Court Opinion

ID: 6512
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:18:13+00
Date Added: 2024-06-11T13:30:27.556542
License: Public Domain

United States Court of Appeals,

                            Fifth Circuit.

                               No. 93-3183.

          RESOLUTION TRUST CORPORATION, Plaintiff-Appellant,

                                    v.

       Louis A. MIRAMON, Jr., et al., Defendants-Appellees.

                            June 21, 1994.

Appeal from the United States District Court for the Eastern
District of Louisiana.

Before JOHNSON, GARWOOD, and JOLLY, Circuit Judges.

     JOHNSON, Circuit Judge:

     The Resolution Trust Corporation (RTC) sued several officers

and directors (collectively, "the defendants") of a failed savings

and loan institution alleging 1) negligence, 2) breach of fiduciary

duty and 3) gross negligence.       Under Fed.R.Civ.P. 12(b)(6), the

district court dismissed the negligence and breach of fiduciary

duty claims holding that they failed to state a claim on which

relief could be granted.       The district court then certified this

case pursuant to Fed.R.Civ.P. 54(b) and the RTC appeals.                We

AFFIRM.

                     FACTS AND PROCEDURAL HISTORY

     For purposes of this appeal, only a brief recitation of the

facts is needed.     On August 7, 1989, the Federal Home Loan Bank

Board closed South Savings and Loan Association ("South Savings"),

a   federally-insured,   state-chartered      institution    located    in

Slidell,    Louisiana.   The    Federal   Savings   and   Loan   Insurance

Corporation (FSLIC) was initially appointed as receiver, but, after

                                    1
the passage of the Financial Institutions Reform, Recovery and

Enforcement Act (FIRREA)1 on August 9, 1989, the RTC succeeded the

FSLIC as receiver.

     On August 9, 1992, the RTC filed the instant action against

the defendants who were former directors or officers of South

Savings.    The RTC sought to recover losses suffered by South

Savings allegedly caused by the defendants' negligence, breach of

fiduciary duties and gross negligence.

     The defendants moved to dismiss, under F.R.Civ.P. 12(b)(6),

the causes of action for negligence and breach of fiduciary duty

contending that these theories failed to state claims on which

relief could be granted.     In making these motions, the defendants

argued that section 1821(k) of FIRREA established gross negligence

as a national standard of liability for directors and officers of

federally-insured depository institutions.       The RTC, by contrast,

argued that federal common law survived the passage of FIRREA and

allows   actions   against   directors   and   officers   of   depository

institutions based on simple negligence.

     The district court found that section 1821(k) did set a

federal standard of care of gross negligence and that any federal

common law to the contrary was preempted.       As the RTC's negligence

and breach of fiduciary duty claims alleged lesser standards of

liability than gross negligence, the district court granted the

defendants' motions and dismissed those claims. The district court

then certified this case for interlocutory review pursuant to

     1
      Pub.L. No. 101-73, 103 Stat. 183 (1989).

                                   2
Fed.R.Civ.P. 54(b).

       Accordingly,      the   RTC    now       appeals    the   district    court's

dismissal of its causes of action against the defendants based on

simple negligence and breach of fiduciary duty contending that

despite section 1821(k), these causes of action remain viable under

the federal common law.         The defendants responded and were joined

by   the     American    Bankers     Association      and    Independent    Bankers

Association of America who filed an amicus curiae brief which

voiced that group's position that section 1821(k) created a federal

standard of gross negligence.              Lastly, in a supplemental round of

briefing, the RTC advances for the first time that even if it has

no causes of action for simple negligence or breach of fiduciary

duty under federal common law, those causes of action are available

under Louisiana state law.

                                     DISCUSSION

       The    issues    in   this   case    involve       questions   of   statutory

construction which we review under a de novo standard of review.

Cruz v. Carpenter, 893 F.2d 84, 86 (5th Cir.1990).

1. Federal Common Law

        The issue herein is whether the RTC can sue directors or

officers of federally-insured depository institutions for simple

negligence and breach of fiduciary duty under the federal common

law.    The district court held that the RTC could not because the

court found that federal common law had been preempted by the plain

language of section 1821(k) which the court held established gross

negligence as the federal standard of care.                  This section states,

                                            3
in pertinent part, that

     [a] director or officer of an insured depository institution
     may be held personally liable for monetary damages in any
     civil action by, on behalf of, or at the request or direction
     of the Corporation ... 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.       Nothing in this
     paragraph shall impair or affect any right of the Corporation
     under other applicable law.

