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Professional Liability Lawsuits
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As receiver for a failed financial institution, the FDIC may sue professionals who played a role in the failure of the institution in order to maximize recoveries. These individuals can include officers and directors, attorneys, accountants, appraisers, brokers, or others. Professional liability claims also include direct claims against insurance carriers such as fidelity bond carriers and title insurance companies.

The FDIC follows the policies adopted by the FDIC Board in 1992, Statement Concerning the Responsibilities of Bank Directors and Officers, which can be found at http://www.fdic.gov/regulations/laws/rules/5000-3300.html#fdic5000statementct, and require Board approval before actions are brought against directors and officers.

Professional liability suits are only pursued if they are both meritorious and cost-effective. Before seeking recoveries from professionals, the FDIC conducts a thorough investigation into the causes of the failure. Most investigations are completed within 18 months from the time the institution is closed. Prior to filing the claim, staff will attempt to settle with the responsible parties. If a settlement cannot be reached, however, a complaint will be filed, typically in federal court.

As receiver, the FDIC has three years for tort claims and six years for breach-of-contract claims to file suit from the time a bank is closed. If state law permits a longer time, the state statute of limitations is followed.

Professionals may be sued for either gross or simple negligence. The Supreme Court has ruled that the FDIC may pursue simple negligence claims against directors and officers if state law permits (Atherton v. FDIC). Federal law preempts state law that insulates directors and officers from gross negligence or worse conduct. Bank directors are allowed to exercise business judgment without incurring legal liability.

Not all bank failures result in Director and Officer (D&O) lawsuits. The FDIC brought claims against directors and officers in 24 percent of the bank failures between 1985 and 1992.

From 1986 through 2011, the FDIC and former Resolution Trust Corporation (1989-1995) collected $6.46 billion from professional liability claims. Over that same time, they spent $1.77 billion to fund all professional liability claims and investigations. Early in the process of professional liability claims, expenses will often exceed recoveries due to the costs incurred in handling new investigations. Professional liability program recoveries lag expenses by several years until settlements occur and judgments are awarded.

As of September 11, 2012, the FDIC has authorized suits in connection with 77 failed institutions against 647 individuals for D&O liability. This includes 32 filed D&O lawsuits (3 of which have settled) naming 266 former directors and officers. The FDIC also has authorized 46 other lawsuits for fidelity bond, insurance, attorney malpractice, appraiser malpractice, accounting malpractice, and RMBS claims. In addition, 160 residential mortgage malpractice and fraud lawsuits are pending, consisting of lawsuits filed and inherited.

For additional background on Professional Liability Suits, please see Chapter 11 of "Managing the Crisis: The FDIC and RTC Experience" http://www.fdic.gov/bank/historical/managing/history1-11.pdf.

  Authorized D&O Defendants
Authorized in 2009 11
Authorized in 2010 98
Authorized in 2011 264
January 2012 18
February 2012 36
March 2012 42
April 2012 24
May 2012 56
June 2012 13
July 2012 14
August 2012 41
September 2012 30
Total 647

