Resolution Trust Corp. v. Miramon ( 1994 )

United States Court of Appeals,
Fifth Circuit.
No. 93-3183.
RESOLUTION TRUST CORPORATION, Plaintiff-Appellant,
v.
Louis A. MIRAMON, Jr., et al., Defendants-Appellees.
June 21, 1994.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before JOHNSON, GARWOOD, and JOLLY, Circuit Judges.
JOHNSON, Circuit Judge:
The Resolution Trust Corporation (RTC) sued several officers
and directors (collectively, "the defendants") of a failed savings
and loan institution alleging 1) negligence, 2) breach of fiduciary
duty and 3) gross negligence. Under Fed.R.Civ.P. 12(b)(6), the
district court dismissed the negligence and breach of fiduciary
duty claims holding that they failed to state a claim on which
relief could be granted. The district court then certified this
case pursuant to Fed.R.Civ.P. 54(b) and the RTC appeals. We
AFFIRM.
FACTS AND PROCEDURAL HISTORY
For purposes of this appeal, only a brief recitation of the
facts is needed. On August 7, 1989, the Federal Home Loan Bank
Board closed South Savings and Loan Association ("South Savings"),
a federally-insured, state-chartered institution located in
Slidell, Louisiana. The Federal Savings and Loan Insurance
Corporation (FSLIC) was initially appointed as receiver, but, after
1
the passage of the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA)1 on August 9, 1989, the RTC succeeded the
FSLIC as receiver.
On August 9, 1992, the RTC filed the instant action against
the defendants who were former directors or officers of South
Savings. The RTC sought to recover losses suffered by South
Savings allegedly caused by the defendants' negligence, breach of
fiduciary duties and gross negligence.
The defendants moved to dismiss, under F.R.Civ.P. 12(b)(6),
the causes of action for negligence and breach of fiduciary duty
contending that these theories failed to state claims on which
relief could be granted. In making these motions, the defendants
argued that section 1821(k) of FIRREA established gross negligence
as a national standard of liability for directors and officers of
federally-insured depository institutions. The RTC, by contrast,
argued that federal common law survived the passage of FIRREA and
allows actions against directors and officers of depository
institutions based on simple negligence.
The district court found that section 1821(k) did set a
federal standard of care of gross negligence and that any federal
common law to the contrary was preempted. As the RTC's negligence
and breach of fiduciary duty claims alleged lesser standards of
liability than gross negligence, the district court granted the
defendants' motions and dismissed those claims. The district court
then certified this case for interlocutory review pursuant to
1
Pub.L. No. 101-73, 103 Stat. 183 (1989).
2
Fed.R.Civ.P. 54(b).
Accordingly, the RTC now appeals the district court's
dismissal of its causes of action against the defendants based on
simple negligence and breach of fiduciary duty contending that
despite section 1821(k), these causes of action remain viable under
the federal common law. The defendants responded and were joined
by the American Bankers Association and Independent Bankers
Association of America who filed an amicus curiae brief which
voiced that group's position that section 1821(k) created a federal
standard of gross negligence. Lastly, in a supplemental round of
briefing, the RTC advances for the first time that even if it has
no causes of action for simple negligence or breach of fiduciary
duty under federal common law, those causes of action are available
under Louisiana state law.
DISCUSSION
The issues in this case involve questions of statutory
construction which we review under a de novo standard of review.
Cruz v. Carpenter, 893 F.2d 84, 86 (5th Cir.1990).
1. Federal Common Law
The issue herein is whether the RTC can sue directors or
officers of federally-insured depository institutions for simple
negligence and breach of fiduciary duty under the federal common
law. The district court held that the RTC could not because the
court found that federal common law had been preempted by the plain
language of section 1821(k) which the court held established gross
negligence as the federal standard of care. This section states,
3
in pertinent part, that
[a] director or officer of an insured depository institution
may be held personally liable for monetary damages in any
civil action by, on behalf of, or at the request or direction
of the Corporation ... for gross negligence, including any
similar conduct or conduct that demonstrates a greater
disregard of a duty of care (than gross negligence) including
intentional tortious conduct, as such terms are defined and
determined under applicable State law. Nothing in this
paragraph shall impair or affect any right of the Corporation
under other applicable law.
