Resolution Trust Corp. v. Hecht, Civ. A. No. R-92-371.

• Citation: 818 F. Supp. 894
• Decision Date: 27 July 1992
• Docket Number: Civ. A. No. R-92-371.
• Parties: RESOLUTION TRUST CORPORATION, Plaintiff, v. Robert E. HECHT, et al., Defendants.
• Court: U.S. District Court — District of Maryland

818 F. Supp. 894

RESOLUTION TRUST CORPORATION, Plaintiff, v. Robert E. HECHT, et al., Defendants.

Civ. A. No. R-92-371.

United States District Court, D. Maryland.

July 27, 1992.

Robert P. Trout, Leslie Lickstein, and Christopher A. Myers, Dunnells, Duvall, Bennett & Porter, Washington, DC, for plaintiff.

Alison D. Kohler, Phillips P. O'Shaughnessy, and John E. Sandbower, III, Sandbower, Gabler & O'Shaughnessy, Baltimore, MD, for defendant Robert E. Hecht, Sr., pro se.

Pearl Brackett, Baltimore, MD, pro se.

Richard E. Dunne, III, and George Beall, Hogan and Hartson, Baltimore, MD, William J. Bowman, Hogan and Hartson, Washington, DC, and John B. Howard, Jr., Hogan and Hartson, Baltimore, MD, for defendants, Thomas F. Mullan, Jr., and Gerald J. Strautberg.

Melvin J. Sykes, Baltimore, MD, for defendant Melvin Pugatch.

Robert E. Cahill, Sr., and Stephen M. Schenning, Nolan, Plumhoff and Williams, Baltimore, MD, for defendant Thomas J. Reynolds.

John H. Doud, III, Fedder and Garten, Baltimore, MD, for defendant, Ward R. Woods.

Robert P. Trout, Leslie Lickstein, and Christopher A. Myers, Dunnells, Duvall, Bennett & Porter, Washington, DC, for counter-defendant, Resolution Trust Corp.

MEMORANDUM AND ORDER

RAMSEY, Senior District Judge.

Pending before the Court in the above-captioned case are several motions, all of which are now ripe for consideration. On July 23, 1992, the Court conducted a hearing on the following pending motions: (1) defendants Thomas F. Mullan, Jr. and Gerald J. Stautberg's motion to dismiss the complaint or for summary judgment or in the alternative to certify the question of statute of limitations to the Maryland Court of Appeals; (2) the Resolution Trust Corporation's motion to strike affirmative defenses; (3) defendants Mullan and Stautberg's motion to dismiss plaintiff's claims for negligence and breach of fiduciary duty; (4) defendants Ward R. Woods and John F. Ireton's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6); and (5) defendant James L. Fisher's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). After considering the submissions of the parties and the arguments of counsel, the Court is now prepared to rule.

I. FACTUAL BACKGROUND

Plaintiff Resolution Trust Corporation ("RTC") instituted this action on February 7, 1992 against ten former officers and directors¹ of Baltimore Federal Financial ("Baltimore Federal"), a federally chartered and insured savings and loan institution. RTC is a federal corporation created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. 101-73, 103 Stat. 183, to manage failed savings and loan institutions under the direction of the Federal Deposit Insurance Corporation ("FDIC"). RTC asserts its claims against the defendants in its corporate capacity as the assignee of the rights of Baltimore Federal.²

In the complaint, RTC alleges that between November, 1983 and July, 1985, the defendants approved six loans to complicated, highly speculative commercial real estate and construction ventures that ultimately resulted in losses to Baltimore Federal that could exceed $32,000,000. Plaintiff charges that the board of directors and senior management of Baltimore Federal seriously imperiled the institution's loan portfolio through unsafe, imprudent, and reckless business practices.³ For each of the six loans at issue, the complaint contains four claims: breach of fiduciary duty, negligence, gross negligence, and breach of contract. RTC did not allege that any of the defendants engaged in any form of self-dealing or fraudulent conduct. In their answers, three of the defendants pled the affirmative defenses of contributory negligence, laches, estoppel, and lack of proximate cause.

At all relevant times to this litigation, FHLBB had the power to examine, supervise, and regulate Baltimore Federal. The complaint alleges that in 1985, FHLBB severely criticized the institution's commercial lending practices. As a result of its unsound lending program and the severe accounting and underwriting problems identified in 1985, FHLBB required Baltimore Federal to enter into a supervisory agreement on July 2, 1986. A year and a half later, on February 8, 1988, Baltimore Federal entered into a consent agreement with FHLBB which strictly limited the institution's commercial real estate and construction lending. On February 7, 1989, FHLBB placed Baltimore Federal in conservatorship, and appointed FSLIC as conservator. After the enactment of FIRREA, RTC replaced FSLIC as conservator. On February 6, 1992, RTC filed the instant action.

