Montana Court Affirms Record $52 Million Jury Verdict in Masters Lawsuit against Comerica Bank; Rejects $10 Million Statutory Cap on Punitive Damages; Comerica to Appeal
BUTTE, Mont., April 3, 2014 /PRNewswire/ -- A Silver Bow County District Court has denied Comerica Banks' challenges to the 52 million dollar jury verdict rendered against it in Masters Group International, Inc.'s ("Masters") effort to hold its lender responsible for breaching agreements, misrepresenting its ability to use federal bailout money to help its distressed borrower, and in seizing bank accounts without notice or need. The bank's actions put Masters out of business. Masters, a Butte-based office supply company, brought its claims against Comerica Bank after Masters was sued by a local development entity and was unable to repay a start up loan made to Masters.
In 2008, as Masters was attempting to bring its world headquarters to Butte with the assistance of Comerica Bank, the bank reversed its promise of a long term banking relationship and demanded Masters seek a new lender. Comerica forced Masters and persons who had guaranteed the Comerica loan into a series of short term agreements in which the bank bettered its collateral position by requiring cash deposits and stock under the bank's exclusive control.
Even though Comerica had agreed to forbear from any attempt to forcibly collect the loan while Masters worked with a new bank to take over the loan, and had an expression of interest from Wells Fargo Bank to not only take over the loan but to increase the amount, a jury agreed that Comerica breached its agreements with Masters when it seized the accounts without notice and had not been truthful with Masters about Comerica's ability to use any of the $2.25 billion in bailout money to help Masters and other current customers. The bank's actions eventually led to Masters' demise.
In denying Comerica's challenges to the verdict, the district judge who heard the case agreed with the jury's findings and also ruled that not only was Comerica liable for the litany of charges of misconduct against it, but he also found the lesser of 3% of net worth or $10 million dollar statutory cap for punitive damages under Montana law to be unconstitutional. The court said, "This case is an example of the capricious nature of the cap. While 3% or $10 million may be an effective deterrent to similar conduct to some defendants, to a party like Comerica with its substantial wealth, $10.5 million is a minuscule amount and likely provides minimal deterrent or none at all."
In January of this year, after a 10-day trial, a Montana jury unanimously found Comerica Bank liable for the claims against it including breach of contract, breach of implied covenant, constructive fraud, deceit, wrongful offset, prospective economic loss and punitive damages. The judge upheld those findings. The court also found substantial evidence that Comerica committed actual malice and/or actual fraud and noted that Comerica employees celebrated their conduct after it was done and "backfilled" facts to support its side of the story in preparation for litigation.
Masters' Co-counsel, Tim Strauch of Missoula, Montana said, "This is a day when a court said, we're not just paying lip service to the constitutional right of a jury trial, we are backing it by deeds and real conviction." The Butte jury's verdict stands alone in the U.S. against a top-20 recipient of federal bailout (TARP) money.
Masters' other Co-counsel, Mick Taleff of Great Falls, Montana remarked that based on the arguments made to challenge the verdict, Comerica still does not recognize the reprehensibility of its conduct or accept responsibility for its actions. He noted the bank filed a notice of appeal to the Montana Supreme Court before the district court had even ruled on its challenges to the verdict. Taleff expressed confidence in the verdict and Masters prevailing in the appeal. "The district court record is strong and the evidence substantial in support of the verdicts. The jury heard both sides and clearly rejected Comerica's position. We are confident the Supreme Court will as well."
SOURCE Masters Group International, Inc.