                                                                                                                           Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-23-1995

RTC v Cityfed & Schuster
Precedential or Non-Precedential:

Docket 94-5307




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995

Recommended Citation
"RTC v Cityfed & Schuster" (1995). 1995 Decisions. Paper 172.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/172


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
                   UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT
                   _______________

                      NO. 94-5307
                    _______________

   RESOLUTION TRUST CORPORATION, in its capacity as
       receiver for CITY SAVINGS, F.S.B., and the
RESOLUTION TRUST CORPORATION, in its corporate capacity

                          v.

     CITYFED FINANCIAL CORP.; RICHARD E. SIMMONS;
     K. MICHAEL DEFREYTAS; JOHN W. ATHERTON, JR.;
          GORDON E. ALLEN; ALFRED J. HEDDEN;
           PETER R. KELLOGG; JOHN KEAN, JR.;
        GILBERT G. ROESSNER; GEORGE E. MIKULA;
         JAMES P. MCTERNAN; VICTOR A. PELSON;
                   MARSHALL M. CRISER

 (Trenton New Jersey District Civil No. 92-cv-05261)

   RESOLUTION TRUST CORPORATION, in its capacity as
           receiver for CITY SAVINGS, F.S.B.

                          v.

        JOHN W. ATHERTON, JR.; GORDON E. ALLEN;
          ALFRED J. HEDDEN; PETER R. KELLOGG;
         JOHN KEAN, JR.; GILBERT G. ROESSNER;
                   JAMES P. MCTERNAN

 (Trenton New Jersey District Civil No. 93-cv-01811)

     Resolution Trust Corporation, in its capacity
         as Receiver for City Savings, F.S.B.,
                Appellant in No. 94-5307


                   ________________

                      NO. 94-5308
                   ________________


             RESOLUTION TRUST CORPORATION

                          v.
     ALFRED J. SCHUSTER; THOMAS J. LYNAM; MARTIN R. SIEGEL;
              RICHARD P. PEARLMAN; JOAN C. MOONAN,
individually and as Executrix of the Estate of Robert J. Moonan;
       EUGENE J. ELIAS; GEORGE HURLEY; WILLIAM B. BRICK;
        JAMES W. DWYER; HARRY H. JAEGER; JOHN R. HIPPLE;
              JOHN C. LAURICELLA; LOUIS A. IATAROLA

          (New Jersey District Civ. No. 93-cv-02560)

            Martin R. Siegel, and Joan C. Moonan, as
          Executrix of the Estate of Robert J. Moonan
                        and individually,
                   Appellants in No. 94-5308

                _______________________________

        On Appeal From the United States District Court
                 For the District of New Jersey
     D.C. Civ. Nos. 92-cv-05261, 93-cv-01811, 93-cv-02569
                _______________________________

                    Argued: November 8, 1994

             Before: BECKER, MANSMANN, and ALITO,
                        Circuit Judges.

                    (Filed   June 23, 1995)



                        DAVID M. FITZGERALD, ESQUIRE (ARGUED)
                        APRIL A. BRESLAW, ESQUIRE
                        Resolution Trust Corporation
                        Litigation Division
                        801 17th Street, NW
                        H-10th Floor
                        Washington, DC 20434

                        GERALD A. LILOIA, ESQUIRE
                        GLENN D. CURVING, ESQUIRE
                        Riker, Danzig, Scherer, Hyland
                               & Perretti
                        Headquarters Plaza
                        One Speedwell Avenue
                        Morristown, NJ 07962
           Attorneys for            Resolution
Trust      Corporation, Appellant in No. 94-5307

           RONALD W. STEVENS, ESQUIRE
(ARGUED)
           Kirkpatrick & Lockhart
           1800 M Street, N.W.
           South Lobby, Suite 900
           Washington, DC 20036

           Attorney for        John W. Atherton,
Jr.,       Alfred J. Hedden         and Gilbert G.
           Roessner, Appellees in No. 94-5307

           DOUGLAS M. KRAUS, ESQUIRE
           Skadden, Arps, Slate, Meagher
                  & Flom
           919 Third Avenue
           New York, NY 10022

           BRUCE I. GOLDSTEIN, ESQUIRE
           Saiber, Schlesinger, Satz
                  & Goldstein
           One Gateway Center, 13th Floor
           Newark, NJ 07102

           Attorneys for              Gordon E.
Allen,
           Marshall M. Criser,              Peter R.
Kellogg,   and Victor A. Pelson,
           Appellees in No. 94-5307

           JOHN F. COONEY, ESQUIRE
           RONALD R. GLANCZ, ESQUIRE
           WILLIAM D. COSTON, ESQUIRE
           MELISSA LANDAU STEINMAN, ESQUIRE
           Venable, Baetjer, Howard,
                  & Civiletti
           201 New York Avenue, NW, Suite 1000
           Washington, DC 20005

           LAURA V. STUDWELL, ESQUIRE
           Orloff, Lowenbach, Stifelman,
                  & Siegel
           101 Eisenhower Parkway
           Roseland, NJ 07068

           Attorneys for       John Kean, Jr.
                         Appellee in No. 94-5307


                         EDWARD J. DAUBER, ESQUIRE (ARGUED)
                         JEFFREY S. BERKOWITZ, ESQUIRE
                         Greenberg, Dauber & Epstein
                         A Professional Corporation
                         One Gateway Center, Suite 600
                         Newark, NJ -7102-5311

                         Attorneys for Martin R. Siegel,
                         Appellant in No. 94-5308

                         J. SHANE CREAMER, ESQUIRE (ARGUED)
                         MAJORIE OBOD, ESQUIRE
                         Dilworth, Paxson, Kalish & Kauffman
                         3200 The Mellon Bank Center
                         Philadelphia, PA 19103

                         Attorneys for Joan C. Moonan,
                         individually and as Executrix of
                         the Estate of Robert J. Moonan,
                         Appellant in No. 94-5308

                         DANIEL KINBURN, ESQUIRE (ARGUED)
                         SUSAN L. HALL, ESQUIRE
                         Williams, Caliri, Miller & Otley
                         A Professional Corporation
                         1428 Route 23
                         Wayne, NJ 07474-0995

                         LLOYD S. MARKIND, ESQUIRE
                         MARGRET E. ANDERSON, ESQUIRE
                         Arnelle & Hastie
                         Woodland Falls Corporate Park
                         210 Lake Drive East, Suite 307
                         Cherry Hill, NJ 08002

                         Attorneys for Resolution Trust
Corporation, Appellee in No.
                         94-5308

                         FREDERIC J. SCHRAGGER, ESQUIRE
                         Law Offices of Frederic J. Schragger
                         3131 Princeton Pike, Building 1B
                         Lawrenceville, NJ 08648

                         Attorney for        Alfred J. Schuster,
                           Richard P. Pearlman, Eugene J. Elias,
                 Harry H. Jaeger, Appellees in
                           No. 94-5308

                           RUDOLPH A. SOCEY, JR., ESQUIRE
                           Lenox, Socey, Wilgus, Formidoni, &
                                  Casey
                           3131 Princeton Pike
                           Trenton, NJ 08648

                           Attorney for              Thomas J.
Lynam,
                           Appellee in No. 94-5308

                           DANIEL J. GRAZIANO, ESQUIRE
                           Brotman & Graziano
                           3685 Quakerbridge Road
                           P.O. Box 3333
                           Trenton, NJ 08619

                           Attorney for James W. Dwyer,
                           Appellee in No. 94-5308

                           STEPHEN W. ARMSTRONG, ESQUIRE
                           Montgomery, McCracken, Walker &
                                  Rhoads
                           Three Parkway, 20th Floor
                           Philadelphia, PA 19102

                           Attorney for John C. Lauricella,
                           Appellee in No. 94-5308


                     ___________________________

                         OPINION OF THE COURT

                     ___________________________

BECKER, Circuit Judge.
            In 1989, Congress enacted § 212(k) of the Financial

Institutions, Reform, Recovery, and Enforcement Act of 1989

("FIRREA") (codified at 12 U.S.C.A. § 1821(k) (1989)), which

provides:
          Liability of directors and officers. -- A
          director or officer of an insured depository
          institution may be held personally liable for
          monetary damages in any civil action by, on
          behalf of, or at the request or direction of
          the Corporation . . . acting as conservator
          or receiver of such institution . . . 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.
          Nothing in this paragraph shall impair or
          affect any right of the Corporation under
          other applicable law.


12 U.S.C.A. § 1821(k) (emphases added).    These interlocutory

appeals, brought pursuant to 28 U.S.C.A. § 1292(b) (1993),

require us to address, with regard to this provision, two

important questions of first impression in this circuit --

whether Congress, by its enactment of § 1821(k), (1) preempted

state law, and/or (2) displaced federal common law actions that

impose liability against directors and officers of insolvent

federally insured depository institutions for conduct less

culpable than gross negligence   (e.g. for ordinary negligence).
          Section 1821(k) was passed by Congress in response to

the enactment by various states, during the middle and late

1980s, of lenient director liability statutes that generally

provided directors with protection from gross negligence claims

by limiting the grounds for liability to instances of reckless,

willful and wanton boardroom misconduct.    This section of FIRREA

permits the Resolution Trust Corporation ("RTC") to seek recovery
for such directors’ and officers’ gross negligence, while

preserving the RTC’s rights under "other applicable law."    The

particular questions raised by these appeals relate to whether

Congress intended its reference to "other applicable law" to

include state law and federal common law.

          The appeals arise from cases brought by the RTC in the

district court for the District of New Jersey on behalf of two

insolvent depository institutions -- United Savings and Loan of

Trenton, New Jersey ("United Savings") and City Federal Savings

Bank ("City Federal") in Bedminster, New Jersey -- against

certain former directors, officers and employees of these

institutions ("the defendants").   The RTC brought claims under

New Jersey law against former directors and officers of United

Savings, a state chartered institution, (the "United Savings

defendants") and federal common law claims against former

directors and officers of City Federal, a federally chartered

institution, (the "City Federal defendants").

          In the United Savings action, the district court denied

the defendants’ motion for dismissal and summary judgment as to

the RTC's state law claims, concluding that § 1821(k) did not

preempt any available actions for negligence and breach of

fiduciary duty under New Jersey law.   In the City Federal action,

the district court granted the defendants’ motion to dismiss the

RTC's federal common law claims, concluding that the enactment of
§ 1821(k) supplanted any available federal common law actions for

negligence and breach of fiduciary duty.1

          Courts of appeals that have considered these issues

have concluded that § 1821(k) does not preempt state law,2 but

that it does displace federal common law.3   We agree that this

provision does not preempt any available state law negligence or

fiduciary duty claims; however, we disagree with the conclusion

that Congress intended by enactment of this statute to supplant

the RTC’s ability to bring such actions under federal common law.

Accordingly, we will affirm the district court's order in the

United Savings action and reverse the court's order in the City

Federal action.



