Tort Of Another: $250,000 Tort Of Another Fee Award, As Damages, Affirmed Because Substantial Benefit “Defense” Involves Consideration Of The Equities

Positive Gains Were Outweighed By Harm To Bank’s Reputation And Its Years Of Struggles With Regulators/Federal Criminal Prosecutors.

            The “tort of another doctrine” is a nuanced one allowing attorney’s fees to be awarded as damages in certain situations.  Fees under this doctrine may be mitigated by consideration of special benefits that the alleged tortfeasor brought to the positive side of the suing plaintiff.  Gateway Bank, F.S.B. v. Metaxas, Case No. A158793 (1^st Dist., Div. 2 June 3, 2021) (published) establishes that the special benefits “defense” is driven by equities, such that simply an arithmetic consideration of positive benefits must be balanced against negative benefits which can consist of both monetary and nonmonetary factors.

            What happened in this case is that defendant/appellant, the president and CEO of plaintiff Gateway Bank, was sued by the bank based on certain transactions with a third party (with that third party using Bank as a warehouse lender) after the bank ran into trouble in the Great Recession.  Appellant pled guilty to criminal bank fraud charges, with the Bank battling numerous regulator and federal criminal prosecutor efforts.  Eventually, some positive monetary gain came from the third-party transaction.  The Bank sued for fraud, fraudulent omission, and breach of fiduciary duty, winning these claims against appellant.  Then, on the capital loan transaction, an appointed referee found damages of $382,154, $250,000 being “tort of another” damages.  Appellant argued that the positive “special benefits” required a finding that tort of another fees should not be allowed.

            The First District, Division 2 rejected the challenge.  It found that the “special benefits” defense in the tort of another area was equitable based such that both monetary and non-monetary considerations should be evaluated, as they were by the referee.  Here, the positive side was outweighed by the harm to bank’s reputation, as well as expenditure of financial resources to battle regulators, federal criminal prosecutors, and indemnify appellant in certain actions.