House bill would make it harder to sue negligent bank officers

[private]Officers and directors of Georgia banks would be more difficult to sue for their negligent business decisions under legislation introduced Wednesday — HB 192 – by Rep. Beth Beskin (R-Atlanta).

Beskin’s bill, if passed, would repeal a unanimous 2014 Georgia Supreme Court decision (FDIC v. Loudermilk) that said bank officers and directors can be held legally accountable if they make negligent decisions that cause the financial institution to fail.

The justices held that Georgia’s “business judgment rule” did not automatically protect bank officers from being held liable for mere negligence.

Their ruling stemmed from a lawsuit filed by the Federal Deposit Insurance Corp. (FDIC) against the directors of the Buckhead Community Bank, which was closed by regulators in December 2009.

The FDIC sued nine of the Buckhead Bank’s former directors and officers, who included Aaron Rents founder R. Charles Loudermilk, in U.S. District Court in 2013 on allegations that the officers were negligent in their management of the failed bank’s lending practices, causing $22 million in losses.

HB 192 provides that bank officers and directors could no longer be sued for mere negligence, but only for “gross negligence,” which the bill defined as “a reckless indifference to or absolute disregard for the best interest of the corporation and its shareholders.”

“It restores Georgia to a gross standard of negligence,” Beskin said. “We need to be consistent with other states. It’s hard to get people to serve on bank boards if they’re open to legal liabilities.”

After the financial crash of 2008 and subsequent Great Recession, more than 80 banks in Georgia failed, the largest number by far of any state.

The FDIC filed several negligence lawsuits against Georgia bank directors and officers, some of them legislators like former state senator Jack Murphy and state Rep. Greg Morris (R-Vidalia), chairman of the House Banks and Banking Committee.

Beskin said her bill was not prompted by the FDIC actions against Morris or by requests from former Buckhead Community Bank directors.

“It doesn’t have anything to do with any particular person,” she said.

© 2017 by The Georgia Report



Tags: bank directors , Beth Beskin , Greg Morris , liability , negligence