Full opinion text
MEMORANDUM OPINION RE: RULE 12 MOTIONS TO DISMISS AND FOR MORE DEFINITE STATEMENT CARROLL, District Judge. This lawsuit arises out of the failure of Southwest Savings and Loan Association (“Southwest”), a federally insured Savings and Loan incorporated under Arizona law. On February 17, 1989, the Federal Savings and Loan Insurance Corporation (“FSLIC”) took possession of Southwest as conservator, and the Resolution Trust Corporation (“RTC”) succeeded the FSLIC in that role. RTC filed its original complaint on December 16, 1991, and its first amended complaint (“complaint”) on February 14, 1992. The eight-count complaint asserts claims against the former directors and officers of Southwest (“the Southwest defendants”) for negligence, negligence per se, gross negligence, breach of fiduciary duty and breach of duty of loyalty. With the exception of Matthew Shevlin and Edward McDermott, the complaint names as defendants every person, other than deceased individuals, who served on Southwest’s board of directors from 1984 until conservatorship. The complaint also asserts a claim against the Southwest defendants’ Arizona spouses for spousal liability, and a claim against Daniel Ludwig and National Bulk Carriers for the return of unlawful dividends. RTC seeks to hold the defendants liable for over $210 million in damages. Defendants have filed 20 motions under Rules 12(b)(6) and 12(e), Fed.R.Civ.P. and the RTC has filed a consolidated opposition to the various motions. 1. Background/Complaint The complaint is divided into seven sections. The first section sets forth the jurisdictional allegations. The second section identifies the parties and their respective relationship to Southwest. Part B of this section describes each of the defendant directors’ and officers’ role and tenure at Southwest. Complaint at ¶¶ 12-25. The complaint asserts that the RTC seeks to impose joint liability on each of the officers and directors, only with respect to his acts or omissions during the period or periods he served as a director or officer of Southwest, or of any subsidiary of Southwest, or during times when said defendants otherwise owed duties to Southwest, its shareholders and its insurer of accounts as hereinafter described, and the consequences of such acts or omissions then and thereafter. Id. at ¶ 25. The third section of the complaint sets forth general allegations regarding the Southwest defendants’ duties and the breaches of these duties. Id. at ¶¶ 30-35. In this section, the complaint asserts that the Southwest defendants owed Southwest, its depositors and the FSLIC, as insurer, fiduciary and other duties requiring them to act prudently in their lending and investment practices and to safeguard the depositors’ insured funds and the FSLIC insurance fund. Id. at ¶ 31. The complaint also asserts that the Southwest defendants owed a duty to carry out their responsibilities at Southwest by exercising the degree of care, skill and diligence that ordinarily prudent persons in like positions would use under similar circumstances. Id. at ¶ 32. The fourth section of the complaint sets forth fourteen loans or investments as “specific examples of the Southwest defendants’ breach of fiduciary duties and gross negligence.” Id. at ¶¶ 36-78. The complaint recites factual allegations concerning seven of these loans. Id. at ¶¶ 36-77. Another seven loans, accounting for more than $66 million of the total damages sought, are summarized in paragraph 78, entitled “Other Imprudent Loans.” The complaint states the defendants’ breaches of duty are not limited to these 14 transactions: [T]hese transactions illustrate the manner in which the Southwest Defendants breached their duties, and together they demonstrate the extent to which the Southwest Defendants willingly used insured deposits to finance speculative real estate acquisition and development projects. Some of these transactions were carried on Southwest’s books as loans, although in economic substance they were investments; others (notably Camelback Esplanade) were carried on Southwest’s books as investments; and some were denominated loans but accounted for as investments. Id. at ¶36. The fifth section of the complaint alleges improper accounting and auditing practices and improper bonuses and dividend distribution. Id. at ¶¶ 79-102. Part A of this section asserts that the Southwest defendants failed to follow generally accepted accounting principles (GAAP) by, inter aha, failing to establish adequate loan reserves, not recognizing losses, obscuring losses that had occurred, describing as loans what were in reality investments, and improperly recognizing contingent interest income. Id. at ¶¶ 79-94. Part B asserts that the Southwest defendants, by inaccurately reporting net income for 1986 and by manipulating a Short Term Management Incentive Plan, caused special bonuses to be paid to various Southwest officers. These bonuses are alleged to have violated 12 C.F.R. § 563.17(b) (1972). Id. at ¶¶ 91-95. Finally, part C alleges that the Southwest defendants paid and defendants Ludwig and National Bulk received imprudent and unlawful