Meanwhile, Back at the FDIC Failed Bank Litigation Ranch

fdic2013As the global financial crisis has receded further into the past and as other issues have crowded to the top of the agenda, the remaining vestiges from the credit crisis have faded into the background. But though the peak of the crisis is now nearly seven years behind us, the crisis remnants continue to work their way through the legal system. In particular, a large part of the wave of failed bank litigation that the FDIC filed against the former directors and officers of many of the U.S. banks that have failed continues to grind on, as evidenced in the FDIC’s latest professional liability litigation update, which the agency posted on its website on July 28, 2015 (here).


According to the agency’s updated webpage, the agency has now filed a total of 108 lawsuits – which means, given that there have been a total of 513 bank failures since January 1, 2008, that the agency has (so far) wound up filing a lawsuit in connection with approximately 21 percent of all bank failures. (As discussed below, the agency continues to file lawsuits and banks continue to fail — albeit both at reduced rates compared to recent years — which means that these numbers and percentages could change before all is said and done.)


The agency also reports that it has authorized lawsuits in connection with 150 bank failures, meaning that the agency has authorized lawsuits in connection with 29 percent of all bank failures. Although the fact that the authorized lawsuit number is larger than the filed lawsuit number could mean that there is a large backlog of yet-to-be-filed lawsuits, the fact is that not all of the authorized but not yet filed lawsuits will ultimately be filed. In some cases, the agency has managed to work out settlements with or on behalf of prospective defendants without the need to actually file a lawsuit.


The numbers of directors and officers against whom the agency has authorized lawsuits has also recently fallen off significantly. In connection with the lawsuits that the agency has authorized so far in 2015, the FDIC has authorized filing suits against 26 former directors and officers, compared with 123 in 2014, 316 in 2014, and 369 in 2012 (which was the high water mark).


The 108 lawsuits that the agency has filed so far have been filed in a total of 27 states and Puerto Rico. The states with the largest number of lawsuit filings so far are Georgia (25); California (15); Florida (12); and Illinois (12). The fact that these states are the ones with the largest number of lawsuits is hardly a surprise, as these states are also the ones that have had the largest number of bank failures, as discussed below. These four states account for nearly 60 percent of all of the failed bank lawsuits (while at the same time accounting for about 51 percent of the bank failures, as discussed below.)


Though the agency has continued to file lawsuits in 2015, the pace of the agency’s lawsuit filing definitely has slowed. So far, the agency has filed only three lawsuits so far this year, compared to 21 in 2014 and 29 in 2013. The agency has filed a lawsuit as recently as July 1, 2015, when it filed a lawsuit in the Southern District of Georgia in connection with the failure of the Montgomery Bank & Trust of Ailey, Georgia. (A copy of the complaint in this most recent action can be found here.) It should be noted that the agency website incorrectly states that this latest lawsuit was filed September 1, 2015 (which would represent quite a feat if the agency could already have pulled that one off); in fact, the latest lawsuit was filed on July 1, 2015.


While the agency is continuing to file failed bank lawsuits, many of the lawsuits the agency has filed have been resolved. The agency reports that 62 of the 108 cases that it has filed have been settled, meaning that more than half of the cases it has filed have been resolved. Of course, that also implies that around 46 remain pending, so these cases will continue to work their way through the courts for some time to come.


Though, as noted at the outset of this post, the credit crisis is now well in the past, banks are continuing to fail, again at a much reduced rate compared to recent years. So far in 2015, there have been six bank failures, including a bank failure as recently as July 10, 2015. By comparison, there were 18 bank failures in 2014 (the lowest annual number since 2007), and 24 in 2003. The high water mark for annual number of failed banks following the financial crisis was in 2010, when there were 157 bank failures.


As noted above, the states with the highest number of failed bank lawsuits were Georgia, California, Florida and Illinois, which are also the states with the highest number of bank failures; Georgia has had 88 bank failures since the current bank failure wave began, while Florida has had 72; Illinois, 62; and California, 40. These four states alone account for 51 percent of all of the bank failures during the current era.


Conspicuously, Georgia leads the league in terms of numbers of bank failures and numbers of failed bank lawsuits. With 25 lawsuits out of 88 bank failures, 28.4% of the bank failures in the state resulted in lawsuits. Georgia not only topped the tables in these two categories, but a greater proportion of its bank failures resulted in lawsuits than was the case for the country as a whole.


