Federal Deposit Insurance Corporation v. Gilbert Bierman

In November 1985, after a lengthy investigation of the faltering Allen County Bank (ACB) in Fort Wayne, Indiana, the Indiana Department of Financial Institutions (DFI) began liquidation proceedings and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver. On November 27, 1987, the FDIC filed suit against seven former directors and officers of ACB. It alleged breaches of common law and statutory duties that resulted in losses to the bank. The case was tried to the bench in July 1991, and judgment was entered in the amount of $574,809.36 against the defendants,1 jointly and severally, with regard to three of the eight groups of loans that were at issue. Federal Deposit Ins. Corp. v. Stanley, 770 F.Supp. 1281 (N.D.Ind.1991). For the reasons that follow, we affirm the judgment of the district court.2

* BACKGROUND3

As the district court noted at the beginning of its comprehensive opinion, this litigation consumed two years of pretrial activity and involved a lengthy, complicated trial. We shall not attempt to repeat here all of the detail so painstakingly set forth by our colleague in the district court. Rather, we shall assume a familiarity with that opinion and limit our efforts to orienting the reader to the discussion of issues on appeal. Indeed, we shall defer some discussion of the facts until our consideration of particular issues.

As early as August 1981, the FDIC began to examine ACB's financial condition and issued a Report of Examination indicating that the classified assets of the bank had risen to 124.2% of total capital and reserves. The FDIC termed this state of affairs "staggering" and cautioned ACB that its loan portfolio was in poor condition, that better quality loans must be acquired, and that the directors must "adequately monitor the lending function." Stanley, 770 F.Supp. at 1285. On February 10, 1982, the FDIC and the DFI entered into a Memorandum of Understanding with ACB requiring, among other things, a 50% reduction of substandard loans within 360 days and the provision of loan servicing and collection policies.

Despite these warnings, ACB continued to deteriorate. On September 11, 1982, the FDIC began to examine ACB.4 The FDIC Report of Examination was issued on November 18, 1982, and showed a loan delinquency rate of more than 25% and many loans that were not supported by current credit information. The Report stressed poor lending practices, including poor supervision, incomplete credit information, self-dealing, and overlending generally. The Report specifically mentioned that little or no credit information had been maintained for commercial loans, including participation loans purchased from affiliated banks.

On February 22, 1983, the FDIC and the DFI entered into a second Memorandum of Understanding with ACB under which ACB agreed to implement an amended written loan policy and to reduce its substandard assets by $1,200,000 by December 31, 1983. ACB did not fulfill its agreement, and on November 22, 1985, liquidation proceedings were initiated pursuant to Indiana Code Sec. 28-1-3.1-1 et seq., and the FDIC was appointed receiver of ACB pursuant to Indiana Code Sec. 28-1-3.1-5. On the same date, the FDIC, as receiver, sold certain ACB assets to the FDIC in its corporate capacity pursuant to Indiana Code Sec. 28-1-3.1-7 and 12 U.S.C. Sec. 1823(c)(2)(A). Among these assets were the claims against ACB directors and officers for failing to perform or poorly performing their duties.

The appellants are former directors and officers of ACB. V. Edgar (Ed) Stanley and Robert Marcuccilli sat on the ACB Board of Directors (Board) from March 24, 1982, until May 22, 1984; Ed Stanley served as president from March 24, 1982, until September 13, 1983. Judith Stanley sat on the Board between March 24, 1982, and May 8, 1984; Dan Stanley served between May 25, 1982, and May 8, 1984; and John Boley served between 1970 and June 16, 1983. Finally, Dr. Gilbert Bierman served from May 1978 until April 9, 1984. During the period when they were ACB directors, the defendants were also shareholders of the bank.

In addition to serving on the Board, Ed Stanley and Judith Stanley also served as directors of Leiters Ford State Bank (Leiters Ford), Counting House Bank, and Western State Bank. Mr. Marcuccilli served concurrently as director of Counting House Bank and Western State Bank, and he served until January 1983 as a director of Leiters Ford.

Mr. Boley attended only one Board meeting between November 9, 1982, and his resignation in June 1983. Dr. Bierman was advised by Ed Stanley in 1982 that he need not attend Board meetings, but that ACB wished to retain his name as director. Accordingly, Dr. Bierman attended no Board meetings after the October 5, 1982 meeting.

