Source: https://www.thefreelibrary.com/FDIC+v.+Rippy%3A+due+care+and+the+business+judgment+rule+in+the+Fourth+...-a0450037453
Timestamp: 2019-04-22 22:52:00+00:00

Document:
FDIC v. Rippy: due care and the business judgment rule in the Fourth Circuit and the potential implications for the banking industry.
If it cannot be established that a director or officer's conduct comported with the fiduciary duties described above, then the subsequent determination of liability will be evaluated through the lens of the BJR so long as there is no evidence of bad faith, conflict of interest, or disloyalty. (41) Because of the limited body of North Carolina case law applying the BJR, North Carolina courts have often relied on the explanation provided in Robinson on North Carolina Corporation Law.
Looking forward, the only remaining issues to be decided by the district court on remand are whether the officer defendants' actions constituted a breach of their fiduciary duties, and, relatedly, whether such actions constituted ordinary negligence. (119) How the case is ultimately resolved, however, is subordinate to how the case was decided by the Fourth Circuit. In that respect, the damage may have already been done. The subsequent discussion elaborates on the practical effects of the Fourth Circuit's application of the BJR, and examines corollary issues that should be considered in light of the decision.
Perhaps more importantly, not only would such a softening of the BJR affect the behavior of those considering D&O opportunities, the actions of those already holding such positions would also be affected. (142) D&Os fearful of incurring personal liability might avoid taking potentially beneficial risks they might otherwise take but for that fear. (143) As was emphasized by the district court, risk-taking is essential to the vitality of banks. (144) Because banks are so inextricably tied to the communities in which they reside, an influx of risk-averse D&Os might stifle growth in the many communities that rely on their banks to extend credit to those looking to start, fund, or expand business. (145) Such a barrier to capital could potentially snowball into reduced revenue, fewer job opportunities, and consequently, diminished prosperity in the entire community. (146) Furthermore, a bank's failure to serve the fundamental needs of its community could potentially result in a decrease in market share, increased regulatory criticism, and the subsequent possibility of acquisition by larger, more aggressive, and less consumer-friendly banks. (147) In light of the apparent erosion of D&O protection afforded by the state, banks should look to other avenues of protection to offset the increased exposure of D&Os to personal liability.
Rather than take the "wait and see approach," banks should take immediate action to put their D&Os in positions they feel will enable them to make decisions that will most effectively serve the interests of the bank. (201) As one of America's foremost innovators once observed, "[w]hen one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us." (202) The banking industry would do well not to forget this advice anytime soon.
(1.) See Matthew C. Klein, Just Who Should We be Blaming Anyway?, The Economist (Jan. 25, 2013, 7:00 PM), http://www.populareconomics.org/economic-crisis-self-blame-the -dangerous-underbelly-of-the-american-dream/ (discussing both the desire and failure to assign blame following the 2009 financial crisis).
(2.) Author and date unknown.
(3.) "The [FDIC] preserves and promotes public confidence in the U.S. financial system ... by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails." Who is the FDIC?, FDIC, https://www.fdic.gov/about/learn/symbol/, (last visited Jan. 11, 2016).
(4.) Fed. Deposit Ins. Co., Professional Liability Lawsuits (last updated Dec. 18, 2015), https://www.fdic.gov/bank/individual/failed/pls/.
(5.) Kevin LaCroix, Meanwhile, Back at the FDIC Failed Bank Litigation Ranch, The D&O Diary (July 28, 2015), http://www.dandodiary.eom/2015/07/articles/failed -banks/meanwhile-back-at-the-fdic-failed-bank-litigation-ranch/ [hereinafter LaCroix, FDIC Litigation]. In the same time period, the FDIC has actually filed lawsuits against twenty-one percent of failed banks. Id. The discrepancy between the number of lawsuits authorized and lawsuits filed may well be attributable to a "large backlog" of suits that will be filed, but have not yet been filed. Id. However, not all suits that have been authorized by the FDIC will ultimately be filed. Id.
(6.) See Kevin LaCroix, Fourth Circuit Affirms Dismissal of All Claims Against Failed Bank's Directors, Revives Negligence Claims Against Bank's Officers, The D&O Diary (Aug, 19, 2015), http://www.dandodiary.com/2015/08/articles/failed-banks/fourth-circuit -affirms-dismissal-of-all-claims-against-failed-banks-directors-revives-negligence-claims -against-banks-officers/ [hereinafter LaCroix, Fourth Circuit] ("This appeal ha[s] been very closely watched and ha[s] attracted a host of amicus briefs in support of the district court's opinion."); Fed. Deposit Ins. Co., supra note 4 (highlighting the plethora of cases either yet to be filed or currently in the litigation process.
