PUBLISH

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

_______________

No. 97-4068 _______________

D. C. Docket No. 93-1830-CV-EBD

JEFFREY H. BECK, as Trustee of Southeast Banking Corporation,

Plaintiff-Appellant,

versus

DELOITTE & TOUCHE, DELOITTE, HASKINS & SELLS, ERNEST & YOUNG,

L.L.P.,

Defendants-Appellees.

______________________________

Appeal from the United States District Court

for the Southern District of Florida

______________________________

(June 23, 1998)

Before EDMONDSON and BIRCH, Circuit Judges, and FAY, Senior Circuit

Judge.

BIRCH, Circuit Judge:

In this case, we determine when the Florida statute of

limitations began to run on a malpractice action brought by the
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Southeast subsequently filed for Chapter 7 bankruptcy on

September 20, 1991.

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trustee of a bankrupt corporation. The district court ruled that the

bankrupt corporation’s directors had been aware of the defendantappellee’s alleged malpractice, and the court imputed this

knowledge to the corporation. As a result, the district court held that

the corporation’s malpractice action had accrued and then expired

long ago. The plaintiff-appellant, however, argues that the directors’

knowledge regarding the alleged malpractice should not be imputed

to the corporation because the interests of the directors and the

corporation were “adverse” with respect to the transaction at issue.

We reverse.

I. BACKGROUND

Plaintiff-appellant, William A. Brandt, Jr. (“the Trustee”), serves

as the trustee for the Southeast Banking Corporation (“Southeast”),

which the Federal Deposit Insurance Company (“FDIC”) placed in

receivership on September 19, 1991.1

 Defendant-appellant Deloitte
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& Touche (“Deloitte”) is an accounting firm that has provided

services to Southeast. For the purposes of this appeal, we accept

the well-pleaded facts in the Trustee’s complaint as true. See St.

Joseph’s Hosp., Inc. v. Hospital Corp. of Am., 795 F.2d 948, 954

(11th Cir. 1986).

In 1988, Southeast purchased First Federal and South Florida

Savings (“First Federal”) (“the acquisition”). At that time, the FDIC

had already placed First Federal into receivership, reflecting First

Federal’s poor financial performance. According to the Trustee,

Southeast’s directors purchased First Federal for the sole purpose

of making Southeast an unattractive target for any future takeover

attempt; Southeast’s directors had no belief or intention that the

acquisition of First Federal might benefit Southeast in any legitimate

way.

As part of the process of purchasing First Federal, Southeast

hired Deloitte as its accountant for the transaction. In performing its

duties, Deloitte allegedly had a choice of two accounting methods.
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The Trustee alleges that use of the Purchase Method would

have shown Southeast to be in violation of various regulatory

capital requirements. 

4

Under the “Purchase Method,” Deloitte would have assessed First

Federal’s meager assets at fair market value. Because Southeast’s

purchase price for First Federal well exceeded the fair market value

of First Federal’s assets, the Trustee maintains that use of the

Purchase Method would have discredited the proposed acquisition

in the eyes of both Southeast’s stockholders and federal regulators.2

As a result, Deloitte’s use of the Purchase Method would have

prevented Southeast from acquiring First Federal.

Instead of the Purchase Method, though, Deloitte employed the

“Pooling Method.” Under this approach, Deloitte did not have to

calculate the excess of Southeast’s proposed purchase price over

First Federal’s fair market value. In fact, Deloitte was able to

account for First Federal’s assets and liabilities at historic recorded

prices instead of fair market value at the time of the transaction.

Further, Deloitte’s use of the Pooling Method permitted it to treat
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Southeast’s and First Federal’s assets and liabilities as if they had

always been combined. By basing its accounting on this blending

of historical rather than present market data, Deloitte allegedly

enabled Southeast to hide the true danger that the acquisition of

First Federal posed to Southeast’s financial health.

According to the Trustee’s complaint, Deloitte’s use of the

Pooling Method constituted malpractice. After providing Southeast’s

directors with the results under both the Purchase and Pooling

Methods, Deloitte allegedly allowed Southeast’s directors to choose

the method on which Deloitte ultimately based its official accounting

opinion, even though Deloitte knew or should have known that use

of the Pooling Method under such circumstances did not conform to

Generally Accepted Accounting Principles (“GAAP”). Worse,

Deloitte allegedly advised the directors to offer certain Southeast

stock for sale to First Federal’s depositors to create the false

appearance that Southeast’s planned acquisition qualified for the

Pooling Method. Deloitte also allegedly allowed Southeast to use its
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accounting opinion to win required regulatory approvals from the

Federal Home Loan Bank Board and the Federal Savings & Loan

Insurance Corporation. Through all of these actions, Deloitte

allegedly violated its duty to Southeast and committed actionable

negligence.

