PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 14-2078

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.

------------------------------

NORTH CAROLINA COMMISSIONER OF BANKS,

Amicus Curiae,

THE CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA; 

AMERICAN ASSOCIATION OF BANK DIRECTORS; INDEPENDENT 

COMMUNITY BANKERS OF AMERICA; THE CLEARING HOUSE 

ASSOCIATION, LLC; AMERICAN BANKERS ASSOCIATION; 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; 
2

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; VERMONT BANKERS ASSOCIATION; VIRGINIA BANKERS 

ASSOCIATION; UTAH BANKERS ASSOCIATION; WASHINGTON BANKERS 

ASSOCIATION; WASHINGTON FINANCIAL LEAGUE; WEST VIRGINIA 

BANKERS ASSOCIATION; WISCONSIN BANKERS ASSOCIATION; WYOMING 

BANKERS ASSOCIATION,

Amici Supporting Appellees.

Appeal from the United States District Court for the Eastern 

District of North Carolina, at Wilmington. Terrence W. Boyle, 

District Judge. (7:11-cv-00165-BO)

Argued: May 13, 2015 Decided: August 18, 2015

Before GREGORY and HARRIS, Circuit Judges, and HAMILTON, Senior 

Circuit Judge.

Affirmed in part, reversed in part, vacated in part, and 

remanded by published opinion. Judge Gregory wrote the opinion, 

in which Judge Harris and Senior Judge Hamilton joined.

ARGUED: James Scott Watson, FEDERAL DEPOSIT INSURANCE 

CORPORATION, Arlington, Virginia, for Appellant. 

Thomas E. Gilbertsen, VENABLE LLP, Washington, D.C., for 

Appellees. ON BRIEF: Mary L. Wolff, Douglas A. Black, 

WOLFF ARDIS, P.C., Memphis, Tennessee; Colleen J. Boles, 

Assistant General Counsel, Kathryn R. Norcross, Senior 

Counsel, Steven C. Morrison, Counsel, FEDERAL DEPOSIT INSURANCE 

CORPORATION, Arlington, Virginia, for Appellant. 

Ronald R. Glancz, Meredith L. Boylan, VENABLE LLP, Washington, 
3

D.C.; Camden R. Webb, Kacy L. Hunt, WILLIAMS MULLEN P.C., 

Raleigh, North Carolina, for Appellees. Katherine M.R. Bosken, 

Raleigh, North Carolina, for Amicus North Carolina Commissioner 

of Banks. Kate Comerford Todd, Steven P. Lehotsky, U.S. CHAMBER 

LITIGATION CENTER, INC., Washington, D.C.; John K. Villa, 

Kannon K. Shanmugam, Ryan Scarborough, Richard Olderman, 

WILLIAMS & CONNOLLY LLP, Washington, D.C., for Amicus The 

Chamber of Commerce of the United States of America. 

Michael A.F. Johnson, Nancy L. Perkins, Elliott C. Mogul, 

Joanna G. Persio, ARNOLD & PORTER LLP, Washington, D.C., for 

Amici American Bankers Association, 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. Matthew P. Previn, Joseph J. Reilly, 

Ali M. Abugheida, BUCKLEY SANDLER LLP, Washington, D.C., for 

Amici American Association of Bank Directors, Independent 

Community Bankers of America, and The Clearing House 

Association, LLC.
4

GREGORY, Circuit Judge:

The Federal Deposit Insurance Corporation, as Receiver for 

Cooperative Bank (“FDIC-R”), brought this civil action against 

the several officers and directors of a failed North Carolina 

bank, Cooperative Bank (“Cooperative” or the “Bank”), alleging 

that the officers and directors were negligent, grossly 

negligent, and breached their fiduciary duties, resulting in the 

failure of the Bank. In this summary judgment appeal, the FDICR argues that the district court erred in finding that North 

Carolina’s business judgment rule shields the officers and 

directors from allegations of negligence and breach of fiduciary 

duty, and that there was insufficient evidence to support claims 

of gross negligence. For the reasons that follow, we vacate the 

district court’s award of summary judgment to the Bank’s 

officers on the FDIC-R’s claims of ordinary negligence and 

breach of fiduciary duty and remand those claims for further 

proceedings. We also reverse and remand the district court’s 

order denying as moot the FDIC-R’s cross-motion for summary 

judgment, as well as its order denying as moot the FDIC-R’s 

motion to exclude the declaration of Robert T. Gammill and the 

attached exhibits. We affirm the district court’s judgment with 

respect to the remaining claims.
5

I.

Cooperative first opened in Wilmington, North Carolina in 

1898 as a community bank and operated as a thrift until 1992. 

