Federal Deposit Insurance v. Stahl

                    United States Court of Appeals,

                            Eleventh Circuit.

                              No. 94-4684.

 FEDERAL DEPOSIT INSURANCE CORPORATION, as manager of the Federal
Savings and Loan Insurance Corporation Resolution Fund, Plaintiff-
Appellant, Cross-Appellee,

                                   v.

   Angelique O. STAHL, Ralph F. Cheplak, Defendants-Appellees,
Cross-Appellants,

    Ross P. Beckerman, W. George Allen, Defendants-Appellees,

   Ira C. Hatch, Jr., Allen E. Baer, Ronald M. Bergeron, Sr.,
Defendants.

                              Aug. 2, 1996.

Appeals from the United States District Court for the Southern
District of Florida. (No. 91-7122-CIV), Wilkie D. Ferguson, Jr.,
Judge.

Before HATCHETT and BLACK, Circuit Judges, and CLARK, Senior
Circuit Judge.

     BLACK, Circuit Judge:

     The Federal Deposit Insurance Corporation (FDIC) filed this

action against former officers and directors of Broward Federal

Savings and Loan Association (Broward), alleging, inter alia,

negligence in relation to seven target loans approved by the

directors.     Defendants filed a motion to dismiss, and also moved

for summary judgment contending that the FDIC's claims with respect

to all seven, or alternatively, two, of the target loans were

time-barred.     These motions were denied.

     The case proceeded to trial against four directors: Angelique
Stahl,   Ralph   Cheplak,   Ross   Beckerman    and   W.   George   Allen.1

     1
      On the eve of trial, the FDIC settled with three of the
original seven defendants: Ira Hatch, Allen Baer and Ronald
Following trial, the jury entered a general verdict in the amount

of $18.6 million in favor of the FDIC against Stahl and Cheplak,

and   returned      no    liability         verdicts   for    Beckerman    and   Allen.

Thereafter, the district court entered an order setting aside the

jury verdict as to Stahl and Cheplak and, in the alternative,

conditionally granting them a new trial on the grounds that the

FDIC presented incompetent evidence and made a prejudicial closing

argument at trial.

      The   district       court      subsequently      entered     a   "take-nothing"

judgment in favor of all four directors from which the FDIC now

appeals.2        Stahl and Cheplak cross-appeal on the bases that the

district court both improperly instructed the jury that an ordinary

negligence standard of care governed the actions of the directors,

and erred in denying summary judgment when claims relating to two

of the target loans were time-barred.                        We affirm the district

court's     judgment      as     to   all    claims    except   those     of   the   FDIC

contending that the district court erred in setting aside the jury

verdict     as    to     Stahl    and       Cheplak    and,    in   the   alternative,

conditionally granting them a new trial.                     We reverse the judgment

as to those claims and remand the case for further proceedings.

                                      I. BACKGROUND3

Bergeron.
      2
      In this opinion, we address the FDIC's claims only as to
Stahl and Cheplak. The FDIC's challenge to the district court's
judgment in favor of Allen and Beckerman is without merit and
does not require discussion. See 11th Cir.R. 36-1.
      3
      Since the district court set aside the jury verdict and
entered judgment as a matter of law in favor of the directors, we
have presented the evidence and construed all inferences in a
light most favorable to the FDIC. See Miles v. Tennessee River
     Broward was a savings and loan association which opened in

1978.   Stahl, who had no banking experience, served as chairman of

the board, and Allen and Beckerman served as directors.                         Later,

Broward promoted Stahl to the position of chief executive officer

and hired Cheplak, who had limited lending experience, as its

president. Stahl and Cheplak approved, and the board ratified, the

seven loans at issue in this case.

     Federal       regulators     warned    Broward    in   1983    of    the     risks

associated with the rapid growth strategy it had adopted.                       Broward

was paying high interest rates in order to attract depositors, but

such growth placed pressure on the institution to reinvest these

funds in high-yield assets such as commercial real estate loans in

order to cover costs.            In rapidly expanding its real estate loan

portfolio, Broward made a large volume of risky loans.

     The Federal Home Loan Bank Board (FHLBB), the federal agency

which regulated thrifts, periodically reviewed Broward's financial

condition to ensure compliance with FHLBB regulations and policies.

Roslyn Hess, an examiner with over 13 years' experience, and Debra

Paradice,     an    agent   with     19    years'   experience,         began    their

regulatory oversight of Broward in 1983.               Based on 1982 and 1983

reviews of a number of Broward's major loans, federal regulators

found     deficiencies      in    its     loan   underwriting      and    appraisal

procedures.

     In 1984, these deficiencies worsened.                   Consequently, the

federal     regulators      required       Broward's    board      to    execute      a
Supervisory Agreement promising to take action to eliminate the


Pulp and Paper Co., 862 F.2d 1525, 1528 (11th Cir.1989).
weaknesses.      The    Supervisory    Agreement   provided   that   before

extending     credit,   Broward   would    take    certain    precautions.4
Thereafter, the Broward board adopted new lending guidelines and

policies as set out in the Supervisory Agreement.

     In addition to the regulatory problems, internal audit reports

also revealed deficiencies in Broward's lending practices.             Even

Beckerman acknowledged these underwriting deficiencies in a letter

to Stahl dated July 1985.         In October 1985, MCS Associates, a

thrift consulting firm, reviewed the lending policies Broward

adopted with the execution of the Supervisory Agreement. MCS noted

that Broward's policies would be successful if implemented, but did

not review Broward's actual lending practices.                The managing

director of MCS, D. James Croft, discovered that Broward had made

several loans after the Supervisory Agreement had been executed but

before the new policies were actually implemented which violated

both the agreement and the new loan procedures.           Croft concluded

Broward was not prepared to make those loans at that time, and

exposed itself to a high degree of risk by doing so.

