Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-94-05126/USCOURTS-ca10-94-05126-0/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 

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PUBLISH Uldle4 F I L E 

State~ COIII'tuo ~----~~ ._..- Tenth Circuit 

APR 11 i995 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT PATRICK FISH"EU Cl~r!t 

RESOLUTION TRUST CORPORATION, 

Plaintiff-Appellee, 

v. 

JOSEPH A. FRATES, THORN HUFFMAN 

JOHN E. DEAS, DAVID L. FIST, 

C. MICHAEL BARKLEY, and 

ROBERT WESTFIELD, 

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Defendants-Appellants. 

No. 94-5126 

Appeal from the United States District Court 

For the Northern District of Oklahoma 

D.C. No. 93-C-123-E 

Williams R. Turnbow (Joseph D. Booz, Resolution Trust Corporation, 

Overland Park, Kansas, with him on the brief), Hershner, Hunter, 

Moulton, Andrews & Neill, Eugene, Oregon, for Plaintiff-Appellee 

Resolution Trust Corporation. 

Frederic Dorwart (J. Michael Medina with him 

Holliman, Langholz, Runnels & Dorwart, Tulsa, 

Defendant-Appellant Joseph A. Frates. 

on the brief) , 

Oklahoma, for 

Thorn C. Huffman, San Antonio, Texas, on the brief Pro Se as 

Defendant-Appellant. 

Frank H. McCarthy, Barkley, Rodolf & McCarthy, Tulsa, Oklahoma, on 

the brief for Defendant-Appellant C. Michael Barkley. 

James W. Tilly and Ann P. Dooley, Tilly & Ward, Tulsa, Oklahoma, 

on the brief for Defendant-Appellant David L. Fist. 

Appellate Case: 94-5126 Document: 01019282763 Date Filed: 04/11/1995 Page: 1 
John E. Deas, Tulsa, Oklahoma, on the brief Pro Se as DefendantAppellant. 

John D. Clayman, Levinson & Smith, Tulsa, Oklahoma, on the brief 

for Defendant-Appellant Robert Westfield. 

W.W. Reeves and Tim w. Miller, Reeves, Murdock & Gifford, Casper, 

Wyoming on the brief for Amicus Curiae Provident Directors. 

Before MOORE and BRORBY, Circuit Judges; and ALSOP, Senior 

~istrict Judge.* 

MOORE, Circuit Judge . 

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* The Honorable Donald D. Alsop, Senior District Judge for the 

United States District Court for the District of Minnesota, 

sitting by designation. 

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Appellate Case: 94-5126 Document: 01019282763 Date Filed: 04/11/1995 Page: 2 
• The Resolution Trust Corporation filed this action on behalf 

of State Federal Savings and Loan Association, a failed federally 

chartered thrift association, against the former directors of 

State Federal, alleging negligence, gross negligence, and breach 

of fiduciary duty. Defendants answered, raising an affirmative 

defense that they could not be held liable for simple negligence. 

The district court granted the RTC's motion to strike that defense 

and certified this interlocutory appeal to resolve the question. 

We reverse. 

The issue is whether 12 U.S.C. § 1821(k) supersedes "federal 

common law," making defendants liable only for gross negligence.l 

~his is a pure question of law; therefore, our review is de novo. 

Estate of Ho~~ v. Commdssioner, 967 F.2d 1437, 1438 (lOth Cir. 

1992). 

The relevant statute provides: 

A director or officer of an insured depository institution may be held personally liable for monetary 

damages . . . for gross negligence, including any 

similar conduct or conduct that demonstrates a greater 

disregard of a duty of care . . . including intentional 

tortious conduct, as such terms are defined and 

determined under applicable State law. Nothing in this 

paragraph shall impair or affect the right of the 

Corporation under other applicable law. 

12 u.s.c. § 1821(k). Whether this enactment has superseded 

federal case law predicating liability upon simple negligence has 

! The district court viewed the question as one of preemption, 

but that is not correct. "Preemption" is the term normally 

applied to the doctrine that federal laws, under the force of the 

Supremacy Clause, "take precedence over state law." B~ack's Law 

Dictio~ 1177 (6th ed. 1990). Unfortunately, the 

miscategorization led the court astray because it permitted use of 

inapplicable authority resulting in the wrong conclusion, as we 

shall discuss. 

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Appellate Case: 94-5126 Document: 01019282763 Date Filed: 04/11/1995 Page: 3 
been decided already by three of our sister circuits. RTC v. 

Gallagher, 10 F.3d 416 (7th Cir. 1993); RTC v. ~ramon, 22 F.3d 

1357 (5th Cir. 1994); F.DIC v. Bates, 42 F.3d 369 (6th Cir. 1994). 

Those cases convincingly resolve the issue, and we see no reason 

to split the circuits on this question. We therefore join them. 