(7.) FDIC ex rel. Coop. Bank v. Rippy, 799 F.3d 301 (4th Cir. 2015).
(8.) Id. at 313. Although the Fourth Circuit ultimately considered only whether the BJR protected officers from the FDIC's ordinary negligence and breach of fiduciary duty claims, this formulation of the question more accurately presents the issue of primary importance.
(9.) See Russell M. Robinson, II, Robinson on North Carolina Corporation Law [section] 14.06, Lexis Advance (database updated Dec. 2015) ("Although the fundamental bases on which the business judgment rule rests have long been established in North Carolina, the rule has been specifically mentioned as such in only a handful of North Carolina appellate decisions.").
(10.) Rippy, 799 F.3d at 313-14.
(11.) Compare id. (holding that the BJR's initial presumption could be rebutted by evidence suggesting that officers had lacked due care), with FDIC v. Willetts, 48 F. Supp. 3d 844, 849-52 (E.D.N.C. 2014) [hereinafter Willetts II] (holding that the BJR's initial presumption could only be rebutted by evidence suggesting grossly negligent conduct). See also infra Part IV.A.
(12.) See Robinson, supra note 9 (emphasizing the infrequency of explicit application of the BJR in North Carolina); Salvie v. Med. Ctr. Pharmacy of Concord, Inc., 762 S.E.2d 273 (N.C. Ct. App. 2014) (highlighting that, while North Carolina state courts are not bound by decisions of federal courts, such decisions may possess substantial persuasive value).
(13.) See FDIC, North Carolina State Profile (2015), https://www.fdic.gov/bank/analytical/stateprofile/atlanta/nc.pdf (valuing the total assets of North Carolina banks at greater than $1.9 trillion, by far the highest asset value of any state in the country).
(14.) See infra Part II.
(15.) See infra Part III.
(16.) See infra Part IV.
(17.) See infra Part V.
(18.) Federal Deposit Insurance Act ("FDIA") [section] 11 (k), 18 U.S.C. [section] 1821 (k) (2012).
(19.) Atherton v. FDIC, 519 U.S. 213, 227 (1997).
(23.) N.C. Gen. Stat. [section][section] 55-8-30(a), 55-8-42(a) (2013) (establishing identical standards of conduct for both directors and officers); see also 4 John M. Strong, Strong's North Carolina Index [section] 459 (Thomas J. Czelusta et al. eds., 4th ed. 1989 & Supp. 2015), Westlaw.
(24.) [section] 55-8-30(a), [section] 55-8-42(a).
(25.) Robinson, supra note 9, at [section] 14.01.
(26.) Id. at [section] 14.02.
(28.) State v. Custard, No. 06 CVS 4622, 2010 WL 1035809 (N.C. Super. Mar. 19, 2010) [hereinafter "Custard II"] ("The North Carolina courts have not created a separate fiduciary duty of good faith because it is not necessary and would create significant uncertainty under our law."). However, in RREF BB Acquisitions, LLC v. MAS Properties, LLC, No. 13 CVS 193, 2015 WL 3646992 (N.C. Super. June 9, 2015), aff'd on reconsideration., No. 13 CVS 193, 2015 WL 7910510 (N.C. Super. Dec. 3, 2015), the North Carolina Business Court declared that a claim for a breach of duty to negotiate in good faith "may be viable," thereby at least tentatively acknowledging the potential existence of a duty of good faith separate and apart from the duties of due care and loyalty.
(29.) Clark W. Furlow, Good Faith, Fiduciary Duties, and the Business Judgment Rule in Delaware, 2009 Utah L. Rev. 1061, 1071 (2009).
(30.) N.C. Gen. Stat. [section][section] 55-8-30(a)(2), 55-8-42(a)(2) (2013).
(31.) Robinson, supra note 9, at [section] 14.03.
(32.) Id.; see also Hauser v. Tate, 85 N.C. 81 (1881) ("To the suggestion that the defendant did not supervise the operations of the bank and knew nothing of its condition, the answer is obvious that he voluntarily assumed a position the obligation of which demands this of him, and persons dealing with the bank may reasonably expect his faithful discharge of that obligation, and if he bestows no attention on the business, it is his own neglect from which others should not suffer."); Townsend v. Williams, 117 N.C. 330 (1895) ("[Directors] are trustees and liable as such for losses attributable to their bad faith, misconduct or want of care. They are to direct and supervise the trust confided to them and are not mere figureheads.").