     Six of the loans at issue in this case were made after the

Supervisory Agreement was executed.       Hess reviewed these loans and

found    numerous   violations    of    prudent    loan   practices,   the




     4
      These included obtaining: (1) financial reports
demonstrating an ability of the borrower/guarantor to repay the
loan; (2) equity of the borrower in security property; (3)
specifications for real estate development projects; (4)
feasibility studies showing the project securing the loan could
generate enough capital to repay the loan; and (5) an appraisal
meeting the requirements of R 41b, an FHLBB guideline for loans
secured by real estate.
Supervisory Agreement and Broward's new lending policies.5                    Hess

did not review one of the seven loans in this lawsuit, but as

approved it was not expected to produce positive cash flow for five

years and required a $1.6 million interest/loss reserve.                        On

November 15, 1985, the FHLBB concluded that Broward was insolvent,

in part due to loan losses. Broward lost approximately $34 million

on the seven loans which the FDIC sought to recover in this

action.6

                               II. ISSUES PRESENTED

     There     are     four    issues    raised    by    the   parties   in   this

appeal/cross-appeal which merit our consideration: (1) whether the

district court erred in determining that an ordinary care standard

governed the actions of the directors;              (2) whether the district

court     erred   in     entering       judgment   for     Stahl   and    Cheplak

notwithstanding the verdict;            (3) whether the district court erred

in conditionally granting Stahl and Cheplak a new trial on the

bases of the FDIC's use of incompetent evidence and prejudicial

closing argument;       and (4) whether Stahl and Cheplak are entitled

to a new trial on the ground that claims relating to two of the

target loans were barred by the statute of limitations.

                              III. STANDARD OF REVIEW

         In reviewing a judgment as a matter of law, we apply the same

     5
      These deficiencies included, inter alia, no proof of
borrower equity, financial statements demonstrating inability to
repay loans, and a lack of feasibility studies.
     6
      Pursuant to an assistance agreement, the Federal Savings
and Loan Insurance Corporation (FSLIC) reimbursed the institution
that acquired Broward for losses on the seven loans. The FDIC
succeeded to the FSLIC's rights and obligations under this
agreement.
standard as the district court in deciding the motion.      Miles v.

Tennessee River Pulp and Paper Co., 862 F.2d 1525, 1528 (11th

Cir.1989).     A judgment notwithstanding the verdict (JNOV) should

only be entered if, in viewing all the evidence and construing all

inferences in a light most favorable to the nonmoving party, the

court finds no reasonable juror could have reached the verdict

returned. Id.;     Rosenfield v. Wellington Leisure Prods., Inc.,
                                                                827

F.2d 1493, 1494-95 (11th Cir.1987) (quoting Reynolds v. CLP Corp.,

812 F.2d 671, 674 (11th Cir.1987)).

         A ruling on a motion for a new trial is generally reviewable

for abuse of discretion.      Rosenfield, 827 F.2d at 1498 (citing

Conway v. Chemical Leaman Tank Lines, Inc., 610 F.2d 360, 362 (5th

Cir.1980)).     When a new trial is granted, however, we apply a more

stringent application of the same standard.      Jackson v. Pleasant

Grove Health Care Ctr., 980 F.2d 692, 695 (11th Cir.1993) (citing

Hewitt v. B.F. Goodrich Co., 732 F.2d 1554, 1556 (11th Cir.1984)).

                            IV. DISCUSSION

A. Standard of care7

     The threshold question in this case is what standard of care

governed the actions of the directors.         The FDIC argues the

district court properly instructed the jury that the applicable


     7
      In ruling on Defendants' motion to dismiss, the district
court determined that a simple negligence standard governed the
directors' actions in this case. In its order setting aside the
jury verdict, the court considered this earlier determination to
be "the law of the case." This is incorrect. Since the denial
of Defendants' motion to dismiss was not a final judgment, the
decision regarding the standard of care was not the law of the
case. See Vintilla v. United States, 931 F.2d 1444, 1447 (11th
Cir.1991). Thus, we must determine whether simple negligence is
in fact the appropriate standard of care to apply in this case.
standard of care under Florida law at the time of the alleged

misconduct was ordinary or reasonable care, but mischaracterized

the requirements of the due care standard in setting aside the jury

verdict.    Stahl and Cheplak counter that only federal law should

have dictated the standard of liability for the directors, which,

they argue, would have imposed a gross negligence burden of proof

upon the FDIC.     On this basis, Stahl and Cheplak contend a new

trial is warranted.     Stahl and Cheplak argue in the alternative

that even if it was proper to utilize Florida law establishing a

simple    negligence   standard   of    liability,     Florida's    business

judgment rule (BJR) still elevates the standard to the level of

gross negligence. In this scenario, Stahl and Cheplak maintain the

FDIC failed to overcome the protection afforded to directors under

the BJR, and contend the district court's judgment as a matter of

law should therefore be affirmed.        In our analysis, we will first

determine whether federal or state law governs the standard of care

for director liability.     Then we will examine what interplay the

BJR has, if any, in relation to the appropriate standard.

