F.D.I.C. v. Gladstone, Civil Action No. 93-11255-NG.

• Decision Date: 11 March 1999
• Docket Number: Civil Action No. 93-11255-NG.
• Citation: 44 F.Supp.2d 81
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Summer GLADSTONE, Anthony F. Delapa, A. James Derderian, Alfred Gladstone, Charles H. Turner, III, David Ean Coleridge, an interested Underwriter at Lloyd's London, individually, and on behalf of all the other interested underwriters at Lloyd's London, who have subscribed to Savings and Loan Blanket Bond No. 834/FB890701, Defendants and Third Party Plaintiffs, v. Sumner Gladstone, Third Party Defendant and Fourth Party Plaintiff, v. Anthony F. Delapa and A. James Derderian, Fourth Party Defendants.
• Court: U.S. District Court — District of Massachusetts

44 F.Supp.2d 81

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. Summer GLADSTONE, Anthony F. Delapa, A. James Derderian, Alfred Gladstone, Charles H. Turner, III, David Ean Coleridge, an interested Underwriter at Lloyd's London, individually, and on behalf of all the other interested underwriters at Lloyd's London, who have subscribed to Savings and Loan Blanket Bond No. 834/FB890701, Defendants and Third Party Plaintiffs, v. Sumner Gladstone, Third Party Defendant and Fourth Party Plaintiff, v. Anthony F. Delapa and A. James Derderian, Fourth Party Defendants.

Civil Action No. 93-11255-NG.

United States District Court, D. Massachusetts.

March 11, 1999.

COPYRIGHT MATERIAL OMITTED

Christine M. Roach, Kern, Hagerty, Roach & Carpenter, Boston, MA, Kevin F. Moloney, Barren & Stadfeld, Boston, MA, Alan L. Spear, Federal Deposit Ins. Corp., Receivership Operations and Litigation, Washington, DC, for Resolution Trust Corp.

Richard J. Grahn, Looney & Grossman, Boston, MA, Edward T. Robinson, Michael Consentino, Seegel & Lipshutz, Wellesley, MA, for Sumner Gladstone.

Richard J. Grahn, Looney & Grossman, Boston, MA, John C. Ottenberg, Miller, Ottenberg & Dunkless, Boston, MA, John C. Englander, Goodwin, Procter & Hoar, Boston, MA, George Lemelman, Lemelman & Lemelman, Boston, MA, for Anthony F. Delapa.

Richard J. Grahn, Stewart F. Grossman, Elizabeth M. Adler, Looney & Grossman, Boston, MA, for A. James Derderian.

Richard J. Grahn, Stewart F. Grossman, Looney & Grossman, Boston, MA, Edward T. Robinson, Michael Consentino, Seegel & Lipshutz, Wellesley, MA, for Alfred L. Gladstone.

MEMORANDUM AND ORDER

GERTNER, District Judge.

Plaintiff Federal Deposit Insurance Corporation ("FDIC") submits two Motions to Dismiss Affirmative Defenses: one a Motion to Strike Affirmative Defenses Which Are Not Based upon the Conduct of Federal Regulatory Agencies (docket # 304), and one a Motion to Strike Affirmative Defenses Which Are Based upon the Conduct of Federal Regulatory Agencies (docket # 306).

Specifically, in its Motion to Strike Affirmative Defenses Which Are Based on the Conduct of Federal Regulatory Agencies, the FDIC moves to strike the following affirmative defenses of Anthony F. Delapa ("Delapa") and A. James Derderian ("Derderian") (collectively "Defendants")¹:

(A) Laches (Delapa 8, Derderian 5)²;

(B) Contributory or comparative negligence (Delapa 5, Derderian 3);

(C) Estoppel (Delapa 7, Derderian 10);

(D) Failure to mitigate damages (Delapa 3, Derderian 4);

(E) Defendant's conduct not a proximate cause of plaintiff's damages (Delapa 6, Derderian 15);

(F) Breach of contract (Delapa 15);

(G) Waiver (Delapa 10, Derderian 9).

(H) Ratification by Home Federal Savings Bank board or shareholders (Delapa 11, Derderian 12).³

In its Motion to Strike Affirmative Defenses Which Are Not Based on the Conduct of Federal Regulatory Agencies, the FDIC moves to strike the following affirmative defenses:

(A) Statute of limitations (Delapa 4, Derderian 6);

(B) FDIC's state and federal common law claims are preempted by 12 U.S.C. § 1821(k) (Delapa 14, Derderian 26)

These motions are granted in part and denied in part.⁴ Specifically, the FDIC's Motion to Strike Affirmative Defenses Which Are Based on the Conduct of Federal Agencies (# 306) is DENIED with the exception of the Motion to Strike the Defense of Laches, which is GRANTED. The FDIC's Motion to Strike Affirmative Defenses Which Are Not Based on the Conduct of Federal Agencies (# 304) is GRANTED.

I. FACTUAL BACKGROUND⁵

Defendants Derderian, Delapa and Sumner Gladstone formed American Heritage Bancorp ("AHB") for the purpose of acquiring Home Federal Savings Bank ("HFSB") in 1985. On June 14, 1985, HFSB entered into an agreement under which it became a wholly owned subsidiary of AHB. At the time of the transaction, however, HFSB was failing its federal regulatory capital requirements. Accordingly, the Federal Savings and Loan Insurance Corporation ("FSLIC") conditioned its approval of the transaction on AHB's (1) infusion of capital into HFSB, and (2) agreement to maintain HFSB's net worth at a certain level.