Though banks have continued to fail even as recently as this month, it seems probable that the continued numbers of bank failures will eventually peter out. According to the FDIC’s latest quarterly banking profile (here), as of March 31, 2015, there were 253 “problem institutions,” compared to a high water mark of 884 problem institutions as of the end of 2010. Not all of the reductions in these numbers are due to the fact that the banking sector has recovered since the financial crisis; some of these reductions are due simply to the numbers of bank failures in the interim, as well as to M&A activity, as the problem institutions have been merged out of existence.


One result of these failures and mergers is that there are now many fewer banking institutions in the U.S. than there once were. In 1990, there were a total of 15,158 banking institutions in the U.S. As of the date of the FDIC’s latest quarterly banking profile, there were only 6,419 banks in the U.S., representing a decline of over 57% during that 25-year period. Moreover, 89.2% of all of the remaining banks have assets of under $1 billion. Indeed, 28.5% of the remaining banks have assets of under $100 million. In the interim, very few new banks have been formed. Given how many of the remaining banks are very small, it seems likely that the number of banking institutions in the U.S. will continue to shrink.


A Buyer’s Guide to Cyber Liability Insurance Coverage: In recent days, I have posted a number of items about cyber liability insurance, including a number of guest posts. All of these items have been well-received, which suggests that this blog’s readership has an active interest in issues concerning cyber liability insurance. For that reason, I am sure readers will be interested to know that they can obtain for free a copy of the publication of  Holland & Knight law firm partner Thomas Bentz entitled ““A Buyer’s Guide to Cyber Liability Insurance Coverage.”  Information about the publication, including instructions on how to obtain either a hard-copy or electronic version of the publication, can be found here. Special thanks to Tom for allowing me to link to his publication.


What’s Your Vector, Victor?: In case you didn’t see it, on July 28, 2015, the Wall Street Journal had an article (here) celebrating the 35th anniversary of the release of “Airplane!” the dialog from which pretty reliably continues to randomly supplement business conversation from time to time (as in, “Looks like I picked the wrong week to stop sniffing glue.”) The Journal article explains that the cinematic inspiration for the movie was the 1957 film “Zero Hour!” and in fact the writers and directors of “Airplane!” bought the rights to the earlier movie before starting their film. Regardless of the movie’s origins, it has some of the classic lines of all time. The following video excerpt has many of the movie’s great scenes. I must caution those unfamiliar with the movie that some might find some of the dialog in this excerpt to be highly offensive – which of course was the point of the dialog in the first place. This excerpt is definitely NSFW, due to the language and the sophomoric humor. Watch the video and have a laugh.

Guest Post: Cyber & Privacy Policy Exclusions: Analyzing Differences, Negotiating Modifications

bob-bregmanThe exclusions are an important part of any liability insurance policy, but this is particularly true of cyber liability insurance polices. In the following guest post, Robert Bregman, CPCU, MLIS, RPLU, Senior Research Analyst, International Risk Management Institute, Inc., takes a look at the ten of the most common exclusions found in cyber liability and privacy insurance policies. This guest post is an excerpt taken from a longer article entitled “Cyber and Privacy Insurance Coverage” that appeared in the July 2015 edition of The Risk Report, and is copyrighted by IRMI. Learn more about The Risk Report here.


I would like to thank Bob for his willingness to publish his article on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this blog. Please contact me directly if you would like to submit a guest post. Here is Bob’s article.




As is the case with virtually every type of management liability insurance, the true extent of coverage that any given policy provides is a function of its exclusionary language. Accordingly, this article will analyze both the differences and similarities between 10 of the most common exclusions found within cyber and privacy policies. Its goal is to assist the reader in negotiating exclusionary wording that maximizes the scope of coverage a policy will provide in the event of a claim. Continue Reading

Guest Post: Five Tips for Success in Cyber Insurance Litigation

Anderson_Roberta (1)Cyber liability insurance is a relatively new product and case law interpreting the policies is only now just developing. However, even at this relatively early stage, there have been some important coverage decisions, and more are coming, as more coverage disputes arise. In the following guest post, Roberta Anderson takes a look at the steps companies can take to decrease the likelihood of a coverage denial and of litigation. Roberta is an Insurance Coverage partner in the Pittsburgh office of K&L Gates LLP and co-founder of the firm’s global Cybersecurity, Privacy and Data Protection practice group. A version of this article previously appeared on Law 360.


