295 Ga. 579
FINAL COPY


    S14Q0454. FEDERAL DEPOSIT INSURANCE CORPORATION v.
                      LOUDERMILK et al.


      BLACKWELL, Justice.

      As the receiver of the Buckhead Community Bank, the Federal Deposit

Insurance Corporation sued nine former officers and directors of the bank,1

alleging that they were negligent with respect to the making of loans, which led

the bank, the FDIC says, to sustain nearly $22 million in losses. The defendants

moved to dismiss the lawsuit, arguing that the business judgment rule relieves

officers and directors of any liability for ordinary negligence. The FDIC

responded that such a business judgment rule is no part of the common law in

Georgia, and even if it were, it does not apply to bank officers and directors,

insofar as the statutory law in Georgia explicitly requires bank officers and

directors to exercise ordinary diligence and care. Unable to “discern clear and

controlling precedent from the Supreme Court of Georgia,” the United States



      1
        These former officers and directors are R. Charles Loudermilk, Sr., Hugh C.
Aldredge, David B. Allman, Marvin Cosgray, Louis J. Douglass III, Gregory W. Holden,
John D. Margeson, Larry P. Martindale, and Darryl L. Overall.
District Court for the Northern District of Georgia certified the following

question to us:

            Does the business judgment rule in Georgia preclude as a
      matter of law a claim for ordinary negligence against the officers
      and directors of a bank in a lawsuit brought by the FDIC as receiver
      for the bank?

With an important qualification, we answer this question in the negative.

      1. To begin, we consider whether the business judgment rule is even a part

of the common law in Georgia. The business judgment rule is a fixture in

American law, and it is a settled part of the common law in many of our sister

states. See S. Samuel Arsht, “The Business Judgment Rule Revisited,”8 Hofstra

L. Rev. 93, 97-100 (1979). But defining the rule is “no easy task,” Franklin A.

Gevurtz, “The Business Judgment Rule: Meaningless Verbiage or Misguided

Notion?,” 67 S. Cal. L. Rev. 287, 289 (1994), insofar as the particulars of the

rule may vary a bit from one jurisdiction to another. See Arsht, supra at 100-

110. Nevertheless, we find a classic statement of the rule in Casey v. Woodruff,

49 NYS2d 625 (N.Y. Sup. 1944):

      Mistakes in the exercise of honest business judgment do not subject
      the directors to liability for negligence in the discharge of their
      fiduciary duties. . . . The directors are entrusted with the
      management of the affairs of the [corporation]. If in the course of

                                       2
     management they arrive at a decision for which there is a reasonable
     basis, and they act in good faith, as the result of their independent
     judgment, and uninfluenced by any consideration other than what
     they honestly believe to be for the best interests of the
     [corporation], it is not the function of the court to say that it would
     have acted differently and to charge the directors for any loss or
     expenditures incurred.
            Prescience is always desirable, but failure to foresee what at
     best is uncertain does not give rise to liability. The law recognizes
     that no director is infallible and that he will make mistakes, but if
     he is honest and uses reasonable diligence, he will be absolved from
     liability although his opinion may turn out to have been mistaken
     and his judgment faulty. . . .
            The question is frequently asked, how does the operation of
     the so-called business judgment rule tie in with the concept of
     negligence? There is no conflict between the two. When courts say
     that they will not interfere in matters of business judgment, it is
     presupposed that judgment — reasonable diligence — has in fact
     been exercised. A d[i]rector cannot close his eyes to what is going
     on about him in the conduct of the business of the corporation and
     have it said that he is exercising business judgment. Courts have
     properly decided to give directors a wide latitude in the
     management of the affairs of a corporation provided always that
     judgment, and that means an honest, unbiased judgment, is
     reasonabl[y] exercised by them.
            Applying the foregoing tests I find no negligence on the part
     of the directors in this case. They may have been mistaken; they
     may have erred, but they did not act blindly, recklessly, or
     heedlessly. They studied the financial problems of the [corporation].
     They were diligent in attending to their duties. These directors fully
     recognized their responsibilities as agents and fiduciaries; they did
     not act as mere dummies or figureheads.

49 NYS2d at 642-644 (citations omitted).


                                       3
       As the rule pertains to the liability of officers and directors for money

damages, it distinguishes between the merits of their business decisions, on the

one hand, and the basis of those decisions, on the other. If an officer or director

has honestly exercised “judgment” with respect to a business matter — that is,

if her decision was made in a deliberative way, was reasonably informed by due

diligence, and was made in good faith — the wisdom of the judgment cannot

ordinarily be questioned in court. See Auerbach v. Bennett, 47 NY2d 619, 629

(N.Y. 1979). See also In re Munford, Inc., 98 F3d 604, 611 (B) (11th Cir. 1996)

(“The business judgment rule protects directors and officers from liability when

they make good faith business decisions in an informed and deliberate manner.”

(citation omitted)). But whether a business decision was, in fact, a product of

deliberation, reasonably informed by due diligence, and made in good faith are

matters that may properly be questioned.2 See Casey, 49 NYS2d at 643-644



       2
         Some courts have framed the business judgment rule as a “presumption that in
making a business decision[,] the directors of a corporation acted on an informed basis, in
good faith[,] and in the honest belief that the action taken was in the best interests of the
company.” Cottle v. Storer Communication, Inc., 849 F2d 570, 575 (II) (11th Cir. 1988). We
do not quarrel with this alternative statement of the rule, insofar as the presumption can be
rebutted by affirmative proof, and the presumption merely reflects that those seeking to
challenge a business decision bear the burden of proving that it was made without good faith,
due diligence, or deliberation.