On June 9, 1986, Sumner Gladstone, Delapa and Derderian were appointed to HFSB's Board of Directors. Alfred Gladstone joined the Board as a director on June 25, 1987. And in June 1987, Charles H. Turner, III ("Turner") became HFSB's chief loan officer.

On June 7, 1990, the Resolution Trust Corporation ("RTC") was appointed by the office of Thrift Supervision ("OTS") as receiver, and on June 8, 1990, the RTC took possession of HFSB's property and assets. The FDIC is the statutory successor in interest to the RTC in this litigation.

FDIC alleges that the bank failed because the Defendants breached their duty of care by failing to adhere (1) to HFSB's internal lending policies, and (2) to the requirements of the Federal Home Loan Bank Board's Memorandum R41c prior to approving nineteen loans which eventually defaulted. The FDIC alleges that these failures violated various statutory, contractual and common-law duties owed to HFSB and its depositors and shareholders. The Defendants submit a variety of affirmative defenses against their liability for the bank's failure.

II. STANDARD FOR MOTION TO STRIKE

Rule 12(f) of the Federal Rules of Civil Procedure provides that "the court may order stricken from any pleading any insufficient defense." Motions to strike are generally disfavored, "and will be granted only if it clearly appears that the plaintiff would succeed despite any state of facts which could be proved in support of defense." FDIC v. Eckert Seamans Cherin & Mellott, 754 F.Supp. 22, 23 (E.D.N.Y.1990). Nonetheless, it is useful to consider the legal sufficiency of defenses to clarify the issues and perhaps narrow them.

Delapa and Derderian object that the FDIC's motions to dismiss are not timely, coming approximately five years after the affirmative defenses were set forth in their defenses. They claim that this tardiness will be of great prejudice to them because they have premised their trial strategy and preparation on the availability of these defenses. As described below, to all intents and purposes, these rulings will not materially affect the evidence submitted.

III. AFFIRMATIVE DEFENSES BASED ON CONDUCT OF FEDERAL AGENCIES

The FDIC presents a general argument against recognizing affirmative defenses based on conduct of federal agencies, and a number of specific objections to specific affirmative defenses. I will handle these in turn.

A. General Argument

1. Federal Common Law

For the past several years, there has been a general consensus amongst courts that defendant tortfeasors in failed bank litigation cannot limit their liability by attacking the conduct of the federal banking agencies. As a matter of federal common law, it was held that the FDIC (along with its predecessor RTC) is insulated from these sorts of affirmative defenses for the following three reasons: (1) the FDIC owes no duty to the officers or directors of failed institutions; (2) public policy is against making the public pay for errors of judgment of FDIC officers attempting to save a failed institution, when the failure was caused by the wrongdoing of the defendants; and, (3) the FDIC's conduct in fulfilling its mandate involves discretionary decisions that should not be subjected to judicial second-guessing. The position that the FDIC is insulated from affirmative defenses attacking its conduct was adopted by all three circuits that had examined the question and by the majority of the district courts. See FDIC v. Oldenburg, 38 F.3d 1119, 1121-22 (10th Cir. 1994); FDIC v. Mijalis, 15 F.3d 1314, 1323-24 (5th Cir.1994); FDIC v. Bierman, 2 F.3d 1424, 1438-41 (7th Cir.1993). See also cases cited in Oldenburg, 38 F.3d at 1121. But see FDIC. v. Ashley 749 F.Supp. 1065, 1068-69 (D.Kan.1990); FDIC v. Niblo, 821 F.Supp. 441, 451-52 (N.D.Tex.1993). The majority position derives from Federal Savings and Loan Ins. Corp. v. Roy 1988 WL 96570, at *1 (D.Md. June 28, 1988).

Then, in 1994, the Supreme Court decided O'Melveny & Myers v. FDIC, 512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994). The FDIC, acting as receiver for a failed bank, sued the law firm of O'Melveny & Myers, alleging professional negligence and breach of fiduciary duty in its representation of the bank. The Ninth Circuit held that federal common law governed these questions — whether knowledge of corporate officers acting against the corporation's interest will be imputed to the corporation, and whether such knowledge can be used as the basis of an estoppel defense against the FDIC as receiver. The Supreme Court reversed in an unanimous opinion, holding that with rare exceptions, "there is no federal general common law." 512 U.S. at 83, 114 S.Ct. 2048 (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). Specifically, it held that except as provided for by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") 12 U.S.C. § 1821(d)(2)(A)(i), state law governs the "FDIC's rights and liabilities, as receiver, with respect to primary conduct on the part of private actors that has already occurred." 512 U.S. at 88, 114 S.Ct. 2048.

Since O'Melveny, many courts have reconsidered whether the FDIC can rely on federal common law insulating it from affirmative defenses attacking its own conduct. In this district, for example, the court in FDIC v. Gaziano, No. 96-11361-MEL (D.Mass. January 29, 1998), held that O'Melveny makes it clear that "FIRREA `places the FDIC in the shoes of the insolvent S & L, to work out its claims under state law, except where some provision in the extensive framework of FIRREA provides otherwise.'" Id., slip op. at 7 (citing O'Melveny, 512 U.S. at 86-87, 114 S.Ct. 2048). Other courts, however, have distinguished cases in which the FDIC's own conduct is at issue from the situation in O'Melveny, in which the prior conduct of ...