                              PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                            No. 14-2078


FEDERAL DEPOSIT INSURANCE      CORPORATION,   as   Receiver   for
Cooperative Bank,

                Plaintiff - Appellant,

          v.

RICHARD ALLEN RIPPY; JAMES D. HUNDLEY; FRANCES PETER FENSEL,
JR.; HORACE THOMPSON KING, III; FREDRICK WILLETTS, III;
DICKSON B. BRIDGER; PAUL G. BURTON; OTTIS RICHARD WRIGHT,
JR.; OTTO C. BUDDY BURRELL, JR.,

                Defendants – Appellees.

------------------------------

NORTH CAROLINA COMMISSIONER OF BANKS,

                Amicus Curiae,

THE CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA;
AMERICAN   ASSOCIATION     OF   BANK   DIRECTORS;     INDEPENDENT
COMMUNITY    BANKERS    OF    AMERICA;   THE    CLEARING    HOUSE
ASSOCIATION, LLC; AMERICAN BANKERS ASSOCIATION; ALABAMA
BANKERS ASSOCIATION; ALASKA BANKERS ASSOCIATION; ARIZONA
BANKERS    ASSOCIATION;      ARKANSAS    BANKERS    ASSOCIATION;
CALIFORNIA     BANKERS      ASSOCIATION;     COLORADO     BANKERS
ASSOCIATION;    CONNECTICUT    BANKERS   ASSOCIATION;    DELAWARE
BANKERS ASSOCIATION; FLORIDA BANKERS ASSOCIATION; GEORGIA
BANKERS ASSOCIATION; HAWAII BANKERS ASSOCIATION; HEARTLAND
COMMUNITY BANKERS ASSOCIATION; IDAHO BANKERS ASSOCIATION;
ILLINOIS BANKERS ASSOCIATION; ILLINOIS LEAGUE OF FINANCIAL
INSTITUTIONS; INDIANA BANKERS ASSOCIATION; IOWA BANKERS
ASSOCIATION; KANSAS BANKERS ASSOCIATION; KENTUCKY BANKERS
ASSOCIATION; LOUISIANA BANKERS ASSOCIATION; MAINE BANKERS
ASSOCIATION; MARYLAND BANKERS ASSOCIATION; MASSACHUSETTS
BANKERS ASSOCIATION; MICHIGAN BANKERS ASSOCIATION; MINNESOTA
BANKERS   ASSOCIATION;     MISSISSIPPI    BANKERS   ASSOCIATION;
MISSOURI BANKERS ASSOCIATION; MONTANA BANKERS ASSOCIATION;
NEBRASKA BANKERS ASSOCIATION; NEVADA BANKERS ASSOCIATION;
NEW HAMPSHIRE BANKERS ASSOCIATION; NEW JERSEY BANKERS
ASSOCIATION; NEW MEXICO BANKERS ASSOCIATION; NEW YORK
BANKERS ASSOCIATION; NORTH CAROLINA BANKERS ASSOCIATION;
NORTH DAKOTA BANKERS ASSOCIATION; OHIO BANKERS LEAGUE;
OKLAHOMA BANKERS ASSOCIATION; OREGON BANKERS ASSOCIATION;
PENNSYLVANIA   BANKERS   ASSOCIATION;   PUERTO    RICO  BANKERS
ASSOCIATION;   RHODE   ISLAND   BANKERS    ASSOCIATION;   SOUTH
CAROLINA   BANKERS    ASSOCIATION;    SOUTH    DAKOTA   BANKERS
ASSOCIATION; TENNESSEE BANKERS ASSOCIATION; TEXAS BANKERS
ASSOCIATION; VERMONT BANKERS ASSOCIATION; VIRGINIA BANKERS
ASSOCIATION; UTAH BANKERS ASSOCIATION; WASHINGTON BANKERS
ASSOCIATION; WASHINGTON FINANCIAL LEAGUE; WEST VIRGINIA
BANKERS ASSOCIATION; WISCONSIN BANKERS ASSOCIATION; WYOMING
BANKERS ASSOCIATION,

                Amici Supporting Appellees.



Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. Terrence W. Boyle,
District Judge. (7:11-cv-00165-BO)


Argued:   May 13, 2015                  Decided:   August 18, 2015


Before GREGORY and HARRIS, Circuit Judges, and HAMILTON, Senior
Circuit Judge.


Affirmed in part, reversed in part, vacated in part, and
remanded by published opinion. Judge Gregory wrote the opinion,
in which Judge Harris and Senior Judge Hamilton joined.


ARGUED:    James    Scott   Watson,    FEDERAL   DEPOSIT   INSURANCE
CORPORATION,       Arlington,      Virginia,      for     Appellant.
Thomas E.    Gilbertsen, VENABLE LLP, Washington, D.C., for
Appellees.      ON BRIEF: Mary L. Wolff, Douglas A. Black,
WOLFF ARDIS,    P.C.,   Memphis,   Tennessee;   Colleen  J.   Boles,
Assistant    General    Counsel,   Kathryn   R.   Norcross,   Senior
Counsel, Steven C. Morrison, Counsel, FEDERAL DEPOSIT INSURANCE
CORPORATION,       Arlington,      Virginia,      for     Appellant.
Ronald R. Glancz, Meredith L. Boylan, VENABLE LLP, Washington,

