Federal Deposit Insurance Corporation v. Bierman

In 1981, the Federal Deposit Insurance Corporation (FDIC) (plaintiff) investigated the faltering Allen County Bank (ACB). FDIC issued a report cautioning ACB and its directors that the bank must acquire better-quality loans. In February 1982, FDIC and the Indiana Department of Financial Institutions (DFI) entered into a memorandum of understanding with ACB, which contained requirements aimed at alleviating the situation. ACB continued to deteriorate. In September 1982, FDIC issued another report stressing poor lending practices, including poor supervision, incomplete credit information, self-dealing, and overlending. In 1983, FDIC and DFI entered into a second memorandum of understanding with ACB containing more requirements, which ACB failed to meet. Accordingly, DFI initiated liquidation proceedings. FDIC was appointed receiver, and in that capacity, sold to itself certain claims against ACB’s former directors and officers (defendants), which included John Boley and Dr. Gilbert Bierman, and later included V. Edgar (Ed) Stanley, Robert Marcuccilli, Judith Stanley, and Dan Stanley. FDIC sued the former directors and officers of ACB for breach of common-law and statutory duties that resulted in bank losses. Namely, Ed Stanley, Judith Stanley, and Marcuccilli simultaneously served as directors for other banks, and, beginning in late December 1982, they used their positions to conduct poor loan transactions on behalf of ACB, as interested directors, that a reasonably prudent banker would not have pursued. Boley had only attended one board meeting during this period, and Bierman had not attended any board meetings since October 1982. The district court found that Boley and Bierman failed to meet their duty of care to ACB by their sheer inattention and, therefore, shared responsibility for the poor loans. The district court also found that Boley and Bierman’s inattention proximately caused the subsequent losses based on Ed Stanley’s comment that if a board member objected to a loan, the other members “weren’t going to cram anything down anybody’s throat.”