I would like to thank Roberta for her willingness to publish her article on my site. I welcome guest posts from responsible authors on topics of interest to readers of this blog. Please contact me directly if you would like to publish a guest post. Here is Roberta’s article.




Many insurance coverage disputes can be, should be, and are settled without the need for litigation and its attendant costs and distractions.  However, some disputes cannot be settled, and organizations are compelled to resort to courts or other tribunals in order to obtain the coverage they paid for, or, with increasing frequency, they are pulled into proceedings by insurers seeking to preemptively avoid coverage.  As illustrated by CNA’s recently filed coverage action against its insured in Columbia Casualty Company v. Cottage Health System,[i] in which CNA[ii] seeks to avoid coverage for a data breach class action lawsuit and related regulatory investigation,[iii] cyber insurance coverage litigation is coming.  And in the wake of a data breach or other privacy, cybersecurity, or data protection-related incident, organizations regrettably should anticipate that their cyber insurer may deny coverage for a resulting claim against the policy.

Before a claim arises, organizations are encouraged to proactively negotiate and place the best possible coverage in order to decrease the likelihood of a coverage denial and litigation.  In contrast to many other types of commercial insurance policies, cyber insurance policies are extremely negotiable and the insurers’ off-the-shelf forms typically can be significantly negotiated and improved for no increase in premium.  A well-drafted policy will reduce the likelihood that an insurer will be able to successfully avoid or limit insurance coverage in the event of a claim.

Even where a solid insurance policy is in place, however, and there is a good claim for coverage under the policy language and applicable law, insurers can and do deny coverage.  In these and other instances, litigation presents the only method of obtaining or maximizing coverage for a claim. Continue Reading

Guest Post: The Importance of Inferiority as a Basis for Leveling the SEC’s Enforcement Action Playing Field

CozenOConnor-Logo-RGBhiscox.logoOne of the controversies in which the SEC recently has found itself involved has been the agency’s use of its own in-house administrative tribunals, where some believe that the agency has an unfair advantage. The increased use of its administrative courts has also drawn court challenges. In the following guest post, Elan Kandel, a Member at the Cozen O’Connor law firm, and Neil Lipuma, Senior Vice President, Underwriting Leader—Financial Services of Hiscox USA take a look at the controversies surrounding the SEC’s use of its administrative tribunals and examines the recent court challenges to the agency’s practices.


I would like to thank Elan and Neil for their willingness to publish their guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this blog. Please contact me directly if you would like to submit a guest post. Here is Elan and Neil’s guest post.




Earlier this month, the American League won this year’s Major League Baseball All-Star Game. The winner of the annual All-Star Game enjoys home-field advantage for the World Series.  Some have questioned whether there is actually a correlation between “home-field advantage” and winning the World Series. There is nothing to question – there is a distinct advantage. Since 1985, the team with the home-field advantage has won 23 of 29 World Series.[1]

The home field advantage extends beyond Major League Baseball.  The Securities and Exchange Commission (SEC) enjoys a pronounced home-field advantage when trying enforcement actions in its own administrative courts as opposed to federal district courts. According to a recent analysis in The Wall Street Journal, the SEC “[w]on against 90% of defendants before its own judges in contested cases from October 2010 through March of this year.”[2]  For fiscal year 2014, U.S. District Court Judge Jed Rakoff remarked that the SEC had won 100% of the actions tried in its administrative courts, while its success rate in federal court for the same period of time was only 61%.[3] Continue Reading

O.K., This Is a Big Deal: 7th Cir. Reinstates Neiman Marcus Consumer Data Breach Class Action

neimanmarcusIn a ruling that could provide an important boost future consumer data breach class action litigation, the Seventh Circuit has reinstated the Neiman Marcus data breach lawsuit, ruling that the district court erred in concluding that the plaintiffs’ fear of future harm from the breach was insufficient to establish standing to pursue their claims. As Alison Frankel said about the appellate court’s ruling in her July 21, 2015 post on her On the Case blog entitled “The Seventh Circuit Just Made it A Lot Easier to Sue Over Data Breaches” (here), “this is a really consequential decision.” The Seventh Circuit’s July 20, 2015 opinion in the Neiman Marcus case can be found here.