On September 21, 1993, the Trustee sued Deloitte for

professional malpractice under Florida law. Soon thereafter, Deloitte

moved to dismiss, arguing inter alia that the Trustee’s suit was

untimely. Specifically, Deloitte argued that because the directors

knew of Deloitte’s use of the Pooling Method in 1988, the applicable

two-year statute of limitations had expired in 1990. The Trustee

responded that the directors’ knowledge of Deloitte’s alleged

negligence should not be imputed to Southeast because the

interests of the directors and Southeast with regard to the acquisition

had been adverse. Thus, the Trustee contended that Southeast’s

malpractice action did not accrue, and therefore the statute of

limitations did not begin to run, until the Trustee’s
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appointment—which occurred within two years of the Trustee’s filing

suit against Deloitte. On September 28, 1994, the district court ruled

that the Trustee had not satisfied the adverse interest exception

because he had “failed to plead” that the directors of Southeast were

acting adversely to Southeast’s interest. R1-31-5. For this reason,

the district court dismissed the original complaint with leave to

amend.

On October 12, 1994, the Trustee filed an amended complaint

alleging that the directors’ interest was adverse to that of the

corporation. The Trustee’s amended complaint was essentially

identical to his original complaint, except for two added paragraphs:

8. From at least in or about 1985 until Southeast’s failure

in September 1991, the Southeast Directors acted with

the improper purpose of maintaining their control over

Southeast and entrenching themselves in their positions

of power and influence, without consideration of whether

their actions were in the best interest of Southeast or its

shareholders. The utter and continuing conscious

disregard by the Southeast Directors of their duties to

Southeast caused a once highly successful business to

fail. Accordingly, the misconduct of the Southeast

Directors did not benefit Southeast in any way, but
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instead destroyed the institution. But for the negligence

of Deloitte & Touche described herein, the Southeast

Directors’ efforts to mask their incompetence and

misdeeds would have been revealed to Southeast’s

regulators and shareholders, who would have taken

timely action to prevent the failure of Southeast.

9. By reason of the aforesaid adverse interests of

Southeast’s Directors whose adverse acts were without

benefit to Southeast, and, indeed were to its fatal

detriment, the knowledge of Southeast’s Directors

regarding Deloitte & Touche’s negligence is not imputed

to Southeast.

R2-43 Exh. A at ¶8, ¶9. After reviewing the Trustee’s amended

complaint, the district court again dismissed his suit as barred by the

statute of limitations, on August 15, 1995. Again, the district court

ruled that “Plaintiff’s allegations . . . are insufficient to meet the

pleading requirement to allege adverse actions taken by Southeast

directors.” R3-56-6. In addition, the district court ruled that the

Trustee could not, in any event, satisfy the adverse interest

exception because the directors’ actions in adopting Deloitte’s

accounting practices did not have an “entirely” adverse effect on

Southeast. Although the district court recognized that “it may seem
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clear that the directors’ actions were not ultimately beneficial to

Southeast,” the court explained that the long-term effect of the

directors’ cooperation with Deloitte was “not the relevant inquiry.” Id.

at 7. “Because Southeast was allowed to continue in business past

the point of insolvency [as a result of the Pooling Method],” the

district court wrote, “the corporation benefitted to the detriment of

outside creditors and stock purchasers.” Id.

Finally, on September 18, 1995, the Trustee attempted to file

a second amended complaint. This time, however, the district court

denied the Trustee leave to amend. Because “the Trustee implicitly

concedes that the alleged malpractice gave the Bank an appearance

of health as the officers and directors were able to declare

dividends,” and because “the Trustee also implicitly concedes that

the alleged malpractice benefitted the Bank by extending its life as

the alleged malpractice masked the company’s financial position,”

the district court held that any further attempt by the Trustee to draft
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a complaint upon which the court could grant relief was futile. R5-

94-4-5.

II. DISCUSSION

In evaluating the sufficiency of a complaint, a court “must

accept the well pleaded facts as true and resolve them in the light

most favorable to the plaintiff.” St. Joseph’s Hosp., 795 F.2d at 954.

A court should not dismiss a suit on the pleadings alone “unless it

appears beyond doubt that the plaintiff can prove no set of facts in

support of his claim.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.

Ct. 99, 102, 2 L. Ed. 2d 80 (1957). In seeking dismissal for failure

to state a viable claim, a defendant thus bears the “very high

burden” of showing that the plaintiff cannot conceivably prove any

set of facts that would entitle him to relief. See Jackam v. Hospital

Corp. of Am. v. Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir. 1986).

We review the district court’s decision to dismiss on the pleadings de
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novo. See McKusick v. City of Melbourne, 96 F.3d 478, 482 (11th

Cir. 1996).

