and ROBERT MATHIASEN, Chief Credit Officer of Heritage Bank, Defendants.

          OPINION AND ORDER REGARDING THE PARTIES' POST-TRIAL MOTIONS

          MARK W. BENNETT, U.S. DISTRICT COURT JUDGE.

         TABLE OF CONTENTS

         I. INTRODUCTION ........................................................................... 2

         II. LEGAL ANALYSIS ........................................................................ 5

         A. Heritage's Post-Trial Motions .................................................... 5

         1. Judgment as a matter of law ............................................. 5

         2. Alternative motion for new trial ......................................... 7

         3. Reduction, remittitur, or new trial on punitive damages ...................................................................... 8

         a. The due process challenge ....................................... 9

         b. Remittitur .......................................................... 12

         4. Credit for the Dirks-Lucken settlement .............................. 14

         a. Background and arguments .................................... 14

         b. Analysis ............................................................ 15

         5. Summary ................................................................... 20

         B. The Luckens' Post-Trial Motions .............................................. 20

         1. The Rule 59(e) Motion .................................................. 20

         2. Attorney's fees ............................................................ 21

         3. Judgment on equitable claims ......................................... 23

         a. Arguments of the parties ....................................... 24

         b. Analysis ............................................................ 27

         i. Unjust enrichment ....................................... 27

         ii. Rescission ................................................. 29

         4. Summary ................................................................... 31

         III. CONCLUSION ............................................................................ 31

         I. INTRODUCTION

         As I explained in prior rulings, this case arises from the last-ditch effort of the plaintiffs-collectively, the Luckens-to come to the financial rescue of a failing rural Iowa automobile dealership, Dirks Motor Company, in 2011 and 2012. More specifically, it involves the alleged misconduct of Heritage Bank, which held much of Dirks Motor's debt, the bank holding company, and certain bank officers and directors- collectively, Heritage. Pursuant to the Seventh Amendment of the U.S. Constitution, this case proceeded to a jury trial on April 9, 2018, on the following claims: (1) a state common-law “fraudulent misrepresentation” claim, based on alleged representations by Heritage, in November 2011, that it would provide Dirks Motor with floor plan financing, if John Lucken (a) provided funds to Heritage to be used to pay off Dirks Motor's debt to Ford Credit, and (b) purchased a $250, 000 Certificate of Deposit at Heritage and pledged it to Heritage as “backup collateral” for the promised floor-plan financing; and (2) a federal “unlawful tying arrangement” claim, based on allegations that, on January 9, 2012, Heritage conditioned its promise to provide floor plan financing to Dirks Motor on the Luckens executing the “Lucken line of credit” and other documents. At the same time as the jury trial on these claims, the Luckens' equitable claims of unjust enrichment and rescission were tried to the bench.

         On April 12, 2018, the fourth day of trial, after a little over three hours of deliberations, the jury returned its verdict. The jury found for the Luckens on both their “fraudulent misrepresentation” claim and their “tying claim”; awarded $500, 000 in compensatory damages for “fraudulent misrepresentation”; awarded $45, 000 in compensatory damages for an “unlawful tying arrangement”; and awarded $4, 000, 000 in punitive damages on the “fraudulent misrepresentation” claim, with a finding that Heritage's fraudulent conduct was directed specifically at the Luckens.[1] Judgment was entered on the jury verdict on April 13, 2018.

         Several post-trial motions followed the verdict. Beginning with Heritage's post-trial motions, Heritage made its Rule 50(a) Motion at the close of the Luckens' case, but I granted Heritage leave to file a written brief after trial, with the understanding that I would take the Rule 50(a) Motion under advisement. Consequently, on April 13, 2018, Heritage filed its Motion For Judgment As A Matter Of Law Under Rule 50 (Rule 50(a) Motion) and a supporting brief.[2] The Luckens filed their Resistance to that motion on April 30, 2018. On May 11, 2018, Heritage filed its Post-Trial Motions For Judgment As A Matter Of Law Or, Alternatively, Remittitur And Conditional New Trial (Rule 50(b) And Rule 59 Motions). The Luckens filed their Resistance to those Motions on May 29, 2018, and Heritage filed its Reply on June 1, 2018. On August 14, 2018, I granted the Luckens' Motion For Leave To File Supplemental Authority In Support Of Their Resistance To Defendants' Rule 50(b) Motion For Judgment As A Matter Of Law Or, Alternatively, New Trial. On May 14, 2018, Heritage filed its Brief Regarding Credit For Settlement. On May 28, 2018, the Luckens filed their Resistance To Defendants' Motion For Setoff/Credit Regarding Settlement.