         Stahl and Cheplak contend the FDIC's claims against the

directors in this case are governed by federal law dictating a

gross negligence standard of director liability. Their argument is

best viewed in a streamlined, step-by-step fashion.            First, Stahl

and Cheplak note that Broward was a federally chartered, regulated,

and insured savings and loan association.            Second, they contend
                                             8
that the Home Owners' Loan Act (HOLA)            dictates that all federal

banking    law   preempts   state      law   with    respect   to    federal

     8
      12 U.S.C. § 1461, et seq. (1994).
institutions.       Finally, they argue § 212(k) of the Financial

Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA),

12 U.S.C. § 1821(k) (1994), established a gross negligence standard

governing   the     actions   of   directors.      Combining     these   three

elements,   Stahl    and    Cheplak   reason    that   federal   banking    law

preempts state law under HOLA, and therefore a gross negligence

standard should be used to establish the FDIC's burden of proof

pursuant to § 1821(k).9

     Stahl and Cheplak cite Fidelity Fed. Sav. & Loan Ass'n v. de

la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982), in

support of their argument that pursuant to HOLA, only federal law

governs the standard of care for the directors in this case.               In de

la Cuesta, the Supreme Court held that a state statute directly in

conflict with an FHLBB regulation was preempted, finding the

federal   regulation       "was   meant   to   pre-empt   conflicting    state

limitations...."     458 U.S. at 159, 102 S.Ct. at 3025.         Against this

background, we examine § 1821(k), which states in relevant part:

          A director or officer of an insured depository
     institution may be held personally liable ... for gross
     negligence ... as such terms are defined and determined under
     applicable State law. Nothing in this paragraph shall impair
     or affect any right of the Corporation under other applicable
     law.


     9
      The district court found that the alleged acts of
negligence in this case occurred between October 1984 and January
1986. FIRREA was not enacted until 1989. Pub.L. No. 101-73, §
1, 103 Stat. 183 (1989). Thus, Stahl and Cheplak are really
asking this Court to retroactively apply a standard of gross
negligence under § 1821(k) to preempt Florida law in the area of
director liability. We decline to resolve this issue, finding
that even if retroactive application of FIRREA is appropriate,
the question still remains as to whether the FDIC may bring a
claim under Florida law utilizing a standard of simple
negligence.
12 U.S.C. § 1821(k).

     While § 1821(k) provides that a director may be held liable

for gross negligence, the FDIC contends that Congress enacted the

last sentence of the statute to permit courts to decide whether to

apply state law to federally chartered financial institutions.   We

reach the same conclusion.    That is, we find that the "saving

language" in the last sentence of the statute enables claims under

"other applicable law," i.e., state law for simple negligence, to

survive the enactment of FIRREA.   Indeed, the Supreme Court in de

la Cuesta specifically declined to hold that federal regulations

would preempt all state laws, de la Cuesta, 458 U.S. at 159 n. 14,

102 S.Ct. at 3025 n. 14, and Stahl and Cheplak themselves concede

courts have not found that federal law occupies the entire field in

the regulation of federal thrifts under HOLA.10

     The Supreme Court has clearly held that because of federalism

concerns, greater evidence of congressional intent is required to

preempt state law than federal common law.    City of Milwaukee v.

Illinois & Michigan, 451 U.S. 304, 316, 101 S.Ct. 1784, 1792, 68

L.Ed.2d 114 (1981).    While Stahl and Cheplak cite cases holding

that the gross negligence standard established in § 1821(k) should

     10
      Independent of HOLA preemption, Stahl and Cheplak put
forth two alternative bases under which this Court could find
that federal law alone governs the liability of corporate
directors. First, in RTC v. Chapman, 29 F.3d 1120 (7th
Cir.1994), the Seventh Circuit relied upon a choice of law
principle known as the internal affairs doctrine in finding that
national law must govern the internal affairs of a
federally-chartered institution in order to achieve uniformity.
29 F.3d at 1122-23. Second, Stahl and Cheplak argue that a
minority of courts have held that § 1821(k) preempts state law
claims not just for federal institutions, but for state
institutions as well. These claims are without merit and do not
warrant discussion.
be used to displace federal common law, see RTC v. Frates, 52 F.3d

295, 296 (10th Cir.1995);         RTC v. Miramon, 22 F.3d 1357, 1360 (5th

Cir.1994);       FDIC v. Bates, 42 F.3d 369, 370 (6th Cir.1994);           RTC v.

Gallagher, 10 F.3d 416, 425 (7th Cir.1993), the majority of our

sister circuits have either specifically declined to reach the

question of whether § 1821(k) preempts state common law, see, e.g.,

Miramon, 22 F.3d at 1359 n. 2;          Gallagher, 10 F.3d at 424, or have

held it does not.          See FDIC v. McSweeney, 976 F.2d 532, 537 (9th

Cir.1992), cert. denied, 508 U.S. 950, 113 S.Ct. 2440, 124 L.Ed.2d

658    (1993).11        Frates   is   particularly   illustrative     of    this

distinction.       In     Frates, the Tenth Circuit held that § 1821(k)

supersedes federal common law predicating liability upon simple

negligence, while specifically reaffirming its holding in FDIC v.

Canfield, 967 F.2d 443, 448 (10th Cir.) (en banc), cert. dismissed,

506 U.S. 993, 113 S.Ct. 516, 121 L.Ed.2d 527 (1992), in which it

concluded § 1821(k) does not preempt state law simple negligence

claims against directors.         Frates, 52 F.3d at 296-97.

