                       Revised July 23, 1999

                  UNITED STATES COURT OF APPEALS
                       For the Fifth Circuit

                    ___________________________

                            No. 98-50288
                    ___________________________

                       50-OFF STORES, INC.,

                                                  Plaintiff-Appellee,

                              VERSUS

               BANQUES PARIBAS (SUISSE) S.A., ET AL,

                                                          Defendants,

                           HOWARD WHITE,

                                               Third Party Plaintiff,

                              VERSUS

                  THE CHASE MANHATTAN BANK, N.A.,

                        Defendant-Third Party Defendant-Appellant.

       ___________________________________________________

           Appeal from the United States District Court
                 For the Western District of Texas
       ___________________________________________________
                            July 1, 1999

Before DAVIS, STEWART, and PARKER, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

     Defendant-Appellant The Chase Manhattan Bank, N.A. (“Chase”)

appeals a jury verdict in excess of $150 million in compensatory,

consequential, and punitive damages for the conversion of 1.5

million shares of stock of Plaintiff-Appellee 50-Off Stores, Inc.

(“50-Off”).   For the reasons that follow, we vacate the awards of

punitive damages and prejudgment interest and uphold the awards of
compensatory and consequential damages.

                                      I.

     We    review   the   record,   including   factual   and   credibility

determinations and the reasonable inferences that may be drawn

therefrom, in the light most favorable to the verdict.            Denton v.

Morgan, 136 F.3d 1038, 1044 (5th Cir. 1998).          When viewed in such

a light, the central facts of this case are as follows.

     Plaintiff-Appellee 50-Off operated a chain of discount retail

stores headquartered in San Antonio, Texas.1         In October 1994, 50-

Off decided to raise money through a stock offering in order to

purchase inventory for the Christmas shopping season.                 50-Off

engaged experienced professionals, including the investment banking

firm of Jefferies & Co. (“Jefferies”), to help it orchestrate the

stock offering.     In order to avoid the regulatory rigors of a full-

blown    stock   offering,   50-Off   decided   to   issue   stock   through

Regulation S, which excused it from many of the requirements of the

Securities Act of 1933.      The offering under Regulation S, however,

had at least one major disadvantage: the stock being issued could

only be sold to foreign investors for the first forty days after

closing.

     50-Off and its law firm Akin, Gump, Strauss, Hauer & Feld,

along with Jefferies and its law firm Morgan, Lewis, and Bockius,

prepared a form subscription agreement.          This agreement required



     1
        At least in part due to the events leading to this lawsuit,
50-Off filed for bankruptcy in October 1996. The company has since
been reformed under the name LOT$OFF Corp.

                                      2
payment on delivery and required that the stock bear a six-month

restrictive   legend.         On    November   8,    1994,     using    this    form

subscription agreement, 50-Off sold 310,000 shares of stock at

$3.75 per share to Swiss and British investors.

     Around   this    time,    Howard    White      called    Chris    Jensen,   an

attorney for Jefferies.            White stated that he was a lawyer who

represented   Banques    Paribas       (Suisse),     S.A.     (“BPS”),    a    major

European bank.2   He stated that BPS wished to purchase 1.5 million

shares of 50-Off stock at $3.65 per share.                   He then introduced

Jensen to three companies: Andalucian Villas (Forty-Eight), Ltd.,

Arnass, Ltd., and Brocimast Enterprises, Ltd. White indicated that

these companies were owned by BPS, or at least closely affiliated

with the bank.       In reality, however, these three companies were

offshore shell corporations of Yanni Koutsoubos, a BPS customer

and, as 50-Off would later discover, an international white collar

criminal.

     White proposed subscription and escrow agreements more complex

than those prepared by 50-Off, Jefferies, and their law firms.

Under White’s proposed agreements, the stock would be delivered to

an escrow agent unpaid for and without a restrictive legend.                     The

escrow agent was to deliver the stock to a bank for authentication

in return for an “irrevocable bank payment guarantee.”                        50-Off

understood that the bank would hold the stock until payment was

received.     Jensen    and    John    Patrick      Ryan,    50-Off’s    attorney,


     2
         In reality, White is not a lawyer, nor was he ever
affiliated with BPS.

                                        3
determined that White’s proposed agreements satisfied Regulation S

and therefore agreed to them.      Dennis Morris, a Canadian attorney,

was selected as the escrow agent.

     On November 9, 50-Off received the executed subscription and

escrow agreements.      The     next   day,    50-Off   issued    1.5   million

unlegended3 shares in BPS’s name and delivered these shares to

Morris. Chase Account Administrator Miha Zajec instructed White on

the procedure for delivering the securities to Chase. White passed

these instructions on to Morris.           Morris, in turn, instructed a

courier, William Jackson, to deliver the shares to Chase.                  Morris

provided a letter to accompany the deposit stating, “These shares

have a debit balance due.”

     On November 14, BPS, a long-time Chase customer, instructed

Chase, “Please accept free4 for our account PS 97824 from Dennis S.