(33.) Robert F. Finke et al., FIRREA and Officer and Director Liability, C880 ALI-ABA 613, 639 (1994), Westlaw; see also Robinson, supra note 9, at [section] 14.03; Resolution Trust Corp. v. Gregor, 872 F. Supp. 1140, 1150-51 (E.D.N.Y. 1994) (holding that under New York law, bank directors are held to the higher standard of simple negligence and are not entitled to the BJR).
(34.) Robinson, supra note 9, at [section] 14.03.
(35.) Anthony v. Jeffress, 172 N.C. 378, 380 (1916).
(36.) Robinson, supra note 9, at [section] 14.03.
(37.) N.C. Gen. Stat. [section][section] 55-8-30(a)(3), 55-8-42(a)(3) (2013).
(38.) Robinson, supra note 9, at [section] 14.04.
(41.) Robinson, supra note 9, at [section] 14.06; see also State v. Custard, No. 06 CVS 4622, 2010 WL 1035809 at *20-21 (N.C. Super. Mar. 19, 2010) (interpreting North Carolina and Delaware case law to delineate proper application of the BJR); Revised Model Business Corp. Act Official Comment [section] 8.30(d), at 224 (1984) (noting that where the statutory standard of conduct is established, there is no need to apply the BJR, which should only be applied where evidence suggests that the statutory standard of conduct had not been met).
(42.) ROBINSON, supra note 9, at [section] 14.06. Furthermore, while the language expressed in Robinson refers only to "directors," the scant body of case law applying the BJR in North Carolina makes it clear that the BJR applies with equal force to officers. See e.g., State ex rel. Long v. ILA Corp., 132 N.C. App. 587, 601 (1999); Custard II, 2010 WL 1035809 at 21. Application of the BJR to officers aligns with its underlying purpose of preventing judicial second-guessing. See infra Part IV.B.i for further discussion of disparate treatment of directors and officers.
(43.) Hammonds v. Lumbee River Elec. Membership Corp., 178 N.C. App. 1, 22 (2006) (quoting HAJMM Co. v. House of Raeford Farms, 94 N.C. App. 1, 10, review on additional issues allowed, 325 N.C. 271 (1989), and modified, aff'd in part, rev'd in part on other grounds, 328 N.C. 578 (1991)).
(44.) See Marcia M. McMurray, An Historical Perspective on the Duty of Care, the Duty of Loyalty, and the Business Judgment Rule, 40 Vand. L. Rev. 605, 614-17 (1987) (discussing the interplay between the BJR and the duty of care).
(45.) See R. Franklin Balotti & James J. Hanks, Jr., Rejudging the Business Judgment Rule, 48 Bus. Law. 1337, 1345-46 (1993) (discussing the initial presumption established by the BJR and the different interpretations of courts regarding what constitutes sufficient rebuttal evidence).
(47.) A thrift institution is "[a] financial institution that ordinarily possesses the same depository, credit, financial intermediary, and account transactional functions as a bank, but that is chiefly organized and primarily operates to promote savings and home mortgage lending rather than commercial lending." Fed. Deposit Ins. Co., Managing the Crisis, app. B, at 787 (1998), https://www.fdic.gov/bank/historical/managing/history3-b.pdf.
(48.) FDIC ex rel. Coop. Bank v. Rippy, 799 F.3d 301, 307 (4th Cir. 2015).
(49.) Id. Although the Fourth Circuit referred to the North Carolina Office of the Commissioner of Banks as the "NCCB" in its opinion, the prevailing acronym in North Carolina is "NCCOB," so that is the form this Note uses. About Us, NCCOB, http://www.nccob.org/Public/AboutUs/AboutMain.aspx, (last visited Jan. 11, 2016).
(52.) Id. at 307-08; see generally Lissa L. Broome & Jerry W. Markham, Regulation of Bank Financial Service Activities, 571-75, (4th ed. 2011) (providing a background discussion of the CAMELS rating system).
(53.) Rippy, 799 F.3d at 308.
(60.) Id. Somewhat ironically, the one category in which Cooperative did not receive a "5" was Sensitivity to Market Risk. It received a "4." Id.
