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Federal Deposit Insurance Corporation v. Coleman

United States District Court, D. Idaho

February 5, 2015

FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for First Bank of Idaho, Plaintiff,
v.
RICHARD J. COLEMAN, SHANNON B. CONKLIN, GLENN J. JANSEN, and RONALD J. KAYE, Jr., Defendants.

MEMORANDUM DECISION AND ORDER

CANDY W. DALE, Magistrate Judge.

Before the Court is Defendants' Motion to Dismiss and for More Definite Statement. (Dkt. 9.) The motion is fully briefed, and the Court heard oral argument on the motion on January 22, 2015. For reasons explained more fully below, the motion will be denied.

BACKGROUND

Plaintiff the Federal Deposit Insurance Corporation ("FDIC-R"), acting in its capacity as receiver for First Bank of Idaho ("First Bank"), filed a three-count Complaint against Defendants Richard Coleman, Shannon Conklin, Glenn Jansen, and Ronald Kaye, all of whom were former loan officers at First Bank. The FDIC-R seeks to hold Defendants personally liable for over $11 million in damages, which First Bank allegedly suffered due to Defendants' underwriting and recommendation of three loans (the "Subject Loans"). In particular, the FDIC-R brings claims for (1) breach of fiduciary duty under Idaho law; (2) negligence under Idaho law; and (3) gross negligence under both Idaho law and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), 12 U.S.C. § 1821(k).

1. Factual Allegations[1]

First Bank was established in 1997 as a state-chartered bank. In 2001, First Bank became a federally chartered stock savings association subject to regulation and supervision by the federal Office of Thrift Supervision, with deposits insured by the FDIC. The Bank was headquartered in Ketchum, Idaho, and had seven branches spread across Blaine and Teton counties in Idaho and Teton County in Wyoming. On April 24, 2009, the Office of Thrift Supervision closed First Bank and the FDIC was appointed receiver under 12 U.S.C. § 1821(c).

Defendant Richard Colemen was First Bank's Senior Vice President and Senior Credit Officer from October 2004 until First Bank's closure in April of 2009. Coleman was the final reviewer and recommending authority for the three Subject Loans. Defendant Shannon Conklin was a loan officer for First Bank from 2001 through March of 2007. Defendant Glenn Jansen began working for First Bank in 2002 as a commercial loan officer and, in 2007, became President of First Bank's Jackson, Wyoming market division. Defendant Ronald Kaye joined the bank in 2002 and served as Vice President and loan officer at First Bank's Jackson, Wyoming branch until his resignation in May of 2007.

First Bank established a Credit Policy to guide its loan officers in "making sound credit judgments and protecting the major asset of the bank-its loan base." (Compl. ¶ 16, Dkt. 1.) The Credit Policy required a loan officer to review the prospective borrower's loan application, along with financial statements, and prepare a "Standard Credit Memo" that contained analysis of and recommendations on potential sources of repayment, key credit risks, and other factors. ( Id. ) Thus, First Bank used credit memos as "risk-surfacing" tools to support informed lending decisions. ( Id. ¶ 17.)

Under the Credit Policy, each loan required the approval of First Bank's Credit Policy Committee ("CPC"). The CPC voted on a loan only if it was first recommended by the loan officers on the account, including the Senior Credit Officer, Coleman. If approval of a recommended loan would have violated the Credit Policy, the loan officer was required to request an exception to the policy and discuss any mitigating factors in the credit memo.

The three Subject Loans were approved by the CPC between May of 2005 and January of 2007. Defendants Coleman and Conklin were involved in underwriting and recommending two of these loans, a residential construction loan (the "Borrower A Loan") and a land acquisition and development loan (the "Sweetwater Loan"). Defendants Coleman, Jansen, and Kaye were involved in underwriting and recommending the third loan, a lot acquisition loan (the "Sage Loan").

The FDIC-R alleges that Defendants failed to follow prudent lending practices and First Bank's Credit Policy in underwriting and recommending the Subject Loans for CPC approval. ( Id. ¶¶ 29, 36(a)-(f), 37, 45(a)-(h), 46, 54(a)-(h).) For example, the FDIC-R claims that proper underwriting on the Borrower A Loan would have uncovered, among other things, that the borrower had twice been convicted of fraud and that his projected income was largely attributable to notes receivable from unreliable sources. Another example is that the credit memo for the Sweetwater Loan failed to warn that the project was overleveraged or that the recommended loan terms violated First Bank's Credit Policy. And, with regard to the Sage Loan, the FDIC-R alleges that the credit memo misstated Sage Capital's financial condition and that Coleman, Jansen, and Kaye violated the Credit Policy by failing to obtain proper appraisals of the collateral, signed loan applications from the borrowers, and signed financial statements from the guarantors. It is further alleged that each Subject Loan required exceptions to the Credit Policy, which were not explained in the accompanying credit memos.

