984 F. Supp. 2d 1354
N.D. Ga.2013Background
- FDIC, as receiver for Buckhead Community Bank, sues nine former bank officers/directors for negligent and grossly negligent management of the loan portfolio.
- Bank growth strategy (2005–2007) emphasized aggressive expansion, including CRE and ADC loans and new branches.
- Loan Committee approved high-risk loans and purchases without independent review, allegedly violating bank policy.
- Portfolio shifted toward high-risk assets; adverse classified assets grew dramatically while regulatory warnings increased.
- Bank failed December 4, 2009; FDIC asserts Loss Loans caused over $21.8 million in damages.
- Defendants move to dismiss arguing Georgia business judgment rule precludes ordinary negligence against bank officers/directors; FDIC opposes and seeks certification of unsettled Georgia law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Georgia’s business judgment rule applies to bank officers and directors in an FDIC suit | FDIC asserts GA law should not shield bank officers from ordinary negligence claims in FDIC suits | Georgia business judgment rule precludes ordinary negligence claims against bank officers/directors | Not applied at this stage; court will certify unsettled issue to GA Supreme Court |
| Whether the FDIC’s complaint states a claim for ordinary negligence | Allegations show failure to exercise even slight diligence in lending | Rule precludes ordinary negligence via business judgment rule | Plaintiff's ordinary negligence claim survives; motion to dismiss denied |
| Whether the FDIC’s claim is viable for gross negligence under 12 U.S.C. § 1821(k) and GA law | Defendants ignored duties and policies, constituting gross negligence | No fatal flaw; standard is difficult to prove as a matter of law | Gross negligence claim survives; court denies dismissal |
| Whether to certify an unsettled question of Georgia law to the GA Supreme Court | Established precedents are uncertain; better resolved by GA Supreme Court | Not necessary to certify if rule can be resolved now | Court will certify unsettled question to Georgia Supreme Court |
Key Cases Cited
- Mobley v. Russell, 174 Ga. 843 (1932) (early guidance on diligence and good faith for bank directors)
- Lau’s Corp. v. Haskins, 261 Ga. 491 (1991) (establishes ordinary negligence standard of care in GA)
- Sutter v. Hutchings, 254 Ga. 194 (1985) (source for standard of care elements in GA negligence)
- Regenstein v. J. Regenstein Co., 213 Ga. 157 (1957) (stockholders bear losses; rationale for business judgment context)
- Brock Built, LLC v. Blake, 300 Ga. App. 816 (2009) (business judgment rule protects officers unless fraud/bad faith/abuse of discretion)
- Atherton v. FDIC, 519 U.S. 213 (1997) (FDIC standard is a floor; state law governs higher standard)
- Morgan v. Horton, 308 Ga. App. 192 (2011) (gross negligence question generally for jury)
- Wright v. United States, 942 F.2d 1089 (1991) (FDIC receiver considerations in retroactivity context)