AMERICAN CAS. v. Sentry Federal Sav. Bank, Civ. A. No. 91-12050-WGY
| Decision Date | 19 October 1994 |
| Docket Number | Civ. A. No. 91-12050-WGY,91-11016-WGY. |
| Citation | 867 F. Supp. 50 |
| Parties | AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Plaintiff, v. SENTRY FEDERAL SAVINGS BANK, Sentry Savings Bank, F.S.B.; Resolution Trust Corporation; Federal Deposit Insurance Corporation; John Abreau; Hester A. Armstrong; Phillip J. Assiran; Robert D. Aubrey; John T. Aylward; Arthur G. Baronousky; Robert F. Barry; Anita M. Bolduc; Barry E. Burden; Byran E. Berthold; Paul F. Butler; Wendy Buttrick; Jane C. Caron; Judith A. Carpenter; Coleman F. Church, III; Alan A. Collette, Jr.; Henry C. Crapo; Wilton Crosby, Jr.; Steven J. DeCesare; Daniel D. Dodge; Harrison T. Drew, Jr.; John A. Drew; Louis Drinkwine; Edward D. Duffy; Jacqueline Dugener; Richard A. Dusseault; Karen L. Etsell; Robert M. Fabiano; Walter H. Fish, Jr.; Martin E. Fishkin; John W. Ford; Edison Fuller; Karen L. Fuller; Lois Gagnon; Rita A. Garbitt; Nicoletta Giaterelis; Jean M. Gilbert; Augustine F. Gouveia; Milton M. Gray, Jr.; Joan M. Griffin; Stephanie A. Haddad; Ernest S. Hill; David A. Hirsch; Ellen T. Holmes; Megan Holway; W. Kent Hudson, Jr.; Gary G. Ingram; Rose R. Johnson; Edward Kelly, Jr.; Peter Kropp; Jeanne L. LaBelle; Anthony J. LaRocco; Marcy L. Long; Francis J. Lucey, Jr.; Walter L. Marchant, Jr.; Elizabeth W. McSorley; Martha D. Miles; Joseph C. Murray; Robert W. Nelson; Barret C. Nichols, Jr.; Martin E. Nolan, Jr.; Kurt D. Noyce; Peter Pollock; Thomas B. Powers; Sabra C. Ramsdell; Deborah P. Robbins; Carlene A. Rogean; Richard L. Rowe, Jr.; Deane B. Sawyer; Pauline L. Schafer; John G. Sears; Maureen C. Shannon; John T. Sheedy; Gerald G. Shuck; Mary L. Smith; George G. Sowpel; Eldredge E. Sparrow; Alan D. Stevens; Elizabeth D. Stukas; John P. Stukas; Betty K. Sullivan; Clifford Swanson; Paula J. Sweetman; Matthew J. Sylvia; Diane Thibault; Sabina Troy; John Turner; Diana L. Varjabedian; William A. Welch; Harold F. Whelden; Paul M. White; Winthrop V. Wilbur, Jr.; Bruce Williams; Patricia E. Winters-Andris; Beverly K. Wood; Mary Jane Yeomans; and Dottie Zakarian, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
COPYRIGHT MATERIAL OMITTED
John A.D. Gilmore, Hill & Barlow, Boston, MA, for American Cas. Co. of Reading, Pa.
Kevin F. Moloney, Alison L. Berman, Barron & Stadfeld, Boston, MA, Eugene J. Comey, Sean M. Fitzpatrick, Katherine C. Linton, Comey & Boyd, Washington, DC, for Resolution Trust Corp.
Michael B. Stusse, Ardito, Sweeney, Stusse, Robertson & Dupuy, West Yarmouth, MA, for F.D.I.C., Hester A. Armstrong, Alan A. Collette, Jr., Wilton Crosby, Jr., John A. Drew, Robert M. Fabiano, Stephanie A. Haddad, Elizabeth W. McSorley, Martha D. Miles, Carlene A. Rogean, George G. Sowpel, Elizabeth D. Stukas, John P. Stukas.
John T. Aylward, pro se.
Jane C. Caron, pro se.
Elyse D. Cherry, Hale & Dorr, Boston, MA, for Karen L. Etsell.
James H. Wexler, Kotin, Crabtree & Strong, Boston, MA, for Martin E. Fishkin, Barrett C. Nichols, Jr., William A. Welch.
Philip M. Boudreau, Hyannis, MA, for Edward Kelly, Jr.
Deane B. Sawyer, pro se.
H. Alfred Yonce, Orleans, MA, for Mary L. Smith.
Robert S. Troy, Law Office of Robert S. Troy, Sandwich, MA, for Sabina Troy.
This declaratory judgment action arises out of a directors' and officers' liability insurance policy (the "Policy") issued by American Casualty Company of Reading, Pennsylvania ("American Casualty") to Sentry Federal Savings Bank ("Sentry"). The relevant undisputed background is as follows.
