In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 17-1775 

ELLIOTT D. LEVIN, as Chapter 7 Trustee for 

Irwin Financial Corporation, 

Plaintiff-Appellant, 

v.

WILLIAM I. MILLER, 

GREGORY F. EHLINGER, and 

THOMAS D. WASHBURN, 

Defendants-Appellees. 

____________________ 

Appeal from the United States District Court for the 

Southern District of Indiana, Indianapolis Division. 

No. 1:11-cv-01264-SEB-MPB — Sarah Evans Barker, Judge. 

____________________ 

ARGUED OCTOBER 25, 2017 — DECIDED AUGUST 17, 2018 

____________________ 

Before KANNE and SYKES, Circuit Judges, and DARROW, 

District Judge.*

 

* Of the Central District of Illinois, sitting by designation. 
2 No. 17-1775 

SYKES, Circuit Judge. Irwin Financial Corporation was a 

holding company for two banks that failed in the wake of 

the 2007–2008 financial crisis. When the crisis began, regulators and Irwin’s outside legal counsel both advised the 

company to buoy up its sinking subsidiaries. Irwin’s Board 

of Directors therefore instructed the officers to do everything 

they could to save the banks. The officers tried to raise 

capital and applied for government aid, but the chances of 

success were slim. Private investors showed little interest in 

the company, and federal regulators signaled that a bailout 

was unlikely. 

A small glimmer of hope flickered in 2009: Irwin received 

a $76 million tax refund. The Board authorized Irwin’s 

officers to transfer the refund to the subsidiary banks and for 

good reason: The Board believed that the refund legally 

belonged to the banks and hoped the cash infusion would 

keep them above water long enough for help to arrive. But 

the refund was not enough to save the day. Management 

could not raise sufficient capital, the hoped-for government 

relief never materialized, the banks failed, and Irwin filed for 

bankruptcy. 

Elliott Levin was appointed as Chapter 7 trustee for Irwin’s bankruptcy estate, and he promptly filed suit against 

three of Irwin’s former officers. The suit alleged, among 

other things, that the officers breached their fiduciary duty 

to provide the Board with material information concerning 

the tax refund. Levin’s legal theory rested on an elaborate 

chain of assertions. He claimed the officers should have 

known the banks were going to fail, so they should have 

investigated alternatives to transferring the tax refund—

specifically, an earlier bankruptcy—despite the Board’s clear 
No. 17-1775 3 

directive to support the banks. Had the officers done so, they 

would have discovered that Irwin might be able to claim the 

$76 million tax refund as an asset in bankruptcy. And if the 

officers had presented this information to the Board, the 

Board would have declared bankruptcy before transferring 

the refund to the banks, thereby maximizing the holding 

company’s value for creditors. 

The district judge didn’t buy Levin’s speculative theory 

and neither do we. Corporate officers have a duty to furnish 

the Board of Directors with material information, but that 

duty is subject to the Board’s contrary directives. The record 

clearly establishes that on the advice of government regulators and expert outside legal counsel, the Board had prioritized saving the banks. The officers had no authority to 

second-guess the Board’s judgment with their own independent investigation. We affirm. 

I. Background 

Before its bankruptcy, Irwin was the holding company 

for two subsidiary banks: Irwin Union Bank and Trust 

Company, which we’ll call the “Bank and Trust,” and Irwin 

Union Bank, FSB, which we’ll call the “Savings Bank.” 

William Miller was Irwin’s CEO and Gregory Ehlinger was 

its CFO. Irwin’s Board of Directors was largely independent: 

A supermajority of ten members were independent outside 

directors, and the Board held an executive session without 

Irwin’s officers after each meeting. At the executive sessions, 

the directors discussed concerns and developed recommendations for management. Lance Odden, the designated lead 

director, would pass along these directives to Irwin’s officers. 
4 No. 17-1775 

As financial institutions, Irwin and the banks were, of 

course, subject to considerable governmental oversight. 

Irwin was registered as a bank holding company with the 

Board of Governors of the Federal Reserve System. As a 

state-chartered member of the Federal Reserve System, the 

Band and Trust answered to both the Federal Reserve and 

the Indiana Department of Financial Institutions. The Savings Bank was a federally chartered savings bank regulated 

by the Office of Thrift Supervision. Finally, because the 

banks held federally insured deposits, both fell under the 

supervision of the FDIC. 