As such, it focused on single-family housing loans. In 1992, 

the Bank converted to a state-chartered savings bank regulated 

by the FDIC.1 Cooperative became a state commercial banking 

institution in 2002, following the board of director’s decision 

to increase the Bank’s assets from $443 million to $1 billion by 

2005. The Bank’s growth strategy focused on commercial real 

estate lending.

 1 The FDIC in its corporate capacity is an insurer and 

federal regulator, and it performs a separate function from the 

FDIC in its capacity as receiver of failed banks. We refer to 

the FDIC in its corporate capacity simply as the “FDIC,” and in 

its receiver capacity as the “FDIC-R” throughout this opinion. 

As the Second Circuit aptly explained:

Created by Congress to “promot[e] the stability of and 

confidence in the nation’s banking system,” Gunter v. 

Hutcheson, 674 F.2d 862, 870 (11th Cir.), cert. 

denied, 459 U.S. 826 (1982), the FDIC is authorized by 

statute to function in two separate and distinct 

capacities: “the Corporation shall insure the 

deposits of all insured banks as provided in this 

chapter,” 12 U.S.C. § 1821(a)(1) (1988); “the 

Corporation as receiver of a closed national bank 

. . . shall have the right to appoint an agent or 

agents to assist it in its duties as such receiver,” 

12 U.S.C. § 1822(a) (1988). . . . [T]hey are discrete 

legal entities . . . .

FDIC v. Bernstein, 944 F.2d 101, 106 (2d Cir. 1991) (first 

alteration in original).
6

The FDIC and the North Carolina Commission of Banks 

(“NCCB”), as Cooperative’s regulators, performed annual reviews 

of the Bank.

During July and August of 2006, the FDIC conducted an 

annual examination of Cooperative as of June 30, 2006. At the 

conclusion of the examination, the FDIC issued the Bank’s 2006 

Report of Examination (“2006 FDIC Report”). Cooperative was 

scored in each of the following categories: Capital, Asset 

Quality, Management, Earnings, Liquidity, and Sensitivity to 

Market Risk. The examination categories collectively are

commonly referred to by the acronym CAMELS, and are scored on 

scale from 1-5, with “1” being the best and “5” being the worst. 

Cooperative received a “2” for each of its CAMELS ratings. The 

majority of the observations in the 2006 FDIC Report were 

positive. However, the Report identified deficiencies in credit 

administration and underwriting, which the FDIC ascribed to 

oversight weaknesses. Additional problems with audit practices, 

risk management, and liquidity were also discussed in the 

Report. Bank management certified that the Report had been 

reviewed, and the appropriate officials agreed to address the 

issues.

In September 2007, the NCCB conducted its annual review of 

Cooperative as of June 30, 2007. At the conclusion of the 

examination, the NCCB issued its 2007 Report of Examination 
7

(“2007 NCCB Report”). Like the 2006 FDIC Report, the 2007 NCCB 

Report awarded the Bank a rating of “2” for each CAMELS 

category. Overall, the NCCB concluded that Cooperative was 

functioning in a satisfactory manner. However, the 2007 NCCB 

Report also observed that Cooperative’s management had been slow 

to correct deficiencies and weaknesses identified in previous 

examinations. Such deficiencies included weak credit 

administration practices, the use of stale financial information 

in the loan approval process, and problematic audit practices. 

Again, Bank management promised to address the issues.

Cooperative additionally underwent an external loan review 

in 2007, which was conducted by Credit Risk Management, L.L.C. 

(“CRM”). CRM reviewed a sample of the loans originating during 

or after April 2006. At the conclusion of the review, CRM 

issued a written report (“2007 CRM Report”). The Report 

indicated that the reviewed loans had received passing grades. 

CRM also observed that credit file documentation for the sample 

loans was generally sufficient, and that the Bank had recently 

hired additional credit analysts. However, CRM also suggested 

that credit file documentation should be updated periodically to 

more accurately reflect the changing status of various 

construction projects.

CRM conducted a second external loan review in June 2008, 

which examined new loans made since its 2007 review. CRM issued 
8

a written report of its findings (“2008 CRM Report”). The 2008 

CRM Report criticized Cooperative for deficiencies relating to 

loan documentation and monitoring, and for use of stale 

financial information. The Report reflected the downward trend 

in grades given to the sample loans. Unlike the 2007 review, 

many of the loans reviewed in 2008 received failing grades.

In November 2008, the FDIC and the NCCB conducted a joint 

annual review of Cooperative as of September 30, 2008. At the 

conclusion of the review, the agencies issued the 2008 Report of 

Examination (“2008 Joint Report”). Cooperative was given a 

rating of “5,” the lowest possible rating, in all but one of the 

CAMELS categories. The sole exception was Sensitivity to Market 

Risk, in which Cooperative was awarded a “4.” The 2008 Joint 

Report was extremely critical, and faulted the Bank for its high 

commercial real estate loan concentration. The Report also 

noted that Cooperative’s management had ignored or inadequately 

addressed previously raised concerns about credit 

administration, underwriting practices, and liquidity. 