                                 2
D.C.; Camden R. Webb, Kacy L. Hunt, WILLIAMS MULLEN P.C.,
Raleigh, North Carolina, for Appellees.         Katherine M.R. Bosken,
Raleigh, North Carolina, for Amicus North Carolina Commissioner
of Banks. Kate Comerford Todd, Steven P. Lehotsky, U.S. CHAMBER
LITIGATION CENTER, INC., Washington, D.C.; John K. Villa,
Kannon K.    Shanmugam,     Ryan   Scarborough,      Richard    Olderman,
WILLIAMS & CONNOLLY LLP, Washington, D.C., for Amicus The
Chamber   of   Commerce     of   the    United    States    of   America.
Michael A.F. Johnson, Nancy L. Perkins, Elliott C. Mogul,
Joanna G. Persio, ARNOLD & PORTER LLP, Washington, D.C., for
Amici American Bankers Association, Alabama Bankers Association,
Alaska   Bankers     Association,     Arizona    Bankers     Association,
Arkansas Bankers Association, California Bankers Association,
Colorado Bankers Association, Connecticut Bankers Association,
Delaware Bankers Association, Florida Bankers Association,
Georgia   Bankers     Association,     Hawaii    Bankers     Association,
Heartland    Community     Bankers     Association,      Idaho    Bankers
Association, Illinois Bankers Association, Illinois League of
Financial   Institutions,      Indiana    Bankers    Association,    Iowa
Bankers   Association,     Kansas    Bankers    Association,     Kentucky
Bankers   Association,     Louisiana     Bankers    Association,    Maine
Bankers Association, Maryland Bankers Association, Massachusetts
Bankers Association, Michigan Bankers Association, Minnesota
Bankers Association, Mississippi Bankers Association, Missouri
Bankers Association, Montana Bankers Association, Nebraska
Bankers Association, Nevada Bankers Association, New Hampshire
Bankers Association, New Jersey Bankers Association, New Mexico
Bankers   Association,     New   York    Bankers    Association,    North
Carolina Bankers Association, North Dakota Bankers Association,
Ohio Bankers League, Oklahoma Bankers Association, Oregon
Bankers Association, Pennsylvania Bankers Association, Puerto
Rico Bankers Association, Rhode Island Bankers Association,
South   Carolina    Bankers    Association,    South     Dakota   Bankers
Association,    Tennessee     Bankers    Association,     Texas   Bankers
Association,     Utah    Bankers     Association,      Vermont    Bankers
Association, Virginia Bankers Association, Washington Bankers
Association, Washington Financial League, West Virginia Bankers
Association, Wisconsin Bankers Association, and Wyoming Bankers
Association.        Matthew     P.    Previn,     Joseph     J.   Reilly,
Ali M. Abugheida, BUCKLEY SANDLER LLP, Washington, D.C., for
Amici American Association of Bank Directors, Independent
Community    Bankers    of    America,     and   The    Clearing    House
Association, LLC.




                                   3
GREGORY, Circuit Judge:

       The Federal Deposit Insurance Corporation, as Receiver for

Cooperative Bank (“FDIC-R”), brought this civil action against

the several officers and directors of a failed North Carolina

bank, Cooperative Bank (“Cooperative” or the “Bank”), alleging

that    the     officers       and    directors          were   negligent,       grossly

negligent, and breached their fiduciary duties, resulting in the

failure of the Bank.            In this summary judgment appeal, the FDIC-

R argues that the district court erred in finding that North

Carolina’s         business    judgment      rule     shields    the      officers   and

directors from allegations of negligence and breach of fiduciary

duty, and that there was insufficient evidence to support claims

of gross negligence.           For the reasons that follow, we vacate the

district      court’s      award     of    summary       judgment    to    the    Bank’s

officers      on    the    FDIC-R’s       claims    of    ordinary     negligence    and

breach of fiduciary duty and remand those claims for further

proceedings.         We also reverse and remand the district court’s

order   denying       as   moot    the     FDIC-R’s      cross-motion      for   summary

judgment, as well as its order denying as moot the FDIC-R’s

motion to exclude the declaration of Robert T. Gammill and the

attached exhibits.            We affirm the district court’s judgment with

respect to the remaining claims.




                                             4
                                  I.

     Cooperative first opened in Wilmington, North Carolina in

1898 as a community bank and operated as a thrift until 1992.

As such, it focused on single-family housing loans.             In 1992,

the Bank converted to a state-chartered savings bank regulated

by the FDIC. 1    Cooperative became a state commercial banking

institution in 2002, following the board of director’s decision

to increase the Bank’s assets from $443 million to $1 billion by

2005.    The Bank’s growth strategy focused on commercial real

estate lending.




     1 The FDIC in its corporate capacity is an insurer and
federal regulator, and it performs a separate function from the
FDIC in its capacity as receiver of failed banks.   We refer to
the FDIC in its corporate capacity simply as the “FDIC,” and in
its receiver capacity as the “FDIC-R” throughout this opinion.
As the Second Circuit aptly explained:

     Created by Congress to “promot[e] the stability of and
     confidence in the nation’s banking system,” Gunter v.
     Hutcheson, 674 F.2d 862, 870 (11th Cir.), cert.
     denied, 459 U.S. 826 (1982), the FDIC is authorized by
     statute to function in two separate and distinct
     capacities:     “the   Corporation   shall    insure  the
     deposits of all insured banks as provided in this
     chapter,”   12   U.S.C.    § 1821(a)(1)    (1988);   “the
     Corporation as receiver of a closed national bank
     . . . shall have the right to appoint an agent or
     agents to assist it in its duties as such receiver,”
     12 U.S.C. § 1822(a) (1988). . . . [T]hey are discrete
     legal entities . . . .

FDIC v. Bernstein, 944     F.2d   101,   106   (2d   Cir.   1991)   (first
alteration in original).


                                  5
       The     FDIC    and       the     North       Carolina     Commission         of        Banks

(“NCCB”), as Cooperative’s regulators, performed annual reviews

of the Bank.

