The FDIC updated its website late last week to reflect developments in the professional liability lawsuits the agency filed in the wake of the wave of bank failures that followed the global financial crisis. The unmistakable impression from the agency’s update is that the FDIC’s failed bank litigation is winding down and in its final stages. At the same time, however, a different page on the agency’s website arguably conveys a different message. The agency’s website’s failed bank list shows that though the financial crisis is well in the past, there have been a noticeable number of bank failures this year, many of them involving sizeable banks — a development that is worth considering and keeping an eye on.
Continue Reading Though the Failed Bank Crisis is Over, Bank Failures Are Still Happening
Ninth Circuit: Insured vs. Insured Exclusion Unambiguously Excludes FDIC’s Failed Bank Claims
During the bank failure wave that followed the global financial crisis, one of the recurring questions was whether or not the failed banks’ D&O insurance policies’ insured vs. insured exclusion precluded coverage for the FDIC’s liability claims as receiver for the failed bank against the banks’ former directors and officers . As I noted in a post late last year, the general consensus among the federal appellate courts is that the exclusion’s applicability to FDIC-R claims is ambiguous and therefore that the exclusion does not preclude coverage. As I also noted, however, there was an exception to this consensus, reflecting important wording differences sometimes found in the exclusion.
Consistent with this exception to the consensus, on January 10, 2017, the Ninth Circuit, applying California law, held in an unpublished opinion that the applicable D&O policy’s insured vs. insured exclusion was not ambiguous and precluded coverage for the FDIC’s claims against the former directors and officers of the failed Security Pacific bank. Unlike the exclusion found in many D&O insurance policies, the policy at issue in the Ninth Circuit’s case specifically precluded coverage for claims brought by any “successor” or “receiver.” The Ninth Circuit’s opinion can be found here.
Continue Reading Ninth Circuit: Insured vs. Insured Exclusion Unambiguously Excludes FDIC’s Failed Bank Claims
Ninth Circuit Holds Applicability of Insured vs. Insured Exclusion to FDIC-R Claims to be Ambiguous
During the course of the wave of failed bank litigation following in the wake of the global financial crisis has been a raft of related coverage litigation addressing the question of whether coverage for claims by the FDIC as receiver of the failed bank against the bank’s former directors and officers is precluded by the D&O insurance policy’s Insured vs. Insured exclusion. A number of courts have found the exclusion to be ambiguous and therefore that the exclusion does not preclude coverage for the FDIC-R’s claims (for example, refer here), while other courts have found the specific exclusions at issue to unambiguously preclude coverage (refer for example here). In the most recent court decision to address these issues, the Ninth Circuit, in a short unpublished October 19, 2016 per curiam opinion (here) affirmed the holding of the district court finding the Insured vs. Insured exclusion applicability to claims brought by the FDIC as receiver is ambiguous, and therefore the exclusion cannot be applied to preclude coverage for the FDIC’s claims against the former directors and officers of the failed Pacific Coast National Bank.
Continue Reading Ninth Circuit Holds Applicability of Insured vs. Insured Exclusion to FDIC-R Claims to be Ambiguous
Guest Post: Jury Applies Georgia’s Business Judgment Rule
As readers will recall, last week I published a post about the split verdict a Northern District of Georgia jury entered in the civil lawsuit the FDIC had filed against certain former directors of the failed Buckhead Community Bank. The verdict arose in one of the rare failed bank cases to actually go all the way to trial. In the following guest post, Robert Long Tod Sawicki, Elizabeth Gingold Clark and Lauren Tapson Macon of the Alston & Bird law firm discuss the Buckhead Community Bank lawsuit trial and verdict. Alston & Bird represents the defendants in the case. I would like to thank Robert and his colleagues for their willingness to allow me to publish their article as a guest post. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the Alston & Bird attorneys’ guest post.
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Failed Bank Litigation: Jury Returns $5 Million Verdict Against Failed Bank’s Former Directors
On October 25, 2016, in one of the few failed bank lawsuits remaining from the bank failure litigation wave that followed the global financial crisis, and one of the very few failed bank lawsuits to go all the way to trial, a civil jury returned a verdict of $4.98 million in the Northern District of Georgia against several former directors and officers of the failed Buckhead Community Bank of Buckhead, Georgia. While the jury returned a verdict in favor of the FDIC as receiver of the failed bank on four of the loans at issue in the case, the jury found the defendants not liable for six other loans for which the FDIC sought recovery.
Continue Reading Failed Bank Litigation: Jury Returns $5 Million Verdict Against Failed Bank’s Former Directors
As the Failed Bank Litigation Wave Winds Down, A Look Back
As we approach what will be the eighth anniversary of the peak of the global financial crisis, many of the effects of the crisis have subsided. But while the crisis and many of the worst of its effects have largely faded into the past, a number of litigated matters related to the crisis have continued to grind through the courts. Among other things, the wave of failed bank lawsuits – that is, lawsuits filed by the FDIC against the former directors and officers of banks that failed in the wake of the crisis – has continued to roll along. However, at this point, it looks as if the failed bank litigation has just about played out. Now that the litigation is winding down, it may be time take a retrospective look at the failed bank litigation wave.
Continue Reading As the Failed Bank Litigation Wave Winds Down, A Look Back
U.S. Banking Sector at Healthy Levels, But Do Problems Loom?
In the FDIC’s latest quarterly banking profile, the agency report overall reflects a generally healthy U.S. banking sector. However, problems may loom on the horizon at least for some banks. In addition, the statistics reflect significant changes that have changed the face of the industry just in the past few years. The FDIC’s Quarterly Banking Profile for the Fourth Quarter 2015 can be found here, and the agency’s February 23, 2016 press release about the report can be found here.
Continue Reading U.S. Banking Sector at Healthy Levels, But Do Problems Loom?
Answering Bank Directors’ D&O Insurance Questions
Bank directors often have many questions about their D&O insurance coverage, and rightly so. If significant reversals at the bank result in liability claims against the company’s senior officials, the bank’s D&O insurance could be the directors’ last line of defense. In this post, I address two issues that bank directors often ask about: first, does the bank’s D&O insurance cover civil money penalties? And, second, as the credit crisis retreats further into the past, when is the D&O insurance marketplace for banks going to “return to normal”?
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Does the FDIC Target Only Failed Bank Directors and Officers That Have D&O Insurance?
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