FDIC-R professional liability lawsuits: A call for uniformity

Abstract

This article examines the US Federal Deposit Insurance Corporation’s (FDIC) efforts to pursue the former directors and officers of failed banks (the ‘Directors and Officers’) for damages. The FDIC, in its capacity as receiver of a failed bank, has the authority to pursue professionals that it believes acted tortiously and contributed to a bank’s losses. With over 500 US banks failing since February 2007, the FDIC has investigated and pursued many such professionals. This article focuses on: the unclear standards of liability to which one group of professionals – Directors and Officers – are held in these FDIC investigations and subsequent lawsuits, the disparate application of those standards by courts, and the negative consequences of the lack of a clear and uniform standard of liability for Directors and Officers. This article concludes that the creation of a uniform statutory gross negligence standard would allow the FDIC to effectively pursue the most culpable Directors and Officers, while eliminating the fear of liability for well-informed business decisions that has driven qualified Directors and Officers out of the banking industry.