Resolution Trust Corp. v. Fleischer

Decision Date21 October 1993
Docket NumberNo. 93-2062-JWL.,93-2062-JWL.
PartiesRESOLUTION TRUST CORPORATION, Plaintiff, v. Ernest M. FLEISCHER, et al., Defendants.
CourtU.S. District Court — District of Kansas

H. David Barr, Andrea J. Goetze, Gage & Tucker, Overland Park, KS, William L. Turner, Bernard J. Rhodes, R. Kent Sellers, Mike L. Racy, Gage & Tucker, Kansas City, MO, Mira N. Marshall, Resolution Trust Corp., Legal Div.-Prof. Liability Section, Washington, DC, for Resolution Trust Corp.

James Borthwick, Michael Thompson, Brian C. Fries, Christopher A. Koster, Blackwell, Sanders, Matheny, Weary & Lombardi, Charles W. German, Brant M. Laue, Robert M. Thompson, Rouse, Hendricks, German, May & Shank, Kansas City, MO, for Ernest M. Fleischer and Mary Greene.

Kathleen A. Hardee, Thomas H. Stahl, Hoskins, King, McGannon & Hahn, Kansas City, MO, for Duane H. Hall, Ronald L. Pfost.

John R. Toland, Toland & Thompson, Iola, KS, James Borthwick, Michael Thompson, Brian C. Fries, Christopher A. Koster, Blackwell, Sanders, Matheny, Weary & Lombardi, Charles W. German, Brant M. Laue, Robert M. Thompson, Rouse, Hendricks, German, May & Shank, Kansas City, MO, for Glenn O. McGuire and Harold Yokum, Stanley Dreher, Jr.

Delton M. Gilliland, Coffman, Jones & Gilliland, Lyndon, KS, Charles W. German, Brant M. Laue, Robert M. Thompson, Rouse, Hendricks, German, May & Shank, Kansas City, MO, for Harry T. Coffman.

Richmond M. Enochs, Francis R. Peterson, Wallace, Saunders, Austin, Brown & Enochs, Overland Park, KS, for Thomas R. Weigand.

Thomas R. Weigand, pro se.

Thomas E. Gleason Jr., Thomas E. Gleason, Chartered, Ottawa, KS, Charles W. German, Brant M. Laue, Robert M. Thompson, Rouse, Hendricks, German, May & Shank, Kansas City, MO, for Lawrence H. Kramer.

Greer S. Lang, Leonard B. Rose, Rose, Brouillette & Shapiro, P.C., Kansas City, KS, Charles W. German, Brant M. Laue, Robert M. Thompson, Rouse, Hendricks, German, May & Shank, Kansas City, MO, for Ted Greene, Jr.

James Borthwick, Michael Thompson, Brian C. Fries, Christopher A. Koster, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, MO, for Barbara J. Fleischer, Boatmen's First Nat. Bank of Kansas City, Ernest W. Fleischer, Pamela Fleischer, Thomas G. Greene, Larry D. Greene, Gail L. Cluen, Douglas C. Greene, Judith Fleischer, and Elizabeth Fredkin.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

I. Introduction

This case involves a suit brought by plaintiff Resolution Trust Corporation ("RTC") alleging multiple causes of action against former directors and officers of Franklin Savings Association ("FSA").1 The matter is currently before the court on plaintiff's motion to strike defenses (Doc. # 111); defendant Fleischer's motion to compel discovery (Doc. # 134); and defendants' request for oral argument (Doc. # 146).2 In its motion to strike defenses, plaintiff seeks a ruling from this court striking certain affirmative defenses pled by defendants, including comparative negligence and mitigation of damages.3

The defendants argue, quite strenuously, that the motion to strike defenses should be denied as to their defenses of comparative negligence and mitigation of damages because of what they contend is the fatally flawed analysis which has led so many courts to the conclusion that such defenses cannot be maintained against the RTC. The Tenth Circuit has not spoken to this subject. The court has thoroughly considered the points raised by all parties and has conducted extensive research of its own. Although some of defendants' points are not without merit, this court concludes that the Tenth Circuit will likely follow the overwhelming weight of authority and disallow these defenses. Thus, plaintiff's motion to strike (Doc. # 111) is granted in part and denied in part4 and defendants' motion to compel discovery (Doc. # 134) is denied.

