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No. 14-2078 United States Court of Appeals Appeal: 14-2078 Doc: 44-1 Filed: 02/06/2015 Pg: 1 of 39 Total Pages:(1 of 61) No. 14-2078 IN THE United States Court of Appeals FOR THE FOURTH CIRCUIT ___________________________________ FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR COOPERATIVE BANK, Plaintiff-Appellant, v. RICHARD ALLEN RIPPY; JAMES D. HUNDLEY; FRANCES PETER FENSEL, JR.; HORACE THOMPSON KING, III; FREDRICK WILLETTS, III; DICKSON B. BRIDGER; PAUL G. BURTON; OTTIS RICHARD WRIGHT, JR.; OTTO C. BUDDY BURRELL, JR., Defendants-Appellees. ______________________________ ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA IN CASE NO. 7:11-CV-165-BO BRIEF OF AMICI CURIAE AMERICAN BANKERS ASSOCIATION AND STATE BANKING ASSOCIATIONS IN SUPPORT OF DEFENDANTS-APPELLEES [Additional amici listed on inside cover] Michael A.F. Johnson Nancy L. Perkins Elliott C. Mogul Joanna G. Persio ARNOLD & PORTER LLP 555 Twelfth Street, NW Washington, DC 20004 (202) 942-5000 [email protected] Counsel for Amici Curiae Appeal: 14-2078 Doc: 44-1 Filed: 02/06/2015 Pg: 2 of 39 Total Pages:(2 of 61) Additional Amici Curiae Alabama Bankers Association, Alaska Bankers Association, Arizona Bankers Association, Arkansas Bankers Association, California Bankers Association, Colorado Bankers Association, Connecticut Bankers Association, Delaware Bankers Association, Florida Bankers Association, Georgia Bankers Association, Hawaii Bankers Association, Heartland Community Bankers Association, Idaho Bankers Association, Illinois Bankers Association, Illinois League of Financial Institutions, Indiana Bankers Association, Iowa Bankers Association, Kansas Bankers Association, Kentucky Bankers Association, Louisiana Bankers Association, Maine Bankers Association, Maryland Bankers Association, Massachusetts Bankers Association, Michigan Bankers Association, Minnesota Bankers Association, Mississippi Bankers Association, Missouri Bankers Association, Montana Bankers Association, Nebraska Bankers Association, Nevada Bankers Association, New Hampshire Bankers Association, New Jersey Bankers Association, New Mexico Bankers Association, New York Bankers Association, North Carolina Bankers Association, North Dakota Bankers Association, Ohio Bankers League, Oklahoma Bankers Association, Oregon Bankers Association, Pennsylvania Bankers Association, Puerto Rico Bankers Association, Rhode Island Bankers Association, South Carolina Bankers Association, South Dakota Bankers Association, Tennessee Bankers Association, Texas Bankers Association, Utah Bankers Association, Vermont Bankers Association, Virginia Bankers Association, Washington Bankers Association, Washington Financial League, West Virginia Bankers Association, Wisconsin Bankers Association, and Wyoming Bankers Association. Appeal: 14-2078 Doc: 44-1 Filed: 02/06/2015 Pg: 3 of 39 Total Pages:(3 of 61) TABLE OF CONTENTS Page STATEMENT OF AMICI CURIAE ..........................................................................1 INTRODUCTION .....................................................................................................2 ARGUMENT .............................................................................................................3 I. THE STANDARD FDIC PROPOSES WOULD INHIBIT USEFUL AND EFFICIENT BUSINESS ACTIVITY....................................................3 A. The Business Judgment Rule Furthers Important and Widely Recognized Social and Economic Benefits...........................................3 B. An Ordinary Negligence Standard Would Discourage Qualified Potential Directors and Officers from Serving......................................6 C. An Ordinary Negligence Standard Would Spur Unwarranted Litigation and Make Credit More Costly..............................................9 D. An Ordinary Negligence Standard Would Constrain Credit Distribution..........................................................................................11 II. FDIC’S PROPOSED ORDINARY NEGLIGENCE STANDARD CONTRAVENES GOVERNING LAW.......................................................13 A. FDIC Relies Upon Authorities That North Carolina’s Supreme Court Would Not Apply......................................................................13 B. Applicable Authority Contravenes FDIC’s Position. .........................14 1. North Carolina Courts Have Long Recognized the Value of the Business Judgment Rule.................................................14 2. North Carolina Case Law Confirms that the Rule Requires More Than Simple Negligence for Directors and Officers to Become Liable. ................................................15 3. The North Carolina Legislature Preserved the Common Law Business Judgment Rule...................................................22 Appeal: 