United States District Court, D. Oregon
Caroline Harris Crowne, Jeffrey E. Alberts and Dustin N.
Nofziger, Pryor Cashman LLP, Of Attorneys for Plaintiff.
Kevin Kiely, Casey M. Nokes, and Nicole M. Swift, Cable
Huston LLP, Of Attorneys for Defendant.
OPINION AND ORDER
Michael H. Simon United States District Judge.
civil lawsuit, Plaintiff Dan Heine (“Heine”) has
filed two motions seeking “further necessary or proper
relief” under 28 U.S.C. § 2202 against Defendant
The Bank of Oswego (the “Bank”). ECF 86 and 111.
Heine asserts that the Bank has failed to comply with the
Court's November 13, 2015 Opinion and Order (ECF 70) and
the Court's December 29, 2015 Judgment (ECF 81). The
Court ordered, and the Judgment declared, that the Bank must
advance Heine's reasonable expenses incurred in defending
the pending criminal case that has been brought against him
and co-defendant Diana Yates (“Yates”) in
United States v. Heine and Yates, Case No.
3:15-cr-238-SI (D. Or.) (the “Criminal Action”).
The undersigned district judge also presides over the
Criminal Action. Trial is set to begin in the Criminal Action
on October 10, 2017. For the reasons that follow, Heine's
motions for further relief are denied without prejudice and
with leave to renew after the trial in the Criminal Action
and Yates co-founded the Bank in 2004. Until August 2016, the
Bank had been a financial institution engaged in the business
of personal and commercial banking and lending, headquartered
in Lake Oswego, Oregon. Heine previously served as the
Bank's President and Chief Executive Officer. Heine also
was a member of the Bank's Board of Directors
(“Board”). Heine left the Bank in September 2014.
Yates previously served as the Bank's Executive Vice
President and Chief Financial Officer. Yates also was the
Secretary of the Board. Yates resigned from the Bank on March
24, 2015, a federal grand jury issued a 27-seven count
indictment against both Heine and Yates for conduct related
to their time with the Bank. On March 9, 2017, a federal
grand jury returned a 19-count Superseding Indictment in this
case. The Superseding Indictment (“Indictment”)
charges Heine and Yates with one count of conspiring to
commit bank fraud, in violation of 18 U.S.C. § 1349, and
multiple counts of making false bank entries, reports, or
transactions, in violation of 18 U.S.C. §§ 2 and
1005. The Indictment alleges that between September 2009 and
September 2014, Heine and Yates conspired to defraud the Bank
through materially false representations and promises. The
Indictment further alleges that one of the purposes of the
conspiracy was to conceal the true financial condition of the
Bank from the Board, the Bank's shareholders, the public,
and the Bank's regulators, including the Federal Deposit
Insurance Corporation. According to the Indictment, Heine and
Yates reported false and misleading information about loan
performance, concealed information about the status of
foreclosed properties, made unauthorized transfers of Bank
proceeds, and failed to disclose material facts about loans
to the Board, shareholders, and regulators, all in an effort
to conceal the Bank's true financial condition.
August 26, 2015, two months after the grand jury returned the
original indictment, Heine, a citizen of Florida, brought
this civil action against the Bank, a citizen of Oregon,
invoking diversity jurisdiction. In this lawsuit, Heine
sought both declaratory relief and advancement of his
reasonable legal fees and expenses in connection with his
defense of the federal criminal action, pursuant to the
Bank's indemnification obligations contained in its
Articles of Incorporation. The Court held that Heine was
entitled to advancement of his reasonable legal fees and
expenses of defense and entered Judgment accordingly. The
Bank began to pay the defense costs of both Heine and Yates.
August 2016, Heine and Yates's combined advancement
expenses exceeded the limits of the Bank's Director &
Officer insurance policy, and the Bank began to pay
Defendants' requested advancement expenses with its own
funds. In November 2016, the Bank began to pay less than all
of Heine's (and Yates's) submitted bills. On January
26, 2017, the Bank filed a non-party motion in the Criminal
Action, asking the Court to review for reasonableness the
detailed billing statements that the Bank had received from
counsel for Heine and Yates.
motion, the Bank stated that it remains committed to
satisfying any obligations it may have to advance
Defendants' reasonable criminal defense fees and
expenses. The Bank also disclosed, in a sealed filing, the
substantial amounts that it had already paid as of November
4, 2016. The Bank added that it had recently received bills
from counsel for Heine and Yates for work performed in
October and November and that, in the Bank's judgment,
the resulting legal bills were excessive and unreasonable.
The Bank also stated in its January 26, 2017 motion that
Heine objected as “premature” to the Court
reviewing for reasonableness in the Criminal Action the
invoices that his counsel had sent to the Bank. On February
16, 2017, the Court declined to exercise ancillary
jurisdiction in the Criminal Action over Bank's fee
dispute with Heine or Yates. Eight days later, on February
24, 2017, Heine filed in this civil case his first of two
motions for further relief.
declining to exercise ancillary jurisdiction in the Criminal
Action over the fee dispute between Heine and Yates, on the
one hand, and the Bank, on the other, before the criminal
trial had concluded, the undersigned explained:
If the Court were to resolve the pending fee dispute
involving Defendants Heine or Yates, the Court would need to
consider and opine upon the reasonableness of the
performances and decisions of Defendants' counsel thus
far in this case, including the legal strategies that counsel
have pursued. For example, because the Bank asserts that
“most” of the invoices submitted by Defendants
“appear attributable to the hearing on
Defendants' motions to suppress, ” the Court likely
would need to consider and comment upon the potential
strategic motives of Defendants' counsel in litigating
their recent motions to suppress. Ruling upon such issues at
this time risks jeopardizing the Court's role in
neutrally presiding over this criminal case, at least until
the trial has concluded.
Although the Court declines at this time to find that it has
and should exercise ancillary jurisdiction over the
Bank's pending fee dispute, the Court recognizes that the
circumstances may be different after the trial concludes.
Thus, although the Court denies the Bank's motion at this
time, the Bank as well as both Defendants or either of them
have leave to renew this issue with the Court ...