12 U.S.C. § 1821(k).
This issue of whether section 1821(k) preempts federal common
law has been addressed by only one other federal appellate court.2
That court, in RTC v. Gallagher, 10 F.3d 416 (7th Cir.1993),
concluded that section 1821(k) preempted federal common law and
that the sole cause of action against directors and officers under
federal law was for gross negligence. This has also been the
conclusion of the majority of district courts that have addressed
this issue.3 For the reasons stated below, we agree with these
2
Two circuit courts have addressed the similar issue of
whether state common law is preempted by § 1821(k) and have held
that state common law standards which allow causes of action
against directors and officers of federally-insured institutions
based on simple negligence are not preempted. FDIC v. Canfield,
967 F.2d 443, 448 (10th Cir.) (en banc), cert. denied, --- U.S. -
---, 113 S. Ct. 516, 121 L. Ed. 2d 527 (1992); FDIC v. McSweeney,
976 F.2d 532, 538 (9th Cir.1992), cert. denied, --- U.S. ----,
113 S. Ct. 2440, 124 L. Ed. 2d 658 (1993). These courts concluded
that state law is preempted only to the extent that states
attempt to insulate directors and officers by establishing a more
forgiving standard of care than gross negligence. Canfield, 967
F.2d at 447; McSweeney, 976 F.2d at 539. We do not decide this
question today.
3
See FDIC v. Harrington, 844 F. Supp. 300, 304
(N.D.Tex.1994); FDIC v. Gonzalez-Gorrondona, 833 F. Supp. 1545,
1552 (S.D.Fla.1993); RTC v. Farmer, 823 F. Supp. 302, 307
(E.D.Pa.1993); FDIC v. Mintz, 816 F.Supp 1541, 1545
(S.D.Fla.1993); FDIC v. Bates, 838 F. Supp. 1216, 1220
4
courts and hold that section 1821(k) preempts federal common law.
It is important to note at the outset the very limited role
of federal common law. Federal courts are not common law courts
possessing a general power to develop and refine their own rules of
decision. Wayne v. Tennessee Valley Authority, 730 F.2d 392, 398
(5th Cir.1984), cert. denied, 469 U.S. 1159, 105 S. Ct. 908, 83
L. Ed. 2d 922 (1985); Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58
S. Ct. 817, 822, 82 L. Ed. 1188 (1938). Rather, the direction of
national policy by the enactment of a federal rule is "generally,
and purposely, reserved to the legislative branch of the
government." Wayne, 730 F.2d at 398. Federal common law is merely
a necessary expedient "resorted to "in the absence of an applicable
Act of Congress' " when federal courts are forced to consider
issues which cannot be answered from federal statutes alone.
Milwaukee v. Illinois, 451 U.S. 304, 314, 101 S. Ct. 1784, 1791, 68
L. Ed. 2d 114 (1981) (quoting Clearfield Trust Co. v. United States,
318 U.S. 363, 367, 63 S. Ct. 573, 575, 87 L. Ed. 838 (1943)). When
Congress does speak to an issue previously governed by federal
common law, the need to resort to this unusual lawmaking by the
federal courts disappears. Milwaukee, 451 U.S. at 313-15, 101
(N.D.Oh.1993); RTC v. Chapman, No. 92-3188, slip op. (C.D.Ill.
Oct. 16, 1992); RTC v. Hecht, 818 F. Supp. 894, 901 (D.Md.1992);
FDIC v. Brown, 812 F. Supp. 722, 726 (S.D.Tex.1992); RTC v.
Gallagher, 800 F. Supp. 595, 602 (N.D.Ill.1992); FDIC v. Barham;
794 F. Supp. 187 (W.D.La.1991); FDIC v. Miller; 781 F. Supp.
1271, 1275 (N.D.Ill.1991); FDIC v. Mijalis, No. 89-1316, 1991 WL
501602 (W.D.La. October 31, 1991). Contra RTC v. Hess, 820
F. Supp. 1359, 1364 (D.Utah 1993); RTC v. Kidd, No. 93-CV-0059-J,
slip op. (D.Wyo. April 16, 1993); RTC v. Gibson, 829 F. Supp.
1110, 1118 (W.D.Mo.1993); FDIC v. Nihiser, 799 F. Supp. 904, 907
(C.D.Ill.1992).
