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Federal Deposti Insurance Corp. v. Kime

United States District Court, S.D. Indiana, Indianapolis Division

March 28, 2014

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Irwin Union Bank and Trust Company, as Receiver for Irwin Union Bank, FSB, Plaintiff,
v.
BRADLEY J. KIME, DUNCAN BURDETTE, KIM ROERIG, and MICHAEL WATERS, Defendants

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[Copyrighted Material Omitted]

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For FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Irwin Union Bank and Trust Company, as Receiver for Irwin Union Bank, FSB, Plaintiff: Byron E. Leet, Sara Veeneman, PRO HAC VICE, WYATT TARRANT & COMBS LLP, Louisville, KY; Robert Edgar Craddock, Jr., PRO HAC VICE, WYATT TARRANT & COMBS, LLP, Memphis, TN; John W. Woodard, Jr., WYATT TARRANT & COMBS LLP, Louisville, KY.

For BRADLEY J. KIME, Defendant: James A. Knauer, KROGER GARDIS & REGAS, LLP, Indianapolis, IN; Kevin Dale Koons, Steven E. Runyan, KROGER GARDIS & REGAS LLP, Indianapolis, IN.

For DUNCAN BURDETTE, Defendant: Linda C. McFee, R. Pete Smith, PRO HAC VICE, MCDOWELL RICE SMITH & BUCHANAN, Kansas City, MO.

For KIM ROERIG, Defendant: Jennifer M. McHugh, PRO HAC VICE, COZEN O'CONNOR, West Conshohocken, PA.

For MICHAEL WATERS, Defendant: Conor P. Flynn, Tracy A. DiFillippo, PRO HAC VICE, ARMSTRONG TEASDALE, LLP, Las Vegas, NE; Kevin R. Stolworthy, ARMSTRONG TEASDALE, LLP, Las Vegas, NE.

OPINION

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Hon. Tanya Walton Pratt, Judge United States District Court Southern District of Indiana.

ENTRY ON MOTION TO DISMISS

This matter is before the Court on the Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted (Dkt. 25) filed by Defendants Bradley J. Kime, Duncan Burdette, Kim Roerig, and Michael Waters (collectively, " Defendants" ). For the reasons set forth below, the Defendants' Motion is DENIED.

I. BACKGROUND

The Federal Deposit Insurance Corporation (" FDIC" ) initiated this action as Receiver for two banks--Irwin Union Bank and Trust Company and Irwin Union Bank, FSB (collectively, " the Banks" ). The Defendants are identified as four officers serving the Banks between 2003 and 2009. (Dkt. 1 at ¶ ¶ 9-12.) The FDIC accuses the Defendants of approving 19 loans between 2005 and 2009 that cost the Banks more than $42 million in losses. ( Id. at 1.)

Although the facts alleged are extensive, they can fairly be summarized as follows: the Defendants violated the Banks' lending policies, disregarded deficiencies in underwriting, failed to thoroughly evaluate borrowers' credit-worthiness, and failed to heed bold warning signs of risk en route to approving loans that never were likely to be repaid. The errors alleged include, for example:

o approving loans without demanding ( id. at ¶ 42) or appraising ( id. at ¶ 75) collateral;
o failing to valuate borrowers' sources of income ( id. at ¶ 57);
o lending to borrowers with speculative repayment sources ( id. at ¶ 64);
o declining to enforce the Banks' capitalization standards ( id. at ¶ 66);
o failing to obtain ( id. ¶ 67) or properly review ( id. at ¶ 93) borrowers' financial records;
o relying on incomplete credit memos from loan officers ( id. at ¶ 82);
o advancing additional funds despite knowing that the borrowers' original

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loan was under-collateralized and would not be repaid ( id. at ¶ 134); and
o lending without requiring sufficient guarantees ( id. at ¶ 150).

The Banks failed on September 18, 2009. ( Id. at ¶ 17.) The same day, the Indiana Department of Financial Institutions and the Office of Thrift Supervision appointed the FDIC Receiver for the Banks under the Financial Institutions Reform, Recovery, and Enforcement Act (" FIRREA" ). ( Id. at ¶ 8.) On September 17, 2012, the parties executed an agreement to toll any applicable statutes of limitations until further notice. ( See Dkt. 21-1.) According to the FDIC, Defendant Waters terminated the Tolling Agreement on April 22, 2013. (Dkt. 35 at 17.) On May 13, 2013, the FDIC filed its complaint seeking to recover the Banks' losses under FIRREA and Indiana law on grounds of negligence, gross negligence, and breach of fiduciary duties. (Dkt. 1.)

II. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must take the facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Mosley v. Klincar, 947 F.2d 1338, 1339 (7th Cir. 1991). The complaint must contain only " a short and plain statement of the claim showing that the pleader is entitled to relief," Fed.R.Civ.P. 8(a)(2), and there is no need for detailed factual allegations. Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007) (citation omitted). Nevertheless, the statement must " give the defendant fair notice of what the claim is and the grounds upon which it rests," and the " [f]actual allegations must be enough to raise a right to relief above the speculative level." Id. (citations and quotations omitted). " Although this does 'not require heightened fact pleading of specifics,' it does require the complaint to contain 'enough facts to state a claim to relief ...


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