FDIC D&O Lawsuits Continue in Georgia

FDIC LawsuitsIn December, I wrote an article about the FDIC’s fervent pursuit of lawsuits against former directors and officers of failed banks in Georgia.  At the time, the FDIC had elected to sue directors and officers at 11 of the approximately 85 banks that have failed in Georgia during this economic downturn.  Since I published that article, the FDIC has continued its onslaught against the directors and officers of failed banks in Georgia by filing 2 additional lawsuits last month.

Both lawsuits were filed in the Northern District of Georgia against former directors and officers of First Security National Bank, which was based in Norcross, Georgia, and Rockbridge Commercial Bank, which was based in Atlanta, Georgia.  The complaints against the directors and officers of these banks are substantially similar to the complaint against the directors and officers of Buckhead Community Bank that I discussed previously.  In the case against First Security National Bank’s directors and officers, the only two causes of action are ordinary negligence and gross negligence.  The claims are also based primarily on the alleged failure to follow the bank’s own loan policies and procedures and failures in underwriting.  The claims against the directors and officers of Rockbridge Commercial Bank are essentially the same factually.  However, against the Rockbridge directors and officers, in addition to the ordinary and gross negligence claims, the FDIC has also brought a claim for breach of fiduciary duty.  The allegations with respect to this claim are standard common law breach of fiduciary duty allegations, alleging that the directors and officers were fiduciaries of the bank, that they breached that duty by “abus[ing] their discretion and/or act[ing] in bad faith in the performance of their respective duties as officers and/or directors of the Bank,” and that these breaches of fiduciary duties proximately damaged the bank.

From a litigation standpoint, it is worth noting that it appears that these D&O cases are being assigned to different judges within the Northern District of Georgia, so it will be interesting to see if the different judges handle these matters differently.  Additionally, the FDIC is using several different law firms to represent it in these lawsuits, so that may also result in slightly different strategies being used.

As I mentioned in my previous post on this topic, Georgia is proving to be a bellwether for the nation with respect to these D&O cases being brought by the FDIC throughout the country.  If the two additional filings in December and the general rate of the filings throughout 2012 are any indication, the FDIC intends to continue to vigorously pursue this type of action, and former directors and officers of failed banks throughout the country should take note.  Although my home state of Tennessee has only seen 3 bank failures since 2007, they have all been fairly recently, in 2012.  Based on the D&O lawsuits in Georgia, it seems that the FDIC has been waiting several years to file the D&O lawsuits after the banks’ failures.  As an example, First Security National Bank and Rockbridge Commercial Bank both failed in December 2009, and the lawsuits were brought almost exactly three years later, which is the relevant statute of limitations in Georgia.  Given this delay, it is likely that Tennessee will not see any of these D&O lawsuits brought by the FDIC in Tennessee in 2013, if it sees any at all.  That delay should give the Georgia cases more time to play out and allow any potential lawsuits in Tennessee of this nature to have the benefit of the rulings by the Northern District of Georgia on the cases existing there.