5
S. Ct. at 1791.
In assessing whether congressional legislation has preempted
a federal common law rule, "we start with the assumption that it is
for Congress, not federal courts, to articulate the appropriate
standards to be applied as a matter of federal law." Id. at 317,
101 S.Ct. at 1792. Even so, when Congress legislates in an area
governed by common law, it is not writing on a clean slate.
Rather, there is a longstanding principle that statutes which
invade the common law are to be read with a presumption favoring
the retention of well-established principles, except when a
statutory purpose to the contrary is present. United States v.
Texas, --- U.S. ----, ----, 113 S. Ct. 1631, 1634 (1993). This
principle applies to federal common law as well as state common
law. Id.
In light of this principle, we note that it is not necessary
for Congress, in order to abrogate a federal common law provision,
to affirmatively proscribe the common law rule. Milwaukee, 451
U.S. at 313-15, 101 S.Ct. at 1791. However, Congress must "speak
directly" to the question addressed by the common law. Id. After
considering the plain language of section 1821(k), we find that
Congress did "speak directly" to the issue of the federal standard
of care for directors and officers of federally-insured depository
institutions thus preempting any resort to federal common law.4
4
We do not find this conclusion to be at odds with
McSweeney, 976 F.2d at 538. The issue before the McSweeney Court
was whether a state common law standard of simple negligence was
preempted and thus any language in that opinion to the effect
that federal common law was not preempted by § 1821(k) is merely
6
The starting point for any question of statutory
interpretation is the statute itself. Absent a clearly expressed
legislative intent to the contrary, " "that language must
ordinarily be regarded as conclusive.' " Kaiser Aluminum & Chem.
Corp. v. Bonjorno, 494 U.S. 827, 110 S. Ct. 1570, 1575, 108 L. Ed. 2d
842 (1990) (quoting Consumer Product Safety Comm'n v. GTE Sylvania,
Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 2056, 64 L. Ed. 2d 766
(1980)). In this case, the statute clearly provides that "[a]
director or officer ... may be held personally liable for monetary
damages in any civil action ... for gross negligence ... as such
terms are defined and determined under applicable State law." 12
U.S.C. § 1821(k). It is difficult to conceive how Congress could
more clearly "speak directly" to the issue of the standard of care
for personal liability of directors and officers of
federally-insured depository institutions. As Congress has spoken
to this area, the need to resort to federal common law no longer
exists. Thus, whatever the content of federal common law may have
been, it "must yield to Congress' clear statement that a gross
negligence standard of liability applies." Gallagher, 10 F.3d at
420.
In urging us to reach a different conclusion, the RTC contends
that the gross negligence standard set out in section 1821(k) is
not exclusive. Section 1821(k), the RTC points out, provides that
a director or officer "may" be held liable under a gross negligence
standard. If that section were meant to be exclusive, the RTC
dicta.
7
argues, it would have said "may only." The RTC finds further
support for its argument in the general savings clause of section
1821(k) which specifically preserves any right the RTC may have
under any other applicable law. This other applicable law, the RTC
contends, includes federal common law which the RTC maintains
allows suits for simple negligence.
The RTC's argument is without merit. First, the word "may" as
used in the first sentence of section 1821(k) empowers the RTC to
bring a cause of action under the gross negligence standard set out
in the rest of the sentence. The RTC, however, would have us read
that word, not as an empowerment, but rather as a qualification
which undermines the very cause of action the section creates. We
agree with the Gallagher court, though, that this term was not
meant to qualify the substantive part of the section providing for
a gross negligence standard.5
Next, we reject the RTC's reading of the savings clause. That
clause states that "[n]othing in this paragraph shall impair or
affect6 any right of the Corporation under other applicable law."
5
"Read in context, the word "may' refers to the right of the
[RTC] to bring an action under this section. "May' cannot
reasonably be read to qualify the gross negligence liability
standard and is therefore irrelevant to the substance of the
provision." Gallagher, 10 F.2d at 420 (quoting Canfield, 967
F.2d at 450 n. 4 (Borby, J., dissenting)).