Morris”   the   1.5   million    50-Off       shares.     In     sending    this

instruction, BPS was acting on behalf of its customer Koutsoubos.

     Also on November 14, Jackson delivered the shares to Chase’s

physical receive window as per Morris’s instructions.                   At the


     3
         As noted above, shares issued under the original form
agreement prepared by 50-Off and Jefferies bore a six-month
restrictive legend, thus indicating that the stock came from this
Regulation S offering and preventing free transferability. The 1.5
million shares for the sale to Koutsoubos were issued without a
legend, making the shares harder to trace and at the same time not
indicating to purchasers that the shares were restricted.
     4
       One of Chase’s expert witnesses, Walter Cushman, testified
that custodial banks such as Chase receive stock for customers
either “free” or versus payment. By instructing that the stock
should be deposited “free,” BPS was indicating that the stock was
either fully paid for or that Chase would not be involved in the
payment for the stock.

                                       4
window, Jackson asked for Zajec, the Chase representative who had

provided the delivery instructions.      The employee at the window

stepped away to call Zajec.    The employee soon returned with Tony

Dinalfo, another Chase employee, to whom Jackson pointed out the

“debit balance due” language.    At trial, Jackson testified,

     I showed them the fact that there was a debit balance, and
     that they should be aware of this because the stock is not
     paid for, and the bank is acting as a temporary custodian,
     intermediate to delivering these shares to the ultimate
     holder, and that they should get paid for these shares and pay
     us for them, or the Dennis Stephen Morris [firm] . . . . That
     this debit balance was a debt or a credit that they owed for
     the shares, and if they sent them onwards they should then get
     paid and transmit it back.

Dinalfo indicated that he understood, initialed parts of the

delivery forms--including the statement that the shares had a

“debit balance due”--and accepted possession of the stock. Dinalfo

then placed an identification number known as a restrictive CUSIP

on the shares, presumably to indicate that the stock had not been

paid for.   The same day, Chase sent Morris a receipt acknowledging

the deposit of the stock.    The receipt stated, “These shares have

a debit balance due against them.”

     Thus, on November 14, 1.5 million unpaid-for and unlegended

50-Off shares, registered to BPS, were deposited at Chase.            These

shares were initially placed in a “holdover” account--an account

used for, among other things, holding shares pending payment.           At

trial, Chase was unable to present the holdover account records for

November 1994.     Chase   contended   that   these   records   had    been

destroyed, as is customary in the industry.       Chase, however, was

able to produce the holdover account records for October 1994.

                                  5
Chase was also unable to produce a delivery ticket--the record made

of every delivery of stock to Chase--for the November 14 deposit.

According to one of Chase’s witnesses, Frank DeCicco, delivery

tickets indicate whether stock is delivered free or if payment is

due. 50-Off argued that the missing delivery ticket was consistent

with the receipt and indicated that a payment was due on the 50-Off

stock.

     As previously noted, on November 14, Chase’s customer, BPS,

sent a message stating the stock was “free” and yet the deposit

information indicated that the stock had a debit balance due.

Walter Cushman, one of Chase’s expert witnesses, testified that

when the delivery instructions and the customer’s instructions are

inconsistent, the stock is either held in a holdover account until

the discrepancy is resolved or it is returned to the deliverer.

Similarly, BPS Account Officer Ramys Molteni agreed that such a

discrepancy should be corrected before the stock is deposited into

the customer’s account.

     Chase, however, either did not notice this discrepancy or

ignored it.   BPS, presumably instructed by Koutsoubos, told Chase

to deposit the 50-Off stock into BPS’s account.     Chase acted as

instructed.    50-Off argued that when Chase deposited the stock

“free” into BPS’s account on November 18, 1994, Chase converted the

stock.

     The subscription agreement called for payment for the 1.5

million shares by November 25.       The payment did not arrive as

scheduled.    50-Off, believing that the shares were deposited in

                                 6
Chase under Morris’s control, still attempted to close the deal.

On November 30, Koutsoubos indicated that payment for one million

shares   was   being    sent.    On   December    2,   however,    Koutsoubos

complained that 50-Off should have disclosed their October sales

figures to him and asked that the purchase price be lowered.                 On

December 8 or 9, 50-Off lowered the price to $3.25 per share.                On

December 22, 50-Off further lowered the price to $2.66.                      On

December 29, Koutsoubos explained that he would not be able to pay

for the shares until January 3, 1995, because his bank officer was

on   vacation.         On   January   18,    Koutsoubos    stated     that    a

representative of 50-Off should come to Lugano to get paid.