Cooperative’s overall condition was traced back to the decision 

to aggressively pursue commercial real estate lending in its 

effort to grow the Bank’s assets.

On March 12, 2009, the FDIC issued a Cease and Desist 

Order, to which the Bank, the NCCB, and the FDIC all consented. 

The Order set forth certain actions that the Bank was required 
9

to take, including developing a capital restoration plan. 

Cooperative was ultimately unable to comply with the terms of 

the Cease and Desist Order, and on June 19, 2009, the NCCB 

closed the Bank and named the FDIC-R as the receiver. According 

to a Material Loss Review conducted by the FDIC Office of 

Inspector General, the FDIC-R suffered losses of $216.1 million 

due to the Bank’s failure.

The FDIC-R filed a complaint against Cooperative in August 

2011, alleging that the named officers and directors were 

negligent, grossly negligent, and breached their fiduciary 

duties in their approval of 78 residential lot loans and 8 

commercial loans between January 2007 and April 2008. The 

complaint seeks damages from each named officer and director in 

amounts ranging from $4.4 million to over $33 million. The 

Appellees responded with a motion to dismiss arguing, among 

other things, that North Carolina law does not contemplate 

negligence claims against officers and directors and, in any 

event, the North Carolina business judgment rule shielded them 

from claims of negligence and breach of fiduciary duty. FDIC v. 

Willetts (Willetts I), 882 F. Supp. 2d 859, 862 (E.D.N.C. 2012). 

They also argued that the FDIC-R had failed to state facts 

sufficient to support its claims of gross negligence. Id. The 

district court denied the motion to dismiss.
10

The Appellees thereafter filed an answer. Their answer 

included several affirmative defenses, including that “[t]he 

FDIC[-R]’s claims are barred in whole or in part by its failure 

to mitigate damages,” and are also barred “in whole or in part 

by the doctrine of superseding or intervening cause.” J.A. 42-

43.

After lengthy discovery, the Appellees filed motions for 

summary judgment on all of the FDIC-R’s claims against them. 

The FDIC-R filed a cross-motion for partial summary judgment on 

the Appellees’ affirmative defenses of failure to mitigate and 

superseding or intervening cause.2

 2 The parties also filed Daubert motions. The Appellees 

sought “to exclude Harry Potter as an expert witness because 

they allege[d] his opinions on [shared loan loss agreements]” 

were of little value and were “not rebuttal testimony, but 

instead an untimely attempt to produce a previously undisclosed 

expert on damages issues.” FDIC v. Willetts (Willetts II), 48 

F. Supp. 3d 844, 848 (E.D.N.C. 2014). The district court 

excluded Mr. Potter’s report because it found both that he had 

an insufficient basis for forming his opinions, and that the 

report was submitted after the deadline for expert reports had 

passed. Id. The FDIC-R does not challenge this ruling.

The FDIC-R sought to exclude the declaration of 

Robert T. Gammill and the attached exhibits, arguing that the 

declaration “contains new expert opinions and previously 

undisclosed facts and data supporting them and because it was 

submitted after the expert witness disclosure deadline.” Id. at 

852. Because the district court granted summary judgment in 

favor of the Appellees on all claims, the motion was denied as 

moot. Id. As discussed below, we reverse the district court’s 

grant of summary judgment to the Officer Appellees on the FDICR’s claims of ordinary negligence and breach of fiduciary duty. 

Accordingly, the FDIC-R’s motion to exclude is no longer moot 

(Continued)
11

The district court granted summary judgment in favor of the 

Appellees, and denied the FDIC-R’s cross-motion for summary 

judgment as moot. The court held that the FDIC-R “fail[ed] to 

reveal any evidence that suggests any defendant has engaged in 

self-dealing or fraud, or that any defendant was engaged in any 

other unconscionable conduct that might constitute bad faith,” 

and that their actions were thus protected by the business 

judgment rule from claims of ordinary negligence and breach of 

fiduciary duty. FDIC v. Willetts (Willetts II), 48 F. Supp. 3d 

844, 850 (E.D.N.C. 2014). The court further found that the 

FDIC-R had failed to adduce evidence “that any of the defendants 

approved the challenged loans and made policy decisions knowing 

that these actions would harm Cooperative and breach their 

duties to the bank” and thus “[could not] show that any of the 

defendants engaged in wanton conduct or consciously disregarded 

Cooperative’s well-being.” Id. at 852.

