An Indianapolis judge has ruled in favor of three former Irwin Union Bank & Trust Co. executives, closing the book on a civil suit that the bank’s bankruptcy trustee originally filed in 2011.
On Friday, Federal Judge Sarah Evans Barker granted a motion for summary judgment on two remaining claims against former CEO William Miller, former Chief Financial Officer Gregory Ehlinger and former Executive Vice President Thomas Washburn. With Barker’s ruling, the suit against the three is now closed.
Federal regulators seized and shut down the Columbus, Indiana-based bank in September 2009. At the same time, the bank also filed for Chapter 7 bankruptcy.
The civil suit dates back to 2011, when the bankruptcy trustee for Irwin sued the three bank officers for breach of fiduciary duty, seeking more than $500 million in damages.
Barker dismissed the suit in 2012, but the bankruptcy trustee appealed the decision and an appeals court reinstated two of the original seven charges. One count alleged that the defendants failed to provide accurate and reliable information to the bank’s board of directors, leading the board to approve dividends and stock repurchases and other distributions when the bank should have been preserving capital.
The second count alleged that the defendants capitulated to bank regulators and made millions of dollars’ worth of capital contributions to the bank even as it was headed for failure.
With regards to the first count, Barker noted in her ruling that recovering money distributed to shareholders for the benefit of those same shareholders would amount to a double recovery.
Barker also disagreed with the trustee’s claim that the bank had a fiduciary duty to preserve value for creditors as insolvency loomed. In the state of Indiana, the judge said, a corporation’s directors and officers do not owe this duty to creditors.
Regarding the second count, Barker said the defendants “fully satisfied their fiduciary duties of care and loyalty” to the bank because they kept the board fully informed of the bank’s condition. Further, Barker said, the board “exercised its own business judgement” on bank-related decisions, and the defendants carried out these board decisions.
“Obviously, we and our clients are very pleased with this outcome,” said James Knauer, an Indianapolis attorney who represented all three defendants.
IBJ was unable to reach bankruptcy trustee Elliott Levin on Monday morning.
This suit was one of two legal actions bank officers had faced. The Federal Deposit Insurance Corp. filed its own suit in 2013 against four different individuals: former officers Bradley Kime, Duncan Burdette, Michael Waters and Kim Roerig. The FDIC reached a $15 million settlement in that case last year.