                  I. FACTS AND PROCEDURAL HISTORY




    1 In referring to the supplanting or displacement of federal
common law by federal statutory enactments, we refrain from the
use of the term "preemption" so as to avoid any confusion with
the alternative question of state law preemption and its various
incidents, which is also addressed in this opinion.           See
Milwaukee v. Illinois, 451 U.S. 304, 317 n.9 101 S. Ct. 1784,
1792 n.9 (1981) (illustrating the confusion which can result when
the term "preemption" is used to refer to the displacement of
federal common law by federal statutory enactments).
    2
       See FDIC v. McSweeney, 976 F.2d 532 (9th Cir. 1992), cert.
denied, 113 S. Ct. 2440 (1993); FDIC v. Canfield, 967 F.2d 443
(10th Cir.) (en banc), cert. dismissed, 113 S. Ct. 516 (1992).
    3
       See RTC v. Frates, 52 F.3d 295 (10th Cir. 1995); FDIC v.
Bates, 42 F.3d 369 (6th Cir. 1994); RTC v. Miramon, 22 F.3d 1357
(5th Cir. 1994); RTC v. Gallagher, 10 F.3d 416 (7th Cir. 1993).
          The RTC, which has been appointed receiver of both

United Savings and City Federal,4 brought these actions on behalf

of both insolvent institutions pursuant to 12 U.S.C.A.

§ 1821(d)(2)(A)(i) (1989), which provides that the RTC succeeds,

upon its appointment as receiver, to all rights, titles, powers

and privileges of such institutions, including claims arising out

of the conduct of the institutions' directors and officers.    See

O'Melveny & Myers v. FDIC, ___ U.S. ___, 114 S. Ct. 2048, 2054

(1994) (recognizing that upon its appointment as receiver, the

RTC "obtain[ed] the rights ‘of the insured depository

institution’ that existed prior to receivership" (quoting 12

U.S.C.A. § 1821(d)(2)(A)(i))).

          A.   United Savings

          In the United Savings action, the RTC alleges that the

defendants failed to discharge their duties and obligations

properly as directors, officers and members of United Bank's

lending committees in connection with their consideration,

approval and subsequent oversight of at least ten large

acquisition, development and construction loans made to various

borrowers between 1984 and 1990.   The RTC's complaint alleges

breach of fiduciary duty and ordinary negligence under New Jersey

law, as well as gross negligence under both New Jersey law and


    4
       The Director of the Office of Thrift Supervision of the
U.S. Treasury Department ("OTS") appointed the RTC as Receiver of
both institutions, declaring City Federal insolvent on December
7, 1989 and United Savings insolvent on June 15, 1990.
§ 1821(k) in the approval of these loans, which allegedly

resulted in a loss to United Savings of approximately $12.7

million.

           In particular, the RTC alleges that the defendants

violated their duty of care by: (1) not hiring experienced

lending underwriters or managers; (2) failing to reduce

underwriting guidelines to a written form; (3) approving large

loans after closing had already taken place; (4) maintaining

inadequate appraisal procedures (often relying on appraisals

provided by the borrower); (5) failing to maintain adequate

internal controls; (6) not returning funds during the

construction phase of commercial properties pending issuance of

final occupancy permits; and (7) generally operating United

Savings in an unsafe and unsound manner.   According to the RTC,

the defendants continued these practices despite warnings by

regulators, outside directors and accountants.   The RTC does not

allege, however, any self-dealing, conflict of interest, bad-

faith or fraud on the part of the defendants.

           In response to the RTC's complaint, the defendants

moved to dismiss, or in the alternative for summary judgment, as

to all New Jersey law claims based on ordinary negligence or

breach of fiduciary duty, arguing that § 1821(k) preempts the

RTC's right to bring such claims.   The district court entered an

order denying defendants' motion and then granted the defendants'

request to certify the court’s order for interlocutory appeal
pursuant to 28 U.S.C.A. § 1292(b) (1993).5     We granted the

petition for leave to appeal.6

    5
       While the question of federal common law preemption was
also certified by the district court in the United Savings
action, the RTC now concedes that, absent the application of
§ 1821(k), only state law governs cases involving the liability
of directors and officers of state-chartered institutions such as
United Savings, while federal law exclusively governs such cases
when the institution is federally chartered, like City Federal.
This concession flows from the RTC’s recognition that the
applicable law governing the liability of officers and directors
for their stewardship of the corporation is the law of the
jurisdiction of incorporation. See RTC v. Chapman, 29 F.3d 1120,
1122 (7th Cir. 1994) (reaching this conclusion under the
"venerable choice-of-law principle known as the internal affairs
doctrine")
    6
        In denying the United Savings defendants' motion to
dismiss all negligence and breach of fiduciary duty claims under
New Jersey law, the district court also rejected the defendants'
argument that the business judgment rule as applied by New Jersey
courts precludes any claims against independent, disinterested
directors in the absence of an allegation of self-dealing,
conflict of interest, bad faith or fraud.          While we certified
this interesting and important issue for interlocutory appeal, we
now conclude that it is not ripe for decision.          See Michota v.
Anheuser-Busch, Inc., 755 F.2d 330, 336 (3d Cir. 1985) (declining
to decide an issue certified as part of an interlocutory appeal
pursuant to § 1292(b) and "remand[ing] it for resolution in the
proper course of the remaining litigation").            Resolving this
question at this stage of the litigation would require us to
prescribe the scope of the protection provided by the business
judgment rule to directors and officers under New Jersey case law
without the benefit of greater factual development in this case.
As the new Restatement of Corporate Governance recognizes, "[t]he
application of duty of care standards is . . . [a] heavily fact
oriented" analysis.   PRINCIPLES OF CORPORATE GOVERNANCE § 4.01 cmt. h
(1994) (emphasis added) ("The application of duty of care
standards is . . . shaped by evidence of what can reasonably be
expected of directors and officers in the context of the
functioning of the modern corporation.").             Given the fact-
intensive nature of the law in this area, we conclude that the
preferable course is to permit the district court's order denying
the United Savings defendants' motion for summary judgment to
stand so that greater factual development can occur. This course
          B.    City Federal

          In the City Federal action, the RTC alleged that the

defendants failed to discharge their duties and obligations

properly as directors and officers of City Federal in connection

with their consideration, approval and subsequent oversight of

several large acquisition, development and construction loans

made to various borrowers during 1985 through 1989.   The RTC's

complaint alleges breach of fiduciary duty, negligence under

federal common law, and gross negligence under both federal

common law and § 1821(k) in the approval of these loans, which

allegedly resulted in damages to City Federal of approximately

$100 million.   In particular, the RTC alleges that the defendants

violated their duty of care by: (1) failing to obtain and verify

necessary financial information from borrowers; (2) maintaining

inadequate appraisal procedures; (3) consistently loaning funds

based on excessively high loan-to-value ratios that violated

mandatory limits placed on such ratios; (4) making repeated

imprudent long-range commitments to future lending or funding;

(5) failing to monitor loan disbursements and the ongoing status

of projects and loans; (6) improperly waiving risk limitations

and other conditions contained in loan commitments to certain

borrowers; (7) failing to require and verify that necessary

will allow the district court better to predict the scope of
protection that the New Jersey Supreme Court would accord the
defendants under the business judgment rule by providing the
court with the opportunity to evaluate the defendants' conduct
vis-à-vis New Jersey case law.
permits and approvals were obtained before funding the loans; (8)

improperly assessing the value of guarantees given as security

for the loans; and (9) not requiring adherence to the Bank’s

lending policies and procedures.   In this action, the RTC does

not allege any self-dealing, conflict of interest, bad-faith or

fraud on the part of the defendants.

          The City Federal defendants responded to the RTC's

complaint by moving to dismiss all claims, other than gross

negligence, arguing that § 1821(k) established an exclusive

federal gross negligence standard of care for directors and

officers of failed federally chartered financial institutions

which supplanted any simple negligence claims available under

federal common law.   The district court agreed with the

defendants' argument and accordingly granted their motion to

dismiss the RTC's complaint to the extent that it alleged claims

other than gross negligence.   The district court granted the

RTC’s request to certify the court’s order pursuant to 28 U.S.C.

§ 1292(b), and we granted the petition for leave to appeal.



          II. FINANCIAL INSTITUTIONS, REFORM, RECOVERY,
                   AND ENFORCEMENT ACT OF 1989




          All parties agree that in enacting § 1821(k) Congress

intended to preempt state laws which limit the liability of

directors and officers to instances of conduct more culpable than
gross negligence (i.e. intentional misconduct).     At issue in

these appeals is whether Congress, by its enactment of § 1821(k),

also preempted state law or displaced federal common law actions

that impose liability for conduct less culpable than gross

negligence (e.g. ordinary negligence).    As we have stated, the

question of the interpretation of § 1821(k) is one of first

impression in this circuit.    Our review of the construction of

federal statutes is plenary.    See Doherty v. Teamsters Pension

Trust Fund, 16 F.3d 1386, 1389 (3d Cir. 1994).



          A.     The Plain Meaning of the Statute

          "The starting point for interpretation of a statute is

the language of the statute itself.    Absent a clearly expressed

legislative intention to the contrary, that language must

ordinarily be regarded as conclusive."    Kaiser Aluminum & Chem.

Corp. v. Bonjorno, 494 U.S. 827, 835, 110 S. Ct. 1570, 1575

(1990) (internal quotation marks omitted).

             The disposition of these appeals turns on the breadth

of § 1821(k)'s last sentence, which has become known as the

"savings clause."    Congress provided that "[n]othing in this

paragraph shall impair or affect any right of the Corporation
under other applicable law."    12 U.S.C.A. § 1821(k) (emphases

supplied).     The RTC contends that this sentence manifests

congressional intent to preserve the RTC's ability to seek

recovery from directors and officers under all "other applicable
laws," including the less forgiving negligence and fiduciary duty

standards of care under state law and federal common law.    We

agree.7

          The defendants contend that, when Congress referred to

"other applicable law" in § 1821(k), it intended to refer only to

the RTC’s ability to pursue regulatory actions under other

sections of FIRREA, such as the RTC’s rights under 12 U.S.C.A.


    7
       We note that, in addition to focusing on the statute’s
saving clause, courts concluding that § 1821(k) did not preempt
state laws which held directors and officers liable for conduct
less culpable than gross negligence, have also gleaned the
limited preemptive intent of Congress from its use of the word
"may" as opposed to "may only" in the first sentence of the
provision: "[a] director or officer . . . may be held personally
liable for monetary damages . . . for gross negligence."       In
Canfield, for example, the court read "may" as a "permissive
term" that "does not imply a limitation on the standards of
officer and director liability," refusing "to construe the first
sentence of the section as saying that an officer or director may
only be held personally liable for gross negligence." Canfield,
967 F.2d at 446 (citing Rose v. Rose, 481 U.S. 619, 626-27, 107
S. Ct. 2029, 2034 (1987), where the Court refused to read "may"
as establishing anything but discretionary power).      The Ninth
Circuit in McSweeney agreed.    McSweeney, 976 F.2d at 537 ("Had
Congress intended this authorizing provision to limit the FDIC .
. . it would have inserted the word `only' in the sentence.").
But see Bates, 42 F.3d at 371 (rejecting this reading as placing
"undue emphasis on the word `may,' which does not modify the
substance of the provision"); Miramon, 22 F.3d at 1361 (same);
Gallagher, 10 F.3d at 420 (same).
          We decline to rest our reading of the text of § 1821(k)
primarily on the belief that Congress intended to demonstrate its
limited preemptive intent through the use of the word "may" in
the statute's first sentence. We do acknowledge, however, that
such a construction is consistent with what we believe to be
otherwise obvious from the statute's language and legislative
history -- Congress intended to permit the RTC to continue to
seek recovery under laws that hold directors and officers to a
more stringent standard of care.
§ 1818(b)-(g) (West Supp. 1995) to seek removal of negligent

directors and officers and to issue "cease and desist" orders in

cases of simple negligence.   But Congress could not have intended

to restrict the RTC to such a limited and specific set of legal

claims by a general reference in this provision to "other

applicable law."   When Congress limited its reference to the law

of a particular jurisdiction in other sections of FIRREA, it did

so with specific language.    See, e.g., 12 U.S.C.A.