       During       July    and    August       of    2006,     the    FDIC    conducted         an

annual examination of Cooperative as of June 30, 2006.                                    At the

conclusion of the examination, the FDIC issued the Bank’s 2006

Report of Examination (“2006 FDIC Report”).                                 Cooperative was

scored    in    each       of    the    following      categories:           Capital,          Asset

Quality,       Management,         Earnings,         Liquidity,       and    Sensitivity         to

Market       Risk.         The     examination         categories       collectively             are

commonly referred to by the acronym CAMELS, and are scored on

scale from 1-5, with “1” being the best and “5” being the worst.

Cooperative received a “2” for each of its CAMELS ratings.                                       The

majority       of    the    observations         in    the     2006     FDIC      Report        were

positive.       However, the Report identified deficiencies in credit

administration         and       underwriting,         which    the     FDIC      ascribed       to

oversight weaknesses.              Additional problems with audit practices,

risk    management,          and       liquidity      were     also    discussed          in    the

Report.        Bank    management         certified      that     the       Report   had       been

reviewed, and the appropriate officials agreed to address the

issues.

       In September 2007, the NCCB conducted its annual review of

Cooperative as of June 30, 2007.                         At the conclusion of the

examination,         the    NCCB       issued    its    2007    Report       of   Examination

                                                 6
(“2007 NCCB Report”).          Like the 2006 FDIC Report, the 2007 NCCB

Report    awarded     the     Bank    a   rating     of     “2”    for   each   CAMELS

category.       Overall,      the    NCCB    concluded      that     Cooperative   was

functioning in a satisfactory manner.                     However, the 2007 NCCB

Report also observed that Cooperative’s management had been slow

to correct deficiencies and weaknesses identified in previous

examinations.           Such         deficiencies         included       weak   credit

administration practices, the use of stale financial information

in the loan approval process, and problematic audit practices.

Again, Bank management promised to address the issues.

       Cooperative additionally underwent an external loan review

in 2007, which was conducted by Credit Risk Management, L.L.C.

(“CRM”).      CRM reviewed a sample of the loans originating during

or after April 2006.             At the conclusion of the review, CRM

issued    a   written       report    (“2007      CRM   Report”).         The   Report

indicated that the reviewed loans had received passing grades.

CRM also observed that credit file documentation for the sample

loans was generally sufficient, and that the Bank had recently

hired additional credit analysts.                  However, CRM also suggested

that credit file documentation should be updated periodically to

more     accurately     reflect        the       changing    status       of    various

construction projects.

       CRM conducted a second external loan review in June 2008,

which examined new loans made since its 2007 review.                       CRM issued

                                             7
a written report of its findings (“2008 CRM Report”).                          The 2008

CRM Report criticized Cooperative for deficiencies relating to

loan    documentation       and     monitoring,     and     for     use       of    stale

financial information.             The Report reflected the downward trend

in grades given to the sample loans.                 Unlike the 2007 review,

many of the loans reviewed in 2008 received failing grades.

       In November 2008, the FDIC and the NCCB conducted a joint

annual review of Cooperative as of September 30, 2008.                             At the

conclusion of the review, the agencies issued the 2008 Report of

Examination     (“2008     Joint     Report”).      Cooperative         was    given    a

rating of “5,” the lowest possible rating, in all but one of the

CAMELS categories.         The sole exception was Sensitivity to Market

Risk, in which Cooperative was awarded a “4.”                      The 2008 Joint

Report was extremely critical, and faulted the Bank for its high

commercial     real   estate       loan   concentration.          The   Report       also

noted that Cooperative’s management had ignored or inadequately

addressed       previously           raised       concerns         about           credit

administration,           underwriting         practices,       and        liquidity.

Cooperative’s overall condition was traced back to the decision

to aggressively pursue commercial real estate lending in its

effort to grow the Bank’s assets.

       On   March   12,    2009,    the   FDIC   issued     a   Cease     and      Desist

Order, to which the Bank, the NCCB, and the FDIC all consented.

The Order set forth certain actions that the Bank was required

                                           8
to     take,    including        developing          a    capital       restoration          plan.

Cooperative was ultimately unable to comply with the terms of

the Cease and Desist Order, and on June 19, 2009, the NCCB

closed the Bank and named the FDIC-R as the receiver.                                 According

to   a    Material   Loss       Review        conducted         by    the    FDIC     Office      of

Inspector General, the FDIC-R suffered losses of $216.1 million

due to the Bank’s failure.

         The FDIC-R filed a complaint against Cooperative in August

2011,     alleging       that    the     named       officers          and    directors       were

negligent,       grossly        negligent,          and    breached          their     fiduciary

duties     in   their     approval       of    78    residential            lot    loans    and    8

commercial       loans    between       January          2007    and    April       2008.      The

complaint seeks damages from each named officer and director in

amounts ranging from $4.4 million to over $33 million.                                         The

Appellees       responded       with    a     motion      to     dismiss      arguing,       among

other     things,    that       North       Carolina       law       does    not     contemplate

negligence claims against officers and directors and, in any

event, the North Carolina business judgment rule shielded them

from claims of negligence and breach of fiduciary duty.                                    FDIC v.

Willetts (Willetts I), 882 F. Supp. 2d 859, 862 (E.D.N.C. 2012).

They     also   argued     that    the       FDIC-R       had    failed      to    state     facts

sufficient to support its claims of gross negligence.                                  Id.     The

district court denied the motion to dismiss.



                                                9
      The Appellees thereafter filed an answer.            Their answer

included   several   affirmative   defenses,   including   that   “[t]he

FDIC[-R]’s claims are barred in whole or in part by its failure

to mitigate damages,” and are also barred “in whole or in part

by the doctrine of superseding or intervening cause.”          J.A. 42-

43.