In the midst of the 2007–2008 financial crisis, the Bank 

and Trust began to flounder. Regulators insisted that Irwin 

had a duty to support its struggling subsidiary. On 

February 28, 2008, a representative from the Federal Reserve 

Bank of Chicago attended a board meeting to discuss “regulatory concerns about [the Bank and Trust’s] liquidity and 

[Irwin’s] expected role as a source of strength for the 

[b]ank[s].” The representative “emphasized the preservation 

of capital at the [b]ank and the need to maintain liquidity.” 

Heeding the regulator’s advice, Irwin adopted a resolution affirming its commitment to keeping the Bank and Trust 

capitalized. Among other things, the resolution emphasized 

“the importance of ensuring that the enterprise maintains 

adequate capital to support its business operations.” 

As the crisis raged on, Irwin turned to independent legal 

counsel for advice. The Board retained Rodgin Cohen and 

other attorneys at Sullivan & Cromwell for advice on the 

Board’s duties in the fraught regulatory landscape. The 

Board began meeting every Friday with outside counsel 

present. Cohen and his colleagues reported directly to the 
No. 17-1775 5 

Board, and the Board expected Irwin’s management to 

follow their advice. 

Cohen urged the Board to support the banks. He advised 

the directors of their duty under the Source of Strength 

Doctrine, which requires bank holding companies to provide 

assistance to subsidiaries in times of financial distress. The 

Board members apparently took his advice to heart. According to one director, the Board was committed to saving the 

banks because it “was the prudent course of action and 

consistent with our fiduciary duties based on Mr. Cohen’s 

counsel [and] statements from regulators.” 

That commitment was soon put to the test. In May 2008 

the Chicago Federal Reserve and Indiana Department of 

Financial Institutions advised Irwin that the Bank and Trust 

was in trouble and supervisory action would follow. Two 

months later the regulators sent a Memorandum of Understanding demanding that Irwin obtain a $50 million cash 

infusion by the end of August. On Cohen’s advice the Board 

directed management to sign and deliver the memorandum. 

Irwin failed to raise $50 million by the deadline. Regulators then sent the Board a formal Written Agreement requiring Irwin and the Bank and Trust to develop a plan to 

“improve management of [their] liquidity positions” and 

“maintain sufficient capital.” Faced with these demands and 

uncertain of its duties, the Board again turned to outside 

counsel for advice. At the October 10, 2008 meeting, counsel 

advised the Board to “be actively engaged in doing whatever [it] can to ensure the bank remains solvent.” That same 

day the Board approved the Written Agreement and authorized Miller, the CEO, to execute it. 
6 No. 17-1775 

In the meantime Irwin began looking to federal programs 

for relief. In October 2008 Congress created the Troubled 

Asset Relief Program (“TARP”), which authorized the 

Treasury Department to purchase troubled assets from 

financial institutions after considering various factors, 

including the “long-term viability of the financial institution.” 12 U.S.C. § 5213(4). The standard for analyzing a 

bank’s viability was left to the discretion of regulatory 

agencies, which included the discretion to decide whether 

TARP funds should be included in the analysis. In 

November 2008 the Board authorized and submitted an 

application for $148 million in TARP funds. 

The application faced an uphill battle. On November 21 

the Board learned that a bank with a financial health rating 

of 4 or 5 would receive TARP funding only as part of an 

acquisition by another bank. Irwin had a rating of 4, and the 

prospects of a buyout looked grim. 

The Board continued to prioritize the Bank and Trust’s 

capitalization. During the December 4 meeting, the Board 

affirmed that the Written Agreement’s capital-sufficiency 

requirement was “of critical importance and should remain 

a primary focus of management.” The Board then “authorized management to move additional equity capital from 

[Irwin] into [the Bank and Trust],” and the officers duly 

transferred $14 million. 

Yet the Bank and Trust’s fortunes continued to decline. 

At the December 17 meeting, the Board learned that the 

Reserve Bank had downgraded its financial health rating to 

a 5. While ominous, the downgrade didn’t mean certain 

failure. The bank remained adequately capitalized, and 

Cohen reassured the Board that he had seen banks with a 5 
No. 17-1775 7 

rating survive with additional capital. And the possibility of 

a government bailout was still on the table. A representative 

from the Federal Reserve explained that the TARP eligibility 

criteria were not static, and although it would be “extremely 

challenging” for Irwin to receive approval, the Federal 

Reserve remained “receptive to listening.” The representative advised that the Board’s plan to raise $50 million in 

equity could be a game changer and would make TARP 

funding more likely. 

