## Facts

- City Federal Savings Bank, a federally chartered and federally insured savings association, entered receivership in 1989.
- The RTC (later succeeded by the FDIC as receiver) sued the bank’s officers and directors in the bank’s name for losses from development, construction, and acquisition loans.
- The receiver alleged gross negligence, simple negligence, and breaches of fiduciary duty.
- Defendants argued that 12 U.S.C. § 1821(k) limited personal liability in receiver-initiated actions to gross negligence (or more culpable conduct), thereby barring claims based on simple negligence even if state law allowed them.
- The district court dismissed all claims except gross negligence.
- The Third Circuit reversed, reading § 1821(k) as setting a minimum (a floor) and allowing stricter standards under other applicable law; it also held federal common law could supply claims because the institution was federally chartered.
- The Supreme Court granted review to decide the preemptive scope of § 1821(k) and whether federal common law supplies a general standard of care for officers and directors of federally chartered, federally insured institutions.

## Issues

1. Whether 12 U.S.C. § 1821(k) preempts state laws that impose officer/director liability for conduct less culpable than gross negligence by limiting receiver suits to gross negligence or worse.
2. Whether federal common law provides a general standard of care governing officer/director liability at federally chartered, federally insured savings institutions, or whether state law supplies that standard subject to § 1821(k).

## Decision

- The Court affirmed the Third Circuit.
- Section 1821(k) does not preempt state laws that impose stricter standards of care than gross negligence (including simple negligence); it preempts only state laws that are more lenient than gross negligence.
- No general federal common-law standard of care governs these officer/director claims; state law provides the standard of conduct, subject to § 1821(k)’s gross-negligence minimum.
- The receiver could proceed on simple-negligence and fiduciary-duty claims to the extent state law recognizes them.

## Legal Principles

- 12 U.S.C. § 1821(k) establishes a nationwide minimum liability standard (gross negligence) for FDIC/RTC actions against officers and directors of federally insured institutions.
- The statute’s savings clause preserves receiver rights under “other applicable law,” allowing enforcement of stricter state standards of care.
- Federal law displaces state standards only when state law would set a liability threshold below gross negligence; in that circumstance, the federal gross-negligence floor substitutes for the more lenient state rule.
- After Erie, federal courts do not create a general federal common law of corporate governance to supply broad officer/director duty standards absent specific statutory authorization.

## Conclusion

The Court held that § 1821(k) sets a gross-negligence floor while preserving stricter state-law duties, and it rejected a freestanding federal common-law standard of care for officers and directors of federally chartered, federally insured institutions.


Atherton v. FDIC, 519 U.S. 213 (1997)