6
The savings clause provides that the RTC's rights under
other applicable law will not be impaired or affected. This
clearly implies that the RTC's rights under some law is being
impaired or affected. FDIC v. Swager, 773 F. Supp. 1244, 1248
(D.Minn.1991). Under the RTC's construction of the savings
clause, though, there is no law that is impaired or affected
because all previous common law remains effective and § 1821(k)
merely grants the RTC an additional option. Had Congress
8
12 U.S.C. § 1821(k). If we were to construe that clause, as the
RTC suggests, to preserve federal common law actions for simple
negligence, then the explicit language of the first sentence of
section 1821(k) which enunciates a cause of action for gross
negligence would be rendered a nullity. Why would the RTC ever
bring an action under section 1821(k), where it would have to prove
gross negligence, when it could bring an action under the federal
common law and only be required to prove simple negligence?
Reading the savings clause to nullify the substantive portion
of the section would violate "the elementary canon of construction
that a statute should be interpreted so as not to render one part
inoperative." Mountain States Tel. & Tel. Co. v. Pueblo of Santa
Ana, 472 U.S. 237, 249, 105 S. Ct. 2587, 2594, 86 L. Ed. 2d 168 (1985)
(quoting Colautti v. Franklin, 439 U.S. 379, 392, 99 S. Ct. 675,
684, 58 L. Ed. 2d 596 (1979)); In re Dyke, 943 F.2d 1435, 1443 (5th
Cir.1991). Moreover, were we to accept the RTC's arguments, the
general savings clause would drown out the more specific
substantive provision.7 This would be contrary to another
intended this result it would have drafted the clause to read
that "[n]othing in this paragraph shall impair or affect any
right of the Corporation under any applicable law." Id.
Accordingly, for this reason also, we find the RTC's construction
of the savings clause to be contrary to the plain meaning of the
statute.
7
But see Chemetron Corp. v. Business Funds, 682 F.2d 1149
(5th Cir.1982), wherein this Court quoted with approval the
following language:
The settled rule of statutory construction is that,
where there is a special statutory provision affording
a remedy for particular specific cases and where there
is also a general provision which is comprehensive
9
important canon of construction which teaches that the more
specific controls over the general. Foreman v. Prudential
Insurance Co., 657 F.2d 717, 723 (5th Cir.1981). Finally, it
simply makes no sense that Congress would establish a cause of
action in one sentence and then render it a nullity in the next.
Accordingly we find that section 1821(k)'s retention of the RTC's
rights under "other applicable law" does not preserve a right to
bring a federal common law action for simple negligence in the face
of the gross negligence language of the substantive part of the
section.
In addition, we find the RTC's arguments based on the
statute's legislative history to be insufficient to change this
conclusion. In making the argument that Congress intended a
federal common law action for simple negligence to remain viable
after the passage of section 1821(k), the RTC relies most heavily
on the Senate Report which provides that
[Section 1821(k) ] enables the FDIC to pursue claims against
directors or officers of insured financial institutions for
gross negligence (or negligent conduct that demonstrates a
greater disregard of a duty of care than gross negligence) or
for intentional tortious conduct.... This subsection does not
prevent the FDIC from pursuing claims under State law or under
other applicable Federal law, if such law permits the officers
or directors of a financial institution to be sued 1) for
violating a lower standard of care, such as simple negligence,
or 2) on an alternative theory such as breach of contract or
enough to include what is embraced in the former, the
special provision will prevail over the general
provision, and the latter will be held to apply only to
such cases as are not within the former.
Id. at 1168, n. 51 (quoting Montague v. Electronic Corp. of
America, 76 F. Supp. 933, 936 (S.D.N.Y.1948) (citations
omitted)).
10
breach of fiduciary duty.
S.Rep. No. 19, 101st Cong., 1st Sess., 135th Con.Rec. S6912 (daily
ed. June 19, 1989). This report, however, was not available when
the Senate initially voted on this bill. Rather, it was published
two months after the Senate initially voted. Id. at S6934.
Accordingly, this report is not entitled to substantial weight.
Gallagher, 10 F.3d at 421; Clarke v. Securities Industry Ass'n,
479 U.S. 388, 407, 107 S. Ct. 750, 761, 93 L. Ed. 2d 757 (1987)
(refusing to give substantial weight to a statement made by the
sponsor of a law placed into the Congressional Record ten days
after the law was passed).
