Comeau v. Rupp

Decision Date29 October 1992
Docket NumberCiv. A. No. 86-1531-B.
Citation810 F. Supp. 1127
PartiesRoger L. COMEAU; David L. Comeau; Charles G. Comeau; Rooks County Savings Association; and Federal Savings and Loan Insurance Corporation (as successor in interest to Rooks County Savings Association); and Rupp Financial Corporation, Plaintiffs, v. Terry RUPP; C.F. Rupp; Farmers National Bank; Alexander Grant & Co., Defendants, Grant Thornton (formerly Alexander Grant & Co., a partnership); and Fox & Company, a partnership, Defendants-Counterclaimants and Cross-Claimants. Grant THORNTON and Fox & Company, Third Party Plaintiffs, v. Mimi KRUSE; Jack Curtis; George Ostmeyer; Bryan Ronck; and A.J. Schwartz, Third Party Defendants.
CourtU.S. District Court — District of Kansas

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A.J. Schwartz, Donald E. Schrag, Ken M. Peterson, Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, for Roger L. Comeau, David L. Comeau, Charles G. Comeau, Rupp Financial Corp.

Byron J. Beck, Mary L. Barrier, Theresa L.F. Levings, Zoe Ann K. Holmes, Morrison & Hecker, Kansas City, MO, John C. Nettels, Jr., Morrison & Hecker, Wichita, KS, for F.D.I.C.

Robert F. Lytle, Patrick D. Gaston, Bennett, Lytle, Wetzler, Winn & Martin, Prairie Village, KS, for Terry Rupp, C.F. Rupp.

Robert J. Roth, William R. Smith, Hershberger, Patterson, Jones & Roth, Wichita, KS, Don C. Staab, Hays, KS, for Farmers Nat. Bank.

Ron C. Campbell, John T. Conlee, Fleeson, Gooing, Coulson & Kitch, Wichita, KS, Theodore A. Livingston, Jr., Mayer, Brown & Platt, Chicago, IL, for defendants Grant Thornton and Fox & Co.

Roger L. Bainbridge, Office of Thrift Supervision, Shawnee Mission, KS, James R. Bloss, Office of Thrift Supervision, Atlanta, GA, for Office of Thrift Supervision.

Robert C. Brown, Smith, Shay, Farmer & Wetta, Wichita, KS, for Jack Curtis, Bryan Ronck.

Jana D. Abbott, Ken M. Peterson, Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, for A.J. Schwartz.

MEMORANDUM AND ORDER

BELOT, District Judge.

This matter is before the court on the various motions for summary judgment and/or dismissal. Several miscellaneous motions are also pending. The court has previously outlined the factual circumstances and procedural history of this litigation. See 762 F.Supp. 1434, 1437-38 (per Theis, J.), and will discuss additional facts as they relate to the respective motions. For convenience, the court provides an index of the pending matters.

                                                                                             Page
                I.    Summary Judgment and/or Dismissal Motions ....................... 1137-1163
                      A.  FDIC v. Accountants ......................................... 1137-1146
                          1.  Liability of FDIC for Acts of RCSA's Agents ............. 1138-1143
                          2.  Causation Requirements for Auditor Malpractice .......... 1143-1144
                          3.  Reckless and Wanton Conduct ............................. 1144-1145
                          4.  Statute of Limitations .................................. 1145-1146
                      B.  Comeaus v. Accountants ...................................... 1146-1154
                          1. Section 10(b) and Rule 10b-5 ............................. 1146-1151
                          2. Breach of Fiduciary Duty and Reckless Conduct ............ 1151-1152
                          3. Standing to Assert Claims Against Fox .................... 1152-1154
                      C.  Accountants v. A.J. Schwartz ..................................... 1154
                      D.  Comeaus v. Rupps ............................................ 1154-1161
                          1.  Federal Securities Claims ............................... 1154-1155
                              a.  § 10(b) of the Securities Act of 1934 ............... 1154
                              b.  § 12(2) of the Securities Act of 1933 ............... 1154
                          2.  State Law Claims ........................................ 1155-1161
                              a.  Securities Claims ................................... 1156-1160
                              b. Common Law Claims ......................................... 1160
                      E. FDIC v. Rupps ................................................ 1161-1162
                      F. Accountants v. Rupps ......................................... 1161-1162
                      G. Accountants v. Comeaus ............................................ 1162
                      H. Accountants v. Bryan Ronck & Jack Curtis ..................... 1162-1163
                II.   Motion for Order Approving Settlement ........................... 1163-1164
                III.  Accountants' Motion to Dismiss FDIC's Complaint and Other Sanc-
                       tions .......................................................... 1165-1167
                IV.   Objections to Magistrate's Order ..................................... 1167
                V.    Motion to Bifurcate ............................................. 1167-1168
                VI.   Conclusion ........................................................... 1168
                
