Federal Deposit Insurance Corporation, as Receiver for Carson River Community Bank v. Jacobs

Filing 103

ORDERED that the # 91 Motion to Reconsider is GRANTED IN PART and DENIED IN PART. The # 90 Order is AMENDED to note that Jacobs may amend his Answer as delineated in this Order, but not in additional ways. Signed by Judge Robert C. Jones on 1/10/2014. (Copies have been distributed pursuant to the NEF - DRM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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FEDERAL DEPOSIT INSURANCE CORP.,

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Plaintiff,
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v.
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JAMES MICHAEL JACOBS et al.,
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Defendants.
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_______________________________________ )

3:13-cv-00084-RCJ-VPC
ORDER

This case arises out of the failure of a bank due to alleged malfeasance by its directors and

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officers in approving bad loans. Pending before the Court is a Motion to Reconsider (ECF No. 91).

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For the reasons given herein, the Court grants the motion in part.

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I.

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On February 26, 2010, the Financial Institutions Division of the Nevada Department of

FACTS AND PROCEDURAL HISTORY

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Business and Industry revoked the charter of non-party Carson River Community Bank (the “Bank”)

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and appointed Plaintiff Federal Deposit Insurance Corp. (“FDIC”) as receiver pursuant to 12 U.S.C.

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§ 1821(c). (See Compl. ¶¶ 4–5, Feb. 22, 2013, ECF No. 1). FDIC sued Defendant James M. Jacobs

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in this Court for gross negligence and breach of fiduciary duties, alleging that approximately $3.6

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million of the Bank’s losses were attributable to Jacobs’s malfeasance as director and member of the

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Senior Loan Committee. (See id. ¶¶ 6–7). Plaintiff alleges that Jacobs used his position to obtain

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approval for loans to uncreditworthy borrowers so that those borrowers could satisfy existing
troubled loans owed to other banks. (See id. ¶¶ 8–10).

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The First Amended Complaint (“FAC”) added Bank officers/directors Charlie Glenn, Daniel

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Dykes, Byron Waite, and Richard McCole as Defendants. (See generally First Am. Compl., June 13,

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2013, ECF No. 24). Jacobs answered and filed crossclaims for indemnification and contribution

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against co-Defendants, a counterclaim against the FDIC for an unspecified cause of action arising out

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of the FDIC’s alleged failure to mitigate damages by selling Bank assets in a commercially

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reasonable manner, and third-party claims against Barbara Sikora, Franklin Bishop, Walter Cooling

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for indemnity and contribution, against Jake Huber and Lillian R. Dangott for breach of guaranty,

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against Kathy Grant and Charles N. Grant for breach of guaranty, and against William V. Merrill,

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Kathy Lynn Merrill, and the Bill and Kathy Merrill Family Trust for breach of guaranty.

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(See Answer, Aug. 2, 2013, ECF No. 35).

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Co-Defendants conditionally settled for a total of $37,500: Glenn ($12,500); Dykes

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($10,000); Waite ($7500); and McCole ($7500). (See Settlement Agreement 3 ¶ 2, June 13, 2013,

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ECF No. 40-1). The FDIC asked the Court to rule under state law that the settlement was made in

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good faith. The Court denied that motion. The FDIC also moved to strike certain affirmative

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defenses, to dismiss the counterclaim, and to strike two unauthorized surreplies. The Court granted

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those motions. Jacobs moved for leave to amend the Answer. The Court denied that motion.

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II.

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DISCUSSION
Jacobs asks the Court to reconsider in several respects. First, he asks the Court to amend the

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previous order to note that he had no interest in the banks to which the parties to whom the Bank

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gave allegedly bad loans owed existing loans. The FDIC in response appears to agree with Jacobs

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that he had no direct interest in those banks. Jacobs takes further issue with the remainder of the

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relevant allegations, but the FDIC stands by them. It appears as if paragraphs eight and nine of the

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Complaint consist of allegations that Jacobs used his position at the Bank to obtain approval for

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loans to uncreditworthy borrowers so that those borrowers could satisfy existing troubled loans owed

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to other (unidentified) banks. Paragraph ten appears to consist of separate allegations that Jacobs

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used his position to arrange for two Oklahoma banks, in which he did in fact have an interest, to

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purchase fractional interests in one of the bad loans already described, under terms that ensured the

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Oklahoma banks’ interests in the loans would be satisfied before the Bank’s interest. The Court may
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have previously conflated the allegations in paragraphs eight through ten to mean that the

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unidentified banks from paragraphs eight and nine included the two Oklahoma banks mentioned in

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paragraph ten, in which Jacobs is in fact alleged to have an interest. The allegations are not

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completely clear, but the Court will not reconsider as to this issue. The parties may further explain

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and defend the allegations at the summary judgment and trial stages, but the Court will not amend its

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previous order to satisfy the parties as to the Court’s interpretation of the allegations where not

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relevant to the outcome of the previous motions.

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Second, Jacobs accepts the Court’s dismissal of the unenumerated counterclaims the Court

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perceived for the FDIC’s failure to monitor the Bank for compliance with the law, for the FDIC’s

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failure to mitigate damages, and for defamation. But he asks the Court to reconsider dismissal of

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another unenumerated counterclaim for recoupment that the Court did not separately address. The

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FDIC responds that recoupment is a legal theory that permits a defendant to plead “recoupment” as

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an affirmative defense where equity so requires, where a statute of limitations bars an affirmative

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claim that would offset the plaintiff’s damages. The FDIC notes that the recoupment defense must

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be based upon a putative affirmative counterclaim, and Plaintiff has no such putative affirmative

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counterclaims that have not been dismissed on the merits. Recoupment is an affirmative defense to a

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contract permitting a breaching party to offset damages to the extent the plaintiff has also breached.

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See Schettler v. RalRon Capital Corp., 275 P.3d 933, 941 (Nev. 2012). The present Complaint is

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based entirely in tort, and the defense of recoupment therefore simply has no application. Even if it

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did, there are no independent counterclaims that have survived on the merits, and the mitigation of

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damages defense has been separately pled. Even if it had not been, the Court would be required to

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treat the recoupment counterclaim as a mitigation defense. See Fed. R. Civ. P. 8(c)(2). The Court

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will not reconsider in this regard.

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Third, Plaintiff asks the Court to reconsider permitting him to file an amended answer to

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more particularly identify the legal bases of his defenses, i.e.: (1) to note that comparative

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negligence, not contributory negligence, applies; (2) to identify the statutes upon which his statutes

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of limitations defenses are based; (3) to identify a statute governing several versus joint-and-several

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liability; and (4) to identify the statute governing his business-judgment-rule defense. The FDIC
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does not object. The Court grants the motion in this regard. Although Jacobs need not plead his

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defenses with such particularity—merely identifying the nature of a defense is enough under Rule

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8(c)(1), and a court will at the summary judgment and trial stages closely examine the relevant

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law—the Court will grant him leave to do so.

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CONCLUSION

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IT IS HEREBY ORDERED that the Motion to Reconsider (ECF No. 91) is GRANTED IN

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PART and DENIED IN PART. The Order (ECF No. 90) is AMENDED to note that Jacobs may amend

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his Answer as delineated in this Order, but not in additional ways.

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IT IS SO ORDERED.
DATED: Thisth30th day of December, 2013.
Dated this 10 day of January, 2014.

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_________________________________
ROBERT C. JONES
United States District Judge

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