Client Alert: Fourth Circuit Issues Decision on Fiduciary Duties of Directors and Officers Under N.C. Law
Monday, August 24, 2015
This Client Alert (see link above), authored by the Wyrick RobbinsBanking & Financial Institutions practice group, discusses an important decision under North Carolina law issued in August 2015 by the Fourth Circuit Court of Appeals in a case originally brought by the Federal Deposit Insurance Corporation (FDIC) against the directors and officers of a failed North Carolina bank. The Fourth Circuit affirmed a federal district court ruling that the FDIC had failed to prove gross negligence on the part of the bank's directors but also held that the lower court had improperly granted defendants' motion for summary judgment on the FDIC's claims of ordinary negligence and breach of fiduciary duty by the bank's officers. The case now returns to the district court level for a full trial on those claims.
The Client Alert notes that the case has far-reaching implications for the fiduciary duty of care for directors and officers of North Carolina corporations, particularly regarding the procedural application of the business judgment rule. The authors suggest that, given the appellate court's ruling that corporate directors and officers can be held liable for ordinary negligence, North Carolina companies might want to review the exculpatory provisions in their articles of incorporation, particularly as to whether the provisions extend to both directors and officers.