The Corporation suggests the circuits are already split 

~ecause of this court's holding in FDIC v. Canfield, 967 F.2d 443 

(lOth Cir. 1992) (en bane). We disagree principally for the 

reason Canfield rests on a different fundament. 

In Canfield we dealt with whether § 182l(k) preempted state 

law. Id. at 445. That inquiry is directed by a different test 

and points up why the district court went astray in this case. 

Preemption involves "the assumption that the historic police 

powers of the States were not to be superseded by the Federal Act 

unless that was the clear and manifest purpose of Congress." 

Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977) (quoting Rice 

v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). Preemption 

:may be found from a 'scheme of federal regulation so pervasive as 

to make reasonable the inference that Congress left no room to 

supplement it.'" Pacific Gas & Elec. Co. v. State Energy 

Resources Conservation & Dev. Comm'n, 461 U.S. 190, 204 (1983) 

(quoting Fideli~ Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 

141, 153 (1982)). In contrast, supersession involves the less 

rigorous test of whether Congress "spoke directly" to the matter 

in the statutory enactment. Milwaukee v. Illinois, 451 u.s. 304, 

315 (1981). Moreover, as the Fifth Circuit has pointed out, "it 

is for Congress, not federal courts, to articulate the appropriate 

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Appellate Case: 94-5126 Document: 01019282763 Date Filed: 04/11/1995 Page: 4 
standards to be applied as a matter of federal law." Miramon, 22 

f.3d at 1360 (quoting Milwaukee, 451 U.S. at 317). To supersede 

authority previously established by federal judicial ruling, 

Congress need not affirmatively proscribe that authority, but may 

do so simply by speaking directly to the issue. Milwaukee, 451 

u.s. at 313-15. 

We did not address the issue of supersession by statute in 

Canfield. We held § 1821(k) does not preempt state law simple 

negligence claims against directors and officers of failed 

institutions. Because the tests of preemption and supersession 

are different, there is no reason why Canfield must dictate the 

result here. 

Applying the more lenient test required by supersession 

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analysis, we believe Galagher, Miramon, and Bates have correctly 

resolved the issue we are called upon to decide here. Congress 

has spoken directly to the standard of negligence issue, and we 

see no reason to depart from or add to the analysis adopted by 

those courts.2 

The judgment of the district court is REVERSED. The case is 

REMANDED for further proceedings. 

2 In a Parthian shot, the Corporation argues this result is 

contrary to FDIC v. Appling, 992 F.2d 1109 (lOth Cir. 1993), to 

which we are bound. Appling merely held a jury instruction 

holding directors to the standard of an "ordinarily prudent and 

diligent bank director" was proper for a claim based on § 1821. 

Id. at 1113. The case did not, however, address the point of 

concern here and is therefore inapposite. 

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Resolution Trust Corp. y. Frates. et al.. No. 94-5126 

Judge Donald D. Alsop 

Special Concurrence 

I CONCUR in the majority opinion, but write separately on the rationale for 

its conclusion. 

The Seventh Circuit in RIC y. Gallagher. 10 F.3d 416 (7th Cir. 1993), the Fifth 

Circuit in RIC y, Miramon, 22 F.3d 1357 (5th Cir. 1994), and the Sixth Circuit in RIC 

y. Bates. 42 F.3d 369 (6th Cir. 1994) do not draw a distinction between the term 

"preemption" and the term "supersession" as is done here by the majority. In 

discussing the circumstances where federal legislation abrogates federal common law 

these circuits expressly rely on a preemption analysis. I agree with the majority that 

it is more accurate to use supersession when describing this issue, but I cannot agree 

that the other circuits have used supersession as the basis· for theli· conclusions.1 

Regardless of whether supersession or preemption is used, the Gallagher. Miramon, 

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Nor can I agree that the District Court was lead "astray" by the term preemption. 

Our sister circuits used the term preemption and we rely heavily on their reasoning. 

In addition, one should note the circuit court decisions in both Miramon and Bates. 

were entered after the district court's decision, and Gallagher was filed only 6 days 

prior to the district court's decision. The district court, therefore, made its ruling 

without the guidance of the three circuit court opinions which are now available to 

us. 

Appellate Case: 94-5126 Document: 01019282763 Date Filed: 04/11/1995 Page: 6 
and Bates. opinions do apply the more lenient test used to override federal common 

law employed by the majority. The difference between our sister circuits' opinions 

and the opinion in the instant case, therefore, is one of semantics and not one of 

reasoning. I believe it will be helpful in the future for attorneys and courts to follow 

Judge Moore's lead and use the term "supersession" in cases where federal statutes are 

claimed to have abrogated earlier federal statutes or common law, and reserve the 

term "preemption" to circumstances where it is alleged federal law overrides state law. 

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