Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Bender v. Jordan

May 5, 2009

MORTON A. BENDER, ET AL. PLAINTIFFS,
v.
CAROLYN D. JORDAN, ET AL. DEFENDANTS,
INDEPENDENCE FEDERAL SAVINGS BANK CROSS PLAINTIFF,
v.
CAROLYN D. JORDAN, ET AL. CROSS DEFENDANTS,
CAROLYN D. JORDAN, ET AL. THIRD PARTY PLAINTIFFS,
v.
MICHAEL J. COBB, ET AL. THIRD PARTY DEFENDANTS,



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

Carolyn D. Jordan and David Wilmot are the former Chair and Vice-Chair, respectively, of the Board of Directors of Independence Federal Savings Bank ("IFSB" or "the Bank"). Thomas L. Batties is the former acting President and Chief Executive Officer. They were all sued in early 2006, along with former directors Michael J. Cobb, William B. Fitzgerald IV, and Eugene K. Youngentob, and the Bank itself as a nominal defendant. The Bank paid the legal fees for the defense and each director and Mr. Batties promised to repay if it were later determined that s/he was not entitled to indemnification. After deciding that Ms. Jordan and Messrs. Wilmot and Batties were not so entitled, the Bank sued them as Third-Party Defendants to recover the monies expended. This Court held that the two directors and former president are severally liable to repay the Bank. See Aug. 11, 2008, Mem. Op. & Order [Dkt ## 112 & 113].

Now, as Third-Party Plaintiffs, Ms. Jordan and Messrs. Wilmot and Batties sue Third-Party Defendants Messrs. Cobb, Fitzgerald and Youngentob, seeking indemnification and/or contribution towards the outstanding liability. The Third-Party Defendants move to dismiss.

I. BACKGROUND

This lawsuit is part of a much larger dispute concerning the future of IFSB between a majority of its Board and dissident shareholders Morton and Grace Bender. See Civ. Action Nos. 03-865, 03-2485, 04-736, and 05-1787. This fifth decision will not recount all the facts and the Court refers a reader to its previous decisions. See, e.g., Dkt. # 112. Suffice to say that in early 2006, Mr. Bender filed a shareholder derivative suit, challenging the handling of a contested election for seats on the IFSB Board and the related shareholders' meeting in October 2005.

Upon suit, the directors and President/CEO (collectively, "Director Defendants") sought indemnification from the Bank. Pursuant to regulations of the Office of Thrift Supervision ("OTS"), which regulates savings and loan institutions, each of the Director Defendants executed the following promise:

Pursuant to Regulations of the Office of Thrift Supervision (the "OTS") governing advancement of expenses to directors and officers of a federal savings association, 12 C.F.R. § 545.121(e), (the "Regulation"), with respect to claims brought against a director or officer arising from service as a director or officer of a federal savings association, I hereby request that Independence Federal Savings Bank (the "Bank") pay reasonable expenses and costs that have been or will be incurred in the defense or settlement of the litigation styled as Morton A. Bender, et al. v. Carolyn D. Jordan, et al. Under the Regulation, I hereby agree that I will repay the Bank any amounts so paid on my behalf by the Bank if it is later determined that I am not entitled to indemnification with respect to the litigation under 12 C.F.R. § 121, and I represent that I have sufficient assets to repay my fair share of such amounts.

See IFSB's Cross-Cl., Exs. 1-3 [Dkt. # 89].

This Court entered a preliminary injunction in favor of Mr. Bender in July 2006 and issued a Memorandum Opinion in which the Court made specific findings concerning the actions of Ms. Jordan and Messrs. Wilmot and Batties that supported the legal conclusion that Mr. Bender was likely to succeed on the merits of his allegations that those defendants had violated the securities laws and the Bank's bylaws. The Court made no findings concerning any actions by Messrs. Cobb, Fitzgerald or Youngentob. Thereafter, Mr. Bender voluntarily dismissed Messrs. Cobb, Fitzgerald and Youngentob, who had almost immediately resigned from the IFSB Board. He filed a First Amended Complaint against only Ms. Jordan and Messrs. Wilmot and Batties in September 2006.*fn1

Although the Director Defendants filed an appeal to overturn the preliminary injunction, they withdrew it on January 2007, immediately before briefs were due in the court of appeals. Ms. Jordan and Mr. Wilmot resigned from the Board and Mr. Batties' relationship with the Bank ceased at the end of 2007.

In the meantime, on May 30, 2007, the Bank, a nominal defendant in the derivative action, filed a cross-claim against Ms. Jordan and Messrs. Wilmot and Batties as Cross-Defendants, seeking repayment of the legal fees expended for their defense. After the Board formally decided that none of the Cross-Defendants was entitled to indemnification, the Bank sought summary judgment. On August 11, 2008, the Court awarded the Bank $649,614.39. See Dkt. # 112. The Court found that each of the Cross-Defendants is severally liable for one-third of the total amount of the fees:

All six original defendants were jointly represented by one firm which mounted the same defense on behalf of each of them. The Court's findings after the preliminary injunction hearing, however, did not include Messrs. Cobb, Fitzgerald, or Youngentob as active transgressors of the securities laws or bylaws. They were subsequently dismissed from the suit. Thus, but for the actions of Ms. Jordan and Messrs. Wilmot and Batties, IFSB would not have violated the securities laws, Mr. Bender would not have filed a successful shareholder derivative action against IFSB, and IFSB therefore would not have advanced funds for legal expenses to any of the Director Defendants or Mr. Batties. . . . And because all six original defendants were represented jointly by one law firm and because that firm mounted the same defense for all of them, the entire amount of the legal fees that the firm accrued is properly attributable to those who were fairly responsible for the expenses -- the three Cross-Defendants. The fair share of the legal fees for which each of the three Cross-Defendants is severally liable is equal to one-third of $649,614.39 -- the total sum of the attorneys' fees and expenses accumulated in defense of Mr. Bender's lawsuit. Consequently, each Cross-Defendant [Ms. Jordan, Mr. Wilmot, Mr. Batties] is liable severally, not jointly, for $216,538.13 plus interest thereon from June 20, 2007 through the day of payment in full by [each].

Aug. 11, 2008, Mem. Op. [Dkt. # 112] at 18-19.

In January 2008, prior to the Court's disposition of IFSB's cross-claim, Ms. Jordan and Messrs. Wilmot and Batties sued Messrs. Cobb, Fitzgerald and Youngentob as Third-Party Defendants. However, the Complaint was not served until September 2008. The Third-Party Complaint contains a single count seeking indemnification or contribution from the Third-Party Defendants. It alleges that IFSB demanded repayment from Ms. Jordan and Messrs. Wilmot and Batties but that, if IFSB were entitled to receive repayment from them, it was also entitled to receive repayment from Messrs. Cobb, Fitzgerald and Youngentob. See Third-Party Compl. [Dkt. # 107], ΒΆΒΆ 11-13. The Third-Party Complaint concluded, "In that event, Third-Party ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.