      After lengthy discovery, the Appellees filed motions for

summary judgment on all of the FDIC-R’s claims against them.

The FDIC-R filed a cross-motion for partial summary judgment on

the Appellees’ affirmative defenses of failure to mitigate and

superseding or intervening cause. 2



      2The parties also filed Daubert motions.    The Appellees
sought “to exclude Harry Potter as an expert witness because
they allege[d] his opinions on [shared loan loss agreements]”
were of little value and were “not rebuttal testimony, but
instead an untimely attempt to produce a previously undisclosed
expert on damages issues.”   FDIC v. Willetts (Willetts II), 48
F. Supp. 3d 844, 848 (E.D.N.C. 2014).       The district court
excluded Mr. Potter’s report because it found both that he had
an insufficient basis for forming his opinions, and that the
report was submitted after the deadline for expert reports had
passed. Id. The FDIC-R does not challenge this ruling.

     The   FDIC-R   sought   to   exclude   the  declaration   of
Robert T. Gammill and the attached exhibits, arguing that the
declaration   “contains  new   expert   opinions and   previously
undisclosed facts and data supporting them and because it was
submitted after the expert witness disclosure deadline.” Id. at
852.   Because the district court granted summary judgment in
favor of the Appellees on all claims, the motion was denied as
moot. Id. As discussed below, we reverse the district court’s
grant of summary judgment to the Officer Appellees on the FDIC-
R’s claims of ordinary negligence and breach of fiduciary duty.
Accordingly, the FDIC-R’s motion to exclude is no longer moot
(Continued)
                                   10
       The district court granted summary judgment in favor of the

Appellees,      and   denied    the    FDIC-R’s     cross-motion      for    summary

judgment as moot.         The court held that the FDIC-R “fail[ed] to

reveal any evidence that suggests any defendant has engaged in

self-dealing or fraud, or that any defendant was engaged in any

other unconscionable conduct that might constitute bad faith,”

and    that   their   actions    were    thus      protected    by   the    business

judgment rule from claims of ordinary negligence and breach of

fiduciary duty.       FDIC v. Willetts (Willetts II), 48 F. Supp. 3d

844, 850 (E.D.N.C. 2014).               The court further found that the

FDIC-R had failed to adduce evidence “that any of the defendants

approved the challenged loans and made policy decisions knowing

that    these   actions    would      harm    Cooperative      and   breach    their

duties to the bank” and thus “[could not] show that any of the

defendants engaged in wanton conduct or consciously disregarded

Cooperative’s well-being.”            Id. at 852.

       This appeal followed.            The FDIC-R argues that:             (1) the

district court improperly applied the business judgment rule;

(2) it presented evidence sufficient for a reasonable juror to

conclude that the directors and officers were grossly negligent;

and (3) there are disputed issues of material fact that preclude



with respect to these claims                 and   must   be   addressed      by   the
district court on remand.



                                         11
granting     summary    judgment         to        the    Appellees   on    alternative

grounds.       For the reasons that follow, we affirm the district

court in part and reverse in part.



                                          II.

     Our   review      of    a   grant    of       summary    judgment     is   de   novo.

French v. Assurance Co. of Am., 448 F.3d 693, 700 (4th Cir.

2006).     “Summary         judgment     is    appropriate         when    there     is   no

genuine issue of material fact and the moving party is entitled

to judgment as a matter of law.”                    Id.    It is axiomatic “that in

ruling on a motion for summary judgment, [t]he evidence of the

nonmovant is to be believed, and all justifiable inferences are

to be drawn in his favor.”               McAirlaids, Inc. v. Kimberly-Clark

Corp.,   756    F.3d   307,      310   (4th        Cir.    2014)   (quoting     Tolan     v.

Cotton, --- U.S. ---, 134 S. Ct. 1861, 1863 (2014) (per curiam))

(internal quotation marks omitted).

     This matter presents several questions of North Carolina

state law.      We have held that,

     in determining state law a federal court must look
     first and foremost to the law of the state’s highest
     court,   giving   appropriate   effect  to   all  its
     implications.   A state’s highest court need not have
     previously decided a case with identical facts for
     state law to be clear.      It is enough that a fair
     reading of a decision by the state’s highest court
     directs one to a particular conclusion.




                                              12
Assicurazioni Generali, S.p.A v. Neil, 160 F.3d 997, 1002 (4th

Cir. 1998).         If the state’s highest court does not provide an

answer,      then    a   federal    court       must     seek       guidance    from   an

intermediate state court.               Id.     In so doing, “we defer to a

decision of the state’s intermediate appellate court to a lesser

degree than we do to a decision of the state’s highest court.

Nevertheless, we do defer.”             Id. (citing, among others, West v.

AT&T, 311 U.S. 223, 237 (1940) (“Where an intermediate appellate

state court rests its considered judgment upon the rule of law

which it announces, that is a datum for ascertaining state law

which is not to be disregarded by a federal court unless it is

convinced by other persuasive data that the highest court of the

state would decide otherwise.”)).



                                         III.

      The FDIC-R first attacks the district court’s reading of

North Carolina’s business judgment rule.                        While we agree with

the   district      court’s   interpretation,           we    find    that     the   court

improperly applied the rule.

