*1 are allegedly mailed. These assertions

clearly without merit. above,

For the reasons set forth is

therefore

ADJUDGED: sup-

1. That the defendant’s motion and denied;

plemental suppress motion to are

2. That the motion for a bill defendant’s

of particulars granted. government

shall within furnish the defendant ten

days all which have requested particulars

not, order, pro- as of the been date of this

vided;

3. That motion to strike the defendant’s denied;

4. That the motion for re- defendant’s denied;

turn of property is

5. That the defendant’s motion to dis-

miss is denied.

William L. GUNTER and Camille

S. Gunter

Theodore M. HUTCHESON et al.

Civ. A. No. C76-1702. Court,

United States District

N. D. Georgia,

Atlanta Division.

March 1980. Motion

On of Reconsideration and

Rehearing May

January, giving of a showing assets separate balance sheet Gunter, apart from and liabilities of Mr. wife, would be those of his new notes at the given for notes to be substituted Rhodes, Russell, Harold L. Thomas W. closing of the Gunters’ K. Gambrell, Wilcox, Jane Russell & stock, be pay- those new notes would Forbes, Atlanta, Ga., plaintiffs. for The new notes only. able Mr. Gunter Chandler, J. D. H. Fleming, John A. payments only provide for interest Phears, Sutherland, Wayne Bren- Asbill & principal for the years, first two nan, Atlanta, Fisher, Ga., N. Robert Myers payable year over a ten thereafter Green, Div., Washington, C., J. Legal D. period per percent principal year at ten Bonneau, Tenn., Jerry Chattanooga, remaining thirty years seven and the FDIC. percent year. principal in the last *4 16(b), (c), (f), (g). ¶ Complaint, Amended

ORDER OF COURT were alleged misrepresentations These writing, were not executed YE,MO Judge. Chief HNB/C, approved by were not the Board of This many action is one of to arise out of HNB/C, Directors of the and were not offi- the failure Hamilton of the National Bank cial records of the HNB/C. Chattanooga (HNB/C). On December In order to acquisition finance the of the 31,1974, the plaintiffs purchased 61%of the stock, HB&T/A the Gunters borrowed $5.5 stock of the Bank Trust Hamilton and Com- HNB/C, million giving from HNB/C two (HB&T/A) pany of Atlanta for million $5.5 notes original principal in the amounts of M. defendant Theodore Hutcheson. million and million securing $2.5 and $3 during negotia- The Gunters allege that those notes with Only the HB&T/A stock. tions preceding purchase the stock some of the million note is involved here. $3 misrepre- defendants caused fraudulent 1976, sentations On concerning February Comptroller the financial condi- tion of the Currency HN&T/A to be made to the declared the HNB/C insolvent Gun- appointed ters. These and alleged misrepresentations in- the FDIC as receiver. The clude, others, among may adopt following: capacity FDIC its as insurer

seven million dollars in certificates of de- continue to have year from the posit in the Atlanta Bank for at least one ($500,000) per year, and Mr. and Mrs. procedure make five hundred thousand dollars through stock; at least one million dollars Gunter would make (f) The Atlanta (c) The Atlanta Bank had and would (b) ^[*] ^[*] The # Chattanooga ^[*] Chattanooga Gunters’ ^[*] ^[*] a federal funds Bank was enough ^[*] ^[*] Bank would leave acquisition Bank; in dividends projected ^[*] ^[*] ($1,000,000) line of of the ^[*] ^[*] provide failure of the of the failed bank. mined to procedure usually enables the FDIC to min- fund, imize the losses to its tioned bank’s either of two what is and natively, bank insured assumption” failure. avoid goals. assets over a maximum commonly use assist the receiver in in order to achieve deposits procedures Miailovich It disruption HNB/C, may arrange purchase transaction. The latter protection known as a period and then In the case of the affidavit when deposit the FDIC deter- of a and time, to liquidate faced with a payout, aforemen- depositors arranging “purchase insurance ¶¶ payment or alter- 2, 4, 6; and from the pay Atlanta Bank to interest on Agreement of FDIC as re- Sale between notes; and (Ex- ceiver and insurer corporate FDIC as

(g) affidavit) (hereinafter The interest on B given by

In order to effect the deceit. purchase and as- The FDIC has counterclaimed for sumption with the promptness to necessary payment on by the note given $3 million the ensure the of the going retention concern Gunters to (and by HNB/C now held the assets, value of the failed bank’s pur- the FDIC) to of finance the stock. chasing immediately bank cannot examine The case is presently the Court before on the loans the of failed bank to determine the motion of summary defendant FDIC for they whether are acceptable quality. of judgment respect to claims ¶ Miailovich 7. purchaser affidavit is and defendant FDIC’s counterclaim. For given period a time to in which purposes of this motion the FDIC admits examine the loans and to return to the plaintiffs’ allegations of fraud. Id.; any receiver unacceptable loans. Pur- legal Defendant FDIC advances two the- chase and Assumption Agreement between ories in for support summary its motion First Tennessee National Bank and the First, judgment. argues the FDIC FDIC (Exhibit as receiver A to Miailovich under 12 1823(e) may disregard it § affidavit) (hereinafter Purchase and As- any agreement which the Gunters seek to sumption Agreement) 3.1(c). One of § the against enforce argu- FDIC. At oral means by which the FDIC corporate ment and post-argument brief, in its attempts insurer to effectuate the afore- emphasized FDIC argument a related e. goals mentioned of a purchase and assump- —i. that federal common law allows the FDIC tion is by agreeing to acquire from the to disregard assets, any fraud receiver Gun- any returned Miailovich af- 7, rely seeking ters ¶ fidavit to invalidate acquire this case it did the note.1 Second, Gunter note the FDIC contends Section 29 from receiver for $3,220,794.50 after by precludes it was Exchange returned Act the use of FTNB. Agreement 1.1. of Sale When § the fraud allegation Gunters brief, post-hearing In argue everyone’s their ignore Gunters for time to argument now, the FDIC only failed to state federal common to the FDIC file an- have ground required law as a for ground. Second, their motion as other motion based on that 7(b). argument Fed.R.Civ.P. This is of no avail the Gunters have briefed the merits the is- First, plaintiffs Third, closely for several reasons. have not sue. the issue is related to the specified any they 1823(e) relief to which would be section issue. entitled; it would be a tremendous waste of