§ 1821(c)(3)(B) (1993) ("powers imposed by State law" (emphasis

added)); 12 U.S.C.A. § 1821(c)(4) (1993) ("notwithstanding any

other provision of Federal law, the law of any State, or the

constitution of any State" (emphasis added)).    In particular,

when Congress limited its reference to other portions of FIRREA

itself, it also did so specifically.    See, e.g., 12 U.S.C.A.

§ 1821(e)(3)(C)(ii) (West Supp. 1995) ("except as otherwise

specifically provided in this section" (emphasis added)).    Given

the specific nature of these references in other portions of

FIRREA, we think that § 1821(k)’s reference to other applicable

law plainly demonstrates an intent to refer to all other

applicable law.

          Such a reading of the statutory language is consistent

with the Supreme Court’s decision in Patterson v. Shumate, 504
U.S. 753, 112 S. Ct. 2242 (1992), where the Court read a

reference to "applicable nonbankruptcy law" in 11 U.S.C.A.

§ 541(c)(2) to encompass "any relevant nonbankruptcy law,
including federal law such as ERISA."    See also Reich v. Webb,

336 F.2d 153, 158 (9th Cir. 1964) (reading the language "any

other law" of 12 U.S.C. § 1464(d)(1) as authorizing federal

regulators to enforce "common law fiduciary responsibilities

. . . through appropriate court action"), cert. denied 380 U.S.

915 (1965).

          Moreover, reading the savings clause to provide for a

broad retention of existing rights is supported by its placement

at the conclusion of the statutory provision.   In Abbott Lab. v.

Gardner, 387 U.S. 136, 145, 87 S. Ct. 1507, 1513-14 (1967), the

Court affirmed that "it is difficult to think of a more

appropriate place to put a general saving clause than where

Congress placed it -- at the conclusion of the section setting

out a special procedure for use in certain specified instances."

Id. (emphases added).

          B.   The Legislative History


          Our reading of § 1821(k)'s language is supported by

clear legislative history, which, in our view, manifests an

effort to place a floor, not a ceiling, on the liability of

directors and officers.   See Chapman, 29 F.3d at 1126 (Posner,

C.J., dissenting) ("The purpose of section 1821(k), as the timing

of the statute's enactment and other features of its history make

clear, was to place a floor under the liability of directors of

savings and loan associations, which were falling like

ninepins.").   We necessarily begin our examination of § 1821(k)’s
legislative history with an inspection of "the provisions of the

whole law, and . . . its object and policy."   Dole v. United

Steelworkers, 494 U.S. 26, 35, 110 S. Ct. 929, 934 (1990).

          Section 1821(k) was enacted as part of FIRREA, a

massive 371-page legislative package that had among its primary

purposes, as evident in the opening provision of the statute,

"strengthen[ing] the enforcement powers of Federal regulators of

depository institutions" and "strengthen[ing] the civil sanctions

and criminal penalties for defrauding or otherwise damaging the

depository institutions and their depositors."   Pub. L. No. 101-

73, § 101(9)-(10), 103 Stat. 183, 187 (1989) (emphasis added)

(reprinted in 12 U.S.C.A. § 1811 note (West Supp. II 1990)).     An

overriding purpose in enacting this legislation was to facilitate

an effort to "seek out and punish those that have committed

wrongdoing in the management of the failed institutions,"8 not to

protect such directors and officers from claims of ordinary

negligence.

          Section 1821(k), in particular, was, as we have already

noted, a reaction to the enactment by various states, during the

middle and late 1980s, of lenient director liability statutes

which protected directors from gross negligence claims by

limiting their liability to instances of reckless, willful and



    8
         President’s News Conference on Savings Crisis and
Nominees, N.Y. TIMES, Feb. 7, 1989, at D8, col. 1 (statement of
President Bush).
wanton boardroom misconduct.9   States enacted these laws out of a

policy concern that too stringent a standard of care would impede

the ability of a corporation to attract and retain the most

qualified individuals as corporate directors.   This "race to the

bottom"10 among certain states was a reaction to the Delaware

Supreme Court's decision in Smith v. Van Gorkom, 488 A.2d 858

(Del. 1985), which held the directors of Trans Union Corporation

liable for their ostensible gross negligence in approving a cash-

out merger notwithstanding the absence of any allegations of

fraud, bad-faith or self-dealing.   The various states enacting

these statutes rejected the result in Van Gorkom and sought to

ensure that their domestic corporations could attract and retain




    9
        See, e.g., IND. CODE ANN. § 23-1-35-1(e)(2) (Burns 1994)
(declaring that directors are not liable unless their conduct
constitutes at least "willful misconduct or recklessness"); FLA.
STAT. ANN. § 607.0831 (West 1994) ("recklessness or an act or
omission which was committed in bad faith or with malicious
purpose"); OHIO REV. CODE ANN. § 1701.59(D) (Anderson 1994)
("deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interest of the
corporation"); see also 8 DEL. CODE ANN. § 102(b)(7) (West 1994)
(permitting a company's stockholders to adopt provisions that
would limit a director's liability to actions that are illegal,
that constitute a breach of the separate duty of loyalty or that
constitute intentional transgressions); ARIZ. REV. STAT. ANN. § 10-
054(A)(9) (West 1994) (same); CAL. CORP. CODE § 204(a)(10) (West
1995) (same).
    10
          William L. Cary, Federalism and Corporate Law:
Reflections upon Delaware, 83 YALE L.J. 663 (1974) (describing
the process whereby states follow each other in enacting changes
in their corporate law that provide greater protection to
officers and directors as a "race to the bottom")
qualified directors and officers by protecting them from claims

of gross negligence.11

          At the same time that states were extending protection

from liability to corporate directors, the regulators of

federally insured depository institutions were embarking on a

concerted litigation campaign to recoup from allegedly corrupt

and incompetent directors a portion of the billions of federal

dollars lost in the bankruptcy of federally insured thrifts.     The

enactment of § 1821(k) represents an attempt to facilitate this

litigation in the wake of the impediments posed by state statutes

insulating directors and officers from liability for gross

negligence.   The debates over § 1821(k) in the Senate demonstrate

this intent to facilitate the recovery effort.12

          The original Senate provision, § 214(n) of the Act,

would have allowed the RTC to sue directors and officers under


    11
        See generally Daniel R. Fischel, The Business Judgment
Rule and the Trans Union Case, 40 BUS. LAW. 1437 (1985); Harvey
Gelb, Director Due Care Liability:    An Assessment of the New
Statutes, 61 TEMP. L. REV. 13 (1988).
    12
       Section 1821(k) originated in the Senate; and, other than
a technical change in the wording of the savings clause, no
substantive debate or amendments to this provision occurred in
the House or at Conference.      The House replaced the Senate
version of the Savings clause, which had referred to "any right,
if any, of the [RTC] that may have existed immediately prior to
the enactment of the FIRREA act," with the current version. The
defendants in these actions, however, correctly do not attribute
any substantive change in Congressional intent to the adoption of
this amendment.   See McSweeney, 976 F.2d at 541 n.9 ("We see
nothing in this change to indicate an intent to expand the
preemptive effect of this provision.").
"any cause of action available at common law, including, but not

limited to, negligence . . . [and] breach of fiduciary duty."        S.

774, 101st Cong., 1st Sess. § 214(n) (1989).     During the Senate

debate, this proposal was modified so as to scale back the extent

of state law preemption by raising the floor on the liability of

directors from "negligence" to "gross negligence."

             The amendment resulted, in large part, from a concern

expressed by Senator Sanford that the sweep of the original

provision was too broad given the valid policy interest,

expressed by states enacting legislation in response to the Van

Gorkom decision, of attracting the best qualified individuals as

directors.    135 CONG. REC. 7150-51 (Apr. 19, 1989).   Senator

Sanford expressed the case for the amendment as follows:
          The bill as drafted would have preempted
          numerous state laws which provided limited
          indemnification for directors and officers.
          These state laws were enacted largely in
          response to problems faced by corporations in
          attracting good officers and directors. . . .
          The   amendment  which   the   managers   have
          accepted modifies the bill to preempt state
          law only in a very limited capacity. . . .
          [Section   1821(k)]   is   not   a   wholesale
          preemption of longstanding principles of
          corporate governance, nor does it represent a
          major step in the direction of establishing
          Federal tort standards or Federal standards
          of care of corporate officers and directors.


Id.   Senator Riegle, the bill's floor manager, evinced agreement

with these concerns, see id. at S4265, and introduced an

amendment reducing the amount of preemption.
          During its introduction, Senator Riegle again explained

the purpose of the amendment:
          In recent years, many States have enacted
          legislation   that   protects  directors   or
          officers of companies from damage suits.
          These   "insulating"  statutes   provide  for
          various amounts of immunity to directors and
          officers. For example, in Indiana, a director
          or officer is liable for damages only if his
          conduct constitutes "willful misconduct or
          recklessness."

               The reported bill totally preempted
          state law in this area, with respect to suits
          brought by the FDIC against bank directors
          and officers. However, in light of the state
          law implications raised by this provision,
          the manager's amendment scales back the scope
          of this preemption.

               Under the managers' amendment, State law
          would be overruled only to the extent that it
          forbids the FDIC to bring suit based on
          "gross negligence" or an "intentional tort."


Id. at 7152-53 (Apr. 19, 1989) (emphases added).   Senators Roth

and Garn also expressed similar sentiments: the intent of this

amendment was to limit, not expand, the preemptive scope of the

provision.   See id. at 7155.
          The defendants, however, like the Seventh Circuit in

Gallagher, 10 F.3d at 422-23, interpret the concerns motivating

this amendment to demonstrate Congressional intent to adopt a

national standard of gross negligence for actions brought by the

RTC in the service of a federal policy of attracting qualified

officers and directors to federally insured financial
institutions.13   We reject this "revisionism," since, as we have

demonstrated, the evolution of § 1821(k) in the Senate does not

represent the adoption of a national standard of gross negligence

over one of ordinary negligence, but rather reflects an effort to

decrease the amount of state law preemption by raising the floor

on the liability of directors and officers.

          The limited sweep of § 1821(k) is also explicitly

demonstrated in a final section-by-section report prepared by the

Senate Banking Committee.   This report is consistent with other

contemporaneous legislative history, and it makes clear that

§ 1821(k) did not disturb any claims, available as a matter of

state or federal law, that would hold directors and officers

liable for conduct less culpable than gross negligence:
          This subsection does not prevent the FDIC
          from pursuing claims under State law or other
          applicable Federal law, if such law permits
          the officers or directors of a financial
          institution to be sued (1) for violating a
          lower standard of care, such as simple
          negligence.