In its extensive opinion, the district court dealt with both the legal and factual issues presented by the parties. We shall set forth here the basics of that exhaustive treatment and rearrange the order of presentation in order to accommodate more efficiently our review of the matters presented to us in this appeal. The district court realized that the liability of the directors was dependent on two issues, standard of care and causation. It addressed, with respect to each, both the appropriate legal principles and the application of those principles to the facts of this case.

With respect to the appropriate standard of care, the district court held that the degree of care to which the bank directors were bound is that which ordinarily prudent and diligent persons would exercise under similar circumstances. Stanley, 770 F.Supp. at 1310. This standard requires that the court review all of the circumstances of the particular case. Under this standard, the directors had a duty to ascertain the condition of the bank and exercise reasonable control and supervision over it. Id. This duty requires that the directors devote, continued the court, a sufficient amount of time and energy to overseeing the bank's affairs, to attending meetings, and to reading the reports of federal and state bank examiners. Id. These duties, held the court, were not delegable and could not be discharged solely by reliance on others. Id. at 1310-11.

With respect to the burden of proof, the district court held that, as a general matter, the burden rested with those who claim a breach of the director's duties. However, when a director approves a transaction between the bank and another institution in which he has an interest, it is the director's obligation to prove that there was no breach of his duty of loyalty and good faith and that the transaction was fair and reasonable to the bank. Id. at 1311.

The district court also recognized that, in order for a director to be liable, any breach of these standards must also be the proximate cause of the injury to the bank. Under this principle, held the district court, if the defendant's negligence is a substantial factor in producing the injury and if the injury is one of a class that was reasonably foreseeable at the time of the defendant's wrongful act, a sufficient causal relationship exists. Id. at 1309-10.2.

The court took pains to detail the evidence regarding the soundness of the loans at the time ACB acquired them and to evaluate them in light of the foregoing principles. It determined that a prudent banker would not have assumed the Abbott, DeVries, and Conn loans. It found the seven directors jointly and severally liable to the FDIC in the amount of $405,599.45; in addition, it found all directors, save for Mr. Boley, jointly and severally liable to the FDIC on an additional $169,209.91. Id. at 1315. The court found that Mr. Boley was no longer a member of the Board at the time the Conn loans were made. We shall summarize each of the transactions in which the district court determined that the directors had breached their duty of care to ACB.

a. Abbott Coal and Energy Loans (Abbott)

On December 30, 1982, ACB was assigned without recourse an installment lease in the amount of $130,484 between Northern Indiana Leasing and Abbott, which was secured by a bulldozer. Ed Stanley and Mr. Marcuccilli were "interested directors" because they were vice-presidents of Northern Indiana Leasing when the lease was sold to ACB. On February 12, 1983, ACB purchased a $60,000 commercial loan to Abbott from Counting House Bank. At the time, Ed Stanley, Judith Stanley, and Mr. Marcuccilli were "interested directors." The district court found that Abbott's financial condition at the time ACB acquired the lease and loan was very poor. Id. at 1288. Indeed, Abbott filed Chapter 11 bankruptcy on June 25, 1985.

The district court engaged in a detailed analysis of the transactions. The court first noted that, prior to purchasing the Abbott lease and the Abbott loan, the ACB had been involved in only one coal-related transaction and had written that particular transaction off as a $39,682 loss on its September 1982 FDIC Report of Examination. In the district court's view, this recent unprofitable experience should have made ACB somewhat hesitant about dealing with Abbott. After analyzing the financial statement that had been available to ACB at the time it purchased these assets, the court concluded that Abbott was operating on borrowed money rather than on operating income. The court also noted that, although total assets on September 30, 1982, were $2,459,733, total assets on July 31, 1981, had only been $1,876,505, and nearly $1,000,000 of the September 30, 1982 assets were in the form of "notes receivable" with no indication of the company's ability to collect on the notes. The court also noted that Abbott's partners' equity had been cut nearly in half between July 31, 1981, and September 30, 1982.

