F.D.I.C. v. Alexander, 94-4229
| Citation | 78 F.3d 1103 |
| Decision Date | 21 March 1996 |
| Docket Number | No. 94-4229,94-4229 |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant, v. Ronald E. ALEXANDER and Buckingham, Doolittle & Burroughs, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
On Appeal from the United States District Court for the Northern District of Ohio; Lesley Brooks Wells, Judge.
LaVern A. Pritchard (argued and briefed), Minneapolis, MN, for F.D.I.C.
Timothy T. Reid, D. Cheryl Atwell (briefed), Reid, Berry & Stanard, Cleveland, OH, for Ronald E. Alexander.
Gerald A. Messerman (argued and briefed), Duvin, Cahn & Hutton, Cleveland, OH, Philip S. Kushner (briefed), Messerman & Messerman, Cleveland, OH, for Buckingham, Doolittle and Burroughs.
Before ENGEL, BROWN, and MILBURN, Circuit Judges.
BROWN, J., delivered the opinion of the court, in which ENGEL, J., joined. MILBURN, J. (pp. ---- - ----), delivered a separate dissenting opinion.
In this legal malpractice case, the Federal Deposit Insurance Corporation (FDIC), which has taken over for the now-dissolved Resolution Trust Corporation (RTC), 1 appeals from a grant of summary judgment for the defendants, an attorney and his law firm. The district court held that Ohio's one-year statute of limitations barred the malpractice claim, which arose out of events that occurred in 1986 involving the defendants and the First Savings and Loan Company of Massillon, Ohio (First Savings). We agree and AFFIRM.
In December of 1985, the board of directors of First Savings requested and received the resignation of its president of eight years, H. William Troop. First Savings retained the services of attorney Ronald Alexander and his firm, Buckingham, Doolittle & Burroughs (the Buckingham firm), to investigate Troop's actions and any possible legal recourse against Troop. Alexander reviewed materials relating to three large commercial loans which Troop had made, and which were First Savings's main concern at the time. First Savings expected to incur losses on the three loans but had not yet done so. Alexander also reviewed, among other things, an insurance policy First Savings held, which protected it from losses caused by the misconduct of its directors and officers (the D & O Policy). The subject of this suit is the alleged negligence of Alexander in the loss of First Savings's potential claim against the insurance company based on the conduct of Troop.
On January 6, 1986, Alexander made his initial presentation of his findings and opinions at a special meeting of the First Savings board. According to the minutes of that meeting, Alexander discussed the possibility that Troop had committed a "breach of duties," and Alexander "[f]elt this would be difficult to litigate inasmuch as no written job description existed." Alexander also discussed why the loans which he had investigated had potential losses, and he discussed a number of potential adverse effects that litigating a claim against Troop could have on the company. Alexander concluded by stating that the directors "must continue to inquire for information and facts" and then "make a decision at the next regular board meeting as to what course of action they want to pursue."
Two weeks later, Alexander wrote an opinion letter to the board, more fully detailing his conclusions and the bases for them. Alexander first advised the board that it would be "difficult" to argue that Troop had committed a breach of contract, because (1) there was no written employment contract or job description for the First Savings president, and (2) First Savings had not had formal underwriting guidelines when the loans were made.
Alexander then considered whether claims could be made against Troop for breaches of his fiduciary duties as an officer and director of First Savings. With regard to two of the loans investigated, Alexander opined that it would be "difficult" to claim Troop breached his fiduciary duties in making them. Basing claims against Troop on these two loans would be problematic because First Savings's loan department employees had improperly handled mechanical details, such as property appraisal and the perfection of security interests. Alexander noted that Troop could argue he had reasonably relied on the other employees to handle such matters. Thus, Alexander stated, "The probability that [First Savings] can recover from Mr. Troop any losses ultimately arising from these two loans is remote."
With regard to a third loan, however, Alexander explained that any loss incurred would stem from a failure which could be charged to Troop. Though Alexander deemed this to be First Savings's "potentially best claim," Alexander concluded for other reasons that "the probability of success in that claim is not likely."
