Longview Aluminum, LLC v Brandt (In re Longview Aluminum, LLC), 2010 WL 2635787 (ND Ill, June 28, 2010)

CASE SNAPSHOT

There are a number of ways directors and officers can get ready personally for potential FDIC litigation.

1. Take steps to understand the bank’s D&O insurance policies before the bank is closed. Determine whether policy coverage is offset by the fees for defense of claims. If so, understand the FDIC wants recovery, not protracted litigation.

The Board of Directors of the Federal Deposit Insurance Corporation, or FDIC, voted on Friday, October 8, 2010, to approve a proposed rule clarifying how the agency would treat certain creditor claims under the new orderly liquidation authority established under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

IN RE: RESOURCE TECHNOLOGY CORP. (October 1, 2010)

On October 12, the FDIC issued a notice of proposed rulemaking for a rule clarifying how the FDIC would treat certain creditor claims under the new liquidation authority, established under the Dodd-Frank Act, for financial companies whose insolvency would pose a significant risk to the financial stability of the United States.

Earlier today, the FDIC announced that the FDIC Board of Directors voted on Friday, October 8, 2010 to approve the issuance of a notice of proposed rulemaking (NPR) regarding the treatment of certain creditor claims under the FDIC’s new orderly liquidation authority established under Title II of the

Creditors of insolvent Delaware corporations have recourse against corporate directors and officers whose disloyal or self-dealing conduct reduces the corporation’s assets available for distribution. Delaware courts have held that directors and officers of insolvent corporations owe fiduciary duties to creditors as the principal stakeholders in the remaining corporate assets. Where those duties are breached, creditors have standing to bring actions derivatively on behalf of the corporation for damages to the corporation. However, in a recent decision by Vice Chancellor J.

Industry observers have been waiting to see when bank failures arising out of the recent financial crisis would produce a wave of Federal Deposit Insurance Corporation (“FDIC”) litigation similar to that seen in the early 1990s after the savings and loan crisis. With its second suit in recent months, the FDIC has shown that it will aggressively pursue claims against directors and officers in connection with failed depository institutions.

In today’s turbulent economic climate, it is vital for creditors and debtors to understand the precise boundaries of their rights and duties when an enterprise becomes insolvent. Directors, officers and managers must acknowledge those to whom they owe fiduciary duties and fulfill those duties at the risk of personal liability, while creditors evaluate their potential remedies against misbehaving insiders to collect on defaulted obligations.

Official Committee of Unsecured Creditors of TOUSA, Inc. v. Technical Olympic, S.A. (In re TOUSA, Inc.), 2010 WL 3835829 (Bankr. S.D. Fla. 2010)

CASE SNAPSHOT