O'Neal Holdings, LP et al v. Bowden et al

Filing 21

ORDER granting 6 Motion to Dismiss, since the Plaintiffs no longer have either a claim or standing, the Court DISMISSES them from this action; granting FDIC-R's 6 Motion to Substitute Party. Federal Deposit Insurance Corporation (As Receiver for Darby Bank & Trust Co.) terminated. Signed by Chief Judge Lisa G. Wood on 9/22/2015. (ca)

3n the Eniteb btatto flitritt Court
for the Soutbern flhtrtct of Oeorgta
'abannab Jibiion
O'NEAL HOLDINGS, LP, et al.,
Plaintiffs,
V.

WALTER B. BOWDEN, et al.,
CV 415-84
Defendants,
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for
Darby Bank & Trust Co.,
Intervenor Plaintiff
ORDER

Before the Court is the Federal Deposit Insurance
Corporation's Motion for Substitution and Motion to Dismiss
(Dkt. no. 6) . For the reasons set forth below, the Court

GRANTS

both motions.
BACKGROUND

The Georgia Department of Bank and Finance shut the doors
of Darby Bank & Trust Company ("Darby") on November

12,

2010

(Dkt. no. 1-2 at 6) .' Darby had been wholly owned by DBT Holding
("DBT"), which filed for bankruptcy on April 4, 2011, and was
When weighing a motion to dismiss, the Court accepts as true the facts as
set forth in the complaint and draw all reasonable inferences in the
plaintiff's favor. Randall v. Scott, 610 F.3d 701, 705 (11th Cir. 2010).

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dissolved the following year.

Id.

Each of the Plaintiffs in

this case owned stock in DBT at the time that Darby was closed.
Id.
The Plaintiffs filed this action in state court on November
25, 2014, alleging that the negligence of Darby's directors had
caused them to suffer damages of more than $2.5 million. Id. at
10. The Federal Deposit Insurance Corporation, as receiver of
Darby ("FDIC-R"), sought to intervene in the action as a
plaintiff, and the state court granted its request (Dkt. no. 1-1
at 1).
After being named a plaintiff, FDIC-R removed the action to
this Court (Dkt. no. 1) . It now seeks to be substituted for the
Plaintiffs as the real party in interest, and it also seeks the
dismissal of the Plaintiffs from the action due to a lack of
standing (Dkt. no. 6) . The defendants do not oppose either the
substitution or the dismissal of the Plaintiffs (Dkt. no. 8)
DISCUSSION

When the Federal Deposit Insurance Corporation ("FDIC") is
appointed receiver of a bank, it succeeds to "all rights,
titles, powers, and privileges of the insured depository
institution, and of any stockholder, member, accountholder,
depositor, officer, or director of such institution with respect
to the institution and the assets of the institution."
U.S.C. § 1821(d) (2) (A) (i) .
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Thus, once appointed receiver of a
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bank, the FDIC owns all derivative claims against the Bank's
officers. See Lubin v. Skow, 382 F. App'x 866, 870 (11th Cir.
2010) . A party that can establish a direct harm, however, may
bring a separate claim.
The parties in this case agree that because the FDIC-R is
the receiver of Darby, it owns all derivative claims against the
Bank's officers (See Dkt. nos. 6-1 at 6; 16 at 3) . They
disagree whether the Plaintiffs' claim in this action is direct
or derivative.
"[W]hether the claims alleged in the Complaint are direct
or derivative is a legal, not factual, determination." Lukin,
382 F. App'x at 871. "State law determines whether a cause of
action is direct or derivative." Hantz v. Belyew, 194 F. App'x
897, 900 (11th Cir. 2006). Under Georgia law, "[w]hether a
claim is derivative or direct is determined by reference to the
allegations of the claim." Holland v. Holland Heating & Air
Conditioning, Inc., 432 S.E.2d 238, 242 (Ga. Ct. App. 1993).
"[A] shareholder must be injured in a way which is different
from the other shareholders or independently of the corporation
to have standing to assert a direct action." Grace Bros. v.
Farley Indus., Inc., 450 S.E.2d 814, 816 (Ga. 1994); see also
Patel v. Patel, 2014 WL 5025821, at

*5 (S.D. Ga. Oct. 7, 2014)

(finding that "only a derivative action is allowed [when] the
Plaintiff's claims are founded upon injuries which are no
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different from that suffered by the corporation"'). A plaintiff
who fails to allege that he suffered an individual injury "ha[s]
no standing to bring an individual rather than a derivative
claim." Holland, 432 S.E.2d at 242. Finally, if the behavior
of corporate officers reduces the value of an investment, the
resulting harm to an investor is "decidedly a derivative one."
Lukin, 382 F. App'x at 872 (applying Georgia law)
Here, the Plaintiffs' claim is derivative.

