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RESOLUTION TRUST CORP. v. CHAPMAN

August 9, 1995

RESOLUTION TRUST CORPORATION, PLAINTIFF,
v.
HENRY CHAPMAN, JOHN CRAWFORD, EARL CUNION, ROBERT GILMORE, DAVID GOULD, ROBERT JAMIESON, NATHANIEL LEDOUX, JAMES LEWIS, HOWARD SAUDER, ROBERT STREHLOW, JR., DONALD ULLMAN, R. DEAN WESTERVELT, DEFENDANTS.



The opinion of the court was delivered by: Richard Mills, District Judge:

OPINION

Will the adverse domination doctrine be applied in Illinois? If so, does it toll the statute of limitations? Let us see.

I. Background

Security Savings and Loan Association, F.A. located in Peoria, Illinois, (Security) was a federally chartered savings and loan which was placed into receivership by the Office of Thrift Supervision on August 17, 1989. The Office of Thrift Supervision appointed the Resolution Trust Corporation (RTC) as Security's receiver. On August 14, 1992, the RTC filed this lawsuit against the former President, Senior Vice-President and Directors of Security, alleging negligence and gross negligence, breach of fiduciary duty and breach of contract. This Court dismissed the negligence, breach of fiduciary duty and breach of contract claims, and that dismissal has been affirmed by the United States Court of Appeals for the Seventh Circuit on interlocutory appeal. Resolution Trust Corp. v. Chapman, 29 F.3d 1120 (7th Cir. 1994).

After receiving the Seventh Circuit's mandate, the RTC filed an Amended Complaint alleging gross negligence against the Senior Vice-President and the former Directors.*fn1 The Senior Vice-President, Richard Robinson, died shortly before the Amended Complaint was filed and the parties subsequently agreed to dismiss all claims against Mr. Robinson. Accordingly, all remaining Defendants were formerly Directors of Security at various times between 1971 and 1989.

When ruling on Defendants' original motion to dismiss, the Court rejected Defendants' argument that several of the RTC's claims were barred by the statute of limitations. This Court held that under the adverse domination doctrine, all of the RTC's claims had been timely brought. In making this determination, the Court relied upon federal common law. This ruling can no longer stand under O'Melveny & Myers v. FDIC, ___ U.S. ___, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994).

In O'Melveny, the Supreme Court reaffirmed the position first announced in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), that "[t]here is no federal general common law." O'Melveny, ___ U.S. at ___, 114 S.Ct. at 2053 (quoting Erie, 304 U.S. at 78, 58 S.Ct. at 822). The Court went on to find that under the comprehensive framework of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. 101-73, 103 Stat. 183, if Congress did not specifically address an issue in FIRREA, that particular issue is to be governed by state law.

  In answering the central question of displacement
  of [state] law, we of course would not contradict
  an explicit federal statutory provision. Nor would
  we adopt a court-made rule to supplement federal
  statutory regulation that is comprehensive and
  detailed; matters left unaddressed in such a
  scheme are presumably left subject to the
  disposition provided by state law.

O'Melveny, ___ U.S. at ___, 114 S.Ct. at 2054 (citations omitted).

There is no provision in FIRREA adopting the adverse domination doctrine. Accordingly, under O'Melveny, the adverse domination doctrine can only be used to toll the statute of limitations in this case if Illinois law would apply the doctrine. On this point, both parties agree.

The parties disagree, however, as to whether or not Illinois law recognizes the adverse domination doctrine.

II. Motion to Dismiss

In ruling on a motion to dismiss, the Court "must accept the well pleaded allegations of the complaint as true. In addition, the Court must view these allegations in the light most favorable to the plaintiff." Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). Although a complaint is not required to contain a detailed outline of the claim's basis, it nevertheless "must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985). Dismissal is not granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

III. Analysis

A. The Claims

The RTC's gross negligence claims are based on two lending programs entered into by Security with the approval of the Board of Directors. The first lending program involved the purchase of $10.6 million in low-grade consumer automobile paper. This lending program took place between May 1987 and January 1988. Defendants do not claim ...


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