BankBryanCave.com

Bank Bryan Cave

Director & Officer Liability

Main Content

Counter-Cyclical Thoughts About D&O Insurance

August 30, 2017

Authors

Ken Achenbach

Counter-Cyclical Thoughts About D&O Insurance

August 30, 2017

by: Ken Achenbach

It can be a challenge, when economic times are relatively good, to take time away from thinking about new opportunities to discuss topics like D&O insurance.  Even though I am biased, I’ll admit that, in those times, discussing the risks of potential liability and how to insure those risks can feel both a pretty unpleasant and a pretty remote thing to be discussing.  However, like all risk-related issues, it is precisely in those times when business is going well that a little bit of counter-cyclical thinking and attention can do the most good over the long haul.

As you approach your next D&O policy renewal – and particularly in the 30-60 days prior to the expiration of your current policy, there are a few things that you may want to consider.

Read More

Fourth Circuit Upholds FDIC’s Ordinary Negligence Claims

October 6, 2015

Authors

Michael Carey

Fourth Circuit Upholds FDIC’s Ordinary Negligence Claims

October 6, 2015

by: Michael Carey

The United States Court of Appeals for the Fourth Circuit, which governs North and South Carolina as well as Virginia, West Virginia and Maryland, has issued an important ruling in FDIC v. Rippy, a lawsuit  brought by the FDIC against former directors and officers of Cooperative Bank in Wilmington, North Carolina.  As it has done in dozens of cases throughout the country, the FDIC alleged that Cooperative’s former directors and officers were negligent, grossly negligent, and breached their fiduciary duties in approving various loans that caused the bank to suffer heavy losses.  The evidence showed the FDIC had consistently given favorable CAMELS ratings to the bank in the years before the loans at issue were made.  The trial court entered summary judgment in favor of all defendants, criticizing the FDIC’s prosecution of the suit as an exercise in hindsight.  The Fourth Circuit, however, vacated the ruling as it applied to

Read More

Maryland’s Business Judgment Rule Bars FDIC’s Ordinary Negligence Claims

March 31, 2015

Authors

Michael Carey

Maryland’s Business Judgment Rule Bars FDIC’s Ordinary Negligence Claims

March 31, 2015

by: Michael Carey

Another court has weighed in on the question of whether the FDIC can sue former directors and officers of failed banks for ordinary negligence.  The latest decision comes from a federal court in Maryland, which held that a gross negligence standard must be applied when evaluating the conduct of directors and officers under Maryland’s business judgment rule.  FDIC v. Arthur, Civil Action No. RDB-14-604 (D. Md. Mar. 2, 2015).

The facts of FDIC v. Arthur follow a now-familiar pattern.  Baltimore-based Bradford Bank failed on August 28, 2009 and the FDIC was appointed as its receiver.  The four defendants are the bank’s former president, a senior loan officer and two directors who served on the bank’s loan committee.  The FDIC alleged that the defendants were negligent, grossly negligent and breached their fiduciary duties to the bank in connection with seven commercial loan transactions, resulting in losses in excess of $7

Read More

Georgia Supreme Court Confirms Business Judgment Rule

July 12, 2014

Authors

Michael Carey

Georgia Supreme Court Confirms Business Judgment Rule

July 12, 2014

by: Michael Carey

The Georgia Supreme Court issued its long-awaited decision in FDIC v. Loudermilk  on Friday, addressing whether the FDIC’s ordinary negligence claims against former directors and officers of failed banks are precluded by the business judgment rule.  There is a lot to digest in the Court’s 34-page opinion, but here are our initial thoughts.

The upshot for bank directors and officers in Georgia is that the business judgment rule is very much alive, and applies to banks to the same extent as other corporations.  That itself is big news—the Georgia Supreme Court had never addressed whether the business judgment rule exists in any context, and the FDIC had argued that if the rule existed at all, it did not apply to banks because the Banking Code imposes an ordinary negligence standard of care.  Much of the Court’s opinion is devoted to explaining how the business judgment rule developed as

Read More

A Rundown on Georgia’s FDIC Failed Bank Litigation

June 11, 2013

Authors

Michael Carey

A Rundown on Georgia’s FDIC Failed Bank Litigation

June 11, 2013

by: Michael Carey

As we have reported before, Georgia has the unfortunate distinction of leading the nation in bank failures since the onset of the late-2000s financial crisis.  Georgia has also seen far more FDIC bank failure lawsuits than any other state:  15 of the 63 bank failure cases brought by the FDIC since 2010 involve Georgia banks and are currently pending in Georgia federal courts.  While some allegations vary from case to case, the general thrust of all of these lawsuits is that the former directors and/or officers of the banks were negligent or grossly negligent in pursuing aggressive growth strategies, with these strategies usually involving a high concentration of risky and speculative speculative real estate and acquisition, construction and development loans.  Here is a rundown of the most interesting and significant developments to date:

