Fdic v. Skow

• Decision Date: 14 August 2012
• Docket Number: Civil Action No. 1:11–CV–0111–SCJ.
• Citation: 955 F.Supp.2d 1357
• Parties: FDIC, as receiver of Integrity Bank of Alpharetta, Georgia, Plaintiff, v. Steven M. SKOW, Alan K. Arnold, Douglas G. Ballard, Clinton M. Day, Joseph J. Ernest, Donald C. Hartsfield, Jack S. Murphy, and Geraldo O. Reynolds, Defendants.
• Court: U.S. District Court — Northern District of Georgia

955 F.Supp.2d 1357

FDIC, as receiver of Integrity Bank of Alpharetta, Georgia, Plaintiff,

v.Steven M. SKOW, Alan K. Arnold, Douglas G. Ballard, Clinton M. Day, Joseph J. Ernest, Donald C. Hartsfield, Jack S. Murphy, and Geraldo O. Reynolds, Defendants.

Civil Action No. 1:11–CV–0111–SCJ.

United States District Court,

N.D. Georgia,

Atlanta Division.

Aug. 14, 2012.

Christopher D. Kiesel, Dustin R. Bagwell, Kyle M. Keegan, Keegan, Denicola, Kiesel, Bagwell, Juban & Lowe, LLC, Baton Rouge, LA, Jeanne Simkins Hollis, Simkins Hollis Law Group, P.C., Atlanta, GA, for Plaintiff.

Paul Anthony Piland, Richard Randolph Edwards, III, Cochran & Edwards, LLC, Smyrna, GA, James E. Connelly, Jennifer Saffold Collins, John Gregory Perry, Robert Riles Ambler, Jr., Womble Carlyle Sandridge & Rice, LLP, Aaron M. Danzig, Edward Alexander Marshall, Arnall Golden & Gregory, Stanley Harold Pollock, Haskell, Slaughter, Young & Rediker, LLC, David Lewis Balser, Ellen Claire Carothers, Tracy Klingler, King & Spalding, LLP, James Barton Manley, Jr., Jeffrey Ronald Baxter, McKenna Long & Aldridge, LLP, Atlanta, GA, Frank M. Young, III, T. Dylan Reeves, Kirk D. Smith, Haskell Slaughter Young & Rediker, Birmingham, AL, for Defendants.

ORDER

STEVE C. JONES, District Judge.

This matter is before the Court on the Plaintiff's Motion for Reconsideration and Partial Summary Judgment, or in the Alternative to Certify the Order for Interlocutory Appeal under 28 U.S.C. § 1292(b)[Doc. No. 92].

I.Motion for Reconsideration

The Plaintiff has moved for the Court to reconsider Section I.B.2 of its February 27, 2012 order [Doc. No. 84, pp. 14–19, 2012 WL 8503168] on the Defendants' Motion to Dismiss/Motion for Judgment on the Pleadings¹ based upon the application of Georgia's business judgment rule to allegations of ordinary negligence and breach of fiduciary duty (based upon ordinary negligence).

Under Local Rule 7.2, motions for reconsideration are not to be filed “as a matter of routine practice,” but only when “absolutely necessary.”L.R. 7.2(E), NDGa.Such absolute necessity arises where there is “(1) newly discovered evidence; (2) an intervening development or change in controlling law; or (3) a need to correct a clear error of law or fact.”Boone v. Corestaff Support Servs., Inc.,805 F.Supp.2d 1362, 1368(N.D.Ga.2011).However, a motion for reconsideration may not be used “to present the court with arguments already heard and dismissed or to repackage familiar arguments to test whether the court will change its mind.”Id.Further, a party“may not employ a motion for reconsideration as a vehicle to present new arguments or evidence that should have been raised earlier, introduce novel legal theories, or repackage familiar arguments to test whether the Court will change its mind.”Brogdon v. Nat'l Healthcare Corp.,103 F.Supp.2d 1322, 1338(N.D.Ga.2000).

Plaintiff moves for reconsideration on three alleged errors, as follows:

(1) by holding that an ordinary negligence count can never survive the business judgment rule (“BJR”) and eliminating any inquiry into whether the allegations in the Complaint rebut the presumption of good faith, the Court created an irrebuttable presumption of good faith for ordinary negligence in cases that is contrary to the plain language of the case of Brock Built, LLC v. Blake,300 Ga.App. 816, 686 S.E.2d 425(2009);

(2)the Court applied an incorrect standard of care;

(3)the Court erred in holding that a court-created business judgment presumption can repeal the statutory standard of care and transform it from ordinary negligence into gross negligence.[Doc.No. 92–1, p. 10].

A.Alleged error # 1: application of the business judgment rule and its rebuttable presumption

In the February 27, 2012 ruling, the Court held that the Defendants' citations of authority (specificallyFlexible Products Co. v. Ervast,284 Ga.App. 178, 643 S.E.2d 560(2007)andBrock Built, LLC v. Blake,300 Ga.App. 816, 686 S.E.2d 425(2009)²) regarding the application of Georgia's business judgment rule to claims for ordinary negligence (based on acts and omissions in the discharge of Defendants' responsibilities as bank directors and officers)³ were determinative and granted the Defendants' motion to dismiss to this regard.