dividends on preferred stock. Id. at ¶¶ 96-102. The sixth section of the complaint sets forth Southwest’s losses that allegedly resulted as a direct and proximate cause of the Southwest defendants’ claimed breaches of duty. Id. at ¶¶ 103-5. Defendants Ludwig and Bulk National are alleged to have received at least $13.4 million in unlawful and imprudent dividends on preferred stock. Id. at ¶¶ 104(a). Defendants Dean, Fannin, Griffith, Kerr, Lewis and Newell are alleged to have authorized at least $1.08 million in unlawful and imprudent bonuses, out of which defendants Lewis, Mirabella, Reese and Snow allegedly received $331,792. Id. at ¶ 104(b). The complaint also alleges that the Southwest defendants’ inaccurate financial statements were designed to, and in fact did, attract new depositors so as to enable Southwest to make more high-risk loans and investments and the RTC, as successor to Southwest’s insurer of accounts, became responsible for repaying those depositors upon Southwest’s failure. Id. at ¶ 105. Finally, the seventh section of the complaint asserts that any statute of limitations with regard to the claims set forth was tolled from the date that such claims otherwise would have accrued to at least until February 17, 1989, when the FSLIC took possession of Southwest. Id. at ¶¶ 106-07. II. Motions to Dismiss — Legal Standard In considering defendants’ motions to dismiss, the Court must presume that the plaintiffs allegations are true, and grant the motion only if it appears “beyond doubt” that the plaintiff can prove no set of facts entitling it to relief. Sun Savings & Loan Assoc. v. Dierdorff, 825 F.2d 187, 191 (9th Cir.1987); Federal Sav. & Loan Ins. Corp. v. Musacchio, 695 F.Supp. 1053, 1058 (N.D.Cal.1988). The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support its claim. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir.1987). Under this liberal standard, motions to dismiss are viewed with disfavor. Intake Water Co. v. Yellowstone River Compact Comm., 590 F.Supp. 293 (D.C.Mont.1983) aff'd, 769 F.2d 568 (9th Cir.), cert. denied, 476 U.S. 1163, 106 S.Ct. 2288, 90 L.Ed.2d 729 (1985). III. FIRREA does not bar claims for negligence, negligence per se and breach of duty of care. (Counts I, II and IV) In the various motions to dismiss, defendants argue that the claims for negligence, negligence per se and breach of duty of care are barred by 12 U.S.C. § 1821(k), as added by section 212 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), Pub.L. No. 101-73, 103 Stat. 183, 243. Section 212(k) of FIRREA provides: A director or officer of an insured depository institution may be held personally liable for monetary damages 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 (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 [RTC] under other applicable law. 12 U.S.C. § 1821 (k) (Supp. II 1990) (emphasis added). Movants contend that the RTC’s claims not rising to the level of gross negligence are preempted by section 1821(k), which sets a single national standard of liability. At the time the parties were briefing this issue, the law regarding the effect of section 1821(k) remained unclear in this Circuit, as in many others. However, in the recent decision of FDIC v. McSweeney, 976 F.2d 532 (9th Cir.1992) cert. denied, - U.S. -, 113 S.Ct. 2440, 124 L.Ed.2d 658 (1993) the Ninth Circuit squarely addresses this issue, holding that FIRREA allows claims against former officials of failed financial institutions premised on a lesser degree of culpability than gross negligence, where authorized under state law. Id. at 540. To hold otherwise, the McSweeney court observes, “would lead to absurd results, creating ‘the perverse incentive for a director in an institution that is having financial difficulty to permit the thrift to fall into ruin ... since the director’s own exposure would be greatly reduced upon the institution of a receivership.’ ” Id. quoting FDIC v. McSweeney, 772 F.Supp. 1154, 1159 (S.D.Cal.1991). See also, FDIC v. Canfield, 967 F.2d 443 (10th Cir.1992), cert. dismissed, - U.S. -, 113 S.Ct. 516, 121 L.Ed.2d 527. IV. Negligence (First Claim) Because 12 U.S.C. § 1821(k) does not preclude state law claims based on a lesser degree of culpability than gross negligence, this Court must determine whether, under Arizona law, the RTC may pursue its simple negligence claim. The Southwest defendants argue that, absent some showing that they acted in bad faith, fraudulently or outside the scope of the corporation’s business, they cannot be held liable for simple negligence. In Fagerberg v. Phoenix Flour Mills Co., 50 Ariz. 227, 71 P.2d 1022 (1937), three director defendants were accused of using corporate funds without authority to speculate in wheat futures, and concealing their losses from the corporation, its stockholders and the other directors by making false entries in the corporate books and false reports to the shareholders. 