       More specifically, the Canfield and McSweeney courts found

that § 1821(k) does not preempt state law establishing a lesser

standard of fault than gross negligence.             Canfield, 967 F.2d at

447;        McSweeney, 976 F.2d at 539.      The legislative history of §

1821(k) supports this theory, stating that Congress intended §

1821(k) to preempt the applicability of state insulating statutes

which       effectively    shielded   corporate   management   from   personal

       11
      See also RTC v. Cityfed Fin. Corp., 57 F.3d 1231, 1249 (3d
Cir.1995) (holding § 1821(k) does not preempt either state or
federal common law), cert. granted, --- U.S. ----, 116 S.Ct.
1415, 134 L.Ed.2d 541 and cert. dismissed, --- U.S. ----, 116
S.Ct. 1587, 134 L.Ed.2d 684 (1996).
liability for grossly negligent actions.                135 Cong.Rec. S4278-79

(daily ed. Apr. 19, 1989) (statement of Senator Riegle).               Further,

while the Supreme Court has determined that § 1821(k) permits

claims    against   directors      for   gross   negligence     "regardless   of

whether state law would require greater culpability," O'Melveny &

Myers v. FDIC, --- U.S. ----, ----, 114 S.Ct. 2048, 2054, 129

L.Ed.2d 67 (1994) (emphasis supplied), it has not found Congress

also   intended     to   preempt   state    laws   imposing    liability   upon

directors for lesser culpability, i.e., simple negligence.                    If

Congress had intended to establish a uniform gross negligence

standard of liability in § 1821(k), it certainly could have done so

more clearly.       Based upon the above reasoning, we are satisfied

that § 1821(k) does not preempt state laws with lesser liability

standards than gross negligence.

        We now must look to the state law that controlled at the time

the negligent acts were allegedly committed in order to determine

the standard of liability applicable to the directors in this case.

The    district   court    instructed      the   jury   that   the   appropriate

standard of care was ordinary negligence, and that due care was an

element of Florida's BJR.           For the reasons detailed below, we

agree.

       The alleged acts of negligence occurred between October 1984

and January 1986. Prior to 1987, the Florida standard of liability

for corporate directors was governed by Fla.Stat. § 607.111(4)

(1987).    As set forth in         International Ins. Co. v. Johns, 685

F.Supp. 1230 (S.D.Fla.1988), aff'd, 874 F.2d 1447 (11th Cir.1989),

this standard provided that directors were to perform their duties
"in good faith ... in a manner ... reasonably believe[d] to be in

the best interests of the corporation, and         with such care as an

ordinarily prudent person in a like position would use under

similar circumstances."      685 F.Supp. at 1237 (emphasis supplied)

(quoting Fla.Stat. § 607.111(4)).      We find Fla.Stat. § 607.111(4),

in effect at the time the alleged negligent acts were committed in

this case, clearly established an ordinary negligence standard of

director liability.12

     Stahl and Cheplak argue that even if a simple negligence

standard of liability prevailed in Florida under Fla.Stat. §

607.111(4) prior to 1987, Florida's BJR elevates such a standard to

the level of gross negligence.        The BJR has been defined to mean

the following:

     [T]he law will not hold directors liable for honest errors,
     for mistakes of judgment, when they act without corrupt motive
     and in good faith ... [I]n order to come within the ambit of
     the rule, directors must be diligent and careful in performing
     the duties they have undertaken;          they must not act
     fraudulently, illegally, or oppressively, or in bad faith.

Id. at 1238 (emphasis supplied) (quoting 3A Fletcher, Cyclopedia

Corporations, § 1039, at 45 (perm. ed. 1986)).

     In support of their argument, Stahl and Cheplak cite FDIC v.

Mintz,    816   F.Supp.   1541   (S.D.Fla.1993),   in   which   the   court

interpreted the BJR as follows:


     12
      The Florida legislature passed Fla.Stat. § 607.1645
(1987), presently codified at Fla.Stat. §§ 607.0830, 607.0831
(1989), to afford corporate officers and directors greater
protection from liability; however, these heightened liability
standards apply only to causes of action accruing on or after
July 1, 1987. See Johns, 685 F.Supp. at 1238 n. 4 (citing Act of
June 30, 1987, ch. 245, § 13, repealed by Act of 1989, ch. 154, §
166; Act of 1990, ch. 179, § 189). Thus, such legislation is
inapplicable to the case at bar.
        Although directors must act with diligence and due care
        (seemingly setting out a simple negligence standard), they are
        only liable when they "act fraudulently, illegally, or
        oppressively, or in bad faith'.... These terms indicate that
        liability will attach only to acts which constitute gross
        negligence and intentional conduct. Because courts will not
        substitute their judgment in place of a corporation's
        directors, the simple negligence of a director cannot be
        reviewed....

             The result of the application of the [BJR] in Florida is
        that the standard of liability for corporate directors is
        "gross negligence.'

816 F.Supp. at 1546 (citations omitted).

        What   the   Mintz   court   has   done       is   completely   ignore   the

threshold requirement of the exercise of ordinary care under

Fla.Stat. § 607.111(4) necessary "to come within the ambit of the

[BJR]," see Johns, 685 F.Supp. at 1238 (quoting 3A Fletcher,

Cyclopedia Corporations, § 1039, at 45 (perm. ed. 1986)), under the

premise that courts must not "substitute their judgment" for that

of directors.        Mintz, 816 F.Supp. at 1546.           We are not persuaded by

the decision in Mintz.

     "The [BJR] is a policy of judicial restraint born of the

recognition that directors are, in most cases, more qualified to

make business decisions than are judges."                  International Ins. Co.

v. Johns, 874 F.2d 1447, 1458 n. 20 (11th Cir.1989).                       In this

light,    the   BJR    may   be   viewed   as     a    method   of   preventing    a

factfinder, in hindsight, from second-guessing the decisions of

directors. For directors to be entitled to the cloak of protection

of the BJR on the merits of their judgments under pre-1987 Florida

law, however, they still must have exercised due care in making

them.     See Schein v. Caesar's World, Inc., 491 F.2d 17, 18 (5th

Cir.) (finding that if directors exercise due care, they then
"incur no liability ... for issues ... they resolve through the

mere exercise of their business judgment"), cert. denied, 419 U.S.