     In the meantime, BPS authorized Chase to transfer the 50-Off

shares into one of Chase’s street names, Egger & Co (“Egger”).               On

January 19, Zajec transferred the shares.          Upon learning that the

shares had been reregistered into the Egger account, Ryan, 50-Off’s

counsel, contacted Joel Brimmer, a Security Control Analyst at

Chase involved in the stock transfer.            On January 26, Ryan told

Brimmer that the shares had still not been paid for and asked why

they had been reregistered.           Brimmer indicated that he would

contact the “appropriate” person.             On January 27, Ryan faxed

Brimmer and Morris a letter expressing concern and stating that the

shares had not yet been paid for.           In this letter, he referenced

his conversation with Brimmer the previous day.                   This letter

stated, among other things, that 50-Off would consider it improper

“for [BPS] or any of its agents, including Chase or its affiliates,

to transfer or otherwise deal with [the stock] . . . .”               Brimmer

                                      7
forwarded this letter to the relevant administrative department at

Chase.    No administrator looked at the letter until mid-February.

     Pursuant to further instructions from BPS, on January 26,

Chase transferred the 50-Off stock into its account at Depository

Trust Co. (“DTC”), a clearinghouse for electronic transactions, and

then into DTC’s street name, Cede & Co.           On January 27, BPS began

to sell the stock.      At this point, Koutsoubos was receiving money

from the sale of stock for which he had never paid.

     On February 15, Ryan wrote Brimmer again, complaining about

the lack of response to his January 27 letter.                By February 17,

Zajec was given both of Ryan’s letters and he quickly forwarded

them to    Chase’s     legal   department.       Lourdes    Fidalgo,    a    Chase

manager,    compiled    a   report   and   referred   the    matter     to   Vice

President and Senior Associate Counsel Lynne Barry, who brought in

another    Chase     attorney,   Barbara     Barrantes,      to     investigate.

Barrantes froze the 50-Off shares, but lifted the freeze after

twenty-four hours.      Barrantes testified that she lifted the freeze

because    she   determined    that,   without    court    authority     from   a

complaining party, Chase could not freeze the shares in BPS’s

account.

     On February 28, Barrantes wrote a letter to BPS.                   In this

letter, she expressed concern about the 50-Off transaction and

another    BPS   transaction     involving    Interactive         Network,    Inc.

(“INNN”) stock.5       She stated, “we must again remind you of your


     5
        The INNN transaction was another fraud scheme perpetrated
by Koutsoubos.

                                       8
obligation to indemnify Chase against all liability, loss and

expense,    including         attorneys’       fees,   which    we     may       incur    in

connection with your custody account or the custody agreement.”

     On    February     21,     50-Off     filed    this    suit.          The   original

defendants       were   BPS,    Howard     White,      Dennis   Morris,          Morris   &

Associates, Yanni Koutsoubos, Arnass, Ltd., Brocimast Enterprises,

Ltd., Andalucian Villas (Forty-Eight), Ltd., and Betafid, S.A. 50-

Off alleged that the Defendants had stolen its stock, converted its

stock,    breached      the     subscription       agreements        and     the    escrow

agreement, and committed securities fraud.

     On March 3, Barrantes spoke with Ryan, apparently for the

first    time.      She   indicated        that    she     could     not     reveal      any

information without a subpoena.                 On this date, there were still

507,000 50-Off shares remaining to be sold.                        Barrantes did not

reveal that shares were being sold and it is not clear whether 50-

Off was aware that the unpaid-for shares were being sold or,

alternatively, that there were any shares that had not been sold.

Within a few more business days, the remaining half-million 50-Off

shares    were    transferred      out     of    Chase’s    control        under    BPS’s

instructions.      50-Off received no money for any of the 1.5 million

shares.

     In December 1996, 50-Off joined Chase as a Defendant to this

lawsuit. 50-Off alleged that Chase had illegally converted the 1.5

million shares.         50-Off also alleged that Chase had aided and

abetted the other Defendants in violating the Texas Securities Act.

This second count against Chase was dismissed by the district

                                           9
court.

     BPS appeared and participated in the trial. However, near the

end of the trial, BPS settled for $2.4 million.              Morris appeared

and testified, but then disappeared.           50-Off did not pursue its

claims against Morris.       Neither White, nor Koutsoubos, nor any of

their companies     appeared.6      During   trial,   the    district   court

entered a $30 million default judgment against Koutsoubos.              After

trial, the district court entered default judgments for $10.575

million for compensatory damages plus $25.95 million each in

punitive damages against Koutsoubos’s shell companies, White, Aries

Peak,    and   Betafid.     The   district   court   found   that   each   had

maliciously committed securities fraud.

     After the presentation of evidence, Chase moved for a directed

verdict on the grounds that 50-Off’s conversion claim was deficient

as a matter of law.       The district court denied this motion and the

case went to the jury on a single liability theory--whether Chase

had converted 50-Off’s stock. The jury found that Chase had indeed

converted the stock and awarded 50-Off $5.475 million ($3.65 per

share for 1.5 million shares) in compensatory damages, $7.5 million

in consequential damages, and $138 million in punitive damages.

The district court credited BPS’s $2.4 million settlement against

this award and entered a judgment in favor of 50-Off for $148.575

million.