551 committee, have because board shall capacity the FDIC its insurer faith, note in exe- acquired been, time of its Gunter continuously, value, knowledge of and without actual cution, of the bank. an official record laws. Plain- any violations of the securities dealing cases Although there are several First, ways. they respond tiffs in several 1823(e), with the of 12 U.S.C. applicability a no note takes argue that transferee resolving pre- very helpful none are transferor had. greater rights than his Court. Section confronting cise issue 1823(e) Second, 12 they insist from such de- 1823(e) FDIC immunizes the Third, they facts. inapplicable on these as collateral payment fenses to on a note federal principle contend that there is no loans, v. FDIC agreements to future make protects common law which the FDIC. Allen, (N.D.Ga. June CA No. C78-592A Fourth, has they contend that the FDIC F.Supp. 1979); Vogel, FDIC v. requirements satisfy failed to of Section pur- a note if the (E.D.Wis.1977), to cancel FDIC 29 of the Act because the unobtainable, pose Dasco proves of the loan really separate capaci- in two has not acted Co., City v. American Trust Bank & ties with its handling to (D.Nev.1977), F.Supp. 767 loans fund note the FDIC Gunter and further because business, guarantor’s made to a v. FDIC had notice of on the defenses collection Smith, (N.D.Ga.1979), F.Supp. 843 Finally, any note. maintain loan, FDIC, West to treat overdrafts as provides event Section 29 no defense to (1979). Ga.App. 254 S.E.2d 392 their claims based on Securities Section than reply 17 and common law fraud. In to the This case more difficult those be- argues latter that for in this case fraud- cause the Gunters assert several reasons the Gunters have no cause ulent inducement as a basis rescission of action under and further that note. law, under purchaser common bona fide parties pointed have one case principles had no notice of point, very but its questiona- rationale is fraud when ques- it obtained note in Rockelman, ble. In FDIC v. tion.2 (E.D.Wis.1978), very on facts similar *6 these, attempt the court upheld the FDIC’s 1823(e). I. 12 U.S.C. § shield itself of fraud allegations from primary argument, Defendant’s allegedly prede- the by FDIC’s committed 1823(e), on 12 based relies the cessors rea- in The court’s entire interest. following language from that provision: soning was as follows: agreement No which tends to diminish in deeply involved This Court has been or defeat or right, the title interest of the of arising insolvency actions out of the Corporation by in asset it acquired long has con- City American Bank and section, under this either as security for that have problems sidered the various by purchase, loan or be against shall valid to cases arisen as a In addition result. Corporation agreement the unless such resolved, forty cases involv- already some (2) shall be writing, in shall have been or ing the individuals FDIC and various by executed bank and person the the legal currently before this entities are persons claiming an adverse interest Court. thereunder, including obligor, the con- involvement, it Because of this Court’s with the of temporaneously acquisition problems the ad- carefully weighed has bank, (3) asset by the the shall have been in ex- dressed this Court has approved by the case. The the board directors of statutes, the committee, amined the approv- bank or its relevant federal loan al shall be in FDIC reflected the minutes of said case law the in similar concerning objected argu- supra. original 2. The Gunters See note 1 have also to these in motion. the they ground ments on the that were not stated on. very agreement sued situations, history purpose and the argue that FDIC. in this case Plaintiffs original was intrinsic to fraud here on analysis Based con- language FDIC, agreement. express that, Neither cludes in its although made 1823(e) any policy corporate not a holder due Section nor capacity, is term the word meaning require course within the of that known to the Court Code, “agreement” only under mean Uniform Commercial read to be Congress means of Section original intended agreement “separate” 1823 to with the Corporation clothe the loan transaction. protections in due afforded a holder argue Plaintiffs the cases some Corporation against course and shield construing 1823(e) in the Section many defenses that would otherwise be money favor involve obtain attempts purpose available. This is the and effect judgments They con- against the FDIC. of this section. tend that this case is different because the This conclusion furthers the intent of rescission, they fail only Gunters seek but Congress soundness in bank- promote to show how that difference is material. ing and protect to aid and FDIC best, plaintiffs argue At simply While conduct of its duties. there are cannot from the obtain rescission may some valid defenses that available capacity its receiver because is not the against FDIC, the Court need not plaintiffs holder of The fact that the note. juncture. address that issue at this sue for may have no one else to rescission concerned, As far as the instant case is contemplated appears to have been Con- convinced, the Court is after its careful gress statute, drafting because the analysis, that the affirmative defense of language admits of no differ- statute fraud in the alleged inducement in this ent rescission actions from treatment case is not a valid defense damage actions.4 The “no accorded FDIC in corporate capacity. its agreement . . . shall be valid” form

460 F.Supp. at 1003. This Court is unable just of the statute easily contemplates to discern the Roekel- exactly what basis damage rescission as a action. 1823(e) man appli- court found 12 U.S.C. § emphasized have Sec- cable,3 as it made no attempt to fit 1823(e) prohibits enforcement tion fraud agreement claim into the “no “agreements”. a “side arguably There is shall be 1823(e). valid” language Section agreement” buy here —to the stock —of Another involving case the failure of the misrepresentations part. which the were a HNB/C appears to be the case Indeed, misrepresentations some of the can 1823(e) which the immunity has perhaps agreements. themselves be deemed rejected. been Realty Riverside Park v.Co. *7 16(b), (c), (f), (g) ¶ See g. Complaint e. FDIC, (M.D.Tenn.1978). 465 F.Supp. 305 supra p. 549. As states it in defendant its As might plaintiffs be expected, rely upon brief, this “if this court holds that [statute] that case heavily. plaintiff There the al- expedient can by simple be avoided leged predecessors that the FDIC’s HNB/C agreements’ claiming alleged that ‘side Mortgage Company Hamilton had part were . of a fraudulent scheme breached the a terms of contract under alleged breaches of agreement’ ‘side will payment sought on a note. become ‘securities fraud. . . .’” De- The court that concluded statute’s ref- 18, July fendant’s brief 1979 at 18. erence to “agreement” was intended to agreements refer to The “shall be independent separate language valid” of Section 1823(e), from the original however, transaction and not to the readily not so does fit the 1823(e) money judgment “no See note 7 infra. is available to the may defendants nor counterclaims act as their ” Smith, 4. See a set-off. . . 466 where the FDIC sued on a note at 845. Judge Murphy held that because of section

553 20-401, and in the not contend definition of § facts of case. Plaintiffs do “instru- agreements” the “side to ment,” 3-104, that referred analogous U.C.C. is § above are “valid.” contrary To the requirements 1823(e) that Section essence of this conten- lawsuit is agreement “executed,” “approved “illegal” tion are “agreements” those directors,” as “an board of and maintained presented not “invalid.” Defendant has 12 official record of the bank.” theory any logical ac- 1823(e)(2)-(4). holder in due course § commodating the instant facts to that lan- further, rule, however, requiring goes much 552, indicated, this em- supra p. guage. As 1-201) to one negotiation (U.C.C. who § phasis language valid” the “shall be does takes value . an instrument “for availability interfere with the without no- faith . . . [and] ” 1823(e) Section in other rescission defense tice . . . this exalt- order to obtain FDIC, provided actions ed freedom status concomitant shows, such as the statute action the FDIC from a claim or defense of fraudulent in- requires, the would-be-rescinder thus concludes that ducement. The Court seeking “validity” establish the 1823(e) much in the Section is as nature of a “agreement.” statute of frauds as a holder in course due argued Plaintiffs have also that Section rule. The Court go need not so far as to frauds; 1823(e) is akin to a statute of like a 1823(e) hold that 12 U.S.C. is the exact § continue, frauds, statute of Section equivalent of a statute of frauds. 1823(e) subject should be to the defense of The Court concludes Section g. fraudulent inducement. E. Inman v. 1823(e) inapplicable. Wallace, (Tex.Civ.App. 558 S.W.2d 554 1977); Merritt, Connelly (Fla. v. 7 So.2d Federal Law II. Common Dist.Ct.App.1973). A similar has been rejected by Vogel, one court. As argument, an alternative defendant F.Supp. at 663.5 estopped, maintains that are un law, principles der of federal common argues Defendant raising against the FDIC the claim or de 1823(e) is more like a holder in due course D’Oench, fense of fraud. In Duhme & Co. frauds; rule than a statute of holder in FDIC, 86 L.Ed. course, course, due takes free of claims U.S. (1942), of over FDIC made a loan $1 and defenses of fraudulent inducement. million to an FDIC-insured bank in connec significant U.C.C. 3-305. The most simi § tion with of the bank’s lia larity 1823(e) between Section and either a acquired bilities another bank and statute of frauds or a in due holder course petitioner’s peti notes as collateral. rule lies in “writing” requirement. D’Oench, tioner Duhme & had sold Co. Compare 1823(e) (“No agree bank bonds which gave ment . defaulted. It . . shall be valid bank the notes “to the bank to agreement (1) carry unless such enable shall be in writ- ing .”); any past . . . Ga.Code Ann. the notes and not show due 20-401 § (“[T]he promise Receipts must bonds.” for the notes writing .”); be in . stated that U.C.C. 3-305 (defining rights given understanding “This note is with the holder in due course payment. of an “instrument” it will All inter which is in not be called for turn “writing” defined as a est payments repaid.” U.C.C. to be Id. *8 3-104). The signature requirement president in a S.Ct. at 678. knew Petitioner’s frauds, g.,

