FDIC v. Barham

• Decision Date: 12 December 1991
• Docket Number: Civ. A. No. 89-0776.
• Citation: 794 F. Supp. 187
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, in its Corporate Capacity v. Charles E. BARHAM, et al.
• Court: U.S. District Court — Western District of Louisiana

794 F. Supp. 187

FEDERAL DEPOSIT INSURANCE CORPORATION, in its Corporate Capacity v. Charles E. BARHAM, et al.

Civ. A. No. 89-0776.

United States District Court, W.D. Louisiana, Monroe Division.

December 12, 1991.

Barry W. Ashe, Cecilia C. Woodley, Stephen G. Bullock, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, La., Betty Jean George Ray, Shreveport, La., Marilyn E. Anderson, Washington, D.C., for plaintiff.

Charles W. Salley, Lunn, Irion, Johnson, Salley & Carlisle, Shreveport, La., for Charles C. Barham.

Charles C. Barham, pro se.

David L. Bussell, pro se.

David T. Caldwell, pro se.

Donald G. Kelly, Kelly & Salim, Natchitoches, La., for Roland Dobson.

James Charles McMichael, Jr., Robert Roberts, III, Blanchard, Walker, O'Quin & Roberts, Shreveport, La., for John J. McHale.

J. Samuel O'Donnell, III, pro se.

Robert Sharp, Jr., Sharp & McVea, Ruston, La., W. Craig Henry, James A. Rountree, Hudson, Potts & Bernstein, Monroe, La., for C.A. Reed, Jr.

F. Drake Lee, Jr., Herschel E. Richard, Jr., Dewey W. Corley, Cook, Yancey, King & Galloway, Shreveport, La., for Joe D. Waggonner, Jr.

Philip A. Franco, F.L. Butler, Adams & Reese, New Orleans, La., Duncan L. Clore, Michael Keeley, Jill Giroir, Strasburger & Price, Dallas, Tex., for Federal Ins. Co.

David T. Caldwell, pro se.

Barry W. Ashe, Cecilia C. Woodley, Stephen G. Bullock, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, La., Betty Jean George Ray, F.D.I.C., Shreveport, La., Marilyn E. Anderson, F.D.I.C., Washington, D.C., for F.D.I.C.

RULING

LITTLE, District Judge.

Plaintiff Federal Deposit Insurance Corporation (FDIC) has brought suit against the former officers and directors of the now defunct First National Bank of Ruston (FNBR).

On 10 April 1986, The Office of the Comptroller of the Currency (OCC) closed FNBR and appointed the Federal Deposit Insurance Corporation (FDIC) as the bank's receiver. Exactly three years later, the FDIC brought this suit, accusing defendants Dobson, Reed, McHale, Sharp, Waggonner and four others of breaches of fiduciary duty and breaches of contract resulting from improper management and lending practices. Defendants thereafter filed a third-party claim against Federal Insurance Company (Federal), alleging that FNBR's liability policy with Federal in effect from September 1981 through September 1984 should cover any damages awarded to FDIC in this action.

We consider (1) defendants' motions to dismiss plaintiff's complaint for failure to state a claim upon which relief may be granted; (2) defendants Sharp and Reed's motion for summary judgment; (3) defendants' motion for summary judgment on the issue of insurance coverage; (4) third-party defendant Federal Insurance Company's motion for summary judgment.

I. DEFENDANTS' MOTIONS TO DISMISS COMPLAINT

Motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted have been filed by defendants Reed, Sharp, Waggonner, McHale, Barham, Dobson, and Caldwell. Because the arguments in these motions are essentially the same, we will consider them together.

The court will not grant Rule 12(b)(6) motions to dismiss unless it is shown beyond a doubt "that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Furthermore, a case should not be dismissed unless an affirmative defense or other bar to relief appears on the face of the complaint. See Garrett v. Commonwealth Mortgage Corp. of America, 938 F.2d 591, 599 (5th Cir.1991). Additionally, the court must accept "all well pleaded averments as true and view them in the light most favorable to the plaintiff." Montgomery v. United States, 933 F.2d 348 (5th Cir.1991) (quoting Rankin v. City of Wichita Falls, 762 F.2d 444 (5th Cir.1985)).