                                             4
(“[The directors] may have erred, but they did not act blindly, recklessly, or

heedlessly. They studied the financial problems of the [corporation]. They were

diligent in attending to their duties . . . . [T]hey did not act as mere dummies or

figureheads . . . .”). So understood, the rule reflects the principle that managing

the affairs of a corporation is a matter committed by law to the discretion of the

directors, the reality that the making of profits involves the taking of some risks,

and the recognition that businesspeople generally are more competent than

judges to exercise business judgment. See Janssen v. Best & Flanagan, 662

NW2d 876, 882 (I) (A) (Minn. 2003) (citing Auerbach, 47 NY2d at 619).

      Although this Court never has spoken of the “business judgment rule” in

so many words, we find an implicit acknowledgment of the rule in a number of

our decisions. At common law, corporate officers and directors in Georgia owed

a duty to exercise ordinary care. See McEwen v. Kelly, 140 Ga. 720, 723 (1) (79

SE 777) (1913) (“[T]hose who accept the position of directors impliedly

undertake to exercise ordinary care and diligence in discharge of the duties thus

committed to them.”). The same was true of bank officers and directors. See

Woodward v. Stewart, 149 Ga. 620, 628 (101 SE 749) (1919) (“[T]he general

rule in this State is that directors of a bank must exercise ordinary care and

                                         5
diligence in the administration of the affairs of the bank . . . .”). But in several

cases in which business decisions by officers and directors were alleged to be

negligent, this Court distinguished between claims of unreasoned and

uninformed decisions and claims of unreasonable decisions. That is, we

distinguished between cases in which a business decision was assailed for the

way in which it was made — that the decision amounted to unthinking

acquiescence, for instance, or was made without reasonable diligence to

ascertain the relevant facts — and those in which the merit alone of the decision

was disputed.

      Three of our decisions at common law are, we think, especially

instructive. First, in McEwen, the bankruptcy trustee of the Southern Iron

Company sued the three directors of the corporation, alleging that one director

had misappropriated corporate assets, and asserting that the other two were

negligent when they elected the first as the corporate treasurer and when they

failed to discharge him sooner. On appeal from the dismissal of the lawsuit, we

explained that, “[w]hile [officers and directors] are not held responsible for

ordinary mistakes or errors of judgment, they are liable for losses and waste of

money and property occurring from neglect or inattention to the business.” 140

                                         6
Ga. at 723 (1) (citation and punctuation omitted; emphasis supplied). We then

observed a distinction between cases involving the mere “exercise of discretion

by directors” — which, we supposed, might form a basis for liability if

“gross[ly] or flagrant[ly] abuse[d]” — and cases in which “directors . . . [act] as

figureheads and dummies[,] . . . allowing the corporation to be looted while they

sat negligently by and looked wise.” Id. at 723-724 (1). Ultimately, we reversed

the dismissal of the lawsuit as to the director charged with willful

misappropriation, but we sustained the dismissal as to the other two directors,

noting that these directors had made inquiry about the misappropriated funds,

that they had made some efforts to recover those funds, and that there was no

evidence that any additional diligence on the part of these directors would have

uncovered the misappropriation sooner. Id. at 725-726 (4). To conclude, we

said:

        [T]here is no complaint that their efforts were not diligent, though
        in part unavailing. . . . In its last analysis, the effort to hold Totten
        and Satterfield liable rests on alleged negligence in the election of
        Kelly to the position of secretary and treasurer, and the failure to
        discharge him sooner. The petition is not lacking in adjective
        characterizations of the conduct of these two defendants; but under
        the vague, general allegations, we do not think that it makes out a
        case of breach of duty on their part . . . .


                                           7
Id. at 726 (4).

      Next, in Shannon v. Mobley, 166 Ga. 430 (143 SE 582) (1928), the state

superintendent of banks had taken over the affairs of the failed Twiggs County

Bank, and he sued its officers and directors for negligent mismanagement.

According to his petition, the officers and directors had turned over the

investments of the bank to the Bankers Trust Company, which then invested the

deposits of the bank in commercial paper that was unsecured and not worth what

the bank had paid for it. Among other things, the superintendent alleged that the

officers and directors “accepted and paid for [the commercial papers] without

question” and “without proper investigation,” and he alleged as well that they

were “on notice that [the commercial paper] was of questionable character, yet

no investigations were made . . . .” 166 Ga. at 432. Concluding that the petition

stated a claim against the officers and directors, we pointed to our statement in

McEwen about “directors . . . acting as figureheads and dummies.” Id. at 436

(citing McEwen). We noted as well that “[a] director of a bank has duties to

perform more essential than that of allowing his name to be printed on the

bank’s stationery; and negligent ignorance is sometimes equivalent to

knowledge.” Id. (citation and punctuation omitted).

                                       8
      Last, in Mobley v. Russell, 174 Ga. 843 (164 SE 190) (1932), this Court

again dealt with investments for a bank by the Bankers Trust Company. In

Russell, the superintendent of banks had sued the officers and directors of the

Taylor County Bank, making allegations like those in Shannon. See 174 Ga. at

844-845. The case had been tried by a jury, which returned a verdict for the

officers and directors. The superintendent appealed, and we affirmed. About the

correctness of the jury charges, we found no error, explaining:

      The mere exercise by directors of poor judgment in making loans
      is not sufficient to form a basis of liability; for the directors merely
      assume the obligations to manage the affairs of the institution with
      diligence and good faith.

