Federal Sav. and Loan Ins. Corp. v. Shelton

• Citation: 789 F. Supp. 1360
• Decision Date: 03 March 1992
• Docket Number: Civ. A. No. 86-393-B.
• Parties: FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION as Receiver of Sun Belt Federal Bank, F.S.B. v. Wendell P. SHELTON, et al.
• Court: U.S. District Court — Middle District of Louisiana

789 F. Supp. 1360

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION as Receiver of Sun Belt Federal Bank, F.S.B. v. Wendell P. SHELTON, et al.

Civ. A. No. 86-393-B.

United States District Court, M.D. Louisiana.

March 3, 1992.

John M. Wilson, Frederick W. Bradley, James D. McMichael, Cheryl V. Cunningham, Liskow & Lewis, New Orleans, La., for FDIC, as Manager of the FSLIC Resolution Trust Fund, as Receiver for SBFB, F.S.B.

Frank J. Gremillion, Baton Rouge, La., Ronald B. Ravikoff, Zuckerman, Spaeder, Taylor & Evans, Miami, Fla., for Wendell P. Shelton.

Sam J. D'Amico, D'Amico & Curet, Baton Rouge, La., for A. Larry Tullos.

Scott H. Crawford, James R. Lewis, Preis & Crawford, Baton Rouge, La., for Robert N. Amacker, Jr., Robert B. Holt, Jr., Harold Dennis, Reynold Minsky, and Bruce Betts.

William A. Hargiss, Monroe, La., for Glenn D. Tanner.

William V. Dalferes, McGlinchey, Stafford, Cellini & Lang, New Orleans, La., for Flournoy Guenard.

Jon C. Adcock, Brook, Morial, Cassibry & Pizza, Baton Rouge, La., Fred J. Cassibry, Jan T. van Loon, Brook, Morial, Cassibry & Pizza, New Orleans, La., for Harry O. Adcock.

Marianne S. Pensa, Galloway, Johnson, Tompkins & Burr, New Orleans, La., Murray H. Wright, Edward E. Nicholas, III, Laura G. Fox, Wright, Robinson, McCammon, Osthimer & Tatum, Richmond, Va., for Continental Cas. Co. and American Cas. Co. of Reading, Pa.

Charles A. Schutte, Jr., Matthews, Atkinson, Guglielmo, Marks & Day, Baton Rouge, La., for Frederick Duplantis.

RULING ON JOINT MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING STANDARD OF CARE

POLOZOLA, District Judge.

This case requires the Court to determine the standard of care required of officers and directors in managing and operating a federally insured financial institution under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).¹

The Federal Savings and Loan Insurance Corporation (FSLIC) originally brought this suit against former directors and officers of the failed Sun Belt Federal Bank, F.S.B. (Sun Belt) seeking damages for imprudent loans, waste of the bank's assets and general mismanagement. Thereafter, the Federal Deposit Insurance Corporation (FDIC) replaced FSLIC as party plaintiff in this case. The complaint filed against the directors and officers accuses them of negligence, gross negligence, negligent breach of fiduciary duty and grossly negligent breach of fiduciary duty.²

This matter is now before the Court on a joint motion for partial summary judgment. Continental Casualty Company, American Casualty Company of Reading, Pennsylvania and various individual directors and officers named as defendants in the action ("Continental") seek dismissal of all claims for negligence and negligent breach of fiduciary duty. Defendants contend these state claims are preempted by federal law. Alternatively, defendants contend no such claims arise under Louisiana law.

To properly rule on defendants' motion for partial summary judgment, the Court must examine the statutory language set forth in FIRREA. It is clear that the starting point for interpreting the meaning of a statute is the statute itself. Absent a clearly expressed legislative intention to the contrary, the language set forth in the statute must be ordinarily construed as conclusive evidence of Congressional intent.³

In 12 U.S.C. § 1821(k), the Congress defined the legal standard under which courts may impose liability on directors and officers of federally insured depository institutions. In this regard, § 1821(k) 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 any right of the Corporation under other applicable law.