50 Ariz. at 229, 71 P.2d at 1024. In affirming a judgment against the defendants, the Arizona Supreme Court reviewed a challenge (demurrer) to the sufficiency of the complaint and concluded that [i]t is the general rule that officers and directors of a corporation are authorized to handle the ordinary business affairs of the corporation according to their best judgments, and, if, acting in good faith within the scope of the corporation’s ordinary business, they commit errors of judgment, they are not liable therefor, but it is equally true that, if they go outside of. the ordinary and usual business of the corporation and engage in transactions unauthorized by its articles of incorporation and not within the ordinary scope of its business, without the consent or ratification of the stockholders, then good faith will not excuse them from responsibility to the corporation for any losses which they may have incurred by reason of their unauthorized and illegal conduct. Id. at 230, 71 P.2d at 1025. Fagerberg has been followed in two Arizona decisions concerning director liability. See Tovrea Land and Cattle Co. v. Linsenmeyer, 100 Ariz. 107, 122, 412 P.2d 47, 62 (1966); Kadish v. Phx-Scottsdale Sports Co., 11 Ariz.App. 575, 466 P.2d 794, 797 (1970). Both cases raise issues concerning actions outside the ordinary scope of corporate business which are issues that are not presently before the Court. In Blumenthal v. Teets, 155 Ariz. 123, 745 P.2d 181 (Ct.App.1987), a shareholder of Greyhound Corporation filed a derivative action against the officers and directors of Greyhound for having approved loans without reasonable inquiry into the collateral or underlying documentation reviewed in deciding to make the loans. Id. at 126, 745 P.2d at 184. The loans were made by Greyhound Leasing and Financial Corporation (GLFC), a wholly-owned subsidiary of Greyhound, in apparent reliance upon forged letters, purchase orders, and legal opinion letters supplied by the borrower. Id. at 125-26, 745 P.2d at 183-84. Shortly after Greyhound publicly disclosed its problems with the loans, plaintiff Blumenthal brought an action on behalf of Greyhound against individual officers and directors of both Greyhound and GLFC. Id. at 126, 745 P.2d at 184. On review of the trial court’s dismissal of the complaint, the principal issue before the Arizona Court of Appeals was whether the plaintiff was excused from complying with the pre-suit demand requirements of Arizona Rule of Civil Procedure 23.1, which relates to shareholder derivative actions. Defendant was a Delaware corporation and the case was decided under Delaware law. Id. at 127, 745 P.2d at 185. The court, quoting Aronson v. Lewis, 473 A.2d 805, 808 (Del.1984), found that the demand requirement can only be excused “where facts are alleged with particularity which create a reasonable doubt that the director’s action was entitled to the protection of the business judgment rule.” 155 Ariz. at 128, 745 P.2d at 186. ‘In our view the entire question of demand futility is inextricably bound to issues of business judgment and the standards of that doctrine’s applicability. The business judgment rule is an acknowledgment of the managerial prerogatives of Delaware directors under Section 141(a). It is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. Absent an abuse of discretion, that judgment will be respected by the courts. The burden is on the party challenging the decision to establish facts rebutting the presumption. * * * * * * First, its protections can only be claimed by disinterested directors whose conduct otherwise meets the tests of business judgment. From the standpoint of interest, this means that directors can neither appear on both sides of a transaction nor expect to derive any personal financial benefit from it in the sense of self-dealing, as opposed to the benefit which devolves upon the corporation or all stockholders generally.’ Id. at 127-28, 745 P.2d at 185-86 quoting Aronson, 473 A.2d at 812 (emphasis added in Blumenthal; citations . omitted in Blumen-thal ). Finding this first principle inapplicable to the case at bar, and again quoting Aronson, the Blumenthal court continued: ‘Second, to invoke the rule’s protection directors have a duty to inform themselves, prior to making a business decision, of all material information reasonably available to them. Having become so informed, they must then act with requisite care in the discharge of their duties. While the Delaware cases use a variety of terms to describe the applicable standard of care, our analysis satisfies us that under the business judgment rule director liability is predicated upon concepts of gross negligence.’ Id. The court concluded that the complaint failed to allege gross negligence with sufficient particularity to demonstrate demand futility. Id. 155 Ariz. at 130, 745 P.2d at 188. In reaching this conclusion, the court considered the fact that Greyhound is a multimillion dollar holding company which through its subsidiaries engages in transportation, bus manufacturing, services and food service, consumer products and financial services. Id. at 129, 745 P.2d at 187. The court found that Greyhound’s board of directors could not be expected to have detailed information regarding every transaction of every subsidiary. Id. There was no allegation that Greyhound’s board of directors knew that GLFC directors, officers, and/or employees failed to authenticate the loan transactions or to conduct a physical inspection of the collateral. Id. Additionally, there was no allegation that Greyhound’s board of directors declined to sue any of its own directors or GLFC’s directors. Id. at 130, 745 P.2d at 188. As stated above, Blumenthal involved a Delaware corporation and the case was decided under Delaware law. Nevertheless, the Blumenthal decision strongly suggests that the decision would be the same under Arizona law. The court compared 8 Del.C. § 141(a) to ARS § 10-035 and noted that “[i]n Arizona, like Delaware, the directors rather than the shareholders manage the affairs of the corporation.” 155 Ariz. at 127, 745 P.2d at 185. The court also noted that despite these statutes, the board members themselves are not expected to operate the business: Even under statutes [like Arizona’s] providing that the business and affairs shall be “managed” by the board of directors, it is recognized that actual operation is a function of management. The responsibility of the board is limited to overseeing such operation. Id. quoting Corporate Director’s Guidebook, 33 Bus.Law 1591, 1603 (1978) (emphasis omitted). In support of its argument that Arizona law recognizes a claim for simple negligence in the management of corporate affairs, the RTC cites DePinto v. Provident Security Life Ins. Co., 374 F.2d 37 (9th Cir.1967) cert. denied, 389 U.S. 822, 88 S.Ct. 48, 19 L.Ed.2d 74 and cert. denied, 389 U.S. 822, 88 S.Ct. 52, 19 L.Ed.2d 74. DePinto involved a stockholder’s derivative action against DePinto, a former director of an insurance company (United), and other individuals and corporations. The theory on which the derivative action was based was that, by reason of fraud, negligence, breach of fiduciary duty, unjust enrichment and conversion on the part of the individual defendants, assets of United were diverted from that corporation in connection with its purchase of allegedly worthless shares of an investment company. DePinto, 323 F.2d 826, 828 (9th Cir.1963). By the time DePinto reached the Ninth Circuit Court of Appeals for its third and final appeal, DePinto and his trustee in bankruptcy, as intervenor, were the only remaining appellants. 374 F.2d at 41. Among DePinto’s arguments on appeal was that the trial judge erred in giving the following jury instruction: ‘The particular acts or omissions on the part of the defendant DePinto, which plaintiffs allege occurred and amounted to negligence or breach of fiduciary duty are as follows: Acceptance of the office of director without intending to discharge the duties and responsibilities of director; delegating or relinquishing his responsibilities as a director to Kelly; failing to attend directors’ meetings; failure to examine minutes, records and transactions and documents of the corporation; failure to keep himself advised by reasonable inquiry as to important transactions of the corporation, and particularly as to the transactions in question resulting in the transfer to Kelly of corporate assets; failure to investigate and to require measures for protection of the corporation with respect to conditions and transactions potentially harmful to the corporation and stockholders when such were brought to his attention or of which he should have learned in the exercise of reasonable care, and failure to exercise reasonable care to assure that adequate funds, property, and security be obtained by the corporation in return for the transfer to James E. Kelly of substantial assets of United Security Life.’ Id. at 40 n. T. Defendant DePinto’s objection to the jury instruction was that it invited the jury to find him liable for acts or omission not properly at issue and for which he had not been charged. Id. at 47. The Ninth Circuit rejected DePinto’s arguments. Id. Nowhere in the various DePinto decisions is there a discussion of the business judgment rule or the applicable standard of officer or director liability. It is clear from the jury instruction quoted above that DePinto was being charged with failing to inform himself and failing to act. Thus, the protections of the business judgment rule would arguably be unavailable in such a context. The most recent Arizona case to discuss the business judgment rule is Shoen v. Shoen, 167 Ariz. 58, 804 P.2d 787 (Ct.App.1990). In Shoen, the Arizona Court of Appeals stated “[t]he duty of care is evaluated according to the ‘business judgment rule,’ which precludes judicial inquiry into actions taken by a director in good faith and in the exercise of honest judgment in the legitimate and lawful furtherance of a corporate purpose.” Shoen dealt with the application of Nevada law to a Nevada corporation and the Shoen court cites no authority, Nevada or otherwise, for its exposition pf the business judgment rule. The preceding review of the relevant Arizona case law, particularly Blumenthal, satisfies the Court that under the business judgment rule, defendants liability must be predicated upon concepts of gross negligence. However, the business judgment rule “operates only