statute of e. Ga.Code Ann. the purpose giving of the bank the Vogel expends money rejected analogy 5. The court an intrusted to it to to the application bank, rely statute of frauds and the of the assets of a can closed insured partial performance because, exception risking thereto the bank’s be an records and will not impairment agree- through of the assets an 1823(e) simply is not a statute of ment not contained in the bank’s records. public policy. frauds. It is based on a federal 437 at 663. operates FDIC, It to insure that the when it

555 Kimbell Foods. The in that application opinion that the case Foods observed Kimbell two-part cases, requires involving a loan of federal common law dealt with two one First, analysis. by must determine Administration Court Business Small applies law at all. whether common (SBA) federal a loan Farmers and the other issue, Supreme With (FHA). to that The Court Home Administration held that federal consistently Court “has was of whether question faced with the governs involving rights law questions priorities were to be deter- of those loans under nationwide fed of the United States law. mined state or federal Foods, 440 at programs.” eral Kimbell U.S. First, Foods the Court in Kimbell found 724, 99 at 1457. Where the United S.Ct. no need for a rule because federal uniform authority exercises derived from acts States procedures SBA and re- operating FHA Congress “passed in the exercise of a quired law in compliance perfect- with state ” power,’ ‘constitutional federal function Moreover, ing security interests. Id., quoting common law controls.9 Clear application felt that each is close- since loan States, field Trust Co. v. United 318 U.S. credit-worthiness, ly sig- scrutinized for no 363, 573, 574, 366, 63 87 L.Ed. 838 S.Ct. nificant delay processing in the loans (1943). In the instant case the FDIC was requirement could be attributed to a exercising authority granted it under 12 the loans be evaluated under state law. 440 729-734, U.S. at 99 S.Ct. at 1459-61. In the second, “more difficult task case, instant the FDIC does have an inter- giving . federal content est in the uniform treatment of notes which Foods, 726, rule.” at 99 Kimbell U.S. it obtains in a purchase assumption S.Ct. at 1458. To hold that federal common difficult, transaction. It would be if not however, governs, necessarily law does not impossible, exped- evaluate the FDIC to require the adoption of a uniform federal itiously an insolvent bank’s numerous loans rule.10 United States v. Little Lake Misere which might governed be by different rules Co., 594-95, 580, Land 412 U.S. 93 S.Ct. of law of pre- several To different states. 2389, 2397-2398, (1973); 37 L.Ed.2d 187 serve the going-concern value failed Trust, 367, Clearfield at at U.S. S.Ct. assets, purchase assumption bank’s 575. Several factors bear decision case, must implemented quickly this—in whether to law incorporate state or to for overnight. its Indeed the note made entire mulate a nationwide federal rule as the journey from receiver to HNB/C First, Court did in D’Oench. one must con receiver, FTNB back and then to to the sider program ques whether the federal FDIC as insurer in a month. The need for tion and must be uniform in character “[is] expeditious such pur- of a implementation throughout Foods, the Nation.” Kimbell chase assumption suggests that Second, U.S. S.Ct. at 1458. governed FDIC must be by a uniform rule one must determine “whether application of requiring that guard only against it be on specific objectives state law would frustrate fraud of knowledge at which it has actual Third, programs.” of the federal Id. it is the time necessary to ascertain “the extent to which begins. transaction If it then knows of application of a federal rule disrupt fraud, might implement pur- it elect to relationships predicated commercial assumption anyway, reasoning chase and state law.” Id. at at 1459. S.Ct. either that the overall cost would be less

In order properly apply these cri even after the FDIC is stuck a worth- here, teria is necessary to review the less has a note or that analysis employed by Supreme recovering Court in chance of in a fraud suit from rejected expressly application 10. Several cases 9. Meo “federal law have held that controls ” involving rights principles cases of the FDIC. . Uniform Commercial Code D’Oench, Smith, citing g. 505 F.2d at 793 n. 315 U.S. at FDIC. E. at 845. 457, 62 at 679. *10 precedence.” those who committed the fraud. Where the took 440 U.S. at 99 S.Ct. note involved has a face value very high at purchas- 1464. Even if one assumes that and/or where there slight are chances of here, ers securities, rely such as suit, recovery in a fraud might the FDIC upon federal expres- and various state choose a straight liquidation pur- over a protect sions of them the law of fraud to chase assumption. and If a different rule sellers, against deceit that reliance will permitted, were the FDIC would be forced misplaced point at the at some to enter or not enter the transaction on the Exchange rule of law such as Act Section basis of incomplete information and thus at disrupt comes play. into It would com- great risk. mercial affairs to the limited extent that a purchaser particularly relies on state

Second, the Court in Kimbell Foods found opposed to federal statements of the law application that the of state law would not of fraud. frustrate objectives of the pro- federal gram. rejected The Court therefore, Only factor, the final cuts that SBA and FHA loans should receive the at against adoption all of a uniform same treatment as federal tax liens on the against protecting federal rule FDIC grounds that overriding purpose of “[t]he one, fraud situations such the instant the tax lien statute obviously is to ensure and it way. plain does so in a limited The prompt revenue collection” in contrast tiffs’ reliance on the state law of fraud SBA and FHA loans which serve a “social must be balanced the need for a purpose. welfare” U.S. uniform rule absolving any FDIC of area, at 1462. In the tax lien the United duty to investigate many notes it ob States is an “involuntary creditor tains in a period short the need time and unable to control the factors that make tax preserve objectives of the FDIC’s likely,” collection whereas in the context of purchase and assumption program. The SBA and FHA loans “when the United Court need solely balancing not on that rely States acts as a guarantor, lender or it does analysis for Exchange there is in Act Sec so voluntarily, with knowledge detailed tion 29 a expression way clear of the the borrower’s financial status.” Id. In which federal law with innocent deals hold purchase and assumption transactions ers of notes tainted fraud. securities investigate FDIC cannot collectibility public policy statutory interests in a failed bank’s assets until some time after purchase transaction and the transaction has been implemented. To the statutory protection interest make the responsible FDIC for the fraud of innocent purchase holders of notes used to its predecessors in interest which it has securities convince the Court state law no actual knowledge would limit the ability has no role dispute in this between FDIC to utilize a and as- plaintiffs and the FDIC. sumption Specifically, transaction. it Accordingly, on the basis of cause the federal com- enter such trans- law, mon actions complete without information GRANTS with motion. respect to the paper amount of worthless

may be obtaining and as to the number of III. Act Section might

lawsuits it have to bring to recover predecessors. fraud its argued in its defendant has motion get and brief that if it fails to summary Finally, the Kimbell Foods Court found case, judgment on then the entire it never- application of federal law would dis- rupt summary judgment theless is entitled to commercial affairs based on state law. The Court reasoned that Section 29 claim. “Creditors who justifiably rely on Specifically, argues state law to obtain the FDIC that it is supe- rior liens would have sort expectations purchaser protected their of innocent under thwarted whenever a federal (b) (c). provides contractual subsections security interest suddenly appeared part: acquisition value it also faith made in violation

