F.D.I.C. v. Canfield

• Decision Date: 23 June 1992
• Docket Number: No. 91-4143,91-4143
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant, v. Charles R. CANFIELD; Benjamin F. Armstrong; Theodore May; Newell P. Parkin; Mac Christensen; Richard A. Christenson; Dale R. Curtis; Frank Diston; Robert Garff; Lee K. Irvine; Ellis Ivory; Arch Madsen; Gus Paulos; Aline Skaggs; Ronald Swenson; Harold W. Milner; and Ernest Wilkinson, Defendants-Appellees. Utah Bankers Association, the American Bankers Association, Gene Rice, Lola M. Rice, George E. Leonard, Jr., Mary Sandra Leonard, Gloria Leonard, Ernest F. Modzelewski, Nancy L. Modzelewski, Reginald T. Morrison, Catherine G. Morrison, Mel L. Decker, Clarice O. Decker, Donald S. Johnson, Marian E. Johnson, Gilberto I. Valdez, Gloria Ann Valdez, Hayden C. Hayden, Ms. Hayden C. Hayden, Peter C. Byrne, Mrs. Peter C. Byrne, Howard E. Kraff, Mrs. Howard E. Kraff, and Utah State Department of Financial Institutions, Amici Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 443

967 F.2d 443

61 USLW 2017

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Appellant, v. Charles R. CANFIELD; Benjamin F. Armstrong; Theodore May;

Newell P. Parkin; Mac Christensen; Richard A. Christenson;

Dale R. Curtis; Frank Diston; Robert Garff; Lee K.

Irvine; Ellis Ivory; Arch Madsen; Gus Paulos; Aline

Skaggs; Ronald Swenson; Harold W. Milner; and Ernest

Wilkinson, Defendants-Appellees.

Utah Bankers Association, the American Bankers Association,

Gene Rice, Lola M. Rice, George E. Leonard, Jr., Mary Sandra

Leonard, Gloria Leonard, Ernest F. Modzelewski, Nancy L.

Modzelewski, Reginald T. Morrison, Catherine G. Morrison,

Mel L. Decker, Clarice O. Decker, Donald S. Johnson, Marian

E. Johnson, Gilberto I. Valdez, Gloria Ann Valdez, Hayden C.

Hayden, Ms. Hayden C. Hayden, Peter C. Byrne, Mrs. Peter C.

Byrne, Howard E. Kraff, Mrs. Howard E. Kraff, and Utah State

Department of Financial Institutions, Amici Curiae.

No. 91-4143.

United States Court of Appeals, Tenth Circuit.

June 23, 1992.

Edward J. O'Meara, Counsel, F.D.I.C., Washington, D.C. (Ann S. Duross, Asst. Gen. Counsel, Richard J. Osterman, Jr., Sr. Counsel, and Jeffrey Ross Williams, Sr. Atty., F.D.I.C., Washington, D.C.; and Warren Patten and Craig T. Jacobsen of Fabian & Clendenin, Salt Lake City, Utah, of counsel, with him on the brief), for plaintiff-appellant F.D.I.C.

Robert S. Campbell, Jr. (Joann Shields of Campbell Maack & Sessions, Blake S. Atkin of Parry, Murray & Cannon, James R. Holbrook and Lynda Cook of Callister, Duncan & Nebeker, Michael N. Zundel of Jardine, Linebaugh, Brown & Dunn, Dale J. Lambert of Christensen Jensen & Powell, George J. Romney of Romney & Condie, and John W. Lowe, Salt Lake City, Utah, with him on the brief), for defendants-appellees.

James S. Jardine and Don B. Allen of Ray, Quinney & Nebeker, Salt Lake City, Utah, filed brief for amicus curiae Utah Bankers Ass'n.

John J. Gill, General Counsel, and Michael F. Crotty, Deputy General Counsel for Litigation, filed brief for amicus curiae American Bankers Ass'n.

Aaron M. Peck, Terry O. Kelly, and Carl W. Sonne of McKenna & Fitting, Peter K. Rosen of Rosen & Winston, Los Angeles, Cal., and Stephen M. Dichter, and Gregg H. Temple of Harrison, Harper, Christian & Dichter, P.C., Phoenix, Ariz., for amici curiae Gene Rice, Lola M. Rice, George E. Leonard, Jr., Mary Sandra Leonard, Gloria Leonard, Ernest F. Modzelewski, Nancy L. Modzelewski, Reginald T. Morrison, Catherine G. Morrison, Mel L. Decker, Clarice O. Decker, Donald S. Johnson, Marian E. Johnson, Gilberto I. Valdez, Gloria Ann Valdez, Hayden C. Hayden, Ms. Hayden C. Hayden, Peter C. Byrne, Mrs. Peter C. Byrne, Howard E. Kraff, and Mrs. Howard E. Kraff.

George Sutton, Com'r, Utah Dept. of Financial Institutions, Paul Van Dam, Atty. Gen. of State of Utah, Jan Graham, Utah Sol. Gen., Bryce H. Pettey, Asst. Atty. Gen., and Billy L. Walker, Sp. Asst. Atty. Gen., Salt Lake City, Utah, for amicus curiae Utah Dept. of Financial Institutions.

Before HOLLOWAY, LOGAN, SEYMOUR, MOORE, TACHA, BALDOCK, BRORBY, EBEL, and KELLY, Circuit Judges.

SEYMOUR, Circuit Judge.