in the context of director action. Technically speaking, it has no role where directors have either abdicated their functions, or absent a conscious decision, failed to act.” Aronson, 473 A.2d at 813. This position is reconcilable with DePinto, which was an action based on the failure to reasonably investigate or to act. See also, e.g. In re J.P. Stevens & Co., Inc. Shareholders Litigation, 542 A.2d 770, 780 n. 3 (Del.Ch.1988) appeal refused 540 A.2d 1088 (Del.1988) (“a conscious decision to act or to refrain from action is a necessary factor for the invocation of the doctrine”); C.f. Hanson Trust PLC v. ML SCM Acquisition Inc., 781 F.2d 264, 274 (2d Cir.1986) quoting Auerbach v. Bennett, 47 N.Y.2d 619, 393 N.E.2d 994, 419 N.Y.S.2d 920 (1979) (“where their ‘methodologies and procedures’ are ‘so restricted in scope, so shallow in execution, or otherwise so proforma or halfhearted as to constitute a pretext or sham,’ then inquiry into their acts is not shielded by the business judgment rule”). Moreover, “[t]o invoke the business judgment rule’s protection, directors have a duty to inform themselves, prior to making a business decision, of all material information reasonably available to them.” Blumenthal, 155 Ariz. at 128, 745 P.2d at 186, quoting Aronson, 473 A.2d at 812. Accord Gaillard v. Natomas Co., 208 Cal.App.3d 1250, 1264-65, 256 Cal.Rptr. 702, 711 (1989) (“directors may not close their eyes to what is going on about them in corporate business, and must in appropriate circumstances make such reasonable inquiry as an ordinarily prudent person under similar circumstances”). While it is clear that, under the business judgment rule, director liability must be based on concepts of gross negligence, it is somewhat less clear what applicable standard governs director liability in situations where the business judgment rule does not apply. In Delaware, the standard for determining whether a business judgment is an informed one is gross negligence. See Donald J. Block et al. The Business Judgment Rule (3rd Ed.) at 17 (citing cases). This rule grows out of the courts’ recognition that “the amount of information that it is prudent to have before a decision is made is itself a business judgment.” In re RJR Nabisco, Inc. Shareholders Litigation [1988-1989 Transfer Binder] Fed.Sec.L.Rep. (CCH) at 91,714 (Del.Ch.1989). In Rabkin v. Philip A. Hunt Chemical Corp., 13 Del.J.Corp.L. 1210, 1987 WL 28436 (Del.Ch.1987), the court considered a motion for reargument of the court’s decision'that plaintiffs stated a claim against Hunt directors based upon their alleged failure to learn of a one year price commitment made by defendant Olin Corporation at the time it purchased a majority of the stock of Hunt. The court affirmed its prior holding that: (1) the business judgment rule does not apply to a claim where directors allegedly failed to act because they were ignorant of the operative facts; (2) the standard of care in a director neglect claim is that which “ordinarily careful and prudent men would use in similar circumstance;” and (3) the complaint adequately alleges a neglect claim against the directors for their failure to learn the terms of the price commitment and to take action with respect to that commitment prior to its expiration. Id. at *1, quoting Graham v. Allis-Chalmers Mfg. Co., 41 Del.Ch. 78, 188 A.2d 125, 130 (Del.Supr.1963): [U]nder the business judgment rule, directors who undertake their decision making responsibility will not be held liable either for a fault in the decision making process or the decision itself unless they were grossly negligent. It does not seem logical to accord the same deference to directors who abdicate their managerial responsibilities. There would be little meaning to the business judgment rule if, in cases not implicating the duty of loyalty, directors were given the same protection from liability whether it applies or not. Id. at *3. See also Rabkin v. Philip A Hunt Chemical Corp., 12 Del.Corp.L. 1156, 547 A.2d 963, 972 (Del.Ch.1986). It has been said that the business judgment rule does not conflict with the concept of negligence. In other words, when courts say that they will not interfere in matters of business judgment, it is presupposed that judgment — reasonable diligence-has in fact been exercised. 3A William Fletcher, Cyclopedia of the Law of Private Corporations § 1039, at 45 (rev. perm. ed. 1986). The Rabkin decisions are consistent with this position. See also William Knepper & Dan Bailey, Liability of Corporate Officers and Directors § 6.02 (1988); Joy v. North, 692 F.2d 880, 886 (2d Cir.1982) cert. denied, 460 U.S 1051, 103 S.Ct. 1498, 75 L.Ed.2d 930 (1983): Whatever its merit, however, the business judgment rule extends only as far as the reasons which justify its existence. Thus, it does not apply in cases, e.g., in which the corporate decision lacks a business purpose, is tainted by a conflict of interest, is so egregious as to amount to a no-win decision, or results from an obvious and prolonged failure to exercise oversight or supervision. Id. The RTC argues that the complaint alleges more than enough facts to place