Turning to the balance sheets of two of the Abbott partners, Robert Goldman and William Gladstone, the court noted that these documents appeared, on a superficial reading, to be reassuring. The court then determined, however, that Goldman's balance sheet appeared to be misleading in several respects. First, Goldman had attributed $750,000 in assets to his interest in Abbott when, during the same period, the firm's balance sheet showed the total partners' equity was $695,109. Other major assets were listed without any supplemental documentation. Nor were any liabilities other than utilities and insurance listed. In short, although Goldman had included his interest in Abbott as an asset, he had failed to include his portion of the firm's liabilities in the liability portion of his balance sheet.

Gladstone's balance sheet of December 31, 1981, suffered, held the district court, from similar deficiencies. He listed among his assets $500,000 for his interest in Abbott and $300,000 for "oil and gas." The latter item was not supported by any documentation. Gladstone's balance sheet also listed no liabilities, but did list a $2,000,000 contingent liability with Liberty National Bank on Abbott. On the basis of all this evidence, the court agreed with the testimony of the bank examiner for the FDIC that a prudent banker would not have relied on these financial statements without some supporting documentation.

The court then turned to the question of whether Abbott's payment history on the lease in question showed that Abbott had sufficient cash flow to pay off the lease. Here, the court found the evidence partially favorable and partially unfavorable to the directors. The court noted that, although ACB's payments were somewhat irregular, its record could not be characterized as "sporadic." Nevertheless, pointed out the district court, Abbott did default on the lease and consequently made some arrangements to ensure that payments were made. The evidence showed that ACB had received some funds directly from Indiana Power and Light Company to pay for the claim and that Mr. and Mrs. Goldman had signed an agreement in which they jointly and severally guaranteed credit extended to Abbott by ACB to the extent of $100,000. The court also pointed out that the Small Business Administration approved, in early 1984, a $450,000 loan to Abbott and had apparently found the company creditworthy at that time.

The district court then undertook a lengthy examination of whether the bulldozer was adequate collateral to secure payment on the lease. The court concluded that ACB should have predicted that the bulldozer would depreciate rapidly when in use in the coal mine and held that any loss suffered by ACB after acquiring the lease was a result of its failure to require sufficient collateral.

With respect to the second transaction with Abbott, a $60,000 commercial loan, the court noted that the loan was secured by two pieces of heavy construction equipment, but the record showed that the equipment was subject to a blanket lien asserted by Leasing Service Corporation and perfected in July 1981. Liberty National Bank also had a lien on the same equipment filed in November 1982.

The court found that the directors were liable on both the loan and the lease because they had failed to take sufficient collateral. With respect to the lease transaction, the court held that directors Ed Stanley and Mr. Marcuccilli were "interested directors" and had not satisfied their burden of showing that the transaction did not breach their duty of loyalty and good faith to the bank. The remaining directors, held the court, had not exercised the requisite degree of reasonable care in the transaction. The court then turned to Dr. Bierman's argument that he had "effectively resigned" on October 5, 1982, when he attended his last Board meeting. The court rejected this argument for several reasons. It noted that Dr. Bierman had continued to receive "committee fees" after that date and, indeed, had been re-elected to the Board in March 1983. It was his duty, held the court, to resign from the Board if he no longer desired the stockholders to believe that he was fulfilling the expected duties of a director. Finally, the court noted that Ed Stanley testified that no loan would have been approved if a Board member "totally objected." The court concluded, on the basis of his testimony, that, if Dr. Bierman had attended these meetings, he could have successfully prevented ACB from purchasing its lease. For the same reason, Mr. Boley was held to be liable for this transaction even though he had not attended the meetings in which it had been discussed.

With respect to the Abbott loan that was purchased from the Counting House Bank, Ed and Judith Stanley, and Mr. Marcuccilli were "interested directors" because, during the time in question, they had served on the Board of the Counting House Bank. Dan Stanley, Dr. Bierman, and Mr. Boley, while not interested directors, had breached their duty of care to the bank.