(62.) The NCCOB also consented, took action to close the bank, and appointed the FDIC as receiver. Id. at 309. In its capacity as receiver, the FDIC "assumes responsibility for efficiently recovering the maximum amount possible from the disposition of the receivership's assets and the pursuit of the receivership's claims." Receivership Management Program, FDIC (last updated May 19, 2015), https://www.fdic.gov/about/strategic/strategic/receivership.html.
(63.) Rippy, 799 F.3d at 309.
(66.) FDIC v. Willetts, 882 F. Supp. 2d 859, 862 (E.D.N.C. 2012) [hereinafter Willetts I].
In discharging his duties a [director or officer] 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; (2) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within their professional or expert competence ... [unless] he has actual knowledge concerning the matter in question that makes reliance ... unwarranted.
(68.) Willetts I, 882 F. Supp. 2d at 862. Because this Note primarily focuses on the Fourth Circuit's application of the BJR, the district court and Fourth Circuit's treatment of the FDIC's gross negligence claims will be addressed only in the footnote text. See infra text accompanying notes 79, 83, 118.
(69.) Id. at 863-64. In reaching this conclusion, the district court specifically relied on North Carolina Corp. Comm. V. Harnett Cnty. Trust Co., 192 N.C. 246 (1926) (holding "negligent failure of its officers to perform their duties" to be a valid cause of action) and a comparison of FF Milling Co. v. Sutton, 9 N.C. App. 181, 184 (1970) (concluding that directors may be liable for actions taken in bad faith, but not errors in judgment made in good faith) and Anthony v. Jeffress, 172 N.C. 278 (1916) (holding directors to a debatably higher standard because of their duty to maintain knowledge of the corporation's financial condition).
(70.) Willetts I, 882 F. Supp. 2d at 864 (internal quotation marks omitted). This question offers yet another alternative phrasing of the primary issue in the case.
(72.) Willetts II, 48 F. Supp. 3d 844, 849 (E.D.N.C. 2014).
(73.) Defendants' Reply in Support of Motion for Summary Judgment at 1, Willetts II, 48 F. Supp. 3d 844 (No. 14-02078).
(74.) Id. At the time this Note was published the FDIC's brief opposing summary judgment was under seal by the court and had not yet been released to the public.
(76.) Id. at 1-2 (internal quotation marks omitted) (quoting Technik v. WinWholesale, Inc., No. 10-CVS-15709, 2012 WL 160068, at *5 (N.C. Super. Jan. 13, 2012)).
(77.) Id. (emphasis in original).
(78.) Id. at 2-3 (emphasis in original). Defendants proceeded to argue that such a showing from the FDIC would be impossible on the basis that "one of Cooperative's principal purposes was to make loans, so there [could be] no opportunity to claim that any of the 87 loans in [the] lawsuit lacked a rational business purpose." Id at 3.
(79.) Id. at 6 (emphasis in original). The defendants also maintained the additional arguments proffered at the motion to dismiss stage that Cooperative directors were protected from personal liability by the exculpatory provision in the bank's articles of incorporation and that all the defendants were further shielded from liability because they were entitled to reasonably rely on other officers and employees in authorizing the questioned loans. Id. at 78. The defendants further argued that they were entitled to summary judgment on the claims of gross negligence because the FDIC failed to adduce evidence that the defendants' actions constituted intentional wrongdoing, as they argued is required for a showing of gross negligence. Id. at 8-9. This argument was made in response to the FDIC's contention that gross negligence requires less than wanton and willful conduct, and that, therefore, an individual can be liable for gross negligence even where there is no intentional wrongdoing. Id. at 8.
(80.) Willetts II, 48 F. Supp. 3d 844, 849 (E.D.N.C. 2014).
(81.) State v. Custard, No. 06 CVS 4622, 2010 WL 1035809, at *21 (N.C. Super. Mar. 19, 2010) (emphasis in original).
(82.) Willetts II, 48 F. Supp. 3d at 849-50 (quoting Robinson, supra note 9, at [section] 14.06).
(83.) Id. at 850. In noting the absence of evidence supporting self-dealing, fraud, or bad faith, the district court thus concluded that the FDIC had failed to adduce evidence suggesting grossly negligent conduct on the part of Cooperative D&Os. Id. Pursuant to this determination and the district court's conclusion that gross negligence does indeed require intentional wrongdoing, the district court awarded summary judgment to all defendants on the claim of gross negligence. Id. at 851-52.