To stand a chance, Irwin believed it needed the Federal 

Reserve to endorse its TARP application. In January 2009 

Miller and Odden reached out to the Federal Reserve and 

asked what Irwin needed to do to win support. After several 

weeks of silence, the Federal Reserve finally responded. The 

demands were staggering. Among other things, Irwin would 

need to raise $150 million in capital and appoint a new CEO. 

And even with the Federal Reserve’s support, there was no 

guarantee that the Treasury Department would approve 

Irwin’s application. In a subsequent board meeting, Irwin’s 

investment-banking advisor dismissed the possibility of 

raising $150 million as “remote” and cautioned against 

basing future plans on that possibility. Unless the government changed the policy, the TARP application was certain 

to fail. Irwin accordingly lobbied the Treasury to enact a 

policy more favorable to its application. 

Around this same time the Board approved the 2009 Tax 

Allocation Agreement that lies at the heart of this controversy. The agreement provided, as it had since 1999, that Irwin 

would file consolidated federal income-tax returns on behalf 

of itself and the banks. Under the agreement if a bank would 

have been entitled to a tax refund had it filed separately, 
8 No. 17-1775 

Irwin would transfer the appropriate amount after receiving 

the consolidated refund from the IRS. Miller projected that 

Irwin would receive $90 million in tax refunds, most of 

which would be owed to the banks. 

Irwin believed that the refunds were the banks’ property, 

and it held the refunds in trust on their behalf. That was 

consistent with nonbinding regulatory guidance issued in 

1998. See Interagency Policy Statement on Income Tax Allocation 

in a Holding Company Structure, 63 FR 64757-01 (Nov. 23, 

1998). Several years after regulators issued this guidance, 

however, a bankruptcy judge in New York issued a contrary 

ruling, holding that a consolidated refund belonged to the 

parent and any payment owed to a subsidiary merely constituted a debt that became an unsecured claim in the parent’s 

bankruptcy estate. See Superintendent of Ins. for the State of 

N.Y. v. First Cent. Fin. Corp. (In re First Cent. Fin. Corp.), 

269 B.R. 481 (Bankr. E.D.N.Y. 2001), aff’d sub nom. Superintendent of Ins. for the State of N.Y. v. Ochs (In re First Cent. Fin. 

Corp.), 377 F.3d 209 (2d Cir. 2004). 

Regulators continued to urge the Board to prop up the 

Bank and Trust. On May 7, 2009, just weeks before the 

disputed tax refund arrived, the Board’s independent directors met in executive session with outside counsel and 

representatives from the Indiana Department of Financial 

Institutions, the FDIC, and the Chicago Federal Reserve. 

During the meeting, the Indiana Department of Financial 

Institutions warned of the consequences if the bank dropped 

below the “adequately capitalized” status. The FDIC explained its resolution process for managing the assets of 

insured banks that declare bankruptcy and urged Irwin to 

protect depositors by moving uninsured deposits into 
No. 17-1775 9 

insured status. The Chicago Federal Reserve expressed 

concern about the bank’s liquidity but suggested that the 

anticipated tax refund could help. Finally, the FDIC advised 

Irwin to continue efforts to raise capital—especially by 

lobbying for changes in the TARP program—while the FDIC 

prepared for a possible resolution. 

The Board agreed and once more directed the officers to 

keep the banks solvent. After excusing the regulators, the 

Board called Miller and the other officers back into the 

meeting and declared a dual-track strategy: Irwin would 

seek to “secure new capital with a government partnership,” 

or should that endeavor fail, “manage a resolution process.” 

The Board accordingly directed the officers “to pursue its 

policy approach with the US Treasury” and “mitigate negative outcomes of a[n] [FDIC] resolution for stakeholders.” 

The Board also directed management to “focus[] on converting as much of the remaining uninsured deposit base as 

possible to fully insured status.” In order to accomplish this 

task, the officers needed to financially support the banks 

long enough to convert uninsured deposits into insured 

status. 

Shortly before the refund arrived, the Board faced yet 

another setback. Irwin had previously hired the accounting 

firm Ernst & Young to assist with the year-end 2008 audit, 

and the audit indicated that the Bank and Trust remained 

adequately capitalized. However, that result rested on a 

particular accounting assumption that Ernst & Young urged 

Irwin to confirm with the SEC. The SEC then issued guidance that contradicted Irwin’s assumption and cast doubt on 

the bank’s status. In a March 31, 2009 letter, Ernst & Young 

informed Irwin that after correcting the mistaken assump-
10 No. 17-1775 

tion, the bank was no longer considered well capitalized. As 

a result, Irwin’s ability to continue as a going concern was in 

serious doubt. 

