Resolution Trust Corp. v. Gallagher, 92 C 1091.

• Decision Date: 10 July 1992
• Docket Number: No. 92 C 1091.,92 C 1091.
• Citation: 800 F. Supp. 595
• Parties: RESOLUTION TRUST CORPORATION, Plaintiff, v. Francis X. GALLAGHER, Vincent J. Gavin, John J. Gill, John W. Gilluly, Gordon A. Groebe, Joseph M. Heidecker, Lawrence Klinger, Louis J. Kole, Gary K. Kummer, Matthew J. Lamb, H. Richard Landis, Edward A. Long and Milton Meyers, Defendants.
• Court: U.S. District Court — Northern District of Illinois

800 F. Supp. 595

RESOLUTION TRUST CORPORATION, Plaintiff, v. Francis X. GALLAGHER, Vincent J. Gavin, John J. Gill, John W. Gilluly, Gordon A. Groebe, Joseph M. Heidecker, Lawrence Klinger, Louis J. Kole, Gary K. Kummer, Matthew J. Lamb, H. Richard Landis, Edward A. Long and Milton Meyers, Defendants.

No. 92 C 1091.

United States District Court, N.D. Illinois, E.D.

July 10, 1992.

COPYRIGHT MATERIAL OMITTED

Alan Francis Curley, Fay Clayton, Steven A. Ramirez, Robinson, Curley & Clayton, P.C., Stephen Novack, Timothy John Miller, Novack & Macey, Chicago, Ill., for plaintiff.

Sean Malone Sullivan, Ross & Hardies, P.C., Chicago, Ill., for defendant Francis X. Gallagher.

Gordon B. Nash, Jr., Gardner, Carton & Douglas, Chicago, Ill., for defendant Vincent J. Gavin.

Edmund Patrick Burke, Thomas M. Lake, Burke & Burke, Ltd., Chicago, Ill., for defendant John J. Gill.

George W. Groble, Donald G. Groble, Groble & Groble, Ltd., Chicago, Ill., for defendant John W. Gilluly.

Michael D. Walsh, Gierach, Schussler & Walsh, Ltd., Oak Lawn, Ill., for defendant Gordon A. Groebe.

Locke E. Bowman, III, Royal B. Martin, Jr., Daniel Thomas Hartnett, Martin, Brown, Sullivan & Bowman, Chicago, Ill., for defendant Joseph M. Heidecker.

Susan Bogart, Chicago, Ill., for defendant Lawrence Klinger.

John Joseph Reidy, Edward P. Freud, Dean J. McElroy, Ruff, Weidenaar & Reidy, Ltd., Chicago, Ill., for defendant Louis J. Kole.

Donald L. Mrozek, John Joseph Foran, Peter D. Sullivan, Hinshaw & Culbertson, Chicago, Ill., Daniel M. Purdom, Hinshaw & Culbertson, Lisle, Ill., for defendant Gary K. Kummer.

Michael J. O'Rourke, Robert Walter Tarun, Bruce Roger Braun, Winston & Strawn, Jack J. Crowe, Sidley & Austin, Chicago, Ill., for defendants Matthew J. Lamb, H. Richard Landis.

George Patrick Lynch, George P. Lynch, Ltd., Chicago, Ill., for defendant Edward A. Long.

MEMORANDUM OPINION

KOCORAS, District Judge:

This matter comes before the court on defendants' motions to dismiss pursuant to Rule 12(b)(6) Fed.R.Civ.P., or in the alternative for a more definite statement pursuant to Rule 12(e). For the reasons set forth below, the motions are granted in part, and denied in part.

BACKGROUND

Plaintiff Resolution Trust Corporation ("the Corporation") filed this action against the former officers and directors of Concordia Federal Bank for Savings ("Concordia") and its wholly owned subsidiary, Concor Financial Services, Inc. ("Concor"). On February 17, 1989, Concordia was placed into conservatorship. On May 29, 1990, Concordia was placed into receivership, and the Corporation was appointed as its Receiver. The complaint seeks to recover losses for the defendants' alleged negligence (Counts I and V), breach of fiduciary duty (Counts II and VI), gross negligence (Counts III and VII), and breach of contract (Counts IV and VIII). The Corporation essentially alleges that the defendants' conduct caused Concordia to incur substantial losses which ultimately resulted in the failure of the bank and its subsidiary.

Each of the defendants¹ has filed a motion to dismiss for failure to state a claim upon which relief may be granted, pursuant to Rule 12(b)(6), or in the alternative for a more definite statement pursuant to Rule 12(e). All of the defendants were granted leave to join and adopt the arguments made in the briefs filed by their codefendants, and therefore we will rule based on the consolidated group of motions.²

LEGAL STANDARD

Defendants must meet a high standard in order to have a complaint dismissed for failure to state a claim upon which relief may be granted. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the court must construe the complaint's allegations in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 235, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). The allegations of a complaint should be construed liberally and a complaint should not be dismissed for failure to state a claim "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which 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). See also Doe on Behalf of Doe v. St. Joseph's Hospital, 788 F.2d 411 (7th Cir. 1986); Ellsworth v. City of Racine, 774 F.2d 182 (7th Cir.1985); Hishon v. King & Spalding, 467 U.S. 69, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).