12 U.S.C. § 1821(k).

     This issue of whether section 1821(k) preempts federal common

law has been addressed by only one other federal appellate court.2

That court, in RTC v. Gallagher, 10 F.3d 416 (7th Cir.1993),

concluded that section 1821(k) preempted federal common law and

that the sole cause of action against directors and officers under

federal law was for gross negligence.     This has also been the

conclusion of the majority of district courts that have addressed

this issue.3   For the reasons stated below, we agree with these

     2
      Two circuit courts have addressed the similar issue of
whether state common law is preempted by § 1821(k) and have held
that state common law standards which allow causes of action
against directors and officers of federally-insured institutions
based on simple negligence are not preempted. FDIC v. Canfield,
967 F.2d 443, 448 (10th Cir.) (en banc), cert. denied, --- U.S. -
---, 113 S. Ct. 516, 121 L. Ed. 2d 527 (1992); FDIC v. McSweeney,
976 F.2d 532, 538 (9th Cir.1992), cert. denied, --- U.S. ----,
113 S. Ct. 2440, 124 L. Ed. 2d 658 (1993). These courts concluded
that state law is preempted only to the extent that states
attempt to insulate directors and officers by establishing a more
forgiving standard of care than gross negligence. Canfield, 967
F.2d at 447; McSweeney, 976 F.2d at 539. We do not decide this
question today.
     3
      See FDIC v. Harrington, 844 F. Supp. 300, 304
(N.D.Tex.1994); FDIC v. Gonzalez-Gorrondona, 833 F. Supp. 1545,
1552 (S.D.Fla.1993); RTC v. Farmer, 823 F. Supp. 302, 307
(E.D.Pa.1993); FDIC v. Mintz, 816 F.Supp 1541, 1545
(S.D.Fla.1993); FDIC v. Bates, 838 F. Supp. 1216, 1220

                                4
courts and hold that section 1821(k) preempts federal common law.

      It is important to note at the outset the very limited role

of federal common law.    Federal courts are not common law courts

possessing a general power to develop and refine their own rules of

decision.   Wayne v. Tennessee Valley Authority, 730 F.2d 392, 398

(5th Cir.1984), cert. denied, 469 U.S. 1159, 105 S. Ct. 908, 83
L. Ed. 2d 922 (1985);    Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58
S. Ct. 817, 822, 82 L. Ed. 1188 (1938).         Rather, the direction of

national policy by the enactment of a federal rule is "generally,

and   purposely,   reserved   to     the   legislative   branch   of   the

government."   Wayne, 730 F.2d at 398.      Federal common law is merely

a necessary expedient "resorted to "in the absence of an applicable

Act of Congress' " when federal courts are forced to consider

issues which cannot be answered from federal statutes alone.

Milwaukee v. Illinois, 451 U.S. 304, 314, 101 S. Ct. 1784, 1791, 68
L. Ed. 2d 114 (1981) (quoting Clearfield Trust Co. v. United States,

318 U.S. 363, 367, 63 S. Ct. 573, 575, 87 L. Ed. 838 (1943)).            When

Congress does speak to an issue previously governed by federal

common law, the need to resort to this unusual lawmaking by the

federal courts disappears.         Milwaukee, 451 U.S. at 313-15, 101

(N.D.Oh.1993); RTC v. Chapman, No. 92-3188, slip op. (C.D.Ill.
Oct. 16, 1992); RTC v. Hecht, 818 F. Supp. 894, 901 (D.Md.1992);
FDIC v. Brown, 812 F. Supp. 722, 726 (S.D.Tex.1992); RTC v.
Gallagher, 800 F. Supp. 595, 602 (N.D.Ill.1992); FDIC v. Barham;
794 F. Supp. 187 (W.D.La.1991); FDIC v. Miller; 781 F. Supp.
1271, 1275 (N.D.Ill.1991); FDIC v. Mijalis, No. 89-1316, 1991 WL
501602 (W.D.La. October 31, 1991). Contra RTC v. Hess, 820
F. Supp. 1359, 1364 (D.Utah 1993); RTC v. Kidd, No. 93-CV-0059-J,
slip op. (D.Wyo. April 16, 1993); RTC v. Gibson, 829 F. Supp.
1110, 1118 (W.D.Mo.1993); FDIC v. Nihiser, 799 F. Supp. 904, 907
(C.D.Ill.1992).
5
S. Ct. at 1791.