(b) Every contract oper- urged in its first brief that or of chapter any provision of *11 as thereunder, capacities in two receiver and every ates regulation rule or —as anticipated correctly corporate contract for list- insurer. It (including any contract length they argue at exchange) plaintiffs’ heretofore for security position, on an ing of fact maintain made, performance not in or hereafter the FDIC does of, or the legal the violation end re- which involves separate capacities. two relationship prac- or any of made continuance has not been argument sult of this of, of this any provision tice in violation clear, apparently but entirely thereun- regulation or rule or chapter any (1) that there urge the to conclude Court der, (2) as re- shall be void ... was transfer, (2) any transfer no was who, any person of not gards rights faith, (3) good and/or that no not made contract, such shall have being party argue in the alter- passed. value Plaintiffs right thereunder with actu- acquired any notice, knowledge, native that reason of by of the facts knowledge al had proper that the FDIC standard and of such making performance or which the ques- it to make notice of sufficient facts pro- such any in violation of contract was Final- note. validity tion the of the Gunter vision, rule, regulation or if the that even Sec- ly, plaintiffs contend (c) chapter shall be Nothing in this established, applies only it tion 29 defense (1) validity any affect the of construed under the to claims Securities (or any exten- loan or extension of credit law or state Act and not Securities thereof) any made or of sion or renewal claims. prior subsequent or lien created outset, mention At the must Court chapter, of this unless at the enactment FDIC, Shipley defendant’s reliance on loan or exten- making time of the of such 22, 1979). (E.D.Tenn. CIV-1-78-11 March (or sion of credit extension or renewal FDIC’s mo- Shipley granted court lien, thereof) creating or the of such notwithstanding the ver- judgment tion making such loan or extension of person dict reasoning follows: as thereof) (or or renewal credit extension Mr. Bonneau testified that such lien shall have actual acquiring or the note paid value for and took the note knowledge of facts reason of which knowledge or good any faith without making of such loan or extension of been exe- may it have awareness that thereof) (or credit extension or renewal banking law or any cuted in violation lien is a viola- acquisition or the of such evidence to regulation. was no There chapter of this or provisions tion of the contrary. thereunder, (2) any rule or or regulation court was Shipley To the extent that the collection of to afford a defense to the adduced at concerned with the evidence any obligation debt or or the enforcement trial, from the distinguishable it is have any by any person lien who shall in this for sum- presented motion evidence debt, obligation, or lien in acquired such importantly, mary judgment. More and without actual good faith for value discuss, mention, not even let alone case did provi- knowledge any of the violation by plaintiffs here. argument presented chapter regula- rule or sion unpersuasive here. The case is therefore affecting legality tion thereunder debt, obligation, or lien. such 29 defense analysis An Section (1) defense to reveals a viable 29(b), (c), Exchange Act Securities claims, (2) support well as 1934 Act 78ce(b), (c). Defendant contends common law view on federal this Court’s knowledge specified lacked First, the in Part II. which it stated 29 when it the note in acquired Section part clear which Further, entirely it is not attempt notes that question. apparent in an Fortunately, the that the of 29 is at issue. plaintiffs’ argument to head off seems each. It transaction was same result obtains under agreement, FDIC owned the “unac- acqui- 29(b) (c)(1) establish that Section liquidate assets” and could them knowledge ceptable actual essential sition with action, plaintiffs’ cause of without supervision. element of the court 29(c)(2) a defense to provides while Section uninterrupted Finally, there was an (1) acquires (2) who a defendant operations. business continuation bank knowl- (4) actual faith for value without 163; also Miailovich F.2d at See Ashley, avoid the edge. Plaintiffs could 4,2, supra p. 549). (discussed ¶¶ affidavit es- under Section conceivably could be goals While such those four any of tablishing the absence of without the division achieved established without factors. Plaintiffs have *12 remains that capacities, the fact into two interrelation- that there are certain dispute Congressionally been such a division has FDIC overlaps and the as ships between clearly The Act contem- mandated. FDIC insurer, the corporate and FDIC as receiver may sell the as receiver plates that FDIC persuaded have not the Court that but corporate as insur- notes and that the FDIC faith facts are to a those material as may buy er notes: acquisition for value. (d) of insured liquidators Receivers or banks . . . offer A. “Good faith” shall be entitled for sale the assets of banks such defend- plaintiffs’ argument The Corporation ., . . capacities seems operate ant does not in two (e) judgment Whenever in the of the question. faith” “good most relevant to the clearly Board of will reduce argues, law es- Directors such action As defendant case in or may operate two the risk avert a loss to tablishes that the threatened FDIC g.E. FDIC v. capacities purposes. Corporation merger for some a and will facilitate 1978); (6th 585 F.2d 157 Cir. FDIC Ashley, with consolidation insured bank of an Godshall, (4th 1977). Cir. 558 F.2d 220 bank, another or will facilitate insured however, note, correctly Plaintiffs of the open the sale or closed assets of an cases dealt in con- capacity those its assumption lia- insured bank jurisdiction text of whether was federal bank, the bilities another insured Cor- under 12 proper 1819. and condi- poration may, upon such terms may pur- . . . tions as it determine if the precedent Even cited chase such assets purchase controlling, good faith in the and al and and sets” to the FDIC its ty ties and an insurer [FTNB]. assumption is First, assumption: reduced the ^[******] policy the sale “acceptable justification deposits risk of loss [HNB&C’s] reflected of the “unacceptable corporate for the assets” in the function deposit facilitated the FDIC capaci- liabili- as- tion.” of certain division “receiver” der the FDIC’s regulations administers §§ 12 U.S.C. 306.2, plaintiffs § In addition, 1822(a) provides 306.3. In § other capacities may a regulations. “receivership.” See C.F.R. language pay argue that reply is not expenses the FDIC that the FDIC as in the For so clear a this note that un- example, “of “liquidator” statutory correct- liquida- in light must

