As discussed in an article in the Sarasota Herald
on May 22, 2013, a Middle District of Florida jury returned a verdict against
Sarasota law firm Icard Merrill, and
one of its partners, Robert
Messick, in a legal malpractice action arising out of the collapse of the
Priority Bank of Bradenton, Florida.
The FDIC had claimed that Messick had represented
multiple parties in a single loan transaction that had cause a significant loss
to the bank. The FDIC, in its role as receiver for the failed bank, had sought
damages of over $4 million, but the jury reduced the damage award to $1.2
million. The trial court is now considering
post-trial motions. The May 23, 2013 press release from the law firm that
had represented the FDIC in the case can be found here.
According to the FDIC's professional liability lawsuits
page on its website (here),
legal malpractice cases are among the 51 actions that the agency has authorized
above and beyond the actions the agency has authorized to be filed against the
former directors and officers of failed banks. As discussed here,
in at least one failed bank lawsuit the agency has filed, the agency's
complaint named as defendants certain former directors and officers of the bank
and also named as defendants the bank's former outside General Counsel and
former outside law firm. In addition to negligence, gross negligence and breach
of fiduciary duty claims against the former directors and officers, the FDIC's
complaint alleged legal malpractice claims against the former General Counsel
and his law firm.
While it is clear that the FDIC intends to pursue
attorney malpractice claims as part of its litigation approach in the current
bank failure wave, the FDIC's pursuit of legal malpractice claims does not seem
to as significant component of the agency's litigation strategy as it was
during the S&L crisis. Information
on the FDIC's website shows that during the S&L crisis, the agency and
the RTC filed a total of 205 attorney malpractice suits in connection with 10
percent of all failed institutions. From those cases and some prelitigation
settlements, the agencies recovered more than $500 million, averaging about
$2.5 million for each suit filed. The primary source of recovery in most of the
cases was attorney malpractice insurance policies.
The agency clearly aims to include attorney malpractice
claims and recoveries this time around. It just seems that the attorney
malpractice claims will not loom as large as part of the agency's failed bank
recoveries as they did during the S&L crisis. The agency does not appear to
be filing nearly as many legal malpractice claims this time around, either in
absolute numbers or as a percentage of bank failures.
In part this decline in the number of failed bank legal
malpractice actions may be due to one important change in the relationship
between bank's outside counsel and the bank's board. Prior to the S&L
crisis, it was quite common for a bank's outside counsel to sit on the bank's
board. The potential conflict in responsibilities led to many of the claims
that the FDIC and the RTC filed during the last bank failure wave. Since then,
it became much less common for outside counsel to serve on bank's boards. So a
factor that led to many of the claims during the S&L crisis simply is not
present for nearly as many of the bank failures during the current bank failure
other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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