On June 2, 2009, Irwin received mixed messages from the 

Indiana Department of Financial Institutions and the Chicago Federal Reserve. In a joint letter to the Board, the regulators advised that the banks needed substantially more than 

$150 million to remain viable; Irwin’s plan to raise 

$50 million was inadequate, and without capital infusion, 

the Bank and Trust’s “likelihood of failure [was] imminent.” 

Later that day, however, Cohen reported that after discussing the letter with the Chicago Federal Reserve, the regulators clarified that they were “not saying the [Bank and Trust] 

is in imminent danger of failure.” Cohen also advised that 

the bank needed to remain adequately capitalized through 

June 30 to buy enough time to negotiate the TARP application with the Treasury. Although the negotiation might not 

succeed, Cohen said “there [was] a reasonable possibility.” 

Two days later Miller informed the Board that Irwin had 

received the consolidated tax refund, which he described as 

“great news for liquidity.” On June 11 Irwin transferred the 

$76 million refund to the banks. Just over $74 million went to 

the Bank and Trust; the remainder went to the Savings Bank. 

Irwin and its subsidiaries continued to hold out hope. In 

July Irwin received encouraging news that the Treasury had 

expressed interest in helping small- and medium-sized 

banks. Later that month the Board asked Cohen “if there was 

an alternative course of action that ha[d] not been identified 

by management.” Cohen responded “that he [did] not know 

of additional things that could be done now other than what 
No. 17-1775 11 

management [was] doing.” As late as August 13, 2009, 

Cohen maintained that there was hope for TARP funds. 

But the TARP application was never approved. The 

banks closed and Irwin filed for bankruptcy on 

September 18, 2009. Levin was appointed Chapter 7 trustee 

of Irwin’s bankruptcy estate while the FDIC was named 

receiver for the banks. 

In September 2011 Levin filed suit in district court, see 

28 U.S.C. § 1334(b), raising seven claims under Indiana law 

for breach of fiduciary duty against Miller, Ehlinger, and a 

third former Irwin officer.1 The district judge initially dismissed the complaint for lack of standing because she believed that every count was derivative of claims that 

belonged to the FDIC as receiver for the banks. We affirmed 

in part and reversed in part, holding that Levin had standing 

to assert two of his claims. Levin v. Miller, 763 F.3d 667 (7th 

Cir. 2014). 

On remand Levin filed an amended complaint limiting 

his claims to the two he had standing pursue. As relevant 

here, he alleged that Miller and Ehlinger breached their duty 

to provide the Board with material information. The trustee 

maintained that Miller and Ehlinger should have informed 

the Board that Irwin could maximize its value if it had 

declared bankruptcy before transferring the tax refund to the 

banks. The judge entered summary judgment for the officers, and Levin appealed. 

 

1 Thomas Washburn, who served as Irwin’s Executive Vice President 

from 2000 until January 2008, was named as the third defendant, but the 

claims against him are not at issue here. 
12 No. 17-1775 

II. Discussion 

We review the summary judgment de novo, drawing all 

reasonable inferences in Levin’s favor. Pain Ctr. of Se. Ind. 

LLC v. Origin Healthcare Sols. LLC, 893 F.3d 454, 459 (7th Cir. 

2018). 

To prevail on a claim for breach of fiduciary duty, a 

plaintiff must show: “(1) the existence of a fiduciary relationship; (2) a breach of the duty owed by the fiduciary to the 

beneficiary; and (3) harm to the beneficiary.” Good v. Ind. 

Teachers Ret. Fund, 31 N.E.3d 978, 983 (Ind. Ct. App. 2015) 

(internal quotation marks omitted). No one disputes that a 

fiduciary relationship existed; officers owe fiduciary duties 

to the corporation they serve. See, e.g., Biberstine v. N.Y. 

Blower Co., 625 N.E.2d 1308, 1318 (Ind. Ct. App. 1993). 

Levin claims that the officers breached their duty to provide information to the Board. In Indiana an officer’s duties 

are “determined by common law rules of agency,” Winkler v. 

V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1231 (Ind. 1994), and 

according to these rules, an agent has a duty to provide 

relevant information to the principal, see RESTATEMENT 

(THIRD) OF AGENCY § 8.11 (AM. LAW INST. 2006). To fulfill this 

duty, officers must “use reasonable effort to provide the 

principal with facts that the agent ... should know when ... 

the agent ... has reason to know that the principal would 

wish to have the facts or the facts are material to the agent’s 

duties to the principal.” Id. 