      As the Supreme Court explained in Atherton v. FDIC, “state

law   sets    the    standard      of   conduct”       which     bank     officers     and

directors must follow “as long as the state standard (such as

simple    negligence)       is     stricter      than        that    of   the    federal

statute.”      519 U.S. 213, 216 (1997).               At issue in Atherton was a

                                          13
federal statute, 12 U.S.C. § 1821(k), which provides that “[a]

director or officer of an insured depository institution may be

held personally liable for monetary damages in any civil action

by”    the   FDIC-R    “for   gross    negligence,    including     any   similar

conduct or conduct that demonstrates a greater disregard of a

duty    of    care    (than   gross    negligence)    including     intentional

tortious conduct, as such terms are defined and determined under

applicable State law.”           12 U.S.C. § 1821(k).      The Supreme Court

interpreted § 1821(k) as “set[ting] a ‘gross negligence’ floor,

which applies as a substitute for state standards that are more

relaxed.”      Atherton, 519 U.S. at 216.

       North Carolina, in turn, provides the following standard:

       (a) A director shall discharge his duties as a
           director, including his duties as a member of a
           committee:

             (1) In good faith;

             (2) With the care an ordinarily prudent person in a
                 like position would exercise under similar
                 circumstances; and

             (3) In a manner he reasonably believes to be in the
                 best interests of the corporation.

N.C.G.S.      § 55-8-30(a);      see   also   id.    § 55-8-42(a)    (providing

identical      standard    for    corporate   officers).      Further,      “[a]

director is not liable for any action taken as a director, or

any failure to take any action, if he performed the duties of

his office in compliance with this section.”                N.C.G.S. § 55-8-

30(d); see also id. § 55-8-42(d) (officer liability).                      Thus,

                                        14
under North Carolina law, a director or an officer can be held

liable for ordinary negligence.              In line with Atherton and 12

U.S.C. § 1821(k), the FDIC-R may sue bank directors and officers

for both ordinary negligence and gross negligence.

     North    Carolina    law    also   allows      corporations       to   protect

directors from liability for ordinary negligence by including

exculpatory    clauses     in     their       articles    of        incorporation.

N.C.G.S. § 55-2-02(b)(3) provides:

     (b) The articles of incorporation may set forth any
         provision that under this Chapter is required or
         permitted to be set forth in the bylaws, and may
         also set forth:

     . . .

     (3) A provision limiting or eliminating the personal
         liability of any director arising out of an action
         whether by or in the right of the corporation or
         otherwise for monetary damages for breach of any
         duty as a director.    No such provision shall be
         effective with respect to (i) acts or omissions
         that the director at the time of such breach knew
         or believed were clearly in conflict with the best
         interests of the corporation . . . .

In other words, a corporation may limit personal liability for a

director’s breach of a duty of care, so long as the director did

not know or believe his or her actions to have been clearly

contrary to the corporation’s best interests.                       Section 55-2-

02(b)(3)   does   not    allow   for    the    limitation      of    the    duty   of

loyalty or the duty of good faith.            Id.

     Officer and director liability for ordinary negligence is

constrained by the business judgment rule.                  While the Supreme
                                        15
Court of North Carolina has not ruled on the issue, the North

Carolina Court of Appeals has recognized that § 55-8-30(d) “has

been   interpreted    as    codifying    the   common   law   theory    of   the

business judgment rule.”        Jackson v. Marshall, 537 S.E.2d 232,

236    (N.C.   Ct.   App.   2000).       Judicial   application    of    North

Carolina’s business judgment rule has been explained by “[a]

leading authority on business law” as follows:

       [The business judgment rule] operates primarily as a
       rule of evidence or judicial review and creates,
       first, an initial evidentiary presumption that in
       making a decision the directors acted with due care
       (i.e., on an informed basis) and in good faith in the
       honest belief that their action was in the best
       interest of the corporation, and second, absent
       rebuttal of the initial presumption, a powerful
       substantive presumption that a decision by a loyal and
       informed board will not be overturned by a court
       unless it cannot be attributed to any rational
       business purpose.

State ex rel. Long v. ILA Corp., 513 S.E.2d 812, 821-22 (N.C.

Ct. App. 1999) (quoting Russell M. Robinson, II, Robinson on

North Carolina Corporation Law § 14.06, at 281 (5th ed. 1995))

(alteration in original).         “[P]roper analysis” of an officer’s

or director’s actions “requires examination of [those] actions

in light of the statutory protections of N.C. Gen. Stat. § 55-8-

30(d)(1990)(amended 1993) and the business judgment rule, either

or both of which could potentially insulate him from liability.”

Id. at 821.      Indeed, Robinson suggests that “a director may be

protected by the business judgment rule even if he fails to meet


                                        16
the     prescribed       standards        of     conduct”       set       forth      in    North

Carolina’s      statute.          Robinson,          Robinson        on    North       Carolina

Corporation Law § 14.06 n.2.

       With    this     framework        in    mind,      we    turn      to   the    FDIC-R’s

claims.

                                               A.

       We     consider     director           liability        first.          Cooperative’s

articles of incorporation include an exculpatory provision, as

permitted by N.C.G.S. § 55-2-02(b)(3):

       A director of the Bank shall not be personally liable
       to the Bank or its shareholders for monetary damages
       for breach of any fiduciary duty as a director;
       provided, however, that this limitation of liability
       shall not be effective with respect to (i) acts or
       omissions that the director at the time of such breach
       knew or believed were clearly in conflict with the
       best interests of the Bank. . . .

J.A.    683    (emphasis      supplied).             In    accordance          with       § 55-2-

02(b)(3), the exculpatory provision in the Bank’s articles of

incorporation does not eliminate liability for breaches of the

duty    of    loyalty    or   the    duty       of   good      faith.          Nor    does    the

provision eliminate liability for gross negligence.