    13
       To support their position the defendants also incorrectly
point to a statement made by Senator Heflin:        "I think the
language should be reviewed and, in my judgment, changed to
ensure that financial institutions are able to attract strong and
capable individuals as directors and officers." 135 CONG. REC. at
7137. As recognized by the Tenth Circuit in Canfield, 967 F.2d
at 790, Senator Heflin’s comments do not relate to § 1821(k), but
rather involved a proposed change to 12 U.S.C.A. § 1818(i)(2)
(Supp. 1995), which made it more difficult for the RTC to obtain
civil penalties against directors and officers.     See 135 CONG.
REC. at 7138 ("I am merely recommending that due process and
fairness dictate that clear standards should be included in
assessment of civil penalties." (statement of Senator Heflin)).
135 CONG. REC. S6912 (daily ed. June 19, 1989) (emphases

supplied).

             The defendants would have us discount this report as

post-enactment legislative history, even though it was available

six weeks before both the Senate and the House enacted the final

version of FIRREA into law.     The defendants base their argument

on the fact that the Senate Banking Committee did not publish

this report until two months after the Senate passed an initial

version of FIRREA, since the period of time between introduction

and passage of the Senate’s initial bill was so short.     In

support of this position, the defendants rely on Clarke v.

Securities Industry Ass'n, 479 U.S. 388, 407, 107 S. Ct. 750, 761

(1987), where the Court refused to "attach substantial weight" to

a statement placed in the congressional record by a sponsor of an

act ten days after the law was passed.     See Gallagher, 10 F.3d at

421-22.   The Supreme Court’s opinion in Clarke is

distinguishable, however, given that the legislative history in

Clarke involved a statement "placed in the Congressional Record

10 days after the passage of the . . . Act."    Clarke, 479 U.S. at

407, 107 S. Ct. at 761.     In discounting the value of the

statement at issue, the Court recognized that "Congress did not
have [the statement] before it in passing the . . . Act."       Id.

In contrast, Congress (both Houses), in enacting § 1821(k), did

have this report "before it" in passing the final version of

FIRREA.   Moreover, the legislative history in Clarke did not
involve a report prepared by the congressional committee that

originally considered the provision in question but rather

involved a statement by a single congressman whom the Court

considered not to be an "impartial interpreter of the bill."     Id.

          To support their reading of § 1821(k)’s legislative

history, the defendants rely on a portion of FIRREA's Conference

Report, which provides:
          Title II preempts State law with respect to
          claims brought by the FDIC in any capacity
          against officers and directors of an insured
          depository   institution.     The  preemption
          allows the FDIC to pursue claims for gross
          negligence or any conduct that demonstrates a
          greater   disregard of    a  duty  of   care,
          including intentional tortious conduct.


H.R. REP. NO. 222, 101st Cong., 1st Sess., reprinted in 1989
U.S.C.C.A.N. 432, 437 (emphases supplied).   We do not believe

that the Conference Report supports the defendants' position.

While the report does acknowledge that § 1821(k) preempts State

law, such an acknowledgement is entirely consistent with the

statute's limited preemptive intent.   Moreover, the second
sentence of this portion of the Conference Report acknowledges

that which is evident throughout the legislative history:

§ 1821(k) "allows" the RTC to pursue claims for gross negligence

in states not permitting such claims, but does not "limit" it

from pursuing claims for ordinary negligence, when available

under applicable law.   See Canfield, 967 F.2d at 448 n.6;

McSweeney, 976 F.2d at 539.
          We are also unpersuaded by the defendants' reliance on

congressional attempts to preserve more explicitly the RTC's

right to bring a claim for negligence under other applicable

state or federal law by seeking to amend § 1821(k) in years

following its enactment.14   It is settled law that post-enactment

legislative history should be afforded little or no weight,

especially in the face of contradictory contemporaneous

legislative history.   See U.S. v. Texas, ___ U.S. ___, ___ n.4,

113 S. Ct. 1631, 1635 n.4 (1993) ("[S]ubsequent legislative

history is a hazardous basis for inferring the intent of an

earlier Congress." (internal quotation marks omitted)); U.S. v.

Knox, 32 F.3d 733, 749 n.14 (3d Cir. 1994) ("[P]ost-enactment

legislative history . . . should be given little, if any, weight

because [it] do[es] not necessarily reflect the intent of the

members of Congress who originally enacted the statutory

language."), cert. denied 115 S. Ct. 897 (1995).   As this court

has stated, adopting the language of Justice Scalia,

    14
         For example, Congressman Richard Baker of         Louisiana
proposed an amendment in October 1991, which provided:

     Paragraph (1) shall not be construed as impairing
          or affecting any right of the . . . [RTC]
          under any provision of applicable State or
          other federal law, including any provision of
          common law or any law establishing the
          personal liability of any director or officer
          of any insured depository institution under
          any standard pursuant to such law.

H.R. 3435, 102d Cong., 1st Sess. § 228 (Comm. Markup Oct. 18,
1991).
          "Subsequent legislative history" -- which
          presumably means the post-enactment history
          of a statute’s consideration and enactment --
          is a contradiction in terms. . . . Arguments
          based on subsequent legislative history, like
          arguments   based  on   antecedent  futurity,
          should not be taken seriously, not even in a
          footnote.


Id. (quoting Sullivan v. Finkelstein, 496 U.S. 617, 631-32, 110

S. Ct. 2658, 2667 (1990) (Scalia, J., concurring in part)).

          In particular, courts should be hesitant to examine

congressional attempts to amend ambiguous legislative provisions

in an effort to determine the intent of a previous Congress in

originally enacting the law.   The fact that Congress subsequently

sought to clarify the limited preemptive intent of § 1821(k) in

the face of conflicting judicial interpretations15 is not

surprising.   Courts finding "retrospective" legislative intent in

such proposed enactments could improperly draw inferences from

unsuccessful Congressional attempts to clarify ambiguities which

Congress did not perceive at the time of enactment.   Such

attempts simply do not shed light on the intent of the Congress

that originally enacted the provision.

    15
        The dispute in the Courts of Appeals about the intended
preemptive   effect  of   § 1821(k)  was   preceded   by similar
disagreement among district courts considering these issues at
the time Congress proposed the clarifying amendment.     Compare
FDIC v. Canfield, 763 F. Supp. 533 (D. Utah 1991) (concluding
that § 1821(k) preempts state law), rev’d, 967 F.2d 443 (10th
Cir. 1992) (en banc); FDIC v. Miller, 781 F. Supp. 1271 (N.D.
Ill. 1991) (concluding that § 1821(k) displaces federal common
law) with FDIC v. Isham, 777 F. Supp. 828 (D. Colo. 1991)
(concluding that § 1821(k) does not preempt state law), and FDIC
v. Haddad, 778 F. Supp. 1559 (S.D. Fla. 1991) (same).
            In sum, we conclude that the legislative history

associated with FIRREA, and particularly § 1821(k), does not

manifest Congressional intent to adopt a uniform gross negligence

standard of care for directors and officers of bankrupt federally

insured depository institutions.     Rather, the legislative history

reflects an effort to ensure that directors and officers of

state-chartered institutions (whom Congress viewed as responsible

for a portion of the significant amount of federal money lost in

the insolvency of such institutions) not escape liability to the

RTC under the shield of certain state laws that had effectively

insulated them even from claims based on their grossly negligent

or reckless conduct.     The intent of Congress was to strengthen,

not weaken, the RTC’s hand in pursuit of directors and officers.

Mindful of this intent, and of our reading of the statute’s

language, we now directly address, in turn, the particular

questions whether Congress preempted state law, or supplanted

federal common law claims brought by the RTC for negligence and

breach of fiduciary duty.



            III.   State Law Preemption

            Pursuant to the Supremacy Clause, U.S. Const. Art. VI,

cl. 2, "state laws that ‘interfere with, or are contrary to the

laws of congress, made in pursuance of the constitution’ are

invalid."   Wisconsin Public Intervenor v. Mortier, 501 U.S. 597,

604, 111 S. Ct. 2476, 2481 (1991) (quoting Gibbons v. Ogden, 9
Wheat 1, 211 (1824)).   Federal law preempts existing state law in

either of two ways:   (1) through evidence of congressional intent

to supplant state authority in a particular area, as expressed

either through the language of the statute, see Jones v. Rath

Packing Co., 430 U.S. 519, 525, 97 S. Ct. 1305, 1309-10 (1977),

or implicitly through the enactment of a federal regulatory

scheme "so pervasive as to make reasonable the inference that

Congress left no room for the States to supplement it," Rice v.

Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152

(1947); or (2) when federal law and state law actually conflict,

such as when "compliance with both federal and state regulations

is a physical impossibility," Florida Lime & Avocado Growers,

Inc. v. Paul, 373 U.S. 132, 142-43, 83 S. Ct. 1210, 1217 (1963),

or when a state law "stands as an obstacle to the accomplishment

and execution of the full purposes and objectives of Congress,"

Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404 (1941).

          As we have stated, both a plain reading of § 1821(k)

and an interpretation of its legislative history reflect a

congressional effort to expand, not constrain, the RTC’s ability

to recover against directors and officers by enabling it to seek

recovery in those states that had adopted laws insulating

officers and directors from liability.   Given this interpretation

of the statute and its legislative history, we conclude that

Congress intended to leave room for state law to supplement

§ 1821(k) by permitting recovery in instances of ordinary
negligence.   Moreover, we do not believe that state laws

subjecting directors of federally insured depository institutions

to a more stringent standard of care by permitting recovery in

instances of negligence conflict in any way with the

congressional enactment of § 1821(k).   In fact, such state laws

are consistent with the expressed congressional purpose in

enacting FIRREA of "strengthen[ing] the enforcement powers of

Federal regulators of depository institutions" and

"strengthen[ing] the civil sanctions . . . for . . . damaging the

depository institutions and their depositors."   Pub. L. No. 101-

73, § 101(9)-(10), 103 Stat. 183, 187 (1989) (emphases added)

(reprinted in 12 U.S.C.A. § 1811 note (West Supp. II 1990)).

          The two Courts of Appeals that have directly confronted

this question also have reached this conclusion.   In Canfield,

967 F.2d at 443, the Tenth Circuit sitting en banc concluded that

§ 1821(k) did not preempt available state law claims that permit

the RTC to recover in instances of conduct less culpable than

gross negligence, and the Ninth Circuit in McSweeney, 976 F.2d at

532, relying on Canfield, reached an identical result.      In

addition to interpreting § 1821(k)'s language and legislative

history in a manner similar to that expressed supra, these courts
set forth several additional reasons in support of their

conclusion, which we also find persuasive.

          First, they rejected the contention that Congress was

motivated in enacting § 1821(k) by a need for a national
liability standard in view of the fact that the statute clearly

calls for the application of various applicable state law

definitions of gross negligence.       12 U.S.C.A. § 1821(k) ("as such

terms are defined and determined under applicable State law");

McSweeney, 976 F.2d at 539; Canfield, 967 F.2d at 447.             The

Canfield court noted that, given the vast differences in the

standards of gross negligence in the various states, id.

("`[T]here is . . . no generally accepted meaning [of gross

negligence]'" (quoting W. PAGE KEETON,    ET AL.,   PROSSER & KEETON   ON THE

LAW   OF   TORTS § 34 at 212 (5th ed. 1984)), "the statute cannot

possibly, even without the last sentence, create a national

standard of liability."       Canfield, 967 F.2d at 447.       We agree

that the congressional use of state law formulations of gross

negligence further illustrates the limited preemptive intent of

Congress in enacting § 1821(k).       If Congress had been motivated

by a need for uniformity in the law it would not have invoked the

application of alternative state definitions of gross negligence,

but rather would have called for the application of a uniform

federal standard.