(86.) Id. Notably, because summary judgment was awarded to the defendants on the ground that their actions were protected by the BJR, the court did not address the defendants' alternative arguments. See id. at 849-53 (avoiding any mention of the applicability of Cooperative's exculpatory provision for its directors and whether the defendants were entitled to the proclaimed statutory reliance); see also supra text accompanying note 79.
(87.) FDIC ex rel. Coop. Bank v. Rippy, 799 F.3d 301, 307 (4th Cir. 2015).
(88.) See Unsealed Principal Brief for Appellant FDIC-Receiver, Rippy, 799 F.3d 301 (No. 14-02078); Redacted Brief of Appellees, Rippy, 799 F.3d 301 (No. 14-02078).
(89.) Compare Unsealed Reply Brief for Appellant FDIC-Receiver at 5, Rippy, 799 F.3d 301 (No. 14-02078) ("[W]hen the North Carolina Court of Appeals explained that the statute did not abrogate the common law, it did not hold, nor could it, that the courts were free after [Section 55-8-30's] enactment to craft or extend the common law to contravene the statute.") (emphasis in original), with Redacted Brief of Appellees, supra note 88, at 30 ("The [r]ule continues to apply with full force and effect even after North Carolina's codification of a standard of conduct for corporate directors and officers.").
(90.) Redacted Brief of Appellees, supra note 88, at 32.
(91.) State ex rel. Long v. ILA Corp., 132 N.C. App. 587 (1999).
(92.) Redacted Brief of Appellees, supra note 88, at 43 (quoting ILA Corp., 132 N.C. App. at 601).
(93.) ILA Corp., 132 N.C. App. at 601-02.
(94.) Redacted Brief of Appellees, supra note 88, at 44.
(95.) Id. (emphasis in original).
(96.) Id. at 45 (quoting In re Trados Inc. S'holder Litig., 73 A. 3d 17, 36 (Del. Ch. 2013)); see infra text accompanying notes 129-47 (discussing the policy arguments surrounding proper application of the BJR).
(97.) Unsealed Reply Brief for Appellant FDIC-Receiver, supra note 89, at 4-5.
(99.) Id. at 8; N.C. Gen. Stat. [section] 55-8-30(a) (2013).
(101.) See id. ("The legislature's expression of the ordinary care standard and only one level of performance to avoid liability show that it did not intend to prescribe a different gross-negligence standard.").
(102.) FDIC ex rel. Coop. Bank v. Rippy, 799 F.3d 301, 312 (4th Cir. 2015). Currently, under North Carolina law, only directors are entitled to protection by exculpatory provisions, so Cooperative officers fell outside the scope of this argument. Id.; see infra Part IV.B for additional discussion of exculpatory provisions.
(103.) Rippy, 799 F.3d at 311 (emphasis in original).
(106.) Id. (quoting State ex rel. Long v. ILA Corp., 132 N.C. App. 587, 597).
(107.) Id. at 312 (emphasis in original) (internal quotation marks omitted).
(110.) Id. at 310. While the court characterized its analysis as different "application," the effect of applying the BJR in such a way that allows its initial presumption to be rebutted by evidence that due care was lacking ultimately amounts to a different interpretation of the rule (i.e., what is sufficient to rebut the BJR's initial presumption of due care). Id.
(111.) Id. at 313. Importantly, no cases are cited in support of this articulation of how the BJR's initial presumption can be rebutted. Id. The court appeared to simply make a logical deduction to arrive at this conclusion. See id. (concluding this articulation of the rule to be the proper statement of law without citing to any authority supporting such an understanding, and, instead, premising its articulation on an observation concerning "the structure of the business judgment rule").
(113.) Id. The Fourth Circuit described Kelley as an independent banking consultant and former "senior bank executive, lender, and attorney at both regional and large commercial banks." Id. at 313 (internal quotation marks omitted).
(118.) Id. at 313-14. Similarly, the Fourth Circuit held that Kelley's affidavit was also sufficient to establish a genuine issue of material fact as to whether the defendants' reliance on other officials and employees was "reasonable" within the meaning of section 55-8-30(b). Id. at 316. The court, therefore, denied the remaining officer defendants' alternative ground for summary judgment. Id. On the FDIC's gross negligence claims, the Fourth Circuit sided with the defendants' contention that a showing of intentional wrongdoing is necessary to sustain a claim of gross negligence. Id. at 314. Accordingly, because the FDIC could not present any evidence of intentional wrongdoing by any of the defendants, the Fourth Circuit affirmed the district court's award of summary judgment on all gross negligence claims. Id. at 315.