Continental contends that 12 U.S.C. § 1821(k) totally preempts state law whenever state law permits a cause of action based upon conduct less blameworthy than gross negligence because Congress promulgated a uniform national standard of gross negligence for recovery against directors and officers by the FDIC in enacting FIRREA. Thus, Continental argues that the "inescapable import" of the above statutory language is that directors may not be held liable for conduct, such as simple negligence, which is less culpable than gross negligence.

In opposing the defendants' motion, the FDIC argues that Congress enacted 12 U.S.C. § 1821(k) to preempt state statutes which insulate bank officers and directors. Such state statutes prevent the FDIC from suing bank directors and officers under any theory of liability or limit director/officer liability to claims for intentional torts. Hence, the FDIC contends that while § 1821(k) provides the FDIC with a clearly defined arsenal of claims to assert against bank officers and directors, the FDIC's statutory protection from hostile state laws does not prevent the FDIC from asserting other claims under federal and state laws.

Under Article I of the United States Constitution and the Supremacy Clause embodied in Article VI, Congress has the power to legislatively preempt state law in all or part of a particular field. It is a well established principle that the Supremacy Clause invalidates state laws that "interfere with, or are contrary to," federal law.⁴ "Preemption may be express or implied."⁵ The essence of the Court's inquiry concerning "a pre-emption question requires an examination of congressional intent."⁶ "Where ... the field which Congress is said to have pre-empted has been traditionally occupied by the States ... `we start with the assumption that the historic police power of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.'"⁷

Preemption is compelled when "Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose."⁸ In "the absence of express preemptive language, the court may infer congressional intent to preempt state law only `where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress "left no room" for supplementary state regulation.'"<sup>9</sup> Even when the federal law is not intended to occupy the entire field, the state law will be preempted if it in fact conflicts with the federal law,<sup>10</sup> or "when the state law `stands as an obstacle to the accomplishment and execution of the full purposes and objects of Congress.'"¹¹

Applying the above principles, the Court finds that 12 U.S.C. § 1821(k) contains no language which indicates that Congress sought to displace available state remedies with the enactment of FIRREA. Section 1821(k) provides that "a director or officer ... may be held personally liable for gross negligence or intentional torts".¹² Continental seeks to have the Court read the word "only" into § 1821(k). This Court is neither permitted nor prepared to judicially amend a statute passed by the Congress. If Congress had wished § 1821(k) to preempt state law claims, Congress would have modified the word "may" with the limiting term "only". It is a well established canon of statutory construction that the word "may" is not synonymous with "may only" and this Court cannot and will not read words into a statute when the statute is clear on its face.¹³ As this Court has stated:

The Court's function is to interpret the law and not to amend or supplement a law enacted by the Congress. For this Court "to supply omissions transcends the judicial function."¹⁴

In addition to its non-exclusive language, 12 U.S.C. § 1821(k) also contains a savings clause which provides that "nothing in this paragraph shall impair or affect any right of the Corporation under other applicable law."¹⁵ The language in the statute — "any right" and "other applicable law" — reserves other remedies to the FDIC beyond those granted to the FDIC by the statute. Ordinarily, causes of action arising under state law are not preempted solely because they impose liability over and above that which is authorized by federal law.¹⁶ If other state or federal laws or jurisprudence grant the FDIC the right to assert a claim against directors and officers of federal insured financial institutions, § 1821(k) preserves those claims. When Congress enacts a statute which creates certain rights, the general rule is that the existing common law rights are not replaced, unless Congress provides a clear and unequivocal statement to the contrary.¹⁷

Continental argues, however, that Congress has adopted a uniform standard for imposing director and officer liability thereby prohibiting states from regulating such conduct. Continental contends that 12 U.S.C. § 1821(k) establishes "a uniform standard of gross negligence for recovery against directors and officers."¹⁸ The Court rejects this contention. If the Court accepts the notion that 12 U.S.C. § 1821(k) represents the exclusive standard of care, a double standard would be created which would interfere with the Congressional intent in enacting the statute while at the same time provide for a ludicrous result. Continental's...