               In addition, the Canfield and McSweeney courts also
based their result on a persuasive policy concern:
          [U]nder defendants' interpretation, consider
          the position of an officer or director of a
          troubled federally insured institution in a
          state allowing actions for negligence. Prior
          to failure, liability would attach for simple
          negligence.   After failure, liability would
          only attach if the officer or director could
          be   proven  grossly   negligent  under   the
          applicable   state   definition.     As   the
          institution struggles, therefore, section
          1821(k) would create an incentive for the
          officers and directors to allow the bank to
          fail. It simply cannot be that FIRREA would
          indirectly encourage such behavior when it
          was designed in part, according to its stated
          purposes, "to curtail . . . activities of
          savings associations that pose unacceptable
          risks to the Federal deposit insurance
          funds." FIRREA, Pub. L. No. 101-73, § 101(3),
          103 Stat. 183, 187 (1989).


Canfield, 967 F.2d at 449; see also McSweeney, 976 F.2d at 540-

41.

          In response to this argument, the defendants correctly

point out that if a director or officer purposely engages in

conduct leading an institution into receivership, such actions

would themselves constitute intentional conduct and indisputably

result in liability under § 1821(k).   See also Canfield, 967 F.2d
at 450 n.5 (Brorby, J., dissenting).   On balance, however, we

find this rejoinder to the RTC's policy argument unpersuasive.

Directors and officers of financial institutions are well advised

of their potential liability under the law.   (Indeed, the

argument that too stringent a standard of care will discourage
capable people from becoming or remaining as directors itself

presumes a sophisticated level of knowledge on the part of such

individuals.)   For instance, they would undoubtedly be aware that

federal receivership would insulate them from claims of

negligence.   Armed with this knowledge, directors and officers of

institutions chartered in states permitting such claims would

have more of an incentive to engage in conduct, which the RTC
could not necessarily prove rises to the level of intentional

conduct or gross negligence, but which nonetheless placed the

institution at greater risk of receivership.

          In sum, we conclude that Congress did not intend to

hinder the RTC by denying it an opportunity to recover for

instances of director and officer negligence when shareholders of

these institutions would have had a right under state law before

receivership, to bring such an action on behalf of the

corporation.    Accordingly, we conclude § 1821(k) does not preempt

the RTC’s right to pursue a claim for conduct less culpable than

gross negligence, if any are available under New Jersey law,

against the United Savings defendants.



          IV.    Displacement of Federal Common Law

          We next address whether, by its enactment of § 1821(k),

Congress foreclosed the RTC’s ability to bring a claim against

officers or directors of federally chartered depository

institutions under federal common law for conduct less culpable

than gross negligence.    The answer to the question of federal

common law displacement turns on an interpretation of

congressional intent.    While it is unnecessary to find that

Congress "had affirmatively proscribed the use of federal common

law," in order to conclude that federal common law has been

supplanted, Milwaukee v. Illinois, 451 U.S. 304, 315, 101 S. Ct.
1784, 1791 (1981) (internal quotation mark omitted), "any terms
of the statute explicitly preserving or preempting judge-made law

are of course controlling, as is clear evidence of Congressional

intent to achieve such results."   In re Complaint of Oswego Barge

Corp., 664 F.2d 327, 339 (2d Cir. 1981) ("In the absence of

clearly expressed legislative intent, legislative history may

provide useful guidance.").

          Lacking statutory language or clear evidence of

congressional intent, we must glean the intent of Congress by

examining whether "the legislative scheme spoke directly" to the

question previously addressed by federal common law, Milwaukee v.

Illinois, 451 U.S. at 315, 101 S. Ct. at 1791 (internal quotation

mark omitted), and assessing the "scope of the legislation."    Id.

at 314-15 n.8, 101 S. Ct. at 1791-92 n.8 (examining whether "‘the

field has been made the subject of comprehensive legislation or

authorized administrative standards.’" (quoting Texas v. Pankey,

441 F.2d 236, 241 (10th Cir. 1971)).   In whole, our inquiry must

discern the intent of Congress so as to resolve the question

whether applying federal common law would constitute "filling a

gap left by Congress’ silence," which is proper, or involve

"rewriting rules that Congress has affirmatively and specifically

enacted," which is improper.   Mobil Oil Corp. v. Higginbotham,
436 U.S. 618, 625, 98 S. Ct. 2010, 2015 (1978).

          We must begin our inquiry, as we have stated, by

determining whether "any terms of the statute explicitly

preserv[e] or preempt[] judge-made law."   Oswego Barge, 664 F.2d
at 339.   In drafting § 1821(k), Congress provided such language,

stating "[n]othing in this paragraph shall impair or affect any

right of the Corporation under other applicable law."   12

U.S.C.A. § 1821(k) (emphases supplied).   We read the plain

meaning of this savings clause as preserving the RTC’s right to

proceed against directors and officers of federally-chartered

institutions under federal common law.    The defendants concede

that before receivership City Federal ("the Corporation") had a

right to bring an action against them under federal common law.

Furthermore, they concede that upon receivership the RTC

"obtain[ed] the rights of [City Federal,] the insured depository

institution that existed prior to receivership."   O’Melveny &

Myers, 114 S. Ct. at 2054.   Accordingly, we conclude the plain

meaning of this provision -- which, stated again, preserves "any

right of the Corporation under other applicable law" -- secures

the RTC’s ability to proceed against the defendants pursuant to

City Federal’s pre-existing rights under federal common law.       In

so doing, we reject the City Federal defendants’ reading of this

provision’s reference to "other applicable law" as one intended

to invoke only the RTC’s rights under other sections of FIRREA or

State law.   As we have demonstrated, when Congress intended to

limit its reference to the law of a particular jurisdiction or to

other portions of FIRREA itself, it did so with the use of

specific language.   See supra pages 14-15.
            Notwithstanding the plain meaning of § 1821(k)’s

savings clause, the defendants contend that we must declare any

available federal common law claims supplanted if Congress "spoke

directly" to the question of the liability of directors and

officers of insolvent depository institutions or "‘occupied the

field through the establishment of a comprehensive regulatory

program supervised by an expert administrative agency,’"

Gallagher, 10 F.3d at 424 (quoting Milwaukee, 451 U.S. at 317,

101 S. Ct. at 1792).   We think that is not enough since, as we

have stated, the answer to the question of federal common law

displacement, like state law preemption, must turn, in the first

instance, on an interpretation of congressional intent, looking

to the text of the statute and then to its legislative history.

            In support of their position, the defendants rely on

the Supreme Court’s decision in Milwaukee v. Illinois, supra,

which concluded that the enactment of the 1972 Amendments to the

Federal Water Pollution Control Act supplanted the federal common

law claim for abatement of a nuisance caused by interstate water

pollution.    The Court did so after examining the scope of the

legislation and whether it spoke directly to the question

previously addressed by federal common law.    We do not believe

the Supreme Court’s opinion in Milwaukee is inconsistent with our
approach.

            The Court in Milwaukee did not reach its conclusion

that federal common law was supplanted until after first
examining in detail the question whether "congressional intent to

preserve the federal common-law remedy . . . is evident in . . .

the statute."    See Milwaukee, 451 U.S. at 327-31, 101 S. Ct. at

1797-1800.     The Court concluded that no such congressional intent

was present.     Id.   In contrast, the intent of Congress

surrounding the adoption of § 1821(k), as evident by both the

provision’s plain meaning and its legislative history, explicitly

preserves any federal remedy for conduct violating a lower

standard of care, such as simple negligence.      The relevant Senate

Report clearly states that "this subsection does not prevent the

FDIC from pursuing claims under . . . other Federal law, if such

law permits the officers or directors of a financial institution

to be sued (1) for violating a lower standard of care, such as

simple negligence."      135 CONG. REC. S6912 (daily ed. June 19,

1989).

             Moreover, we do not believe (1) that § 1821(k) "spoke

directly" to the standard of care applicable to directors and

officers of federally-chartered depository institutions or (2)

that the scope of this legislation occupied the field.       The

defendants contend that in enacting § 1821(k) Congress "spoke

directly" to the standard of care for directors and officers of

federally chartered institutions previously governed by federal

common law.     We disagree.   As we have demonstrated, in enacting

§ 1821(k) Congress sought to address the question of what

standard should apply in cases where the RTC was confronted with
an applicable state insulating statute, so as to ensure that the

RTC could recover when the applicable state law insulated

directors and officers from actions for gross negligence.    While

portions of FIRREA were enacted to govern both state and

federally chartered institutions, see 12 U.S.C.A. § 1813(a)-(c)

(1989), § 1821(k) was simply not enacted to define the standard

of care applicable to federally chartered institutions governed

by federal common law.

          Section 1821(k) calls for the application of the

"applicable State law" formulation of gross negligence.     To read

this sub-section as supplanting federal common law would be to

create an additional (and serious) problem, because it is unclear

which formulation of gross negligence the City Federal defendants

would have us apply.   See KEETON, supra, at 212 (there is "no

generally accepted meaning" of gross negligence).   In a case

involving the liability of directors and officers of a federally

chartered institution, such as City Federal, no state law

standard is "applicable," since federal law governs the liability

of such individuals.   See Chapman, 29 F.3d at 1122.   If Congress

had intended to speak directly to the question of what standard

should apply when the depository institution is federally

chartered, it would, in our view, have addressed the question of

which formulation of gross negligence should apply in such

instances.   The absence of such direction and the provision’s

reference to "applicable State law" reinforces our conclusion
that Congress did not intend to address the liability standards

applicable to directors and officers of federally chartered

institutions in enacting § 1821(k), but rather enacted the

provision for the purpose of preempting state insulating

statutes.

            In addition, we find it inconceivable that Congress

intended to displace existing federal common law which already

provided an action for conduct less culpable than gross

negligence only in instances when an institution enters

receivership.    If Congress had intended to codify a federal

standard of liability for directors and officers of federally

chartered institutions, it would not have limited its application

to circumstances where the institution entered receivership.

Such an approach would, if the federal common law standard is one

of ordinary negligence, create the anomalous situation of

providing greater protection from liability to directors and

officers when their institutions go insolvent, since before

receivership directors and officers would be subject to

derivative claims for ordinary negligence by the "Corporation,"

while after receivership such claims would be limited to gross

negligence.

