FDIC Suits Against Outside Advisors to Failed Banks: Latest - PowerPoint PPT Presentation

Presenting a live 90 ‐ minute webinar with interactive Q&A FDIC Suits Against Outside Advisors to Failed Banks: Latest Developments Defending Agency Claims Against Auditors, Law Firms and Other Professionals; Maximizing E&O Insurance Coverage WEDNES DAY, APRIL 17, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Mary C. Gill, Partner, Alston & Bird , Atlanta teven C. Morrison, Counsel, Professional Liability/ Financial Crimes Group, FDIC , Jacksonville, Fla. S Linda D. Kornfeld, Partner, Jenner & Block , Los Angeles Linda D. Kornfeld, Partner, Jenner & Block , Los Angeles The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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WWW.ALSTON.COM FDIC Claims Against FDIC Claims Against Outside Bank Advisors Mary C. Gill Alston & Bird LLP Alston & Bird LLP mary.gill@alston.com

WWW.ALSTON.COM FDIC Post-Financial Crisis D&O Litigation  The number of lawsuits filed by the FDIC against D&Os of failed banks has steadily increased over the past four years.  The FDIC generally has three years from the closing of a bank to g y y g initiate a lawsuit. The number of bank closings reached a crescendo in 2009 and 2010, which explains the increased number of lawsuits in the past months.  As of April 16, 2013, the FDIC has authorized suits in connection with 109 failed institutions against 888 D&Os and filed 54 lawsuits against 407 D&Os. 0 &Os  The FDIC has settled a number of claims against D&Os, many of which were resolved prior to litigation. The FDIC has recently begun to post these settlements on its website to post these settlements on its website. 6

WWW.ALSTON.COM FDIC Litigation Against D&Os Most lawsuits filed by the FDIC against D&Os follow a similar pattern. The FDIC alleges that:  The D&Os pursued a strategy of undue risk with an exceptionally The D&Os pursued a strategy of undue risk with an exceptionally high concentration of acquisition, development and construction (“ADC”) or commercial real estate (“CRE”) loans.  Th The ADC and CRE loans violated bank loan policies, underwriting ADC d CRE l i l t d b k l li i d iti standards and applicable rules and regulations.  The D&Os are personally liable under theories of negligence, The D&Os are personally liable under theories of negligence, gross negligence, or breach of fiduciary duty for losses from these loans to the bank/FDIC. 7

WWW.ALSTON.COM FDIC Litigation Against Bank Advisors  The FDIC also investigates and may pursue claims against Th FDIC l i ti t d l i i t outside bank advisors, including:  Attorneys Attorneys  Accountants  Appraisers  Appraisers  The FDIC has authorized 51 lawsuits against an array of third parties, which include these categories. 8

WWW.ALSTON.COM FDIC Litigation Against Failed Bank Attorneys  Lawsuits filed by the FDIC against bank attorneys in the current post- financial crisis include claims relating to:  The collection of bank documents prior to closing of the bank;  Alleged failure to follow closing instructions;  Alleged failure to follow closing instructions;  Alleged failure to record liens;  Allegations of aiding and abetting directors and officers in the Allegations of aiding and abetting directors and officers in the violation of bank policies and federal regulations; and  Alleged failure to advise the bank client about violations of regulations and statutes regulations and statutes, usually concerning loans, or failing to usually concerning loans or failing to sufficiently oversee a particular transaction. 9

WWW.ALSTON.COM FDIC Litigation Against Failed Bank Attorneys  Causes of action against bank attorneys have included negligence, gross negligence, breach of fiduciary duty, legal malpractice, negligent misrepresentation, breach of contract, breach of express or implied warranty, unjust enrichment, aiding and abetting, fraud, and deceptive trade practices.  The FDIC may bring claims against an entire law firm on theories of The FDIC may bring claims against an entire law firm on theories of vicarious liability or failure to monitor the lawyer’s compliance with professional standards. 10

WWW.ALSTON.COM FDIC Litigation Against Failed Bank Attorneys: Claims Relating to the Possession of Closed Bank Documents  FDIC v. Bryan Cave LLP , No. 1:10-CV-3666 (N.D. Ga. Nov. 9, 2010).  Claim that law firm’s acquisition and possession of copied bank records was improper and unlawful under state and federal law.  Voluntary Dismissal with Prejudice filed August 8, 2011.  Voluntary Dismissal with Prejudice filed August 8 2011  McKenna Long & Aldridge LLP v. FDIC , No. 1:10-CV-3779 (N.D. Ga. 2011).  Declaratory judgment sought that law firm lawfully and properly acquired and possessed certain bank documents.  Voluntary Dismissal with Prejudice filed April 12, 2011. 11

WWW.ALSTON.COM FDIC Litigation Against Failed Bank Attorneys: Claims Against Closing Attorneys for the Bank  FDIC v. Andersen, Tate & Carr, PC , No. 1:10-CV-3383 (N.D. Ga. Oct. 19, 2010).  FDIC alleged that law firm failed to use ordinary care, skill and judgment in the wiring of payoff funds prior to obtaining a release of a security deed on g p y p g y collateral property, resulting in bank’s inability to foreclose on the property.  Stipulation of Dismissal with Prejudice, contemplating settlement, filed May 2, 2012.  FDIC v. Jampol, Schleicher, Jacobs & Papadakis, L.L.P. , No. 1:10-CV-3382 (N.D. Ga. Oct. 19, 2010).  FDIC alleged that bank lawyers failed to use the ordinary care, skill and FDIC ll d th t b k l f il d t th di kill d judgment in preparation of a security deed, and the bank was damaged due to its inability to foreclose on the property intended to be secured by the deed.  Stipulation of Dismissal with Prejudice filed August 24 2012  Stipulation of Dismissal with Prejudice filed August 24, 2012. 12

WWW.ALSTON.COM FDIC Litigation Against Failed Bank Attorneys: Claims Against Closing Attorneys for the Bank  FDIC v. Icard, Merrill, Cullis, Timm, Furen & Ginsberg, P.A. , No. 8:11-CV-02831- VMC-MAP (M.D. Fla. Dec. 23, 2011).  FDIC alleged that bank lawyers committed malpractice and breached FDIC alleged that bank lawyers committed malpractice and breached fiduciary duty by (i) closing a loan without obtaining assignment of an option to purchase a portion of the subject property; (ii) failing to obtain a written waiver of the requirement to secure an assignment of the option prior to closing the loan; and (iii) failing to advise bank of defendants’ conflict of l i th l d (iii) f ili t d i b k f d f d t ’ fli t f interest and to obtain a written waiver of the conflict prior to its engagement with the bank.  Defendants have filed a motion for summary judgment arguing that the bank D f d t h fil d ti f j d t i th t th b k would have made the loan regardless of defendants’ purported malpractice. 13