838, 95 S.Ct. 67, 42 L.Ed.2d 65 (1974);13 AmeriFirst Bank v. Bomar,
757 F.Supp. 1365, 1376 (S.D.Fla.1991) (same).                   As articulated

clearly     by    the   court   in   Casey    v.   Woodruff,   49   N.Y.S.2d    625

(N.Y.Sup.Ct.1944):

       The question is frequently asked, how does the operation of
       the so-called "business judgment rule' tie in with the concept
       of negligence? There is no conflict between the two. When
       courts say that they will not interfere in matters of business
       judgment,   it   is   presupposed   that   judgment—reasonable
       diligence—has in fact been exercised. A durector [sic] cannot
       close his eyes to what is going on about him in the conduct of
       the business of the corporation and have it said that he is
       exercising business judgment. Courts have properly decided to
       give directors a wide latitude in the management of the
       affairs of a corporation provided always that judgment, and
       that means an honest, unbiased judgment, is reasonable [sic]
       exercised by them.

49 N.Y.S.2d at 643.

       In accordance with the foregoing rationale, we conclude the

district court properly instructed the jury that due care was an

element of the BJR. That is, under pre-1987 Florida law, directors

must have acted with ordinary care for the BJR to apply.                        See

Johns, 874 F.2d at 1461 & n. 27 (recognizing Florida's pre-1987

ordinary care statute as the basis for applying the BJR).                 If due

care    was      in   fact   exercised   as    required    under    Fla.Stat.    §

607.111(4), directors are protected by the BJR, no matter how poor

their business judgment, unless they acted fraudulently, illegally,

oppressively, or in bad faith.           See id.     Said differently, so long


       13
      In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th
Cir.1981) (en banc), this Court adopted as binding precedent all
decisions of the former Fifth Circuit handed down prior to the
close of business on September 30, 1981.
as due care was exercised, the BJR protects a "good director" (one

who did not act fraudulently, illegally, oppressively, or in bad

faith) who made an honest error or mistake in judgment, but not a

"bad        director"      (one        who     acted     fraudulently,        illegally,

oppressively, or in bad faith) who made a bad decision.

       Consistent with the above, we hold the application of the BJR

in   Florida        does   not    require       that   the     FDIC    establish        gross

negligence to sustain its burden in this case.                        While some courts

such as Mintz have held the BJR elevates the simple negligence

standard under Fla.Stat. § 607.111(4) to one of gross negligence,

Mintz, 816 F.Supp. at 1546;                    see also In re Southeast Banking

Corp., 827 F.Supp. 742, 747 (S.D.Fla.1993) (holding that pre-1987

Florida law establishes a gross negligence standard), rev'd on
                                                                                   14
other grounds, 69 F.3d 1539 (11th Cir.1995), we disagree.                                 See

FDIC v. Gonzalez-Gorrondona, 833 F.Supp. 1545, 1556 (S.D.Fla.1993)

("[P]rior to July 1, 1987, the law of Florida imposed liability on

corporate directors and officers for simple negligence");                        FDIC v.

Haddad,       778    F.Supp.      1559,      1567   (S.D.Fla.1991)        ("Defendants'

position that in general there is no cause of action against

corporate directors under Florida law for "simple negligence' is

unfounded.")

       The     court-made        BJR    does    not    change    Florida's     pre-1987

statutory       simple     negligence         standard    to    a     gross   negligence


       14
      Stahl and Cheplak rely on Delaware and District of
Columbia law applying a gross negligence standard under the BJR.
See Aronson v. Lewis, 473 A.2d 805, 812 (Del.1984); Washington
Bancorporation v. Said, 812 F.Supp. 1256, 1269 (D.D.C.1993).
Unlike pre-1987 Florida law, however, neither of these states had
a general statute setting forth an ordinary care standard.
standard;     it merely protects directors who exercised reasonable

diligence in the first instance from liability on the merits of

their business judgment, unless they acted fraudulently, illegally,

oppressively,    or    in    bad    faith.        Thus,    based    upon   our   above

conclusion that § 1821(k) does not preempt state law establishing

a lesser standard of fault than gross negligence, we hold the

district court properly determined that the standard of care

governing the actions of the directors in this case was ordinary

negligence.     Only if the directors met this standard were they

entitled to the protection of the BJR.

B. JNOV

      As noted above, the district court properly instructed the

jury in this case that the appropriate standard of care was

ordinary negligence, and that due care was an element of the BJR.

Based upon the evidence presented at trial, the jury concluded

Stahl and Cheplak had failed to exercise due care; therefore, they

were not entitled to the protection of the BJR on the merits of

their judgment.

     In setting aside the jury verdict, however, the district court

improperly characterized the standard of care and then reweighed

the evidence to satisfy the standard in an attempt to bring the

directors within the ambit of the BJR. Curiously pointing out that

neither the Supervisory Agreement nor an FHLBB guideline, R 41b,

"established    a     tort   standard        of   care,"     the    district     court

mischaracterized the due care standard apparently based upon its

conclusion    that    this    was    "not    a    case    where    there   was   total

indifference to standard underwriting practices."                     While it very
well   may   be   true   that   the   directors        did   not   exhibit    "total

indifference" in the exercise of their business judgment, they need

not have done so to be found liable under the ordinary negligence

standard of care applicable in this case.