II. LEGAL STANDARDS

A. Motion to Dismiss

A motion to dismiss under Fed.R.Civ.P. 12(b)(6) tests the bare legal sufficiency of a complaint. In deciding the motion, the Court must take all well-pleaded allegations of the complaint as true, and must draw all inferences in favor of the plaintiff. See Coakley & Williams, Inc. v. Shatterproof Glass Corp., 706 F.2d 456 (4th Cir.1983), cert. denied, 475 U.S. 1121, 106 S.Ct. 1640, 90 L.Ed.2d 185 (1986). After viewing the complaint in this light, the Court may not grant a motion to dismiss "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 the claim." Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d 324 (4th Cir.1989) (emphasis added); see also Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

B. Motion for Summary Judgment

Summary judgment under Rule 56 of the Federal Rules of Civil Procedure serves the important purpose of "conserving judicial time and energy by avoiding unnecessary trial and by providing a speedy and efficient summary disposition" of litigation in which there is no genuine dispute as to any fact which could possibly affect the outcome of the case. Bland v. Norfolk & Southern R.R. Co., 406 F.2d 863, 866 (4th Cir.1969). The applicable standards for analyzing a motion for summary judgment under Rule 56 are well established. The party seeking summary judgment bears the initial burden of showing the absence of any genuine issue of material fact, and that he is entitled to judgment as a matter of law. In determining whether the defendant has sustained this burden, the trial judge must consider "not whether he thinks the evidence unmistakably favors one side or the other but whether a "fair-minded jury could return a verdict for the party opposing the motion ..." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986); Pulliam Invest. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir.1987).

In Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), the Supreme Court stated that

Rule 56(c) mandates the entry of summary judgment, after an adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine dispute as to any material fact," since a complete failure of proof as to an essential element of the nonmoving party's case necessarily renders all other facts immaterial.

Id. at 322-23, 106 S.Ct. at 2552-53.

III. MOTION OF DEFENDANTS MULLAN AND STAUTBERG TO DISMISS THE COMPLAINT OR FOR SUMMARY JUDGMENT OR IN THE ALTERNATIVE TO CERTIFY THE QUESTION OF STATUTE OF LIMITATIONS TO THE MARYLAND COURT OF APPEALS

Defendants Mullan and Stautberg assert that the statute of limitations bars all claims against them.⁴ They argue that the three year limitations period applicable to all of RTC's claims expired before FSLIC was appointed conservator and assumed control of the institution's assets on February 7, 1989. Under this argument, FSLIC could not have received by assignment any viable claims because all claims arising from the six loans at issue were time barred. Consequently, defendants argue that FSLIC could not have transferred any viable claims to RTC when RTC replaced FSLIC as conservator. All of RTC's claims against defendants must, they assert, be dismissed on statute of limitations grounds.

In an action brought by a federal entity for claims it received by assignment, a court must conduct a two part inquiry to determine whether the claims are barred by the statute of limitations. See, e.g., FDIC v. Thayer Ins. Agency, Inc., 780 F.Supp. 745, 747 (D.Kan.1991). First, the court must determine whether the causes of action were barred by the applicable state statute of limitations before the federal agency acquired the institution's assets. See, e.g., FDIC v. Bachman, 894 F.2d 1233, 1236 (10th Cir. 1990). If the limitations period did not expire before the assignment, the court must then determine if the federal entity filed suit within the applicable federal limitations period. Thayer, 780 F.Supp. at 748.

In 1984, Judge Joseph Young of this district applied this two part rule in FSLIC v. Williams, 599 F.Supp. 1184 (D.Md.1984). The dispute in that case arose after plaintiff FSLIC succeeded to all claims against the former officers and directors of a federally insured savings and loan that became insolvent. Among the defendants named in the suit was Loella Fisher, an officer of the institution who was allegedly responsible for violations of FHLBB regulations, the underreporting of problem loans to FHLBB, and a great number of other improprieties. Defendant moved for summary judgment on limitation grounds, claiming that one of FSLIC's claims was time-barred because the plaintiff knew of the Ms. Fisher's alleged misconduct for over three years before the suit was filed.

In Williams, Judge Young employed the two step limitations analysis for claims assigned to a federal entity. 599 F.Supp. at 1192. In his discussion of the first prong of the test, the court properly focused on the three year Maryland statute of limitations set forth in Md.Cts. &...