           In assessing whether congressional legislation has preempted

a federal common law rule, "we start with the assumption that it is

for Congress, not federal courts, to articulate the appropriate

standards to be applied as a matter of federal law."            Id. at 317,

101 S.Ct. at 1792.       Even so, when Congress legislates in an area

governed by common law, it is not writing on a clean slate.

Rather, there is a longstanding principle that statutes which

invade the common law are to be read with a presumption favoring

the    retention    of   well-established    principles,    except   when   a

statutory purpose to the contrary is present.              United States v.

Texas, --- U.S. ----, ----, 113 S. Ct. 1631, 1634 (1993).               This

principle applies to federal common law as well as state common

law.       Id.

           In light of this principle, we note that it is not necessary

for Congress, in order to abrogate a federal common law provision,

to affirmatively proscribe the common law rule.              Milwaukee, 451
U.S. at 313-15, 101 S.Ct. at 1791.          However, Congress must "speak

directly" to the question addressed by the common law.           Id.   After

considering the plain language of section 1821(k), we find that

Congress did "speak directly" to the issue of the federal standard

of care for directors and officers of federally-insured depository

institutions thus preempting any resort to federal common law.4

       4
      We do not find this conclusion to be at odds with
McSweeney, 976 F.2d at 538. The issue before the McSweeney Court
was whether a state common law standard of simple negligence was
preempted and thus any language in that opinion to the effect
that federal common law was not preempted by § 1821(k) is merely

                                     6
          The     starting        point    for      any     question    of   statutory

interpretation is the statute itself.                     Absent a clearly expressed

legislative       intent     to    the     contrary,        "   "that   language    must

ordinarily be regarded as conclusive.' "                     Kaiser Aluminum & Chem.

Corp. v. Bonjorno, 494 U.S. 827, 110 S. Ct. 1570, 1575, 108 L. Ed. 2d
842 (1990) (quoting Consumer Product Safety Comm'n v. GTE Sylvania,

Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 2056, 64 L. Ed. 2d 766

(1980)).        In this case, the statute clearly provides that "[a]

director or officer ... may be held personally liable for monetary

damages in any civil action ... for gross negligence ... as such

terms are defined and determined under applicable State law."                        12

U.S.C. § 1821(k).       It is difficult to conceive how Congress could

more clearly "speak directly" to the issue of the standard of care

for     personal      liability           of       directors      and    officers    of

federally-insured depository institutions.                      As Congress has spoken

to this area, the need to resort to federal common law no longer

exists.    Thus, whatever the content of federal common law may have

been, it "must yield to Congress' clear statement that a gross

negligence standard of liability applies."                      Gallagher, 10 F.3d at

420.

       In urging us to reach a different conclusion, the RTC contends

that the gross negligence standard set out in section 1821(k) is

not exclusive.      Section 1821(k), the RTC points out, provides that

a director or officer "may" be held liable under a gross negligence

standard.       If that section were meant to be exclusive, the RTC

dicta.

                                               7
argues, it would have said "may only."       The RTC finds further

support for its argument in the general savings clause of section

1821(k) which specifically preserves any right the RTC may have

under any other applicable law. This other applicable law, the RTC

contends, includes federal common law which the RTC maintains

allows suits for simple negligence.

     The RTC's argument is without merit.   First, the word "may" as

used in the first sentence of section 1821(k) empowers the RTC to

bring a cause of action under the gross negligence standard set out

in the rest of the sentence.    The RTC, however, would have us read

that word, not as an empowerment, but rather as a qualification

which undermines the very cause of action the section creates.    We

agree with the Gallagher court, though, that this term was not

meant to qualify the substantive part of the section providing for

a gross negligence standard.5

     Next, we reject the RTC's reading of the savings clause. That

clause states that "[n]othing in this paragraph shall impair or

affect6 any right of the Corporation under other applicable law."

