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Harris v. Federal Deposit Insurance Corp.

United States District Court, N.D. Georgia, Atlanta Division

September 30, 2014

JAMES H. HARRIS, CYNTHIA EPTING, and JODY Q. GARRISON, as Executor of the Estate of Irma L. Herrin, Plaintiffs,


RICHARD W. STORY, District Judge.

This case comes before the Court on Defendants Miller, Dodd, and Garrison's Motion for Summary Judgment [110]. After reviewing the record, the Court enters the following Order.


This action arises out of the alleged fraudulent conduct of Defendant Bank Officers in inducing Plaintiffs to take out loans to help prop up Cleveland Motor Cars, Inc. ("CMC"), a financially troubled car dealership in Cleveland, Georgia. CMC had a long-standing relationship with Community Bank & Trust ("CBT") until CBT failed and the Federal Deposit Insurance Corporation ("FDIC") was appointed as receiver.

By late 2008, CMC owed CBT approximately $6.5 million. That debt became unsecured when a security deed lapsed on real property that served as collateral for these loans. (Pls.' Statement of Add'l Material Facts ("SAMF"), Dkt. [113] ¶ 9.) Still, CBT honored CMC's checks as the overdrafts on CMC's checking account piled up to around $1.2 million. (Id. ¶ 18.) The overdraft fees amounted to thousands of dollars per day. (Id. ¶ 16.) Meanwhile, Mitchell Simpson, CMC's founder, and Defendant Randal Jones, CBT's Chief Credit Officer responsible for processing loans and collateral documentation, had daily conversations about CMC's overdrafts and plans to keep it afloat. (Id. ¶¶ 8, 14.)

At this time, Defendant Charles Miller was the Chief Executive Officer of CBT and was Defendant Jones's direct supervisor. (Id. ¶¶ 12, 15.) Defendant Wes Dodd was the Chief Financial Officer and Chairman of the Asset Liability Committee, and all loans over $50, 000 were reported to him on a weekly basis. (Id. ¶ 13.) Defendant Jan Garrison was a Senior Vice President and Chief Compliance Officer, and she was responsible for reporting all potential violations of banking laws and regulations to the CBT Board of Directors. (Id. ¶¶ 10-11.)

Throughout this period, CBT assured CMC that it was working on a solution. According to Simpson, "Jones repeatedly stated that he was working with Defendants Dodd and Miller to remedy the overdrafts with a consolidation loan." (Id. ¶ 19; Simpson Aff., Dkt. [116-13] ¶ 6.) The FDIC had also commenced an examination of CBT, and Simpson states that in August 2008 he received a call from Jones telling him they needed to correct the overdrafts to prepare for the examination. (Pls.' SAMF, Dkt. [113] ¶¶ 20-21; Simpson Aff., Dkt. [116-13] ¶¶ 7-8.) Jones asked Simpson to meet him at CBT the next day. (Id.) Simpson attended that meeting along with Plaintiff James Harris and others. Miller briefly stopped by, telling the attendees only that they "would get through everything and he would see us on the other side.'" (Simpson Aff., Dkt. [116-13] ¶ 8.)

While it would take some time to complete a consolidation loan, Jones devised a plan whereby it would make $200, 000 loans to "Affiliated Borrowers"-business associates, friends, and family of Simpson-with the proceeds going to CMC's accounts with CBT. (Pls.' SAMF, Dkt. [113] ¶ 23.) Jones assured the Affiliated Borrowers, including Plaintiff Harris, that they would not be responsible for the loans. (Id. ¶ 38.) In fact, Jones told Harris that CMC would make payments on the note, not him, and the note would be consolidated with a larger loan from CBT to CMC within ninety days. (Id.)

Simpson states that he and some of the Affiliated Borrowers went to CBT to execute the $200, 000 loans around August 2008. (Simpson Aff., Dkt. [116-13] ¶ 12.) No Plaintiffs accompanied Simpson at this time. (Id.) Simpson went to Garrison's office to sign the loan paperwork. She did not advise them of any of the loan terms, but the documents were on her desk and she showed the Affiliated Borrowers where to sign. (Id.) Simpson believes Harris executed his loan separately either later that day or the next day. (Id. ¶ 14.)

