Fed. Deposit Ins. Corp. v. Elmore
| Decision Date | 22 November 2013 |
| Docket Number | No. 13 C 1767,13 C 1767 |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR INBANK, Plaintiff, v. ELBERT ELMORE, VIRGINIA BROWNING, NORMAN REIHER and ROBERT ROMERO, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Judge Amy J. St. Eve
AMY J. ST. EVE, District Court Judge:
On March 7, 2013, Plaintiff Federal Deposit Insurance Corporation ("FDIC"), in its capacity as Receiver for InBank, filed a three-count Complaint against Defendants Elbert Elmore, Virginia Browning, Norman Reiher, and Robert Romero (collectively, "Defendants"). (R. 1, Compl.) The Complaint alleges the following: Count I - Negligence (In the Alternative to Count III); Count II - Gross Negligence (12 U.S.C. § 1821(k)); Count III - Breach of Fiduciary Duty as to Defendant Romero (In the Alternative to Count I). Defendants Browning, Reiher, and Romero filed a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6) and Defendant Elmore filed a separate motion to dismiss. (R. 22; R. 28.) Defendants filed a joint memorandum in support of their motions to dismiss. (R. 25, Mem.) For the reasons set forth below, the Court denies Defendants' motions to dismiss.
Plaintiff alleges the following facts, which the Court deems true for purposes of this motion.
InBank, an Illinois-chartered, nonmember, FDIC-insured bank was founded in 1970 under the name Interstate Bank of Oak Forest ("Interstate"). (Compl. ¶ 14.) Its main office was located in Oak Forest, Illinois, and it had branch offices in Chicago, Illinois and Tinley Park, Illinois. (Id.) In 2008, Interstate changed its name to InBank. (Id.) On September 4, 2009, the Illinois Department of Financial and Professional Regulation ("IDFPR") closed InBank and appointed the FDIC as receiver. (Id., ¶ 5.) Pursuant to that appointment, the FDIC succeeded to all rights, titles, powers and privileges of InBank and the stockholders, depositors, and other parties interested in the affairs of InBank. See 12 U.S.C. § 1821(d)(2)(A)(i) (2010).
The FDIC, as receiver for InBank, filed the instant Complaint against Defendants in an effort to recover approximately $6.8 million in losses that the bank had suffered on numerous commercial real estate ("CRE") and acquisition, development and construction ("ADC") loans. (Compl. ¶ 1.) Each Defendant was a member of InBank's Loan Committee during all relevant times for purposes of the Complaint. (Id., ¶¶ 7-10.) The Loan Committee was responsible for approving InBank's loans. (Id., ¶ 7.) Elmore was a founder of InBank and served as CEO from the founding until March 12, 2008, and as a member of the Board from the founding until July 30, 2009. (Id.) Browning was a Senior Vice President from the founding of the bank until March 25, 2009, and served as a member of the Board from April 20, 2005 until March 25, 2009. (Id., ¶ 8.) Reiher was a founder of InBank and served as a member of the Board throughout thebank's existence. (Id., ¶ 9.) Romero was InBank's Vice President of Lending and Senior Lending Officer1 from April 19, 2005 until September 4, 2009. (Id., ¶ 10.)
The FDIC alleges that in 2004, InBank began substantially expanding its lending activities outside its primary trade area of Oak Forest, Illinois. (Id., ¶ 15.) The FDIC asserts that InBank increased its construction and land development loans from approximately $41 million in June 2005 to approximately $61 million in June 2006, and eventually $65 million by March 2007. (Id., ¶ 16.)