     The district court denied Chase’s motions to set aside the


     6
           White’s company Aries Peak had been joined in December
1996.

                                      10
verdict, for a new trial, for remittitur, and for other post-

judgment relief. The district court also denied Chase’s request to

reduce the damage award by $4.3 million--the amount Jefferies, 50-

Off’s investment bank, paid 50-Off in a settlement.7       Chase now

appeals.

                                II.

     Chase first argues that, as a matter of law, 50-Off did not

establish conversion because 50-Off did not hold title to or

possess the shares on the date of the alleged conversion.      Chase

also argues that 50-Off’s conversion claim must fail as a matter of

law because 50-Off suffered no actual damages from the alleged

conversion.

                                A.

     Under Texas law, “the tort of conversion is defined as the

unauthorized and wrongful assumption and exercise of dominion and

control over the property of another, to the exclusion of and

inconsistent with the owner’s rights.”    Crutcher v. Continental

Nat’l Bank, 884 S.W.2d 884, 888 (Tex. App. 1994, writ denied).

Chase relies on the well-established rule that a plaintiff seeking

to establish conversion must prove title, possession, or the

immediate right to possession of the property at the time of the

alleged conversion.    See Lone Star Beer, Inc. v. Republic Nat’l

Bank of Dallas, 508 S.W.2d 686, 687 (Tex. Civ. App. 1974, no writ).

     Chase argues that when 50-Off sent the shares to Dennis Morris



     7
         Chase does not challenge this ruling on appeal.

                                11
on November 14, 1994, the company voluntarily relinquished to

Morris all rights to its shares.             For legal support, Chase relies

on Texas Business and Commerce Code § 8.313(a)(1) (West 1991),

which provides that certificated securities, such as those under

consideration in this case, are transferred to a purchaser at “the

time he or a person designated by him acquires possession” of

them.8   Chase contends that because Dennis Morris was a “person

designated by [the purchaser],” and 50-Off voluntarily gave its

shares to Morris, 50-Off did not hold any rights to possession or

ownership when Chase allegedly converted the stock on November 18.

In response, 50-Off argues that Morris, the escrow agent, was

designated   by   it   and   not   by    the    purchasers   so    that   50-Off

maintained rights of possession over the stock--through Morris--

until November 18.

     Consistent with Texas law, the district court instructed the

jury that “[i]n a claim for conversion, a plaintiff must show []

that (1) the defendant wrongfully exercised dominion or control

over the property to the exclusion of, or inconsistent with the

plaintiff’s rights of possession . . . .”           Therefore, when the jury

concluded that Chase converted the stock, it implicitly found that

50-Off--through    its   escrow     agent       Morris--retained    rights   of

possession over the 1.5 million shares until November 18.


     8
        Also relevant is Section 8.301 of the Texas Business and
Commerce Code, which provides: “(a) Upon transfer of a security to
a purchaser (Section 8.313), the purchaser acquires the rights in
the security which his transferor had or had actual authority to
convey unless the purchaser’s rights are limited by Section
8.302(d).”

                                        12
     After reviewing the record, we find sufficient support--

through, among other things, the escrow agreement and Morris’s

testimony--for this implicit jury finding.    Moreover, as 50-Off

points out, Chase did not advocate this “purchasers’ designee”

theory before the jury.    For example, in its closing argument,

Chase barely mentions Morris, stating only, “Dennis Morris, the

escrow agent . . . was the one whose job it was to take this stock,

take the money, and get the exchange made.    Mr. Morris testified

that that was his job.    There’s a contract that spells out that

that was his job . . . , the escrow agreement.”       If anything,

Chase’s own closing argument treats Morris as 50-Off’s agent, and

not as the purchasers’ designee.

     In light of the jury’s implicit finding that 50-Off--through

Morris--retained rights to possession of the stock and the support

for that finding within the record, we reject Chase’s contention

that as a matter of law no conversion took place on November 18.9

                                B.


     9
         The facts in this case are different from those in a
typical conversion case, in which the tortfeasor takes possession
of the converted property. Here, Chase committed certain errors
that helped thieves steal 50-Off’s stock. Although this factual
scenario is atypical, it still satisfies the elements of the tort
and Chase does not argue to the contrary. See, e.g., Restatement
of Torts (Second) § 222 (1965) (“If the dispossession seriously
interferes with the right of the other to control the chattel, the
actor may also be subject to liability for conversion.”); D & G
Equip. Co., Inc. v. First Nat’l Bank of Greencastle, 764 F.2d 950,
955-58 (3d Cir. 1985) (bank liable for conversion, under the UCC,
when it permitted unauthorized former corporate executive to
deposit and disburse corporate funds to his personal account);
Sherrill White Constr. Co. v. South Carolina Nat’l Bank, 713 F.2d
1047, 1049-51 (4th Cir. 1983) (bank liable for conversion when it
accepted and cashed unauthorized checks from corporation).