     5
      "Read in context, the word "may' refers to the right of the
[RTC] to bring an action under this section. "May' cannot
reasonably be read to qualify the gross negligence liability
standard and is therefore irrelevant to the substance of the
provision." Gallagher, 10 F.2d at 420 (quoting Canfield, 967
F.2d at 450 n. 4 (Borby, J., dissenting)).
     6
      The savings clause provides that the RTC's rights under
other applicable law will not be impaired or affected. This
clearly implies that the RTC's rights under some law is being
impaired or affected. FDIC v. Swager, 773 F. Supp. 1244, 1248
(D.Minn.1991). Under the RTC's construction of the savings
clause, though, there is no law that is impaired or affected
because all previous common law remains effective and § 1821(k)
merely grants the RTC an additional option. Had Congress

                                  8
12 U.S.C. § 1821(k).    If we were to construe that clause, as the

RTC suggests, to preserve federal common law actions for simple

negligence, then the explicit language of the first sentence of

section 1821(k) which enunciates a cause of action for gross

negligence would be rendered a nullity.           Why would the RTC ever

bring an action under section 1821(k), where it would have to prove

gross negligence, when it could bring an action under the federal

common law and only be required to prove simple negligence?

     Reading the savings clause to nullify the substantive portion

of the section would violate "the elementary canon of construction

that a statute should be interpreted so as not to render one part

inoperative."   Mountain States Tel. & Tel. Co. v. Pueblo of Santa

Ana, 472 U.S. 237, 249, 105 S. Ct. 2587, 2594, 86 L. Ed. 2d 168 (1985)

(quoting Colautti v. Franklin, 439 U.S. 379, 392, 99 S. Ct. 675,

684, 58 L. Ed. 2d 596 (1979));    In re Dyke, 943 F.2d 1435, 1443 (5th

Cir.1991).    Moreover, were we to accept the RTC's arguments, the

general   savings   clause   would       drown   out    the   more     specific

substantive   provision.7     This       would   be    contrary   to    another

intended this result it would have drafted the clause to read
that "[n]othing in this paragraph shall impair or affect any
right of the Corporation under any applicable law." Id.
Accordingly, for this reason also, we find the RTC's construction
of the savings clause to be contrary to the plain meaning of the
statute.
     7
      But see Chemetron Corp. v. Business Funds, 682 F.2d 1149
(5th Cir.1982), wherein this Court quoted with approval the
following language:

          The settled rule of statutory construction is that,
          where there is a special statutory provision affording
          a remedy for particular specific cases and where there
          is also a general provision which is comprehensive

                                     9
important   canon   of    construction        which    teaches    that    the    more

specific    controls     over   the    general.        Foreman    v.     Prudential

Insurance Co., 657 F.2d 717, 723 (5th Cir.1981).                       Finally, it

simply makes no sense that Congress would establish a cause of

action in one sentence and then render it a nullity in the next.

Accordingly we find that section 1821(k)'s retention of the RTC's

rights under "other applicable law" does not preserve a right to

bring a federal common law action for simple negligence in the face

of the gross negligence language of the substantive part of the

section.

     In    addition,     we   find    the    RTC's    arguments   based     on   the

statute's legislative history to be insufficient to change this

conclusion.     In making the argument that Congress intended a

federal common law action for simple negligence to remain viable

after the passage of section 1821(k), the RTC relies most heavily

on the Senate Report which provides that

     [Section 1821(k) ] enables the FDIC to pursue claims against
     directors or officers of insured financial institutions for
     gross negligence (or negligent conduct that demonstrates a
     greater disregard of a duty of care than gross negligence) or
     for intentional tortious conduct.... This subsection does not
     prevent the FDIC from pursuing claims under State law or under
     other applicable Federal law, if such law permits the officers
     or directors of a financial institution to be sued 1) for
     violating a lower standard of care, such as simple negligence,
     or 2) on an alternative theory such as breach of contract or

            enough to include what is embraced in the former, the
            special provision will prevail over the general
            provision, and the latter will be held to apply only to
            such cases as are not within the former.

     Id. at 1168, n. 51 (quoting Montague v. Electronic Corp. of
     America, 76 F. Supp. 933, 936 (S.D.N.Y.1948) (citations
     omitted)).

                                        10
      breach of fiduciary duty.

S.Rep. No. 19, 101st Cong., 1st Sess., 135th Con.Rec. S6912 (daily

ed. June 19, 1989).     This report, however, was not available when

the Senate initially voted on this bill.          Rather, it was published

two months after the Senate initially voted.               Id. at S6934.

Accordingly, this report is not entitled to substantial weight.

Gallagher, 10 F.3d at 421;       Clarke v. Securities Industry Ass'n,

479 U.S. 388, 407, 107 S. Ct. 750, 761, 93 L. Ed. 2d 757 (1987)

(refusing to give substantial weight to a statement made by the

sponsor of a law placed into the Congressional Record ten days

after the law was passed).