the applicability of the business judgment rule or a simple negligence standard into issue. First, the complaint alleges that defendants repeatedly approved large real estate loans without obtaining critical information, such as adequate appraisals of the security, current financial statements, information on pri- or bankruptcies, credit reports, verification of deposits or tax returns of the borrowers. As an example, the RTC points to its allegations in the complaint with respect to Camel-back Esplanade, where the directors are alleged to have approved what was then the largest project in Southwest’s history “without any meaningful investigation,” “without ascertaining the true price of the land being purchased,” and at “a single board meeting ... lasting less than two and one-half hours and at which several other large projects were also considered.” Second, the RTC contends that the business judgment rule does not protect directors from liability for transactions in which the director has a personal interest. The RTC refers to allegations in the complaint that defendants Newell and Lewis approved the Burns loans without disclosing their affiliations to Burns’ entities, and defendants Lewis and Mirabella approved the first Paye/Tempe loans shortly after making a large profit in a real estate transaction with the borrower. The RTC also refers to allegations in the complaint that several directors and officers approved the Camelbaek Esplanade transaction despite Symington’s affiliated person status, and to allegations that defendants Dean, Fannin, Griffith, Kerr, Lewis and Newell benefitted defendants Lewis, Reese and Snow by overstating their performance evaluations and Southwest’s income for 1986. The RTC also points to allegations in the complaint that the directors and officers abdicated their functions by failing to develop adequate loan underwriting, disbursement, record keeping, modification and loss procedures, and failed to heed the warnings of federal and state regulators and accountants about specific transactions and general policies. Finally, the RTC argues that even if defendants could claim a presumption of good faith under the business judgment rule, the complaint alleges facts that, if assumed to be true, are more than sufficient to place the defendants’ good faith at issue. As an example of “one of the most obvious breaches of good faith,” the RTC points to allegations of defendants’ concerted plan to use depositors’ funds to engage in an inordinate number of speculative real estate ventures, followed by their cover-up of the resulting losses. The Court concludes that the complaint alleges facts which, taken as true, cast a reasonable doubt that the defendants’ actions are entitled to the protection of the business judgment rule. The complaint is replete with allegations that defendants “failed in their duty to inform themselves, prior to making a business decision, of all material information reasonably available to them.” Blumenthal, 155 Ariz. at 128, 745 P.2d at 186. Other allegations concern defendants’ abdication of their functions as officers and directors through their failure to develop adequate loan underwriting, disbursement, record keeping, modification and loss reserve procedures. Moreover, there are numerous allegations relating to defendants’ failure to heed warnings of federal and state regulators and their own accountants about specific problems. A transaction by transaction determination of the application of the business judgment rule to the allegations contained in the complaint is beyond the scope of the motions presently before the Court and would involve factual determinations. In this regard, application of the business judgment rule is peculiarly a question of fact. See FSLIC v. Musacchio, 695 F.Supp. 1053, 1064 (N.D.Cal.1988). V. Gross Negligence Under Arizona Law (Third Claim) FIRREA specifies that defendant officers and directors may be held liable for gross negligence as such term is defined and determined under applicable State law. 12 U.S.C. § 1821(k). Defendants assert that the complaint fails to state a claim for relief as none of the allegations, if proved, would establish a prima facie case of gross negligence under Arizona law, as defined in Scott v. Scott and its progeny: Wanton [i.e. gross] negligence is highly potent, and when it is present it fairly proclaims itself in no uncertain terms. It is ‘in the air,’ so to speak. It is flagrant and evinces a lawless and destructive spirit. 