Continue Reading

Securities Suit Against Company That Used Stock Promotion Firm Survives Dismissal Motion

cytrxAs I have previously noted on this blog (most recently here), one of the more distinctive litigation phenomena in recent years has been the rash of securities class action lawsuits involved allegations that the defendant firms’ use of stock promotion firms had resulted in misrepresentations to investors. The difficulty for the plaintiffs in these cases is that under the U.S. Supreme Court’s 2011 Janus Capital Group’s decision (about which refer here), only the “maker” of an allegedly misleading statement can be held liable under Rule 10b-5, and in many of these cases it was the stock promotion firm, not the company itself, that “made” the allegedly misleading statement.


However, in a recent motion to dismiss ruling in one of these stock promotion firm securities class action lawsuit, the plaintiffs’ complaint survived the dismissal motion in part, even though the Court agreed that the company defendants could not be liable for statements “made” by the stock promotion firm. The ruling is interesting in and of itself and also for what it says about theories of liability that apparently survived the U.S. Supreme Court’s Janus ruling.


As discussed below, in a July 13, 2015 ruling, Central District of California Chief Judge George H. King, granted in part and denied in part the defendants’ motions to dismiss the securities class action lawsuit that plaintiff shareholders had filed against CytRx Corporation, certain of its officers, and its offering underwriters. A copy of Judge King’s ruling can be found here. Continue Reading

NERA Reports on Latest Wage and Hour Lawsuit Settlement Trends

time_clock_1One of the most significant areas of litigation in the employment practices liability arena has been the employee lawsuits seeking damages for employer violations of federal and state wage and hour laws. But while these kinds of lawsuits remain important, many of the trends in the settlements have shifted in the most recent years, according to a recent study from NERA Economic Consulting. The July 14, 2015 report, entitled “Trends in Wage and Hour Settlements: 2015 Update,” can be found here. NERA’s July 14, 2015 press release about the report can be found here. Continue Reading

Is the Dodd-Frank Whistleblower Bounty Program Gaining Momentum?

seclogoWhile the SEC’s Dodd-Frank whistleblower program has drawn significant attention, the fact is that the program has gotten off to a slow start. As of the end of the last fiscal year, the SEC had during the program’s history received a total of 10,193 whistleblower reports, but had made only 14 whistleblower awards. (Indeed, the agency had rejected more award requests – 19 – than awards given.) While the agency’s deliberate pace in making awards seems unchanged, the agency continues to make substantial awards and the aggregate value of the awards is gradually becoming quite considerable.


On July 17, 2015, the SEC announced yet another significant award, a $3 million award to a company insider whose information “helped the SEC crack a complex fraud.” Consistently with the law’s requirements, the agency did not disclose the name of the whistleblower or the company involved. The SEC’s July 17, 2015 press release can be found here. The redacted July 17, 2015 SEC Order determining the whistleblower award can be found here. Continue Reading

The Beginning of the End of the Merger Objection Lawsuit Curse?

del1One of the great curses of the corporate litigation environment in recent years has been the proliferation of merger objection suits, the incidence of which has gotten to the point that now just about every large merger deal draws at least one lawsuit, and sometimes several. However, if recent developments in the Delaware Chancery Court are any indication, the courts are as appalled by this seemingly undifferentiated mass of litigation as are the parties to the transactions. Two recent decisions may suggest that the Delaware courts, at least, are no longer willing simply to accept the standard “disclosure only” settlements that typically resolve these kinds of cases, which in turn may mean that the cases could become less attractive to the plaintiffs’ lawyers that bring these cases. Continue Reading

Advisen Report: Declining Corporate and Securities Litigation Filings Continued in Second Quarter, But Most Recent Quarterly Trend May be Upward

PrintThe recent annual trend toward declining numbers of corporate and securities lawsuit filings continued in the first half and second quarter of 2015, although second quarter activity did increase slightly compared to the prior quarter, according to a report from the insurance industry information firm, Advisen. If the increase in the second quarter numbers compared to the first were to continue for the remainder of the year, the number of new corporate and securities lawsuits during the year could see an annual increase for the first time in four years. The July 15, 2015 Advisen report, entitled “D&O Claims Trends: Q2 2015” can be found here. Continue Reading