In a decision further clarifying the state’s apportionment statute, the Georgia Supreme Court issued a ruling supporting a group of former bank directors who said they were improperly denied a chance to have a nearly $5 million federal jury award apportioned between them.
The unanimous opinion authored by Justice Sarah Warren came in response to three questions from the U.S. Court of Appeals for the Eleventh Circuit, which had been asked to overturn the award and said it did not know whether the former directors of the failed Buckhead Bank were entitled to have liability divided among them.
Warren’s opinion said the 2005 apportionment statute, which did away with joint and several liability in cases “brought against one or more persons for injury to person or property,” included claims for “purely pecuniary damages” such as those asserted by the Federal Deposit Insurance Corp.
At the same time, the opinion said in answering the second question posed by the Eleventh Circuit that the statute did not end joint and several liability for co-defendants determined to have acted “in concert.”
But, it said, such liability can only apply if the court determines the damages are “indivisible” and cannot be apportioned to each at-fault party according to his or her share of the blame.
The justices punted on the third question, which asked whether decisions by a bank’s board of directors can be deemed a “concerted action” rising to the level of joint and several liability. That determination requires a “record-intensive evaluation” of the FDIC’s claims and evidence to determine “which fault is truly indivisible as a matter of law.”
The underlying case stems from the collapse of Buckhead Bank in 2009, when it was closed and taken over by federal regulators.
The FDIC sued eight former directors and officers, including founder and board chairman Charlie Loudermilk Sr., for claims including negligence and gross negligence for their roles in approving 10 commercial real estate loans that defaulted, costing the bank more than $21 million.
Prior to trial in 2016, Northern District Judge Thomas Thrash ruled that the apportionment law did away with joint and several liability in cases “brought against one or more persons for injury to person or property” and that the bank directors had acted “in concert” and were thus not covered by its provisions.
At trial, the jury found the directors negligent in approving four of the 10 loans at issue and awarded just under $5 million in damages.
The directors appealed, arguing that Thrash should have allowed the damages to be apportioned, because “injury to person or property” includes economic property, and cited three Georgia Court of Appeals cases in which apportionment was ordered in cases involving business and economic torts.
Appeals Court Judges Gerald Tjoflat, Beverly Martin and R. Lanier Anderson wrote that the dispute presented questions of law they could not answer.
“Because no Georgia Supreme Court decision has yet addressed these consequential state-law questions, we respectfully ask the court to answer them,” the panel said.
Warren’s 39-page answer said that the FDIC’s position that “injury to person or property” could only be applied to tangible property was too narrow and could also include “property that could be characterized as intangible,” such as economic losses.
“As a result, the type of damages the FDIC seeks here are not, as a threshold matter of law, excluded from apportionment” under the law.
As to the second question, the justices said the 2005 law did not eliminate joint and several liability for joint tortfeasors “with an important caveat: Concerted action survives the apportionment statute, but only insofar as it was traditionally understood at common law within the context of torts.”
“The early common law theory ‘was that there was a mutual agency of each to act for the others, which made all liable for the tortious acts of any one,’” Warren wrote.
The apportionment law changed the legal landscape, she said, such that “the pertinent inquiry is therefore whether fault is capable of division. When fault is divisible and the other requirements of [the statute] are met, then the trier of fact ‘shall’ apportion.
“If fault is indivisible,” Warren continued, “then the trier of fact cannot carry out the statute’s directive of awarding damages ‘according to the percentage of fault of each person’ and the apportionment statute does not govern how damages are awarded.”
Thus joint and several liability survives the statute, she said.
“We emphasize, however, that this holding encompasses only traditional concerted action, as it was understood at common law, for the basic reason that fault in such scenarios is not divisible.”
The defendants’ appellate counsel includes Alston & Bird lawyers Robert Long, Theodore Sawicki, Elizabeth Clark and Lauren Macon, who declined to comment.
The FDIC’s appellate team includes agency attorneys J. Scott Watson and J. Stuart Tonkinson, and Joyce Gist Lewis and George Shingler of Atlanta’s Shingler Lewis. An FDIC spokesman declined to comment on the litigation.
In a statement to the Daily Report, former Georgia Trial Lawyers Association President Robin Frazer Clark, who is not involved in the case, said the ruling reminded her of a famous quote attributed to Mark Twain: “The rumors of my death have been greatly exaggerated,”
“I believe the rumors of the death of joint and several liability have been greatly exaggerated,” said Clark. “In every case I have handled involving more than one defendant since 2005, I have argued that joint and several liability is still alive and kicking. Until now, I have not had a trial judge or defense attorney agree with me.”
“Loudermilk gives me new hope with my argument,” she said. “When the Georgia Legislature enacted the apportionment scheme, it did not expressly abolish joint and several liability. So, if we are going to go down the path that strict construction necessarily leads, the only destination one can reach is that joint and several liability survived the apportionment scheme, exactly as Justice Warren explains.”
Clark said she is “a little disappointed in the court’s reasoning regarding indivisible injury, because if there ever existed an indivisible injury, it would be the death of someone. In a case where there is no concerted action by the defendants, is one defendant responsible for the decedent’s heart? And another defendant responsible for the decedent’s lungs?”
In addition, she said, “I am a little concerned about the ethical propriety of asking for apportionment of damages among the defendants who are all represented by the same counsel. Neither the Georgia Supreme Court’s opinion or the District Court’s opinion that originally denied defendants’ request for apportionment makes mention of this, although it seems to me to be an obvious ethical lapse.”
Wednesday’s opinion marks the second time the justices have been asked to rule on previously unsettled law in the case. In 2014, Thrash asked the high court to decide whether Georgia’s “business-judgment rule,” which protects corporate officers from liability by assuming they will act in good faith for business decisions unless they can be proven to have acted negligently, shielded the defendants for ordinary negligence claims.
The justices said it did not and the case proceeded.
In 2017, in response to the concerns raised about that ruling by the banking community and Georgia Chamber of Commerce, the Legislature raised the negligence standard so that only gross negligence falls outside the rule’s protection.