            This scenario would create a perverse incentive for the

directors and officers who manage our nation’s federally

chartered institutions to decrease their risk of liability by

leading their institutions into receivership.   See supra at 29-
31.    Congress could not have intended to create such an incentive

in enacting a statute intended to "strengthen the enforcement

powers of Federal regulators."     Pub. L. No. 101-73, § 101(10),

103 Stat. 183, 187 (1989).     Even assuming that the proper

characterization of preexisting federal common law standard (as

one of negligence or gross negligence) is unclear, it seems quite

unlikely that Congress would have intended to reformulate the

post-receivership standard as gross-negligence, while leaving the

pre-receivership standard in a state of ambiguity.16

      16
        Given our conclusion that § 1821(k) does not address the
liability of directors and officers of federally chartered
institutions, we need not discern whether the federal common law
standard is one of ordinary or gross negligence.     The district
court should simply permit the RTC to proceed against the City
Federal defendants under existing federal common law.     We note
that the Supreme Court first articulated a common law standard of
care for directors and officers of federally chartered depository
institutions over 100 years ago in Briggs v. Spaulding, 141 U.S.
132, 11 S. Ct. 924 (1891):

       The   degree of care required depends upon the
             subject to which it is to be applied, and
             each case has to be determined in view of all
             the circumstances. . . . [T]he duties imposed
             are presumed to call for nothing more than
             ordinary care and attention. . . .         If
             nothing has come to their knowledge, to
             awaken suspicion of the fidelity of the
             president and cashier, ordinary attention to
             the affairs of the institution is sufficient.
             If they become acquainted with any fact
             calculated to put prudent men on their guard,
             a degree of care commensurate with the evil
             to be avoided is required, and a want of that
             care certainly makes them responsible. . . .
             In any view the degree of care to which these
             defendants   were   bound   is   that   which
             ordinarily prudent and diligent men would
             exercise under similar circumstances . . . .
            We also reject the defendants’ contention that the

federal common law was supplanted because of the scope of FIRREA.

Relying on the opinion in Milwaukee, the defendants seek to

capitalize on the fact that FIRREA created several agencies, such

as the RTC, to deal with the thrift crisis, and conferred upon

these institutions expanded federal regulatory powers over the

activities of the officers and directors of insured financial

institutions.    However, Milwaukee does not help the defendants’

position.    In examining the scope of the legislation there in

question, the Milwaukee Court relied in significant part on a

number of statements in the Act’s legislative history which

demonstrated "the establishment of . . . a self-consciously


Id. at 148, 11 S. Ct. at 929.
     We recognize that Briggs arose before Erie R.R. v. Tompkins,
304 U.S. 64 (1938), and hence, while addressing the liability of
directors and officers of a nationally chartered bank, it did not
label the articulated standard as one of federal common law.
Moreover, in light of the dramatic changes to have occurred to
the legal and economic environment confronted by federally-
chartered depository institutions, the Supreme Court might choose
to reexamine and/or refine the Briggs articulation of the common
law standard of liability for directors and officers of such
institutions.
     Nevertheless, over a century later, the Briggs articulation
of the standard of care apparently continues to apply as a matter
of federal common law.    For instance, in FDIC v. Appling, 992
F.2d 1109, 1113-14 (10th Cir. 1993), the Tenth Circuit described
the standard of care for directors and officers of a federally
chartered bank "as requiring such care and diligence as an
ordinarily prudent man would exercise with reference to the
administration and management of such a moneyed institution."
See also FDIC v. Bierman, 2 F.3d 1424, 1432 (7th Cir. 1993)
("Ordinary care, in this matter as in other departments of the
law, means that degree of care which ordinarily prudent and
diligent men would exercise under similar circumstances.").
comprehensive program by Congress."    Milwaukee, 451 U.S. at 319,

101 S. Ct. at 1793 ("The ‘major purpose’ of the Amendments was

‘to establish a comprehensive long-range policy for the

elimination of water pollution.’" (quoting S. REP. NO. 92-414 at

95)).   The defendants in this action can point to nothing in the

plain language of the statute or its legislative history to

suggest that Congress, in enacting FIRREA, intended to establish

a comprehensive legislative program to address the liability of

directors and officers.    Rather, as we have demonstrated, the

congressional purpose in enacting FIRREA, and § 1821(k) in

particular, was exactly the opposite.

           As Senator Sanford recognized, this provision does not

represent "a wholesale preemption of longstanding principles of

corporate governance, nor does it represent a major step in the

direction of establishing Federal tort standards or Federal

standards of care of corporate officers and directors."       135

CONG. REC. at 7151.   Rather than intending exhaustively to

enumerate the powers available to federal regulators, Congress

sought only to strengthen the RTC’s ability to recover against

malfeasant directors and officers of our nation’s thrifts by

supplementing the laws that already regulated the activity of

directors and officers, such as the federal common law standard

of care.   We cannot conclude solely from the enactment of

provisions meant to enhance the powers of federal regulators that

Congress intended to occupy the field and supplant existing
powers already available as a matter of federal common law.

Rather, Congress explicitly preserved "any right" available

"under other applicable law."

          In sum, the intent of Congress in enacting § 1821(k)

was not to insulate directors and officers of bankrupt federally

insured depository institutions from federal common law liability

for conduct less culpable than gross negligence.     Rather,

§ 1821(k) reflects, as we have demonstrated, an effort to ensure

that directors and officers could not escape liability to the RTC

under the shield of certain state laws that had effectively

insulated them from claims based on their grossly negligent or

reckless conduct.    To read any more into the enactment of

§ 1821(k) would, as Chief Judge Posner has recognized, "make

traps of its words" and perniciously turn the statute on its

head, since Congress intended this provision to strengthen, not

weaken, the RTC’s ability to recover for director and officer

misconduct.     See Chapman, 29 F.3d at 1126-27 (Posner, C.J.,

dissenting) ("What would otherwise be a more stringent standard,

that of simple negligence, is diluted by interpretation of a

statute intended to make the liability of such directors more

stringent.").

          We recognize that the two Courts of Appeals to have

addressed both state law preemption and the displacement of

federal common law by § 1821(k) would permit the RTC to pursue an

action for negligence under state law, but not under federal
common law.   See Frates, 52 F.3d at 295 and Canfield, 967 F.2d at

443 (10th Cir.); Chapman, 29 F.3d at 1122 and Gallagher, 10 F.3d

at 416 (7th Cir.).   These courts have justified such a

distinction by the need for greater congressional intent to

preempt state law as opposed to that necessary to displace

federal common law, given the federalism concerns present when

state law is preempted.   Gallagher, 10 F.3d at 424 ("‘Such

concerns are not implicated in the same fashion when the question

is whether federal statutory or federal common law governs, and

accordingly the same sort of evidence of clear and manifest

purpose is not required.’" (quoting Milwaukee, 451 U.S. at 316,

101 S. Ct. at 1792); see also Milwaukee, 451 U.S. at 317, 101 S.

Ct. at 1792 ("[T]he assumption [is] that it is for Congress, not

federal courts, to articulate the appropriate standards to be

applied as a matter of federal law." (internal quotation mark

omitted)).

          We agree that this generalized reasoning can result, in

certain instances, in a conclusion that a particular statutory

enactment did not preempt state law, yet did displace federal

common law.   However, in our view, the distinction is not

determinative here since the plain meaning of § 1821(k) and the

clear legislative history surrounding its enactment, which

demonstrates that this provision was not intended to apply to

federally chartered institutions, sufficiently overcome the

presumption favoring the displacement of federal common law.
          In reaching the contrary conclusion that § 1821(k)

displaced federal common law, the courts of appeals to have

considered the question have relied, in significant part, on the

argument that permitting the RTC to seek recovery for a

director’s negligence would render § 1821(k) meaningless.   The

Seventh Circuit in Gallagher stated that "[r]eading the ‘savings

clause’ as preserving a federal common law standard of liability

for less culpable conduct than gross negligence would render the

substantive portion of § 1821(k) surplusage."    Gallagher, 10 F.3d

at 420 ("It is illogical that Congress intended in one sentence

to establish a gross negligence standard of liability and in the

next sentence to eviscerate that standard by allowing actions

under federal common law for simple negligence."); see also

Bates, 42 F.3d at 372 ("If the court reads the savings clause to

preserve simple negligence claims, then the gross negligence

standard explicitly articulated . . . is redundant, meaningless

surplusage."); Miramon, 22 F.3d at 1361.   Moreover, in

articulating this "surplusage" argument, the Fifth Circuit in

Miramon rhetorically inquired -- "Why would the RTC ever bring an

action under section 1821(k), where it would have to prove gross

negligence, when it could bring an action under the federal

common law and only be required to prove simple negligence?"    Id.
          We are unpersuaded by this argument.    Given the RTC’s

concession that it can only bring federal common law claims

against directors and officers of federally chartered
institutions and not against their state-chartered counterparts,

the answer to the Miramon court’s question is clear.     Concluding

that § 1821(k) does not displace federal common law does not

render this provision "redundant, meaningless surplusage" because

the RTC still needs § 1821(k) to bring actions for gross

negligence against directors and officers of institutions

chartered in states with statutes insulating them from such

liability.    More particularly, the RTC could not bring a federal

common law claim of negligence against directors and officers of

depository institutions chartered in states with statutes

insulating them from liability claims of gross negligence (or

worse), since, as the RTC concedes, state law governs the

liability of these individuals in the instances where § 1821(k)

does not apply.    See Chapman, 29 F.3d at 1122 (holding that the

applicable law governing the liability of officers and directors

for their stewardship of the corporation is the law of the

jurisdiction where the institution was incorporated or

chartered).    Accordingly, § 1821(k) is needed to ensure that the

RTC is not constrained from seeking recovery for gross negligence

in instances where a state insulating statute would apply.

             As we have stated, allowing the RTC to bring such

actions was precisely the purpose underlying the enactment of
§ 1821(k).    When the defendants are directors of federally

chartered institutions, such as City Federal, this purpose is not

present and the statute simply has no relevance.    Permitting the
RTC to pursue an action under federal common law when the

depository institution is federally chartered in no way renders

the statute inoperative; rather such a conclusion merely

appropriately limits § 1821(k) to its intended realm.

                          V. CONCLUSION

          We hold that Congress did not preempt existing state

law or supplant federal common law holding directors and officers

liable for conduct less culpable than gross negligence.17

Accordingly, we will affirm the district court's order in the

United Savings action, permitting the RTC to pursue negligence

and fiduciary duty claims, if any, under New Jersey law.    In the

City Federal action, we will reverse the district court's order

and direct the court to permit the RTC to pursue any claims for

negligence or breach of fiduciary duty available as a matter of

federal common law.



RTC v. Cityfed Financial Corp, et al., No.   94-5307

RTC v. Schuster, et al., No. 94-5308




MANSMANN, Circuit Judge, concurring in part and dissenting in
part.



    17
        As we have noted, in addition to bringing a claim under
federal common law in the City Federal action, the RTC has also
brought a claim of gross negligence under § 1821(k). Given our
conclusion that Congress did not intend § 1821(k) to apply to
federally-chartered depository institutions, the RTC cannot
proceed under § 1821(k) in the City Federal action.
           I concur in the majority's holding that section 1821(k)

of the Financial Institutions, Reform, Recovery and Enforcement

Act of 1989 ("FIRREA"), 12 U.S.C. § 1821(k), does not preempt

claims for simple negligence or breach of fiduciary duty that may

be available to the RTC under state law.   I respectfully dissent,

however, from Part IV of the opinion, where the majority holds

that section 1821(k) does not supplant the RTC's ability to bring

such actions under federal common law.   I find the majority's

conclusion contrary to the statute's language and legislative

history.   I believe that section 1821(k) establishes a gross

negligence standard of liability in suits brought by the RTC

against the directors and officers of federally-chartered insured

depository institutions, and accordingly would hold, as our

sister courts of appeals in the Fifth, Sixth, Seventh and Tenth

Circuits have held18, that the federal common law standard of

simple negligence19 must yield to section 1821(k)'s higher

standard in such cases.


