On July 14, 2011, the FDIC filed a lawsuit in the
Northern District of Georgia against 15 former directors and officers of Haven
Trust Bank of Duluth, Georgia. This suit is the ninth the FDIC has filed as
part of the current bank failure wave and the second that the FDIC has filed in
Georgia. A copy of the FDIC's complaint can be found here.
Scott Trubey's July 14, 2011 Atlanta Journal-Constitution article
describing the lawsuit can be found here.
Haven Trust was one of the earliest bank closures of the
current wave when it failed on
December 18, 2008. The bank's failure has already been the subject of
extensive litigation. In late December 2008, the bank's investors filed a securities class action
lawsuit against the former directors and officers of the bank. But as
on January 14, 2011, Northern District of Georgia Judge Charles A. Pannell, Jr.
granted the defendants' motion to dismiss the securities suit.
The FDIC's suit filing against the Haven Trust officials
may come as little surprise; indeed, as discussed here,
the FDIC had previously sought to intervene in the investors' securities suit.
Among other considerations the FDIC cited as part of its bid to intervene was
the FDIC's own intention to assert claims against the individual defendants and
the FDIC's concomitant "interest" in the bank's D&O insurance. On December
29, 2010, Judge Pannell denied the FDIC's motion to intervene, as discussed here.
He specifically rejected the argument that the FDIC has a "legally protectable
interest" in the D&O insurance, as a mere prospective claimant.
In its lawsuit, the FDIC accuses the former directors and
officers of gross negligence and alleges that they breached other duties. The
complaint specifically alleges improper lending practices and seeks to recover
over $40 million. Among other things, the FDIC alleges that the bank suffered
losses of over $7 million on improper loans to family members of two bank
While this lawsuit is only the second that the FDIC has
filed against former directors and officers of a failed Georgia bank as part of
the current round of bank failures, there undoubtedly will be many more to
come. Georgia, with 65 bank failures since mid-2008, has had more bank failures
than any other state during that period. The prior FDIC lawsuit involving
a Georgia bank failure was the lawsuit filed in January 2011 against former
directors and officers of Integrity Bank, about which refer here.
Though the FDIC has so far filed only nine lawsuits
against failed bank officials, many more lawsuits will be coming. According to
the professional liability lawsuit page on the FDIC's website (which can be
the FDIC had as of July 7, 2011 authorized lawsuits against 248 individuals at
28 failed institutions. Even with the Haven Trust lawsuit, the FDIC has sued
only 68 individuals in connection with nine failed institutions. Many more
suits have been authorized, and it seems likely that even as the suits already
authorized are filed, even more with be authorized in the months ahead.
Haven Trust was one of the first banks to fail back in
late 2008, and the FDIC is just getting around to filling suit now. Since Haven
Trust failed, well over 300 other banks have failed, and further bank failures
seem likely. Given the lag time on the Haven Trust lawsuit, the FDIC
lawsuits could continue to accumulate for at least another three years or more.
other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
For more information about LexisNexis
products and solutions connect with us through our corporate site.