Atherton v. FDIC, 519 U.S. 213 (1997)

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OCTOBER TERM, 1996

Syllabus

ATHERTON v. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for CITY SAVINGS, F. S. B.

certiorari to the united states court of appeals for the third circuit

No. 95-928. Argued November 4, 1996—Decided January 14, 1997

After City Federal Savings Bank, a federally chartered, federally insured savings association, went into receivership, the Resolution Trust Corporation (RTC), which has since been replaced as receiver by respondent Federal Deposit Insurance Corporation (FDIC), brought this action in City Federal's name against several of its officers and directors, claiming that they had acted (or failed to act) in ways that led City Federal to make bad loans, and that these actions (or omissions) were unlawful because they amounted to gross negligence, simple negligence, and breaches of fiduciary duty. The defendants moved to dismiss under 12 U. S. C. 1821(k), which states, in relevant part: "A director or officer of [a federally insured bank] may be held personally liable for monetary damages in any [RTC-initiated] civil action . . . for gross negligence [or] similar conduct . . . that demonstrates a greater disregard of a duty of care (than gross negligence) . . . . Nothing in this paragraph shall impair or affect any right of the [RTC] under other applicable law." (Emphasis added.) In dismissing all but the gross negligence claims, the District Court agreed with the defendants that, by authorizing actions for gross negligence or more seriously culpable conduct, the statute intended to forbid actions based upon less seriously culpable conduct, such as simple negligence. Reversing, the Third Circuit interpreted 1821(k) as simply offering a safeguard against state legislation that had watered down applicable state standards of care—below a gross negligence benchmark. As so interpreted, the statute did not prohibit actions resting upon stricter standard of care rules—whether originating in state law (which the Circuit found applicable to state-chartered banks) or in federal common law (which the Circuit found applicable to federally chartered banks). Noting City Federal's federal charter, the Circuit concluded that the Government could pursue any claims for negligence or breach of fiduciary duty available as a matter of federal common law.

Held: State law sets the standard of conduct for officers and directors of federally insured savings institutions as long as the state standard (such as simple negligence) is stricter than that of 1821(k). The federal

213

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