    18
          RTC v. Frates, ___ F.3d ___ (10th Cir. 1995) [1995 U.S.
App. LEXIS 7990]; RTC v. Bates, 42 F.3d 369 (6th Cir. 1994); RTC
v. Miramon, 22 F.3d 1357 (5th Cir. 1994); RTC v. Gallagher, 10
F.3d 416 (7th Cir. 1993).
    19
          The majority does not decide what standard of liability
controls under the federal common law. Nevertheless, it strongly
suggests in footnote 16 that it is one of ordinary (or simple)
negligence and discusses the question before us as if the federal
common law would permit the RTC to sue the directors and officers
of failed federally chartered insured depository institutions for
simple negligence.
            My analysis is guided throughout by the vastly

different tests the Supreme Court has instructed us to use when

deciding whether a federal statute supplants federal common law

on the one hand, or preempts state law on the other.    When

considering state law preemption, "`we start with the assumption

that the historic police powers of the States are not to be

superseded by the Federal Act unless that was the clear and

manifest purpose of Congress'".    Milwaukee v. Illinois, 451 U.S.

304, 316 (1981) (citations omitted).    By contrast, when the

question is whether federal statutory or federal common law

governs, "`we start with the assumption' that it is for Congress,

not federal courts, to articulate the appropriate standards to be

applied as a matter of law."    Id. at 317 (footnote omitted).

Federal common law is a "`necessary expedient'", resorted to in

the absence of a federal statute and is "`subject to the

paramount authority of Congress.'"   Id. at 313-14 (citations

omitted).    Although a statute will not invade well established

principles of common law unless a statutory purpose to the

contrary is present, United States v. Texas, ___ U.S. ___, 113 S.

Ct. 1631, 1634 (1993), when Congress "speak[s] directly" to the

question addressed by the common law, federal common law is

supplanted.    Id.; Milwaukee v. Illinois, 451 U.S. at 315.
Moreover, it is not necessary for Congress to "affirmatively

proscribe" the federal common law rule in order to abrogate its

application.    Id.
                                I.

          All questions of statutory interpretation start with

the language of the statute itself, and "[a]bsent a clearly

expressed legislative intent to the contrary, `that language must

ordinarily be regarded as conclusive.'"   Kaiser Aluminum &

Chemical Corp. v. Bonjorno, 494 U.S. 827, 835 (1990), quoting

Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S.

102, 108 (1980).

          Section 1821(k) has two parts: a substantive provision

and a savings clause.   In the first sentence, section 1821(k)

provides that "[a] director or officer of an insured depository

institution may be held personally liable in any civil action

by[] . . . the [RTC] . . . for gross negligence, including any

similar conduct or conduct that demonstrates a greater disregard

of a duty of care . . . as such terms are defined and determined

under applicable State law[]"; and in the second sentence, saves

"any right of the [RTC] under other applicable law".20        Under

    20
          Section 1821(k) provides in pertinent part:

          (k) Liability of directors and officers

          A   director  or   officer   of  an   insured
          depository institution may be held personally
          liable for monetary damages in any civil
          action by, on behalf of, or at the request or
          direction of the Corporation, which action is
          prosecuted wholly or partially for the
          benefit of the Corporation . . . for gross
          negligence, including any similar conduct or
FIRREA, "the term `insured depository institution' means any bank

or savings association the deposits of which are insured by the

[Federal Deposit Insurance] Corporation pursuant to this

chapter."    12 U.S.C. § 1813(c)(2) (emphasis added).   Thus, that

Congress has spoken directly in section 1821(k)'s substantive

provision to the standard of liability for the directors and

officers of all failed federally-insured depository institutions,

including those with a federal charter is, I believe, not open to

question.

            I also do not share the majority's confidence in the

clarity of the savings clause.21   Beginning its analysis by

inquiring whether any terms of section 1821(k) "`explicitly

preserv[e] or preempt[] judge-made law[]'", the majority "read[s]

the plain meaning of th[e] savings clause as preserving the RTC's



            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.       Nothing in this
            paragraph shall impair or affect any right of
            the Corporation under other applicable law.


12 U.S.C. § 1821(k).
    21
          I could not discern the meaning of the savings clause
without reference to section 1821(k)'s legislative history. In
my view, the savings clause ensures that even though state
insulating statutes are preempted, state law which imposes a
higher standard than section 1821(k)'s gross negligence liability
standard, holding directors and officers liable for simple
negligence, remains available to the RTC.   See supra pp. 9-10.
right to proceed against directors and officers of federally-

chartered institutions under federal common law."    Majority Op.

at 32-33.   This interpretation of the savings clause, however,

has been rejected by our sister courts as contrary to elementary

canons of statutory construction.    They have concluded that if

the savings clause were construed to preserve federal common law

actions for simple negligence, then the language of the

substantive sentence of section 1821(k) which specifically

enunciates a cause of action for gross negligence would be

meaningless surplusage and rendered a nullity.    I agree.   RTC v.

Bates, 42 F.3d 369, 372 (6th Cir. 1994); RTC v. Miramon, 22 F.3d

1357, 1361-62 (5th Cir. 1994); RTC v. Gallagher, 10 F.3d 416, 420

(7th Cir. 1993).    See RTC v.Frates, ___ F.3d ___ (10th Cir. 1995)

[1995 U.S. App. LEXIS 7990 at 4].    ("[W]e believe Ga[l]agher,

Miramon, and Bates have correctly resolved the [federal common

law displacement] issue . . . and we see no reason to depart from

or add to the analysis . . . .").

            To avoid this dilemma, the majority informs us that

section 1821(k) does not address the liability of directors and

officers of federally-chartered depository institutions in RTC

actions and was enacted only to preempt state insulating

statutes.    I have difficulty comprehending how section 1821(k)

can preserve the RTC's right to sue the directors and officers of

federal financial institutions for simple negligence under

federal common law, and at the same time, not address the
liability of these individuals in RTC actions.   The majority

cannot have it both ways; either section 1821(k) addresses the

issue or it does not.22

          The majority's position that section 1821(k)'s

"intended realm" is limited to state chartered depository

institutions, Majority Op. at 44, flies in the face of FIRREA's

applicable definitional provisions.   As noted, section 1821(k)

covers directors and officers of "insured depository

institution[s]", an all-inclusive term as defined in 21 U.S.C. §

1813(c)(2).   Subsections 1813(c)(4) and (5), on the other hand,

distinguish between and define respectively "Federal depository

institution[s]" and "State depository institution[s]".23    If
    22
          I would also disagree with the view that the
substantive sentence of section 1821(k) speaks only to RTC
actions against the directors and officers of state institutions
and the savings clause speaks to RTC actions against the
directors and officers of both state and federal institutions.
Neither the statute's language nor its legislative history
indicates that Congress restricted the subject matter of section
1821(k)'s first sentence to state institutions, then expanded it
to include state and federal institutions in the second.
Further, if section 1821(k)'s substantive provision only concerns
state insulating statutes, federal common law need not be
"preserved".   Finally, "other applicable law" in the savings
clause cannot refer to federal common law if the substantive
provision relates only to actions involving state institutions,
because federal common law does not have a place in such actions.
    23
          Subsections 1813(c)(4) and (5) provide:

     (4) Federal depository institution

          The term "Federal depository institution"
          means any national bank, any Federal savings
          association, and any Federal branch.
section 1821(k) was intended to apply only to state institutions,

Congress would have referred in the statute to insured "State

depository institution[s]".   Indeed, when Congress sought to

restrict the application of section 1821's subsections to state

institutions, it did so explicitly by using the appropriate term.

E.g., 12 U.S.C. § 1821(c)(3)(A) ("Whenever the authority having

supervision of any insured State depository institution . . .

appoints a conservator . . . the Corporation may accept such

appointment.")(emphasis added).

          Moreover, the majority's position that section

1821(k)'s scope is limited to state institutions is premised on

what I believe to be an erroneous interpretation of the statute.

The majority states that since "gross negligence" does not have a

"generally accepted meaning", Majority Op. at 36, had Congress

intended to speak directly to the standard of liability for

directors and officers of federally chartered institutions it

would have clarified which formulation of gross negligence

applies in such cases.24   In addition, the majority concludes

     (5) State depository institution

          The term "State depository institution" means
          any   State    bank,   any    State   savings
          association, and any insured branch which is
          not a Federal branch.

21 U.S.C. § 1813(c)(4),(5).
    24
          In making this point, the majority cites FDIC v.
McSweeny, 976 F.2d 532, 539 (9th Cir. 1992), cert. denied, ___
U.S. ___, 113 S. Ct. 2440 (1993), and FDIC v. Canfield, 967 F.2d
433, 447 (10th Cir. 1992). In these cases, the courts concluded
that a federal statutory gross negligence standard and section

1821(k)'s reference in the first sentence to "applicable State

law" cannot co-exist.   I do not find them mutually exclusive, and

read the statute as directing the courts to define "gross

negligence" in cases involving failed federal depository

institutions by the state law that has the closest connection to

the institution at issue.   Congress has, at various times and in

various contexts, enacted statutes which rely upon state laws of

decision in an overall federal statutory scheme.   In re TMI

Litigation Cases Consol. II, 940 F.2d 832, 855 (3d Cir. 1991),

cert. denied, 503 U.S. 906 (1992).25   Concepts of negligence fall

that section 1821(k) does not preempt state law claims for simple
negligence, viewing the statute's reliance on state law for the
definition of gross negligence as directly refuting the
proposition that FIRREA establishes a uniform, national standard
of gross negligence liability. Id.

     Since its decision in Canfield, the Court of Appeals for the
Tenth Circuit has held that section 1821(k) supplants federal
common law. RTC v. Frates, ___ F.3d ___ (10th Cir. 1995) [1995
U.S. App. LEXIS 7990]
    25
          Examples of federal statutes that explicitly authorize
the use of state law include: the Price-Anderson Amendments Act
of 1988, 42 U.S.C. § 2014(hh) (the "substantive rules for
decision" in public liability actions "shall be derived from" the
law of the state in which the nuclear incident occurs); the
Federal Tort Claims Act, 28 U.S.C. § 1346(b)(the law of the place
where the act or omission occurred determines the liability of
the United States); 16 U.S.C. § 457 (claims for death or personal
injury within a federal enclave are governed by laws of the
state); the Outer Continental Shelf Lands Act, 43 U.S.C. §
1333(2)(A) (the civil and criminal laws of each adjacent state
are the law of the United States regarding the Outer Continental
Shelf's subsoil and seabed). At times, the use of state law in a
federal scheme is a matter of congressional intent. See, e.g.,
Reconstruction Finance Corp. v. Beaver County, 328 U.S. 204
squarely within the province of the state courts and the conduct

that rises to the level of gross negligence may vary from place

to place.    Thus, a direction from Congress to look for guidance

to the law of the locality in which a federally chartered

depository institution is based represents a sensible and

reasonable way to determine the parameters of the gross

negligence liability standard in any given case.

            I therefore read the plain meaning of section 1821(k)

as "speaking directly" to the standard of liability applicable in

suits brought by the RTC against the directors and officers of

federally chartered insured depository institutions, and setting

it at gross negligence.



                                II.

            When I look for legislative history that contradicts

section 1821(k)'s plain meaning as I see it, I find none; and in

fact, I find legislative history showing that Congress had before

it several competing concerns when enacting section 1821(k) which

it resolved in favor of a gross negligence liability standard.