D&O Suits Filed

  1. FDIC as Receiver for IndyMac Bank, F.S.B. v. Van Dellen, Case No. 2:10-cv-04915-DSF-CW (U.S. District Court for the Central District of California Filed Jul. 2, 2010).
  2. FDIC as Receiver of Heritage Community Bank v. Saphir, Case No. 1:10-cv-07009 (U.S. District Court for the Northern District of Illinois Filed Nov. 1, 2010).
  3. FDIC as Receiver for 1st Centennial Bank v. Appleton, Case No. 2:11-cv-00476-JAK-PLA (U.S. District Court for the Central District of California Filed Jan. 14, 2011).
  4. FDIC as Receiver for Integrity Bank of Alpharetta v. Skow, Case No. 1:11-cv-00111-JEC (U.S. District Court for the Northern District of Georgia Filed Jan. 14, 2011).
  5. FDIC as Receiver of Corn Belt Bank and Trust Company v. Stark, Case Number 3:11-cv-03060-SEM–BGC (U.S. District Court for the Central District of Illinois Filed Mar. 1, 2011).
  6. FDIC as Receiver of Washington Mutual Bank v. Killinger, Case No. 2:11-cv-00459-MJP (U.S. District Court for the Western District of Washington Filed Mar. 16, 2011).
  7. FDIC as Receiver for Wheatland Bank v. Spangler, Case No. 10-cv-04288 (U.S. District Court for the Northern District of Illinois Filed May 5, 2011).
  8. FDIC as Receiver for IndyMac Bank, F.S.B. v. Perry, Case No. 11-cv-05561-ODW-MRW (U.S. District Court for the Central District of California Filed Jul. 6, 2011).
  9. FDIC as Receiver for Haven Trust Bank v. Briscoe, Case No. 1:11-cv-02303-SCJ (U.S. District Court for the Northern District of Georgia Filed Jul. 14, 2011).
  10. FDIC as Receiver of Michigan Heritage Bank v. Cuttle, Case No. 2:11-cv-13442-BAF-MKM (U.S. District Court for the Eastern District of Michigan Filed Aug. 8, 2011).
  11. FDIC as Receiver of The Columbian Bank and Trust Co. v. McCaffree, Case No. 2:11-cv-02447-JAR-KGS (U.S. District Court for the District of Kansas Filed Aug. 9, 2011).
  12. FDIC as Receiver for Cooperative Bank v. Rippy, Case No. 7:11-cv-00165-BO (U.S. District Court for the Eastern District of North Carolina Filed Aug. 10, 2011).
  13. FDIC as Receiver for Silverton National Bank, N.A. v. Bryan, Case No. 1:11-cv-02790-JEC (U.S. District Court for the Northern District of GeorgiaFiled Aug. 22, 2011).
  14. FDIC as Receiver for First National Bank of Nevada v. Dorris, Case No. 11-cv-01652-GMS (U.S. District Court for the District of Arizona Filed Aug. 23, 2011).
  15. FDIC as Receiver for Alpha Bank v. Blackwell, Case No. 11-cv-03423 (U.S. District Court for the Northern District of Georgia Filed Oct. 7, 2011).
  16. FDIC as Receiver for Mutual Bank v. Mahajan, Case No: 1:11-cv-07590 (U.S. District Court for the Northern District of Illinois Filed Oct. 25, 2011).
  17. FDIC as Receiver for Westsound Bank v. Johnson, Case No. 3:11-cv-05953-RBL (U.S. District Court for the Western District of Washington Filed Nov. 18, 2011).
  18. FDIC as Receiver of Bank of Asheville v. Greenwood, Case No. 1:11-cv-00337-MR-DLH (U.S. District Court for the Western District of North Carolina Filed Dec. 29, 2011).
  19. FDIC as Receiver for R-G Premier Bank of Puerto Rico v. Galán-Alvarez,Case No. 3:12-cv-01029-JAG (U.S. District Court for the District of Puerto Rico Filed Jan. 18, 2012).
  20. FDIC as Receiver of Westernbank Puerto Rico v. Garcia, Case No. 3:11-cv-02271-GAG (U.S. District Court for the District of Puerto Rico Filed Jan. 20, 2012).
  21. FDIC as Receiver for County Bank v. Hawker, Case No.1:12-cv-00127-LJO-DLB (U.S. District Court for the Eastern District of California Filed Jan. 27, 2012).
  22. FDIC as Receiver on Behalf of Silver State Bank v. Johnson, Case No. 2:12-cv-00209 (U.S. District Court for the District of Nevada Filed Feb 9, 2012).
  23. FDIC as Receiver for Community Bank & Trust v. Miller, Case No. 2:12-cv-00042-WCO (U.S. District Court for the Northern District of Georgia Filed Feb. 24, 2012).
  24. FDIC as Receiver for Freedom Bank of Georgia v. Adams, Case No. 1:12-cv-00726-JOF (U.S. District Court for the Northern District of Georgia Filed Mar. 2, 2012).
  25. FDIC as Receiver for Broadway Bank v. Giannoulias, Case No. 1:12-cv-01665 (U.S. District Court for the Northern District of Illinois Filed Mar. 7, 2012).
  26. FDIC as Receiver for Florida Community Bank v. Price, Case No. 2:12-cv-00148 (U.S. District Court for the Middle District of Florida Filed Mar. 13, 2012).
  27. FDIC as Receiver for Omni National Bank v. Klein, Case No. 1:12-cv-00896-RLV (U.S. District Court for the Northern District of Georgia Filed Mar. 16, 2012).
  28. FDIC as Receiver for Cape Fear Bank v. Coburn, Case No. 7:12-cv-00082-BO (U.S. District Court for the Eastern District of North Carolina Filed Apr. 4, 2012).
  29. FDIC as Receiver for First Bank of Beverly Hills v. Faigin, Case No. 12-cv-03448 (U.S. District Court for the Central District of California Filed Apr. 20, 2012).
  30. FDIC as Receiver for Innovative Bank v. Hong, Case No. cv-12-2658 (U.S. District Court for the Northern District of California Filed May 23, 2012).
  31. FDIC as Receiver for Community Bank of Arizona v. Jamison, Case No. 12-cv-01508 (U.S. District Court for the District of Arizona Filed July 13, 2012).
  32. FDIC as Receiver for Piedmont Bank v. Whitley, Case No. 12-cv-170 (U.S. District Court for the Northern District of Georgia Filed July 13, 2012).

Last Updated 9/14/2012 communications@fdic.gov