Id. at 847-848 (6) (a) (citations omitted; emphasis supplied).

      Although our decisions at common law speak in terms of a general duty

on the part of officers and directors to exercise ordinary diligence and care, they

do so mostly with respect to the way in which business decisions are made, not

the wisdom of the decisions. The cases suggest that, if the only dispute is about

the wisdom of a business judgment — what this Court in McEwen called an

“exercise of discretion” — the law at least would require something more than

a mere want of ordinary care to establish liability, if the merit of the judgment


                                         9
could be questioned at all. See McEwen, 140 Ga. at 723-724 (suggesting,

without deciding, that liability might arise from “exercise of discretion” for “its

gross or flagrant abuse”). But whether a business decision was, in fact, an

exercise of “judgment” — whether it was a product of deliberation, reasonably

informed by due diligence, and made in good faith — is open to judicial

scrutiny. See, e.g., Collier v. Mayflower Apartments, Inc., 196 Ga. 419, 426 (26

SE2d 731) (1943); Shannon, 166 Ga. at 432-433. In this sense, our decisions at

common law about the liability of officers and directors for money damages

implicitly acknowledge the business judgment rule.3

       3
          Although it concerned alleged self-dealing by directors and a want of good faith, not
mere negligence, our decision in Collier, 196 Ga. 419,, also is consistent with the business
judgment rule and warrants some discussion. In Collier, we addressed the viability of a suit
by a minority shareholder against four corporate directors to recover damages for the
corporation. The minority shareholder asserted that the directors had mismanaged the
corporation by settling a debt owed to the corporation for “a considerably less sum than the
debt.” 196 Ga. at 425. Concluding that the allegations stated a viable claim against the
directors, we noted that the directors had offered no reasoned basis for their decision, for
instance, that the debtor might be “insolvent, or of doubtful solvency” or “that it would not
be [in] the best interest of [the corporation] to collect [the full amount of the debt].” Id. The
absence of a reasoned basis for the decision, we said, suggested a lack of good faith,
observing that the decision to forego full collection of the debt allegedly benefitted one
director personally. See id. at 425-426. We added, however, that
        [i]f the fact be that the directors did not in fact arbitrarily and wantonly give
        away a substantial asset of [the corporation], but on the contrary settled this
        indebtedness in good faith, in the exercise of their judgment and discretion and
        for what they believed to be for the best interest of [the corporation], all things
        considered,
the directors would avoid liability as a result. Id. at 426. But because the exercise of such

                                              10
       So understood, we note that the business judgment rule is consistent with

another line of our precedents, a line of equity cases that do not speak directly

to the liability of officers and directors for money damages in suits at law, but

nevertheless reflect a strong judicial reluctance to question the business

judgments of businesspeople. See, e.g., Tallant v. Exec. Equities, Inc., 232 Ga.

807, 810 (209 SE2d 159) (1974); Regenstein v. J. Regenstein Co., 213 Ga. 157,

159-160 (97 SE2d 693) (1957); Malone v. Armor Insulating Co., 191 Ga. 146,

150 (12 SE2d 299) (1940); Smith v. Albright-England Co., 171 Ga. 544, 545

(156 SE 313) (1930). More than a hundred years ago, this Court explained in

one such case — a case in which a minority shareholder of a lumber company

sought by equity to compel management to resume the sawing of certain logs —

that “[n]o principle of law is more firmly fixed in our jurisprudence than the one

which declares that the courts will not interfere in matters involving merely the

judgment of [management] in exercising control over corporate affairs.” Bartow

Lumber Co. v. Enwright, 131 Ga. 329, 333-334 (62 SE 233) (1908) (emphasis

supplied). In refusing such equitable relief, we observed:


judgment was not shown by the pleadings, the suit could not be dismissed on a demurrer. See
id.

                                            11
       The course adopted by [management], as shown by the evidence,
       was after a due investigation and consideration of the situation, and
       an inspection of the logs on hand and the making of estimates as to
       the cost of converting them into lumber and the price which could
       then be obtained for such lumber, had convinced [management] that
       the company as a corporation and themselves as stockholders would
       sustain financial loss should they attempt for the time being to
       operate the plant. . . . The mere fact that the court may differ with
       the majority of the corporation as to the wisdom of the course which
       their judgment directs will not justify [equitable] interference. . . .
       [T]he evidence clearly presents a case in which the question of
       advisability of operating the plant was one solely to be determined
       by an exercise of judgment, and the decision of this question was
       the rightful prerogative of [management] in control of the affairs of
       the corporation.

Id. at 335-336. Although these equity cases do not directly concern the liability

of officers and directors for money damages in suits at law, they nevertheless

offer some additional support for the idea that the business judgment rule fits

comfortably in our common law.4

       From our precedents, we conclude that the business judgment rule is a

settled part of our common law in Georgia, and it generally precludes claims


       4
         In several of the early judicial decisions recognizing that officers and directors owe
a duty of ordinary care, we relied on analogies to trustees. See, e.g., Woodward, 149 Ga. at
628; McEwen, 140 Ga. at 722-723 (1). The law of trust is, of course, largely equitable. See
Fine v. Saul, 183 Ga. 309, 312 (2) (188 SE 439) (1936) (“Trusts of every kind, not generally
cognizable at law, are peculiar subjects of equity jurisdiction.”). Accordingly, equity cases
properly inform our analysis, even if they are not dispositive in the context of a suit at law
for money damages.