      Moreover, examination of all of the legislative history, and

scrutiny of the sequence of events leading up to the bill's

passage, calls into question the conclusion of that report.            This

law   initiated   in   the   Senate   and,   as   originally    drafted,   it

explicitly provided for the exact same standard of liability which

the RTC now implores us to judicially adopt.             Specifically, it

would have allowed the RTC to bring a claim "for any cause of

action available at common law, including, but not limited to,

negligence,   gross    negligence,     willful    misconduct,    breach    of

fiduciary duty...."     S. 774, § 214(n), 101st Cong., 1st Sess. at

105-06 (calendar N. 45, April 13, 1989).            In the Senate debate,

however, several senators expressed concern over this provision

fearing that it would deter qualified individuals from serving as

                                      11
directors and officers.8

      Senator Riegle, one of the bill's floor manager's, agreed that

this was a serious concern and thus he submitted an amendment which

deleted any reference to simple negligence.    135 Cong.Rec. S4451-

52.   This amendment, with only minor changes, would become section

1821(k).    Speaking in favor of the amendment, Senator Sanford

stated that

      these changes are essential if we are to attract qualified
      officers   and  directors   to   serve   in   our  financial
      institutions.... The amendment would permit the FDIC to bring
      an action or direct others to bring an action against the
      directors and officers of a financial institution if the
      director or officer acted with gross negligence or committed
      an intentional tort.

Id. at S4276-77.   This comment reflects the deletion of a simple

negligence standard from section 1821(k).

      Moreover, the House version of FIRREA, which was passed after

the Senate version and which was the version that emerged from the

conference committee and was voted into law, preserved the Senate's

removal of the simple negligence standard.    See Pub.L. No. 101-73,

103 Stat. 183 (Aug. 9, 1989), reprinted in 1989 U.S.C.C.A.N. 86.

Further, the House-Senate Conference report confirms that the

standard of liability under section 1821(k) is gross negligence:

      Title II preempts State law with respect to claims brought by
      the FDIC in any capacity against officers or directors of an
      insured depository institution.    The preemption allows the
      FDIC to pursue claims for gross negligence or any conduct that
      demonstrates a greater disregard of a duty of care, including

      8
      In particular, Senator Heflin argued for an amendment "to
ensure that financial institutions are able to attract strong and
capable individuals as directors and officers." 135 Cong.Rec.
S4264 (daily ed. April 19, 1989). Senator Conrad also supported
Senator Heflin's request for an amendment. Id.

                                 12
     intentional tortious conduct.9

H.R.Conf.Rep. No. 222, 101st Cong. 1st Sess. 393, 398 (1989),

reprinted in 1989 U.S.C.C.A.N. 432, 437. This conference report is

entitled to great deference inasmuch as it represents the final

statement of terms agreed upon by both houses of Congress.                      Davis

v. Lukhard, 788 F.2d 973, 981 (4th Cir.), cert. denied, 479 U.S.
868, 107 S. Ct. 231, 93 L. Ed. 2d 157 (1986).

     In sum, it appears that the sponsors of the bill feared that

they could not get the votes needed for passage if they attempted

to retain the standard of liability from the original draft of the

bill which would have explicitly allowed the RTC to bring simple

negligence actions under the federal common law.                       Therefore, the

sponsors dropped that standard and put in its place a federal gross

negligence standard of liability.

     This   conclusion      that    the    simple       negligence       standard   of

liability   was   removed    from    the       statute    is    also    supported   by

postenactment     legislative       history.            Although       post-enactment

legislative     history     cannot    be        given     the    same     weight    as

contemporaneous legislative history, we would be remiss if we did

     9
      A major concern of this section was the trend in the states
of passing legislation that insulated directors and officers from
liability unless they were reckless or committed willful
breaches. Hence, one purpose was of this section was to ensure
that the RTC could bring an action for gross negligence even in
the face of contrary state law. Thus, as explained by Senator
Riegle, this section preempts state law at least to the extent
that the state law disallows an action against a director or
officer for gross negligence or for any conduct reflecting a
higher disregard of a duty of care than gross negligence. 135
Cong.Rec. S4278-79 (daily ed. April 19, 1989). As the issue we
face is whether federal common law is preempted, the issue of
insulation by forgiving state legislation is not relevant.