In the

Complaint, the Plaintiffs allege that they suffered the harm of
being invested in a bank operated by negligent directors that
then failed (See Dkt. no. 1-2 at 9-10) . This is the same harm
suffered by DET and its investors. See id. at 7-8. Nowhere do
the Plaintiffs distinguish between the harm they suffered and
the harm suffered by every other investor in DBT. 2

The

Plaintiffs acknowledge that they did not know about the
defendants' alleged behavior until after FDIC-R filed its own
suit, which also indicates the derivative nature of their claim.
Id. at 8. Thus, the Court finds that the Plaintiffs' claim of
negligence is a derivative claim.
The Plaintiffs argue that the Eleventh Circuit's decision
in Medkser v. Feingold, 307 F. App'x 262 (11th Cir. 2008),
2

The Plaintiffs do allege that "[t]he actions of the Defendants have caused
each Plaintiff a harm separate and apart from those damages sustained by the
shareholders of DBT Holding or Darby Bank." (Dkt. no. 1-2 at 8). However,
the Plaintiffs provide nothing as a factual basis for this conclusory
statement. See Ashcroft v. Igbal, 556 U.S. 662, 681 (2009) (noting that
conclusory allegations "are not entitled to be assumed true.").

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supports the categorization of their claim as a direct action
(Dkt. no. 16 at 4-5) . They are incorrect. While the Plaintiffs
are correct that the Eleventh Circuit distinguished between
direct and derivative actions, see Medkser, 307 F. App'x at 26465, the court also determined that the plaintiffs had brought
direct actions only because they alleged injury that other
investors did not suffer (i.e., fraud), id. at 265. The court
also found that bringing a claim related to a loss in value of
investment was "indistinguishable" from claims brought by other
investors. Id. In this case, the Plaintiffs have alleged only
that they suffered damages when the negligent behavior of
Darby's directors devalued their investment in DBT (Dkt. no. 1-2
at 9-10) . This claim is indistinguishable from claims that
could be brought by other DBT shareholders. Just as in Medkser,
the Complaint reveals no allegations of fraud or
misrepresentation but only that of negligence. 3
The Plaintiffs also argue that they were not similarly
situated when compared to other injured shareholders (Dkt. no.
16 at 5-6) .

They claim that their rights as shareholders "are

different from those other shareholders in

[DBT]."

Id. at 5.

The Plaintiffs do argue that the defendants made false statements to them
about their lending practices and that these false statements induced the
Plaintiffs to invest in Darby (Dkt. no. 16 at 5) .
But this claim appears
nowhere in the Complaint.
The Plaintiffs raise it for the first time in
their opposition to FDIC-R's Motion. Being bound by the Complaint, the Court
cannot consider this freshly raised claim. See Gilmour v. Gates, McDonald &
Co., 382 F.3d 1312, 1313 (11th Cir. 2004) (holding that new claims cannot be
raised for the first time in response to a summary judgment motion)
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I

As support, they point to their purchase of preferred rather
than common stock. Id. at 6. But the Plaintiffs' allegations
do not indicate how the purchase of preferred rather than common
stock inflicted a different harm upon them. Although it was
different in scope, their investment in DET was reduced in value
as a result of the same alleged mismanagement of Darby's
directors. This sort of harm is "decidedly a derivative one."
See Lukin, 382 F. App'x at 872.
Finally, the Plaintiffs argue that the injury they suffered
was "separate and distinct" from the injuries suffered by other
DBT shareholders (Dkt. no. 16 at 6) . In arguing this, the
Plaintiffs provide no details about what different injuries they
suffered. In any case, they argue only that they were "uniquely
vulnerable," id., but not that they were uniquely injured. The
Complaint is likewise silent on what separate and distinct
injuries befell the Plaintiffs. Such conclusory allegations are
insufficient to allow the Court to find their harm to be direct
rather than derivative.
CONCLUSION

The Plaintiffs have failed to allege any harms unique to
themselves. Because their alleged injuries are no different
than those suffered by DBT, the Court finds this action to be a
derivative action. As a derivative action, it is owned by FDIC-

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Therefore, the Court

GRANTS

FDIC-R's Motion to Substitute

as the real party in interest (Dkt. no. 6) . Since the
Plaintiffs no longer have either a claim or standing, the Court
DISMISSES them from this action.

This 22ND day of September 2015.

LISA GODHEY WOOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

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