b. Sidney DeVries and DeVries Hog and Grain Farm Loans

On March 24, 1983, ACB purchased a $70,000 note from Leiters Ford. The district court found, however, that the security interest that had been granted to Leiters Ford was, for all intents and purposes, worthless because LaSalle National Bank had a prior interest in it dating from a March 1980 pledge. In brief, Sidney DeVries had granted to Leiters Ford a security interest in all livestock, crops, and equipment owned and thereafter acquired by him. However, this security interest was preempted by an earlier security interest securing loans granted by Leiters Ford with the participation of LaSalle National Bank. The district court therefore concluded that LaSalle National Bank clearly had a prior interest in the collateral pledged in the March 19, 1980 security agreement and that Leiters Ford's March 24, 1983 loan to DeVries Hog and Grain Farm was unsecured for all practical purposes. On April 11, 1983, ACB purchased a $40,000 loan to DeVries Hog and Grain Farm from Leiters Ford. Ed Stanley and Judith Stanley were "interested directors." This loan was secured by collateral that had previously been pledged to LaSalle National Bank. In addition, the court found that there was no evidence that a futures contract pledged to secure this loan had any value.

Finally, the district court found that, on June 14, 1983, ACB had participated in a loan of $35,000 to Sidney DeVries from Leiters Ford. Of the original loan, ACB's participation was $34,000; Leiters Ford kept $1,000. The defendants claimed that this debt was secured by two indemnifying mortgages and four security agreements that covered DeVries' livestock, equipment, and machinery, as well as his futures account. All of this security had previously been pledged to LaSalle National Bank to cover other debts.

After reviewing all of the evidence, the district court concluded that, at least as early as February 1983, Sidney DeVries and DeVries Hog and Grain Farm were facing severe financial difficulties. DeVries had previously failed to obtain a loan from the FmHA, and LaSalle National Bank had refused to participate in any further loans. However, in March, April, and June 1983, ACB purchased three of DeVries' loans from Leiters Ford. The borrowers were not only in financial trouble but could not give ACB any new collateral because that collateral had already been pledged to LaSalle National Bank. The court determined that a reasonably prudent banker would not have participated in these loans. As it had with respect to the Abbott loans, the court determined whether each of the directors was "interested" in the transaction and then employed the appropriate burden of proof in determining liability.

c. Conn loans

On June 24, 1983, Leiters Ford issued to ACB a participation of $144,755 in a $147,262 loan that it had earlier made to James and June Conn, grain farmers. Ed Stanley and Judith Stanley were "interested directors" because they were directors of both Leiters Ford and ACB at the time. On July 19, 1983, Leiters Ford issued to ACB a participation of $13,000 in a $33,530.19 loan made to the Conns. The district court found that, at the time the loans were made, the Conns had a debt-to-net worth ratio of 2.23 to 1 (or a ratio of 9.51 to 1 after the Conns' inflated valuation of their farm land was taken into account). The district court concluded that a prudent banker would not have participated in the Conn loans. First, the Conns were highly leveraged. Their financial statement as of January 31, 1983, showed that they had debts of $1,575,500 and a net worth of $705,750. According to the FDIC bank examiner, they had over-valued their real estate. The court also noted that they had suffered a net loss of approximately $60,000 in 1982. During that year, the Conns had a total cash income of $249,084 and total cash expenses of $310,794, which netted a loss of $61,710 for 1982. When adjusted for non-farm income, the Conns had a net farm loss of $80,675. While there was some dispute about the matter among the parties, the court found that the Conns had sold crops in 1982 for $203,536 and that, even with this crop income, they had suffered an overall loss of $61,710.

The court found that, by the Conns' own reckoning, they would be unable to service the existing debt. The court also emphasized that, while ACB had a security interest in all growing or planted crops on the real estate farmed by the Conns, those liens had been subordinated each year to input lenders in order to allow the Conns to continue to meet operating expenses. Consequently, the court had no difficulty concluding that "[a] prudent banker, in an arm's length transaction, would not have participated in the Conn loans." Stanley, 770 F.Supp. at 1295. As it did with respect to the Abbott transactions, the district court then determined whether each director was "interested" in the particular transaction and applied the appropriate burden of proof. Mr. Boley had resigned prior to the Conn transactions and therefore was held not to be liable for the improvident Conn loans.