                                             12
against officers and directors for their business decisions that sound in ordinary

negligence, except to the extent that those decisions are shown to have been

made without deliberation, without the requisite diligence to ascertain and assess

the facts and circumstances upon which the decisions are based, or in bad faith.

Put another way, the business judgment rule at common law forecloses claims

against officers and directors that sound in ordinary negligence when the alleged

negligence concerns only the wisdom of their judgment, but it does not

absolutely foreclose such claims to the extent that a business decision did not

involve “judgment” because it was made in a way that did not comport with the

duty to exercise good faith and ordinary care. We note as well that the business

judgment rule applies equally at common law to corporate officers and directors

generally and to bank officers and directors. Having concluded that such a

business judgment rule is a part of our common law, we must consider whether

the General Assembly has modified or abrogated the business judgment rule by

statute. But before we turn to the statutes concerning the obligations and

liabilities of bank officers and directors, we must consider one other contention

of the defendants.



                                       13
      Citing two decisions of our Court of Appeals, the defendants urge this

Court to recognize a different sort of business judgment rule. In Flexible

Products Co. v. Ervast, 284 Ga. App. 178 (643 SE2d 560) (2007), the Court of

Appeals said that the rule “forecloses liability in officers and directors for

ordinary negligence in discharging their duties,” 284 Ga. App. at 182 (2) (b) (ii),

and a few years later, in Brock Built, LLC v. Blake, 300 Ga. App. 816 (686

SE2d 425) (2009), it reasoned that “allegations amounting to mere negligence,

carelessness, or lackadaisical performance are insufficient as a matter of law [to

overcome the business judgment rule].”5 300 Ga. App. at 822 (3). According to

the defendants, these decisions show that the business judgment rule does not

just preclude some claims that sound in ordinary negligence, but it precludes all

such claims, without regard to the nature of the claim. To the extent that Flexible

Products and Brock Built recognize an absolute bar against all claims premised

on a want of ordinary care — even claims premised on allegations that a



      5
          The Court of Appeals also said in Brock Built that the business judgment rule
protects officers and directors from liability “when they make good faith decisions in an
informed and deliberate manner.” 300 Ga. App. at 822 (3) (citations and punctuation
omitted; emphasis supplied). This statement of the rule — unlike the subsequent statement
that “allegations amounting to mere negligence” never can be enough to overcome the rule
— is consistent with the rule acknowledged at common law in our earlier cases.

                                           14
business decision was uninformed or unreasoned — such a rule finds no support

in our common law, which, as we have explained, reflects a more modest

business judgment rule. Nevertheless, as we consider the implications of the

pertinent statutory law, we will consider the extent to which Flexible Products

and Brock Built might find support in the statutes.6

       2. Our examination of the statutory law starts with OCGA § 7-1-490 (a),

which concerns the care with which bank officers and directors are to perform

their duties:

              Directors and officers of a bank or trust company shall
       discharge the duties of their respective positions in good faith and
       with that diligence, care, and skill which ordinarily prudent men
       would exercise under similar circumstances in like positions. In
       discharging his duties, a director or officer, when acting in good
       faith, shall be entitled to rely upon information, opinions, reports,


       6
          In Flexible Products, the Court of Appeals cited two sections of the Corporation
Code as the sole support for its understanding of the business judgment rule. 284 Ga. App.
at 182 (2) (b) (ii) (citing OCGA §§ 14-2-830 and 14-2-842). In Brock Built, the Court of
Appeals relied on Flexible Products, as well as two federal cases, 300 Ga. App. at 822 (3),
although neither of the federal cases really supports the idea that the business judgment rule
in Georgia precludes all claims that sound in ordinary negligence. See Munford, 98 F3d at
611 (B) (providing only that “[t]he business judgment rule [in Georgia] protects directors and
officers from liability when they make good faith business decisions in an informed and
deliberate manner”); Medserv Corp. v. Nemnom, 1997 U. S. Dist. LEXIS 18246, *9-10 (II)
(N.D. Ga. 1997) (citing Mansfield Hardwood Lumber Co. v. Johnson, 268 F2d 317 (5 th Cir.
1959), a case involving Louisiana law). If the rule articulated in Flexible Products and Brock
Built is right, it can only be because the statutes require or suggest that rule.

                                             15
      or statements, including financial statements and other financial
      data, in each case prepared or presented by:
                   (1) One or more officers or employees of the
             bank or trust company whom the director or officer
             reasonably believes to be reliable and competent in the
             matters presented;
                   (2) Counsel, public accountants, or other persons
             as to matters which the director or officer reasonably
             believes to be within such person’s professional or
             expert competence; or
                   (3) A committee of the board upon which the
             director or officer does not serve, duly designated in
             accordance with a provision of the articles of
             incorporation or the bylaws, as to matters within that
             committee’s designated authority, which committee the
             director or officer reasonably believes to merit
             confidence;
      but such director or officer shall not be considered to be acting in
      good faith if he has knowledge concerning the matter in question
      that would cause such reliance to be unwarranted. A director or
      officer who so performs his duties shall have no liability by reason
      of being or having been a director or officer of the bank or trust
      company.