                                13
     Chase next argues that it cannot be held liable for conversion

because 50-Off suffered no actual damages.           Chase also contends

that if 50-Off did suffer actual damages, these damages were not a

result of Chase’s actions.     We reject both of Chase’s arguments.

     Damages are an element of a conversion claim under Texas law.

See Reed v. White, Weld & Co., Inc., 571 S.W.2d 395, 397-98 (Tex.

Civ. App. 1978, no writ).     Conversion damages “are limited to the

amount necessary to compensate the plaintiff for the actual losses

or injuries sustained as a natural and proximate result of the

defendant’s conversion.”     United Mobile Networks, L.P. v. Deaton,

939 S.W.2d 146, 148 (Tex. 1997).       The proper measure of damages for

conversion is generally the fair market value of the converted

material on the date that it was converted, plus any other losses

suffered as a natural and proximate cause of the conversion.             See

id.; Quest Medical, Inc. v. Apprill, 90 F.3d 1080, 1086 & n.6 (5th

Cir. 1996).   In this case, the judge instructed the jury that, if

they found that Chase had converted the stock, they “may award 50-

Off Stores the fair market value of the stock on the day and at the

place it was converted and any other losses or expenses which were

a natural and proximate cause of the conversion.”           Chase did not

challenge the correctness of the jury charge on this issue and does

not do so here.     Our question, then, is whether the evidence is

sufficient to support the jury’s award based on these instructions.

     Chase argues that because the purchasers were thieves and

never intended to pay for the stock, 50-Off did not show that

Chase’s   actions   caused   50-Off    any   loss.   In   support   of   its

                                      14
argument, Chase relies primarily on Deaton, 939 S.W.2d at 148-49.

In Deaton, the defendant had converted the plaintiff’s customer

list by illegally copying the list.          The plaintiff sought damages

equal to the list’s value, basing this valuation on the income the

list had generated.          The Supreme Court of Texas held that the

plaintiff failed to prove damages because it provided no proof that

the defendant’s conversion lowered the value of the plaintiff’s

customer list.      Id.   Deaton, however, is inapposite to the case at

hand.    In Deaton, the court found no proof of damages because the

plaintiff never lost its customer list.             The defendant converted

the list by reproducing it, not by taking the only available copy

of the list.   The plaintiff submitted no evidence that the value of

its original list had been lowered by the defendant’s conversion.

Id.     Here, Chase did not copy or otherwise duplicate the stock.

Instead, Chase moved the actual 1.5 million shares into BPS’s

account before 50-Off or Morris received any payment for the

shares.     While    Chase    is   correct   that   Deaton   stands   for   the

proposition that a conversion plaintiff must prove that the loss of

the converted material caused the damages claimed, Deaton has no

further application to the facts of this case.

      In this case, according to Chase’s own expert’s testimony, if

Chase had noticed the conflict between the delivery ticket and the

customer’s order, the stock would have been returned to the issuer,

50-Off, or at least held by Chase until it was determined whether

money was owed on the stock.         If Chase had acted in this manner,

the 1.5 million shares would have been returned to 50-Off, if not

                                       15
in late November, then at some later time.          50-Off could have then

found new purchasers for the stock.          It is the proceeds from this

later sale--actual damages--that Chase’s conversion prevented 50-

Off from realizing.10      Or, more simply put, the shares had value

when they were deposited at Chase. When Chase converted the stock,

it took this value from 50-Off.            Chase’s conversion was thus a

cause of 50-Off’s damages.

                                      C.

       We turn next to the propriety of the compensatory damage

award.      This issue turns on whether the record supports the award.

       When we divide the compensatory damage award of $5.475 million

by the numbers of shares converted--1.5 million--it is clear that

the jury found that each share had a fair market value of $3.65.

Fair market value is the price that a willing purchaser would pay

for the stock and the price that would cause a willing seller to

part    with    the   stock,   when   such   a   sale   is   an   arms-length

transaction.      See, e.g., Quest Medical, 90 F.3d at 1086.         Because


       10
        Chase states that “50-Off’s sole damage theory posited that
the thieves would have paid the purchase price absent the alleged
conversion . . . .” The record, however, does not support Chase’s
characterization of 50-Off’s argument. 50-Off presented evidence
that if Chase had acted correctly, the stock would have been
returned to 50-Off. During its closing argument, 50-Off stated
that if Chase had “followed that agreement [made at the deposit
window] this stock never would have gotten into the hands of the
thieves.” 50-Off is therefore not limiting its claim to one that
the thieves would have paid for the stock. At most, 50-Off argues
that, absent Chase’s conversion, either Koutsoubos would have paid
for the stock (which he did in some of his previous stock
purchases) or the stock would have been returned to 50-Off. In
either case, whether Koutsoubos intended to pay for the stock or
not does not alter the basic fact that the stock had value when
Chase converted it.

                                      16
Koutsoubos probably never intended to pay the price he negotiated

for the stock, the stock price that Koutsoubos agreed upon with 50-

Off is not a useful indication of fair market value.                   It only shows

what price 50-Off would accept, not the price an arms-length

purchaser would pay.