       The FDIC-R does not contend that the Director Appellees

breached a duty of loyalty.                    Thus, unless there is a genuine

issue    of    material    fact     as    to     whether       the    Director        Appellees

breached their duty of good faith, the exculpatory provision




                                               17
will protect them from liability for ordinary negligence and

breach of fiduciary duties.

       Under North Carolina law, “the duty of good faith requires

[corporate] directors to avoid self-dealing.”                      ILA Corp., 513

S.E.2d at 819.         Here, there is no allegation or evidence in the

record that the directors engaged in self-dealing or fraud or

otherwise acted in bad faith.              Rather, the FDIC-R argues only

that   the    evidence      suggests   that     the    Director    Appellees      took

actions harmful to the Bank, in part by making decisions without

adequate information.           This is insufficient.             The exculpatory

clause   protects       directors   from       monetary      liability   unless    the

directors “knew or believed [that their acts or omissions] were

clearly in conflict” with the Bank’s best interests.                          N.C.G.S.

§ 55-2-02(b)(3) (emphasis added).                Actions that might have been

harmful or decisions that could have been better made do not

rise to the level of bad faith in this context, especially in

light of the fact that the Bank received CAMELS scores of “2”

from   both    of     its   regulators    despite      the    Director    Appellees’

actions.      We find that the FDIC-R has not presented sufficient

evidence     of   a   breach   of   the   duty    of   good     faith    to   raise   a

genuine issue of material fact.

       We therefore affirm the district court’s award of summary

judgment to the Director Appellees as to the FDIC-R’s claims of

ordinary negligence and breach of fiduciary duty.

                                          18
                                            B.

     We turn next to officer liability.                      The Bank’s exculpatory

provision      does     not       cover   Bank    officers.         Thus,     we        analyze

officer liability through the lens of North Carolina’s business

judgment rule.

     As     discussed         above,      courts       begin   with         the     “initial

evidentiary presumption that in making a decision the directors

acted with due care (i.e., on an informed basis) and in good

faith in the honest belief that their action was in the best

interest of the corporation.”                     ILA Corp., 513 S.E.2d at 822

(quoting Robinson, Robinson on North Carolina Corporation Law

§ 14.06 at 281).            Given the structure of the business judgment

rule,    the    initial       presumption        can   be   rebutted    with        evidence

showing     that      the     Officer      Appellees:          (1)     did        not    avail

themselves of all material and reasonably available information

(i.e., they did not act on an informed basis); (2) acted in bad

faith, with a conflict of interest, or disloyalty; or (3) did

not honestly believe that they were acting in the best interest

of Cooperative.

     The       FDIC-R       has     presented      adequate     rebuttal           evidence.

Specifically,         its      evidence      is        sufficient      to     rebut         the

presumption that the Officers Appellees acted on an informed

basis.     The FDIC-R presented the expert affidavit and reports of

Brian H. Kelley, an independent banking consultant and former

                                            19
“senior bank executive, lender, and attorney at both regional

and large commercial banks.”                  J.A. 219-20.             His expert report

and expert rebuttal report each discuss the general problems

with the Appellees’ lending and underwriting processes, and also

incorporate      by   reference         his        loan    reports      addressing       each

individual loan.

      Kelley stated that, in his opinion, the officers did not

act   in   accordance      with     generally        accepted      banking      practices.

His affidavit states that the Appellees often approved loans

over the telephone, without first examining relevant documents.

Moreover, they often did not receive the loan documents until

after the phone calls, and sometimes not until after the loans

had already been funded.             Kelley further stated that the review

process    was    inconsistent          with        practices      at     other     banking

institutions,     and      did    not   comport           with   his    understanding     of

officer    and    director        duties.           He     further      noted     that    the

Appellees had failed to address warnings and deficiencies in the

Bank’s examination reports.

      To be sure, the Bank’s regulators awarded it “2” ratings on

its CAMELS.         But, as Kelley observed, the Bank’s reports of

examination         also         contained          several        indications           that

Cooperative’s credit administration and audit processes, among

others,    needed     substantial       improvement.              He    also    thought   it



                                              20
clear from his review that certain loans should never have been

approved.

     Kelley’s affidavit and reports thus provide a sufficient

basis for rebutting the presumption that the Bank’s officers

acted on an informed basis.           Having found that there is evidence

to support the notion that the Officer Appellees did not act on

an informed basis, we need not address the other two avenues of

rebuttal.    See ILA Corp., 513 S.E.2d at 821-22 (explaining the

business judgment rule presumption that officers “acted with due

care (i.e., on an informed basis) and in good faith in the

honest belief that their action was in the best interest of the

corporation” (emphasis added)).

     We move to the second evidentiary presumption only “absent

rebuttal of the initial presumption.”               Id. (quoting Robinson,

Robinson    on   North    Carolina    Corporation    Law   § 14.06   at   281).

Because we find that there is sufficient evidence to rebut the

initial evidentiary presumption of the North Carolina business

judgment rule, we vacate the district court’s grant of summary

judgment    on   the     FDIC-R’s    claims   of   ordinary   negligence   and

breach of fiduciary duty as to the Officer Appellees.




                                        21
                                           IV.

        The FDIC-R argues that North Carolina law does not require

a showing of intentional wrongdoing in order to sustain a claim

of gross negligence.         We disagree.

      Traditionally, under North Carolina law, the North Carolina

Supreme    Court    “has   often       used    the    terms       ‘willful     and       wanton

conduct’    and     ‘gross      negligence’       interchangeably            to     describe

conduct    that    falls     somewhere        between       ordinary    negligence          and

intentional conduct.”            Yancey v. Lea, 550 S.E.2d 155, 157 (N.C.

