due to a conflict between national policy and the application of state law. Id. at 1790. Yet, "federal common law is a necessary expedient, and when Congress addresses a question previously governed by a decision rested on federal common law, the need for such an unusual exercise of lawmaking by federal courts disappears." Id. at 1791 (citations omitted).
The enactment of § 1821(k) by Congress has eviscerated the need for courts to construct law regarding a federal standard of liability for directors and officers of failed institutions. Congress has now chosen the standard of gross negligence as the federal standard of liability, and any previously existing federal law in this area is preempted as a result.
The Corporation argues that the federal common law standard of negligence still remains viable because of the "savings" clause of § 1821(k). We disagree. As Judge Holderman stated in FDIC v. Miller, 781 F. Supp. 1276 (N.D. Ill. 1991):
By passing Section 1821(k), however, Congress "spoke directly" to the issue which those cases dealt. Congress has now expressly defined the magnitude of negligence which would give rise to a federal cause of action against officers and directors of federally insured financial institution. . . . If Section 1821(k) were construed in the way urged by the FDIC, with federal common law negligence causes of action preserved, the main body of the provision requiring "gross negligence" would have no effect. Consequently, the federal gross negligence standard Section 1821(k) establishes would be purposeless, since a federal negligence standard would already exist and be preserved by the savings clause.
781 F. Supp at 1276. We find that the passage of § 1821(k) preempted all previously existing federal common law, and created a federal cause of action solely for gross negligence.
Next, we must review the substance of the allegations in the complaint to determine whether they present causes of action under state law, which is not preempted by § 1821(k), or federal law, which is now set forth exclusively in § 1821(k). Concordia and Concor, its subsidiary, were federally chartered, federally regulated, federally insured thrifts which were organized under federal law. Moreover, Concordia was declared insolvent and placed into conservatorship and ultimately receivership pursuant to federal law. In addition, Concordia was placed into receivership with a federal agency. In essence, Concordia was a creature of federal law "from its cradle to its corporate grave." Rettig v. Arlington Heights Federal Savings & Loan Association, 405 F. Supp. 819, 823 (N.D. Ill. 1975). As a result, there is no basis for any state law claims in this case. Therefore, all claims will be construed as arising under federal law.
We now must address the sufficiency of the federal law claims. As we stated above, the enactment of FIRREA by Congress displaced previously existing federal common law, and established gross negligence as the federal standard of officer and director liability. Therefore, Counts I and IV (negligence) and Counts II and VI (breach of fiduciary duty) must be dismissed for failure to state a claim upon which relief may be granted, since the conduct they allege falls below the minimum level of culpability established by Congress in § 1821(k).
III. Whether Actions Taken By Defendants Are Protected By the Business Judgment Rule
Defendants next argue that their conduct and decisions while serving on Concordia's Board of Directors are protected by Illinois' business judgment rule, which provides that directors and officers who have been diligent and careful in executing their duties will not be held personally liable for errors in judgment. See Stamp v. Touche Ross & Co., 1992 Ill.App. LEXIS 363 (Ill.App. 1st Dist. 1992). However, as we previously determined, the Corporation's claims all sound in federal law rather than in state law. Therefore, Illinois' business judgment rule has no application. Moreover, as discussed above, the previously existing federal common law, which required officers and directors to exercise the degree of care which ordinarily prudent and diligent persons would exercise,
has been replaced by § 1821(k), which sets a federal liability standard of gross negligence. Moreover, since the claims for negligence and breach of fiduciary duty have been dismissed, any argument relating to the applicability of the business judgment rule is moot.
IV. Whether the Corporation Has Adequately Stated a Claim for Breach of Contract
Defendants argue that the Corporation has failed to adequately allege a breach of contract claim in Counts IV and VIII because these counts essentially allege breach of fiduciary duty, which is properly plead as a tort claim rather than a contract claim. In FDIC v. Greenwood, 739 F. Supp. 450, 452-53 (C.D. Ill. 1989), the court specifically held that allegations of breach of fiduciary duty by the directors of a bank could not stand as the basis for a breach of contract action. 739 F. Supp. 452-53. See also FDIC v. Dannen, 747 F. Supp. 1357, 1362 (W.D. Mo. 1990); Sarraga v. Girod Vela & Co., Inc., 649 F. Supp. 11 (D.P.R. 1986). Counts IV and VIII clearly state contract claims based on breaches of fiduciary duty. There are no allegations regarding any written contract. Moreover, in discussing the terms of the purported contract between the parties, the complaint merely alleges that "there were express or implied contracts between Concordia and the defendants requiring defendants to faithfully, properly, and with due care discharge their duties as directors, officers, and/or employees in return for the salaries and/or directors' fees which they were paid." (Complaint P 84). This is simply a statement of the defendants' fiduciary duties to the institution, rather than a claim for breach of contract.
In its response, the Corporation concedes that Counts IV and VIII essentially allege breach of fiduciary duty, yet asks us to follow the holding in Hughes v. Reed, 46 F.2d 435 (10th Cir. 1931), which stated that breaches of fiduciary duty can form the basis for a breach of contract claim. 46 F.2d at 440-41. However, we choose to follow the approach taken in this Circuit and hold that claims for breach of fiduciary duty must be pleaded as tort claims rather than contract claims.
As discussed above, the tort claims for breach of fiduciary duty in counts II and VI were dismissed because there is no basis for state law claims in this case, and federal law requires a minimum culpability of gross negligence. Therefore, any arguments which the Corporation makes regarding any alleged breach of fiduciary duty must necessarily fall under the claims alleging gross negligence. Because we find that the allegations in Counts IV and VIII state tort claims rather than claims for breach of contract, Counts IV and VIII are dismissed for failure to state a claim upon which relief may be granted.
V. Whether the Corporation Can Recover Economic Damages
Finally, defendants argue that the Corporation cannot recover economic damages on its tort claims. In support of their argument, defendants rely on the Illinois common law as set forth in Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 435 N.E.2d 443 (1982). Since we have determined above that there is no basis for any state claims in this case, and because the remaining tort claims are governed by the federal statute, Illinois law is not relevant. Rather, the rules governing the damages to which the Corporation is entitled are set forth in 12 U.S.C. § 1821(l), which states: "In any proceedings related to any claim against an insured depository institution's director, officer, . . . recoverable damages determined to result from the improvident or otherwise improper use or investment of any insured depository institutions' assets shall include principal losses and appropriate interest." 12 U.S.C. § 1821(l). We therefore reject defendants' argument that Illinois law can be applied to restrict the amount of damages which the Corporation can recover on its federal law claims under the statute.
For the reasons set forth above, Counts I, II, IV, V, VI, and VIII are dismissed. The gross negligence claims stated in Counts III and VII remain.
Charles P. Kocoras, United States District Judge
Dated: July 9, 1992