| Research Abstract |
Congress intended section 1821 (k) to precmpt state insulting statutes. shielding directors and officers from suits for breach of duty to corporations and financial institution. But there is an argument wheather this statute bars lawsuits for lesser standard of liability such as negligence under state statute or common law.
Many courts have held that section 1821 (k) merely establishes a minimum standard of care for liability of directors and officers of financial institution and doesn't prevent from applying more stringent standard such as simple negligence. The other hand, several courts have held that FIRREA mandates a uniform standard, so preempting the other standard. Recently, four conrts in federal circuit have held that section 1821 (k) supersedes federal common law, because Congress acted FIRREA as federal uniform standard. And Chapman court held that state law claims weren't preempled, but concluded RTC could not bring suits against federally chartered in stitutions. The FDIC
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consists to bring suits against directors and officers for simple negligence. The dofendant directors and officers argue that section 1821 (k) limits to gross negligence or willful misconduct of directors and officers. As there are such splits. Supreme court should address this issue.
The FDIC was born by the 1933 Act amid the banking crisis of 1930s. Additional to acting as receiver or conservator, FDIC has gained broad investigative powers and other superpowers under common law since then. The regulation of FDIC has been sucessful in protecting dipositors and reducing bank failures. But the banking cricis of 1980s realized that the insursnce fund was not necessary inexhaustible. and altered the banking regulation. Now, the FDIC's liability is taken to protect both of the insurance fund and taxpayrs. And the FDIC acknowledges that it does not only suit on behalf of depositors, shareholders and creditors, but also on behalf of the deposit insurance fund. So, PDIC tries to maximize the recover lost funds and hold directors accountable for their mismanagement.
Sometimes courts reject the FDIC's policy arguments regarding the need to preserve the national insurance fund. For example. O'melveny & Myers court recently held, 'there is no federal policy that the insurance fund should always win.'. So, directors can assert the defense against FDIC'S suits on business judgment rule or sometimes on contributry negligence of the regulator. Less
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