Second, ly agreement “liquidation” contends a assignment liqui- of the two effected no eliminated the for constant court matter need “liquida- supervision receivership. options of a A receiver dation chosen term. C.F.R. personnel simply needs court for the disburse- tor” is authority urge that when the nego- 306. Plaintiffs also expenses, ment of funds to pay a closed bank which settlements, buys the issuance of FDIC assets of tiation receiver, refers rata, serves as the statute accountings, pro payment, insurer, FDIC both receiver and as sim- assignment By of creditors. virtue of “Value” statutory C. Corporation.” ply as “the however, above, clearly dif- quoted scheme Third, the note acquired the one receiver on between the ferentiates the re payment million to of over $3 hand, insurer. and, hand, on the other affidavit, 8,¶ satis ceiver, Miailovich factu strong Plaintiffs have made fying the of Section requirement “value” support al their record in attempt to contro 29. The opera great overlap is a between there in their vert statement this fact was the corporate insurer. tions of the receiver and to defendant’s state supplemental response FDIC importantly, employed Most facts, without undisputed ment of material charge” receiver” “liquidator same “as record, that the defend any citation to the liquidator.” and “as The FDIC maintained commer “pay” ordinary ant did not in the Chattanooga per no separate offices cial sense. it performed, functions formance two charge did not know liquidator and the D. “Knowledge” employees whether other in his office The final corporate were receiver or in element the Section performing defense to lack of “actual surer functions. While unclear division is the rescission *13 of cause responsibility may the Court to Ex- knowledge of Securities the violation.” necessary wonder whether it is for the change 78cc(c)(2). 29(c)(2), § to have the capacities, FDIC two it does not that operative observes first the purchase convince the Court the that and “knowledge” not “actual language is but assumption, a Congressionally approved, Second, (c)(2) knowledge.” subsection legitimate transaction with regulatory a knowledge the viola- speaks of actual “of purpose, lacks faith. tion,” (b) and (c)(1) while refers subsections facts knowledge to actual “of reason “Acquired” B. which the loan ... is making of such (b) (c), chapter Under subsections and the violation of this (c) FDIC must also that it “acquired” establish . .” Subsection establishes the note.11 for plaintiffs. Gunter The Miailovich affidavit stiff burden In face of the the corporate capaci explicit language, plaintiffs states that in its that argue FDIC this ty $3,220,794.50. “purchased” governing the note for is “actual the standard addition, In the between the knowledge contract FDIC but rather “notice.” Further, as was on corporate they receiver and as insurer the FDIC argue that FDIC provides irregularities the the note acquisition by such an notice Gunter corporate as Agreement agreed FDIC insurer. to take back from the time it first points Sale 1. to the significant argu most Defendant Plaintiffs’ the note. Gunter agreement ment be- is that contrary Gunter FTNB and the note was neither en physically moved nor tween the receiver and corporate purportedly dorsed when the FDIC “ac the receiver contract between However, quired” insurer, it. neither contains they emphasizing the fact that that notes. How- unacceptable seek rescission from the FDIC to admits that reference note; assumed ever, “acquired” apparently the defendant has in those contracts deed, that were complaint they in their the notes expressly unacceptability seek the Miailovich from returned FTNB for rescission “holder” of the to be from “poor ¶ assets of Complaint Amended that it would be note. 22. stated Post-Hearing argument, substance.” Plaintiffs’ mercial 11. At oral counsel for the FDIC ac- knowledged “ordinary p.15. that that was not Brief at The Court believes this Although precise sense in the was commercial transfer.” transfer “non-commercial” meaning designed results men- it was achieve the of this “non-commercial”. character- clear, entirely certainly supra p. Ashley, in the ization is not does not tioned affidavit, p. supra Miailovich 549. follow this characterization “paper was a without “com- transfer transfer” knowledge” language (c) subsection must uncollectible,” “possibly quality,” notice, “notice,” they read to mean returned. would be “[unacceptable” contend, law limitation on common affidavit, ¶ intend- 5. Without Miailovich support In bargains. illegal rescission of is suffi- whether this ing any decision as to which make cases they cite this conclusion notice, believes the Court cient to constitute Okin v. standard. to a “notice” reference issue can be “knowledge/notice” 1946); (2d Cir. Lane SEC, 154 F.2d determining whether by first best resolved Corp., F.Supp. Midwest Banchares controlling is the “knowledge” or “notice” Those references are (E.D.Ark.1972). standard. Moreover, dicta, those obviously however. at the outset The Court notes cited the “actual very same cases have also attempt no serious plaintiffs have made 31; Okin, 154 F.2d at knowledge” standard. In “knowledge.” FDIC had argue that the Further, Lane, at 1211-12. to defendant’s response supplemental their language in the “void” courts have read material facts undisputed statement of prevent (b) as “voidable” subsection all the knew that only state that the FDIC committed have themselves those who “irregu- returned loans suffered from some of a void obtaining rescission fraud from the Court larity.” Accordingly, because 387, 90 Mills, g. 396 U.S. E. contract. below that concludes for the reasons stated present policy at 623. No such standard, controlling “knowledge” is the alleged de- where the defendant is not ele- the final defendant has established frauder. defense. ment of the foregoing For reasons correctly that the courts argue Plaintiffs satisfies the Court believes 29(b) embody have construed Section requirements Act Section illegal bargains, concept law common Not does a reason provide “voidability” of contracts providing for Ex as to the granting the motion *14 in of the law. Mills v. Elec- made violation claim, change supports it also the Act but 375, 387, Co., tric Auto-Lite 396 U.S. 90 II that federal in Part conclusion reached 616, 623, (1970); 593 24 L.Ed.2d Occi- the FDIC not be requires common law that Assoc., Inc., Ryan dental v. Pat Life Ins. Co. this case. for fraud in held liable cert, 1255, (4th Cir.), 496 F.2d 1266 denied 29 on 1933 Securi- of Section IV. Effect 1023, 499, 419 42 L.Ed.2d 297 U.S. 95 S.Ct. ties Act Counts German, (1974); Pearlstein v. & Scudder 1136, (2d 1970) (Friendly, 429 F.2d 1149 Cir. it is enti- Defendant next contends J., dissenting); Register Co. Inc. v. Gannett on summary judgment tled to Co., 818, (D.Conn. F.Supp. Pub. 428 830 Act Count II on Securities which is based 29(b) 1977). reading a has offered 77q. Such of Section It has 17(a), 15 U.S.C. § dismissing this prevailed express arguments over the statute’s use of several Count,12 that not including the contention the word “void” instead of “voidable.” limitations found in Ex- Thus, impose the plaintiffs, conclude the “actual Inc., 1255, (4th 1974). Al- plaintiffs 496 F.2d 1267 Cir. 12. The have FDIC maintains that attempt- implied private though plaintiffs in Life no cause of action Occidental under sec- 17(a), 17(a), relying at id. tion on hold- ed to state a claim under section this Court’s earlier 1, opinion ing 1260 n. does not make to that effect in this court’s case. Gunter Hutcheson, explicit applying (N.D.Ga.1977). whether section 433 42 The the court was “voidability” principle spoken clearly 17 or to courts have not 29’s to section whether principles employed implying private in other sections the 1933 as sections causes Act such Supreme opinion apply 11 and 12. The recent of action to situations Court such as this where Mtg. Lewis, plaintiffs in Transamerica Advisors v. 444 seek rescission both on their own 242, 11, (1979), 62 L.Ed.2d 146 U.S. 100 S.Ct. claim and as a defense to the counter- apply principles implying ap- used in claim. has seems to One court held that section 29 claims, private plies rendering cause of action even to a determina- to Securities Act trans- a cause of action for rescission tion whether actions voidable when -violate that Act. Assoc., at implied. 100 S.Ct. Ryan id. at be See Occidental Life Ins. Co. v. Pat should &

