Mary Gill was quoted in a Bank Safety & Soundness Advisor article discussing a recent California federal district court case in which claims for negligence against the directors of the institution were barred by the business judgment rule. “This decision follows prior case law, which is directly on point in the FDIC litigation context,” said Gill. “It expressly held, under California law, that directors are afforded protection from liability for simple negligence under the business judgment rule. The court ruled that directors are immune from claims of ordinary negligence brought by the FDIC when they have acted in good faith and on an informed basis.”
“This issue, the standard under which liability may be imposed, is going to shape dramatically the nature and extent of litigation going forward,” she continued. “We can expect to see a series of court rulings on this issue and it will determine the contours of future FDIC litigation. In other words, if in most cases defendants prevail in getting simple negligence allegations dismissed, the FDIC will be limited to claims of gross negligence, which is a much higher burden for the FDIC. It would suggest that the FDIC may be more selective in cases that they file because the burden to establish liability is higher.”