Newport Beach Man Wins Landmark Case and Justified Moral Victory Against Bank -- Case Sends Powerful Message to Banks Against Harsh and Unfair Use of "Setoffs" and "Conversion"

    IRVINE, CA, September 20, 2011 /24-7PressRelease/ -- Mark Zigner of Newport Beach, Calif. won a precedent-setting verdict against Pacific Mercantile Bank on Wednesday, September 14, 2011 in Orange County Superior Court in Santa Ana, Calif. He proved to the court, and to the jury, that the bank had wrongfully seized funds in his accounts at the bank as a 'setoff' against a debt Zigner owed on a line of credit.

The jury awarded Zigner $2,172,001, including a conservative $250,000 in compensatory damages, and a statement-making $1,870,000 in punitive damages. His attorney, Costa Mesa, Calif.-based Frank W. Battaile, will also seek additional compensation from the court for attorney's fees and court costs. The final judgment will likely exceed $2,500,000.

In April 2009, the bank's new Chief Credit Officer Michael Green, who, at the time, had been employed at Pacific Mercantile Bank for only 15 days, ordered the setoff. Green did not seek input from other senior bank officials who had worked with Zigner for more than 10 years, who could have fully informed him of the long-term, cooperative and profitable relationship Zigner had with the bank. After the setoff, Green was not open to further discussion on the matter with those bank officials who had worked with Zigner, and refused to reconsider his decision.

"I got a call from my banker on the afternoon of April 20, 2009 and he told me about the setoff," said Zigner. "He was so stunned he could barely find the words to explain what had happened. He also told me that exercising the setoff was just wrong, and that when he asked Green why he did it, Green replied: 'Because I can'."

At the time, Zigner, an International jewelry broker in Newport Beach, was in the process of building a home, but after the setoff, he was unable to qualify for permanent takeout financing, and couldn't pay the contractors on the project, resulting in liens and lawsuits. He had to close his office in Newport Center, and struggled to secure working capital to purchase inventory for his business.

"My FICO score plummeted, cutting the available limits on my credit cards in half. In fact, because of this, I no longer qualify for any credit at all," added Zigner. "This experience has been an unbelievable nightmare that could easily have been avoided by simply communicating, assessing the options, and finding the appropriate solution together, as we'd done for the last decade."

During the trial the bank put on evidence of the loan documents Zigner signed, which included the original line of credit agreement and numerous subsequent renewals of the line of credit. The written agreements, on forms presented by the bank, did in fact provide that the bank could exercise the right of setoff in case Zigner defaulted on the line of credit. However, the court found that considering all of the circumstances, including Zigner's long-term relationship with the bank, the availability of less drastic remedies, and the manner in which the bank conducted the setoff, the bank was equitably estopped to conduct the setoff. That is, the court found that the setoff was unfair and unjust.

Orange County Superior Court Court Judge Francisco F. Firmat, instructed the jury that the setoff was wrongful. The jury determined that the unlawful setoff caused Zigner further damages, and that the bank's conduct was malicious and oppressive. In the second phase of the trial the jury assessed punitive damages equal to the bank's pretax income for the second quarter of 2011.

In his final ruling to the bank's attorney, Thomas Robins III, of Frandzel Robins Bloom & Csato, L. C., Judge Firmat said, "You don't have to give him a new line of credit, you don't have to refuel him - but you can't shoot him out of the sky, especially when you've got other options. And you did. And you did."

The jury verdict included an express finding that the bank "converted" Zigner's funds. Conversion is a legal term for the wrongful taking of another person's personal property. Unlike breach of contract, conversion is a tort that gives rise to potential liability for punitive damages, if the jury finds that the conversion was carried out with malice or oppression or fraud. The punitive damages awarded by the jury against the bank were based on a finding that the bank did convert Zigner's funds, and that it did so with both malice and oppression.

"This verdict is a huge relief and an enormous moral victory that I hope will serve some good purpose for the millions who are facing unfair practices at the hands of indifferent and ruthless banking institutions," said Zigner. "I have no illusions about the bank's and Green's continuing denial that they did anything wrong. I expect the matter to be appealed, and my attorney is confident of ultimate victory in the court of appeal and, if necessary, in the Supreme Court."

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