2. Procedural History

The FDIC-R filed this lawsuit on July 29, 2014. Defendants waived service of process and, in September of 2014, filed the instant motion to dismiss. The motion requests dismissal the Complaint under Federal Rule of Civil Procedure 12(b)(6) or an order requiring the FDIC-R to provide a more definite statement of its claims. The parties have consented in writing to have a Magistrate Judge conduct any and all proceedings in this case. (Dkt. 17); see also 28 U.S.C. § 636(c).

Defendants advance four arguments for dismissal.[2] First, Defendants claim the FDIC-R's claims are time-barred. Second, Defendants argue the business judgment rule precludes the FDIC-R's claims for breach of fiduciary duty and negligence. Third, Defendants assert that the FDIC-R failed to adequately plead gross negligence under Idaho law. Fourth, Defendants claim the FDIC-R's Complaint does not plead facts showing Defendants proximately caused the alleged damages.

The FDIC-R filed a response to Defendants' motion in early October of 2014. The response references a Tolling Agreement executed by the parties on March 14, 2012, as well as ten amendments purporting to extend the duration of the Tolling Agreement. Both the Tolling Agreement and its amendments are attached to the Declaration of Lorriane G. Hanson in Support of Plaintiff's Response to Defendants' Motion to Dismiss. ( See Hanson Dec. ¶¶ 3-13, Dkt. 13-1.) The FDIC-R relies on the Tolling Agreement and its amendments to counter Defendants' argument that the FDIC-R's claims are time-barred.

Defendants' reply brief argued that any agreement to toll the statute of limitations would have no legal effect. Thereafter, the FDIC-R sought, and the Court granted, leave to file a surreply on the timeliness issue. In the surreply, the FDIC-R contends the Tolling Agreement renders its claims timely and estops Defendants from asserting the statute of limitations as a defense.

LEGAL STANDARD

Ordinarily, the Court looks only at the pleadings when evaluating a motion to dismiss under Rule 12(b)(6). U.S. v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). In circumstances not present here, the Court also may consider any documents attached to the pleadings, documents incorporated by reference, or matters subject to judicial notice without converting the Rule 12(b)(6) motion into one for summary judgment. See id. at 908-09. Otherwise, Rule 12(d) directs the Court to treat a motion to dismiss as a motion for summary judgment under Rule 56 if a party presents, and the Court does not exclude, extra-pleading materials on a motion to dismiss. The decision whether to exclude the extra-pleading materials or convert the motion is committed to the Court's discretion. Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1207 (9th Cir. 2007). If the Court decides to treat the motion as one for summary judgment, it must give all parties "a reasonable opportunity to present all the material that is pertinent to the motion." Fed.R.Civ.P. 12(d).

Here, the FDIC-R has submitted matters outside the pleadings-namely, the Tolling Agreement and its amendments-in connection with its opposition to the untimeliness allegation in Defendants' motion to dismiss. The Tolling Agreement is not referenced in or attached to the Complaint, nor is it subject to judicial notice. However, during oral argument, counsel for Defendants confirmed that Defendants do not dispute the authenticity of the Tolling Agreement or the amendments submitted by the FDIC-R. The Court finds that considering the Tolling Agreement and its amendments for the limited purpose of resolving the parties' timeliness arguments will facilitate the "just, speedy, and inexpensive" determination of this action. Fed.R.Civ.P. 1. Therefore, the Court will apply the standards of Rule 56 to the timeliness argument in Defendants' motion to dismiss.

Under Rule 56(a), summary judgment is appropriate if "the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Critically, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). "A dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 514 (9th Cir.2010) (quoting Anderson, 477 U.S. at 248). "If a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may... consider the fact undisputed for the purposes of the motion." Fed.R.Civ.P. 56(e)(2).

Because the Tolling Agreement pertains only to Defendants' timeliness argument, the Court will evaluate the remainder of Defendants' motion to dismiss under the Rule 12(b)(6) standards. A motion to dismiss under Rule 12(b)(6) will be granted when the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When reviewing a complaint under this Rule, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002). A complaint attacked by a Rule 12(b)(6) motion to dismiss "does not need detailed factual allegations... but requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. In other words, the complaint must plead "enough facts to state a claim of relief that is plausible on its face." Id. at 570.

ANALYSIS

1. The FDIC-R's claims are timely

Defendants first argue that the FDIC-R's claims are time-barred because FIRREA contains a four-year statute of repose that may not be altered by agreement. Defendants claim the FDIC-R's claims accrued no later than April 24, 2009, and that the Complaint was filed more than four years after that date. In response, the FDIC-R contends FIRREA contains a statute of limitations that could be, and was, suspended by the parties' Tolling Agreement. In the alternative, the FDIC-R argues Defendants are equitably ...


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