         Turning to the Luckens' post-trial motions, on April 27, 2018, the Luckens filed their Rule 59(e) Motion To Alter Or Amend Judgment (Rule 59(e) Motion), requesting that I enter judgment trebling their damages on the “tying” claim to $135, 000 and award attorney's fees pursuant to 12 U.S.C. § 1975, and also award pre-filing interest, pre-judgment interest, and post-judgment interest. Heritage did not respond to that motion. On April 27, 2018, the Luckens also filed their Motion For Award Of Reasonable Attorney's Fees (Motion For Attorney's Fees), pursuant to 12 U.S.C. § 1975, seeking attorney's fees directly attributable to the “tying” claim and a 33% allocation of other attorney's fees for case preparation and trial. The Luckens filed Errata to that motion on May 4, 2018. Heritage filed its Resistance to the Motion For Attorney's Fees on May 14, 2018, and the Luckens filed their Reply on May 21, 2018. On August 14, 2018, I granted the Luckens leave to file their Supplemental Request For Award Of Reasonable Attorney's Fees, seeking attorney's fees for post-trial briefing related to the “tying” claim. Heritage resisted the Supplemental Request on August 21, 2018. On May 11, 2018, the Luckens filed their Brief In Support Of The Court Entering Judgment On Plaintiffs' Unjust Enrichment And Rescission Claims (Request For Judgment On Equitable Claims). Heritage filed its Resistance to that Request on May 25, 2018, and the Luckens filed their Reply on May 31, 2018.

         Heritage requested oral arguments on its Rule 50(b) And Rule 59 Motions. I conclude that the parties' written submissions are sufficient, however, so that I will consider those Motions and all the other post-trial motions and requests fully submitted on the written submissions.

         I will consider Heritage's post-trial Motions, first, then turn to consideration of the Luckens' Motions, if appropriate.

         II. LEGAL ANALYSIS

         A. Heritage's Post-Trial Motions

         1. Judgment as a matter of law

         In this case, I took Heritage's Rule 50(a) Motion made at the close of the Luckens' case under advisement pending written submissions, and Heritage subsequently filed its post-trial Rule 50(b) And Rule 59 Motions. The Luckens have not argued that Heritage's post-trial Rule 50(b) Motion exceeds the scope of Heritage's earlier Rule 50(a) Motion. See, e.g., Hagen v. Siouxland Obstetrics & Gynecology, P.C., 799 F.3d 922, 928 (8th Cir. 2015) (“[A] Rule 50(b) movant must have ‘sought relief on similar grounds under Rule 50(a).'” (quoting Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n.5 (2008)). Under these circumstances, I will merge Heritage's two Rule 50 Motions and consider them under the standards applicable to a post-trial Rule 50(b) motion.

         Heritage argues that the jury's verdict is “at war” with the undisputed facts in the case. The Luckens argue that there is not only sufficient but overwhelming evidence supporting the jury's verdict.

         Review of a jury verdict by the courts “is extremely deferential given ‘the danger that the jury's rightful province will be invaded when judgment as a matter of law is misused.'” Dean v. Searcey, 893 F.3d 504, 511 (8th Cir. 2018) (quoting Bavlsik v. General Motors, L.L.C., 870 F.3d 800, 805 (8th Cir. 2017)). Thus, it is well-settled that the court must give great deference to the jury's verdict and draw all reasonable inferences in favor of the nonmoving party, must not make credibility assessments or weigh the evidence, and may overturn the verdict only if no reasonable jury could have reached it. See, e.g., id.; Letterman v. Does, 859 F.3d 1120, 1124 (8th Cir. 2017); Dean v. County of Gage, Neb., 807 F.3d 931, 936 (8th Cir. 2015); Estate of Snyder v. Julian, 789 F.3d 883, 887 (8th Cir. 2015); Jackson v. City of Hot Springs, 751 F.3d 855, 860 (8th Cir. 2014). Indeed, courts will not overturn a verdict unless there is “a complete absence of probative facts to support the verdict, ” Dean, 893 F.3d at 511 (internal quotation marks and citations omitted); “all of the evidence points one way and is susceptible of no reasonable inference sustaining the position of the nonmoving party, ” Letterman, 859 F.3d at 1124 (internal quotation marks and citations omitted); or “the record contains no proof beyond speculation to support [a] verdict, ” Jackson, 751 F.3d at 860 (internal quotation marks and citations omitted).