75 Ariz. 116, 122, 252 P.2d 571, 575 (1953); Walls v. Arizona Dept. of Public Safety, 170 Ariz. 591, 826 P.2d 1217 (App.1991). The Arizona courts have yet to articulate a gross negligence standard for director and officer liability. Generally in this context, “[i]f gross negligence be understood as meaning something nearly approaching fraud or bad faith, then the rule is not to be commended and is against the decided weight of the authority.” Fletcher, § 1034 at 31; see also W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 34 at 212 (5th ed. 1984) (gross negligence “differs from ordinary negligence only in degree, and not in kind”). The RTC argues that under Arizona law, the issue of gross negligence is a question of fact and that the complaint includes factual allegations sufficient to support such a claim. See Walls, 170 Ariz. at 595, 826 P.2d at 1221 (court may withdraw the issue of gross negligence from the jury only when no evidence is introduced that would lead a reasonable person to find gross negligence); Coyner Crop Dusters v. Marsh, 90 Ariz. 157, 367 P.2d 208 (1962) (if there is any evidence upon which to predicate finding of wanton negligence, court should not exclude jury from so finding). Defendants assert that the allegations in the present action are not dissimilar to those dismissed in Blumenthal as failing to rise to the level of gross negligence. However, here, unlike in Blumenthal, there are allegations that defendants continued to approve speculative loans despite repeated warnings from federal regulators and accountants that the information defendants relied on was inadequate and, in some instances, the approvals based on such inadequate information were unlawful. Furthermore, there are allegations that defendants approved loans without disclosing them conflicts of interest with borrowers. Finally, there are allegations that defendants approved loans under circumstances where such approvals violated federal and Arizona banking and corporate laws. The RTC points to allegations in the complaint that defendants failed to inform themselves of critical information about the ability of borrowers to repay, or their speculative real estate projects to support the major loans they personally approved. Such failure to inform oneself, RTC asserts, by itself demonstrates gross negligence. In Smith v. Van Gorkom, 488 A.2d 858 (Del.1985), a divided Delaware Supreme Court found directors grossly negligent in failing to exercise sufficient deliberation before approving a cash-out merger at a fifty percent premium over the market price. The merger was negotiated by Van Gorkom, the chairman of Trans Union, without consulting the rest of the board. 488 A.2d at 866-67. The board approved the merger in a two-hour meeting, without examining the underlying merger documents. Id. at 868-69. No outside expert was consulted as to the fairness of the purchase price. Id. at 876. Accordingly, the court found that the directors simply “did not reach an informed business judgment” and “acted in a grossly negligent manner.” Id. at 874, 884. Similarly, the RTC’s complaint alleges that Southwest’s directors approved the Camel-back Esplanade project without having seen the joint venture agreements or determined the true purchase price of the property, and having discussed the venture only once, at a two and one-half hour meeting at which the directors also considered and approved a number of other important deals. Complaint at ¶¶ 65-73. By way of reply, the defendants argue that the Van Gorkom decision is severely limited to the context of corporate takeovers. But see: Briggs v. Spaulding, 141 U.S. 132, 11 S.Ct. 924, 35 L.Ed. 662 (1890) (liability may be predicated on “gross inattention”); Ford v. Taylor, 176 Ark. 843, 4 S.W.2d 938 (Ark.1928) (finding directors grossly negligent after they received a report from a bank examiner that alerted them to the bank’s critical condition, but they declined to give close attention to bank affairs). What constitutes a proper performance of the duties of a director is a question of fact, which must be determined in each case in view of all the circumstances; the character of the company, the condition of its business, the usual methods of managing such companies, and all other relevant facts taken into consideration. Fletcher § 1034 at 31. Defendants’ motions to dismiss claims of gross negligence will be denied. VI. Negligence Per Se Claim Based on Violation of HOLA (Second Claim) The second claim of the complaint alleges that the Southwest defendants caused, permitted and acquiesced in numerous regulatory violations. Specifically, the RTC alleges that the Southwest defendants violated the following provisions of the Code of Federal Regulations: 12 C.F.R. § 545.32(d) (1983 and 1984); 12 C.F.R. § 545.36(b)(2) (1984); 12 C.F.R. § 561.29 (1983); 12 C.F.R. § 563.41(b) (1979); 12 C.F.R. § 563.41(c)(ii) (1979); 12 C.F.R. § 536.17—1(c)(1), (i), (iii), (iv), (1983) and (vi) (1983 and 1986); and 12 C.F.R. § 563.17(b) (1976). These regulations were promulgated by the Federal Home Loan Bank Board (“FHLBB”) pursuant to the Home Owners Loan Act (“HOLA”) 12 U.S.C. § 1461 et seq. The regulations provide, generally, limitations and requirements relating to loan practices and other operations of federally insured savings and loan associations. For example, 12 C.F.R. § 545.32(d) (1984) proscribes real estate loans that exceed 100 percent of the market value of the security property. 