Appeals from the United States District Court for the Southern District of California. D.C. No. CV-93-0992-IEG. D.C. No. CV-93-0509-IEG. Irma E. Gonzalez, District Judge, Presiding.
Before: Diarmuid F. O'Scannlain and Stephen S. Trott, Circuit Judges; Bruce M. Van Sickle,*fn** District Judge. Opinion by Judge O'Scannlain.
O'SCANNLAIN, Circuit Judge:
In this first of two related cases*fn1 arising out of the failure of the Imperial Savings Association, we must decide whether a court-approved settlement of a shareholder derivative suit precludes the receiver from bringing mismanagement claims against former officers and directors.
The Federal Deposit Insurance Corporation ("FDIC"), as receiver for failed savings and loan Imperial Savings Association ("ISA"), appeals the district court's summary judgment for ISA's former officers and directors in the FDIC's actions for negligence and breach of fiduciary duty (the "mismanagement claims"). The district court concluded that claim preclusion barred the FDIC from obtaining judgment against the officers and directors because of a court-approved, class action shareholder derivative suit, Shields v. Thygerson,*fn2 which settled shortly before federal regulators seized ISA.
ISA, a San Diego-based savings and loan, was a wholly-owned subsidiary of Imperial Corporation of America ("ICA"), a financial institution holding company. ICA and ISA shared the same board of directors. The Shields settlement resolved consolidated shareholder derivative and federal securities class actions involving ICA's investments in junk bonds and consumer loans. These investments arose from transactions with Michael Milken and Drexel Burnham Lambert in the late 1980s.
Appellees Barclay Davidson, Mark L. Kline, Michael Lea, and Anthony E. Maniscalco II (collectively "the officers") were ISA officers between 1987 and 1989 and were allegedly involved in imprudent investments and transactions. Appellee Gary M. Cypres served on the ICA and ISA boards as an outside director from March 1987 to December 1988.*fn3
Davidson claims that he was only an officer (vice president) of ISA between May and July of 1988, and that he was "a mere employee" (marketing representative) when the allegedly imprudent loans were arranged prior to January 1988. According to the FDIC's complaint, Kline was "Executive Officer in charge of First Financial Equities Corporation," an ISA subsidiary "involved in acquisition of real estate, and was a member of the Executive Lending and Investment Committee, which was responsible for credit risk underwriting of all lending investments" at ISA. In the Shields complaint, Lea was named as a "Senior Vice-President Financial and Economic Analysis" of ICA. Maniscalco took part in a $16 million loan made in 1988 by ISA to Global Motors, the importer of the Yugo automobile - the loan went into default. Although Maniscalco was not named in the Shields complaint, the complaint referred to the defaulted Global Motors loan, which is also cited in the FDIC's allegations against Maniscalco.
The Shields class action and derivative complaint alleged violations of federal securities laws, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and relevant state laws. The complaint specifically alleged that between 1987 and 1989, officers and directors of ICA and ISA engaged in imprudent financial policies, including inadvisable loans.
The parties prepared a Stipulation of Settlement, which provided that American Casualty Company would make a $12.5 million payment to an escrow fund, of which $10 million would be "deemed" to be in settlement of the class actions and $2.5 million would be "deemed" to be in settlement of the derivative actions. ICA was obligated to contribute an additional $500,000 to the escrow fund, creating a total settlement fund of $13 million for payment to the plaintiffs in the class actions. The settlement released the directors and officers of ICA and ISA from any claims that might have been brought against them by ICA or ISA.
On December 15, 1989, the ICA Board approved the Stipulation of Settlement.*fn4 The settlement included ICA, ISA, and all ICA subsidiaries and affiliates in the definition of "Signatory Defendants." At a hearing on February 22, 1990, U.S. Magistrate Judge Harry McCue approved the settlement under Federal Rules of Civil Procedure 23 and 23.1 and signed the final judgment.*fn5 Magistrate Judge McCue concluded that (1) the notice provided to shareholders was "the best notice practicable under the circumstances"; (2) the settlement was "the product of good faith arm's length negotiations"; and (3) the settlement was "fair, reasonable and adequate as to" ICA and the shareholders.
On the same day that Magistrate Judge McCue approved the settlement, the United States Office of Thrift Supervision ("OTS") ordered the seizure of ISA and placed it into conservatorship under the RTC. OTS Order No. 90-375 (Feb. 22, 1990). On February 28, 1990, ICA filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code.
In its corporate capacity and as receiver for ISA, the Resolution Trust Corporation ("RTC") filed actions against the officers, as well as the directors and other executives of ISA, to recover damages for the losses suffered by ISA as a result of the imprudent transactions that took place between 1987 and 1989. On June 22, 1994, the district court granted the officers' and directors' motion for summary judgment on the two mismanagement claims (negligence and breach of fiduciary duty), concluding that the claims were barred by claim preclusion. Pursuant to Federal Rule of Civil Procedure 54(b), the district ...