On September 21, 1990, the Office of Thrift Supervision ("OTS") placed Sentry in receivership/de novo conservatorship and named the Resolution Trust Corporation ("RTC") as the conservator. On March 14, 1991, an action was filed in the Massachusetts Superior Court sitting in and for the County of Barnstable, Robert N. Greenfield, et al. v. Gerald G. Shuck, et al., No. 91-355 (Mass. Sup.Ct., Barnstable, filed March 14, 1991). The Massachusetts action was brought by purchasers of subordinated capital notes ("Securities") of Sentry against executive officers, directors, and branch managers of Sentry. In April, 1991 the action was removed to this Court. On July 24, 1991, the RTC's Motion to Intervene in the Greenfield action was allowed. Greenfield's Third Substitute Complaint alleges the following claims: fraud/deceit (Count I); aiding and abetting harm to third parties (Count II); negligent misrepresentation (Count III); breach of fiduciary duty (Count IV); and violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. (Count V).1 Although not contained in the Third Substitute Complaint, Greenfield also brings a claim for violations of federal securities law, namely, The Securities Exchange Act of 1934, § 10(b) and SEC Rule 10b-5 (Count VI). See Greenfield v. Shuck, 856 F.Supp. 705 (D.Mass.1994) ().
On August 2, 1991, American Casualty filed the instant action. A motion to amend the Complaint was allowed by this Court on February 23, 1992. The Amended Complaint requests that this Court issue a declaratory judgment that there is no coverage available to the defendants2 under the Policy. As grounds therefor, American Casualty alleges that Endorsement No. 16 of the Policy, "Amendment of Merger/Consolidation Clause," provides that the Policy terminated on September 21, 1990 and that the Policy provides no coverage for any action brought after that date (Count I); Endorsement No. 12 of the Policy, "Insured vs. Insured" excludes coverage for any action brought against the directors or officers of Sentry by the RTC or FDIC as the "Insured" (Count II); Endorsement No. 8 of the Policy, "Limitation of Coverage," excludes coverage for actions brought by the FDIC or other regulatory agency, including the RTC (Count III); and the Policy contained "Notice of Claims" provisions at parts 6(a) and (b) and an "Extensions" provision at part 2 that the insured failed to perform (Count IV).
American Casualty has moved for summary judgment on all counts of the Amended Complaint. The RTC, Shuck3, and Fishkin4 have opposed American Casualty's Motion. The RTC has moved for partial summary judgment on the issues of timeliness and sufficiency of notice (Count IV). Shuck and Fishkin have moved for summary judgment on all four counts of American Casualty's Amended Complaint.5
On July 21, 1992, this Court held a hearing regarding the above motions. The motion by the RTC was allowed as to Count IV; the motions by Shuck and Fishkin were taken under advisement on Counts I and III and allowed on Counts II and IV; accordingly, the motion by American Casualty was taken under advisement on Counts I and III and denied on Counts II and IV. The Court will now explain its rulings on Counts II and IV and address Counts I and III.
American Casualty argues that Endorsement No. 8, the Regulatory Endorsement (titled "Limitation of Coverage"), excludes from coverage all loss arising out of any claims which may be brought against directors or officers of Sentry by the RTC or any other regulatory agency. The Endorsement provides:
(Appendix to Plaintiff's Motion for Summary Judgment, Exhibit A.)
12 U.S.C.A. § 1821(d)(2)(A)(i) (West 1989). Since depositors and shareholders have a right to bring derivative claims against directors and officers for mismanagement, the RTC succeeds to those rights. RTC asserts that American Casualty and Sentry should not be able privately to contract to eliminate the RTC's statutory rights.
The RTC also argues that the Regulatory Exclusion should not be enforced because to do so would significantly impair important public policies. "A promise is unenforceable if the interest in its enforcement is outweighed in the circumstances by a public policy harmed by enforcement of the agreement." Town of Newton v. Rumery, 480 U.S. 386, 392, 107 S.Ct. 1187, 1191, 94 L.Ed.2d 405 (1987). The public policy the RTC identifies as being violated is the above cited grant of "rights titles, powers and privileges" of the failed institution and the RTC's broad powers to liquidate or otherwise resolve failed banks in furtherance of the vital public interest in a safe and stable banking system.
Finally, the RTC argues that the Regulatory Exclusion is ambiguous because it could be interpreted as (1) precluding coverage only for secondary claims6 and not for direct claims by the RTC and (2) applying only to regulatory actions by the RTC and not to the assertion of shareholder or depositor claims.
The RTC cites eight federal district courts which have refused to enforce a regulatory exclusion similar or identical to the one at issue. American Casualty cites ten federal district courts and two circuit courts that have reached the opposite conclusion.7 The First Circuit has not addressed the issue. At the urging of this Court, the parties have submitted memoranda addressing the applicability of the doctrine of collateral estoppel or issue preclusion to the issues under consideration.8
American Casualty argues that...
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