OCGA § 7-1-490 (a). Pointing to the first and last sentences of subsection (a),

the FDIC urges that subsection (a) supersedes the business judgment rule at

common law. In this respect, the FDIC reasons that, if “[a] director or officer

who so performs his duties” — that is, one who performs his duties “in good

faith and with that diligence, care, and skill which ordinarily prudent men would

exercise under similar circumstances in like positions” — “shall have no

                                       16
liability,” then an officer or director who fails to “so perform[ ] his duties”

necessarily must have liability. As we understand it, the FDIC essentially argues

that the business judgment rule has no application at all to bankers, and if a bank

officer or director fails to exercise ordinary care, he is liable, period. The

defendants contend, on the other hand, that subsection (a) sets out a duty to act

in good faith and to exercise ordinary care, and it creates a safe harbor from

liability for officers and directors that do so, but that does not mean that officers

and directors otherwise always must be liable. After all, the defendants note, it

would have been easy enough for the General Assembly to provide explicitly

that “[a] director or officer who [fails to] so perform[ ] his duties shall have . .

. liability,” but the General Assembly did not do so. Accordingly, the defendants

argue, subsection (a) does not supersede the business judgment rule.

      “When we consider the meaning of a statute, we must presume that the

General Assembly meant what it said and said what it meant.” Deal v. Coleman,

294 Ga. 170, 172 (1) (a) (751 SE2d 337) (2013) (citation and punctuation

omitted). To that end, “we must read the statutory text in its most natural and

reasonable way, as an ordinary speaker of the English language would.” Id.

(citations and punctuation omitted). And although the statutory arguments in

                                         17
this case are chiefly about OCGA § 7-1-490 (a), we must take care not to limit

our consideration to the words of subsection (a) alone. As we recently

explained:

      In our search for the meaning of a particular statutory provision, we
      look not only to the words of that provision, but we consider its
      legal context as well. After all, context is a primary determinant of
      meaning. For context, we may look to the other provisions of the
      same statute, the structure and history of the whole statute, and the
      other law — constitutional, statutory, and common law alike — that
      forms the legal background of the statutory provision in question.

May v. State, 295 Ga. 388, 391-392 (___ SE2d ___) (2014) (citations and

punctuation omitted). Considering the words of subsection (a), as well as their

legal context, we conclude — for the reasons described below — that the statute

does not supersede the business judgment rule at common law, as the rule was

acknowledged in the early decisions of this Court. We conclude as well,

however, that subsection (a) is inconsistent with the different sort of rule

described by the Court of Appeals in Flexible Products and Brock Built.

      To begin, we note that the general standard of care described in the first

sentence of OCGA § 7-1-490 (a) does not appear to differ in any meaningful

way from the standard adopted at common law in Georgia, see Woodward, 149

Ga. at 628, and as we have explained, the standard at common law was

                                       18
concerned with the way in which business decisions were made — not their

wisdom — and in any event, it fit comfortably with the business judgment rule.

The legal context of the provisions in subsection (a) about the standard of care

and liability suggests strongly that these provisions should be understood

consistent with the common law. In the first place, the structure of subsection

(a) as a whole reveals that the statute is largely addressed to the process by

which an officer or director is to become informed about the matters as to which

he is to exercise judgment. Indeed, the general standard of care is followed

immediately in subsection (a) by provisions about the information upon which

a bank officer or director may properly rely, provisions that, in turn, are

followed immediately by the provision about liability. See OCGA § 7-1-490 (a).

Besides the structure of subsection (a), we note that another provision of the

Banking Code provides that an “underlying objective” of the whole Code —

including OCGA § 7-1-490 (a) — is to allow “[o]pportunity for management of




                                      19
financial institutions to exercise their business judgment.”7 OCGA § 7-1-3 (a)

(8).

       Most important, however, is the statutory pedigree of OCGA § 7-1-490

(a), which shows that the statute was meant to retain the common law. The

general statutory standard of care was adopted in 1974, as a part of the

enactment of an entirely new Banking Code. See Ga. L. 1974, p. 705, § 1. The

words by which the General Assembly in 1974 described the statutory standard

of care for bank officers and directors — the same words by which the standard

still is described today — were taken verbatim from Section 713 of the Georgia

Business Corporation Code of 1968. Compare Ga. L. 1974, p. 705, § 1 (Ga.

Code of 1933, § 41A-2211) with Ga. L. 1968, p. 565, § 1 (Ga. Code of 1933, §

22-713). And unlike most of the Business Corporation Code of 1968 — which

was principally drawn from an early version of the Model Business Corporation

Act — the standard in Section 713 notably was borrowed from New York



       7
         Notably, the phrase “business judgment” is not one that appears frequently in the
statutes. Indeed, we have found only one other Georgia statute that speaks of “business
judgment,” providing that the board of the Georgia Life and Health Insurance Guaranty
Association “may exercise reasonable business judgment to determine the means by which
the association is to provide [certain benefits] in an economical and efficient manner.”
OCGA § 33-38-7 (a) (20).

                                           20
Business Corporation Law § 717, with the apparent understanding that New

York law and the early decisions of this Court were consistent about the duties

of officers and directors. Contemporaneous commentary on the Business

Corporation Code of 1968 indicates that the words borrowed from the New

York statute were meant to “embod[y] the same standard that the Georgia

Supreme Court long has applied.”8 See Ga. Code of 1933, § 22-713 (1977)

(comment) (citing McEwen and Woodward). By the time the General Assembly

borrowed the same words again for the new Banking Code, of course, the

business judgment rule was settled in New York, where it was understood to

coexist with the statutory standard of ordinary care. See, e.g., Auerbach, 47

NY2d at 629-631; Heimann v. American Express Co., 279 NYS2d 867, 881

(N.Y. Sup. 1967) (“[T]he well-established business judgment rule applies to

      8
         Commentary about the Business Corporation Code of 1968 was prepared by the
State Bar of Georgia and published alongside the Business Corporation Code. That
commentary would have been available to the General Assembly and the public alike in
1974, when the words of Section 713 were copied into the new Banking Code, and it,
therefore, informs the original public meaning of the words used in the Banking Code.
According to that commentary,
       [t]he first sentence of [Section 713] . . . is based upon N.Y. Bus. Corp. Law
       Section 717, and represents the weight of judicial authority. . . . Essentially,
       this provision embodies the same standard that the Georgia Supreme Court
       long has applied. See McEwen v. Kelly, 140 Ga. 720 (79 SE 777) (1913);
       Woodward v. Stewart, 149 Ga. 620 (101 SE 749) (1920).
Code of 1933, § 22-713 (1977) (comment).