In January 2009, Harris learned from CBT that the loan had not been consolidated and thus the loan made in his name would have to be renewed. (Pls.' SAMF, Dkt. [113] ¶ 42.) Harris signed the loan-renewal documents in Garrison's office, although he could not recall if she was present at the time. (Harris Depo., Dkt. [116-7] at 34-35.) In February 2009, Harris's note came due. Worried that he could be held in default, Harris made a payment on the note. (Pls.' SAMF, Dkt. [113] ¶ 46.) CMC then reimbursed Harris for the payment he made on the note. (Id. ¶ 47.)

Plaintiffs also point to an October 23, 2008 e-mail from Michael Dunagan, a loan review officer, to Defendants Miller, Dodd, and Jones addressing the Affiliated-Borrower loans. (See Dunagan E-mail, Dkt. [116-13] at 39.) In this e-mail, Dunagan states that Garrison told him Miller and Dodd had approved some of these loans, but the e-mail does not specifically mention Plaintiffs' loans. (Id.)

In addition to the $200, 000 Affiliated-Borrower loans, in early 2009 CBT and CMC got other individuals to assist CMC in purchasing used cars at auction by taking out $125, 000 loans. (Pls.' SAMF, Dkt. [113] ¶ 70.) These Affiliated Borrowers included Plaintiffs Irma Herrin and Cynthia Epting. (Id.) As with the $200, 000 loans, the $125, 000 loans were to be taken out in individuals' names, but the proceeds were to be deposited into CMC's account with CBT. (Id. ¶ 72.) The $125, 000 loans would also be consolidated into a single loan to CMC. (Id.) These loans were secured by titles to cars purchased at auction, and as the cars were sold, the notes were paid down. Garrison was involved in this process. (See E-mails Between Simpson and Garrison, Dkt. [116-13] at 46-47.) In addition, Garrison signed loan files related to the $125, 000 Affiliated-Borrower loans. (Pls.' SAMF, Dkt. [113] ¶ 90.)

Unlike the other Plaintiffs, Epting never had direct contact with Simpson or anyone from CBT. Rather, her son approached her about taking out a $125, 000 Affiliated-Borrower loan, and she granted him permission to sign the loan documents on her behalf. (Id. ¶ 106.) Epting also received assurances from her son that she would not have to pay back the loan because CMC would be responsible. (Id. ¶ 108.) Garrison signed the documents in Epting's loan file. (Id. ¶ 114.) Despite Garrison's involvement in the loans, however, Epting testified that she did not know how the exchange of titles would work at the time the straw-borrower loans to Plaintiffs were made. (Defs.' Resp. to Pls.' SAMF, Dkt. [124] ¶ 117.)

Eventually, the CBT Board of Directors approved the $11 million consolidation loan. James Bruce, an Affiliated Borrower as well as business associate and father-in-law of Simpson, testified that he discussed the consolidation loan with Defendants Miller, Jones, and Garrison. (Pls.' SAMF, Dkt. [113] ¶ 127.)

On January 10, 2010, CBT failed, the Commissioner of the Georgia Department of Banking and Finance closed CBT, and the FDIC was appointed as receiver. (Id. ¶ 135.) The FDIC then pursued the Affiliated Borrowers to attempt to collect on the notes. (Id. ¶ 141.) Plaintiffs filed suit against the FDIC as receiver for CBT ("FDIC-R"), as well as Defendant Bank Officers Jones, Miller, Dodd, and Garrison. In response, the FDIC-R counterclaimed against Plaintiffs. Plaintiffs assert that they have been damaged by incurring attorney's fees, costs, and expenses in defending themselves against the FDIC-R's claims. In addition, Plaintiffs state that their credit histories ...

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