The FDIC alleges that Defendants acted negligently (Count I) and grossly negligent (Count II) by disregarding the Bank's loan policies, prudent lending practices, and regulatory warnings about deficiencies in InBank's underwriting, administrative, and operational practices in connection with 15 CRE and ADC loans ("the Subject Loans") between November 30, 2005 and April 9, 2008 that totaled approximately $22 million and have caused losses to date of approximately $6.8 million. (Id, ¶¶ 18-39; 139-149.) The FDIC also alleges that Defendant Romero, as an Officer of the Bank and member of its Loan Committee, owed the Bank fiduciary duties to act with the utmost care and in the best interests of the Bank and that he breached those duties (Count III) by approving the Subject Loans, which he knew disregarded prudent lending practices and violated the Bank's loan policies. (Id., ¶¶ 150-153.)
"A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must"give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) (citation omitted). Under the federal notice pleading standards, a plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Id. at 555. Put differently, a "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570). "In evaluating the sufficiency of the complaint, [courts] view it in the light most favorable to the plaintiff, taking as true all well-pleaded factual allegations and making all possible inferences from the allegations in the plaintiff's favor." AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011).
Defendants argue that the Complaint is untimely because the FDIC filed it nearly six months after the expiration of the statute of limitations. (Mem. at 2.) The FDIC filed this action as receiver for InBank pursuant to 12 U.S.C. § 1821(d)(2) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). FIRREA contains a provision known as the "Extender Statute" that provides a statute of limitations for actions brought by the FDIC as receiver for a failed bank. 12 U.S.C. § 1821(d)(14). The Extender Statute states, in relevant part:
12 U.S.C. § 1821(d)(14).
The appointment of the FDIC as Receiver of InBank on September 4, 2009 triggered the Extender Statute's three year limitations period ("the federal period") under section (A)(ii)(I). Pursuant to section (A)(ii)(II), the limitations period under Illinois law for negligence, gross negligence, and breach of fiduciary duty is five years. 735 ILCS 5/13-205. Defendants assert that the three-year federal period expired on September 5, 2012 and that the appointment of the FDIC as Receiver of InBank extinguished the five-year Illinois period. (Mem. at 3.) Defendants also contend that the Complaint fails to plead either tolling or timeliness under any alternative theory or state statute of limitations. (Id.) Thus, Defendants argue, the March 7, 2013 filing of the Complaint was untimely and the Court should dismiss the Complaint with prejudice. (Id. at 3-4.)
The FDIC responds that it timely filed its claims because the parties entered into a tolling agreement ("the tolling agreement") that tolled and suspended the limitations period, and that it filed its Complaint within the limitations period pursuant to the tolling agreement. (R. 40, Resp. at 2-9.) Alternatively, the FDIC contends that even in the absence of the tolling agreement, it filed the Complaint within the alternative five-year state limitations period pursuant to 12 U.S.C. § 1821(d)(14)(A)(ii)(II) 2. (Id. at 11-15.)
Defendants' statute of limitations argument fails at this stage. Defendants argue that the Complaint is untimely on its face "and fails to plead either tolling or timeliness under any alternative theory or state statute of limitations." (Mem. at 3.) The Seventh Circuit has held that a statute of limitations defense is an affirmative defense and that complaints need not anticipate or allege facts that tend to defeat affirmative defenses. U.S. Gypsum Co. v. Indiana Gas Co., Inc. et al., 350 F.3d 623, 628 (7th Cir. 2003); see also Barry Aviation, Inc. v. Land O' Lakes Mun. Airport Comm'n., 377 F.3d 682, 688 (7th Cir. 2004) (). The exception to this rule arises when the "allegations of the complaint itself set forth everything necessary to satisfy the affirmative defense." Brooks v. Ross, 578 F.3d 574, 579 (7th Cir. 2009). In Brooks, the Seventh Circuit found that it was appropriate to consider the statute of limitations at the motion to dismiss stage because "the relevant dates [we]re set forth unambiguously in the Complaint" and because the plaintiff's substantive response to the statute of limitations defense did not apply to that case. Id. That is not the case here because Defendants executed a tolling agreement with the FDIC prior to the expiration of the three-year federal period. All relevant dates, therefore, are not set forth...
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