This appeal followed. The FDIC-R argues that: (1) the 

district court improperly applied the business judgment rule; 

(2) it presented evidence sufficient for a reasonable juror to 

conclude that the directors and officers were grossly negligent; 

and (3) there are disputed issues of material fact that preclude 

 

with respect to these claims and must be addressed by the 

district court on remand.
12

granting summary judgment to the Appellees on alternative 

grounds. For the reasons that follow, we affirm the district 

court in part and reverse in part.

II.

Our review of a grant of summary judgment is de novo. 

French v. Assurance Co. of Am., 448 F.3d 693, 700 (4th Cir. 

2006). “Summary judgment is appropriate when there is no 

genuine issue of material fact and the moving party is entitled 

to judgment as a matter of law.” Id. It is axiomatic “that in 

ruling on a motion for summary judgment, [t]he evidence of the 

nonmovant is to be believed, and all justifiable inferences are 

to be drawn in his favor.” McAirlaids, Inc. v. Kimberly-Clark 

Corp., 756 F.3d 307, 310 (4th Cir. 2014) (quoting Tolan v. 

Cotton, --- U.S. ---, 134 S. Ct. 1861, 1863 (2014) (per curiam)) 

(internal quotation marks omitted).

This matter presents several questions of North Carolina 

state law. We have held that,

in determining state law a federal court must look 

first and foremost to the law of the state’s highest 

court, giving appropriate effect to all its 

implications. A state’s highest court need not have 

previously decided a case with identical facts for 

state law to be clear. It is enough that a fair 

reading of a decision by the state’s highest court 

directs one to a particular conclusion.
13

Assicurazioni Generali, S.p.A v. Neil, 160 F.3d 997, 1002 (4th 

Cir. 1998). If the state’s highest court does not provide an 

answer, then a federal court must seek guidance from an 

intermediate state court. Id. In so doing, “we defer to a 

decision of the state’s intermediate appellate court to a lesser 

degree than we do to a decision of the state’s highest court. 

Nevertheless, we do defer.” Id. (citing, among others, West v. 

AT&T, 311 U.S. 223, 237 (1940) (“Where an intermediate appellate 

state court rests its considered judgment upon the rule of law 

which it announces, that is a datum for ascertaining state law 

which is not to be disregarded by a federal court unless it is 

convinced by other persuasive data that the highest court of the 

state would decide otherwise.”)).

III.

The FDIC-R first attacks the district court’s reading of 

North Carolina’s business judgment rule. While we agree with 

the district court’s interpretation, we find that the court

improperly applied the rule.

As the Supreme Court explained in Atherton v. FDIC, “state 

law sets the standard of conduct” which bank officers and 

directors must follow “as long as the state standard (such as 

simple negligence) is stricter than that of the federal 

statute.” 519 U.S. 213, 216 (1997). At issue in Atherton was a 
14

federal statute, 12 U.S.C. § 1821(k), which provides that “[a] 

director or officer of an insured depository institution may be 

held personally liable for monetary damages in any civil action 

by” the FDIC-R “for gross negligence, including any similar 

conduct or conduct that demonstrates a greater disregard of a 

duty of care (than gross negligence) including intentional 

tortious conduct, as such terms are defined and determined under 

applicable State law.” 12 U.S.C. § 1821(k). The Supreme Court 

interpreted § 1821(k) as “set[ting] a ‘gross negligence’ floor, 

which applies as a substitute for state standards that are more 

relaxed.” Atherton, 519 U.S. at 216.

North Carolina, in turn, provides the following standard:

(a) A director shall discharge his duties as a 

director, including his duties as a member of a 

committee:

(1) In good faith;

(2) With the care an ordinarily prudent person in a 

like position would exercise under similar 

circumstances; and

(3) In a manner he reasonably believes to be in the 

best interests of the corporation.

N.C.G.S. § 55-8-30(a); see also id. § 55-8-42(a) (providing 

identical standard for corporate officers). Further, “[a] 

director is not liable for any action taken as a director, or 

any failure to take any action, if he performed the duties of 

his office in compliance with this section.” N.C.G.S. § 55-8-

30(d); see also id. § 55-8-42(d) (officer liability). Thus, 
15

under North Carolina law, a director or an officer can be held 

liable for ordinary negligence. In line with Atherton and 12 

U.S.C. § 1821(k), the FDIC-R may sue bank directors and officers

for both ordinary negligence and gross negligence.

North Carolina law also allows corporations to protect 

directors from liability for ordinary negligence by including 

exculpatory clauses in their articles of incorporation. 

N.C.G.S. § 55-2-02(b)(3) provides:

(b) The articles of incorporation may set forth any 

provision that under this Chapter is required or 

permitted to be set forth in the bylaws, and may 

also set forth:

. . .

(3) A provision limiting or eliminating the personal 

liability of any director arising out of an action 

whether by or in the right of the corporation or 

otherwise for monetary damages for breach of any 

duty as a director. No such provision shall be 

effective with respect to (i) acts or omissions 

that the director at the time of such breach knew 

or believed were clearly in conflict with the best 

interests of the corporation . . . .

