W Holding Company, Inc. v. AIG Insurance Company- Puerto Rico
3:11-cv-02271
| D.P.R. | Oct 23, 2012Background
- FDIC, as Westernbank's receiver, filed claims against former Westernbank D&O's and conjugal partnerships and insurers to enforce liability policies and recover damages.
- W Holding owned all Westernbank stock; FDIC intervened in a Puerto Rico court action seeking coverage and damages.
- FDIC seeks $176.02 million in losses from alleged grossly negligent real estate, construction, and asset-based loans approved 2004–2009.
- D&O's sought coverage under Chartis; FDIC asserted claims for gross negligence, breach of fiduciary duty, adverse domination, fraudulent transfers, and insurer-related direct actions.
- Seven motions to dismiss were filed by D&O's and conjugal partners and insurers; court denies all motions, sustaining the FDIC’s claims as pled.
- Court applies FIRREA and Puerto Rico law, discusses Rule 12(b)(6) standards, and analyzes limitations tolling and insurer exclusions in denying the dismissals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FDIC states plausible gross negligence and related claims against D&Os. | W Holding; FDIC argues D&O actions meet gross negligence standard. | D&O's contend claims fail under lack of plausible misconduct. | Yes; claims pled plausibly under FIRREA and Puerto Rico law. |
| Whether adverse domination tolls limitations for gross negligence claims. | FDIC argues tolling applies due to control by culpable D&O's. | D&O's argue tolling not applicable for negligence. | Adverse domination tolls the limitations period for gross negligence. |
| Whether FDIC can plead fraudulent conveyance against Stipes and Dominguez. | FDIC alleges transfers with intent to hinder/defraud. | D&O's challenge sufficiency of debtor/instrumentality status and intent. | Yes; allegations sufficient to proceed to discovery. |
| Whether insured-vs-insured exclusion bars FDIC's claims against insurers. | FDIC seeks enforcement on behalf of depositors and fund, not collusive action. | Exclusion should preclude FDIC claims. | Exclusion does not preclude FDIC claims; insurers' dismissal denied. |
Key Cases Cited
- Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53 (Del. 1989) (gross negligence standard; deliberate and knowledgeable conduct)
- In re Payroll Express Corp., 186 F.3d 196 (2d Cir. 1999) (adverse domination tolling and corporate claims)
- Int’l Inv. Trust v. Cornfeld, 619 F.2d 909 (2d Cir. 1980) (adverse domination rationale; discovery-based tolling)
- Villarini-Garcia v. Hosp. Del Maestro, 8 F.3d 81 (1st Cir. 1993) (limitations did not start until information to sue was available)
- Atherton v. FDIC, 519 U.S. 213 (1997) (state common law governs director/officer liability; FIRREA context)
- O’Melveny & Myers v. FDIC, 512 U.S. 79 (1994) (limits federal common law; reliance on state law principles)
- Platt v. Wilmot, 193 U.S. 602 (1904) (statutory liability; liability created by statute)