Moreover, examination of all of the legislative history, and
scrutiny of the sequence of events leading up to the bill's
passage, calls into question the conclusion of that report. This
law initiated in the Senate and, as originally drafted, it
explicitly provided for the exact same standard of liability which
the RTC now implores us to judicially adopt. Specifically, it
would have allowed the RTC to bring a claim "for any cause of
action available at common law, including, but not limited to,
negligence, gross negligence, willful misconduct, breach of
fiduciary duty...." S. 774, § 214(n), 101st Cong., 1st Sess. at
105-06 (calendar N. 45, April 13, 1989). In the Senate debate,
however, several senators expressed concern over this provision
fearing that it would deter qualified individuals from serving as
11
directors and officers.8
Senator Riegle, one of the bill's floor manager's, agreed that
this was a serious concern and thus he submitted an amendment which
deleted any reference to simple negligence. 135 Cong.Rec. S4451-
52. This amendment, with only minor changes, would become section
1821(k). Speaking in favor of the amendment, Senator Sanford
stated that
these changes are essential if we are to attract qualified
officers and directors to serve in our financial
institutions.... The amendment would permit the FDIC to bring
an action or direct others to bring an action against the
directors and officers of a financial institution if the
director or officer acted with gross negligence or committed
an intentional tort.
Id. at S4276-77. This comment reflects the deletion of a simple
negligence standard from section 1821(k).
Moreover, the House version of FIRREA, which was passed after
the Senate version and which was the version that emerged from the
conference committee and was voted into law, preserved the Senate's
removal of the simple negligence standard. See Pub.L. No. 101-73,
103 Stat. 183 (Aug. 9, 1989), reprinted in 1989 U.S.C.C.A.N. 86.
Further, the House-Senate Conference report confirms that the
standard of liability under section 1821(k) is gross negligence:
Title II preempts State law with respect to claims brought by
the FDIC in any capacity against officers or directors of an
insured depository institution. The preemption allows the
FDIC to pursue claims for gross negligence or any conduct that
demonstrates a greater disregard of a duty of care, including
8
In particular, Senator Heflin argued for an amendment "to
ensure that financial institutions are able to attract strong and
capable individuals as directors and officers." 135 Cong.Rec.
S4264 (daily ed. April 19, 1989). Senator Conrad also supported
Senator Heflin's request for an amendment. Id.
12
intentional tortious conduct.9
H.R.Conf.Rep. No. 222, 101st Cong. 1st Sess. 393, 398 (1989),
reprinted in 1989 U.S.C.C.A.N. 432, 437. This conference report is
entitled to great deference inasmuch as it represents the final
statement of terms agreed upon by both houses of Congress. Davis
v. Lukhard, 788 F.2d 973, 981 (4th Cir.), cert. denied, 479 U.S.
868, 107 S. Ct. 231, 93 L. Ed. 2d 157 (1986).
In sum, it appears that the sponsors of the bill feared that
they could not get the votes needed for passage if they attempted
to retain the standard of liability from the original draft of the
bill which would have explicitly allowed the RTC to bring simple
negligence actions under the federal common law. Therefore, the
sponsors dropped that standard and put in its place a federal gross
negligence standard of liability.
This conclusion that the simple negligence standard of
liability was removed from the statute is also supported by
postenactment legislative history. Although post-enactment
legislative history cannot be given the same weight as
contemporaneous legislative history, we would be remiss if we did
9
A major concern of this section was the trend in the states
of passing legislation that insulated directors and officers from
liability unless they were reckless or committed willful
breaches. Hence, one purpose was of this section was to ensure
that the RTC could bring an action for gross negligence even in
the face of contrary state law. Thus, as explained by Senator
Riegle, this section preempts state law at least to the extent
that the state law disallows an action against a director or
officer for gross negligence or for any conduct reflecting a
higher disregard of a duty of care than gross negligence. 135
Cong.Rec. S4278-79 (daily ed. April 19, 1989). As the issue we
face is whether federal common law is preempted, the issue of
insulation by forgiving state legislation is not relevant.