                                          13
not consider it.   Cannon v. University of Chicago, 441 U.S. 677,

687 n. 7, 99 S. Ct. 1946, 1952, n. 7, 60 L. Ed. 2d 560 (1979).    In

this case, we note that there have been two subsequent attempts to

amend section 1821(k) to codify a simple negligence standard.10

These two attempts to reinstate a simple negligence standard belie

the RTC's position that the savings clause of section 1821(k), as

enacted, preserves a right to sue for simple negligence under

federal common law.

     At best, the RTC has shown that the legislative history to

FIRREA is muddled and sends conflicting signals.    However, this

history simply does not demonstrate the kind of "clearly expressed

legislative intention" needed to overcome the plain meaning of the

statute.   Kaiser Aluminum, 494 U.S. at 833-34, 110 S.Ct. at 1575.

     10
      In August 1991, the FDIC submitted to Congress a proposed
amended savings clause which provided that:

           Nothing in this subsection shall impair or affect any
           right of the [FDIC] under other applicable State or
           Federal law, including a right to hold such director or
           officer personally liable for negligence.

     Liebold, Federal Common Law: What & Where?, in Civil &
     Criminal Liability of Officers, Directors & Professionals:
     Bank & Thrift Litigation in the 1990's, 153, 161 n. 12
     (Practicing Law Institute 1991) (emphasis added). Then,
     after this proposal was withdrawn, Congressman Baker, at the
     request of the FDIC, submitted another proposed amendment
     which would have provided that there would have been no
     impairment of any right of the RTC

           under any provision of applicable State law or other
           Federal law, including any provision of common law or
           any law establishing the personal liability of any
           director or officer of an insured depository
           institution under any standard pursuant to such law.

     H.R. 3435, 102nd Cong., 1st Sess. § 228 (Comm. Markup Oct.
     18, 1991).

                                14
That "plain meaning" of the statute provides for gross negligence

as the federal standard of liability.       As this statute "speaks

directly" to the issue of the standard of liability for directors

and officers of federally-insured depository institutions, we hold

that federal common law in this area is preempted.    Milwaukee, 451
U.S. at 313-16, 101 S.Ct. at 1791-92.

2. Louisiana Law

          During the proceedings in the district court, and in its

first two appellate briefs before this Court, the RTC proceeded

with the understanding that the standard of liability for directors

and officers of depository institutions under Louisiana law was

gross negligence.     This was a well-founded belief as this Court

held exactly that in Louisiana World Exposition v. Federal Ins.

Co., 864 F.2d 1147, 1151 (5th Cir.1989).11       See also FSLIC v.

Shelton, 789 F. Supp. 1360, 1366-67 (M.D.La.1992) ("There is no

     11
      In Louisiana World Exposition, this Court was called on to
determine whether La.Rev.Stat.Ann. § 12:226(A) (West 1969)
described a simple negligence or a gross negligence standard of
liability. Louisiana World Exposition, 864 F.2d at 1149. This
statute established the standard of care applicable to directors
and officers of a nonprofit Louisiana corporation and it provides
that

             [o]fficers and directors shall be deemed to stand in a
             fiduciary relation to the corporation and its members,
             and shall discharge the duties of their respective
             positions in good faith, and with that diligence, care,
             judgment and skill which ordinarily prudent men would
             exercise under similar circumstances in like positions.

     § 12:226(A). Reading this language in light of Louisiana
     case law and the commentary, this Court held that simple
     negligence was not enough under this statute for personal
     liability to be assessed, but rather a showing of gross
     negligence was necessary. Louisiana World Exposition, 864
F.2d at 1151.

                                  15
claim under Louisiana law based on simple negligence against

officers and directors").    Further, the Louisiana legislature, in

1992, codified that standard by the enactment of Act 586 which

provides that:

     A director or officer of a financial institution shall not be
     held personally liable to the financial institution or the
     shareholders or members thereof for monetary damages unless
     the director or officer acted in a grossly negligent manner as
     defined in R.S. 6:703(9) or engaged in conduct that
     demonstrates a greater disregard of the duty of care than
     gross negligence, including intentional tortious conduct or
     intentional breach of the duty of loyalty.

La.Rev.Stat.Ann. 6:786(B) (West Supp.1994).