II. Standard for Reviewing Motion to Strike

Rule 12(f) of the Federal Rules of Civil Procedure provides that "the court may order stricken from any pleading any insufficient defense." A defense is insufficient if, as a matter of law, it cannot succeed under any circumstances. See In re Sunrise Securities Litigation, 818 F.Supp. 830, 840 (E.D.Pa.1993); F.D.I.C. v. Isham, 782 F.Supp. 524, 530 (D.Colo.1992). The purpose of the rule is to minimize delay, prejudice, and confusion by narrowing the issues for discovery and trial. See Resolution Trust Corp. v. Scaletty, 810 F.Supp. 1505, 1515 (D.Kan.1992).

III. Discussion
A. Comparative Negligence and Mitigation of Damages

Plaintiff's complaint in this case asserts tort claims against former directors and officers of FSA brought under Kansas law in its capacity as a receiver. Plaintiff asserts claims under the theories of negligence, negligence per se, and breach of fiduciary duty. Plaintiff also asserts claims based on a breach of implied contract theory. Plaintiff's ability to pursue state law negligence causes of action against defendants in cases such as this was set forth in the Tenth Circuit's opinion in F.D.I.C. v. Canfield, 967 F.2d 443 (10th Cir.1992).

In negligence actions, Kansas employs a comparative fault scheme whereby a party bringing suit may only collect those damages which were proximately caused by the fault of another party. See K.S.A. § 60-258a. Parties cannot recover damages caused by their own fault. Strong policy reasons influenced the State of Kansas to enact its comparative fault statute, including a desire to impose individual liability based on the proportional fault of all parties and a desire that all litigation arising out of a certain circumstance take place in one action. See Brown v. Keill, 224 Kan. 195, 580 P.2d 867 (1978); Mick v. Mani, 244 Kan. 81, 766 P.2d 147 (1988).

Defendants in this case contend that because plaintiff has asserted state law negligence claims against them, Kansas principles of comparative fault should apply and their negligence should be compared to that of the RTC, whose negligence after taking control of the institution as conservator and later as receiver defendants contend contributed to eventual losses suffered by FSA. It would appear at first blush that defendants should be entitled to assert all state law defenses against plaintiff, including comparative fault. Interestingly, however, virtually every case to consider their argument has rejected it, whether it be brought under the guise of comparative fault, mitigation of damages or strict proof of causation.5 The question is whether all these decisions are wrong, having blindly followed the lead of Roy6 down the path to a foolish result in which no court has had the nerve to say, as the defendants do, that the emperor is unclothed, or whether they have a principled basis which merits their sweeping adoption of an apparently favored position for this particular litigant.7 This is a fair question for defendants to put.

Courts have advanced several rationales in holding that government conservators or receivers are insulated from affirmative defenses which place in issue their conduct after assuming control of an institution's assets. See F.D.I.C. v. Benjes, 815 F.Supp. 1415 (D.Kan.1993). These rationales include: (1) there is a public policy implicit in the federal statutes creating the FDIC, FSLIC and RTC that the public should not bear any losses due to errors in judgment by federal receivers or conservators (Federal Sav. & Loan Ins. Corp. v. Burdette, 718 F.Supp. 649 (E.D.Tenn.1989)); (2) the conduct of the FDIC, FSLIC or RTC in fulfilling its mandate, which includes marshalling the assets of a failed financial institution, should not be subjected to judicial second guessing (F.D.I.C. v. Isham, 782 F.Supp. 524, 532 (D.Colo.1992)); and (3) the absence of any duty between the FDIC and former officers and directors of a failed institution — the no-duty rule — means that government conservators or receivers are insulated from affirmative defenses which place in issue their conduct after assuming control of the institution's assets (F.D.I.C. v. Carlson, 698 F.Supp. 178 (D.Minn.1988); F.D.I.C. v. Greenwood, 719 F.Supp. 749 (C.D.Ill.1989)).8