Levin faults the officers for failing to inform the Board 

that an earlier bankruptcy could have maximized Irwin’s 

value. His theory rests on a series of assumptions: (1) the 

officers should have seen the writing on the wall and real-
No. 17-1775 13 

ized that the banks were doomed to fail and that transferring 

the tax refund would be a waste; (2) they should have 

investigated whether filing for bankruptcy earlier was a 

better option; (3) had they investigated, they would have 

hired a tax and bankruptcy expert who would have advised 

that Irwin could claim the refund as an asset in bankruptcy 

(based on the New York bankruptcy judge’s decision); and 

(4) had the officers reported this information, the Board 

would have declared bankruptcy earlier, before transferring 

the tax refund, thereby maximizing Irwin’s value and the 

size of the bankruptcy estate for the creditors. 

Even on its own terms, Levin’s complicated theory is dubious. The argument’s intricate chain of inferences rests on a 

series of speculative and increasingly questionable links—

especially the assertion that, contrary to both regulatory 

guidance and Irwin’s years-long understanding (memorialized in a written agreement), the Board would have tried to 

claim the tax refund as its own asset in bankruptcy. Color us 

skeptical. 

Nevertheless, Levin’s theory fails for a more fundamental 

reason. The duty to provide information is not absolute; it is 

qualified by the duty to obey the Board’s lawful instructions. 

Corporate “officers are chosen by, report to[,] and are subject 

to the direction of the board of directors.” IND. CODE § 23-1-

36-2 official cmt. Under the rules of agency, they have “a 

duty to comply with all lawful instructions” received from 

the Board, and they must comply with those instructions 

even if they “believe[] that doing otherwise would be better 

for the principal.” RESTATEMENT (THIRD) OF AGENCY § 8.09(2) 

(AM. LAW. INST. 2006); id. cmt. c. Crucially, the duty to 

comply supersedes the duty to inform: An agent’s obligation 
14 No. 17-1775 

to provide information is “subject to any manifestation by 

the principal.” Id. § 8.11. 

As the financial crisis deepened, the Board clearly manifested the intention to save the banks and directed the 

officers accordingly. In February 2008 the Board resolved to 

keep the Bank and Trust well capitalized. Later that year the 

Board authorized Miller to execute the written agreement 

requiring Irwin to maintain sufficient capital at the bank. 

The Board ordered Miller to make a $14 million capital 

contribution to the bank in December, and in May 2009 it 

directed the officers to continue trying to raise capital while 

preparing the bank’s deposit accounts for a possible resolution. 

As agents of the Board, the officers had a duty to execute 

the Board’s strategy and directives. And that strategy was 

plainly incompatible with declaring bankruptcy. Insolvency 

would have killed any chance of government relief and cut 

short efforts to insure deposit accounts. The officers had no 

right—much less a duty—to pursue a course of action that 

directly contradicted the Board’s clear instructions. 

Nor did the officers have a fiduciary duty to hire an expert to second-guess the Board’s judgment. The Board made 

its decisions based on the advice of regulatory agencies and 

deeply experienced outside counsel. The Chicago Federal 

Reserve, Indiana Department of Financial Institutions, and 

the FDIC all urged the Board to financially support its 

subsidiaries. The lawyers from Sullivan & Cromwell, whom 

the Board specifically retained for advice on fiduciary duties, 

agreed. The officers were not obligated to retain their own 

expert to challenge regulators, counsel, and the Board itself. 
No. 17-1775 15 

Levin insists that the Board never manifested a desire to 

not receive information about Irwin’s potential value in 

bankruptcy. He claims the Board was not irrevocably committed to propping up the banks and that it may have 

changed course had it known that an earlier bankruptcy 

could maximize value. It would only be logical, Levin 

argues, for the directors to be interested in such information. 

Without it, he argues, the Board “hardly could have manifested a desire not to receive such information.” 

 This argument rests on speculation and cannot be reconciled with the record. The Board’s response to the crisis was 

driven by the demands of federal and state regulators and 

guided by expert outside counsel. Taking account of the 

regulatory directives and expert legal advice, the Board 

exercised its judgment and chose to devote its resources to 

saving the banks. As agents, the officers had no right to 

spend company resources pursuing a different strategy. 

AFFIRMED.