                                          21
insulate acts of directors in connection with the internal management of a

corporation against interference by the courts.”); Casey, 49 NYS2d at 642-644.

In addition to the standard of care, the 1974 version of the Banking Code

identified information upon which an officer or director could rely, although the

information was identified more narrowly than in the current version of the

statute.9 See Ga. L. 1974, p. 705, § 1. The 1974 statute said nothing explicitly

about liability, but insofar as it adopted the standard of care at common law, it

impliedly allowed claims against officers and directors for a want of ordinary

care in the process by which they made a business decision, see, e.g., Shannon,

166 Ga. at 432-433, 436, but not as to the wisdom of the judgment itself.

       The current statutory provisions about liability and the information upon

which an officer or director may rely were added to OCGA § 7-1-490 (a) a few

years later. See Ga. L. 1977, p. 730, § 7. It is notable, we think, that these

provisions were added to the statute at once, a circumstance consistent with our


       9
         The 1974 statute provided that a bank officer or director properly might
       rely upon financial information concerning the bank or trust company
       represented to them to be correct by the president or the officer of the bank or
       trust company having charge of its books of account, or stated in a written
       report by an independent or certified public accountant or firm of such
       accountants fairly to reflect the condition of such institution.
Ga. L. 1974, p. 705, § 1 (Ga. Code of 1933, § 41A-2211).

                                             22
view that the statutory reference to liability is chiefly about the way in which a

business decision is made, not the merit of that decision. Indeed, the preamble

of the 1977 amendment says nothing about any liability of officers or directors,

as one would expect if the amendment were meant to do away with the business

judgment rule at common law and thereby subject officers and directors to more

potential liabilities. To the contrary, the preamble says only that the amendment

was intended to “confirm and clarify the current right of directors to rely upon

information, opinions, reports or statements regularly furnished them by others.”

Id. (preamble).

      In the light of this statutory history, we conclude that OCGA § 7-1-490 (a)

is perfectly consistent with the business judgment rule acknowledged at

common law in the decisions of this Court. To be sure, subsection (a) provides

that an officer or director who acts “in good faith and with that diligence, care,

and skill which ordinarily prudent men would exercise under similar

circumstances in like positions” “shall have no liability by reason of being or

having been a director or officer of the bank or trust company.” OCGA § 7-1-

490 (a). And no doubt, these provisions imply strongly that, if an officer or

director fails to act in good faith or with such ordinary care, he is subject to

                                       23
liability. But taken in its legal context, the statutory reference to ordinary

“diligence, care, and skill” is most reasonably understood to refer to the care

required with respect to the process by which a decision is made, most notably

the diligence due to ascertain the relevant facts. So understood, the implication

of liability means only that an officer or director who acts in bad faith or fails

to exercise such ordinary care with respect to the process for making a decision

is liable.

       This understanding of the statute comports with the principle that, “to the

extent that statutory text can be as reasonably understood to conform to the

common law as to depart from it, the courts usually presume that the legislature

meant to adhere to the common law.” May, 295 Ga. at 397. It also is consistent

with the understanding of the New York Court of Appeals, which has

characterized N.Y. Bus. Corp. Law § 717 (a) — the current version of which is

substantially similar to the current version of OCGA § 7-1-490 (a)10 — as a


       10
         N.Y. Bus. Corp. Law § 717 (a) provides:
               A director shall perform his duties as a director, including his duties as
       a member of any committee of the board upon which he may serve, in good
       faith and with that degree of care which an ordinarily prudent person in a like
       position would use under similar circumstances. In performing his duties, a
       director shall be entitled to rely on information, opinions, reports or statements
       including financial statements and other financial data, in each case prepared

                                              24
legislative recognition of the business judgment rule. See Lindner Fund, Inc. v.

Waldbaum, Inc., 82 NY2d 219, 224 (N.Y. 1993). It is consistent as well with the

approach of the Eleventh Circuit in Fed. Deposit Ins. Corp. v. Stahl, 89 F3d

1510 (11th Cir. 1996), a decision that we find persuasive. There, the Eleventh

Circuit addressed the coexistence of the business judgment rule and a Florida

statute that closely resembled OCGA § 7-1-490 (a). The Florida statute

“provided that directors were to perform their duties in good faith, in a manner



      or presented by:
                    (1) one or more officers or employees of the corporation
             or of any other corporation of which at least fifty percentum of
             the outstanding shares of stock entitling the holders thereof to
             vote for the election of directors is owned directly or indirectly
             by the corporation, whom the director believes to be reliable and
             competent in the matters presented,
                     (2) counsel, public accountants or other persons as to
             matters which the director believes to be within such person's
             professional or expert competence, or
                      (3) a committee of the board upon which he does not
             serve, duly designated in accordance with a provision of the
             certificate of incorporation or the by-laws, as to matters within
             its designated authority, which committee the director believes
             to merit confidence, so long as in so relying he shall be acting in
             good faith and with such degree of care, but he shall not be
             considered to be acting in good faith if he has knowledge
             concerning the matter in question that would cause such reliance
             to be unwarranted. A person who so performs his duties shall
             have no liability by reason of being or having been a director of
             the corporation.