In other words, a corporation may limit personal liability for a 

director’s breach of a duty of care, so long as the director did 

not know or believe his or her actions to have been clearly

contrary to the corporation’s best interests. Section 55-2-

02(b)(3) does not allow for the limitation of the duty of 

loyalty or the duty of good faith. Id.

Officer and director liability for ordinary negligence is 

constrained by the business judgment rule. While the Supreme 
16

Court of North Carolina has not ruled on the issue, the North 

Carolina Court of Appeals has recognized that § 55-8-30(d) “has 

been interpreted as codifying the common law theory of the 

business judgment rule.” Jackson v. Marshall, 537 S.E.2d 232, 

236 (N.C. Ct. App. 2000). Judicial application of North 

Carolina’s business judgment rule has been explained by “[a] 

leading authority on business law” as follows:

[The business judgment rule] operates primarily as a 

rule of evidence or judicial review and creates, 

first, an initial evidentiary presumption that in 

making a decision the directors acted with due care 

(i.e., on an informed basis) and in good faith in the 

honest belief that their action was in the best 

interest of the corporation, and second, absent 

rebuttal of the initial presumption, a powerful 

substantive presumption that a decision by a loyal and 

informed board will not be overturned by a court 

unless it cannot be attributed to any rational 

business purpose.

State ex rel. Long v. ILA Corp., 513 S.E.2d 812, 821-22 (N.C. 

Ct. App. 1999) (quoting Russell M. Robinson, II, Robinson on 

North Carolina Corporation Law § 14.06, at 281 (5th ed. 1995)) 

(alteration in original). “[P]roper analysis” of an officer’s 

or director’s actions “requires examination of [those] actions 

in light of the statutory protections of N.C. Gen. Stat. § 55-8-

30(d)(1990)(amended 1993) and the business judgment rule, either 

or both of which could potentially insulate him from liability.” 

Id. at 821. Indeed, Robinson suggests that “a director may be 

protected by the business judgment rule even if he fails to meet 
17

the prescribed standards of conduct” set forth in North 

Carolina’s statute. Robinson, Robinson on North Carolina 

Corporation Law § 14.06 n.2.

With this framework in mind, we turn to the FDIC-R’s 

claims.

A.

We consider director liability first. Cooperative’s 

articles of incorporation include an exculpatory provision, as 

permitted by N.C.G.S. § 55-2-02(b)(3):

A director of the Bank shall not be personally liable 

to the Bank or its shareholders for monetary damages 

for breach of any fiduciary duty as a director; 

provided, however, that this limitation of liability 

shall not be effective with respect to (i) acts or 

omissions that the director at the time of such breach 

knew or believed were clearly in conflict with the 

best interests of the Bank. . . .

J.A. 683 (emphasis supplied). In accordance with § 55-2-

02(b)(3), the exculpatory provision in the Bank’s articles of 

incorporation does not eliminate liability for breaches of the 

duty of loyalty or the duty of good faith. Nor does the 

provision eliminate liability for gross negligence.

The FDIC-R does not contend that the Director Appellees 

breached a duty of loyalty. Thus, unless there is a genuine 

issue of material fact as to whether the Director Appellees

breached their duty of good faith, the exculpatory provision 
18

will protect them from liability for ordinary negligence and 

breach of fiduciary duties.

Under North Carolina law, “the duty of good faith requires 

[corporate] directors to avoid self-dealing.” ILA Corp., 513 

S.E.2d at 819. Here, there is no allegation or evidence in the 

record that the directors engaged in self-dealing or fraud or 

otherwise acted in bad faith. Rather, the FDIC-R argues only 

that the evidence suggests that the Director Appellees took 

actions harmful to the Bank, in part by making decisions without 

adequate information. This is insufficient. The exculpatory 

clause protects directors from monetary liability unless the 

directors “knew or believed [that their acts or omissions] were 

clearly in conflict” with the Bank’s best interests. N.C.G.S. 

§ 55-2-02(b)(3) (emphasis added). Actions that might have been 

harmful or decisions that could have been better made do not 

rise to the level of bad faith in this context, especially in 

light of the fact that the Bank received CAMELS scores of “2” 

from both of its regulators despite the Director Appellees’ 

actions. We find that the FDIC-R has not presented sufficient 

evidence of a breach of the duty of good faith to raise a 

genuine issue of material fact.

We therefore affirm the district court’s award of summary 

judgment to the Director Appellees as to the FDIC-R’s claims of 

ordinary negligence and breach of fiduciary duty.
19

B.

We turn next to officer liability. The Bank’s exculpatory 

provision does not cover Bank officers. Thus, we analyze 

officer liability through the lens of North Carolina’s business 

judgment rule.

