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Federal Deposit Insurance Corp. v. Fitl

United States District Court, D. Nebraska

September 2, 2016

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Mid City Bank, Inc.; Plaintiff,
PATRICIA M. FITL, as Personal Representative of the Estate of James G. Fitl, Deceased; Defendant


          Laurie Smith Camp, Chief United States District Judge.

         This matter is before the Court on the Partial Motion to Dismiss for Failure to State a Claim (“Motion to Dismiss”) (Filing No. 33), filed by Defendant Patricia Fitl (“Defendant”) as Personal Representative of the Estate of James G. Fitl (“Fitl”), deceased, and the Motion to Strike Certain Affirmative Defenses (“Motion to Strike”) (Filing No. 42), filed by Plaintiff Federal Deposit Insurance Corporation (“FDIC”), as Receiver for Mid City Bank, Inc. (“Bank”). For the reasons stated below, the Motion to Dismiss will be denied and the Motion to Strike will be granted in part.


         The following facts, alleged in the Amended Complaint (Filing No. 5), are assumed true for purposes of the Motion to Dismiss. The Bank's main office and all four of its branch offices were located in Omaha, Nebraska. (Filing No. 5 ¶ 10.) Fitl served as its President from August 16, 1971, to September 15, 2010, and as Chairman of its board from March 6, 1972, to October 8, 2010. (Id. ¶ 5.) During that time, every Bank loan was made with Fitl's full knowledge and direct approval. (Id. ¶ 12.)

         Before August 13, 2009, the Bank operated under several versions of a lending policy (“Loan Policy”), lacking any practical guidance. (Id. ¶ 13.) None of these versions mandated or provided any (i) processes for approval, funding, and file documentation for loans; (ii) control and oversight mechanisms; or (iii) risk management mechanisms. (Id.) The Loan Policy did not include limits on certain key metrics, such as debt-to-income ratio limits or minimum credit scores. (Id. ¶ 14.) Some versions lacked loan-to-value ratio limits. (Id.)

         The Loan Policy merely instructed the Bank's loan officers to consider general factors in evaluating potential loans, such as the borrower's financial condition, management capability, plan of repayment, and the economic environment. (Id.) The Loan Policy encouraged loan officers to have “an accurate and thorough understanding of each customer's financial needs and conditions” and “complete confidence in the borrower's honesty and integrity, and reasonable confidence in his ability to repay.” (Id. ¶ 13.) Before the Loan Policy's revision in 2009, loan documentation was “nearly nonexistent.” (Id. ¶ 15.) For several years, the Bank operated with no written policy regarding loan approval authority for Bank management. (Id. ¶ 16.)

         In 2009, the Bank revised its Loan Policy to require maintenance of a complete credit file on each borrower. (Id. ¶ 15.) The credit files contained information such as collateral valuations and borrower financial information. (Id.) Also in 2009, the Bank established a Loan Committee to review and approve loans. (Id.)

         The FDIC alleges that approvals of seventeen loans (“Target Loans”) by the Bank and Fitl between July 6, 2007, and March 8, 2010, were deficient in at least one of the following ways: (i) failure to analyze the borrowers' and guarantors' ability to repay the loans; (ii) lending to borrowers with inadequate cash flow; (iii) reliance on outdated, unverified, and inadequate financial information for borrowers and guarantors; (iv) failure to analyze the value of collateral; (v) failure to require adequate collateral for loans; (vi) failure to acquire adequate appraisals; and (vii) lending outside the Bank's trade market area. (Id. ¶ 17.)

         Despite these alleged deficiencies, Fitl approved the Target Loans. (Id. ¶ 20.) In so approving, Fitl failed to undertake analysis necessary to evaluate the Target Loans, and violated Loan Policy requirements. (Id. ¶ 18.) Fitl also approved loans without documentation, and created no standard credit or loan memoranda prior to 2010. (Id. ¶ 19.)

         On November 4, 2011, the Bank ceased operation, and the Nebraska Department of Banking and Finance appointed the FDIC as the Bank's receiver. (Id. ¶ 3.) Fitl died on October 30, 2014. On November 3, 2014, the FDIC filed this action against Fitl personally, seeking damages of $4, 018, 000.00 stemming from the approval of the Target Loans, and asserting claims based on gross negligence under § 1821(k) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") (“Count I”), see 12 U.S.C. § 1821(k); and Breach of Fiduciary Duty in violation of Nebraska Law (“Count II”). The next day, November 4, 2014, the FDIC filed an action in the County Court of Douglas County, Nebraska, to name Galen Stehlik (“Stehlik”) as Special Administrator for Fitl's estate, and the FDIC amended its Complaint in this Court, naming Stehlik as a defendant in his capacity as Special Administrator. (Id. ¶ 4.) Although the Defendant acknowledges that the County Court granted the FDIC's motion for appointment of Stehlik as Special Administrator on November 4, 2014, the Defendant alleges that the County Court did not issue formal letters of appointment to Stehlik until the next day, November 5, 2014. (Defendant's Brief, Filing No. 48 at 16; Answer, Filing No. 35 ¶ 97.)


         I. Motion to Dismiss: Rule 12(b)(6)

         “To survive a motion to dismiss, the factual allegations in a complaint, assumed true, must suffice ‘to state a claim to relief that is plausible on its face.'” Northstar Indus., Inc. v. Merrill Lynch & Co., 576 F.3d 827, 832 (8th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). “[A]lthough a complaint need not include detailed factual allegations, ‘a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.'” C.N. v. Willmar Pub. Sch., Indep. Sch. Dist. No. 347, 591 F.3d 624, 629- 30 (8th Cir. 2010) (quoting Twombly, 550 U.S. at 555). “Instead, the complaint must set forth ‘enough facts to state a claim to relief that is plausible on its face.'” Id. at 630 (quoting Twombly, 550 U.S. at 570).

         “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ritchie v. St. Louis Jewish Light, 630 F.3d 713, 716 (8th Cir. 2011) (internal quotation marks omitted) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “Courts must accept . . . specific factual allegations as true but are not required to accept . . . legal conclusions.” Outdoor Cent., Inc. v., Inc., 643 F.3d 1115, 1120 (8th Cir. 2011) (internal quotation marks omitted) (quoting Brown v. Medtronic, Inc., 628 F.3d 451, 459 (8th Cir. 2010)). When ruling on a defendant's motion to dismiss, a judge must rule “on the assumption that all the allegations in the complaint are true, ” and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.'” Twombly, 550 U.S. at 555-56 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). The complaint, however, must still “include sufficient factual allegations to provide the grounds on which the claim rests.” Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir. 2009).

         II. Motion to Strike: Rule 12(f)

         Under Federal Rule of Civil Procedure 12(f), “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). “[A] district court enjoys ‘liberal discretion'” in ruling on a Rule 12(f) motion to strike. Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 1063 (8th Cir. 2000) (quoting Thor Corp. v. Automatic Washer Co., 91 F.Supp. 829, 832 (D.C. Iowa 1950)). “Despite this broad discretion however, striking a party's pleadings is an extreme measure, and, as a result, . . . ‘[m]otions to strike ...

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