Columbian Bank and Trust Company lost some $52 Million before it was taken over by the Federal Deposit Insurance Corporation. The FDIC filed suit to recover these losses from some of the Bank's former Directors and Executive Officers on the grounds that these people allegedly caused the losses through their alleged Negligence and alleged Breach of Fiduciary Duties.
These individual Defendants filed a Motion to Stay the FDIC's recovery action against them. The asserted grounds behind their Motion to Stay essentially boiled down to alternative reasons for the Federal Court in this case to rule that the FDIC had been appointed Receiver of the defunct Bank "prematurely". One of the asserted reasons was that although the Kansas State Bank Commissioner had declared that the Bank was insolvent and accordingly was in need of receivership, the Bank filed an appeal from that State administrative ruling, and the appeal was "remanded" to the Kansas Administrative Agency by the Kansas Court.
The Defendants in the FDIC recovery action argued for a Stay of that action because Kansas should have "primary jurisdiction" and the FDIC's recovery action against them would, they argued, be preempted for purposes of a Federal Court Stay under theories of "primary jurisdiction," abstention, or inherent Stay powers. The Federal Judge disagreed completely in this case.
First, and factually most significant to her ruling in this case, the Federal Judge wrote that "[t]his court is not deciding the same issue that is being reviewed in the state administrative proceeding. This Court is not reviewing the decision to declare the Bank insolvent or the decision to appoint a receiver." Federal Deposit Insurance Corp. as Receiver of the Columbian Bank & Trust Co. v. McCaffree, et al., 2011 WL 625785 *2 (D. Kan. December 15, 2011), Download Federal Deposit Insurance Corp., Receiver of Coumbian Bank and Trust Co. v. McCaffree (D.Kan. Case No. 11.2447, Memo. and Order Dec. 15, 2011) PUBLIC ACCESS.
Second, and legally most significant to the District Judge's ruling in this case, the FDIC filed its recovery action while acting pursuant to Federal statutory authority. Federal Courts are therefore forbidden to enjoin -- or stay, by another name -- the FDIC's recovery actions because those recovery actions are authorized by Federal Statute. "This case involves an area of enforcement that carries with it a strong congressional policy in favor of prompt enforcement.... This case was filed by the FDIC-R pursuant to its statutory authority as receiver.... The FDIC-R's filing of this director and officer liability action is in keeping with its statutory duty to maximize recoveries for the receivership." Id. at *4.
The Federal Deposit and Insurance Corporation's authority by Federal Statute to recover monies from Directors and Executive Officers of statutorily defined "banks," lends new light to any attempt to understand the intensity with which many Directors and Officers of investment banks vowed not to ever subject themselves or their institutions to the FDIC.
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