Fed. Deposit Ins. Corp. v. Baldini

• Citation: 983 F.Supp.2d 772
• Decision Date: 14 November 2013
• Docket Number: Civil Action No. 1:12–7050.
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver Ameribank, Inc., Plaintiff, v. Jack A. BALDINI, et al., Defendants.
• Court: U.S. District Court — Southern District of West Virginia

983 F.Supp.2d 772

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver Ameribank, Inc., Plaintiff,

v.Jack A. BALDINI, et al., Defendants.

Civil Action No. 1:12–7050.

United States District Court, S.D. West Virginia.

Nov. 14, 2013.

Elizabeth W. Neiberger, Frederick J. Springer, Bryant Miller Olive, Tallahasee, FL, Michael F. Gibson, Gibson Lefler & Associates, Princeton, WV, for Plaintiff.

J. Mark Adkins, Floyd E. Boone, Jr., Julia A. Chincheck, Bowles Rice McDavid Graff & Love, John D. Hoblitzell, III, Rebecca A. Betts, Kay Casto & Chaney, Michael W. Carey, Carey Scott Douglas & Kessler, Charleston, WV, Matthew P. Bosher, Hunton & Williams, Richmond, VA, for Defendants.

MEMORANDUM OPINION AND ORDER

DAVID A. FABER, Senior District Judge.

By Judgment Order dated September 30, 2013, the court DENIED defendants' motions to dismiss. (Doc. Nos. 21, 24, and 26). The reasons for that decision follow.

I. Background

Ameribank, Inc. (“Ameribank” or “the Bank”) was a federally chartered savings bank with headquarters in West Virginia. Complaint ¶ 8. On September 19, 2008, the Office of Thrift Supervision closed Ameribank and appointed the FDIC as Receiver. Id. at ¶ 9. Pursuant to 12 U.S.C. § 1821(d)(2)(A)(I), the FDIC, as receiver, succeeded to all the rights, titles, and privileges of Ameribank and its stockholders, account holders, and depositors. Id.

According to the complaint, the allegations of which are taken as true for purposes of this motion, the closure of Ameribank was the result of a failure on the part of the Bank's officers to properly supervise and manage the Bank's relationship with Bristol Home Mortgage Lending, LLC, d.b.a. LendingOne (“Bristol”). See Complaint generally. Bristol was a third-party mortgage broker and loan originator. Complaint ¶ 1.

The complaint alleges that Ameribank entered into an agreement with Bristol in May of 2004 as part of an effort to expand the bank's market and loan profile. Id. at ¶¶ 31–32. Specifically, the parties entered into a Mortgage Loan Sale and Servicing Agreement (“MLSS Agreement”) under which Ameribank was required to fund all construction and rehabilitation account (“CRA”) loans presented to it by Bristol. Id. at ¶ 33. According to the terms of the agreement, loans would be approved as long as they conformed to Bristol's policies and underwriting standards. Id. However, in many situations, Ameribank funded loans without getting certification from Bristol that the loan met Bristol's underwriting standards. Id. at ¶ 37. Ameribank “allowed Bristol to exercise unfettered and unsupervised control over the underwriting ... and the Bank supplied the funds without further analysis by Defendants as required by safe and sound lending practices.” Id. at ¶ 2. Its role in funding Bristol-originated loans was limited to signing and returning Bristol's Request for Preliminary Approval of Purchase of Loan form. Id. at ¶ 56. The complaint further alleges that Ameribank frequently funded the loans without signing this document and that none of the named defendants required the document to be signed before providing the requested loan funds. Id. at ¶ 57.

The gist of the complaint is that, given the high-risk nature of the loans involved and the amount of control given to Bristol, defendants had a duty to exercise due diligence and implement internal controls and ongoing monitoring to ensure the security of the Bristol-originated loans. See id. at ¶ 35. According to the FDIC, defendants could not in good faith delegate entirely the duty to ensure the safety of these loans to Bristol. Id. at ¶ 3. As a result of the defendants' alleged negligent oversight, the FDIC charges that the Defendants allowed the Bank to fund Bristol-originated loans in violation of: (1) the MLSS agreement between Bristol and Ameribank, (2) Bristol's loan policies, (3) Ameribank's loan policies, (4) applicable underwriting requirements, and (5) prudent lending practices. Id.