Alexander went on to say that First Savings did not then "have a clear right of recovery" from Troop and that, "even if loss is ultimately incurred, the possibilities of recovery are only probable, at best." Alexander also suggested that the board, before it made a "final decision whether to pursue this matter further," should weigh three factors beyond the likelihood of recovery: potentially high (and unrecoverable) litigation expenses, time that would be lost by officers, directors, and employees, and adverse media attention which could hurt First Savings in the marketplace.
The First Savings board met the next day to review Alexander's letter. According to the minutes of that meeting, each board member commented about the various factors and the likelihood of success. The board then voted unanimously not to act against Troop at that time, but stated that it wanted to "leave open an avenue for possible future action if evidence would warrant it."
In December of 1986, as its D & O Policy for the relevant time period was about to expire, First Savings asked Alexander to draft a letter giving notice of existing and potential claims to its insurer. The letter, dated December 30, 1986, gave the insurer notice of various claims against officers and directors of First Savings, but it included nothing about a claim against former president Troop for breach of contract or fiduciary duties.
Gene Boerner, who was then president of First Savings, testified that he was aware the letter contained no claim against Troop, and that "he would have known," as a practical matter, that the absence of such a claim meant First Savings's claims against Troop would not be satisfied. The board, Boerner said, had wanted to pursue claims against Troop, but "the chances of success were less than 50-50 as I remember and it was not a situation that Ron Alexander suggested that we enter into." Billing records and other evidence reflect that Alexander and the Buckingham firm continued to represent First Savings in matters involving the D & O Policy and director and officer liability in general after writing this letter. That representation did not involve any claims against Troop, however, because the claim letter to First Savings's insurer asserted no such claims. The commercial loans which Troop had made eventually went into default, causing First Savings to lose more than $3 million.
First Savings failed, and the RTC was appointed as its receiver on April 19, 1990. The RTC filed this suit in the district court on April 16, 1993, alleging primarily that (1) Alexander was negligent in investigating the possible claims against Troop, and (2) the Buckingham firm failed to supervise Alexander properly. In October of 1994, the district court entered summary judgment for the defendants on the grounds that all of the RTC's claims were time-barred. 2 The RTC timely appealed. While that appeal was pending, so-called "sunset" legislation ended the life of the RTC, and the FDIC assumed all cases which the RTC had pending. 12 U.S.C. § 1441a(m) (1994). For the sake of continuity, we shall refer to the RTC in the remainder of this opinion.
We review the district court's grant of summary judgment de novo, using the same test the district court used. E.g., City Management Corp. v. U.S. Chem. Co., 43 F.3d 244, 250 (6th Cir.1994). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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." Fed.R.Civ.P. 56(c).
The RTC was never allowed to resurrect claims which had lapsed under state statutes of limitations when it was appointed receiver. E.g., Resolution Trust Corp. v. Seale, 13 F.3d 850, 853 (5th Cir.1994). Thus, the parties agree that state law, in this case Ohio law, is dispositive on the threshold question of whether any legal malpractice claims against the defendants lapsed before the RTC was appointed receiver for First Savings. In Ohio, legal malpractice claims must be brought within one year from the date the cause of action accrues. Ohio Rev.Code Ann. § 2305.11(A) (Baldwin 1994). The leading Ohio case holds that a legal malpractice claim "accrues," and the statute begins to run, on the later of two dates: (1) "when there is a cognizable event whereby the client discovers or should have discovered that his injury was related to his attorney's act or non-act and the client is put on notice of a need to pursue his possible remedies against the attorney" or (2) "when the attorney-client relationship for that particular transaction or undertaking terminates." Zimmie v. Calfee, Halter & Griswold, 43 Ohio St.3d 54, 538 N.E.2d 398, 401 (1989). Thus, a court must examine both dates, and the later of the two will control when the statute begins to run. Id.
In determining when the "cognizable event" took place under Zimmie, a court must explore the facts of the case and...
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