As discussed above, courts begin with the “initial 

evidentiary presumption that in making a decision the directors 

acted with due care (i.e., on an informed basis) and in good 

faith in the honest belief that their action was in the best 

interest of the corporation.” ILA Corp., 513 S.E.2d at 822 

(quoting Robinson, Robinson on North Carolina Corporation Law

§ 14.06 at 281). Given the structure of the business judgment 

rule, the initial presumption can be rebutted with evidence 

showing that the Officer Appellees: (1) did not avail 

themselves of all material and reasonably available information 

(i.e., they did not act on an informed basis); (2) acted in bad 

faith, with a conflict of interest, or disloyalty; or (3) did 

not honestly believe that they were acting in the best interest 

of Cooperative.

The FDIC-R has presented adequate rebuttal evidence. 

Specifically, its evidence is sufficient to rebut the 

presumption that the Officers Appellees acted on an informed 

basis. The FDIC-R presented the expert affidavit and reports of 

Brian H. Kelley, an independent banking consultant and former 
20

“senior bank executive, lender, and attorney at both regional 

and large commercial banks.” J.A. 219-20. His expert report 

and expert rebuttal report each discuss the general problems 

with the Appellees’ lending and underwriting processes, and also 

incorporate by reference his loan reports addressing each 

individual loan.

Kelley stated that, in his opinion, the officers did not 

act in accordance with generally accepted banking practices. 

His affidavit states that the Appellees often approved loans 

over the telephone, without first examining relevant documents. 

Moreover, they often did not receive the loan documents until 

after the phone calls, and sometimes not until after the loans 

had already been funded. Kelley further stated that the review 

process was inconsistent with practices at other banking 

institutions, and did not comport with his understanding of 

officer and director duties. He further noted that the 

Appellees had failed to address warnings and deficiencies in the 

Bank’s examination reports.

To be sure, the Bank’s regulators awarded it “2” ratings on 

its CAMELS. But, as Kelley observed, the Bank’s reports of 

examination also contained several indications that 

Cooperative’s credit administration and audit processes, among 

others, needed substantial improvement. He also thought it 
21

clear from his review that certain loans should never have been 

approved.

Kelley’s affidavit and reports thus provide a sufficient 

basis for rebutting the presumption that the Bank’s officers 

acted on an informed basis. Having found that there is evidence

to support the notion that the Officer Appellees did not act on 

an informed basis, we need not address the other two avenues of 

rebuttal. See ILA Corp., 513 S.E.2d at 821-22 (explaining the 

business judgment rule presumption that officers “acted with due

care (i.e., on an informed basis) and in good faith in the 

honest belief that their action was in the best interest of the 

corporation” (emphasis added)).

We move to the second evidentiary presumption only “absent 

rebuttal of the initial presumption.” Id. (quoting Robinson, 

Robinson on North Carolina Corporation Law § 14.06 at 281).

Because we find that there is sufficient evidence to rebut the 

initial evidentiary presumption of the North Carolina business 

judgment rule, we vacate the district court’s grant of summary 

judgment on the FDIC-R’s claims of ordinary negligence and 

breach of fiduciary duty as to the Officer Appellees.
22

IV.

The FDIC-R argues that North Carolina law does not require 

a showing of intentional wrongdoing in order to sustain a claim 

of gross negligence. We disagree.

Traditionally, under North Carolina law, the North Carolina 

Supreme Court “has often used the terms ‘willful and wanton 

conduct’ and ‘gross negligence’ interchangeably to describe 

conduct that falls somewhere between ordinary negligence and 

intentional conduct.” Yancey v. Lea, 550 S.E.2d 155, 157 (N.C. 

2001). Further, the court has defined “‘gross negligence’ as 

‘wanton conduct done with conscious or reckless disregard for 

the rights and safety of others.’” Id. (quoting Bullins v. 

Schmidt, 369 S.E.2d 601, 603 (N.C. 1988)). The court has also 

noted that “‘[a]n act is wanton when it is done of wicked 

purpose, or when done needlessly, manifesting a reckless 

indifference to the rights of others.’” Id. (quoting Foster v. 

Hyman, 148 S.E. 36, 37-38 (N.C. 1929)).

In 2005, the North Carolina Supreme Court seemed to change 

course. In Jones v. City of Durham (Jones II), the court 

acknowledged that “gross negligence” had previously been equated 

with “wanton conduct,” but “note[d] that N.C.G.S. § 1D–5(7),” 

North Carolina’s statute concerning the recovery of punitive 

damages in civil actions, “defines ‘willful and wanton conduct’ 

and establishes that such conduct, necessary for the recovery of 
23

punitive damages, see N.C.G.S. § 1D-15(a), is more than gross 

negligence.” 622 S.E.2d 596, 600 (N.C. 2005), superseded and 

withdrawn by Jones v. City of Durham (Jones III), 638 S.E.2d 202 

(N.C. 2006). The North Carolina Supreme Court continued that 

“[i]n light of this distinction, we conclude that while willful 

and wanton conduct includes gross negligence, gross negligence 

may be found even where a party’s conduct does not rise to the 

level of deliberate or conscious action implied in the combined 

terms of ‘willful and wanton.’” Id.

