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July 29, 1993

THE FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as Receiver of Mountain Ridge State Bank, Plaintiff,
LEO EVERETT WHITE, et al., Defendants.

The opinion of the court was delivered by: H. LEE SAROKIN

 Sarokin, District Judge

 Before the court is plaintiff's motion to strike most of the affirmative defenses asserted by the defendants to this action, including their defenses that the plaintiff has contributed to the losses at issue and that the plaintiff has failed to mitigate damages.


 Aspects of the motion pending before the court raise fundamental questions regarding the duties and responsibilities of government agencies with respect to failed banking institutions. Specifically, plaintiff's motion to strike defendants' failure to mitigate and contributory negligence defenses places in issue whether the government's performance of its duties and responsibilities, or the lack thereof, affects the liability of persons being sued by such agencies for alleged misconduct.

 The FDIC serves in a dual capacity with respect to financial institutions. It acts as a regulator of operating banks and frequently is appointed receiver for failed ones. The court has little difficulty in concluding that any alleged failures to supervise or to regulate by a government agency prior to the takeover of a failed financial institution cannot serve to relieve or to reduce the liability of any alleged wrongdoers. The defense that "the government should have caught and stopped us" is easily rejected.

 However, once the government takes on the role of operator of the institution, conclusions based on assertions that the government did not carry out its duties properly are not quite so apparent. In a perfect world, the government would take over a failed financial institution and efficiently and expeditiously resolve its problems and restore its solvency or liquidate it so as to maximize the value of its assets and minimize its losses. In the real world, due to the large number of bank failures, the enormity of their problems and the lack of experienced governmental personnel to deal with those problems, the cure is frequently worse than the disease. Indeed, in many instances it appears that the taxpayers might have been better off leaving the alleged culprits in charge -- leaving the foxes to guard the hen house -- rather than having the government step in and increase rather than mitigate the losses.

 By their answers, defendants have indicated that one of the issues in this case may be assigning responsibility for losses that have increased by reason of the government's neglect or inaction in its operation of the Bank. In other words, defendants answers raise the question of who is responsible when an asset worth a certain amount at the time of the government's takeover of the institution is later sold for significantly less than the takeover value, a loss that may be due solely to the agency's delay in acting?

 In almost every instance in which courts have addressed this issue, it has been resolved in favor of the taxpayer and against the wrongdoer. Such a conclusion can be rationalized by virtue of the fact that the responsible (or irresponsible) bank officers and directors have set the losses in motion and cannot have their liability excused or diminished because the government agency in charge is overworked or understaffed.

 Here, in the choice between having a wrongdoer or the taxpayer absorb any additional losses, public policy dictates that the entirely innocent taxpayers should not suffer the burden, particularly where it is apparent that they have already contributed so much to the bail-out of those institutions where no or little recovery is available. In some particular instances, however, imposing added liability created by the neglect or inaction of the government on those found to be wrongdoers may by unfair and onerous. Nevertheless, as a general proposition, it is appropriate to fasten liability on those who have given birth to the problem rather than on those who have inherited it and must now correct it.


 On October 5, 1990, the Commissioner of the New Jersey Department of Banking declared the Mountain Ridge State Bank (the "Bank"), a banking institution chartered under the laws of the State of New Jersey, insolvent and closed it. Pursuant to 12 U.S.C. § 1821, the Federal Deposit Insurance Corporation (the "FDIC") was appointed as the liquidating receiver of the Bank with all the rights, obligations and powers provided by law. On November 9, 1992, the FDIC filed this lawsuit against the former directors and officers of the Bank, *fn1" asserting that defendants breached their fiduciary duties to the Bank and that they were negligent and grossly negligent in the discharge of their duties to the Bank. Plaintiff seeks compensatory damages, interest, costs of suit, attorneys' fees and other relief the court deems appropriate. By March 5, 1993, all of the defendants had filed answers to plaintiff's complaint.


 Plaintiff now moves to strike all but two of the affirmative defenses asserted by the various defendants *fn2" pursuant to Federal Rule of Civil Procedure 12(f), arguing that these defenses are insufficient as a matter of law.