                                             25
reasonably believed to be in the best interests of the corporation, and with such

care as an ordinary prudent person in a like position would use under similar

circumstances.” 89 F3d at 1516 (punctuation and emphasis omitted). That

statute, the Eleventh Circuit said, “clearly established an ordinary negligence

standard of director liability.” Id. But the statutory standard was not inconsistent

with the business judgment rule, for, as the Eleventh Circuit explained:

      The court-made [business judgment rule] does not change [the
      Florida] statutory simple negligence standard to a gross negligence
      standard; it merely protects directors who exercised reasonable
      diligence in the first instance from liability on the merits of their
      business judgment, unless they acted fraudulently, illegally,
      oppressively, or in bad faith.

Id. at 1518. We conclude that the business judgment rule acknowledged at

common law in the decisions of this Court is consistent with, and has not been

superseded by, OCGA § 7-1-490 (a).

      As our citation of Stahl suggests, however, the absolute rule of Flexible

Products and Brock Built — a rule that all claims that sound in ordinary

negligence are barred by the business judgment rule, leaving room only for

claims of gross negligence against officers and directors — does not fare as well

in the face of the statute. The implication of the liability provision in OCGA §


                                        26
7-1-490 (a), as we have explained, is that bank officers and directors may be

liable for a failure to exercise ordinary care with respect to the way in which

business decisions are made. Flexible Products and Brock Built are inconsistent

with that implication. Moreover, even if the statute could be read to allow the

rule described in Flexible Products and Brock Built, it certainly cannot be read

reasonably to require or even suggest that rule. The absence of support in the

Banking Code for Flexible Products and Brock Built is fatal to the contention

that the variant of the business judgment rule described in those decisions

applies in this case. As we have said, Flexible Products and Brock Built find no

support in our common law. If these decisions are sound, it is only because their

rule is required or at least suggested by the statutory law. At least in the context

of bank officers and directors, Flexible Products and Brock Built have no such

statutory support. Accordingly, we must conclude that the business judgment

rule described in Flexible Products and Brock Built has no application to bank

officers and directors.

      Flexible Products and Brock Built involved non-bank officers and

directors. But as much as the Banking Code, the provisions of the Business

Corporation Code of 1989 upon which the Court of Appeals relied in Flexible

                                        27
Products — and in Brock Built too, insofar as it cited Flexible Products, see note

6, supra — are inconsistent with the absolute rule articulated in those decisions.

Like OCGA § 7-1-490 (a), the Corporation Code requires non-bank officers and

directors to “discharge [their] duties . . . in good faith . . . and [w]ith the care an

ordinarily prudent person in a like position would exercise under similar

circumstances.” OCGA §§ 14-2-830 (a) (1), (2) (directors) and 14-2-842 (a) (1),

(2) (officers). And also like OCGA § 7-1-490 (a), the Corporation Code

provides:

            [An officer or director] is not liable to the corporation or to its
      shareholders for any action taken as [an officer or director], or any
      failure to take any action, if he performed the duties of his office in
      compliance with this Code section.

OCGA §§ 14-2-830 (d) and 14-2-842 (d). Although the Corporation Code

seems to leave room for the sort of business judgment rule acknowledged at

common law in the decisions of this Court, see OCGA §§ 14-2-830 (comment)

and 14-2-842 (comment), the relevant provisions of the Corporation Code are

inconsistent with the alternative version of the rule articulated in Flexible

Products and Brock Built.




                                          28
      This case, of course, involves only bank officers and directors, and so, we

could leave Flexible Products and Brock Built as applied to non-bank officers

and directors for another day. But what must be done with these precedents is

clear enough, and waiting for another case to do so would only create needless

uncertainty. Accordingly, we now overrule Flexible Products and Brock Built.

      3. Urging the absolute rule described in Flexible Products and Brock

Built, the defendants worry in their briefs that, if the law permits even some

claims against bank officers and directors that sound in ordinary negligence,

bank management will be too much deterred from taking risks, to the detriment

of Georgia banks and consumers alike. Even if that were so, Flexible Products

and Brock Built are inconsistent with OCGA § 7-1-490 (a), and “this Court does

not have the authority to rewrite statutes.” State v. Fielden, 280 Ga. 444, 448

(629 SE2d 252) (2006). And even if we thought that the variant of the rule

described in Flexible Products and Brock Built reflects a more sound policy,

“striking the right balance between competing legitimate policy interests is a

political question . . . [and] [w]e leave political questions to the political

branches . . ..” Deal, 294 Ga. at 174 (1) (a), n. 11 (citations omitted). In any

event, the worries of the defendants underestimate, we think, the strength of the

                                       29
business judgment rule acknowledged in our early decisions at common law,

which, as we have held today, is consistent with the statutory law. In this

respect, a few features of that rule and the standard of ordinary care for bank

officers and directors deserve some additional discussion.

      First, we have spoken throughout this opinion of claims against officers

and directors that “sound in ordinary negligence,” and those words were chosen

purposefully. Although the standard of ordinary care for bank officers and

directors looks a lot like the standard usually employed in Georgia with respect

to claims of “ordinary negligence,” there is an important difference. Our Code

defines ordinary negligence as the absence of ordinary diligence, and it defines

“ordinary diligence” as

      that degree of care which is exercised by ordinarily prudent persons
      under the same or similar circumstances. As applied to the
      preservation of property, the term “ordinary diligence” means that
      care which every prudent man takes of his own property of a similar
      nature. . . .

