Federal Deposit Insurance Corp. v. Loudermilk
295 Ga. 579
| Ga. | 2014Background
- FDIC, as receiver for Buckhead Community Bank, sues nine former officers/directors for alleged negligent loan decisions causing nearly $22 million in losses.
- Defendants moved to dismiss citing Georgia business judgment rule; FDIC argued statute and common law interact differently.
- District Court certified a question to the Georgia Supreme Court: whether the business judgment rule precludes ordinary-negligence claims against bank officers/directors.
- Georgia Supreme Court held the business judgment rule is part of the common law, not superseded wholesale by OCGA § 7-1-490(a), but not absolute.
- Court overruled Flexible Products Co. v. Ervast and Brock Built, LLC v. Blake as applied to bank officers/directors, explaining limited immunity depends on adherence to good faith and due care.
- Statutory provisions align with the common-law rule: reliance provisions and the standard of care focus on the process of decision-making, not simply the merit of the decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the business judgment rule part of Georgia common law? | FDIC says not part of common law. | Loudermilk argues rule is implied by statutes. | Yes; it is part of common law. |
| Does OCGA § 7-1-490(a) supersede the business judgment rule? | Statute overrides common-law rule. | Statute is consistent with, not a repeal of, the rule. | Statute does not supersede the rule. |
| Does the statutory framework require absolute immunity like Flexible Products? | Statute supports absolute immunity. | Statute supports only process-based immunity. | Flexible Products/Brock Built are overruled for bank officers/directors. |
| Can bank officers/directors be liable for ordinary negligence in the decision-making process? | Yes, under ordinary negligence theory. | No, as long as decisions were made with deliberation and due care. | Yes, under limited circumstances; cannot preclude such claims entirely. |
Key Cases Cited
- McEwen v. Kelly, 140 Ga. 720 (Ga. 1913) (directors owe ordinary care; liability for gross neglect exists for certain mismanagement)
- Woodward v. Stewart, 149 Ga. 620 (Ga. 1920) (bank directors not bound to ordinary diligence of their own business; need reasonable supervision)
- Shannon v. Mobley, 166 Ga. 430 (Ga. 1928) (bank officers have duties beyond nominal involvement; negligent ignorance may be liability)
- Mobley v. Russell, 174 Ga. 843 (Ga. 1932) (mere poor judgment not a basis for liability; require diligence and good faith)
- Casey v. Woodruff, 49 NYS2d 625 (N.Y. Sup. 1944) (business judgment rule: no liability if honest, informed judgment in good faith)
- Auerbach v. Bennett, 47 N.Y.2d 619 (N.Y. 1979) (business judgment rule protects informed, deliberate decision-making)
- Flexible Products Co. v. Ervast, 284 Ga. App. 178 (Ga. App. 2007) (held rule bars ordinary-negligence claims against officers/directors)
- Brock Built, LLC v. Blake, 300 Ga. App. 816 (Ga. App. 2009) (allocates absolute bar to ordinary-negligence claims against officers/directors)
- FDIC v. Stahl, 89 F.3d 1510 (11th Cir. 1996) (coexistence of business judgment rule with similar statutes)