The district court here initially relied on Jones II in its 

opinion denying the Appellees’ motion to dismiss. Willetts I, 

882 F. Supp. 2d at 865. But in its summary judgment opinion, 

the court backtracked, noting that “its earlier reliance” on 

Jones II “was misplaced as the North Carolina Supreme Court 

withdrew the Jones [II] opinion and no North Carolina court has 

applied the withdrawn reasoning of Jones [II] while several have 

defined gross negligence in its traditional terms.” Willetts 

II, 48 F. Supp. 3d at 851 n.2. Aside from the district court’s 

denial of the motion to dismiss in this case, only one other 

federal court has relied on the withdrawn Jones II opinion, and 

it did so in an unpublished opinion. See Snow v. Oneill, No. 

1:04CV00681, 2006 WL 1837910, at *3 (M.D.N.C. June 5, 2006). 

The district court here correctly observed that no North 

Carolina state courts have relied on the withdrawn opinion.
24

The FDIC-R urges this Court to view Jones II as an 

indication of how the North Carolina Supreme Court will decide 

future gross negligence cases. But in Jones III, the North 

Carolina Supreme Court withdrew its Jones II opinion “[f]or the 

reasons stated in the dissenting opinions [in the court of 

appeals] as to the gross negligence claim.” Jones III, 638 

S.E.2d at 203 (citing Jones v. City of Durham (Jones I), 608 

S.E.2d 387, 394-95 (N.C. Ct. App. 2005) (Levinson, J., 

dissenting in part and concurring in part)). Jones I, in turn, 

relied on the traditional definition of “gross negligence.” The 

North Carolina Supreme Court thus withdrew its reasoning as to 

the difference between gross negligence and willful and wanton 

conduct.

Even absent Jones III, we nonetheless find the reasoning in 

Jones II inapposite. Jones II addressed the definition of gross 

negligence within the context of North Carolina’s punitive 

damages statute. Another provision of that same statute 

provides:

This Chapter applies to every claim for punitive 

damages, regardless of whether the claim for relief is 

based on a statutory or a common-law right of action 

or based in equity. In an action subject to this 

Chapter, in whole or in part, the provisions of this 

Chapter prevail over any other law to the contrary.

N.C.G.S. § 1D-10 (emphasis added). Thus, to the extent that the 

enactment of N.C.G.S. § 1D–5(7) signaled the abrogation of the 
25

common law definition of gross negligence, it did so only in the 

context of cases where a plaintiff seeks punitive damages.

The FDIC-R makes no claim for punitive damages in its 

complaint. Because there is no claim for punitive damages, the 

traditional common law definition of gross negligence applies. 

Accordingly, to survive summary judgment, the FDIC-R must show 

that there is a genuine issue of material fact as to whether the 

Appellees’ conduct amounted to “‘wanton conduct done with 

conscious or reckless disregard for the rights and safety of 

others.’” Yancey, 550 S.E.2d at 157 (citation omitted) (“‘An 

act is wanton when it is done of wicked purpose, or when done 

needlessly, manifesting a reckless indifference to the rights of 

others.’” (citation omitted)).

Here, the FDIC-R has failed to present evidence that the 

Appellees’ actions were grossly negligent. To be sure, the 

Appellees failed to address deficiencies outlined in examination 

reports issued by the FDIC and the NCCB. But those same reports 

repeatedly awarded Cooperative ratings of “2” in the CAMELS 

categories. In the face of this contradiction, we find that 

there is insufficient evidence that the Appellees acted wantonly 

or with reckless indifference. We thus affirm the district 

court’s award of summary judgment to all of the Appellees on the 

issue of gross negligence.
26

V.

The Appellees argue that summary judgment can be entered on 

alternative grounds. The district court did not address any of 

these arguments below.

First, the Appellees argue that they “made the challenged 

loans in reliance on reports, opinions, appraisals, financial 

data and other information developed and provided by 

Cooperative’s experienced loan officers and credit 

administrators.” Br. of Appellees 54. In advancing their 

argument, they cite N.C.G.S. § 55-8-30(b), which provides:

In discharging his duties a director is entitled to 

rely on information, opinions, reports, or statements, 

including financial statements and other financial 

data, if prepared or presented by: (1) One or more 

officers or employees of the corporation whom the 

director reasonably believes to be reliable and 

competent in the matters presented . . . .