       The price Koutsoubos agreed to pay, however, was not the only

evidence of the stock’s value.              50-Off presented evidence that in

the    week    prior    to    arranging     the   1.5   million    share       sale    to

Koutsoubos, it sold 310,000 shares to European investors at $3.75

per share in an arms-length transaction.                  50-Off also presented

evidence that it had received an offer from another legitimate

buyer for 190,000 shares at $3.65 per share.11                    In addition, the

jury    was    told    that    on   November      18,   1994,   the    date    of     the

conversion, 50-Off shares were trading on the NASDAQ market at

between     $4.375     and    $4.75   per    share.      Because      shares    from    a

Regulation S offering cannot be sold immediately to American

investors, these shares sell for less than the unrestricted shares

trading on markets such as the NASDAQ.                    The jury heard expert

testimony indicating that a 20 percent discount for Regulation S

shares was plausible.          Thus, a fair market value of $3.65 per share

in a Regulation S offering is reasonable for a stock trading on the

NASDAQ exchange at between $4.375 and $4.75 per share.                         In sum,

there is ample evidence to support the jury’s finding that on

November 18, 1994, the 50-Off stock had a fair market value of


       11
              This proposed sale was not completed on Koutsoubos’s
request.

                                            17
$3.65 per share and that the conversion of the 1.5 million shares

caused 50-Off to suffer a loss of $5.475 million.

                               III.

     Chase next challenges the jury award of $138 million in

punitive damages. Because we agree with Chase that the evidence is

insufficient to support an award of punitive damages in this case,

we vacate the jury’s punitive damage award.12

     The court instructed the jury that it could award punitive

damages if “the defendant acted with malice or willfulness or with

callous and reckless indifference to the safety or rights of

others.”   The court also instructed the jury that the defendant’s

behavior must be “shocking and offensive” before it could award

punitive damages.    Chase did not object to the district court’s

charge.    We therefore review the record to determine whether the

evidence is sufficient for the jury to determine that Chase’s

behavior was malicious or willful or made with callous and reckless



     12
          Chase also contends that the district court’s jury
instructions for awarding punitive damages were incorrect.
However, Chase failed to preserve this issue for appeal.         We
therefore do not consider this argument and assume without deciding
that the jury instructions on punitive damages were correct as
given.
     50-Off argues that Chase also waived the issue of whether the
evidence was sufficient to support an award of punitive damages by
failing to include that issue within its motion for judgment as a
matter of law.     After reviewing the record, we conclude that
Chase’s objection to the jury charge on this issue--in which Chase
argued that the evidence was insufficient to submit the question of
punitive damages to the jury--was sufficient to preserve the error
for appeal under Fed. R. Civ. P. 50. See, e.g., Scottish Heritable
Trust, P.L.C. v. Peat Marwick Main & Co., 81 F.3d 606, 610-11 (5th
Cir. 1996); Polanco v. City of Austin, Texas, 78 F.3d 968, 973-75
(5th Cir. 1993).

                                18
indifference so as to warrant a punitive damage award.            After a

careful review of the record, we conclude that no matter how 50-Off

attempts to massage the facts, Chase did not act in a manner

justifying an award of punitive damages.

     A low-level Chase employee conducting high-volume business

made an error that led to the unpaid-for 50-Off stock being

deposited “free” into BPS’s account. As previously discussed, this

error     constituted   conversion   and    rendered   Chase   liable   for

substantial damages.       However, despite 50-Off’s claims to the

contrary, it presented no evidence that Chase or any of its

employees intended to illegally convert the stock or otherwise aid

in Koutsoubos’s criminal scheme.13

     In addition to making the processing error constituting the

conversion, Chase was slow to react to 50-Off’s expressions of

concern in January and February 1995.         50-Off contacted Chase and

made the bank aware of possible problems with the 50-Off stock

transaction. Chase took weeks to follow up on these complaints and

to ascertain what had taken place.         If Chase had reacted faster or

more aggressively, Koutsoubos and his coconspirators might have

been stopped before all the 50-Off stock was sold.        However, beyond

these two points--the processing error and the delay--there is

little support for the award of punitive damages, and this evidence


     13
         Just because Chase possessed the intent required for
conversion--that is, the intent to move the stock from the holdover
account into BPS’s account--does not mean that Chase possessed the
sort of wrongful intent required for punitive damages under the
jury instructions. See Winkle Chevy-Olds-Pontiac, Inc. v. Condon,
830 S.W.2d 740, 746 (Tex. App. 1992, writ dism’d).

                                     19
alone is not sufficient to warrant an award of punitive damages.

       50-Off places special emphasis on the fact that Chase had an

indemnity provision with BPS.         50-Off notes that when it brought

its concerns to Chase’s attention, Chase reminded BPS that it

expected to be indemnified for any losses or damages it suffered

from following BPS’s instructions.             50-Off contends that this

evidence demonstrates that Chase was willing maliciously to ignore

the rights of 50-Off or any other small company so long as such a

request came from an important customer such as BPS.

