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Federal Deposit Insurance Corporation As Receiver for Security Savings Bank v. Jones

United States District Court, D. Nevada

September 19, 2014

Federal Deposit Insurance Corporation as Receiver for Security Savings Bank, Plaintiff,
v.
Kelly Jones, Stephen Dervenis, and Thomas Procopio, Defendants.

ORDER RE: DEFENDANTS' MOTION TO DISMISS [DOC. 28]; AND DEFENDANTS' MOTION TO JOIN A NECESSARY PARTY [DOC. 32]

JENNIFER A. DORSEY, District Judge.

The FDIC as the receiver for failed Security Savings Bank sues three of the Bank's former officers and directors to recoup more than $13.1 million in bad loans made in 2005 and 2006 and-the FDIC claims-in violation of the Bank's lending policies, defendants' fiduciary duties, and just good sense. Doc. 1. Defendants move to dismiss the FDIC's claims under the business judgment rule, as time-barred, and as generally implausible. Doc. 28. They also ask to join the borrower of one of these loans as a necessary party under Rule 19 but, suspecting that the court lacks jurisdiction over that borrower, they mostly move to dismiss the complaint for failure to join this indispensable party. Doc. 32. Having considered the parties' protracted briefing on both motions, I grant the motion to dismiss only to the extent it seeks to dispose of any fiduciary-breach claim founded upon a duty of loyalty because it appears that the FDIC has abandoned that theory, and I deny the motions in all other respects.

Background[1]

This action involves a financial institution's nationwide real estate speculation and presents the question of who should be held responsible for the significant monetary losses after it all fell apart. The FDIC is the receiver of Security Savings Bank, a Henderson, Nevada, financial institution. Doc. 1. The Bank, chartered in 2000, soon came to focus its business on loan participations, particularly commercial real estate ("CRE") and acquisition, development, and construction ("ADC") loans. See id. at 7. This suit involves seven of these loans, for which the FDIC alleges that proper underwriting standards were ignored by the Bank's three high-ranking officers Kelly Jones, Stephen Dervenis, and Thomas Procopio[2]-the loan underwriters responsible for ensuring compliance with these policies before any loan was recommended for Bank approval:

1. A $100, 000 participation in a $66.4 million senior ADC loan in Winchester Properties, a California development, approved on or about October 11, 2005. Doc. 1 at 17-18 ("Winchester Senior Loan"). The debtor defaulted on or about January 2007. Id. at 23.
2. A $3.4 million participation in a $4.8 million ADC mezzanine loan in Winchester Properties, on or about October 11, 2005. Id. at 17-18 ("Winchester Mezzanine Loan"). The debtor defaulted on or about November 2007. Id. at 23.
3. A $1.55 million participation in a $3 million mezzanine ADC loan in WSJ Key West, a Florida development, on or about November 30, 2005. Id. at 24 ("Key West Mezzanine Loan"). The debtor defaulted on or about February 2008. Id. at 28.
4. A $5 million participation in a $35, 630, 000 senior ADC loan for Winners, LLC, a Florida development, on or about February 10, 2006 ("Winners Senior Loan"). Id. at 29. The debtor defaulted on or about December 2007. Id. at 33.
5. A $3 million participation interest in a $19, 040, 000 ADC loan for Corinthian Communities, an Idaho development, on or about June 20, 2006 ("Corinthian Loan"). The FDIC does not state that this loan ever defaulted, although they allege that "damages in excess of $2.26 million" have been sustained. Id. at 38.
6. A $5 million participation in a $26, 210, 000 ADC loan in Northshore Center THC, LLC, an Illinois development, on or about July 5, 2006 ("Northshore Loan"). Id. at 38. The FDIC does not state that this loan ever defaulted, although they allege that "damages in excess of $3.4 million" have been sustained. Id. at 43.
7. A $3, 748, 500 participation in a $4, 165, 000 ADC loan for Hisey, LLC, a Washington State development, on or about October 4, 2006 ("Hisey Loan"). Id. at 44. On or about November 2006, the Loan Committee approved the Bank's acquisition of the remaining loan balance, thereby increasing its share to $4, 165, 000. Id. The FDIC does not state that this loan ever defaulted, although it alleges that "damages in excess of $900, 000" have been sustained. Id. at 48.

On January 31, 2013, the FDIC filed the instant action, alleging two counts against all defendants. In its first count, the FDIC alleges that defendants breached their "fiduciary duties, " which "[a]s officers and directors of the Bank, at all times, [they] owed to the Bank." Doc. 1 at 49-50. These duties include the "fiduciary duties of care and loyalty, including duties of honesty, full disclosure, and the obligation to exercise their powers in good faith and with a view to the interests of the bank." Id. The FDIC's second count alleges gross negligence against all defendants under Nevada Law and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, ("FIRREA"), 12 U.S.C. § 1821(k). Id. at 52.

Discussion

A. The Motion to Dismiss [#28]

Federal Rule of Civil Procedure 8(a) governs the standard for pleadings in a federal cause of action, and requires that "[a] pleading that states a claim for relief must contain: (1) a short and plain statement of the grounds for the court's jurisdiction....; (2) a short and plain statement of the claim showing that the pleader is entitled to relief; and (3) a demand for the relief sought." A district court may dismiss a complaint brought under Rule 8(a) for failing to state a claim upon which relief can be granted. Fed. R. Civ. Proc. 12(b)(6).

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "[A] plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court is also "not bound to accept as true a legal conclusion couched as a factual allegation." Id. (quoting Papsan v. Allain, 478 U.S. 265, 286 (1986)).

To state a "plausible" claim for relief, a plaintiff must "plead[] factual content that allows the court to draw a reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678-79. A complaint may only be dismissed for violating the statute of limitations when it is apparent from the face of the complaint that the period has run. See Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010), rev'd on other grounds, 754 F.3d 712 (9th Cir. 2014).

1. The Timeliness of the FDIC's Claims under § 1821(d)(14) of FIRREA

The time for initiating this suit is governed by § 1821(d)(14) of FIRREA, which provides a three-year "statute of limitations" for FDIC receivership claims "[n]otwithstanding any provision of contract."[3] Id. ; F.D.I.C. v. New Hampshire Ins. Co., 953, F.2d 478, 486 (9th Cir. 1991). The parties do not dispute that the FDIC became a receiver on February 27, 2009, and filed this action nearly four years later on January 31, 2013. See Doc. 1 at 5. The FDIC contends that prior to the running of the statute of limitations, on February 12, 2012, the parties executed a written agreement to toll the limitations period to permit them to exchange documents and attempt to resolve the case without resorting to a lawsuit. Doc. 61 at 8-9. This tolling agreement was extended four times[4] and ultimately expired on February 4, 2013. See id. at 22-30. The FDIC thus contends that the tolling period was extended to February 4, 2013, and its filing of this action on January 31, 2013, was timely; defendants claim that the tolling agreements could not legally operate to extend the filing deadline because the statute is actually one of repose, not limitations.

a. The FIRREA Statutory Period Is One of Limitation, Not Repose.

Section 1821(d)(14) provides:

(A) In general
Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the Corporation as conservator or receiver shall be-
....
(ii) in the case of any tort claim... the ...

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