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First Bank and Trust v. Treme

Court of Appeals of Louisiana, Fifth Circuit

December 19, 2018





          Panel composed of Judges Susan M. Chehardy, Robert A. Chaisson, and John J. Molaison, Jr.


         Warren G. Treme ("Treme"), a building contractor and former customer of First Bank and Trust ("First Bank"), appeals a judgment dismissing his claims for damages against the bank and its subsidiary, First Bank and Trust Community Development Corporation ("First Bank CDC"), under the anti-tying provisions of the Bank Holding Company Act, 12 U.S.C. § 1972, et seq. (the "anti-tying claims"), with prejudice after a jury trial. Treme asserted these claims in response to the bank's lawsuit against him for sums due on promissory notes. The bank's claims were resolved by a consent judgment and are not at issue in this appeal.

         At the trial of his anti-tying claims, Treme maintained that the bank violated federal law by requiring him to continue providing construction services to First Bank CDC on community development projects as a condition or requirement for obtaining loans from the bank.[1] The jury found the evidence insufficient to prove that a tying arrangement existed. The trial court dismissed Treme's claims with prejudice based on the jury verdict.

         On appeal, Treme seeks to have the judgment of dismissal reversed. He claims the trial court committed reversible error in its instructions to the jury and contends the jury was clearly wrong in finding that no tying arrangement existed. For the reasons that follow, we affirm.


         This lawsuit originated in 2006 with First Bank's collection efforts against Treme by executory process and a petition for a deficiency judgment. Treme answered the petition and filed a reconventional demand against the bank and third party demands against First Bank CDC and Joseph C. Canizaro, the bank's chairman, asserting claims for breach of contract, fraud, fraudulent inducement, illegal tying, extortionate banking transactions, and breach of fiduciary duty. Canizaro was dismissed from the lawsuit by summary judgment, which this Court affirmed in First Bank and Trust v. Treme, 13-168 (La.App. 5 Cir. 10/30/13), 129 So.3d 605.

         In a 2009 judgment on exceptions, the trial court sustained an exception of prescription as to some of Treme's illegal tying claims, which involved bank loans and construction contracts spanning the period 1996-2005. Noting that anti-tying claims must be brought within four years of when the alleged violation occurred, the trial court found that claims arising from contracts executed before July 28, 2002, were prescribed. 12 U.S.C. § 1277.

         In August 2017, First Bank and Treme entered into a consent judgment in the bank's favor for over $2 million in principal, interest and attorney fees owed by Treme on promissory notes. The consent judgment recognized Treme's right to offset this indebtedness by any amount that may be awarded to him on his demands against First Bank and First Bank CDC.

         By the time of the jury trial in 2017, Treme's only remaining claims against First Bank and First Bank CDC were the anti-tying claims. At trial, Treme limited his damage claims to contracts executed after July 28, 2002, in accordance with the trial court's ruling on the prescription exception. However, the court allowed the parties to introduce evidence of contracts executed before that date to provide a complete narrative to the jury about the relationships between the parties, which began with the earlier contracts, and to provide context for references to the earlier contracts in the evidence concerning non-prescribed claims.[2]


         Treme's claims against First Bank and its subsidiary, First Bank CDC, are founded on the following provisions in the Bank Holding Company Act, 12 U.S.C. § 1972(1)(C) and (1)(D):

(1) A bank shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement-
(C) that the customer provide some additional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan, discount, deposit, or trust service; [or]
(D) that the customer provide some additional credit, property, or service to a bank holding company of such bank, or to any other subsidiary of such bank holding company[.]

         The trial court instructed the jury that the plaintiff in an anti-tying claim must prove three things: (1) that the bank extended credit or made a loan to a borrower with a requirement or condition that the borrower obtain or provide some service to the bank or its subsidiary; (2) that the arrangement is considered unusual; and (3) that the bank received a benefit from the arrangement.

         Without objection, the jury was instructed as follows:

A claim made under the Bank Holding Company Act requires proof that the extension of credit was conditioned on the bank's customer obtaining some other product or service from the bank or one of its subsidiaries. The term "conditioned" or "required" means that something was demanded or required as a prerequisite to the loan. What is required here is proof that the bank conveyed its intention to withhold credit unless the borrower fulfilled a prerequisite of purchasing or furnishing some additional product or service other than repayment of the loan. Further, that additional product or service must be shown to be a tying arrangement which actually benefited the bank.