13
not consider it. Cannon v. University of Chicago, 441 U.S. 677,
687 n. 7, 99 S. Ct. 1946, 1952, n. 7, 60 L. Ed. 2d 560 (1979). In
this case, we note that there have been two subsequent attempts to
amend section 1821(k) to codify a simple negligence standard.10
These two attempts to reinstate a simple negligence standard belie
the RTC's position that the savings clause of section 1821(k), as
enacted, preserves a right to sue for simple negligence under
federal common law.
At best, the RTC has shown that the legislative history to
FIRREA is muddled and sends conflicting signals. However, this
history simply does not demonstrate the kind of "clearly expressed
legislative intention" needed to overcome the plain meaning of the
statute. Kaiser Aluminum, 494 U.S. at 833-34, 110 S.Ct. at 1575.
10
In August 1991, the FDIC submitted to Congress a proposed
amended savings clause which provided that:
Nothing in this subsection shall impair or affect any
right of the [FDIC] under other applicable State or
Federal law, including a right to hold such director or
officer personally liable for negligence.
Liebold, Federal Common Law: What & Where?, in Civil &
Criminal Liability of Officers, Directors & Professionals:
Bank & Thrift Litigation in the 1990's, 153, 161 n. 12
(Practicing Law Institute 1991) (emphasis added). Then,
after this proposal was withdrawn, Congressman Baker, at the
request of the FDIC, submitted another proposed amendment
which would have provided that there would have been no
impairment of any right of the RTC
under any provision of applicable State law or other
Federal law, including any provision of common law or
any law establishing the personal liability of any
director or officer of an insured depository
institution under any standard pursuant to such law.
H.R. 3435, 102nd Cong., 1st Sess. § 228 (Comm. Markup Oct.
18, 1991).
14
That "plain meaning" of the statute provides for gross negligence
as the federal standard of liability. As this statute "speaks
directly" to the issue of the standard of liability for directors
and officers of federally-insured depository institutions, we hold
that federal common law in this area is preempted. Milwaukee, 451
U.S. at 313-16, 101 S.Ct. at 1791-92.
2. Louisiana Law
During the proceedings in the district court, and in its
first two appellate briefs before this Court, the RTC proceeded
with the understanding that the standard of liability for directors
and officers of depository institutions under Louisiana law was
gross negligence. This was a well-founded belief as this Court
held exactly that in Louisiana World Exposition v. Federal Ins.
Co., 864 F.2d 1147, 1151 (5th Cir.1989).11 See also FSLIC v.
Shelton, 789 F. Supp. 1360, 1366-67 (M.D.La.1992) ("There is no
11
In Louisiana World Exposition, this Court was called on to
determine whether La.Rev.Stat.Ann. § 12:226(A) (West 1969)
described a simple negligence or a gross negligence standard of
liability. Louisiana World Exposition, 864 F.2d at 1149. This
statute established the standard of care applicable to directors
and officers of a nonprofit Louisiana corporation and it provides
that
[o]fficers and directors shall be deemed to stand in a
fiduciary relation to the corporation and its members,
and shall discharge the duties of their respective
positions in good faith, and with that diligence, care,
judgment and skill which ordinarily prudent men would
exercise under similar circumstances in like positions.
§ 12:226(A). Reading this language in light of Louisiana
case law and the commentary, this Court held that simple
negligence was not enough under this statute for personal
liability to be assessed, but rather a showing of gross
negligence was necessary. Louisiana World Exposition, 864
F.2d at 1151.
15
claim under Louisiana law based on simple negligence against
officers and directors"). Further, the Louisiana legislature, in
1992, codified that standard by the enactment of Act 586 which
provides that:
A director or officer of a financial institution shall not be
held personally liable to the financial institution or the
shareholders or members thereof for monetary damages unless
the director or officer acted in a grossly negligent manner as
defined in R.S. 6:703(9) or engaged in conduct that
demonstrates a greater disregard of the duty of care than
gross negligence, including intentional tortious conduct or
intentional breach of the duty of loyalty.
La.Rev.Stat.Ann. 6:786(B) (West Supp.1994).