       Only if the facts and inferences point so strongly and

overwhelmingly in favor of Defendants that this Court believes that

reasonable persons could not arrive at a contrary conclusion may we

find the district court properly set aside the jury verdict.                      See

Reynolds v. CLP Corp., 812 F.2d 671, 674 (11th Cir.1987).                     On the

other hand, if there is "evidence of such quality and weight that

reasonable     and   fair-minded      men   in   the    exercise      of    impartial

judgment might reach different conclusions," id. (quoting Michigan

Abrasive Co., Inc. v. Poole, 805 F.2d 1001, 1004 (11th Cir.1986)),

this   Court   should    find   the    district    court      erred    in   entering

judgment as a matter of law in favor of Defendants.

       A court is not free to reweigh the evidence and substitute

its judgment for that of the jury.                See id. at 674-75.           This,

however, is precisely what the district court did in this case.

After mischaracterizing the standard, the district court concluded

the standard was satisfied based upon its own view of the evidence.

Specifically, the district court was persuaded by the testimony of

a regulatory attorney and Croft, who both stated Broward had good

policies, and Cheplak, who the court found presented a "very

credible defense."        Finally, after determining that Stahl and

Cheplak satisfied the appropriate standard of care, the district

court found they were entitled to the benefits of the BJR and set

aside the jury verdict.
     The jury in this case apparently just did not find this

testimony    of    the   regulatory     attorney,      Croft   and   Cheplak   as

convincing as did the district court, and there appears to be ample

support in the record to justify such a conclusion.                  While Croft

characterized the management team as above average and the new

lending     policies     well   done,    he    still    criticized     Broward's

implementation of the policies. The regulatory attorney never even

reviewed    Broward's     underwriting,       and   Cheplak's   testimony,     of

course, could be viewed by a jury as self-serving.

     As the district court itself recognized, this is "a case where

persons, on different sides of a dispute, disagreed as to whether

Broward[ ]'s underwriting practices were adequate...."                 But, "the

determination of negligence is ordinarily within the province of

the trier of fact," Decker v. Gibson Prods. Co. of Albany, Inc.,

679 F.2d 212, 216 (11th Cir.1982), and based upon the evidence

presented at trial, we are not convinced that no reasonable juror

could find Stahl and Cheplak liable for failure to exercise due

care.      In yearly examination reports from 1982 through 1984,

regulators criticized Broward's commercial loan underwriting and

appraisal procedures, and ultimately required Broward to sign the

Supervisory Agreement obligating it to exercise prudent lending

standards.        Hess, an examiner with over 13 years' experience,

testified that in her examination of six of the target loans at

issue in this case, she found numerous underwriting deficiencies

which violated industry standards, the Supervisory Agreement, FHLBB

appraisal standards (R 41b), and Broward's new lending policies.

If believed, this evidence could create an inference that the
directors    failed   to   exercise   due    care   in   accelerating    loan

origination, approving the subject loans, and complying with the

Supervisory Agreement and R 41b.

       Viewing the facts in a light most favorable to the FDIC, we

find    substantial   evidence   of   such     quality    and   weight   that

fair-minded jurors exercising impartial judgment could reasonably

have concluded Stahl and Cheplak failed to exercise due care with

respect to the seven target loans.          The basis for entering a JNOV

should not be the judge's determination of which party has the

better case.    Reynolds, 812 F.2d at 674.       We conclude the district

court erred in entering judgment as a matter of law in favor of

Stahl and Cheplak, and reinstate the jury verdict in favor of the

FDIC.

C. New trial

1. Evidence and closing argument.

       In the alternative, the district court conditionally granted

Stahl and Cheplak a new trial on the grounds that they were

prejudiced by the FDIC's summation, and the erroneous admission of

incompetent evidence. There are two portions of the FDIC's closing

argument which the district court maintains "had the effect of

impairing the jury's dispassionate consideration of the case, and

caused unfair prejudice to the defendants."              The first relevant

portion is as follows:

            What you have here is the directors were negligent and
       they breached their fiduciary obligation to the bank.... Send
       the right message to the directors around the country. They
       have to be accountable for their actions.

            If they are not held accountable for their conduct we'll
       never get out of this mess, this banking mess that the country
       has found itself in.
Trial Transcript at R23-168-24;        169-1 (emphasis supplied).

     The district court cited Vineyard v. County of Murray, Ga.,

990 F.2d 1207, 1213 (11th Cir.), cert. denied, 510 U.S. 1024, 114

S.Ct. 636, 126 L.Ed.2d 594 (1993), as an example of a case in which

a similar "send the message" closing argument was made.                      In

Vineyard, this Court analyzed whether, in light of "the entire

argument, the context of the remarks, the objection raised, and the

curative instruction," the statement at issue was "such as to

impair gravely the calm and dispassionate consideration of the case

by the jury."     990 F.2d at 1213 (quoting           Allstate Ins. Co. v.

James, 845 F.2d 315, 318 (11th Cir.1988)).             "[R]eluctant to set

aside a jury verdict because of an argument made by counsel during

closing arguments," id. at 1214, this Court in Vineyard affirmed

the district court's denial of the motion for mistrial.

     The district court in this case maintains the Vineyard court

decided the case the way it did only because it was satisfied the

curative    instruction    sufficiently      eliminated       any   resulting

prejudice from the remark.       Here, by contrast, Allen was the only

defendant   to   even   object   to   the   remark,    none   of    the   other

defendants requested a curative instruction, and the district court

admits it did not give one, "certain that a curative instruction

would have been ineffective."         While a curative instruction does

not always remedy the harm of an improper closing argument, see

McWhorter v. City of Birmingham, 906 F.2d 674, 678 (11th Cir.1990),

it is curious how the district court could be so certain that one

would have been ineffective here, given that this Court has found

"the influence of the trial judge "is necessarily and properly of
great weight and his lightest word or intimation is received with

deference, and may prove controlling.' " Allstate, 845 F.2d at 319

(quoting Quercia v. United States, 289 U.S. 466, 470, 53 S.Ct. 698,

699, 77 L.Ed. 1321 (1933)).