         During its deliberations, the jury used a verdict form with questions concerning each element of proof in the case. By a vote of 9-3, the jury answered "No" to the first question: "Do you find by a preponderance of the evidence that a tying arrangement(s) existed between Warren G. Treme and First Bank and Trust?" The jury did not answer the other questions in the verdict form.


         First Bank CDC, a wholly owned subsidiary of First Bank and Trust, coordinated community development projects involving blighted homes in New Orleans by assisting property owners with hiring architects and contractors and obtaining financing to renovate their property. During the construction phase, funding came primarily from sales of tax credits to investors and from community development block grants. Once the renovations were completed, the owner could obtain a bank loan. The community development work of First Bank CDC was important to its parent company, First Bank, because federal law requires banks to do a certain amount of business in challenging areas.

         Treme, a self-employed general contractor, began working on First Bank CDC projects in the late 1990s and entered into more than a dozen construction contracts involving First Bank CDC projects from 1996 until 2003. Initially, the properties were owned by various nonprofit organizations, with First Bank CDC serving as the developer. First Bank CDC was a for-profit organization and charged development fees on the projects. On three of the later projects, First Bank CDC was the property owner.

         A fixed-price construction contract was signed for each project, meaning that Treme could not get paid any more than the stated contract price unless the property owner approved a change order for an additional payment. Whether serving as owner or as developer, First Bank CDC calculated the price to be paid to the contractor by considering the amount of financing that was available for a particular project, primarily from tax credits and grants, and did not solicit bids from contractors to determine what the proposed work would cost. The contract prices in Treme's contracts ranged from $47, 000 to $1.2 million, depending on the number of properties involved in a project.

         Treme was paid the full contract price on each contract but claimed that he lost money on every project he did for First Bank CDC because the contract price was never enough to cover the construction costs. He testified that all of the money he borrowed from First Bank was used to pay for cost overruns on First Bank CDC projects, but he did not produce any documents to substantiate that cost overruns occurred or the amount of any overruns. He acknowledged that his accounting was not what it should be and said all of his business and personal records were destroyed in Hurricane Katrina.

         On direct examination, Treme identified several loan documents he signed from 2003-2005 and testified:

Q. So as late as March 2005, you were still getting extensions of credit at the bank and you were still working on bank, CDC property?
A. Yes.
Q. You understood that they are not going to give you this credit unless you keep working on the projects?
A. Yes.
Q. Did you understand that you had told the bank that they could get any profit - any profit would go to them to pay these notes, if they needed that?
A. Yes.

         Treme testified that his relationship with First Bank CDC began when a loan officer at First Bank asked him to be part of a team the bank was putting together to revitalize inner city neighborhoods. Throughout his testimony, Treme said he considered himself to be part of the team. When asked why he continued working on unprofitable projects, Treme said the bank's owner, Joseph Canizaro, and its president, David Moore, told him to "keep going" on the projects, which they said were important to them, and assured him that the bank would cover the losses and that he would make money on future projects.

         Treme testified that he did not read any of the construction contracts or loan documents he signed. He did not consult a lawyer about the contracts before he signed them, explaining that he signed some of the contracts in meetings he attended with bankers, architects, First Bank CDC representatives and lawyers present. Treme said he assumed the lawyers represented everyone on the team, including him.

         When asked why he continued to sign the contracts, Treme said:

A. I was part of a team of these people. Whatever they told me to sign, I just signed. I wasn't paying attention to all of this stuff. I wanted to get into the bigger picture of these with Mr. Canizaro and Mr. David Moore and all these people that promised me.
Q. Why didn't you stick it to them? You had a deal?
A. The only way I can tell you is I was part of a team. I was part of --working with this bank to improve the inner city, so maybe I would get a better deal later.

         At some point before the fall of 2000, Ashton Ryan became president of the bank. Treme described a meeting he had with Ryan and with First Bank CDC's president, Jamie Neville, ...

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