       50-Off, however, ignores a major point. BPS was a customer of

Chase, and therefore Chase owed BPS important duties.               See, e.g.,

King v. Crossland Sav. Bank, 111 F.3d 251, 259 (2d Cir. 1997) (bank

owes duty of care to customer); Young v. U.S. Dep’t of Justice, 882

F.2d    633,   643   &   n.12   (2d   Cir.   1989)   (bank   owes    duty    of

confidentiality to customer).         50-Off, on the other hand, was not

a Chase customer (at least in this matter) and thus Chase’s duties

to 50-Off were limited.         See Renner v. Chase Manhattan Bank, 1999

WL 47239, *13 (S.D. N.Y. 1999); see also Guidry v. Bank of LaPlace,

740 F. Supp. 1208, 1218 (E.D. La. 1990), aff’d as modified, 954

F.2d 278, 286-87 (5th Cir. 1992); E.F. Hutton Mortgage Corp. v.

Equitable Bank, N.A., 678 F. Supp. 567, 577-79 (D. Md. 1988).               The

only obligations Chase owed 50-Off evolved out of the events that

took place at the deposit window.          Far from Chase’s loyalty to BPS

being evidence of behavior deserving punishment, Chase might well

have broken banking laws had it not protected BPS’s confidences or

had it released information without a subpoena or other court

                                      20
authorization.     See, e.g., N.Y. Banking Law § 134(5).        Thus, it is

not surprising that after becoming aware of possible problems with

BPS’s   account,    Chase   reminded     BPS   that   it   expected   to   be

indemnified for liabilities resulting from BPS’s instructions.

This evidence certainly does not support an inference that Chase

acted maliciously toward 50-Off.

     50-Off stresses a number of additional events, such as Chase’s

actions in the INNN stock fraud also committed by Koutsoubos, in an

attempt to justify the award of punitive damages.           However, after

considering the record in detail, we conclude that these events--

upon which 50-Off places considerable reliance--at most demonstrate

errors in judgment and technical flaws in Chase’s procedures that

left them exposed to a cunning criminal such as Koutsoubos.            These

events do not demonstrate the sort of maliciousness, willfulness,

or reckless indifference that would support an award of punitive

damages.

     In sum, while Chase converted 50-Off’s stock, the record

evidence does not support an inference that Chase acted with such

malice or reckless indifference as to justify an award of punitive

damages.   For this reason, the district court should not have

submitted the issue of punitive damages to the jury.           We therefore

vacate the award of punitive damages.

                                   IV.

     Chase next argues that the district court made a number of

evidentiary errors that mandate reversal and retrial.                 Chase

contends that the district court should have admitted evidence and

                                   21
instructed the jury on proportionate responsibility among the

Defendants and on 50-Off’s failure to mitigate, and should not have

excluded the deposition testimony of Claude Battiaz, the BPS

executive in charge of BPS’s relationship with Chase.       We turn now

to those arguments.

                                  A.

     Chase challenges the district court’s decision to exclude

evidence of the Defendants’ proportionate responsibility and its

refusal to instruct the jury on this issue.14      In response, 50-Off

contends, first, that Chase waived this issue for appeal and,

second, that the district court’s ruling was correct.15

     50-Off contends that Chase failed to identify the affirmative

defense of proportionate responsibility as a contested issue of

fact or law in the Pretrial Order and also failed to timely request

an instruction or special interrogatory on the issue.           50-Off

acknowledges   that   Chase   submitted   a    proposed   proportionate

responsibility special interrogatory.         However, 50-Off contends



     14
          Chase requested that the jury be given a special
interrogatory assigning responsibility for the conversion among
BPS, Betafid, S.A., Yanni Koutsoubos, Andalucian Villas (Forty
Eight) Ltd., Arnass Ltd., Brocimast Enterprises, Ltd., Dennis
Morris, Howard White, Aries Peak, Inc., and The Chase Manhattan
Bank.   The district court rejected this proposed interrogatory
without explanation.
     15
        In its initial brief, Chase challenged the district court’s
exclusion of evidence of negligence by 50-Off, Akin, Gump, and
Jefferies. 50-Off contended that Chase was procedurally barred
from raising this issue on appeal. In footnote 27 of its reply
brief, Chase concedes this point. In the text of the reply brief,
Chase focuses solely on the alleged error concerning the
responsibility of the other Defendants.

                                  22
that because this interrogatory was submitted only after 50-Off had

closed its case and after BPS had settled, it would have been

“manifestly unjust” for the trial court to have allowed Chase to

raise a new defense theory so late in the trial, citing Flannery v.

Carroll, 676 F.2d 126, 130-31 (5th Cir. 1982) (plaintiff barred

from raising claim not contained in pretrial order, except by

having the district court approve a motion to amend the pretrial

order).