This case requires our construction of section 212(k) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1821(k) (Supp. I 1989). The Federal Deposit Insurance Corporation (FDIC) brought this action in its corporate capacity seeking to hold the officers and directors of the failed Tracy Collins Bank & Trust Company liable under Utah law for their allegedly negligent management of the institution. See 12 U.S.C. § 1823(c), (d)(3)(A); id. § 1821(d)(2) ¹; see also FDIC v. Bank of Boulder, 911 F.2d 1466, 1468-71 (10th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 1103, 113 L.Ed.2d 213 (1991). The district court granted defendants' motion to dismiss, holding that section 1821(k) preempts state law and bars the FDIC from seeking damages from officers and directors of failed institutions for simple negligence. FDIC v. Canfield, 763 F.Supp. 533 (D.Utah 1991). A panel of this court concluded that this holding was contrary to the plain language of section 1821(k) and reversed. We granted rehearing en banc and vacated the panel opinion. After considering additional briefing and hearing oral argument, we conclude that the panel was correct.

"As in any case of statutory interpretation, we begin with the plain language of the law." United States v. Morgan, 922 F.2d 1495, 1496 (10th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2803, 115 L.Ed.2d 976 (1991). " 'Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.' " Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 110 S.Ct. 1570, 1575, 108 L.Ed.2d 842 (1990) (citation omitted). We review the construction of federal statutes de novo. United States v. Temple, 918 F.2d 134, 134 (10th Cir.1990).

The central question in this appeal is whether section 1821(k) establishes a national standard of gross negligence for officers and directors in actions brought by the FDIC, and thereby preempts state statutory or common law permitting such actions for simple negligence. The statute provides:

A director or officer of an insured depository institution may be held personally liable for monetary damages in any civil action by, on behalf of, or at the request or direction of the Corporation, which action is prosecuted wholly or partially for the benefit of the Corporation--

(1) acting as conservator or receiver of such institution,

(2) acting based upon a suit, claim or cause of action purchased from, assigned by, or otherwise conveyed by such receiver or conservator, or

(3) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed in whole or in part by an insured depository institution or its affiliate in connection with assistance provided under section 1823 of this title,

for gross negligence, including any similar conduct or conduct that demonstrates a greater disregard of a duty of care (than gross negligence) including intentional tortious conduct, as such terms are defined and determined under applicable State Law. Nothing in this paragraph shall impair or affect any right of the Corporation under other applicable law.

12 U.S.C. § 1821(k) (emphasis added).

The district court held, and defendants argue, that section 1821(k) preempts state law and limits the FDIC's ability to pursue recovery from officers and directors to those cases in which it can demonstrate gross negligence under the applicable state definition. Under this interpretation, an action like this one, enabled by state law and sounding in simple negligence, would therefore be barred by the statute.

The FDIC contends that the statute preempts only those state laws that require a higher degree of culpability than gross negligence in actions brought by the FDIC against officers and directors. ² Under the FDIC's construction, the last sentence of section 1821(k) is a "savings clause" that saves a simple negligence action against officers and directors of a failed bank in a state where such an action is otherwise permissible. ³

In our judgment, the words used in section 1821(k) to describe the potential liability of officers and directors belie the creation of an exclusive federal liability standard. The section provides that "a director or officer may be held personally liable for monetary damages ... for gross negligence." 12 U.S.C. § 1821(k) (emphasis added). "May" is a permissive term, and it does not imply a limitation on the standards of officer and director liability. See Rose v. Rose, 481 U.S. 619, 626-27, 107 S.Ct. 2029, 2034, 95 L.Ed.2d 599 (1987) (Court refused to read "may" as establishing anything other than discretionary power). FIRREA enables the FDIC to stand in the shoes of the failed bank and its stockholders and to sue the officers and directors for mismanagement under state law. See 12 U.S.C. § 1821(d)(2) infra n. 1; id. § 1823(c), (d)(3)(A). In this context, no reasonable construction of "may" results in an absolute limitation of the liability of officers or directors to instances of gross negligence. Rather, the first sentence of section 1821(k) effectively provides that even where state law under which the FDIC is authorized to bring suit otherwise limits actions against officers and directors to intentional misconduct, an officer or director may nevertheless be held liable for gross negligence. In states where an officer or director is liable for simple negligence, however, the FDIC may rely, as it does in this case, on state law to enable its action.

In order to uphold the district court's construction of section 1821(k), we would have to construe the first sentence of the section as saying that an officer or director may only be held personally liable for gross negligence. This would require us to insert a word into the statute, and we decline to do so. See Resolution Trust Corp. v. Lightfoot, 938 F.2d 65, 66-67 (7th Cir.1991) ("may" does not, on its face, mean "may only").

The last sentence of the statute cements our understanding of it. In construing a statute, reliance must be placed on an unambiguous statute's "evident" meaning. See Small v. Britton, 500 F.2d 299, 301 (10th Cir.1974). With this in mind, we believe that "other applicable law" means all "other applicable law." ⁴ Under the statute then, any other law providing that an officer or director may be held liable for simple negligence survives; such a law would be an "other applicable law," and construing the statute to bar its application would "impair" the FDIC's rights under it.

It is a general rule of construction that the statute should be read as a whole. 2A N. Singer, Sutherland Statutory Construction § 46.05 (5th ed. 1992). Linguistic choices made by Congress in other sections of FIRREA enrich our understanding of the choice made by Congress in section 1821(k). Unless the rest of the...