This appeal turns on a single issue: whether the directors’ selfinterest in the acquisition prevented the accrual of Southeast’s

malpractice action, and thus running of the statute of limitations, until

the Trustee’s appointment. Under 11 U.S.C. § 108(a), a trustee of

a bankrupt may bring a suit either (1) within the regularly-applicable

statute of limitations or (2) within two years of the order for relief if

the regularly-applicable limit did not expire before the filing of the

bankruptcy petition. Because the Trustee filed the present action

two years and one day after the date of the petition, he must allege

facts sufficient to satisfy Florida’s two-year statute of limitations if

this suit is to proceed. See Fla. Stat. § 95.11(4)(a) (establishing a

two-year limit for the filing of professional malpractice actions). This

Florida limitation period runs from “the time the cause of action is

discovered or should have been discovered with the exercise of due

diligence.” Id. In normal circumstances, the knowledge of a
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corporation’s directors (and therefore their discovery of malpractice)

is imputed to the corporation. See Seidman & Seidman v. Gee, 625

So.2d 1, 2 (Fla. Dist. Ct. App. 1992) (per curiam), review granted,

640 So. 2d 1106 (Fla. 1994), cause dismissed, 653 So. 2d 384 (Fla.

1995). Thus, Deloitte contends that the directors’ knowledge of

Deloitte’s alleged malpractice was imputed to Southeast in 1988,

and that the statute of limitations therefore expired in 1990.

The Trustee, however, argues that Southeast’s cause of action

against Deloitte did not accrue until his appointment because the

directors’ interest regarding Deloitte’s use of the Pooling Method

was adverse to that of Southeast. As the Florida courts have

recognized, “an exception to the imputation rule exists where an

individual is acting adversely to the corporation. In that situation, the

officer’s knowledge and conduct are not imputed to the corporation.”

Id. at 2-3; Golden Door Jewelry Creations, Inc. v. Lloyds

Underwriters Non-Marine Assoc., 117 F.3d 1328, 1338-39 (11th Cir.

1997) (applying Florida law); Tew v. Chase Manhattan Bank, N.A.,
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728 F. Supp. 1551, 1560 (S.D. Fla. 1990) (same). The key question

thus becomes: Did the Trustee allege facts that might conceivably

establish that the directors’ interest was adverse?

In its orders dismissing this case, the district court ruled that the

Trustee could not avail himself of the adverse interest exception

because Deloitte’s alleged malpractice brought Southeast some

short-term benefit. In so holding, the district court was correct that

Florida law requires that a corporate officer’s interest be entirely

adverse for the exception to apply (i.e., his actions must neither be

intended to benefit the corporation nor actually cause short- or longterm benefit to the corporation). See Gee, 625 So. 2d at 3. Under

Florida law, the knowledge of a corporate officer whose fraud or

misbehavior brings short-term gain to the corporation, or merely

injures a third party, is imputed to the corporation, even if the

officer’s misbehavior ultimately causes the corporation’s insolvency.

See id. at 203; accord Cenco Inc. v. Seidman & Seidman, 686 F.2d

449, 456 (7th Cir. 1982) (relied on in Gee). Nonetheless, the district
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court used the wrong baseline in its attempt to determine whether

Deloitte’s use of the Pooling Method conferred any benefit on

Southeast. In its final order of October 11, 1996, the district court

read the complaint as conceding that Deloitte’s use of the Pooling

Method had allowed Southeast to hide its financial distress and even

to declare a dividend after the acquisition; these short-term benefits

to Southeast, in the district court’s view, precluded an adverse

interest exception. The Trustee, however, alleges in his complaint

that, but for Deloitte’s negligence in using the Pooling method, the

acquisition would not have occurred. Taken from this perspective,

any concealment that Deloitte’s actions may have allowed only

mitigated the injury that Deloitte’s negligence caused Southeast.

Even assuming that the district court properly drew its inferences

regarding concealment from the complaint, the Trustee has not

conceded that Southeast was, in the short- or long-term, better off

because of Deloitte’s use of the Pooling Method than it would have

been had Deloitte employed the Purchase Method. A director’s
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wrongful actions toward his corporation do not have to rise to the

level of corporate “looting” (as in Tew) or embezzlement (as in

Golden Door) in order to be adverse and thereby prevent imputation,

as long as the corporation receives no benefit from the director’s

misbehavior. Therefore, we hold that the district court erred by

ruling that the Trustee did not allege a set of facts that might

conceivably entitle him to relief.

III. CONCLUSION

To avoid imputation of the directors’ knowledge of Deloitte’s

alleged malpractice, the Trustee must show that the directors’ and

Southeast’s interests in Deloitte’s use of the Pooling Method were

adverse. Assuming that the facts that the Trustee alleges in his

complaint are true, the Trustee has satisfied this burden. Therefore,

we REVERSE the holding of the district court and REMAND this

case for further consideration consistent with this opinion.