     In light of the entire summation, the context of the remarks,

the lack of objections and the district court's decision not to

give a curative instruction, we conclude the "send the message"

remark did not so unfairly prejudice Stahl and Cheplak as to

warrant a new trial.

     The second portion of the FDIC's summation which the district

court maintains unfairly prejudiced Defendants is as follows:

          The only way we can insure that our depository
     institution[s] will be responsibly run is if we insist that
     the directors conduct themselves reasonably and discharge
     their duties diligently.

          To do otherwise will invite disaster not only for the
     banking system but for the insurance fund and ultimately the
     taxpayer.

Trial Transcript at R23-169-16 (emphasis supplied).

     The district court found the FDIC's "taxpayer" reference

prejudicial to Stahl and Cheplak on the grounds that it asked

jurors to identify with the FDIC in the potential adverse effect of

the decision, or implied the jurors had a financial stake in the

outcome of the case.   The court cited Allstate as an example of a

case in which this Court reversed an order denying a motion for a

new trial on the basis of a closing argument.    In Allstate, the

insurance company argued that the insured had caused or procured a

fire to collect insurance proceeds, and stated in closing that the

jurors were the "somebody" who could do something to prevent the

higher insurance premiums which typically result from such cases.
Allstate, 845 F.2d at 319.            Allstate further stated in summation

that the jurors should treat the case "with all the attendant

personal emotional responses." Id. This Court concluded that such

a closing argument implied a "basis for the verdict other than the

evidence presented," impairing the jury's calm and dispassionate

consideration of the case.         Id.

     In examining the summation as a whole and the context of the

remarks,   see    Vineyard,     990    F.2d   at   1213,   we   find   that    the

statements made by the FDIC's counsel in closing did not unfairly

prejudice Stahl and Cheplak.           Further, here again, Allen was the

only defendant to object to the "taxpayer" remark, none of the

other defendants requested a curative instruction, and the district

court did not give one.        In light of the foregoing, we conclude the

FDIC's "taxpayer" reference was not so prejudicial to Defendants as

to warrant a new trial.

     As its final ground for ordering a new trial, the district

court contends it erroneously admitted into evidence a transcript

of a telephone conversation between Cheplak and employees of Drexel

Burnham    in    which   the   Drexel     employees    criticized      Broward's

underwriting practices.          The transcript had been admitted into

evidence pursuant to a pretrial stipulation in which the parties

agreed that all exhibits identified at deposition could be used at

trial.     The transcript was used at trial by the FDIC both to

impeach Cheplak and in summation.

     Only when the jury requested to see the transcript during its

deliberations     did    the   district    court   closely      examine   it   and

determine the document to be incompetent on four grounds:                      (1)
Defendants had not seen the transcript, (2) its authenticity had

not been demonstrated, (3) recording of the conversation had not

been authorized, and (4) the admission of the transcript violated

the hearsay rule.     The district court instructed the jury to

disregard the requested document, but states in its Order that it

doubts the instruction had any effect given the return of verdict

shortly thereafter.

      As to the first two grounds of incompetency, we find Stahl

and Cheplak were on notice of the transcript's existence and waived

any authenticity claims by agreeing to the pretrial stipulation in

the first instance.   This Court has affirmed the binding nature of

pretrial stipulations which have been entered voluntarily and

submitted to the court.   Busby v. City of Orlando, 931 F.2d 764,

771 n. 4 (11th Cir.1991).     Stahl and Cheplak counter that this

pretrial stipulation is not binding because the district court

never conducted a final pretrial conference nor approved the

stipulation in a pretrial order; however, pretrial conferences are

not mandatory when, as here, the district court opts to proceed by

calendar call.   S.D.Fla.Local Rules, Rule 16.1(E) (1994).

     The   district   court   effectively    adopted   the   pretrial

stipulation by conducting the trial proceedings consistent with it.

Thus, after permitting the FDIC to rely upon the transcript under

the pretrial stipulation, during trial and summation, we conclude

it was improper for the district court to strike the document after

the case had gone to the jury on the basis of alleged defects the

FDIC no longer had an opportunity to cure.

      As to the third ground of incompetency, that the transcript
was inadmissible because its recordation was not authorized, this

Court has found that under Florida law, all participants need not

consent to the recording of a conversation if such recordation is

done in the ordinary course of business.              See Royal Health Care

Servs., Inc. v. Jefferson-Pilot Life Ins. Co., 924 F.2d 215, 218

(11th    Cir.1991).       Finding     no   evidence   to   suggest   that   the

conversation contained in the transcript was anything but a routine

business discussion regarding underwriting deficiencies at Broward,

we conclude consent to the recordation was not necessary.

        Finally, we disagree with Stahl and Cheplak's contention that

the district court properly excluded the transcript on hearsay

grounds.     Finding the transcript was offered to show Cheplak's

knowledge of Broward's underwriting problems, and not to establish

the   intrinsic   truth    of   the   matter   asserted,    we   conclude   the

document was admissible. See United States v. Parry, 649 F.2d 292,

295 (5th Cir. Unit B June 1981).