I. Summary Judgment and/or Dismissal Motions

Several parties have moved for summary judgment.

Rule 56(c) of the Federal Rules of Civil Procedure directs the entry of summary judgment in favor of the party who "shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses...." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The court's inquiry is to determine "whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Summary judgment is inappropriate if there is sufficient evidence on which a trier of fact could reasonably find for the nonmoving party. Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 684 (10th Cir.1991).

The burden of proof at the summary judgment stage is similar to that at trial. "Entry of summary judgment is mandated, after an adequate time for discovery and upon motion, against a party who `fails to make a showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Aldrich Enters., Inc. v. United States, 938 F.2d 1134, 1138 (10th Cir.1991) (quoting Celotex, 477 U.S. at 322, 106 S.Ct. at 2552). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact by informing the court of the basis for its motion. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552. This burden, however, does not require the moving party to "support its motion with affidavits or other similar materials negating the opponent's claim." Id. (emphasis in original). Once the moving party properly supports its motion, the nonmoving party "may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. at 2514; Devery Implement Co. v. J.I. Case Co., 944 F.2d 724, 726 (10th Cir. 1991). The court reviews the evidence in a light most favorable to the non-moving party, e.g., Washington v. Board of Public Utilities, 939 F.2d 901, 903 (10th Cir.1991), under the substantive law and the evidentiary burden applicable to the particular claim. Anderson, 477 U.S. at 255, 106 S.Ct. at 2513.

A. FDIC v. Accountants (Doc. 821)

Defendants Grant Thornton ("Grant") and Fox & Company ("Fox") (collectively, "the Accountants") move for summary judgment on all claims filed against them by the Federal Deposit Insurance Corporation ("FDIC"). A brief recitation of the nature of these claims is in order.

The FDIC brings this action in its corporate capacity as the successor in interest to the Rooks County Savings and Loan Association ("RCSA" or "Association"). The FDIC has sued Terry and C.F. Rupp ("the Rupps"), who from May 1983 until February 1986 were majority owners, president, and directors of the RCSA. The minority owners and directors during this same time period were plaintiffs Roger, David, and Charles Comeau ("the Comeaus").1 The FDIC alleges that the lending practices of the Rupps caused the RCSA to suffer losses on specific loans, for which the FDIC seeks recovery under a single theory of breach of fiduciary duty to the Association.

The FDIC also brings common law claims against the Accountants. The FDIC alleges that the Accountants negligently and recklessly certified RCSA's financial statements for the years 1984 and 1985 as conforming to Generally Accepted Accounting Principles ("GAAP"), notwithstanding the Accountants' actual or constructive knowledge of the high risk posed by certain participation loans. The specific loans for which the FDIC seeks recovery originated from the Halle Mortgage Company — a mortgage brokerage in Colorado Springs, Colorado that was involved in real estate acquisition and development in Colorado. The FDIC alleges that the Accountants failed to recognize the high risk nature of these loans, and that the losses suffered on these loans would have been avoided if the Accountants had properly alerted the Comeaus and George Ostmeyer — alleged "outside directors" of the RCSA Board.

The Accountants raise a series of interrelated legal arguments that will frame the scope of the court's factual review. According to the Accountants: (1) the Rupps' knowledge and concealment of material facts, which the FDIC itself alleges, must be imputed to the RCSA and the FDIC as its successor in interest; (2) the Rupps' misfeasance, imputed to the FDIC, is contributory negligence on the part of plaintiff FDIC, which bars the FDIC from recovery; (3) reliance on the 1984 and 1985 audits is an...

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