Defendants were former officers and, in some cases directors, with Ameribank. They are sued, however, only in their capacity as officers. Defendant James Sutton was Acting President of the Bank from December 21, 2006, until January 18, 2007. Id. at ¶ 16. The complaint further alleges that Sutton “functioned as the Bank's primary executive officer” from January 18, 2007, until October 9, 2007. Id. at ¶ 18. Defendant Jack A. Baldini was interim President of Ameribank from January 18, 2007, through October 9, 2007. Id. at ¶ 19. According to the complaint, “[u]nder Baldini's and Sutton's joint leadership, the number of Bristol-originated loans funded by Ameribank dramatically increased....” Id. at ¶ 20.

Louis J. Dunham was the President and CEO of the Bank from January 27, 2005, to on or about December 15, 2006. Id. at ¶ 22. Dunham also served as the Bank's Florida Branch President from May 2003 to January 27, 2005. Id. David G. Cogswell was Ameribank's Executive Vice President (“EVP”) and Chief Risk Officer (“CRO”) from May 2003 until his resignation on January 18, 2007. Id. at ¶ 25. The complaint further alleges that Cogswell performed the duties of the Chief Financial Officer (“CFO”) during that same time period. Id. Michael O'Brien was the Senior Vice President (“SVP”) and Collections Manager (“CM”) for the Bank from May 2003 until January 18, 2007. Id. at ¶ 27.

In this case, the FDIC claims that defendants' conduct as alleged in the complaint rose to the level of negligence, gross negligence, and a breach of fiduciary duty. The FDIC, therefore, seeks to recover compensatory and other damages suffered by it as the result of the Bank funding Bristol-originated loans without proper supervision or independent review. Id. at ¶ 4.

Pending before the court are individual motions to dismiss by defendants Baldini and Sutton and a joint motion to dismiss by defendants Dunham, Cogswell, and O'Brien (hereinafter referred to as “Dunham defendants” or “Dunham motion”). The FDIC filed a consolidated memorandum in opposition to the motions to dismiss and all defendants have filed reply briefs.

II. Standard of Review

“[A] motion to dismiss for failure to state a claim for relief should not be granted unless it appears to a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proved in support of his claim.” Rogers v. Jefferson–Pilot Life Ins. Co., 883 F.2d 324, 325 (4th Cir.1989) (citation omitted) (quoting Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), and Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.1969)). “In considering a motion to dismiss, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff.” Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993); see also Ibarra v. United States, 120 F.3d 472, 474 (4th Cir.1997).

In evaluating the sufficiency of a pleading, the cases of Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), provide guidance. When reviewing a motion to dismiss, under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief may be granted, a court must determine whether the factual allegations contained in the complaint “give the defendant fair notice of what the ... claim is and the grounds upon which it rests,” and, when accepted as true, “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ( quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed.2004)). “[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.” Twombly, 127 S.Ct. at 1969. As the Fourth Circuit has explained, “to withstand a motion to dismiss, a complaint must allege ‘enough facts to state a claim to relief that is plausible on its face.’ ” Painter's Mill Grille, LLC v. Brown, 716 F.3d 342, 350 (4th Cir.2013) ( quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).

According to Iqbal and the interpretation given it by our appeals court,

[L]egal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement fail to constitute well-pled facts for Rule 12(b)(6) purposes. See Iqbal, 129 S.Ct. at 1949. We also decline to consider “unwarranted inferences, unreasonable conclusions, or arguments.” Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n. 26 (4th Cir.2009); see also Iqbal, 129 S.Ct. at 1951–52.

Ultimately, a complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Iqbal, 129 S.Ct. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Facial plausibility is established once the factual content of a complaint “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. In other words, the complaint's factual allegations must produce an inference of liability strong enough to nudge the plaintiff's claims “ ‘across the line from conceivable to plausible.’ ” Id. at 1952 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).

Satisfying this “context-specific” test does not require “detailed factual allegations.” Id. at 1949–50 (quotations omitted). The complaint must, however, plead sufficient facts to allow a court, drawing on “judicial experience and common sense,” to infer “more than the mere possibility of misconduct.” Id. at 1950. Without such “heft,” id. at 1947, the plaintiff's claims cannot establish a valid entitlement to relief, as facts that are “merely consistent with a defendant's liability,” id. at 1949, fail to nudge claims “across the line from conceivable to plausible.” Id. at 1951.

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