2001).     Further, the court has defined “‘gross negligence’ as

‘wanton conduct done with conscious or reckless disregard for

the   rights      and   safety    of     others.’”      Id.       (quoting     Bullins       v.

Schmidt, 369 S.E.2d 601, 603 (N.C. 1988)).                         The court has also

noted    that     “‘[a]n   act    is    wanton       when    it    is   done       of    wicked

purpose,     or     when   done        needlessly,          manifesting        a    reckless

indifference to the rights of others.’”                      Id. (quoting Foster v.

Hyman, 148 S.E. 36, 37-38 (N.C. 1929)).

      In 2005, the North Carolina Supreme Court seemed to change

course.      In    Jones   v.     City    of     Durham      (Jones     II),       the    court

acknowledged that “gross negligence” had previously been equated

with “wanton conduct,” but “note[d] that N.C.G.S. § 1D–5(7),”

North    Carolina’s      statute       concerning      the     recovery      of     punitive

damages in civil actions, “defines ‘willful and wanton conduct’

and establishes that such conduct, necessary for the recovery of

                                           22
punitive damages, see N.C.G.S. § 1D-15(a), is more than gross

negligence.”         622 S.E.2d 596, 600 (N.C. 2005), superseded and

withdrawn by Jones v. City of Durham (Jones III), 638 S.E.2d 202

(N.C. 2006).         The North Carolina Supreme Court continued that

“[i]n light of this distinction, we conclude that while willful

and wanton conduct includes gross negligence, gross negligence

may be found even where a party’s conduct does not rise to the

level of deliberate or conscious action implied in the combined

terms of ‘willful and wanton.’”            Id.

      The district court here initially relied on Jones II in its

opinion denying the Appellees’ motion to dismiss.                     Willetts I,

882 F. Supp. 2d at 865.             But in its summary judgment opinion,

the court backtracked, noting that “its earlier reliance” on

Jones    II   “was    misplaced     as   the    North   Carolina    Supreme    Court

withdrew the Jones [II] opinion and no North Carolina court has

applied the withdrawn reasoning of Jones [II] while several have

defined gross negligence in its traditional terms.”                        Willetts

II, 48 F. Supp. 3d at 851 n.2.                 Aside from the district court’s

denial of the motion to dismiss in this case, only one other

federal court has relied on the withdrawn Jones II opinion, and

it did so in an unpublished opinion.                    See Snow v. Oneill, No.

1:04CV00681, 2006 WL 1837910, at *3 (M.D.N.C. June 5, 2006).

The     district     court   here    correctly       observed      that   no   North

Carolina state courts have relied on the withdrawn opinion.

                                          23
     The    FDIC-R     urges     this   Court       to   view    Jones       II     as    an

indication of how the North Carolina Supreme Court will decide

future gross negligence cases.                But in Jones III, the North

Carolina Supreme Court withdrew its Jones II opinion “[f]or the

reasons    stated    in   the    dissenting        opinions     [in    the    court       of

appeals] as to the gross negligence claim.”                           Jones III, 638

S.E.2d at 203 (citing Jones v. City of Durham (Jones I), 608

S.E.2d     387,   394-95        (N.C.   Ct.    App.      2005)     (Levinson,            J.,

dissenting in part and concurring in part)).                     Jones I, in turn,

relied on the traditional definition of “gross negligence.”                              The

North Carolina Supreme Court thus withdrew its reasoning as to

the difference between gross negligence and willful and wanton

conduct.

     Even absent Jones III, we nonetheless find the reasoning in

Jones II inapposite.        Jones II addressed the definition of gross

negligence    within      the    context      of    North     Carolina’s          punitive

damages     statute.       Another      provision        of   that     same       statute

provides:

     This Chapter applies to every claim for punitive
     damages, regardless of whether the claim for relief is
     based on a statutory or a common-law right of action
     or based in equity.     In an action subject to this
     Chapter, in whole or in part, the provisions of this
     Chapter prevail over any other law to the contrary.

N.C.G.S. § 1D-10 (emphasis added).                 Thus, to the extent that the

enactment of N.C.G.S. § 1D–5(7) signaled the abrogation of the


                                         24
common law definition of gross negligence, it did so only in the

context of cases where a plaintiff seeks punitive damages.

      The   FDIC-R     makes   no   claim    for   punitive       damages      in   its

complaint.     Because there is no claim for punitive damages, the

traditional common law definition of gross negligence applies.

Accordingly, to survive summary judgment, the FDIC-R must show

that there is a genuine issue of material fact as to whether the

Appellees’    conduct     amounted     to     “‘wanton      conduct      done       with

conscious or reckless disregard for the rights and safety of

others.’”     Yancey, 550 S.E.2d at 157 (citation omitted) (“‘An

act is wanton when it is done of wicked purpose, or when done

needlessly, manifesting a reckless indifference to the rights of

others.’”    (citation omitted)).

      Here, the FDIC-R has failed to present evidence that the

Appellees’    actions    were   grossly      negligent.       To    be    sure,     the

Appellees failed to address deficiencies outlined in examination

reports issued by the FDIC and the NCCB.              But those same reports

repeatedly    awarded    Cooperative        ratings   of    “2”    in    the    CAMELS

categories.     In the face of this contradiction, we find that

there is insufficient evidence that the Appellees acted wantonly

or   with   reckless    indifference.         We   thus    affirm   the     district

court’s award of summary judgment to all of the Appellees on the

issue of gross negligence.



                                       25
                                        V.

       The Appellees argue that summary judgment can be entered on

alternative grounds.          The district court did not address any of

these arguments below.