(120.) See LaCroix, Fourth Circuit, supra note 6 (noting that the Fourth Circuit's decision "ha[s] been very closely watched").
(122.) Compare Willetts II, 48 F. Supp. 3d 844 (E.D.N.C. 2014) (holding that the FDIC had presented insufficient evidence to rebut the initial presumption of the business judgment rule), with Rippy, 799 F.3d at 313-14 (holding that the FDIC had presented sufficient evidence to rebut the initial presumption).
(123.) Rippy, 799 F.3d at 313.
(124.) Compare Willetts II, 48 F. Supp. 3d at 849-50 (establishing gross negligence as the standard of liability for D&Os), with Rippy, 799 F.3d at 313 (establishing ordinary negligence as the standard of liability for D&Os).
(125.) See LaCroix, Fourth Circuit, supra note 6 (discussing the potential issues surrounding the Fourth Circuit's reliance on the FDIC's expert's affidavit).
(126.) Id. In the defendant's Reply Brief they noted language from an unpublished opinion to the effect that not only should the court not substitute its own judgment for that of the board, but that it should not substitute the Plaintiffs expert opinion for that of the board. Defendants' Reply in Support of Motion for Summary Judgment, supra note 73, at 6.
(127.) Rippy, 799 F.3d at 313; see LaCroix, Fourth Circuit, supra note 6 (expressing that the FDIC will almost always be able to hire experts who will provide similar criticisms to what was presented in Rippy).
(128.) LaCroix, Fourth Circuit, supra note 6.
(129.) Rippy, 799 F.3d at 301-02.
(130.) Brief of Amicus Curiae for the Chamber of Commerce of the United States at 10, Rippy, 799 F.3d 301 (No. 14-2078).
(136.) Brief of Amicus Curiae for the American Bankers Association and State Banking Associations at 9-10, FDIC ex rel. Coop. Bank v. Rippy (2015) (No. 14-2078).
(137.) See LaCroix, Fourth Circuit, supra note 6 (discussing the ease with which the FDIC can procure similar affidavits thereby lessening the protection available to D&Os under the BJR).
(138.) See id. (explaining the problems of attributing such weight to expert witness affidavits, particularly in light of their widespread availability); Brief of Amicus Curiae for the Chamber of Commerce of the United States, supra note 130, at 11-12 (highlighting the incredibly high settlement rate in FDIC lawsuits).
(139.) Brief of Amicus Curiae for the Chamber of Commerce of the United States, supra note 130, at 12-13 (emphasizing how uncertainty can be leveraged to force settlement in largely meritless cases).
(140.) See 3A Fletcher Cyc. Corp. [section] 1037, Westlaw (database updated Sep. 2015) ("[B]usiness is inherently risky and the quality of a business decision cannot always be judged by the immediate results; therefore, personal liability for a decision that produces bad results would make it difficult to secure the services of able and experienced corporate directors.").
(141.) See Brief of Amicus Curiae for the American Bankers Association and State Banking Associations, supra note 136, at 7 ("If corporate value is to be enhanced, the courts must not discourage qualified and capable people from serving as directors and taking risks.") (internal quotation marks omitted). Cf. Brief of Amicus Curiae for the Chamber of Commerce of the United States, supra note 131, at 19-20 (explaining the inextricable relationship between the welfare of community banks and that of their surrounding communities, specifically in the lending context).
(143.) See Brief of Amicus Curiae for the Chamber of Commerce of the United States, supra note 130 at 18 ("Hindsight review of business decisions destroys '[t]he entire advantage of the risk-taking, innovative, wealth-creating engine that is the ... corporation ... with disastrous results for shareholders and society alike.'") (quoting In re Walt Disney Co. Derivative Litig., 907 A.2d 693, 698 (Del. Ch. 2005)).
(145.) Brief of Amicus Curiae for the Chamber of Commerce of the United States, supra note 130, at 19.
(146.) See id. (noting the FDIC's own study on the importance of community banks extending credit to individuals and organizations in their communities).
(148.) FDIC ex ret. Coop. Bank v. Rippy, 799 F.3d 301, 312 (4th Cir. 2015) (quoting N.C. Gen. Stat. [section] 55-2-02(b)(3) (2015)).
(150.) Robinson, supra note 9, at [section] 18.12; N.C. Gen. Stat. [section][section] 55-8-30(a)(2), 55-8-42(a)(2) (2015).
