Vieira v. Anderson et al

Filing 42

ORDER re defendants' 21 MOTION to Dismiss; 28 ORDER dismissing case; and 33 OPINION of the Fourth Circuit Court of Appeals. Defendants' motion to dismiss is DENIED. Signed by Honorable David C Norton on 3-14-2013. (gcle, 3-14-13)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
MICHELLE L. VIEIRA, Trustee for the Estate )
of Beach First National Bancshares, Inc.,
)
)
Plaintiff,
)
)
vs.
)
)
MICHAEL BERT ANDERSON, ORVIS
)
BARTLETT BUIE, RAYMOND E.
)
CLEARY, III, THOMAS FUHNER, MICHAEL)
D. HARRINGTON, JOE N. JARRETT, JR., )
RICHARD E. LESTER, LEIGH AMMONS
)
MEESE, RICK H. SEAGROVES, DON J.
)
SMITH, SAMUEL ROBERT SPANN, JR., B. )
LARKIN SPIVEY, JR., WALTER E.
)
STANDISH, III, and JAMES C. YAHNIS, as )
Directors of Beach First National Bancshares, )
Inc., and WALTER E. STANDISH, III, as
)
President and Chief Executive Officer of
)
Beach First National Bancshares, Inc.,
)
)
Defendants.
)
______________________________________ )

Civil No. 2:11-cv-0055-DCN

ORDER

This matter is before the court on defendants’ motion to dismiss. Plaintiff, as
Chapter 7 trustee for Beach First National Bancshares, Inc. (Bancshares), alleges that
defendants breached their fiduciary duties and acted negligently in their capacities as
Bancshares directors and officers when they allowed Bancshares’ equity interest in a
Myrtle Beach office building to be subordinated to the interest of another entity.
Defendants counter that plaintiff has failed to properly plead her claim.
For the reasons stated below, the court denies defendants’ motion to dismiss.

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I. BACKGROUND
The following facts are drawn from the complaint. Bancshares is a bank holding
company organized under the laws of the State of South Carolina. Beach First National
Bank, Myrtle Beach, South Carolina (“Bank”), was Bancshares’ wholly-owned
subsidiary and primary asset. The Bank operated was incorporated under the laws of the
United States and subject to examination by the United States Office of the Comptroller
of the Currency (OCC).
Defendants are all former Bancshares directors and officers, who allegedly
appointed themselves as directors and officers of the Bank, thus directly and indirectly
controlling the Bank’s management and operation. The Bank struggled throughout 2008
and 2009 and ultimately failed. On April 9, 2010, the OCC closed the bank and named
the Federal Deposit Insurance Corporation (FDIC) as its receiver. The FDIC then sold,
or approved the sale and transfer of, all of the Bank’s assets to The Bank of North
Carolina. The Bank no longer exists.
On May 14, 2010, Bancshares filed a voluntary bankruptcy petition 11 U.S.C. § 7
in the United States Bankruptcy Court for the District of South Carolina. On or about
May 17, 2010, plaintiff was appointed as the Chapter 7 trustee of Bancshares’ estate, and
on September 29, 2010, she filed an adversary proceeding against defendants, alleging
breach of fiduciary duty and negligence claims and seeking actual, consequential, and
punitive damages.
On December 1, 2010, defendants moved to dismiss the suit and to withdraw the
reference to the bankruptcy court. Among other things, defendants argued that plaintiff
lacked standing because derivative claims are reserved, by statute, to the FDIC. On April

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29, 2011, this court granted the motion to withdraw the reference to the bankruptcy court.
The court held a hearing on the motion to dismiss and, by a written order issued on
August 25, 2011, dismissed the entire complaint on the grounds that plaintiff lacked
standing to bring her claims.
Plaintiff timely appealed the dismissal to the Fourth Circuit. On December 28,
2012, the appellate court affirmed in part and reversed in part the district court’s
dismissal. The Fourth Circuit found that plaintiff only had standing to bring one of her
claims, which relates to Bancshares’ ownership interest in an office building located in
Myrtle Beach. The Fourth Circuit remanded the case so that this court could consider the
merits of plaintiff’s remaining claim.
II. MOTION TO DISMISS STANDARD
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss for
“failure to state a claim upon which relief can be granted.” When considering a Rule
12(b)(6) motion to dismiss, the court must accept the plaintiff’s factual allegations as true
and draw all reasonable inferences in the plaintiff’s favor. See E.I. du Pont de Nemours
& Co. v. Kolon Indus., 637 F.3d 435, 440 (4th Cir. 2011). But “the tenet that a court
must accept as true all of the allegations contained in a complaint is inapplicable to legal
conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
On a motion to dismiss, the court’s task is limited to determining whether the
complaint states a “plausible claim for relief.” Id. at 679. A complaint must sufficient
contain factual allegations in addition to legal conclusions. Although Rule 8(a)(2)
requires only a “short and plain statement of the claim showing that the pleader is entitled
to relief,” “a formulaic recitation of the elements of a cause of action will not do.” Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The “complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “Facts pled that are
‘merely consistent with’ liability are not sufficient.” A Soc’y Without a Name v.
Virginia, 655 F.3d 342, 346 (4th Cir. 2011) (quoting Iqbal, 556 U.S. at 678).
III. DISCUSSION
Plaintiff’s sole remaining claim relates to Bancshares’ ownership interest in an
LLC that holds real property. The complaint states:
As directors and officers of Bancshares, the Defendants knowingly
participated in a breach of their fiduciary duties and obligations of good
faith and loyalty to Bancshares by failing to execute their responsibilities
in manner consistent with the best interests of Bancshares, including, upon
information and belief and without limitation, the following:
...
Bancshares formed a limited liability company with a law firm. The
purpose of the LCC [sic] was to construct and own an office building in
Myrtle Beach, South Carolina. Bancshares and the Bank’s offices were
located in the building. Bancshares owns two-thirds of the LLC and the
law firm owns one-third. Upon information and belief, the Defendants,
acting as directors and officers of Bancshares, and in contrary to standard
and prudent practices, caused Bancshares and/or the Bank’s loans or
interest in the LLC to be subordinated to the law firm’s equity interests in
the LLC, to the ultimate detriment and loss of Bancshares’ equity interest
in the LLC.
Compl. ¶¶ 28, 28(p). Defendants move to dismiss this claim on the grounds that: (i) it
fails to meet the pleading standards required by Twombly and Iqbal; (ii) it lacks the
allegations of bad faith, dishonesty, or incompetence required by the business judgment
rule; and (iii) it does not properly allege that defendants’ action caused plaintiff’s injury.
While not a model of detail, the allegations that remain in plaintiff’s complaint
nevertheless state a claim for relief that is plausible on its face. Plaintiff has alleged that

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defendants improperly subordinated Bancshares’ interest in the LLC to the law firm’s
interest, thereby causing Bancshares to suffer a loss. While the complaint does not
elaborate on the transactions through which defendants may have improperly
subordinated Bancshares’ interest in its real estate holding, it nevertheless contains
sufficient factual matter to survive a motion to dismiss.
As counsel noted at the hearing, defendants’ business judgment rule and causation
arguments are entwined with and flow from their position that the pleadings are
insufficient. Because the court has found that the pleadings survive the court’s scrutiny
at this stage of the litigation, these arguments are unavailing, but will surely be repeated
at the summary judgment stage.
IV. CONCLUSION
For the reasons above, the court DENIES defendants’ motion to dismiss. The
parties are DIRECTED to jointly submit a proposed scheduling order to the court within
fifteen (15) days of the date of this order.

AND IT IS SO ORDERED.

DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
March 14, 2013
Charleston, South Carolina

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