As set out in the Court's February ruling:

In Flexible Products Co. v. Ervast, the Georgia Court of Appeals stated:

Georgia's business judgment rule relieves officers and directors from liability for acts or omissions taken in good faith compliance with their corporate duties.Such rule forecloses liability in officers and directors for ordinary negligence in discharging their duties.“[O]rdinary diligence or negligence is what an ordinarily prudent man would do under the same circumstances....”Given that officers and directors thus are protected from liability for ordinary negligence,the trial court erred in refusing to direct a verdict for [defendant] on [plaintiff's] ordinary negligence claim.

284 Ga.App. at 182, 643 S.E.2d at 564–65(emphasis added).

In Brock Built, LLC v. Blake, the Georgia Court of Appeals explained the business judgment rule as follows:

Georgia law requires that corporate officers and directors discharge their duties in good faith and with the care of an ordinarily prudent person in a like position.In determining whether a corporate officer has fulfilled his or her statutory duty, Georgia courts apply the business judgment rule.The business judgment rule affords an officer the presumption that he or she acted in good faith, and absolves the officer of personal liability unless it is established that he or she engaged in fraud, bad faith or an abuse of discretion:⁴

The business judgment rule protects ... officers from liability when they make good faith business decisions in an informed and deliberate manner.The presumption is that they have acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.Unless this presumption is rebutted, they cannot be held personally liable for managerial decisions.However, officers may be held liable where they engage in fraud, bad faith, or an abuse of discretion.⁵

Allegations amounting to mere negligence, carelessness, or “lackadaisical performance” are insufficient as a matter of law.

300 Ga.App. at 821–22, 686 S.E.2d at 430–31(citations omitted, emphasis added).⁶

The Brock Built court further stated: “[T]he business judgment rule is a policy of judicial restraint born of the recognition that [officers] are, in most cases, more qualified to make business decisions than are judges.”Id. at 823and686 S.E.2d at 431(quotingIn re The Bal Harbour Club,316 F.3d 1192, 1194–95(II)(11th Cir.2003)).

As stated above, Plaintiff moves for reconsideration on the ground that by holding that an ordinary negligence count can never survive the BJR and eliminating any inquiry into whether the allegations in the Complaint rebut the presumption of good faith, the Court created an irrebuttable presumption of good faith for ordinary negligence in cases that is contrary to the plain language of the case of the Brock Built case.

The crux of the present motion for reconsideration involves the proper interpretation of the Flexible Products and Brock Builtcases.

Before going any further, the Court must first consider the question raised by Plaintiff in its brief as to whether this Court is bound by two intermediate appellate decisions of the Georgia Court of Appeals.Doc.No. 92–1, p. 18.Plaintiff cites the case of C.I.R. v. Estate of Bosch,387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886(1967) for the proposition that a decision of an intermediate appellate court is not controlling where the highest court of the State has not spoken on the point.

The Court notes that the Plaintiff's citation of the Bosch's Estate case is incomplete, as after the stated proposition, the United States Supreme Court went on to state: “ ‘an intermediate appellate state court ... is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.’ ”387 U.S. at 465, 87 S.Ct. at 1782(emphasis added).

As correctly stated by Defendants, Bosch's Estate does not direct federal courts to ignore state court decisions.Doc. No. 110, p. 23.In addition, there is a subsequent United States Supreme Court case, Gooding v. Wilson,405 U.S. 518, 526 n. 3, 92 S.Ct. 1103, 1108 n. 3, 31 L.Ed.2d 408(1972) in which the Supreme Court recognized that it had been informed that “the Court of Appeals of Georgia is a court of statewide jurisdiction, the decisions of which are binding upon all trial courts in the absence of a conflicting decision of the Supreme Court of Georgia.”Id.The Supreme Court went on to hold that “[f]ederal courts therefore follow these holdings as to Georgia law.”Id.

There is also Eleventh Circuit authority which holds that:

[a]federal court applying state law is bound to adhere to decisions of the state's intermediate appellate courts absent some persuasive indication that the state's highest court would decide the issue otherwise.A federal court is bound by this rule whether or not the court agrees with the reasoning on which the state court's decision is based or the outcome which the decision dictates.

Silverberg v. Paine, Webber, Jackson & Curtis, Inc.,710 F.2d 678, 690(11th Cir.1983)(emphasis added);see alsoState Farm Mut. Auto. Ins. Co. v. Duckworth,648 F.3d 1216, 1224(11th Cir.2011)(recognizing that the process is not exact and reviewing relevant precedent to guide analysis) and Versiglio v. Bd. of Dental Exam'rs of Ala.,651 F.3d 1272(11th Cir.2011), vacated and superseded on rehearing byVersiglio v. Bd. of Dental Exam'rs of Ala.,686 F.3d 1290(11th Cir.2012)(recognizing the practice of giving ordinary deference to state courts when they interpret...