(151.) Robinson, supra note 9, at [section] 18.12.
(152.) See, e.g., Marc I. Steinberg, The Evisceration of the Duty of Care, 42 Sw. L.J. 919, 920 (1989) (discussing the effect of exculpatory provisions on the duty of care after Van Gorkom). Of further benefit to those covered by exculpatory provisions, North Carolina allows exculpation of liability stemming from "third-party actions as well as direct or derivative corporate actions." Robinson, supra note 9, at [section] 18.12.
(153.) Rippy, 799 F.3d at 313 (capitalization in original).
(154.) 28 Strong's N.C. Index 4th, Trial [section] 539 (2007) ("'Findings of fact' are statements of what happened in space and time. A pronouncement by the trial court which does not require the employment of legal principles will be treated as a 'finding of fact,' regardless of how it is denominated in the court's order.") (quoting Duvenant v. Duvenant, 142 N.C. App. 169, 173 (2001)).
(156.) See Savage v. Zelent, 111 S.E.2d 801, 804 (N.C. Ct. App. 2015) (expressing the interpretational rule of expressio unius est exclusio alterius--"expression of one thing is the exclusion of the other").
(157.) See generally Dennis R. Honabach, Smith v. Van Gorkom: Managerial Liability and Exculpatory Clauses-A Proposal to Fill the Gap of the Missing Officer Protection, 45 Washburn L.J. 307 (2006) (providing possible explanations for this disparity in treatment, discussing why it is important, and arguing that the gap needs to be filled).
(158.) See N.C. Gen. Stat. [section] 55-2-02(b)(3) (2015) (authorizing use of a "provision limiting or eliminating the personal liability of any director") (emphasis added).
(159.) See Honabach, supra note 157, at 318 n.82 (listing Louisiana, Maryland, New Hampshire, New Jersey, Virginia, Nevada, and Utah as the states authorizing officers the use of exculpatory provisions). Since publication, however, Nevada raised its standard of liability to gross negligence, thus foreclosing the need for such a provision. See Nev. Rev. Stat. [section] 78.138(7) (2015) (providing that officers will be personally liable for a breach of duty when "[t]he breach of those duties involved intentional misconduct, fraud or a knowing violation of law"). Utah has since shifted the other direction, and no longer allows for exculpation of officers. Utah Code Ann. [section] 16-10a-841 (West 2015) (providing, without mention of applicability to officers, that directors may limit personal liability).
(160.) See Honabach, supra note 157, at 326-28 (detailing the different ways states handle officer liability and the relevant policy considerations).
(161.) Honabach, supra note 157, at 328.
(162.) Smith v. Van Gorkom, 488 A. 2d 858, 872-81 (1985) (explaining how directors were found to have breached their duty of care).
(163.) See Steinberg, supra note 152, at 919-20 ("Shocked at the Delaware court's 'chutzpah' in imposing liability where no self-dealing or other breach of the duty of loyalty existed, corporate fiduciaries and their counsel clamored for action.").
(164.) Honabach, supra note 157, at 311-12.
(166.) Thomas C. Lee, Limiting Corporate Directors' Liability: Delaware's Section 102(b)(7) and the Erosion of the Directors' Duty of Care, 136 U. Pa. L. Rev. 239, 247 n.32 (1987).
(167.) See id. at 252 n.63 (stating that directors' concerns "were heightened by highly publicized lawsuits involving potentially ruinous recoveries").
(168.) See Honabach, supra note 157, at 307 (contending that "the explanation for the exclusion of officers is more an accident of history than a product of tight legal analysis").
(170.) Steinberg, supra note 152, at 920 n.12.
(172.) See Honabach, supra note 157, at 328 (offering the possibility that "the reason most exculpatory provisions apply only to a director might well be explained more easily as a historical artifact, a response to Van Gorkom").
(173.) See id. at 327-29 (discussing the robust legal commentary "analyz[ing] both the existing law and its desirability" that has emerged in the wake of Enron and the subsequent corporate responsibility movement).
(174.) A. Gilchrist Sparks, III, & Lawrence A. Hamermesh, Common Law Duties of Non-Director Corporate Officers, 48 Bus. Law. 215, 219-20 (1992).
(176.) See Mae Kuykendall, Symmetry and Dissonance in Corporate Law: Perfecting the Exoneration of Directors, Corrupting Indemnification and Straining the Framework of Corporate Law, 1998 Colum. Bus. L. Rev. 443, 535-36 (1998) (discussing indemnification as a form of compensation, but the underlying rationale still applies to exculpation).