In its supplemental brief to this Court, however, the RTC
switched gears and contended for the first time that the Louisiana
law applicable at the time of the events in this case was simple
negligence. For support, the RTC looked to Mary v. The Lupin
Foundation, 609 So. 2d 184 (La.1992), which the RTC claimed rejected
the conclusion in Louisiana World Exposition and held that prior to
the enactment of Act 586, the Louisiana standard of care was simple
negligence. Further, the RTC contended that Act 586 could not be
retroactively applied to defeat the RTC's rights which had vested
prior to its passage.12
The RTC's contentions in its supplemental brief raise two
troubling questions. The first is whether we can address this
12
Although section 2 of Act 586 specifically provides that
it is to be applied retroactively, the RTC argues that the this
would be ignored by the Louisiana courts because its claims were
vested before the enactment of Act 586. See Gilboy v. American
Tobacco Co., 582 So. 2d 1263, 1265 (La.1991) (A statute that
changes settled law relating to substantive rights only has
prospective effect).
16
issue raised for the first time in the RTC's third round of
appellate briefing. The second is whether we can give Act 586
retroactive effect. Fortunately, we do not need to address these
issues because we find that the Louisiana standard of liability for
directors and officers is, and was, gross negligence.
The RTC's reliance on Mary as contra authority to Louisiana
World Exposition is misplaced. In Mary, the issue before the
Louisiana Supreme Court was not the standard of liability for
directors and officers, but rather it was the appropriate statute
of limitations to be applied to the action brought by Dr. Mary.
The action centered around the sale of the St. Charles General
Hospital which was owned by the Lupin Foundation. Dr. Mary, a
director of the Lupin Foundation, sued certain of his codirectors
claiming that they had wrongfully and secretly received $5 million
in a side deal with the purchaser of St. Charles. Mary, 609 So. 2d
at 186.
Dr. Mary did not bring this suit until nine years after the
transaction, however. Thus, the defendants challenged the basis of
the cause of action brought by Dr. Mary. If, as the defendants
argued, the facts alleged stated a claim under La.Rev.Stat.Ann. §§
12:219(C) & 12:226(D) for unlawful distribution of corporate
assets, then a two-year statute of limitations applied. Id. at
187. Thus, Dr. Mary's claim would be time-barred. On the other
hand, if, as Dr. Mary contended, the facts alleged stated a claim
under La.Rev.Stat.Ann. § 12:226(A) for breach of fiduciary duty by
an officer or director, then a ten-year statute of limitations
17
applied. In that case, the claim would not be time-barred. Id.
Resolving this issue, the Louisiana Supreme Court held that
Dr. Mary's claims were not time-barred as the facts alleged stated
a claim under La.Rev.Stat.Ann. 12:226(A) and that the ten-year
statute of limitations applied. Id. at 188. In making this
determination, though, the Louisiana Supreme Court only decided the
basis of liability under the facts as alleged. It did not decide
the issue of the standard of care under which personal liability
could be imposed against directors or officers under section
12:226(A) as that issue was not before the court.
Accordingly, we see no conflict between Mary and Louisiana
World Exposition. The Louisiana Supreme Court was not attempting
to set any standard of liability and we find no explicit or
implicit intention in Mary to reject the gross negligence standard
announced by this Court in Louisiana World Exposition, 864 F.2d at
1151. Therefore, we adhere to the conclusion of the Louisiana
World Exposition Court and hold that even prior to the enactment of
Act 586, the standard of care under Louisiana law for the
imposition of personal liability against directors and officers was
gross negligence.13
CONCLUSION
Section 1821(k) "speaks directly" to the issue of the standard
of liability of a director or officer of a federally-insured
13
As we conclude that the Louisiana standard of liability
mirrors the federal standard set in § 1821(k), we have no
occasion to determine whether § 1821(k) would preempt a more
onerous state standard and we express no opinion in that regard.
See supra note 2.
18
depository institution thus preempting federal common law.14
Moreover, the federal standard of liability established by section
1821(k) is gross negligence as defined under applicable state law.
Gross negligence is also the standard to be applied under Louisiana
law. Consequently, as neither federal law nor Louisiana law
recognizes a cause of action against directors or officers of
depository institutions for lesser breaches of duty than gross
negligence, the district court did not err in dismissing the RTC's
claims for simple negligence and breach of fiduciary duty.
AFFIRMED.
14
In light of this conclusion, we have no occasion to
consider whether absent § 1821(k) federal common law would govern
the duties owed their corporation by directors or officers of
state-chartered, federally-insured, financial institutions.
19