Vieira v. Anderson (In re Beach First National Bancshares, Inc.)

Summarized by Jennifer Lyday , Waldrep Wall Babcock & Bailey PLLC
13 years 2 months ago

Citation:

Vieira v. Anderson (In re Beach First National Bancshares, Inc.), No. 11-2019, 2012 U.S. App. LEXIS 26569 (4th Cir. Dec. 28, 2012).

Tag(s):

Ruling:

The Court of Appeals for the Fourth Circuit affirmed the district court's judgment, which dismissed the trustee's complaint for negligence and breach of fiduciary duty against the former officers and directors of a now bankrupt bank because the trustee did not have standing to bring the derivative claims under FIRREA as the right to pursue such claims belongs to the FDIC, regardless of whether the FDIC wishes to pursue the claims. In coming to its decision, the 4th Circuit relied on an unpublished 11th Circuit decision, Lubin v. Skow (In re Integrity Bancshares, Inc.), 382 Fed. App'x 866 (11th Cir. 2010) (per curium). In that very similiar case, the 11th Circuit concluded that the FDIC succeeded to all derivative claims against officers and directors of the subsidiary bank. The 11th Circuit observed that the bankruptcy trustee could bring claims for direct harm to the holding company, as opposed to claims derived from subsidiary level breaches of duty.

Procedural context:

Trustee brought complaint for negligence and breach of fiduciary duty against the former officers and directors of a now bankruptcy bank. The defendants moved the bankruptcy court to (1) stay the adversary proceeding; (2) withdraw the reference to the bankruptcy court and transfer the action to the United States District Court for the District of South Carolina, or (3) dismiss the case for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The bankruptcy court stayed the proceedings, and the district court granted the motion to withdraw the reference. After briefing and argument, the district court also granted the defendants' motion to dismiss, concluding that the trustee lacked standing to bring the action. The trustee appealed.

Facts:

The trustee filed the action against the former directors and officers of Bancshares, which also formerly served as the officers and directors of First National Bank Myrtle Beach, SC, a wholly owned subsidiary of Bancshares. The Bank was Bankshares' primary asset. In 2008, the United States Office of the Comptroller of the Currency ("OCC") began monitoring the Bank. Finding serious deficiencies with the management and operation of the Bank, OCC required the Bank to take a number of corrective actions. These corrective actions failed to sustain the financial stability of the Bank. Consequently, on April 9, 2010, OCC closed the Bank and named the Federal Deposit Insurance Corporation ("FDIC") as its receiver. The FDIC subsequently liquidated all of the Bank's assets so that the Bank ceased as a going concern or functional entity.As a consequence of the Bank's failure, Bancshares filed for bankruptcy under Chapter 7 on May 14, 2010, in the United States Bankruptcy Court for the District of South Carolina. Under the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), the FDIC, when appointed receiver of a bank, succeeds to "all rights, titles, powers, and privileges of the insured depository institution, and of any stockholder . . . of such institution . . . ." The district court concluded that the trustee only brought derivative claims against the defendants because the harm caused to Bancshares, the holding company, was the direct result of the failure of its wholly-owned subsidiary and primary asset. The 4th Circuit agreed, with one exception. The trustee was permitted to bring a particular claim for harm caused directly to the holding company, not indirectly through the harm defendants caused the bank subsidiary.

Judge(s):

Judge Agee, Judge Wynn, and Judge Floyd

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