OCGA § 51-1-2.

      Both at common law and by statute, the standard of ordinary care for bank

officers and directors is less demanding than the standard of “ordinary



                                      30
diligence” with which most ordinary negligence claims are concerned. As this

Court explained in Woodward:

      [A bank director] is not bound to exercise the same degree of care
      which a prudent man would exercise in his own business. This is
      too high a standard. To expect a director under such circumstances
      to give the affairs of the bank the same care that he takes of his own
      business is unreasonable, and few responsible men would be willing
      to serve upon such terms. In the case of a city bank doing a large
      business, he would be obliged to abandon his own affairs entirely.
      A business man generally understands the details of his own
      business, but a bank director cannot grasp the details of a large bank
      without devoting all his time to it, to the utter neglect of his own
      affairs. A director is expected to attend the meetings of the board
      with reasonable regularity, and to exercise a general supervision and
      control.

149 Ga. at 624 (citation and punctuation omitted). The same limitation appears

in the statutory law concerning bank officers and directors, which does not

demand the “care which is exercised by ordinarily prudent persons under the

same or similar circumstances,” OCGA § 51-1-2, but instead requires only the

“diligence, care, and skill which ordinarily prudent men would exercise under

similar circumstances in like positions.” OCGA § 7-1-490 (a) (emphasis

supplied). In other words, bank officers and directors are only expected to

exercise the same diligence and care as would be exercised by “ordinarily

prudent” officers and directors of a similarly situated bank.

                                       31
      Second, OCGA § 7-1-490 (a) conclusively presumes that it is reasonable

for an officer or director to rely upon certain information as a part of the

diligence with which the standard of ordinary care is concerned. So long as an

officer or director does so in good faith, he

      shall be entitled to rely upon information, opinions, reports, or
      statements, including financial statements and other financial data,
      in each case prepared or presented by:
                  (1) One or more officers or employees of the
            bank or trust company whom the director or officer
            reasonably believes to be reliable and competent in the
            matters presented;
                  (2) Counsel, public accountants, or other persons
            as to matters which the director or officer reasonably
            believes to be within such person’s professional or
            expert competence; or
                  (3) A committee of the board upon which the
            director or officer does not serve, duly designated in
            accordance with a provision of the articles of
            incorporation or the bylaws, as to matters within that
            committee’s designated authority, which committee the
            director or officer reasonably believes to merit
            confidence[.]




                                       32
OCGA § 7-1-490 (a). If an officer or director relies in good faith on information

described in subsection (a), the reasonableness of his reliance cannot be

questioned in court.11

       Finally, the business judgment rule makes clear that, when a business

decision is alleged to have been made negligently, the wisdom of the decision

is ordinarily insulated from judicial review, and as for the process by which the

decision was made, the officers and directors are presumed to have acted in

good faith and to have exercised ordinary care. See note 2, supra. Although this

presumption may be rebutted, the plaintiff bears the burden of putting forward

proof sufficient to rebut it. All together, the limited standard of care, the

conclusive presumptions as to reasonable reliance, and the rebuttable

presumptions of good faith and ordinary care offer meaningful protection, we

think, to officers and directors who serve in good faith and with due care. The

business judgment rule does not insulate “mere dummies or figureheads” from


       11
          Whether the information upon which an officer or director relied is, in fact, the sort
of information described in OCGA § 7-1-490 (a) — whether it was, for instance, “prepared
or presented by . . . [an] officer[ ] or employee[ ] of the bank . . . whom the director or officer
reasonably believes to be reliable and competent in the matters presented” — can be
questioned, of course. And good faith can be questioned as well, including by proof that the
officer or director “ha[d] knowledge concerning the matter in question that would cause such
reliance to be unwarranted.” OCGA § 7-1-490 (a).

                                               33
liability, of course, but it never was meant to do so. To the extent that more

protection for officers and directors is desirable, the political branches may

provide it. But because the political branches already have spoken — by

enacting a statute inconsistent with Flexible Products and Brock Built — this

Court cannot.

      4. As described above, the business judgment rule precludes some, but not

all, claims against bank officers and directors that sound in ordinary negligence.

With that qualification, we answer the certified question in the negative.

      Certified question answered. All the Justices concur.



                            Decided July 11, 2014.

      Certified question from the United States District Court for the Northern

District of Georgia.

      Miller & Martin, Michael P. Kohler, Charles B. Lee, Laura E. Ashby, J.

Scott Watson, David C. Joseph, for appellant.

      Womble, Carlyle, Sandridge & Rice, Robert T. Ambler, Jr., Alston &

Bird, Robert R. Long IV, Elizabeth G. Greenman, Steven M. Collins, Brian D.

Boone, Jeffrey J. Swart, for appellees.

                                       34
      Samuel S. Olens, Attorney General, W. Wright Banks, Jr., Senior

Assistant Attorney General, Stephanie K. Burnham, Assistant Attorney General,

Bryan Cave Powell Goldstein, Michael P. Carey, John R. Bielema, Jr.,

Sutherland, Asbill & Brennan, W. Scott Sorrels, Thomas W. Curvin, Valerie S.

Sanders, Samuel J. Casey, Nkoyo-Ene R. Eiffiong, Buckley Sandler, Joseph J.

Reilly, Katherine B. Katz, amici curiae.




                                      35
