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Neathery v. Winfield

February 25, 2010

IVAN NEATHERY, INDIVIDUALLY AND AS A SHAREHOLDER OF MERIDIAN BANK, PLAINTIFF,
v.
CLAY WINFIELD, INDIVIDUALLY AND AS A MEMBER OF THE BOARD OF DIRECTORS OF MERIDIAN BANK, TIMOTHY KEISER, INDIVIDUALLY AND AS A MEMBER OF THE BOARD OF DIRECTORS OF MERIDIAN BANK, BRAD RENCH, INDIVIDUALLY AND AS THE PRESIDENT OF MERIDIAN BANK, AND THE FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR MERIDIAN BANK, DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on Defendant Federal Deposit Insurance Corporation (hereinafter "FDIC") and Defendant Brad Rench's (hereinafter "Rench") Motions to Dismiss (Docs. 10, 11). Plaintiff Ivan Neathery (hereinafter "Neathery") filed a Response (Doc. 18), to which FDIC filed a Reply (Doc. 19) and a Motion to Submit Supplemental Authority (Doc. 20). For the following reasons, the Court, inter alia, GRANTS in part and DENIES in part FDIC's Motion to Dismiss (Doc. 10) and Rench's Motion to Dismiss (Doc. 11).

As a preliminary matter, the Court notes that the motions of FDIC and Rench are substantively identical; as such, the Court will address them simultaneously. Both motions fail to specify a rule under which they filed their motions to dismiss; therefore, the Court assumes the grounds for the motions are as follows. The Court assumes that the motion to dismiss for failure to fulfill the pre-suit demand requirement is a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) (hereinafter "Federal Rule 12(b)(1)"). Meanwhile, the Court assumes that the motion to dismiss the alleged derivative claim is a motion to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6) (hereinafter "Federal Rule 12(b)(6)"). As discussed infra, despite this procedural distinction, the Court's factual assumptions remain the same.

BACKGROUND

I. Motions to Dismiss Generally

For motions made under Federal Rule 12(b)(6), the court must accept all factual allegations in the complaint as true and draw all reasonable inferences from those facts in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)); Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir. 2007). The same standard is applicable when a party makes a motion to dismiss under Federal Rule 12(b)(1). See, e.g., Hammond v. Clayton, 83 F.3d 191, 192 (7th Cir. 1996); Garcia v. Copenhaver, Bell & Assocs., 104 F.3d 1256, 1261 (11th Cir. 1997); United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994).

II. Facts

Rench, the president of Meridian Bank, Clay Winfield (hereinafter "Winfield"), a member of the board of directors of Meridian Bank, and Timothy Keiser (hereinafter "Keiser"), also a member of the board of directors of Meridian Bank, allowed Meridian Bank to extend loans to themselves to purchase real estate at an interest rate less than they would receive with any other bank. These individuals were able to extend these loans by fraudulently pledging security.

Furthermore, the trio caused Meridian Bank to purchase real estate at an amount more than five times the amount of the fair market value. Neathery alleges that these individuals abused their respective positions and inside information and engaged in conduct that benefitted them on a personal basis, to the detriment of Meridian Bank and its shareholders.

On October 10, 2008, the director of the Illinois Department of Financial and Professional Regulation, Division of Banking, closed Meridian Bank and appointed the FDIC as Receiver. (See Doc. 2, Exh. A). The FDIC accepted its appointment and has thereafter succeeded to all rights, titles, and powers and privileges of Meridian Bank pursuant to 12 U.S.C. § 1821 (c)(3)(A), including the right to bring a derivative claim against the corporation. (See Doc. 2, Exh. B). Neathery, an individual shareholder of Meridian Bank, did not receive notice of the receivership prior to filing his complaint.

III. Relevant Procedural Posture

On May 28, 2009, Neathery filed a six-count Complaint (Doc. 2, Exh. C.) in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, seeking recovery for alleged misconduct on the part of certain members of Meridian Bank's board of directors and the bank president.

On August 18, 2009, FDIC filed a notice of substitution of parties in order to substitute the FDIC for Meridian Bank. On August 19, 2009, FDIC timely removed the state court action to the United States District Court for the Southern District of Illinois.*fn1 (Doc. 2). The ...


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