         This is not a case in which these standards have been met. Heritage's arguments for judgment as a matter of law are essentially reiterations of its arguments in support of summary judgment, evidentiary motions, and other pretrial arguments. Notwithstanding Heritage's post-trial contention that the jury's verdict is “at war” with the undisputed facts, Heritage's arguments actually demonstrate the extent to which disputed facts gave rise to various reasonable inferences, not just inferences that would have supported a verdict for Heritage on any claim. To overturn the jury's verdict in this case would improperly invade the jury's province, see Dean, 893 F.3d at 511, because a reasonable jury could have found as this jury did on this record, Letterman, 859 F.3d at 1124; Estate of Snyder, 789 F.3d at 887; Jackson, 751 F.3d at 860. Because there was evidence from which the jury could draw reasonable inferences supporting the verdict, this simply is not a case involving “a complete absence of probative facts to support the verdict, ” Dean, 893 F.3d at 511, nor one involving “no proof beyond speculation to support [a] verdict, ” Jackson, 751 F.3d at 860 (internal quotation marks and citations omitted), nor one in which “all of the evidence points one way and is susceptible of no reasonable inference sustaining the position of the [Luckens], ” Letterman, 859 F.3d at 1124 (internal quotation marks and citations omitted).

         Heritage's Rule 50(a) Motion For Judgment As A Matter Of Law, made during trial, and its post-trial Rule 50(b) Motion For Judgment As A Matter Of Law are denied.

         2. Alternative motion for new trial

         Heritage requests that, if I grant the motions for judgment as a matter of law, I also conditionally require a new trial, in the alternative, in the event that the judgment as a matter of law is vacated or reversed on appeal. Thus, Heritage expressly seeks a new trial only if I grant its Motion For Judgment As A Matter Of Law, but I have not done so. Therefore, no alternative new trial will be granted on the ground asserted by Heritage. Moreover, I will not grant a motion for new trial as an alternative to my denial of Heritage's Motions For Judgment As A Matter Of Law, either.

         The Eighth Circuit Court of Appeals has repeatedly explained that a new trial pursuant to Rule 59 based on the sufficiency of the evidence should only be granted “when ‘the verdict is against the weight of the evidence and allowing it to stand would result in a miscarriage of justice.'” Lonesome Dove Petroleum, Inc. v. Holt, 889 F.3d 510, 516 (8th Cir. 2018) (quoting Bennett v. Riceland Foods, Inc., 721 F.3d 546, 553 (8th Cir. 2013)); accord Coterel v. Dorel Juvenile Grp., Inc., 827 F.3d 804, 807 (8th Cir. 2016); Michigan Millers Mut. Ins. Co. v. Asoyia, Inc., 793 F.3d 872, 878 (8th Cir. 2015); Burris v. Gulf Underwriters Ins. Co., 787 F.3d 875, 878-79 (8th Cir. 2015). Here, although I viewed the credibility of John Lucken's testimony differently than the jurors obviously did, and I would not have found for the Luckens on their claims because of this, I cannot say that the jury's verdict for the Luckens was so against the weight of the evidence that allowing it to stand would result in a miscarriage of justice. Indeed, one of the reasons I find no miscarriage of justice is that a reasonable jury could have found for the Luckens on this trial record.

         Therefore, Heritage's alternative Motion For New Trial is denied.

         3. Reduction, remittitur, or new trial on punitive damages

         Heritage also challenges the jury's award of $4, 000, 000 in punitive damages under due process standards, or, in the alternative, asks for a remittitur of the punitive damages and a conditional new trial on punitive damages, if the Luckens refuse to accept the remitted award. The Luckens argue that the punitive damages award should not be disturbed.

         The Eighth Circuit Court of Appeals drew on a prior Eleventh Circuit decision for an explanation of the difference between a due process ...


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