            Congress was aware that a number of states had enacted

legislation that shields directors and officers from liability

except for reckless or willful breaches of duty in order to


(1946) (Congress intended that state law define "real property"
for tax purposes under the Reconstruction Finance Corporation
Act.).
persuade capable individuals to accept corporate directorships.

Finding an intentional tort standard of liability unacceptably

high, Congress enacted section 1821(k) with at least the purpose

in mind to preempt state insulating statutes.   RTC v. Miramon, 22

F.3d 1357, 1363 n.9 (5th Cir. 1994).    At the same time, however,

Congress was not prepared to displace all state law.    Thus, the

evolution of section 1821(k) from preliminary to final form was

toward less preemption, FDIC v. McSweeny, 976 F.2d 532, 540 (9th

Cir. 1992), cert. denied, ___ U.S. ___, 113 S.Ct. 2440 (1993),

with Congress ultimately leaving it, through the savings clause,

to each state to decide whether a simple negligence standard is

appropriate within its own borders.26

          While Congress sought to set a standard of liability in

section 1821(k) that provided federal regulators with adequate

enforcement power, Pub.L. No. 101-73, § 101(9)-(10), 103 Stat.

183, 187 (1989), it also understood the importance of attracting

qualified persons to serve as officers and directors of financial

institutions.27   RTC v. Gallagher, 10 F.3d 416, 422 (7th Cir.
    26
          During the floor debate in the Senate on the managers'
amendment to the Senate's original bill, Senator Riegle, the
bill's sponsor, explained that the amended bill sought to limit
the preemptive scope of section 1821(k) to state insulating
statutes. See Majority Op. at 20.
    27
          The remarks of Senator Sanford during the floor debate
on the managers' amendment indicate that Congress was concerned
that financial institutions be able to attract competent
management:

          Mr. President, I would like to thank the
          distinguished managers of the bill, Senator
1993).    Accordingly, the standard of liability to be included in

the statute -- simple or gross negligence -- was a matter of

debate.   While the Senate's initial bill would have allowed the

RTC to bring claims "for any cause of action available at common

law, including but not limited to, negligence, gross negligence,

willful misconduct, breach of fiduciary duty . . . .", S.774, §


           RIEGLE and Senator GARN, for including in the
           managers' amendment modifications to the bill
           regarding directors and officers liability
           insurance   contracts,   surety   bond,   and
           financial institution bond contracts, and
           provisions relating to State laws affecting
           the liability of officers and directors of
           financial institutions.

           I believe that these changes are essential if
           we are to attract qualified officers and
           directors   to   serve   in   our   financial
           institutions.

135 Cong.Rec. S4276-77 (daily ed. April 19, 1989).

     During this same debate, Senator Heflin noted the need for
changes in the Senate bill to "ensure that financial institutions
are able to attract strong and capable individuals as directors
and officers[]", and Senator Riegle agreed.     Id. at S4264-65.
Although Senator Heflin's comments were made in connection with
modifications to FIRREA's "standard for imposition of civil
penalties" provision, now codified at 21 U.S.C. § 1818(i)(2), I,
unlike the majority, believe that the Senator's statements
further our understanding of section 1821(k). The Supreme Court
has counseled that "`[t]he true meaning of a single section of a
statute . . ., however precise its language, cannot be
ascertained if it be considered apart from related sections. . .
.'"   Commissioner v. Engle, 464 U.S. 206, 223 (1984), quoting
Helvering v. Morgan's, Inc., 293 U.S. 121, 126 (1934). See also
Richards v. United States, 369 U.S. 1, 11 (1962) ("We believe it
fundamental that a section of a statute should not be read in
isolation from the context of the whole Act . . . .").
214(n), 101st Cong., 1st Sess. at 105-106 (calendar N. 45, April

13, 1989), its amended version removed, inter alia, all

references to a simple negligence standard:
          [A director or officer of an insured
          financial institution may be held personally
          liable] for gross negligence, or intentional
          conduct, as those terms are defined and
          determined under applicable State law.
          Nothing in this paragraph shall impair or
          affect any right, if any, of the [FDIC] that
          may have existed immediately prior to the
          enactment of the [FIRREA] Act.

135 Cong.Rec. S4452 (daily ed. April 19, 1989).28


    28
          The majority relies exclusively on the following Senate
Report as demonstrative of Congress' intent to "explicitly
preserve[] any federal remedy for conduct violating a lower
standard of care, such as simple negligence[]", Majority Op. at
34-35:

     [Section 1821(k)] enables the FDIC to pursue
          claims against directors or officers of
          insured financial institutions for gross
          negligence   (or   negligent   conduct   that
          demonstrates a greater disregard of a duty of
          care   than   gross    negligence)    or  for
          intentional tortious conduct.      This right
          supersedes State law limitations that, if
          applicable, would bar or impede such claims.
          This subsection[] does not prevent the FDIC
          from pursuing claims under State law or under
          other applicable Federal Law, if such law
          permits the officers or directors of a
          financial institution to be sued (1) for
          violating a lower standard of care, such as
          simple negligence, or (2) on an alternative
          theory such as breach of contract or breach
          of fiduciary duty . . . .

S.Rep. No. 19, 101st Cong., 1st Sess., 135 Cong.Rec. 6912 (daily
ed. June 19, 1989).
          Commenting in favor of the amended bill, Senator

Sanford unmistakenly articulated Congress' intent to establish a

standard of liability of gross negligence in section 1821(k) and

clarified that the standard Congress enacted for actions brought

under the statute was not intended for other cases:
               While I fundamentally believe that
          issues of corporate governance and the
          standard of care to which corporate officers
          and directors should be held are matters of
          State law, not Fed[e]ral law, the preemption
          of State law permitted by this bill is
          limited solely to those institutions that
          have Federal deposit insurance and to those
          cases in which the directors of officers have
          committed intentional torts or acts of gross
          negligence. As such, the establishment of a
          federal standard of care is based on the
          overriding Federal interest in protecting the
          soundness of the Federal Deposit Insurance
          Corporation fund and is very limited in
          scope. It is not a wholesale preemption of
          longstanding principles of corporate
          governance, nor does it represent a major
          step in the direction of establishing Federal
          tort standards or Federal standards of care
          of corporate officers and directors.


     If this were the only item of legislative history before us,
I would find the majority's position more persuasive.      When I
consider the Report in context, however, I do not believe it
supports the majority's position. The Report was prepared by the
Senate Banking Committee that drafted the Senate's original bill.
Due to the press of time, it was not placed in the Congressional
Record until two months after the Senate voted on and passed the
amended bill.   Id. at S6934.   As noted, the original bill was
modified substantially to delete references to simple negligence.
I therefore question the Report's value. RTC v. Miramon, 22 F.3d
1357, 1362 (5th Cir. 1994) ("[E]xamination of all of the
legislative history, and scrutiny of the sequence of events
leading up to the bill's passage, calls into question the
conclusion of th[e] report.").
Id. at S4264-65.29


           The House version of section 1821(k), passed after the

Senate version, H.R. 1278, 101st Cong., 1st Sess., 135 Cong.Rec.

H2602 (daily ed. June 15, 1989), and the version that was

ultimately voted into law, preserved the Senate's removal of the

simple negligence standard.   See Pub.L. No. 101-73, 103 Stat. 183
(Aug. 9, 1989), reprinted in 1989 U.S.C.C.A.N. 86.   The House-

Senate Conference Report which represents the final statement of

terms agreed upon by both Houses of Congress confirms that

Congress decided upon a gross negligence standard for section

1821(k):
           Title II preempts State law with respect to
           claims brought by the FDIC in any capacity
           against officers or directors of an insured
           depository institution. The preemption
           allows the FDIC to pursue claims for gross
           negligence or any conduct that demonstrates a
    29
          The majority also points to Senator Sanford's comments
for support. While the Senator's comments certainly demonstrate
that section 1821(k) was not intended to set a universal standard
of director and officer liability, I do not believe they support
the view that Congress did not address the standard of liability
to be used in this RTC action.

     Further, I believe the Senator's comments cast doubt on the
majority's statement that "[e]ven assuming that the proper
characterization of preexisting federal common law standard (as
one of negligence or gross negligence) is unclear, it seems quite
unlikely that Congress would have intended to reformulate the
post-receivership standard as gross negligence, while leaving the
pre-receivership standard in a state of ambiguity." Majority Op.
at 37. It appears that when enacting section 1821(k), Congress
did not focus on the duty of care that directors and officers of
financial institutions may owe their shareholders or third
parties in pre-receivership situations or on duties of care in
other areas.
          greater disregard of a duty of care,
          including intentional tortious conduct.


H.R.Conf.Rep. No. 222, 101st Cong. 1st Sess. 393, 398 (1989),

reprinted in 1989 U.S.C.C.A.N. 432, 437.
          Events which occurred after the statute's enactment

also confirm that Congress established a standard of liability

greater than simple negligence in section 1821(k).    I recognize

that post-enactment legislative history is not as weighty as

legislative history that is contemporaneous with a statute's

passage, but as the Supreme Court has instructed, I would "be

remiss" to ignore it.   Cannon v. University of Chicago, 441 U.S.

677, 687 n. 7 (1979).   There were two unsuccessful efforts to

amend section 1821(k) to include a simple negligence standard of

liability, one by the FDIC,30 and the other by Congressman Baker

of Louisiana.31   Gallagher, 10 F.3d at 423.   Only the presence of


    30
          The FDIC amendment provided:

     Nothing in this subsection shall impair or affect
          any right of the [RTC] under other applicable
          State or Federal law, including a right to
          hold such director or officer personally
          liable for negligence.

Miramon, 27 F.3d at 1363 n.10.
    31
          The Baker amendment provided:

     Paragraph (1) shall not be construed as impairing
          or affecting any right of the . . . [RTC]
          under any provision of applicable State or
          other Federal law, including any provision of
          common law or any law establishing the
          personal liability of any director or officer
a gross negligence standard in section 1821(k) would have

precipitated these attempts to reintroduce simple negligence as a

standard in the statute.   Further, had Congress preserved the

federal common law standard in section 1821(k), as the majority

contends, these amendments would not have been necessary.

          Finally, the public policy consideration the majority

raises regarding the "perverse incentive" that would be created

if the pre-receivership liability standard is simple negligence

and the post-receivership standard is higher, Majority Op. at 37,

may be more imagined than real.   I have no reason to believe that

the directors and officers of federal depository institutions

will allow their institutions to fail in order to take advantage

of section 1821(k)'s gross negligence standard.   If, however, the

statute has this result, it flows from the statute as written,

which is for Congress to correct. FMC Corp. v. U.S. Dep't of

Commerce, 29 F.3d 833, 846 (3d Cir. 1994) (declining to amend

CERCLA by "judicial fiat").



                               III.

          In my judgment, the only reading of section 1821(k)

consistent with its plain meaning and its legislative history is


          of an insured depository institution under
          any standard pursuant to such law.

H.R. 3435, 102nd Cong., 1st Sess. § 228 (Comm. Markup Oct. 18,
1991).
that the statute "speaks directly" to the standard of liability

applicable to the directors and officers of state and federal

federally-insured depository institutions in RTC actions.   I

must, therefore, conclude that the federal common law in this

area is supplanted.   Milwaukee v. Illinois, 451 U.S. 304, 313-16

(1984).
