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Federal Deposit Ins. Corp. v. Loudermilk

The business judgment rule generally precludes claims sounding in ordinary negligence against officers and directors of both corporations and banks for their business decisions, except to the extent that those decisions are shown to have been made without deliberation, without the requisite diligence to ascertain and assess the facts and circumstances upon which the decisions are based or in bad faith.

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As the receiver of the Buckhead Community Bank, the Federal Deposit Insurance Corporation sued nine former officers and directors of the bank,1 alleging that they were negligent with respect to the making of loans, which led the bank, the FDIC says, to sustain nearly $22 million in losses. The defendants moved to dismiss the lawsuit, arguing that the business judgment rule relieves officers and directors of any liability for ordinary negligence. The FDIC responded that such a business judgment rule is no part of the common law in Georgia, and even if it were, it does not apply to bank officers and directors, insofar as the statutory law in Georgia explicitly requires bank officers and directors to exercise ordinary diligence and care. Unable to “discern clear and controlling precedent from the Supreme Court of Georgia,” the United States District Court for the Northern District of Georgia certified the following question to us:

Does the business judgment rule in Georgia preclude as a matter of law a claim for ordinary negligence against the officers and directors of a bank in a lawsuit brought by the FDIC as receiver for the bank

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