In their motions to dismiss, defendants argue that under Section 212(k) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) (12 U.S.C. § 1821(k)) they may be held liable only for acts of administration amounting to more than simple fault. Section 1821(k) creates a federal liability standard for officers and directors of federally insured depository institutions. It 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.

The federal liability standard created by § 1821(k), by its express terms, requires a showing of either gross negligence or greater violations of duty. Thus, § 1821(k) plainly preempts any state law that would prohibit the FDIC from suing officers and directors for gross negligence or conduct more negligent than gross negligence.

Defendants argue that § 1821(k) also preempts state causes of action that would allow the FDIC to sue officers and directors for other forms of negligence. They contend that § 1821(k) establishes a uniform national standard under which officers and directors may only be held liable for "gross negligence." Because FDIC has failed to specify a claim of "gross negligence" in its complaint, defendants argue, the complaint must be dismissed for failure to state a claim upon which relief may be granted.

The plain language doctrine controls our interpretation of a statute. Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 110 S.Ct. 1570, 108 L.Ed.2d 842 (1990). The concluding sentence of § 1821(k) states that nothing in the statute "shall impair or affect any right of the FDIC under other applicable law." We interpret this sentence to mean what it says — that the FDIC is not barred from proceeding under other applicable laws. There is nothing in § 1821(k) that precludes claims for breach of a lesser standard of care than gross negligence.¹ We assume that if Congress had intended to preempt the application of state law they would have so stated. Instead, the statute declares expressly that it must not be read to limit the FDIC's rights under "other applicable law."

We hold that FDIC's failure to use the magic words "gross negligence" in its complaint is not fatal to its suit; indeed, the FDIC has stated a claim under "other applicable law." Defendants motions to dismiss do not require us to explicate other standards of care applicable to FDIC's complaint (under Louisiana law). We need only ask whether FIRREA preempts the FDIC from suing defendants for other forms of negligence besides "gross negligence." Because we find that the FDIC is not barred by 12 U.S.C. § 1821(k) from proceeding under a lesser standard of fault than gross negligence, we must deny defendants' motions to dismiss.

II. SHARP AND REED'S MOTION FOR SUMMARY JUDGMENT

Defendants Reed and Sharp have also filed a motion for summary judgment on the claims brought against them by the FDIC. We will deny this motion.

Reed and Sharp attempt to distinguish their roles as officers and directors of FNBR from the other defendants in this case. They claim that they cannot be liable because they played a lesser part in the approval of certain loans and had no notice of the process employed by the bank staff in suggesting board approval for certain loans. Reed and Sharp also argue that none of their activities can be defined as "gross negligence" under Louisiana law, which they maintain is the applicable negligence standard in this case.

After reviewing their motion for summary judgment and the supporting documents, we conclude that Reed and Sharp have failed to show that there are no genuine issues of material fact to be decided at trial. The fact intensive arguments contained in this motion — which attempt to differentiate Reed and Sharp's responsibilities for particular loans from those of the other defendants — are more appropriately decided at trial.² A complete development of the facts surrounding the involvement of all of the defendants is necessary³ before a decision can be made on Reed and Sharp's acts and conduct. We therefore deny the motion for summary judgment.

We note, however, that the pleadings reveal some confusion regarding the applicable standards of law. Both parties argue that this court must apply federal common law to this case because it involves directors and officers of a national bank. These arguments ignore the clear applicability of FIRREA's § 1812(k). In enacting § 1812(k), Congress created a federal statutory standard applicable to officers and directors of national banks. Any federal common law in existence previous to the enactment of FIRREA would be superseded by the statute: "when Congress has legislated on the subject, the legislation and not federal common law, will be deferred to." Wayne v. Tennessee Valley Authority, 730 F.2d 392 (5th Cir.1984), cert. denied, 469 U.S. 1159, 105 S.Ct. 908, 83 L.Ed.2d 922 (1991). Accordingly, this court will apply § 1812(k) as the federal standard of liability, and will disregard any previously applicable federal common law.

Where it...