561 damages are under the Act tive available Act on Securities change Section Svc., Inc., give Act. v. Law Globus Res. Securities causes of action (2d 1969). in F.2d The court Glo- the Ex- Cir. sweep” than “broader Act much Exchange in bus at held that the limitation Reply Brief Second change Act. FDIC’s 28(a) damages would to actual Section most to hold p. ironic 4. It would well Act claims as be- apply to Securities express purchaser innocent 29(c)’s Section create an cause to hold otherwise “would appli- a cause action is limitation on cable, dichotomy the 1933 between unfortunate defense under a cause action or and 1934 Acts.” Id. 1286. “To avoid at no cause of 17(a), express because Section have endeavored courts such inconsistencies section. provided in that action or defense pari treat the 1933 in and 1934 Acts Congress had in- Plaintiffs contend if single materia and to construe them as rights 29 to in limit tended Section comprehensive regulation.” scheme of Id. Act, in the 1933 it demonstrated granted in Significantly, emphasized that Court it knew to do so and Section 29 that how irony mentioned earlier which would inhere so expressly. could have done a cause of action implying under Section applicability of Section 29 is Although 17(a) imposing upon without that cause of e. the 1934 chapter” limited to “this —i. action found express limitations Act, has held Fourth Circuit —the 1934 Act. Id. at 1284. under the 29 can affect a claim that Section Act, reasoning foregoing precedents, that the two Given the 1933 Securities Court of action or pari construed in materia. concludes cause Acts must be might be able Life, defense which the 496 F.2d 1265-67. More Occidental 17(a) to state under Securities Act Section “voida- specifically, the Court held that the is limited Exchange Act Section 29(b)13 principle applies of Section bility” Thus there is an reason for independent Act claims. The Fifth Circuit Securities granting the motion as to Section has recognized principle also claim as well for the hold as more support materia, pari Acts are to be two read ing in Part II that the is entitled to even with to a in the provision summary judgment principles fed under which, Exchange Act like eral law. common application expressly limited to the Ex- Co., Tullís v. change Kohlmeyer Act.14 & Law Claims V. State (5th 1977). F.2d Cir. has also employed pari concludes,

Second Circuit the in on the based puni- (Part II) materia whether principle deciding principles common law of federal *15 dissenting). (White, p. supra. 250 J. This Court need not 13. See 560 plaintiffs the issue of have a resolve whether the rescission, cause of action for because even construing Exchange 14. The court in Tullís was do, they if the Court believes the cause 28(b), 78bb(b), pro- Act 15 U.S.C. § of action is cut off where the FDIC satisfies vides: purchaser requirements the innocent Ex- of. (b) Nothing chapter in this be con- shall change Act section 29. modify regard (1) existing strued law with binding any any to the effect plaintiffs on member of The FDIC also contends any exchange requisite action privity taken the authori- shown the between have not exchange disputes FDIC, relying of such Hill ties to settle be- themselves members, Fran’s, Inc., (2) regard Corp. v. American its Int’l. 448 tween or with to the York 1971); (5th Signetics binding any person F.2d 680 Cir. Collins v. effect such action on (E.D.Pa.1977); F.Supp. Hardy agreed thereby, Corp., 443 552 v. who has be bound Sanson, F.Supp. (N.D.Ga.1973). regard any binding 1034 to the on such with effect privity required any disciplinary maintain that Plaintiffs no action taken member 17, relying upon section Schaefer v. First exchange under a result of the authorities of the Bank, 1193-94 any exchange, National rule insofar violation of (N.D.Ill.1970), privity and that with are action taken inconsistent with as the is not FDIC, York, relying upon supra. The Hill chapter provisions of this or the rules and dispute resolve for the need not regulations thereunder. paragraph. previous in the mentioned reason and on the principles incorrectly applied that the Court embodied in the feder- section 29 al (Parts securities IV), laws III and that no to claims and defenses the 1933 Secu- under state law claim of may following fraud be stated Act. The rities is as discussion FDIC, because has possible the FDIC brief as in the be read and should acquired the note in question faith, context of March 4 supplement value, knowledge. without actual order. VI. Summary I. Law Federal Common Section 1823(e) is inapplicable because the order, As indicated the March 4 plaintiffs do not seek to hold “valid” the brief- Court saw no need to ask for further alleged side “agreements.” (Part I.) The ing on this issue had because the Court FDIC is entitled to complete summary eleven) already (now briefs received seven judgment under principles of federal com- on the and had also heard 'FDIC’s motion mon (Part law. II.) addition, In p.-550 At argument. extensive oral 1.n. has satisfied specific requirements of Further, sug- have still not plaintiffs (Part Act III). Section 29. This gested the issue could any why reason provides an independent reason for grant- original motion was raised after ing the motion to the Ex- significant filed. The Court believes claim; change Act in addition the satisfac- in the instant motion the have tion of Section supports the holding in interpretation challenged only the Court’s Part II. Once it is determined that have not offered to applicable law and FDIC is entitled to summary judgment on present any evidence which tend to the Exchange claim, it follows in this create fact material under the issue of case that it is likewise entitled on the 1933 law interpreted as the Court has it. Act claim because of the pari materia (Part doctrine. IV). This too support plaintiffs’ position adds thrust of the to the holding in Part II. Finally the the merits of the federal common law issue is not obligated to satisfy state innocent is that Foods nor neither Kimbell D’Oench purchaser standards to avoid liability for the FDIC from progeny its shelter (Parts fraud. V). II and fraud and claims or defenses of subject FDIC should be to state law holder

SO ORDERED. First, concepts. due course the Gunters contend that ON MOTION OF RECONSIDERATION AND REHEARING It has not precisely Congress when spoken “in comprising issues sub- area Presently before the Court is pro- stantially established related to an motion for reconsideration and rehearing gram of government operation," [United in the alternative for certification pur- Co., States Little Lake Misere Land suant to 28 1292(b). The defend- 580, 593, 2389, 2397, 412 U.S. ant FDIC opposes those motions and moves L.Ed.2d (1973)], Clearfield di- entry of final judgment in its favor. rects federal fill the interstices courts to plaintiffs oppose the latter motion. *16 of “according to legislation federal their MOTION FOR own standards.” Trust RECONSIDERATION Clearfield Co. States, 363, 367, supra, United 318 U.S. at Plaintiffs have urged reconsideration of 573, 575, S.Ct. 87 L.Ed. 838. the 4, Court’s March 1980 order granting the FDIC’s motion for summary judgment. Foods, Kimbell (emphasis at 1458 S.Ct. They (1) contend that federal common law added). argue Plaintiffs then “In this case does not protect the FDIC from claims and Congress spoken has in an area substantial- fraud, defenses (2) based that the ly related to the in issue: in 12 situation Court elevated “form over substance” in its 1823(e) . . Plaintiffs’ analysis of 29, section 12, and brief of March 1980 at p. 4 (emphasis Next, the Gunters differ with argument this Court’s The to this added). appeal facial application to this case of the three factors one is lost when notices the difference the by Supreme considered and Court in Kim- emphasized by plaintiffs language the of bell Foods in ascertaining the content Court. by Supreme that the emphasized First, any rule of federal common law. relationship spoke of substantial The Court they say is not program that refer government program; plaintiffs to a Plaintiffs’ throughout uniform the nation. relationship between the to a substantial 12, In p. support brief of 1980at 5. March meaning (presumably in issue” “situation rely upon of FDIC v. argument they 1823(e). fraud) the claims of and section 670, Corp., Sumner 602 F.2d 679 n. Fin. has not Congress The Court concludes that (5th 1979) Cir. and of portion Meo. In the the of spoken to issue of claims or defenses by Sumner Fifth plaintiffs, cited the Circuit availa- against fraud FDIC and that the was of simply discussing capacity the dual a claim bility of such or defense receiver, and so FDIC as insurer and “substantially an issue related to FDIC is doing it to the difference between alluded program government op- an of established as receiver of a state FDIC’s role bank (i. e., purchase eration” and its receiver of a national role as bank. program). assumption of thus has portion cited Sumner noth- Gunters further contend that ing purchase assumption do with protect had intended to Congress FDIC a national bank. Meo will be discussed from fraud would have done so in section below. 1823(e). That perfectly logical, equally but it is reasonable to assume Further, respect “uniformity” with to the Congress saw no need to mention fraud Foods, the inquiry by Kimbell required 1823(e) when section was enacted in 1950on Gunters contend that even if the FDIC assumption that fraud was covered un governed by should be a uniform of body Supreme ruling der the Court’s in D’Oench. law, there is no adopt reason to a rule Also, bears noting “it e., always produces a uniform result—i. Appeals D’Oench specifically held that always “that the should able FDIC the FDIC should be treated as a holder in to rights defeat of innocent individuals due course under Negotiable Instru give induced fraud to their notes to effect, ments Law which was then in even Plaintiffs’ brief of March insured bank.” though the acquired FDIC had the debtor’s 12, ruling 6. The Court’s does p. 1980 at purchase note in a transac result; not a uniform always produce tion like one in issue here.” FDIC’s rights be able to defeat the FDIC would not 30, brief of (cit November 1979 at n.* p. 9 of a where the FDIC had actual maker D’Oench, ing (8th 1941), F.2d 491 Cir. ruling fraud. The Court’s knowledge of grounds, aff’d on other U.S. simply that the FDIC will not have ensures (1942). 86 L.Ed. 956 This holding hasty perhaps to make a overnight — —de- been could have known Congress when it many termination how of a failed bank’s 1823(e) enacted 12 U.S.C. All may assets be infected fraud. this discussion about Congressional inten tion with law of Admin.News, ute itself. simply is, legislative history reiterates course, respect See pp. extremely ^[1971] language 3774. Legislative in behind the section U.S.Code then speculative, and existing of the stat Cong. case & making certain lectible. Notice bell Foods, With always respect transaction assumption has notice Gunters contend that obligations the second factor in Kim- uncollectibility is, of various obtained in a factors uncol- issue, tent with to this course, if there was equatable knowledge can any, fraud, most realistically be believes that it derived and the Court general purpose from the legislation impose greater af burden on the FDIC a much *17 responsible any to for fecting preserve the FDIC—to make it fraud which the FDIC’s obligations taints the which the as- insure FDIC. ability country’s banking to sumes. system. Exchange Act Section II. respect to the third consid-

Finally, with Foods, plaintiffs eration in Kimbell argument with of the Gunters’ The thrust provides to the urge that adherence UCC the Court’s respect to section is that rule, is relied better because UCC substance over March 4 form order elevates throughout na- in commercial affáirs the FDIC in deciding that a transfer acknowledged as much in tion. The Court insurer had receiver to point out the March 4 order but went on treated this previously occurred. where the federal risky that such reliance is question with the argument in connection play. p. into At securities laws come “good was in whether the transfer argument Perhaps appealing the most faith;” top page the discussion at the is the to the made the Gunters question apply equally Meo, D’Oench, and First Nation- effect that other of whether there transfer. No was a encompass the al cannot be extended to raised in involving issue has been section 29 present Although those cases are situation. which has the motion for reconsideration one, not with this there is squarely point on considered. fully already been very which admits of a language in them example, broad For in First interpretation. said,

National, the Ninth Circuit III. 1933 Act It is not accommodation necessary for the holding With to the Court’s specific of the knowledge maker to have Act section 29 the application of arrangement scheme of fraudulent Act, Court ac- to the 1933 Securities defense; preclude the it is sufficient that difficulty of novelty and knowledges the he aid lends himself to a scheme to issue, raised have not but bank in concealing the true nature of the fully con- already issue which has not been transaction, misrepresenting sidered. note as a valid of the bank. asset added). 587 F.2d at (emphasis Like- wise the Supreme Court D’Oench stated Reconsidera- Summary IV. —Motion would be sufficient in this case “[i]t tion that the maker lent himself to a scheme or for the foregoing For the reasons arrangement banking whereby the authori- of March order reasons in the Court’s stated ty on respondent which the relied on insur- summary 1980 the FDIC’s motion ing the bank likely was or was be mis- and the motion for judgment is GRANTED (em- led.” 815 at 681 U.S. is DENIED. reconsideration added). phasis UNDER CERTIFICATION MOTION FOR Whatever emphasized language 1292(b) AND MOTION FOR 28 U.S.C. § means, any require- the Court believes that JUDGMENT FINAL ENTRY OF ment of participation active or —however

passive participation must be—is out- for certification moved The Gunters have weighed by Specifically, other factors. 4 order under March Court’s three Kimbell inquiries mandated Foods 1292(b). apparently apparently ap- have not heretofore been agrees March 4 order should also plied involving pur- a case the FDIC’s but it would immediately appealable, chase transaction. In addi- from a prefer be taken any appeal tion, subsequent neither nor the D’Oench requests the Court judgment final application cases have dealt with the 54(b). to Fed.R.Civ.P. pursuant to enter Exchange Act section 29. The answers to 54(b) provides as follows: Rule and the inno- inquiries the Kimbell Foods (b) Upon Multiple Judgment Claims cence of the FDIC as defined section Multiple Parties. When more Involving ignore any the Court lack of require presented for relief is than one claim participation by active the Gunters in the action, claim, counter- alleged fraud. whether as *18 case, however, claim, claim, cross-claim, the Court third-party or believes that involved, are it would multiple parties place when be particularly harsh to may entry position large direct of a final Gunters in a where a bond on court judgment appeal might as to one or more but fewer This harshness required. parties only upon difficulty than all of the claims or novelty arises from the of the that there is no express an determination issues involved here. The Court has decid- express just delay reason for ed several issues and sub-issues as matters judgment. In entry direction for the of of impression arriving first at its ruling absence of such determination on the summary judg- motion for direction, form of deci- any order or other ment. The believes that sion, adjudi- designated, however relationship between the and the cates fewer than the claims or the all Gunters should remain nearly in status fewer than all rights and liabilities of quo possible, and thus in language parties shall not terminate the action as Rule 54 the Court concludes that there is any parties, of the claims or and the “just reason delay” for entering final subject order or other form of decision is judgment. before the entry to revision at time 1292(b) provides: 28 U.S.C. § all the judgment adjudicating claims (b) When a judge, making district in a rights and the and liabilities of all the civil appeal- action an order not otherwise parties. section, able under this shall be of the opposition In entry judgment of final opinion that such a control- order involves the Gunters correctly point entry out that ling question of law as to which there is judgment automatically final does not ground opin- substantial difference follow from claim(s) the termination of the ion and that appeal an immediate against one of multiple parties. In addition the order may materially advance the they contend this case there are two ultimate litigation, termination of the he “just delay.” reason[s] shall so state in writing in such order. They entry first contend that of judg- The Court of Appeals may thereupon, ment might require post a large them to its discretion, appeal to be tak- permit an bond on appeal, requirement a which they en order, from such if application made believe especially onerous in view of the to it within days entry ten after the novelty of the issues involved in the motion Provided, however, the order: appli- That for summary judgment. They also assert cation appeal for an hereunder shall not against their cross-claim the FDIC as stay proceedings in the district court un- “receiver” in a related case should succeed less judge the district or the Court of and act as a “set-off” the claim of Appeals or judge shall so thereof order. the FDIC in this argument case. This is The Court hardly imagine can a better case premise based on the in this case the for certification 1292(b). under FDIC as insurer has contended that ruling on the FDIC’s motion for sum- Gunters should have sued the receiver. mary judgment required Court to de- Even if the term set-off is not construed in questions cide several of first impression, i. sense, a narrow legal but rather in a broad e., (1) the question applicability of the 12of enough sense to comprehend simply the 1823(e) case, (2) to a fraud presence of judgments two of roughly equal question presence of the and content of parties other, amounts owed two to each law, (3) question federal common of the the Court does not believe the possibility capacity dual the FDIC with the Gunters will recover in another whether a transfer can be made for the case material to whether the Court should purposes of Exchange Act Section enter judgment in this case. question applicability Sec-

The Gunters other would tion 29 to ruling against the 1933 Act. In likewise have little Gunters, merit in most cases. In placed large the Court has *19 In the the Gunters.

practical burden on they must at- ASSOCIA of the case TRUCKING present posture AMERICAN Plaintiff, TIONS, INC., numerous de- fraud tempt prove collect what fendants and if successful damages from them. could be substantial TRANSPORTATION DEPARTMENT OF were not liable If the Gunters al., et Defendants. note, have substan- then incentive, the FDIC substan- tially less Civ. A. No. 79-2857. incentive, pursue the case. tially more Court, motion, mat- States practical as a United District Thus the FDIC’s ter, District of Columbia. question raises the of who will bear the moving litigation ultimate burden 8, 1980. April proceed forward. If the were to Gunters with of this Court’s the case on basis were ulti-

ruling appellate and an court Court, then the

mately disagree relitigated.

case would have to be Such cost to all

procedure would be a tremendous case in time and many parties to this

legal expenses. that the

Thus Court concludes Court’s controlling

order of March 4 “involves

question of law is a sub- as to which there ground opinion

stantial for difference appeal

and that an from the immediate may materially

order advance the ultimate . .” litigation

termination of the 1292(b).

28 U.S.C. § reasons, foregoing

Accordingly, for the motion for certification

hereby and the FDIC’s motion GRANTED DENIED. Fur- entry judgment

ther, hereby of March 4 is amend- order

ed to include the above certification. ques-

The Court has not considered stay proceedings pend-

tion of whether a

ing appeal appropriate. would be

SO ORDERED. notes Mr. hibit to Miailovich and Mrs. Agreement Sale) pp. Gunter would be deferred until 1-2. adoption acquired of the and as- the Gunter note in its sumption required procedure FDIC no corporate capacity, it had actual knowl- willing find a bank to assume the liabilities edge of the securities laws. violations paid compensat- failed bank when ¶ 9. Miailovich affidavit ing amount of assets. Although trans- William L. and plaintiffs, Camille S. action was quickly effected to maintain the Gunter, damages and seek rescission “going bank, concern value” of the failed with their alleged pur- fraud in connection liabilities HNB/C exceeded its assets HB&T/A; chase of stock in the by $70 million of $384 liabilities as million— FDIC, the Gunters seek rescission. compared to $314 million of assets. To attempted to Plaintiffs have state claims right obtain the to purchase the HNB/C (1) under the following theories: I— Count liabilities, First Tennessee National Bank Exchange 10(b), Securities Act § U.S.C. (FTNB) approximately million, bid $16 78j(b); § Securities and Commis- reducing discrepan- the net liabilities-assets 10b-5,17 240.10b-5; cy to sion Rule approximately The FDIC C.F.R. and § million. $54 78cc; in its capacity may, pursuant to Exchange (2) insurer Act 15 U.S.C. § § 1823(e), U.S.C. provide financial assist- § 17(a), Count II —1933 Securities § ance to a purchase the receiver facilitate (3) 77q; Count III —Ga.Code Ann. and assumption, in this case 97-114; 97-112(a) (4) §§ Count IV— agreed pay the receiver million. $54 105-301, 304; Ga.Code Ann. §§ 2, 4, Miailovich ¶¶ affidavit Count law V—common fraud and

notes . . . .” and “keep[ing] was the notes alive.” Id. concluded that such FDIC] The issue before Supreme Court policy dictated the result.6 Id. The Court D’Oench petitioner’s liability was whether also petitioner observed that the “lent him- on the governed by notes was state law or self arrangement” to a which scheme or federal law. The first observed that Court was the FDIC. Id. at “likely to mislead” had petitioner “the arranged and the bank 460, 62 at 681. S.Ct. express purpose use the note for the of While the reasoning employed in D’Oench deceiving respondent on insurance of the and in relying fairly several cases thereon is bank, loan, making or on the of the the case clear, all, how, is not clear if at would be on all fours with Deitrick v. Grea- reasoning applies facts of the instant ney, 190, 480, U.S. S.Ct. L.Ed. 694 [309 what, case. specifically, More it is not clear (1940)].” 457, Id. at S.Ct. 679. Dei- any, if applicability those cases have to a trick involved an act of a violative federal situation, this, such as where there is no statute; banking there Court held that indication that anyone intended to deceive public policy prohibited the defendant from the FDIC or that plaintiffs were in- relying on wrongful his own act to defeat volved in or “lent any themselves to” fraud- obligation owed to the Similarly, FDIC. ulent scheme. The line cases D’Oench of D’Oench, the Court concluded that “Pub- provides basis, at least generalized how- lic policy requires who, person that a for the ever, concluding should accommodation of the bank executes an protected against plaintiffs’ reliance on a instrument which is in form a binding obli- claim or defense of fraud of which the gation, estopped should be from thereafter FDIC was unaware.7 asserting that simultaneously the parties agreed that generalized the instrument This basis becomes more should not be 459, enforced.” Id. at concrete the instant application S.Ct. at 680. In reaching this conclusion facts (1) the Court of recent appar- Supreme Court’s ently First, analysis considered two factors. of federal common law in United recognized Court policy Foods, Inc., “federal States v. Kimbell 440 U.S. to protect misrepresenta- (1979),8 59 L.Ed.2d 711 [the FDIC] tions made to influence the action of Exchange Act Section 29. The Court [the stated, actually principles 1978). 6. The distinguished Court “Those The court Meo as a case judgment call for an affirmance of the below.” agreement whereby where “there was no secret arguable, therefore, It is thus other the assets of the bank would be overstated. reasoning was dicta. simply There was a failure of consideration of promissor which the was unaware until after Perhaps leading progeny D’Oench is FDIC bank was closed and the suit was filed Meo, (9th 1974). 505 F.2d 790 Cir. apparently FDIC.” Id. First National plaintiff in that case executed a note to a bank overstating condemned the result of assets acquire common stock in the bank. The purpose doing rather than the so. This in voting bank ordered its broker to issue trust emphasis slight combination with its on the instead, and, certificates since were held extent to which the maker must be involved in collateral, plaintiff the bank as never estopped, strong policy order to be exhibits a failed, saw them. When the bank the FDIC protecting capacity transactions obtained note in its as re- ignorant. strong expression solely upon it is A ceiver. The FDIC relied D’Oench arguing policy arguably plaintiff estopped such a was found Rockelman (quoted supra pp. 551-552), avoid the note although for failure of consideration. The rejected position, reasoning the FDIC’s expressly court did not mention D’Oench or the principles required that the D’Oench some sort Ninth Circuit cases. participation by plaintiff. Id. at 791-92. interpretation Such an of D’Oench seems to parties 8. The have not discussed Kimbell Foods emphasize equitable principles of D’Oench argument. in brief or oral re- The Court has public policy preserving integri- over the ty motion, ceived seven briefs on this and believes banking institutions. A later Ninth Cir- positions parties that it understands emphasized plaintiff cuit case that the need not enough briefing well that further of the effect know of the fraud but must “lend himself’ necessary. of Kimball Foods is not estopped. to the scheme to be FDIC v. First Co., (9th Nat. Fin. 587 F.2d Cir.