     In its supplemental brief to this Court, however, the RTC

switched gears and contended for the first time that the Louisiana

law applicable at the time of the events in this case was simple

negligence.   For support, the RTC looked to Mary v. The Lupin

Foundation, 609 So. 2d 184 (La.1992), which the RTC claimed rejected

the conclusion in Louisiana World Exposition and held that prior to

the enactment of Act 586, the Louisiana standard of care was simple

negligence.   Further, the RTC contended that Act 586 could not be

retroactively applied to defeat the RTC's rights which had vested

prior to its passage.12

     The RTC's contentions in its supplemental brief raise two

troubling questions.      The first is whether we can address this

     12
      Although section 2 of Act 586 specifically provides that
it is to be applied retroactively, the RTC argues that the this
would be ignored by the Louisiana courts because its claims were
vested before the enactment of Act 586. See Gilboy v. American
Tobacco Co., 582 So. 2d 1263, 1265 (La.1991) (A statute that
changes settled law relating to substantive rights only has
prospective effect).

                                  16
issue raised for the first time in the RTC's third round of

appellate briefing.     The second is whether we can give Act 586

retroactive effect.    Fortunately, we do not need to address these

issues because we find that the Louisiana standard of liability for

directors and officers is, and was, gross negligence.

       The RTC's reliance on Mary as contra authority to Louisiana

World Exposition is misplaced.           In Mary, the issue before the

Louisiana Supreme Court was not the standard of liability for

directors and officers, but rather it was the appropriate statute

of limitations to be applied to the action brought by Dr. Mary.

The action centered around the sale of the St. Charles General

Hospital which was owned by the Lupin Foundation.            Dr. Mary, a

director of the Lupin Foundation, sued certain of his codirectors

claiming that they had wrongfully and secretly received $5 million

in a side deal with the purchaser of St. Charles.       Mary, 609 So. 2d

at 186.

       Dr. Mary did not bring this suit until nine years after the

transaction, however. Thus, the defendants challenged the basis of

the cause of action brought by Dr. Mary.          If, as the defendants

argued, the facts alleged stated a claim under La.Rev.Stat.Ann. §§

12:219(C)   &   12:226(D)   for   unlawful   distribution   of   corporate

assets, then a two-year statute of limitations applied.            Id. at

187.    Thus, Dr. Mary's claim would be time-barred.        On the other

hand, if, as Dr. Mary contended, the facts alleged stated a claim

under La.Rev.Stat.Ann. § 12:226(A) for breach of fiduciary duty by

an officer or director, then a ten-year statute of limitations

                                    17
applied.     In that case, the claim would not be time-barred.              Id.

      Resolving this issue, the Louisiana Supreme Court held that

Dr. Mary's claims were not time-barred as the facts alleged stated

a claim under La.Rev.Stat.Ann. 12:226(A) and that the ten-year

statute of limitations applied.             Id. at 188.     In making this

determination, though, the Louisiana Supreme Court only decided the

basis of liability under the facts as alleged.            It did not decide

the issue of the standard of care under which personal liability

could be imposed against directors or officers under section

12:226(A) as that issue was not before the court.

      Accordingly, we see no conflict between Mary and Louisiana

World Exposition.     The Louisiana Supreme Court was not attempting

to set any standard of liability and we find no explicit or

implicit intention in Mary to reject the gross negligence standard

announced by this Court in Louisiana World Exposition, 864 F.2d at

1151.      Therefore, we adhere to the conclusion of the Louisiana

World Exposition Court and hold that even prior to the enactment of

Act   586,   the   standard   of    care    under   Louisiana   law   for   the

imposition of personal liability against directors and officers was

gross negligence.13

                                   CONCLUSION

      Section 1821(k) "speaks directly" to the issue of the standard

of liability of a director or officer of a federally-insured

      13
      As we conclude that the Louisiana standard of liability
mirrors the federal standard set in § 1821(k), we have no
occasion to determine whether § 1821(k) would preempt a more
onerous state standard and we express no opinion in that regard.
See supra note 2.

                                       18
depository        institution   thus    preempting   federal   common    law.14

Moreover, the federal standard of liability established by section

1821(k) is gross negligence as defined under applicable state law.

Gross negligence is also the standard to be applied under Louisiana

law.        Consequently, as neither federal law nor Louisiana law

recognizes a cause of action against directors or officers of

depository institutions for lesser breaches of duty than gross

negligence, the district court did not err in dismissing the RTC's

claims      for   simple   negligence    and   breach   of   fiduciary   duty.

AFFIRMED.

       14
      In light of this conclusion, we have no occasion to
consider whether absent § 1821(k) federal common law would govern
the duties owed their corporation by directors or officers of
state-chartered, federally-insured, financial institutions.

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