      Chase does not deny that it failed to raise the defense in the

Pretrial Order.    Rather, Chase contends that it did not waive the

issue because it raised the defense of the Defendants’ comparative

responsibility in its answers and in a pretrial motion.              Chase did

raise the issues of comparative responsibility and comparative

negligence in its answer, although it is not clear whether Chase

was   referring   to   the   other   Defendants   or   to   50-Off    and   its

advisors.   The motion Chase refers us to, however, focuses on the

actions of 50-Off and its law firm and does not mention either

comparative responsibility or comparative negligence in reference

to the other Defendants’ actions.          Thus, Chase asks that we remand

this case for a new trial because the district court rejected a

requested jury interrogatory based on a defense that was not

clearly raised in the Pretrial Order, in Chase’s answers, or at

trial until after 50-Off had rested its case.           The district court

did not abuse its discretion in refusing to give this issue to the

jury under the circumstances and a remand for trial of this defense

is not warranted.      See Fed. R. Civ. P. 16.

                                      23
                                B.

     Chase next contends that the district court erred in excluding

evidence of 50-Off’s failure to mitigate damages and in refusing to

instruct the jury on mitigation.     After reviewing the record, we

find no error.

     In Bank One, Texas, N.A. v. Taylor, 970 F.2d 16 (5th Cir.

1992), we set forth the predicate a litigant must establish in

order to have the issue of mitigation presented to the jury.    We

stated: “One who claims a failure to mitigate damages has the

burden to prove not only a lack of diligence on the part of [the]

injured party, but also the amount by which damages were increased

by such failure to mitigate.”   Id. at 29.

     Chase contends that 50-Off could have taken two steps to

reduce its damages. First, it argues that 50-Off could have sought

a court order enjoining Chase from transferring the stock. Second,

it argues that 50-Off could have diluted its total outstanding

shares by issuing additional shares of stock and thereby reducing

its loss from the converted shares.

     Chase failed to cite to the district court or to this Court a

single case in which a court has held that a litigant’s failure to

seek an injunction enjoining expected harmful conduct is required

for that litigant to recover for its full damages.16   As we stated


     16
        Chase points to NY Banking Law § 134(5) in support of its
argument that--absent a court order--New York law prohibited it
from recognizing any claim adverse to its depositor to securities
on deposit in the bank. Whatever effect is to be given to this
statute, Chase did not argue this statute to the district court in
support of its mitigation argument and cannot raise it for the

                                24
in Bank One: “an injured party is required to incur only slight

expense and reasonable effort in mitigating his damages.” 970 F.2d

at 29 (internal quotation marks omitted).            We are satisfied that

neither of the actions Chase contends 50-Off should have taken meet

this test.     Also, the record is bare with respect to the extent of

any savings 50-Off would have enjoyed if it had sought and obtained

an injunction in late January or early February 1995, when 50-Off

first became aware that the stock was at risk.               For example, on

February 15, 1995, approximately 900,000 shares of stock remained

in Cede & Co., but the record does not establish the value of those

remaining shares as of that date.             Similarly, Chase proffered no

evidence tending to show the extent of 50-Off’s savings if it had

diluted its stock.

      Chase did not demonstrate that a legitimate jury question was

presented from which a jury could have determined that 50-Off

failed to mitigate its damages by not undertaking the actions

described above.      Because no genuine issue of fact was presented,

the district court did not err in excluding the evidence and in

refusing to instruct the jury on mitigation.

                                         C.

      Chase    next   contends    that    the   district   court    abused   its

discretion by excluding the deposition testimony of Claude Battiaz,

a BPS executive in charge of that bank’s relationship with Chase.

The   taking    of    Battiaz’s   deposition      involved   a     complex   and



first time on appeal.

                                         25
disorganized stream of events, which included conflicts between

Swiss and American civil procedure, confusion over the required

oaths, and the presence of a translator for only half of the

deposition.    Considering this confusion and the incompleteness of

Battiaz’s deposition, we conclude that the district court did not

abuse its discretion in excluding Battiaz’s deposition testimony.

                                    V.

     Chase    contends,   and   50-Off   concedes,   that   the   award   of

prejudgment interest and the award of consequential damages are

duplicative--both serve to compensate the plaintiff for the loss of

use of the converted property. See Harris v. Christianson-Keithley

Co., 303 S.W.2d 422, 427-28 (Tex. Civ. App. 1957, writ ref’d

n.r.e.).     Therefore, we vacate the award of prejudgment interest.

                                CONCLUSION

     In this case, 50-Off, a discount retail store, sued to recover

damages for losses it suffered as the victim of an international

securities fraud.     50-Off was awarded substantial compensatory,

consequential, and punitive damages against Chase, one of the banks

through which the securities fraud was consummated.          Although the

jury was entitled to find that Chase converted 50-Off’s stock,

Chase did not act in such a manner as to justify an award of

punitive damages.    We therefore vacate that award.        We also vacate

the district court’s award of prejudgment interest.



AFFIRMED in part, VACATED in part.



                                    26
