On September 11, 2023, the U.S. District Court for the Southern District of Florida denied Deutsche Bank’s request for a new trial and required the bank to pay pre-judgment interest following a verdict handed down in April for allegations that the bank aided and abetted fraudulent activity and thereby allowed certain clients to run a Ponzi scheme. The court did, however, reduce the pre-judgment interest requested by the plaintiffs from $38 million to approximately $16,500. The April verdict arose from allegations of a scheme whereby four individuals misappropriated hundreds of millions of dollars by issuing worthless notes to real estate investors and transferring the investors’ funds to special purpose vehicles that they created. The plaintiffs, certain foreign representatives and liquidators of entities used by fraudsters, sued Deutsche Bank, contending that the bank was aware of, and assisted in, the Ponzi scheme. (Our April 2023 report on the case is available here.)

Deutsche Bank argued that it should receive a new trial because, among other reasons, the agency agreements between the bank and the investors explicitly disclaim any duty of care owed by the bank to the investors—and thus precluded the plaintiffs’ tort claims. The court disagreed and held that the provision did not disclaim any duties in tort, as exculpatory provisions that provide relief for a party from his or her own negligence are disfavored in Florida and should be strictly construed against the party claiming protection thereunder. As to the plaintiffs’ request for pre-judgment interest, the court looked to Florida law, which deems such interest appropriate if (i) there is an out-of-pocket loss and (ii) a date certain that such loss occurred. Deutsche Bank argued the investors did not make any payments on the notes and, therefore, pre-judgment interest was inappropriate because no loss occurred. In fashioning relief, the court held that, while a payment of money is not required, in this case, the date certain of the loss was not ascertainable prior to entry of the jury verdict, as the jury could have based its decision on note issuances occurring on various dates or other negligent behavior. Therefore, the court held that pre-judgment interest is only appropriate from the date the jury returned its verdict to the date the final judgment is entered. This thus decreased the pre-judgment interest from $38 million to approximately $16,500.

The case is Pearson v. Deutsche Bank AG, No. 21-22437 (S.D. Fla. Sept. 11, 2023). The plaintiffs are represented by EFR Law Firm. Deutsche Bank is represented by Cahill Gordon & Reindel LLP and Duane Morris LLP. The opinion is available here.