        First, the Appellees argue that they “made the challenged

loans in reliance on reports, opinions, appraisals, financial

data     and    other    information         developed        and    provided       by

Cooperative’s         experienced       loan      officers           and    credit

administrators.”        Br.     of   Appellees   54.      In    advancing      their

argument, they cite N.C.G.S. § 55-8-30(b), which provides:

       In discharging his duties a director is entitled to
       rely on information, opinions, reports, or statements,
       including financial statements and other financial
       data, if prepared or presented by:     (1) One or more
       officers or employees of the corporation whom the
       director reasonably believes to be reliable and
       competent in the matters presented . . . .

N.C.G.S. § 55-8-30(b) (emphasis added); see also N.C.G.S. § 55-

8-42     (providing     the     same    protection       to     officers       of    a

corporation).         Here,    there   is    evidence    in    the    record    that

Cooperative’s regulators, as well as its independent auditor,

found     its   commercial      loan    administration         and   underwriting

process    lacking.       The    FDIC-R’s     expert,    as     detailed    above,

similarly criticized the loan and credit administration process

as contrary to standard banking practices.                    Accordingly, there

is a genuine issue of material fact about whether the Officer




                                        26
Appellees’          reliance        on      the    reports       of     their          credit

administrators and loan officers was reasonable.

       Next,    the       Appellees       argue    that    the   FDIC-R       “failed     to

produce      evidence       that    the    defendants,      rather     than    the     Great

Recession, proximately caused the loan defaults pled.”                               Br. of

Appellees 59.           Proximate cause is “a cause that produced the

result in continuous sequence and without which it would not

have occurred, and one from which any man of ordinary prudence

could have foreseen that such a result was probable under all

the facts as they existed.”                   Mattingly v. North Carolina R.R.

Co.,   117     S.E.2d     844,     847     (N.C.   1961)    (citation       and   internal

quotation marks omitted).                   Foreseeability is necessary for a

finding of proximate cause, but “does not require that [the]

defendant should have been able to foresee the injury in the

precise      form    in     which    it     actually      occurred.”        Hairston      v.

Alexander Tank & Equip. Co., 311 S.E.2d 559, 565 (N.C. 1984).

Rather, a plaintiff need only prove that “in ‘the exercise of

reasonable care, the defendant might have foreseen that some

injury    would       result        from     his   act     or    omission,        or    that

consequences of a generally injurious nature might have been

expected.’”          Hart    v.     Curry,    78   S.E.2d    170,     170   (N.C.      1953)

(emphasis added) (citation omitted).                   Moreover,

       [t]here may be two or more proximate causes of an
       injury.    These may originate from separate and
       distinct sources or agencies operating independently

                                              27
        of each other, yet if they join and concur in
        producing the result complained of, the author of each
        cause would be liable for the damages inflicted, and
        action may be brought against any one or all as joint
        tort-feasors.

Batts    v.    Faggart,      133    S.E.2d    504,      506    (N.C.    1963)       (citation

omitted).

      Certainly, it is convenient to blame the Great Recession

for   the     failure    of   Cooperative,         and    in    turn       for    the     losses

sustained by the FDIC-R when it took over the Bank.                                  However,

there    is    evidence       in    the   record,        as    outlined          above,    that

suggests that “in the exercise of reasonable care,” the Bank

officers could have “foreseen that some injury would result from

[their]       act[s]    or    omission[s],         or    that        consequences         of     a

generally injurious nature might have been expected.”                               Hart, 78

S.E.2d at 170 (emphasis added) (citation omitted).                               Even before

the     Recession,       exam       reports       from    both        of     Cooperative’s

regulators       indicated         that   the      Bank        was    utilizing         unsafe

practices.       And while the Recession undoubtedly contributed to

the failure of the Bank, it may have been only one of many

contributing factors.              This is a genuine issue of material fact,

and thus this is a question for a jury.                       See Adams v. Mills, 322

S.E.2d 164, 172 (N.C. 1984) (“[P]roximate cause of an injury is

ordinarily a question for the jury.”).

      Finally,     the       Appellees       argue      that    the     FDIC-R       has       not

adequately determined its damages.                   Under North Carolina law, in

                                             28
an action “in tort rather than contract, . . . damages must be

the natural and probable result of the tortfeasor’s misconduct.”

Olivetti Corp. v. Ames Bus. Sys., Inc., 356 S.E.2d 578, 585

(N.C.    1987).            Additionally,         “[i]t    is     a     well-established

principle       of   law    that    proof    of       damages    must    be   made   with

reasonable       certainty.”         Id.         There    is     no    requirement   for

absolute certainty, but rather the evidence of damages “must be

sufficiently specific and complete to permit the jury to arrive

at a reasonable conclusion.”                Weyerhaeuser Co. v. Godwin Bldg.

Supply    Co,    Inc.,      234    S.E.2d    605,      607     (N.C.    1977)   (quoting

Service Co. v. Sales Co., 131 S.E.2d 9, 22 (N.C. 1963)).

       While the Appellees argue briefly that the FDIC-R’s damages

calculations were speculative and did not pass muster below, the

district court in reality stated only that it was excluding the

FDIC-R’s damages expert, Harry Potter (a ruling not challenged

here) because his report “merely relies on information found in

[Office of Inspector General] and FDIC publications,” and “[a]n

expert is not needed to relay this type of information to the

jury.”    Willetts II, 48 F. Supp. 3d at 848.                        The district court

never concluded that the FDIC was not able to prove its damages

with    reasonable     certainty,      and       we    decline    to    determine    that

question in the first instance.




                                            29
                            VI.

     For the foregoing reasons, the judgment of the district

court is

                           AFFIRMED IN PART, REVERSED IN PART,
                                VACATED IN PART, AND REMANDED.




                             30