In addition to determining that, with respect to the three sets of transactions described above, the directors had breached their duty to ACB and that their breach was a proximate cause of the bank's loss, the district court also rejected the defendants' contention that the FDIC had failed to mitigate bank losses and that it therefore could not claim such losses from the directors. The district court relied upon cases that have explained the "no duty" rule in such circumstances and have held that any duty that the FDIC might owe extends to the public rather than to the directors or officers who are wrongdoers. See FSLIC v. Burdette, 718 F.Supp. 649 (E.D.Tenn.1989) (discussing FDIC v. Greenwood, 719 F.Supp. 749 (C.D.Ill.1989), and FSLIC v. Roy, No. JFM-87-1227, 1988 WL 96570 (D.Md. June 28, 1988)).

The defendants relied on FDIC v. Carter, 701 F.Supp. 730 (C.D.Cal.1987). In that case, the court had looked to the Federal Tort Claims Act (FTCA) as the appropriate decisional matrix and had determined that "most of the FDIC's actions when disposing of the assets of a bank are purely ministerial, and are not grounded in social or economic policy. As a result, these actions can serve as the basis for a counterclaim or affirmative defense...." Id. at 735-37. The district court here concluded, however, that United States v. Gaubert, 499 U.S. 315, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991), had effectively overruled Carter when it determined that "[d]ay-to-day management of banking affairs, like the management of other businesses, regularly require judgment as to which of a range of permissible courses is the wisest. Discretionary conduct is not confined to the policy or planning level." Id. at ----, 111 S.Ct. at 1275 (quoted in Stanley, 770 F.Supp. at 1309). The district court read Gaubert as overruling Carter "insofar as Carter holds that the FDIC's actions when disposing of a bank's assets can serve as a basis for reducing the amount of the FDIC's recovery because such actions by the FDIC are ministerial or operational." Stanley, 770 F.Supp. at 1309.

At the outset, we set forth the general standards of review that must govern our scrutiny of the district court's decision. Questions of law are, of course, subject to our de novo review. By contrast, we may disturb the district court's findings of fact only if we determine that they are clearly erroneous. Fed.R.Civ.P. 52(a);5 Anderson v. City of Bessemer City, 470 U.S. 564, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). In Anderson, the Supreme Court explained the role of the reviewing court under this deferential standard:

"[a] finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395[, 68 S.Ct. 525, 541, 92 L.Ed. 746] (1948). This standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently.

....

Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous. United States v. Yellow Cab Co., 338 U.S. 338, 342[, 70 S.Ct. 177, 179, 94 L.Ed. 150] (1949); see also Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844[, 102 S.Ct. 2182, 72 L.Ed.2d 606] (1982).

This is so even when the district court's findings do not rest on credibility determinations, but are based instead on physical or documentary evidence or inferences from other facts.

470 U.S. at 573-74, 105 S.Ct. at 1511. The Court also noted that deference to the factfinder's expertise serves the end of insuring the efficient use of judicial resources. Id. at 574-75, 105 S.Ct. at 1511-12.

It is also well-established in this circuit that we shall review mixed questions of fact and law under the clearly erroneous standard. Elberg v. Mobil Oil Corp., 967 F.2d 1146, 1149 (7th Cir.1992); Mucha v. King, 792 F.2d 602, 605 (7th Cir.1986). This standard is especially appropriate when the applicable law is well-settled and the district court had the opportunity to evaluate the demeanor of the witnesses. Ambrosino v. Rodman & Renshaw, Inc., 972 F.2d 776, 784 (7th Cir.1992); Shango v. Jurich, 965 F.2d 289, 291 (7th Cir.1992).

a. standard of care6

The parties do not dispute the basic principles governing bank director responsibilities:

[D]irectors must exercise ordinary care and prudence in the administration of the affairs of a bank, and [ ] this includes something more than officiating as figureheads. They are entitled under the law to commit the banking business, as defined, to their duly-authorized officers, but this does not absolve them from the duty of reasonable supervision, nor ought they to be permitted to be shielded from liability because of want of wrongdoing, if that ignorance is the result of gross inattention....

