When Can You Apportion Liability For A Group Action?

How do you apportion liability among parties equally responsible for a decision? Short answer: Sometimes, you don't. That was the answer reached by the United States Court of Appeals for the Eleventh Circuit in Federal Deposit Insurance Corporation v. Loudermilk, Case No. 16-17315 (decided July 22, 2019).

The case involved the failed Buckhead Community Bank. After the bank failed, the FDIC, as receiver, sought to hold the directors who served on the loan approval committee liable for allegedly negligently having approved certain risky loans. Eventually, a jury held the committee members liable for approving four loans and awarded the FDIC approximately five million dollars in damages.

The directors contended that liability should have been apportioned among them. By statute, Georgia law requires the apportionment of liability between tortfeasors based on their relative fault. In response to a certified question, the Georgia Supreme Court held that Georgia’s apportionment statute generally applied to claims against corporate directors. Opinion, p. 11. However the Eleventh Circuit concluded that a factual basis did not exist for apportionment in this case.

Any one of the loan committee members could have vetoed any particular loan. Therefore, by voting yes or at least not voting no, all of the committee members were equally responsible for each loan. In light of that fact, the Eleventh Circuit concluded that the jury had no factual basis on which to apportion liability among the loan committee members. The jury could not have held one director more responsible than any other.

This decision raises interesting issues regarding director liability. Any case involving the liability of individuals for a group decision may not receive the benefit of Georgia’s apportionment statue.

The opinion is available at http://media.ca11.uscourts.gov/opinions/pub/files/201617315.pdf

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