N.C.G.S. § 55-8-30(b) (emphasis added); see also N.C.G.S. § 55-

8-42 (providing the same protection to officers of a 

corporation). Here, there is evidence in the record that 

Cooperative’s regulators, as well as its independent auditor, 

found its commercial loan administration and underwriting 

process lacking. The FDIC-R’s expert, as detailed above, 

similarly criticized the loan and credit administration process 

as contrary to standard banking practices. Accordingly, there 

is a genuine issue of material fact about whether the Officer 
27

Appellees’ reliance on the reports of their credit 

administrators and loan officers was reasonable.

Next, the Appellees argue that the FDIC-R “failed to 

produce evidence that the defendants, rather than the Great 

Recession, proximately caused the loan defaults pled.” Br. of 

Appellees 59. Proximate cause is “a cause that produced the 

result in continuous sequence and without which it would not 

have occurred, and one from which any man of ordinary prudence 

could have foreseen that such a result was probable under all 

the facts as they existed.” Mattingly v. North Carolina R.R. 

Co., 117 S.E.2d 844, 847 (N.C. 1961) (citation and internal 

quotation marks omitted). Foreseeability is necessary for a 

finding of proximate cause, but “does not require that [the] 

defendant should have been able to foresee the injury in the 

precise form in which it actually occurred.” Hairston v. 

Alexander Tank & Equip. Co., 311 S.E.2d 559, 565 (N.C. 1984). 

Rather, a plaintiff need only prove that “in ‘the exercise of 

reasonable care, the defendant might have foreseen that some 

injury would result from his act or omission, or that 

consequences of a generally injurious nature might have been 

expected.’” Hart v. Curry, 78 S.E.2d 170, 170 (N.C. 1953) 

(emphasis added) (citation omitted). Moreover,

[t]here may be two or more proximate causes of an 

injury. These may originate from separate and 

distinct sources or agencies operating independently 
28

of each other, yet if they join and concur in 

producing the result complained of, the author of each 

cause would be liable for the damages inflicted, and 

action may be brought against any one or all as joint 

tort-feasors.

Batts v. Faggart, 133 S.E.2d 504, 506 (N.C. 1963) (citation 

omitted).

Certainly, it is convenient to blame the Great Recession 

for the failure of Cooperative, and in turn for the losses 

sustained by the FDIC-R when it took over the Bank. However, 

there is evidence in the record, as outlined above, that 

suggests that “in the exercise of reasonable care,” the Bank 

officers could have “foreseen that some injury would result from 

[their] act[s] or omission[s], or that consequences of a 

generally injurious nature might have been expected.” Hart, 78 

S.E.2d at 170 (emphasis added) (citation omitted). Even before 

the Recession, exam reports from both of Cooperative’s 

regulators indicated that the Bank was utilizing unsafe 

practices. And while the Recession undoubtedly contributed to 

the failure of the Bank, it may have been only one of many 

contributing factors. This is a genuine issue of material fact, 

and thus this is a question for a jury. See Adams v. Mills, 322 

S.E.2d 164, 172 (N.C. 1984) (“[P]roximate cause of an injury is 

ordinarily a question for the jury.”).

Finally, the Appellees argue that the FDIC-R has not 

adequately determined its damages. Under North Carolina law, in 
29

an action “in tort rather than contract, . . . damages must be 

the natural and probable result of the tortfeasor’s misconduct.” 

Olivetti Corp. v. Ames Bus. Sys., Inc., 356 S.E.2d 578, 585 

(N.C. 1987). Additionally, “[i]t is a well-established 

principle of law that proof of damages must be made with 

reasonable certainty.” Id. There is no requirement for 

absolute certainty, but rather the evidence of damages “must be 

sufficiently specific and complete to permit the jury to arrive 

at a reasonable conclusion.” Weyerhaeuser Co. v. Godwin Bldg. 

Supply Co, Inc., 234 S.E.2d 605, 607 (N.C. 1977) (quoting 

Service Co. v. Sales Co., 131 S.E.2d 9, 22 (N.C. 1963)).

While the Appellees argue briefly that the FDIC-R’s damages 

calculations were speculative and did not pass muster below, the 

district court in reality stated only that it was excluding the 

FDIC-R’s damages expert, Harry Potter (a ruling not challenged 

here) because his report “merely relies on information found in 

[Office of Inspector General] and FDIC publications,” and “[a]n 

expert is not needed to relay this type of information to the 

jury.” Willetts II, 48 F. Supp. 3d at 848. The district court

never concluded that the FDIC was not able to prove its damages 

with reasonable certainty, and we decline to determine that 

question in the first instance.
30

VI.

For the foregoing reasons, the judgment of the district 

court is

AFFIRMED IN PART, REVERSED IN PART,

VACATED IN PART, AND REMANDED.