Briggs v. Spaulding, 141 U.S. 132, 165-66, 11 S.Ct. 924, 935, 35 L.Ed. 662 (1891) (holding directors not liable because of illness, retirement, or leave of absence) (quoted in Chicago Title & Trust Co. v. Munday, 297 Ill. 555, 131 N.E. 103, 105 (1921)).7 In Rankin v. Cooper, 149 F. 1010, 1013 (C.C.W.D.Ark.1907), the court elaborated on the duties of directors:

(1) Directors are charged with the duty of reasonable supervision over the affairs of the bank. It is their duty to use ordinary diligence in ascertaining the condition of its business, and to exercise reasonable control and supervision over its affairs. (2) They are not insurers or guarantors of the fidelity and proper conduct of the executive officers of the bank, and they are not responsible for losses resulting from their wrongful acts or omissions provided they have exercised ordinary care in the discharge of their duties as directors. (3) Ordinary care, in this matter as in other departments of the law, means that degree of care which ordinarily prudent and diligent men would exercise under similar circumstances. (4) The degree of care required further depends upon the subject to which it is to be applied, and each case is to be determined in view of all the circumstances.

Directors are charged with keeping abreast of the bank's business and exercising reasonable supervision and control over the activities of the bank. See, e.g., Martin v. Webb, 110 U.S. 7, 15, 3 S.Ct. 428, 433, 28 L.Ed. 49 (1884) ("Directors cannot in justice to those who deal with the bank shut their eyes to what is going on around them."); Gallin v. National City Bank, 152 Misc. 679, 273 N.Y.S. 87 (1934) (relying on Briggs and Rankin ).8 A failure properly to supervise and attend Board meetings may become the basis for a charge of negligence. Bowerman v. Hamner, 250 U.S. 504, 39 S.Ct. 549, 63 L.Ed. 1113 (1919). The fact that an absentee director had no knowledge of the transaction and did not participate in it does not absolve him of liability. See Hoye v. Meek, 795 F.2d 893, 895 (10th Cir.1986) (semi-retired director and chairman who failed to monitor and make necessary inquiries breached his statutory duty of care); Preston-Thomas Constr., Inc. v. Central Leasing Corp., 518 P.2d 1125, 1127 (Okla.Ct.App.1973) ("[W]here the duty to know exists, ignorance resulting from a neglected official duty creates the same liability as knowledge.").

A director may not rely on the judgment of others, especially when there is notice of mismanagement. Certainly, when an investment poses an obvious risk, a director cannot rely blindly on the judgment of others. In Rankin, the court specifically recognized a heightened responsibility among those directors who have an inkling of trouble brewing:

If nothing has come to the knowledge to awaken suspicion that something is going wrong, ordinary attention to the affairs of the institution is sufficient. If, upon the other hand, directors know, or by the exercise of ordinary care should have known, any facts which would awaken suspicion and put a prudent man on his guard, then a degree of care commensurate with the evil to be avoided is required, and a want of that care makes them responsible. Directors cannot, in justice to those who deal with the bank, shut their eyes to what is going on around them.

149 F. at 1013. In Rankin, the directors relied entirely on the bank president to conduct the business of the bank. However, rumors began to circulate that the president was mismanaging, and a government examiner issued a report saying as much and counselling the Board to exercise better vigilance. Despite these warnings, the Board continued to be inattentive. The court found that "the directors should be held liable for all losses that could have been prevented by a proper discharge by them of their duties after [the date that they had notice from the examiner]." Id.

Reliance arguments are especially weak when regulators have told directors to take action. See, e.g., FDIC v. Brickner, 747 F.2d 1198, 1202 (8th Cir.1984) (directors could not ignore bank examiner warnings); Atherton v. Anderson, 99 F.2d 883, 891 (6th Cir.1938) (regulators had given repeated serious warnings to the Board, but the members could not insulate themselves from knowledge by failing to read the reports); Rankin, 149 F. at 1013-14 (abundant warning had come through the report of a bank committee and a report of the Comptroller of Currency).9 Finally, when insider transactions are being contemplated, "[t]he director's duty of inquiry cannot be met by representations of propriety from interested parties; he must be personally satisfied that there was an adequate independent investigation showing the propriety of the transaction." Fitzpatrick v. FDIC, 765 F.2d 569, 577 (6th Cir.1985).

b. proximate cause

It is well-settled that a director will not be liable for losses to the corporation absent a showing that his act or omission proximately caused the subsequent losses. See Briggs, 141 U.S. at 147, 11 S.Ct. at 929; Michelsen v. Penney, 135 F.2d 409, 419 (2d Cir.1943); Warner v. Penoyer, 91 F. 587 (2d Cir.1898); Francis v. United Jersey Bank,