In addition, it is well-settled that federal court pleadings need only comply with the standards of "notice pleading." Williams v. Adams, 625 F.Supp. 256, 262 (N.D.Ill.1985). Notice pleading merely requires that in order to state a claim for relief, the plaintiff must give notice to the defendant of the theory behind the claims alleged and the basic facts which support those allegations. Maclin v. Paulson, 627 F.2d 83, 86 (7th Cir.1980). "As long as the defendant is on sufficient notice of the nature of the claim, the plaintiff has satisfied federal pleading requirements." Ganton Technologies, Inc. v. Quadion Corp., 755 F.Supp. 203, 207 (N.D.Ill.1990). We address defendants' motions keeping these principles in mind.

DISCUSSION

Defendants argue that the Corporation's complaint must be dismissed based on five primary arguments: 1) that the Corporation's alleged claims are barred by the applicable statute of limitations, 2) that the Corporation improperly seeks to recover for conduct protected by the business judgment rule, 3) that pursuant to 12 U.S.C. § 1821(k), the Corporation may only assert a claim against defendants based on gross negligence, 4) that the Corporation has failed to adequately allege a cause of action for breach of contract, and 5) that the Corporation seeks recovery for alleged economic losses, which is prohibited by Illinois common law. Each of these arguments will be addressed below.

I. Whether the Claims are Barred by the Applicable Statutes of Limitations

The Corporation brought its complaint pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1811 et seq. Section 1821(d)(14) of FIRREA contains the statute of limitations provision for all claims brought by the Corporation, and provides in pertinent part:

(14) STATUTE OF LIMITATIONS FOR ACTIONS BROUGHT BY CONSERVATOR OR RECEIVER—

(A) IN GENERAL—Notwithstanding any provision of any contract, the applicable statute of limitations with respect to any action brought by the Corporation as conservator or receiver shall be—

(i) in the case of any contract claim, the longer of—

(I) the 6-year period beginning on the date the claim accrues; or

(II) the period applicable under state law; and

(ii) in the case of any tort clam, the longer of—

(I) the 3-year period beginning on the date the claim accrues, or

(II) the period applicable under state law.

(B) DETERMINATION OF THE DATE ON WHICH A CLAIM ACCRUES—For purposes of subparagraph (A), the date on which the statute of limitations begins to run on any claim described in such subparagraph shall be the later of—

(I) the date of the appointment of the Corporation as conservator or receiver; or

(II) the date on which the cause of action accrues.

12 U.S.C. § 1821(d)(14). Therefore, pursuant to § 1821(d)(14), the Corporation's contract claims are governed by a six-year statute of limitations, and the tort claims are governed by a three-year statute of limitations unless the applicable state law limitations period is longer. Under Illinois law, the applicable limitations period for tort and contract claims is five years. Ill. Rev.Stat. ch. 110, ¶ 13-205. Therefore, the Corporation's tort and contract claims are governed respectively by five- and six-year limitations periods.

Section 1821 provides that the limitations period begins to run on the later of the date the Corporation was appointed as the conservator or receiver, or the date the claim accrued. Defendants argue that since the Corporation was appointed as conservator of Concordia on February 17, 1989, all tort claims accruing before February 17, 1984 and all contract claims accruing before February 17, 1983 are barred by the statute of limitations.

However, defendants' calculation of the limitations period under Section 1821 is simply inaccurate. § 1821 makes clear that the limitations period begins to run on the date that the claim accrues, and that the claim accrues on the later of the date that the Corporation was appointed as conservator, or when the cause of action accrued. Therefore, the Corporation had five- and six-year limitations periods within which to file their claims which began to run on February 17, 1989. Since the Corporation filed its complaint on February 12, 1992, the claims are not time-barred. However, § 1821(d)(14) does not revive claims that were previously time-barred under the applicable state statutes of limitations. See e.g., RTC v. Krantz, 757 F.Supp. 915, 921 (N.D.Ill.1991). Therefore, defendants argue that any claims which accrued prior to February 17, 1983 are barred because the Illinois statute of limitations had already run when the Corporation was appointed as conservator. Defendants assert that since the complaint commingles both time-barred claims with those that are potentially viable, the complaint must be dismissed pursuant to Rule 12(b)(6). See Fowler v. Mutual Life Insurance Co., 1992 WL 14146 (N.D.Ill.1992); Tellis v. United States Fidelity & Guaranty Co., 805 F.2d 741 (7th Cir.1986).

In its response, the Corporation argues that these limitations periods were tolled under the adverse domination doctrine. The adverse domination doctrine tolls the running of the statute of limitations period where the entity is controlled by or dominated by wrongdoers. The statute of limitations begins to run again when the wrongdoers lose control of the entity. This rationale behind the adverse domination doctrine is premised upon the principle that officers and directors who have harmed the entity cannot be expected to take legal...