Following the recent bank failure wave, the FDIC filed liability actions against the former directors and offices of many of the failed banks, as detailed here. But the FDIC did not sue the former executives of every failed bank. Why did the FDIC sue the executives of some failed banks but not others? Was it because the failed banks the agency targeted had engaged in qualitatively different conduct? Or was it merely because the ones the FDIC sued had D&O insurance in force from which the agency could extract a monetary recovery?
Continue Reading Does the FDIC Target Only Failed Bank Directors and Officers That Have D&O Insurance?
Fourth Circuit Affirms Dismissal of All Claims Against Failed Bank’s Directors, Revives Negligence Claims Against Bank’s Officers
On August 18, 2015, in an interesting opinion that takes a close look at exculpatory bylaw issues and the business judgment rule under North Carolina law, the Fourth Circuit affirmed in part and reversed in part the district court’s dismissal of the failed bank lawsuit the FDIC had filed against former directors and officers of Cooperative Bank of Wilmington, N.C. The appellate court affirmed the dismissal of all of the claims against the director defendants but reversed the lower court’s ruling as to the negligence and breach of fiduciary duty claims against the officer defendants.
Continue Reading Fourth Circuit Affirms Dismissal of All Claims Against Failed Bank’s Directors, Revives Negligence Claims Against Bank’s Officers
Tenth Circuit: D&O Insurance Policy’s Insured vs. Insured Exclusion Unambiguously Precludes Coverage for FDIC’s Failed Bank Claims
In an important decision concerning D&O insurance coverage in connection with failed bank claims, the Tenth Circuit, applying Kansas law, held that a D&O policy’s insured vs. insured exclusion unambiguously precluded coverage for claims brought by the FDIC as receiver of a failed bank against the bank’s former directors and officers. The Tenth Circuit’s decision arguably contrasts with the Eleventh Circuit’s December 2014 decision in the Community Bank & Trust case (about which refer here), in which the Eleventh Circuit had held that the insured vs. insured exclusion at issue in that case was ambiguous with respect to the question of whether it precluded coverage for FDIC’s failed bank claims. However, the specific language in the exclusion at issue in this case precluding coverage for claims brought a “receiver” of the insured company – language not present in the policy the Eleventh Circuit considered — was a dispositive factor in the Tenth Circuit’s conclusion about the exclusion’s applicability. A copy of the Tenth Circuit’s August 6, 2015 decision can be found here.
Continue Reading Tenth Circuit: D&O Insurance Policy’s Insured vs. Insured Exclusion Unambiguously Precludes Coverage for FDIC’s Failed Bank Claims
Meanwhile, Back at the FDIC Failed Bank Litigation Ranch
As 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).
Continue Reading Meanwhile, Back at the FDIC Failed Bank Litigation Ranch
A Credit Crisis-Era Vestige: Fourth Circuit Affirms Bank Executives’ Criminal Conviction
Federal prosecutors have come in for considerable criticism over their failure to press criminal charges against executives of financial institutions whose stumbles led to the global financial crisis. As Southern District of New York Judge Jed Rakoff pointed out in his blistering January 9, 2014 opinion column in The New York Review of Books (
A Closer Look at an FDIC Failed Bank Lawsuit Settlement
According to the FDIC’s website (here), as of March 24, 2015, 44 of the 106 failed bank lawsuits the agency has filed have settled. So there is nothing particularly newsworthy about the fact that the parties to another one of the failed bank lawsuit had reached a settlement. Just the same, however, the
FDIC: Banks Prosper, Problem Institutions Remain
The banking industry had a “positive quarter” in the third quarter of 2014, according to the FDIC”s latest Quarterly Banking Profile. Banks continue to improve and are performing better than during the same period a year ago. In the aggregate during the quarter, banks reported income growth based on growing revenue rather than just lower
Failed NC Bank Execs Granted Summary Judgment on All FDIC Claims
On September 11, 2014, in a sharply worded order that will give heart to the FDIC’s many other failed bank litigation targets, Eastern District of North Carolina Judge Terrence Boyle, applying North Carolina law, granted the summary judgment motion of the former directors and officers of the failed Cooperative Bank of Wilmington, N.C., in the
FDIC: Banks Improve, Problem Institutions Linger
Overall, the banking industry continued to improve in the first quarter of 2014, although banks did see their noninterest income decline due to reduced mortgage activity and a drop in trading revenue, according to the FDIC’s Quarterly Banking Profile for 1Q14. The latest Quarterly Banking Profile can be found here and the FDIC’s May 28,
D&O Policy Excluding “Receiver” Claims Bars Coverage for FDIC Failed Bank Lawsuit
In an interesting April 7, 2014 opinion (here), Magistrate Judge Stanley A. Boone of the Eastern District of California, applying California law, held that a D&O insurance policy’s insured vs. insured exclusion precludes coverage for claims brought against former officers of the failed County Bank of Merced, California by the FDIC in its