(177.) See Honabach, supra note 157, at 327 (noting that resolution of this issue is first in the hands of the state legislature and then in the hands of the courts).
(178.) See Robinson, supra note 9, at [section] 18.12 (discussing exculpatory clauses in North Carolina generally, and specifically noting that they may only be used to protect directors from potential liability).
(179.) See Lloyd L. Drury, III, What's the Cost of A Free Pass? A Call for the Reassessment of Statutes that Allow for the Elimination of Personal Liability for Directors, 9 Transactions: Tenn. J. Bus. L. 99, 114-22 (2007) (providing a detailed discussion of the potentially negative impact that exculpatory provisions can have on companies who make use of them).
(183.) See FDIC ex rel. Coop. Bank v. Rippy, 799 F.3d 301, 312 (4th Cir. 2015) (explaining how exculpatory clauses can protect directors from liability arising from conduct that fails to meet the prescribed statutory standards); see also Steinberg, supra note 152, at 928-29 (explaining the potential effect of exculpatory provisions on Delaware's duty of care).
(184.) Steinberg, supra note 152, at 919-20.
(185.) Drury, supra note 179, at 114-115.
(187.) Cf. id. at 115 (discussing how greater pressure on a director or officer to ensure that they are informed in their decision-making may foster better business practices across the board, which will, in-turn, benefit the company as a whole).
(188.) See id. ("The idea is that the procedural good of informing oneself is not simply an intrinsic good, but is instrumental in achieving other desirable ends such as being aware of conflicts and making substantive decisions that are more likely to be of the greatest benefit to shareholders.").
(189.) See Kuykendall, supra note 176, at 469-70 ("Exculpation statutes, simply by enactment, eliminate large segments of the financial liability of directors in public corporations. In doing so, they create a dissonance between substantive corporate law, which remains intact despite the removal of financial accountability, and the remedial substructure.").
(191.) Drury, supra note 179, at 118.
(192.) Id.; See also Michael Bradley & Cindy A. Schipani, The Relevance of the Duty of Care Standard in Corporate Governance, 75 Iowa L. Rev. 1, 47-70 (1989) (discussing the results of an empirical study on the immediate effect of exculpatory provisions on the value of Delaware corporations following Van Gorkom).
(193.) Drury, supra note 179, at 118; Bradley & Schipani, supra note 192, at 60-64 (comparing the abnormal returns and cumulative abnormal returns in the twenty-one trading days prior to the Van Gorkom decision and the twenty-two trading days after the Van-Gorkom decision).
(194.) Id.; Bradley & Schipani, supra note 192, at 61 (finding this conclusion to be "consistent with the view that the new regime established by section 102(b)(7) allows corporate managers greater latitude in managing their firms, which in turn increases the agency costs of the corporate form and reduces the value of the equity claims of these firms").
(195.) Drury, supra note 179, at 113.
(196.) See supra text accompanying notes 132-38.
(198.) See Honabach, supra note 157, at 307 (discussing the demand for increased director protection following a court decision perceived as expanding potential liability).
(199.) See supra Part IV.B. (discussing the practical effect of exculpatory provisions on director conduct as raising the standard of liability to gross negligence and identifying additional consequences to consider before implementation). Other measures banks can take to limit both D&O liability include indemnification of a director of officer for reasonable costs incurred during the litigation process upon a vote of the board, Robinson, supra note 9, at [section] 18.04, and purchasing liability insurance to protect D&Os for personal liability up to a certain amount. ROBINSON, supra note 9, at [section] 18.10. For a more thorough discussion of ways to limit D&O liability, see Seth Van Aalten, D&O Insurance in the Age of Enron: Protecting Officers and Directors in Corporate Bankruptcies, 22 Ann. Rev. Banking L. 457 (2003).
(200) See supra Part IV.B.ii.
(201) See Wyrick Robbins Yates & Ponton LLP, Client Alert: Scope of the Fiduciary Duty of Care for Directors and Officers (2015), http://www.wyrick.com/documents/newsPdfs/ClientAlertFiduciaryDuties.pdf (urging clients to reexamine their articles of incorporation following the Fourth Circuit's decision in Rippy).
(202) Alexander Graham Bell (date unknown).
The direct impact of disparate impact claims on banks.

References: v. 
 v. 
 v. 
 v. 
 V.

 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 V. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.