The public policy concerns cited by courts for disallowing affirmative defenses that would bring into issue post conservator or receivership actions of governmental banking agencies were summarized by one court as follows:

In cases of the failure of a savings institution, it is important to the public that the receiver rapidly and efficiently convert the assets of that institution to cash to repay the losses incurred by the insurance fund and the depositors for deposits not covered. Suits by the FSLIC as a receiver to recover assets, or to recover damages for wrongdoing, should not be encumbered by an examination in court of the correctness of any specific act of the FSLIC in its receivership. The rule that there is no duty owed to the institution or wrongdoers by the FSLIC/Receiver is simply a means of expressing the broad public policy that the banking laws creating the FSLIC and prescribing its duties are directed to the public good, and that every separate act of the FSLIC as a receiver in collecting assets is not open to second guessing in actions to recover damages from wrongdoing directors and officers. If there is no wrongdoing by the officer or director, there can be no liability, but if wrongdoing is established, the officer or director should not be allowed to set up as a defense a claim that would permit the detailed examination of the FSLIC's action as a receiver.
When an individual becomes an officer or director of a savings and loan, they are aware that if that institution becomes insolvent, federal banking laws and regulations require that a receiver be appointed, often the FSLIC, to marshal the institution's assets as promptly as possible to avoid further injury to the insurance fund and the public at large. The special urgency required in the liquidation of a savings and loan, and a commercial bank, is a result of the
...

To continue reading

Request your trial
10 cases
  • Resolution Trust Corp. v. Fleischer
    • United States
    • Kansas Supreme Court
    • March 17, 1995
    ...See Resolution Trust Corp. v. Fleischer, 848 F.Supp. 917 (D.Kan.1994) (motion for partial summary judgment); Resolution Trust Corp. v. Fleischer, 835 F.Supp. 1318 (D.Kan.1993) (motion to strike affirmative defenses); Resolution Trust Corp. v. Fleischer, 826 F.Supp. 1273 (D.Kan.1993) (motion......
  • Phillips v. Booker
    • United States
    • U.S. District Court — District of Kansas
    • November 19, 1999
    ... ... Gomez, 24 F.3d 924, 926 (7th Cir.1994) (trust accounts may be tapped to pay restitution). The court in Johnpoll ... ...
  • F.D.I.C. v. Mijalis
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • March 10, 1994
    ...great majority of the district courts is in accord with the conclusion reached by the Bierman court. See Resolution Trust Corp. v. Fleischer, 835 F.Supp. 1318, 1321 n. 5 (D.Kan.1993) (collecting cases). District courts within our circuit have come to different results. Compare Resolution Tr......
  • Resolution Trust Corp. v. Fleischer, 93-2062-JWL.
    • United States
    • U.S. District Court — District of Kansas
    • December 1, 1994
    ...have a principled basis which merits their sweeping adoption of an apparently favored position for this particular litigant." Fleischer, 835 F.Supp. at 1321. Defendants contend that based upon the Supreme Court's ruling in O'Melveny, it is apparent that the emperor was indeed unclothed, and......
  • Request a trial to view additional results
1 books & journal articles
  • A Review of the Kansas Comparative Fault Act
    • United States
    • Kansas Bar Association KBA Bar Journal No. 63-06, June 1994
    • Invalid date
    ...251, 796 P.2d at 550. [FN75]. Id. at 257-58, 796 P.2d at 554. [FN76]. Id. at 264, 796 P.2d at 559. [FN77]. Id. [FN78]. RTC v. Fleisher, 835 F.Supp. 1318 (D.Kan.1993). [FN79]. See K.S.A. 60-258a. [FN80]. 231 Kan. 372, 646 P.2d 1036 (1982). [FN81]. Id. at 378, 646 P.2d at 1041. [FN82]. Id; se......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT