FDIC v. Abraham ( 1998 )

REVISED, April 28, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-30411
FEDERAL DEPOSIT INSURANCE
CORPORATION, as receiver and
subrogee of Capital Union Savings
FA and Capital-Union Savings
Association and in its corporate
capacity as manager of the FSLIC
Resolution Fund,
Plaintiff-Appellant,
versus
INSA S. ABRAHAM, ET AL.,
Defendants,
INSA S. ABRAHAM, NAYLOR M. CRAGIN,
JAMES S. EMERY, CHARLES C. GARVEY,
WILLIAM L. MILLER, G. ALLEN PENNIMAN,
JR., RAYMONE G. POST, JR., M. J.
RATHBONE, JR., PAUL R. REEVES, ROBERT
M. STUART, O.M. THOMPSON, JR., O.M.
THOMPSON, III, WILLIAM H. WRIGHT, JR.,
DANIEL H. HOFFMAN, JR., HIBERNIA
NATIONAL BANK, in its capacity as
curator of the property and estate
of Henry W. Jolly, Jr.,
Defendants-Appellees.
Appeal from the United States District Court
for the Middle District of Louisiana
March 13, 1998
Before JOLLY, WIENER and STEWART, Circuit Judges.
WIENER, Circuit Judge.
The FDIC, as statutory successor to the RTC, appeals the
district court’s grant of summary judgment dismissing the suit
filed by the RTC in June 1993 against fifteen (15) former officers
and directors (collectively, Appellees) of Capital-Union Savings,
F.A. The gravamen of the district court’s judgment was its
determination that the claims asserted against Appellees for breach
of their fiduciary duties sounded in unintentional tort, i.e.,
negligence (or gross negligence), and were thus time barred by
Louisiana’s one-year prescriptive period; that none of the claims
against Appellees —— including the claim arising from the
repurchase of another thrift’s participation in the so-called
Esplanade Mall Loan1 —— rose to the level of fraud, self-dealing,
bad faith, or any other kind of misdeed that would constitute a
breach of Appellees’ fiduciary duty of “good faith” under the
applicable state statute.2
The district court concluded that its decision was mandated by
1
The FDIC’s late efforts to create a genuine issue of
material fact by recharacterizing Appellees’ action in the
repurchase of Royal Palm’s participation is unavailing; at worst it
amounted to gross negligence and at best to a permissible exercise
of their collective business judgment.
2
La. Rev. Stat. Ann. § 6:291 (West 1986) (amended 1992). The
1992 amendments to Title 6 of the Louisiana Revised Statutes made
§ 6:291 applicable to officers and directors of banks and bank
holding companies only, adding a new provision —— § 6:786 —— to
cover officers and directors of other financial institutions,
presumably including savings and loan associations and other
“thrifts.”
2
our holding in FDIC v. Barton,3 in the opinion of which we state
that “[g]ross negligence is a violation of the duty of care, but
unless it is coupled with fraud, a breach of trust or other ill
acts, it does not constitute a breach of fiduciary duty.”4 The
Barton opinion goes on to say that “[t]o set out a claim for the
breach of fiduciary duty, the FDIC would have to have alleged the
failure of good faith and loyalty by the Directors.”5
The principal thrust of the FDIC’s position on appeal is that,
irrespective of what we held in Barton, we are now Erie-bound to
abandon that case as binding precedent and follow the subsequent,
purportedly opposite holding of a Louisiana intermediate court of
appeal in Theriot v. Bourg.6 In considering the fiduciary duty of
corporate directors in Louisiana under the Business Corporation
Law,7 which contained language identical to the wording of the
statutes that applied to bank and savings and loan directors at the
times relevant to the instant suit, the Theriot court merely
approved the trial court’s jury charge which described the duty of
officers and directors of Louisiana corporations as “two-fold:
First, is the duty to act in good faith. Second, there is the duty
3
96 F.3d 128 (5th Cir. 1996), reh’g and suggestion for reh’g
en banc denied, 104 F.3d 700 (5th Cir. 1997).
4
Id. at 133-34.
5
Id. at 133 (citing FDIC v. Duffy, 47 F.3d 146, 152 (5th
Cir. 1995) (quoting Gerdes v. Estate of Cush, 953 F.2d 201, 205
(5th Cir. 1992)).
6
691 So.2d 213 (La. Ct. App.), writ denied, 696 So.2d 1008(La.), recons. denied, 701 So.2d 146 (La. 1997).
7
La. Rev. Stat. Ann. § 12:91 (West 1994).
3
to act with due care. . . . The law does not require that the
officers or directors who breach their fiduciary duties as to the
corporation profit financially from the corporation’s loss before
they can be held liable for damages resulting from their breach of
duty.”8 The Theriot court went on to say that it was unpersuaded
by our decision in Louisiana World Exposition v. Federal Insurance
Company.9
The Louisiana Supreme Court denied writs in Theriot; and it is
clear that in doing so the court was aware of our Barton opinion,
as it was argued in support of the writ application. What effect,
if any, Barton may have had in the decision to deny writs is
unknown. What is known, however, is that Theriot did not involve
the issue of time bar. Neither can the opinion in Theriot be read
as a clear and unequivocal holding —— as the FDIC would have us
read it —— that (1) the version of the state statute defining the
fiduciary duty of officers and directors of banks and savings and
loan associations then in effect created a single duty, (2) such
duty was personal under the Louisiana scheme rather than general or
delictual, or (3) the prescriptive period applicable to any breach
of the duty, whether it be the facet implicating loyalty and good
faith or the facet comprising the “prudent man” rule, was subject
8
Theriot, 691 So.2d at 221-22.
9
864 F.2d 1147, 1152 (5th Cir. 1989) (holding that simple
negligence alone was insufficient to establish personal liability
of an officer or director of a nonprofit Louisiana corporation;
“[I]n order to recover against any defendant, the plaintiff must
establish at least gross negligence on the part of that
defendant.”).
4
to the prescriptive period of ten years.
Our well-known standard of review of the district court’s
grant of summary judgment is de novo.10 “To the extent a district
court’s grant of summary judgment is based on an interpretation of
state law, our review of that determination is also de novo.”11
Even though federal subject matter jurisdiction of the case we
review on appeal today is not grounded in diversity of citizenship,
we nonetheless apply the rules of interpretation that have evolved
since Erie Railroad v. Tompkins12 to the controlling state law here
under examination. “When adjudicating claims for which state law
provides the rules of decision, even when those claims are ``federal
questions’ in form, we are bound to apply the law as interpreted by
the state’s highest court.”13 And, when a state’s highest court has
not spoken on an issue, our task is to determine as best we can how
that court would rule if the issue were before it. In so doing, we
are bound by an intermediate state appellate court decision only
when we “remain unconvinced ``by other . . . data that the highest
court of the state would decide otherwise.’”14
10
FDIC v. Myers, 955 F.2d 348, 349 (5th Cir. 1992).
11
Floors Unlimited, Inc. v. Fieldcrest Cannon, Inc., 55 F.3d
181, 184 (5th Cir. 1995).
12
304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).
13
Ladue v. Chevron, U.S.A., Inc., 920 F.2d 272, 274
(5th Cir.), reh’g denied, 925 F.2d 1461 (1991) (citing Commissioner
of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 87 S.
Ct. 1176, 1783, 18 L.Ed.2d 886 (1967)).
14
Id. (internal citations omitted). C.f. Green v. Walker,
910 F.2d 291, 294 (5th Cir. 1990) (Louisiana appellate court
decision merely a “guide” to federal court in its decision-making
5
Among the “other . . . data” that might contribute to our
remaining unconvinced that the Louisiana Supreme Court would decide
contrary to our decision in Barton is the fact that the Louisiana
statutes that delineate the fiduciary duties of an officer or
director of a bank or other financial institution were amended in
1992 by legislation (which, incidentally, appears to conform to our
holding in Barton) clarifying that an action for the breach of an
officer’s or director’s duty of care (including a breach based on
gross negligence) has a different prescriptive period than a breach
of the duty of good faith (intentional breaches of the duty of
loyalty, and acts or omissions of bad faith, fraud, or violations
of law). The clarifying legislation specifies that negligence
actions against such fiduciaries must be filed within one (1) year
following the date of the act, omission, or neglect, or within one
(1) year after it was or should have been discovered, but in no
case later than three (3) years from the date of the act, omission
or neglect. On the other hand, that legislation specifies a two-
year prescriptive period and four-year preemptive period for such
fiduciaries’ intentional and fraudulent breaches of the duty of
good faith of such fiduciaries.15 Such expressions by the Louisiana
legislature augur against an eventual Louisiana Supreme Court
holding that would make Barton clearly wrong.
process) and Wood v. Armco, Inc., 814 F.2d 211, 213 n.5 (5th Cir.
1987) (“The decision of an intermediate appellate state court
guides, but is not necessarily controlling upon, the federal court
when determining what the applicable state law is.”).
15
See La. Rev. Stat. Ann § 6:293, added by Acts 1992, No.650,
and § 6:787, added by Acts 1992, No. 586 (West Supp. 1998).
6
And, if we are chary to rely on —— much less be bound by ——
the holding of one intermediate state appellate court as the
harbinger of such a future ruling by the state’s highest court, we
are doubly so when, as now, the state in question is Louisiana,
where the primary sources of law are its constitution, codes, and
statutes and the decisions of its courts are secondary sources of
law until and unless the numbers and unanimity of such decisions
achieve the force of law through the Civil Law doctrine of
jurisprudence constante.16 Likewise, our usual reluctance to use the
single holding of but one among a number of intermediate state
courts of appeal as the foundation of an “Erie-guess” about how the
highest court of the state might rule on a given issue of state law
is further heightened in the instant case by the realization that
the FDIC’s purpose in urging us to do so is to have us disregard
our decision in Barton in favor of such a guess. Thus the appeal
we consider today places us squarely at the legal intersection
where the foregoing Erie rules for interpreting state law collide
with the doctrine of stare decisis.
We are, of course, a strict stare decisis court. One aspect
of that doctrine to which we adhere without exception is the rule
that one panel of this court cannot disregard, much less overrule,
the decision of a prior panel.17 Adherence to this rule is no less
16
Songbyrd, Inc. v. Bearsville Records, Inc., et al.,
104 F.3d 773, 776 (citing Alvin B. Rubin, Hazards of a Civilian
Venturer in a Federal Court: Travel and Travail on The Erie
Railroad, 48 La.L.Rev. 1369, 1372 (1988)).
17
United States v. Taylor, 933 F.2d 307, 313 (5th Cir.),
cert. denied, 502 U.S. 883, 112 S. Ct. 235, 116 L.Ed.2d. 191
7
immutable when the matter determined by the prior panel is the
interpretation of state law: Such interpretations are no less
binding on subsequent panels than are prior interpretations of
federal law.18 Thus, when a panel is considering a governing
question of state law on which a prior panel has ruled, the
subsequent panel’s obligation to follow that ruling is not
alleviated by intervening decisions of intermediate state appellate
courts unless such “subsequent state court decisions . . . are
clearly contrary to a previous decision of this court.”19
This general rule, as quoted from Pruitt, arises from
identical language in Farnham v. Bristow Helicopters, Inc.,20 which
itself relied on the following comment in Broussard v. Southern
Pacific Transportation Co.:
[A] prior panel decision “should be followed by other
panels without regard to any alleged existing confusion
in state law, absent a subsequent state court decision or
statutory amendment which makes this Court’s [prior]
decision clearly wrong.”21
Neither Broussard nor Lee clarified precisely what is meant by “a
(1991).
18
Broussard v. Southern Pac. Transp. Co., 665 F.2d 1387, 1389
(5th Cir. 1982) (en banc).
19
Pruitt v. Levi Strauss & Co., 932 F.2d 458, 465 (5th Cir.
1991)(citing Farnham v. Bristow Helicopters, Inc., 776 F.2d 535,
537 (5th Cir. 1985)); see Lee v. Frozen Food Express, Inc.,
592 F.2d 271, 272 (5th Cir. 1979) (our own precedent “should be
followed by other panels . . . absent a subsequent state court
decision or statutory amendment which makes this Court’s decision
clearly wrong.”).
20
776 F.2d 535, 537 (5th Cir. 1985).
21
Broussard, 665 F.2d at 1389 (quoting Lee, 592 F.2d at 272).
8
subsequent state court decision . . . which makes this Court’s
[prior] decision clearly wrong,” but, at a minimum, a contrary
ruling squarely on point is required. We read Broussard and Lee to
contemplate a ruling from a state’s highest court only, by virtue
of the close proximity of the references to such courts and
statutory amendments. Admittedly, Farnham relied on two subsequent
contrary state appellate court decisions to justify disregarding
our prior precedent; yet even in Farnham there were ultimately four
intermediate appellate court decisions (two prior and two
subsequent) from three of Louisiana’s five courts of appeal, and
the holdings in all four cases were squarely contrary to our
precedent.
We conclude then, that when our Erie analysis of controlling
state law is conducted for the purpose of deciding whether to
follow or depart from prior precedent of this circuit, and neither
a clearly contrary subsequent holding of the highest court of the
state nor a subsequent statutory authority, squarely on point, is
available for guidance, we should not disregard our own prior
precedent on the basis of subsequent intermediate state appellate
court precedent unless such precedent comprises unanimous or near-
unanimous holdings from several —— preferably a majority —— of the
intermediate appellate courts of the state in question.
But even in the alternative that we would be prone to
disregard our own precedent on the basis of nothing more than one
contrary opinion of but one of the several intermediate courts of
appeal of the state in question, we would not do so in this case.
9
For even a cursory comparison of the issues, discussions, and
holdings in Barton and Theriot demonstrates beyond cavil that the
pure holding of Theriot is not “clearly contrary” to the holding of
Barton. In a nutshell, Theriot recognizes that the state statutory
language under examination in both cases requires officers and
directors to discharge their fiduciary duties in ways that are free
of, inter alia, negligence.22 Barton, on the other hand, concerned
only the question whether the breach of a fiduciary’s duty of care
under the prudent man standard of the statute is subject to the
one-year liberative prescription for delicts or, by virtue of its
inclusion in the statutory listing of the standards of care of a
fiduciary, is subject to the ten-year prescription that is
applicable to a fiduciary’s breach of the duty of loyalty or good
faith —— the precise issue on which the decision of the district
court turned in the instant case. Thus, even if aspects of the
reasoning in the state appellate court decision in Theriot are
contrary to some aspects of the reasoning in Barton, we cannot say
that the holding in Theriot is “clearly” contrary to the holding in
Barton.
Inasmuch as we agree with the district court’s conclusion that
all claims asserted by the FDIC (including the claim emanating from
the Esplanade Mall matter) sound in negligence, it follows that the
22
Although not at issue here, both cases implicitly recognize
that officers and directors in Louisiana also must discharge their
fiduciary duties in good faith, i.e., free of fraud, self-dealing,
and other such ill acts; and, again implicitly, that breach of a
duty of good faith by officers and directors is subject to the ten
year prescription for personal actions.
10
district court correctly determined that it was constrained by our
decision in Barton to hold that those claims are barred by the one-
year period of prescription for delictual actions. And, as we
reach the same conclusion in our de novo review regarding the
nature of the FDIC’s claims, and —— like the district court —— are
bound by the holding in Barton, we affirm in all respects the
district court’s grant of summary judgment dismissing the claims of
the FDIC against Appellees.
AFFIRMED.
11