 Rule 12(f) provides, in relevant part, that "upon motion made by a party . . . the court may order stricken from the pleading any insufficient defense." Fed. R. Civ. P. 12(f). However, motions to strike affirmative defenses are generally disfavored because they require the court to evaluate legal issues before the factual background of a case has been developed through discovery. See, e.g., Cipollone v. Liggett Group, Inc., 789 F.2d 181, 188 (3d Cir. 1986); United States v. 416.81 Acres of Land, 514 F.2d 627, 631 (7th Cir. 1975); Glenside West Corp. v. Exxon Corp., 761 F. Supp. 1100, 1115 (D.N.J. 1991). Thus, the United States Court of Appeals for the Third Circuit has stated that "a court should not grant a motion to strike a defense unless the insufficiency of the defense is 'clearly apparent.'" Cipollone, 789 F.2d at 188; see also Glenside, 761 F. Supp. at 1115 (noting that "a motion to strike will not be granted where the sufficiency of a defense depends on disputed issues of fact . . . [nor] is [it] meant to afford an opportunity to determine disputed and substantial questions of law").

 Although motions to strike are not favored, courts recognize that a motion to strike can save time and litigation expense by eliminating the need for discovery with regard to legally insufficient defenses. See id. at 1115 (and cases cited therein). Plaintiff maintains that this is precisely the type of case where striking the insufficient defenses will prevent "a flood of inquiry . . . for which both the public and the defendants will pay dearly, in wasted litigation time and expense." Plt. Brief at 4. Defendants *fn3" assert that all of their defenses are legally sufficient and therefore should not be stricken. In order to resolve this motion, the court will first set out briefly the defenses at issue and then consider their legal sufficiency.

 Plaintiff asserts, and defendants do not dispute, that the affirmative defenses at issue fall into the following categories: 1) contributory negligence; 2) estoppel; 3) waiver; 4) ratification; 5) unclean hands; 6) collateral estoppel; 7) statute of limitations and laches; 8) failure to mitigate damages; 9) lack of proximate cause; 10) conclusory statements or denials; 11) lack of consideration; and, 12) reliance upon defenses asserted by other defendants. Because the court finds that this categorization encompasses all of the relevant defenses asserted by the various defendants, the court will turn to the legal sufficiency of these defenses beginning first with all of the defenses relating to action or inaction by the FDIC.

 A. Defenses Involving the FDIC's Actions

 At the outset of this discussion, the court notes, as stated above, that Congress has assigned the FDIC two distinct roles. The FDIC's primary function arises out of its obligation to insure "the deposits of all banks and savings associations which are entitled to the benefits of insurance," 12 U.S.C. § 1811, and is primarily regulatory in nature. See id. at § 1821(a). However, the FDIC also serves a second function, which is to act as a receiver or conservator of failed financial institutions. Id. at § 1821(c). As plaintiff notes, courts have carefully maintained a wall between the FDIC's two functions, holding that the actions of the FDIC as a regulator cannot form the basis for claims asserted against the FDIC as receiver, and vice-versa. See, e.g., FDIC v. Cheng, 787 F. Supp. 625, 634 (N.D. Tex. 1991); FDIC v. Butcher, 660 F. Supp. 1274, 1280 (E.D. Tenn. 1987). With this framework in mind, the court turns now to the specific defenses asserted that are based on action or inaction by the FDIC.

 1. Contributory Negligence

 The first affirmative defense at issue asserts that the FDIC's own negligence contributed to any losses sustained by the Bank and its shareholders. In support of its motion to strike this defense, plaintiff argues that "any assertion that the FDIC was negligent prior to the Bank's insolvency is insufficient as a matter of law." *fn4" Plt. Brief at 4. Plaintiff relies on First State Bank v. United States, 599 F.2d 558 (3d Cir. 1979), cert. denied, 444 U.S. 1013, 62 L. Ed. 2d 642, 100 S. Ct. 662 (1980), in which the United States Court of Appeals for the Third Circuit held that the FDIC owed no "duty to warn the Bank's board of the derelictions of their president and employees." Id. at 566. Plaintiff also cites numerous cases from other circuits and districts, in each of which the court has adopted this "no duty" rule. *fn5" See Plt. Brief at 5-7.

 Behind the almost universal acceptance of the "no duty" rule, see Resolution Trust Corp. v. Kerr, 804 F. Supp. 1091, 1099 (W.D. Ark. 1992) (noting that "the no duty rule has gained acceptance ...

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