The most heavily litigated issue has been whether the business judgment rule insulates bank directors and officers

Read More

Failed Bank D&O Lawsuits Spike in Late April

May 3, 2013

Authors

Bard Brockman

Failed Bank D&O Lawsuits Spike in Late April

May 3, 2013

by: Bard Brockman

The pace of FDIC lawsuits against former bank directors and officers picked up considerably in the second half of April. Between April 15th and the end of the month, the FDIC filed eight D&O lawsuits. Each of the lawsuits relate to bank failures allegedly arising from an overconcentration in CRE and ADC loans. In six of the eight cases, the FDIC’s complaint was filed only days before the expiration of the 3-year limitations period. Here is a short synopsis of each new case:

  • The first lawsuit was filed against the former senior officers of Riverside National Bank of Florida (Ft. Pierce, FL). The bulk of the FDIC’s complaint in that case focused on failed loans that had been secured by stock of Riverside’s affiliated holding company. We previously summarized the lawsuit in our April 24, 2013 blog post.
  • Later on April 15th, the FDIC sued two former senior
    Read More

FDIC Starts Posting Settlement Agreements

March 26, 2013

Authors

Bryan Cave

FDIC Starts Posting Settlement Agreements

March 26, 2013

by: Bryan Cave

The FDIC has begun posting copies of its settlement agreements on its website.  It recently came under fire after the L.A. Times printed an article criticizing the FDIC for not being more transparent on the issue of whether its litigation efforts are bearing fruit.  The FDIC responded to that criticism by posting the settlement agreements on its website.  This website will likely be updated from time to time with new settlement agreements.

Not all of the settlement agreements posted on the FDIC’s site are from D&O cases.  At least a few of them are from claims against brokers, lawyers or accountants for the failed banks.  At this time, we don’t see any particular trends or patterns based on the settlement agreements on claims against former D&Os.

Read More

FDIC Sues Former Chairman and Senior Officers of La Jolla Bank

February 20, 2013

Authors

Bard Brockman

FDIC Sues Former Chairman and Senior Officers of La Jolla Bank

February 20, 2013

by: Bard Brockman

Last week the FDIC filed its 51st lawsuit against former directors and officers of failed banking institutions since July 2010. This most recent suit is against the former chairman, former CEO and former Chief Credit Officer of La Jolla Bank, which failed and went into FDIC receivership on February 19, 2010. A copy of the lawsuit is available here.

Many of the central themes in the FDIC’s complaint are consistent with its other recent D&O lawsuits – the Bank pursued an aggressive growth strategy fueled by heavy concentrations in commercial real estate lending, with insufficient underwriting and loan policy compliance, and without regard to deteriorating market conditions. What makes this case different is the FDIC’s theory that the Bank’s CEO and COO gave preferential loan treatment to certain Friends of the Bank (“FOB”). The senior officers, both of whom were compensated in large part based on loan production, allegedly

Read More

FDIC Sues Former Directors and Officers for “Reckless Gamble” on Subprime Lending

January 31, 2013

Authors

Bard Brockman

FDIC Sues Former Directors and Officers for “Reckless Gamble” on Subprime Lending

January 31, 2013

by: Bard Brockman

Earlier this month, the FDIC filed its 42nd D&O lawsuit since the advent of the Great Recession. This suit was filed against the former directors and two former executive officers of Charter Bank of Santa Fe, N.M. (“Charter” or the “Bank”), which was closed and placed into FDIC receivership in January 2010.  A copy of the FDIC’s complaint is available here. This case represents a departure from the FDIC’s typical claims about alleged over concentrations in ADC and CRE lending. It instead focuses on Charter’s intentional strategy to enter into the subprime lending market in late 2006.

According to the FDIC’s complaint, the defendants authorized the formation of a subprime lending group in late 2006, with plans to target subprime borrowers, primarily in Florida, California and Texas. The Bank ultimately committed 72% of the its core capital to opening and operating its subprime lending unit. By pursuing

Read More

FDIC Files Third D&O Lawsuit in Florida

January 2, 2013

Authors

Bard Brockman

FDIC Files Third D&O Lawsuit in Florida

January 2, 2013

by: Bard Brockman

The pace of FDIC suits continued to pick up steam in the fourth quarter, with the FDIC filing its third lawsuit suit in Florida, this time against the former directors of Peoples First Community Bank (Panama City, FL). Peoples First Community Bank (“Peoples First” or the “Bank”) was closed and put into receivership on December 18, 2009. The FDIC’s lawsuit was filed on December 17, 2012 – one day prior to the expiration of the three-year limitations period. For a copy of the FDIC’s complaint, click here.

The FDIC’s complaint against the former Peoples First directors is strikingly similar, both in tone and substance, to its last several D&O complaints. As we previously reported, the FDIC now must overcome a ruling by the Middle District of Florida that Florida’s statutory version of the Business Judgment Rule bars claims against former directors for

Read More
The attorneys of Bryan Cave LLP make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.