Opinion ID: 544274
Heading Depth: 2
Heading Rank: 1

Heading: Appeal of Liability

Text: 9 Mmahat and Mmahat & Duffy appeal--on multiple points--the jury's finding of liability for malpractice and breach of fiduciary duty.
10 Several officers and directors of Gulf Federal settled with the FDIC at or before trial for some $1.9 million, but the jury was not given an interrogatory to determine what portion of ultimate fault should be attributed to them. Mmahat complains that was error; under Louisiana law he is entitled to a proportionate reduction of his liability by the percentage of fault attributed to the settlors. La.Civ.Code Ann. art. 1804 (West 1988); Nance v. Gulf Oil Corp., 817 F.2d 1176, 1180-81 (5th Cir.1987). 11 The FDIC concedes that Mmahat is entitled to some credit for the amounts paid by the settling defendants, but since [f]ederal law governs the rights of the FDIC, FDIC v. Lattimore Land Corp., 656 F.2d 139, 143 n. 6 (5th Cir.1981), they urge us to adopt a federal common law rule to govern this type of case and insure uniformity in similar suits tried nationwide. Under FDIC's proposed pro tanto rule, Mmahat would get a dollar-for-dollar credit for any amount paid by the settling defendants. 4 The Second Circuit has adopted the pro tanto approach where interests of uniformity in a federal case mandate application of a federal common law. Singer v. Olympia Brewing Co., 878 F.2d 596, 600 (2d Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 729, 107 L.Ed.2d 748 (1990). 12 Mmahat had the burden at trial of proving the settlors' share of fault, but the court below found that there was insufficient evidence in the record to permit a finding of proportionate fault. This finding makes the proportionate reduction v. pro tanto inquiry moot, so we will not resolve it here, but we are left with a question of double recovery. Because the money paid by the settling defendants and recovery from Mmahat overlap, we feel Mmahat should get credit for the amount paid. We therefore remand this issue to the district court to determine what portion of the amount paid by the settlors is attributable to the seven loans Mmahat was sued on, and give Mmahat a dollar-for-dollar credit on that amount.
13 Mmahat filed for bankruptcy protection after this suit was filed but before trial; the district court lifted the automatic stay and consolidated the actions. Because the jury found that Mmahat had breached a fiduciary duty, the court found that the judgment was not dischargeable because of his bankruptcy. The bankruptcy code excepts from discharge acts committed by fraud or defalcation while acting in a fiduciary capacity. 11 U.S.C. Sec. 523(a)(4). Mmahat argues that the exception should not apply since there was no acquisition or use of property that is not the debtor's. Boyle v. Abilene Lumber, Inc., 819 F.2d 583, 588 (5th Cir.1987). 14 FDIC argues that there was defalcation: Mmahat urged Gulf Federal to make improper loans so that he could earn fees. Mmahat thereby enriched himself at the cost of Gulf Federal's assets. Carey Lumber Co. v. Bell, 615 F.2d 370, 376 (5th Cir.1980). We agree. Mmahat cannot discharge this judgment in bankruptcy.
15 Mmahat and New England argue that FDIC's claim was prescribed by Louisiana law before FDIC took over Gulf Federal as receiver. Torts such as malpractice are covered by a one year limitations period in Louisiana. La.Civ.Code Ann. art. 3492. Taken alone, that period seems to bar the claims today. 5 But in a legal malpractice action, the doctrine of contra non valentem tolls the limitations period until the attorney-client relationship ends. Montgomery v. Jack, 556 So.2d 267 (La.App. 2d Cir.1990), cert. denied, 559 So.2d 1377 (La.1990). In this case, the relationship ended when Gulf Federal went into receivership. 16 Mmahat argues that contra non valentem did not apply because he did not conceal facts which would have put the FDIC on notice of the malpractice. But FDIC did not own, nor could it enforce the claims until it took over as receiver; no amount of notice would have allowed FDIC to sue before that time. Further, the only court to address this issue held that when the government acquires a cause of action from an institution, limitations begins to run as figured from the perspective of the institution, not the regulators. FDIC v. Buttram, 590 F.Supp. 251, 254-55 (N.D.Ala.1984). And we agree with the Buttram court. 17 Because we find that contra non valentem tolled the limitations clock on this action until the attorney-client relationship ended at receivership, we affirm on this point. This action was not prescribed when FDIC stepped in.
18 The trial court allowed several witnesses to give opinion testimony even though FDIC's pre-trial order listed them as fact, not expert, witnesses. Mmahat argues this was an abuse of discretion, but we do not agree. Fed.R.Evid. 701 allows even lay witnesses to give opinion testimony that is (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue. It was clearly within the trial court's discretion to allow the witnesses to give opinion testimony. 19 Mmahat also argues that the court below erred in admitting into evidence certain FHLBB examination reports, prepared without Gulf Federal's knowledge before it went into receivership. Specifically, the documents contained hearsay statements from Joseph Mmahat--John's brother--opining that Mmahat encouraged improper loans so his law firm could make fees. The document itself was admissible as a public record, but Fed.R.Evid. 805 demands that all hearsay within a document have its own exception. Because Joseph Mmahat was himself still a defendant at the time the document was introduced into evidence, it was clearly admissible as a non-hearsay admission under Fed.R.Evid. 801(d)(2)(A). 6
20 Mmahat brought a series of state law counter-claims against FDIC for negligent regulation. In essence, Mmahat claims the FDIC should be liable for failure to put Gulf Federal into receivership sooner. The district court dismissed the claims because they addressed discretionary functions and so were excepted from the Federal Torts Claims Act (FTCA). 28 U.S.C. Sec. 2671 et seq. That exception to the FTCA reads, in pertinent part: 21 The provisions of [the FTCA] shall not apply to(a) Any claim based upon an act or omission of an employee of the government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused. 28 U.S.C. Sec. 2680(a). 22 Mmahat argues that the discretionary function exception does not apply to negligent regulation of a financial institution, and cites Gaubert v. U.S., 885 F.2d 1284 (5th Cir.1989). In Gaubert, we held that the FHLBB could lose the protection of the exception if it went beyond discretionary acts and began day-to-day management of a financial institution. Id. at 1290. But Mmahat's reliance on Gaubert is misplaced. There, we found that over-interference can take regulators outside the discretionary function exception; here, Mmahat wants us to take the FDIC out of the exception for failure to interfere. We decline to do so, and affirm the district court on this point. 7
23 Mmahat argues that there was insufficient evidence to sustain the jury's finding of legal malpractice, because there was no evidence that he gave advice specifically on the seven loans at issue in this case. We will not disturb the jury's verdict unless, considering the evidence in the light most favorable to the FDIC, the facts and inferences point so overwhelmingly to Mmahat that reasonable jurors could not have arrived at a verdict except in his favor. Lubbock Feed Lots, Inc. v. Iowa Beef Processors, Inc., 630 F.2d 250, 268-69 (5th Cir.1980). 24 Striving to meet his burden of proof on appeal, Mmahat cites examples of certain officers and directors who did not hear or follow his advice on certain specific occasions. We do not find those examples sufficient to overcome the verdict of a correctly instructed jury. We likewise reject New England's complaint that Mmahat acted not as attorney but as chairman of the board, and therefore could not have committed legal malpractice as a matter of law. The jury's verdict will stand.
25 Finally, Mmahat and the firm argue that the court below incorrectly instructed the jury as to proximate cause, failure to mitigate damages, and the attorney-client relationship. We find that the court gave full and complete instructions on each of the issues, and defer to the district court's broad discretion to formulate a charge. U.S. v. Graves, 669 F.2d 964, 970 (5th Cir.1982).