2. Statute of limitations.

        Stahl and Cheplak also claim they are entitled to a new trial

on the ground that claims relating to two of the target loans were

barred by the statute of limitations.             Pursuant to 12 U.S.C. §

1821(d)(14)(A) & (B) (1994), this Court must determine whether the

claims brought by the FDIC were viable under the applicable statute

of limitations at the time the FDIC acquired the claims.              See RTC

v. Artley, 28 F.3d 1099, 1101 (11th Cir.1994).             Florida Statute §

95.11(3)(a) (1995) provides a four-year statute of limitations for

actions founded on negligence.             Thus, the precise issue here is

whether the claims regarding two of the target loans made before
December 31, 1984, known as the Cypresswood and Mason Center loans,

were still viable at the time the FDIC acquired these claims more

than four years later, on December 31, 1988.

      The district court held the statute of limitations did not

begin to run on the negligence claims until the date the loans went

into default.15   Stahl and Cheplak counter that several courts have

held the statute of limitations begins to run when a negligent loan

is made, not when it fails;      but in support of this proposition,

they rely on authority from jurisdictions other than Florida. See,

e.g., id. at 1102 (recognizing that under Georgia law, statute of

limitations begins to run when loans are made).

       State law governs the viability of the FDIC's claims, see id.

at 1101;     therefore, Stahl and Cheplak's reliance on non-Florida

law is misplaced.      In Florida, "[a] cause of action accrues when

the   last   element   constituting   the   cause   of   action   occurs."

Fla.Stat. § 95.031(1) (1995).     Accordingly, under Florida's "last

element" rule, actions for negligence do not accrue until the

plaintiff suffers some type of damage.      Wildenberg v. Eagle-Picher

Indus., Inc., 645 F.Supp. 29, 30 (S.D.Fla.1986). Moreover, Florida

courts have found that the limitations period does not begin to run


      15
      In doing so, the district court distinguished Corsicana
Nat'l Bank v. Johnson, 251 U.S. 68, 40 S.Ct. 82, 64 L.Ed. 141
(1919). In Corsicana, a bank director loaned money in violation
of the National Bank Act, and the Supreme Court held the cause of
action against the director accrued on the date the loan was
made. 251 U.S. at 86, 40 S.Ct. at 90. The Court reached this
conclusion because it determined the damage was complete at that
time. Id. In the case at hand, however, the district court
reasoned that Defendants' negligence caused cumulative damage to
Broward which did not fully accrue until the loans were in
default or the FDIC knew or should have known of the negligence.
We agree.
until a plaintiff knew or should have known of the injury.     See,

e.g., Lund v. Cook, 354 So.2d 940, 941 (Fla.Dist.Ct.App.), cert.

denied, 360 So.2d 1247 (Fla.1978).   Indeed, in Jones v. Childers,

18 F.3d 899 (11th Cir.1994), we found:

     Florida courts ... have broadly adopted the discovery
     principle, holding in a variety of legal contexts that the
     statute of limitations begins to run when a person has been
     put on notice of his right to a cause of action. Generally
     under Florida law, a party is held to have been put on notice
     when he discovers, or reasonably should have discovered, facts
     alerting him of the existence of his cause of action.

18 F.3d at 906 (footnote omitted).

     Stahl and Cheplak respond that jurisdictions like Florida

which follow the "discovery rule" have nevertheless held a cause of

action accrues when the pertinent loan is made rather than when it

fails.    See, e.g., RTC v. Farmer, 865 F.Supp. 1143 (E.D.Pa.1994).

We find any such decisions contrary to the spirit of Florida's last

element and discovery rules.

     The damage in this case did not occur until the loans at issue

were not repaid, at which point the FDIC should have been alerted

to the existence of a negligence cause of action.         Thus, we

conclude the district court correctly determined that the statute

of limitations did not begin to run on these claims until the loans

failed.    Since Stahl and Cheplak presented no summary judgment

evidence showing when the borrowers defaulted on the loans, the

district court appropriately denied summary judgment.16

     16
      The FDIC also alleged a variety of circumstances that
purported to establish claims for breach of fiduciary duty.
Actions for breach of fiduciary duty, like negligence actions, do
not accrue under Florida's last element rule until the plaintiff
suffers some type of damage. Penthouse North Assoc., Inc. v.
Lombardi, 461 So.2d 1350, 1352 (Fla.1984). Since the FDIC
alleged such a wide range of fiduciary duty claims, however, the
                            V. CONCLUSION

     For the foregoing reasons, we reverse the judgment of the

district court setting aside the jury verdict as to Stahl and

Cheplak and, in the alternative, conditionally granting them a new

trial.     In all other respects, we affirm the district court's

judgment.   Accordingly, we remand the case for further proceedings

consistent with this opinion.

     AFFIRMED in part;    REVERSED in part;   and REMANDED.

     HATCHETT, Circuit Judge, concurring in part and dissenting in
part:

     Although I agree with the law this opinion announces and the

reasoning in the opinion, I respectfully dissent in part.     I would

grant Stahl and Cheplak a new trial because the pre-1987 Florida

law on the standard of care for directors was at best confusing.

This opinion announces a clear standard to govern directors in this

circuit.    I fully concur in this standard;       but, neither the

district court nor the parties had the benefit of this standard at

the trial of this case.    In light of the confusion in our circuit

law and the split in circuits, the district court followed the law

of its district.   Consequently, I would order a new trial for Stahl

and Cheplak with this standard to be applied.



district court was unable to pinpoint when the damages in
relation to each claim occurred, concluding it could have been
"at the time of the default or perhaps at some time before
default." Nevertheless, under Florida's discovery rule, the
statute of limitations did not begin to run on the fiduciary duty
claims until the FDIC knew or should have known of the alleged
breaches. Since Stahl and Cheplak make no reference to the
fiduciary duty claims on appeal, and presented no summary
judgment evidence regarding when the FDIC knew or should have
known of the alleged breaches, we conclude the district court
properly denied summary judgment on this issue as well.