14-2078 Doc: 44-1 Filed: 02/06/2015 Pg: 4 of 39 Total Pages:(4 of 61) III. NO COUNTERVAILING POLICY REASONS SUPPORT FDIC’S PROPOSED ORDINARY NEGLIGENCE STANDARD. ..........................24 CONCLUSION........................................................................................................28 CERTIFICATE OF COMPLIANCE.......................................................................29 CERTIFICATE OF SERVICE ................................................................................30 -ii- Appeal: 14-2078 Doc: 44-1 Filed: 02/06/2015 Pg: 5 of 39 Total Pages:(5 of 61) TABLE OF AUTHORITIES Cases: Page(s): AGI Assocs., LLC v. City of Hickory, N.C., 773 F.3d 576 (4th Cir. 2014) ..............................................................................13 Alford v. Shaw, 349 S.E.2d 41 (N.C. 1986)...........................................................................passim Atherton v. FDIC as Rec. for City Sav., 519 U.S. 213 (1997)............................................................................................27 In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996) ..............................................................................7 In re Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106 (Del. Ch. 2009) ......................................................................12, 19 Currie v. United States, 644 F. Supp. 1074 (M.D.N.C. 1986), aff’d, 836 F.2d 209 (4th Cir. 1987) ..........4 Dynamics Corp. of Am. v. CTS Corp., 794 F.2d 250 (7th Cir. 1986) ..............................................................................10 Ehrenhaus v. Baker, No. 08-CVS-22632, 2008 WL 5124899 (N.C. Bus. Ct. Dec. 5, 2008)....5, 17, 19 Energy Investors Fund, L.P. v. Metric Constr., Inc., 525 S.E.2d 441 (N.C. 2000)................................................................................18 F-F Milling Co. v. Sutton, 175 S.E.2d 746 (N.C. Ct. App. 1970).................................................................17 FDIC v. Loudermilk, 761 S.E.2d 332 (Ga. 2014) ...........................................................................23, 24 FDIC v. Skow, 763 S.E.2d 879 (Ga. 2014) .................................................................................23 Appeal: 14-2078 Doc: 44-1 Filed: 02/06/2015 Pg: 6 of 39 Total Pages:(6 of 61) FDIC v. Stahl, 89 F.3d 1510 (11th Cir. 1996) ............................................................................22 First Ind. Fed. Sav. Bank v. FDIC, 964 F.2d 503 (5th Cir. 1992) ..............................................................................27 First Union Corp v. SunTrust Banks, Inc., No. 01-CVS-10075, 2001 WL 1885686 (N.C. Bus. Ct. Aug. 10, 2001) ............................................................7, 11, 20, 25 Gagliardi v. TriFoods Int’l, Inc., 683 A.2d 1049 (Del. Ch. 1996) ..........................................................5, 24, 25, 26 Gordon v. Pendleton, 162 S.E. 546 (N.C. 1932)..............................................................................16, 20 Green v. Condra, No. 08-CVS-6575, 2009 WL 2488930 (N.C. Bus. Ct. Aug. 14, 2009) .............18 Hawes v. Oakland, 104 U.S. 450 (1882)......................................................................................14, 16 Henrichs v. Chugach Alaska Corp., 250 P.3d 531 (Alaska 2011) ...............................................................................22 Hoye v. Meek, 795 F.2d 893 (10th Cir. 1986) .............................................................................22 Janssen v. Best & Flanagan, 662 N.W.2d 876 (Minn. 2003) ...........................................................................10 Joy v. North, 692 F.2d 880 (2d Cir. 1982) .......................................................................5, 9, 11 Lillian Knitting Mills Co. v. Earle, 745 E.2d 351 (N.C. 1953)...................................................................................20 Meiselman v. Meiselman, 307 S.E.2d 551 (N.C. 1983)................................................................................18 Minnis v. Sharpe, 162 S.E. 606 (N.C. 1932)....................................................................................16 - ii - Appeal: 14-2078 Doc: 44-1 Filed: 02/06/2015 Pg: 7 of 39 Total Pages:(7 of 61) Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 374 S.E.2d 385 (N.C. 1988)................................................................................16 N.C. Corp. Comm’n v. Harnett Cnty. Trust Co., 134 S.E. 656 (N.C. 1926)....................................................................................20 Nicholson v. Am. Safety Utility Corp., 488 S.E.2d 240 (N.C. 1997)..................................................................................9 Oberlin Cap., L.P. v. Slavin, 554 S.E.2d
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