12 C.F.R. § 563.17(b) (1979) provides that compensation to officers and directors shall be reasonable and commensurate with their duties and responsibilities. The complaint asserts that the alleged violations are actionable as a negligence per se claim “because the regulations establish a standard of care that: (a) relates to the harm sought to be prevented by such statutes or regulations; and (b) is raised by RTC in its corporate capacity, as successor in interest to persons within the class which the statutes or regulations seek to protect.” Complaint at ¶ 118. In Arizona, violation of a statute establishes the elements of duty and breach, requiring the plaintiff to prove only proximate cause and damages. See Cobb v. Salt River Valley Water Users’ Ass’n, 57 Ariz. 451, 114 P.2d 904 (Ariz.1941). It is the prevailing rule, recognized in Arizona, that a breach of a statute intended as a safety regulation is not merely evidence of negligence, but is negligence per se. Brannigan v. Raybuck, 136 Ariz. 513, 667 P.2d 213 (Ariz.1983). One of defendants’ arguments in support of dismissal of this claim is that the HOLA regulations at issue do not provide a damages remedy for their violation. The intent of Congress not to create a damages remedy under HOLA or its regulations, defendants contend, precludes the assertion of a state law claim for negligence per se grounded on a violation of the federal regulation promulgated by the FHLBB. The RTC does not dispute that the HOLA regulations at issue do not grant it a private cause of action for violations. Such a position would run contrary to the weight of the authority. As the Eighth Circuit Court of Appeals stated in FSLIC v. Capozzi: [W]e likewise discern no congressional intent that the broad-based regulatory protections involved here grant a federal cause of action for damages to a federally insured, state-chartered thrift institution against its former directors. In the context of this type of institution, we believe these regulations are ‘forward-looking, not retrospective; they seek to forestall insolvency, not to provide recompense after it has occurred. In short, there is no basis in the language of the regulations or the promulgating statutes for inferring that a civil cause of action for damages lay in favor of anyone.’ FSLIC v. Capozzi, 855 F.2d 1319, 1325 (8th Cir.1988) (quoting Touche Ross & Co. v. Redington, 442 U.S. 560, 570-71, 99 S.Ct. 2479, 2486, 61 L.Ed.2d 82 (1979)) vacated on other grounds, 490 U.S. 1062, 109 S.Ct. 2058, 104 L.Ed.2d 624 (1989); accord RTC v. Hess, 820 F.Supp. 1359, 1368 (D.Utah 1993); FSLIC v. Olano, 1989 WL 54226 (E.D.La. May 17, 1989); Eureka Fed. Sav. and Loan Ass’n v. Kidwell, 672 F.Supp. 436 (N.D.Cal.1987); First Hawaiian Bank v. Alexander, 558 F.Supp. 1128 (D.Haw.1983). Instead, the RTC argues that the complaint asserts a claim for negligence and that the regulations merely set the standard of care. Response at 20-21. The RTC claims that it does not seek to create a private right of action under HOLA, “any more than an injured pedestrian seeks to create a private right of action under a statute setting a speed limit.” Id. at 20. Defendants respond that the distinction between an implied right of action for violation of a statute and a claim of negligence per se based on that violation is ephemeral. The RTC cites three cases in support of the proposition that defendants can be held liable for negligence per se based on a violation of HOLA regulations. In FSLIC v. Wilkinson, No. CIV-89-505-A (W.D.Okla. July 23, 1990) (unpublished opinion), the district court denied defendants’ motion to dismiss the negligence per se claim, concluding that: “Holding negligent or willfully errant directors liable in money damages for violations of HOLA and its regulation is consonant with the regulatory scheme and the intent of Congress: that is, ensuring that savings and loan associations are properly managed and financially sound.” Id. at 4-5. However, the Wilkinson decision is otherwise void of analysis. The RTC cites another unpublished opinion, RTC v. Eason, No. CIV-92-5033 (W.D.Ark., July 16, 1992). In Eason, defendant sought to dismiss a count of the complaint asserting a violation of HOLA. The court denied defendant’s motion, basing its holding on the RTC’s assertion that the count is a “negligence claim, and that the alleged violations serve as evidence of the duties imposed on the directors and officers of a financial institution.” Id. at 3. The court upheld the count as a negligence claim, not a negligence per se claim, concluding that “evidence of a statutory violation may give rise to an action for negligence.” Id. In the third case cited by the RTC, FSLIC v. Musacchio, 695 F.Supp. 1053 (N.D.Cal.1988), the FSLIC alleged that defendant, the founder and principal shareholder of Columbus Savings and Loan, was negligent per se in failing to adhere to various deposit insurance statutes and regulations. Defendant contested whether the plaintiff, as conservator for Columbus, was intended to be protected by the statutes and regulations in question. 695 F.Supp. at 1064. The Musac-chio court, after discussing the lack of applicable ease law before the court, found it was free to either accept or reject the applicability of California’s negligence per se presumption. The court elected to accept the presumption, noting that under California law the presumption is permissive, not mandatory; the defendant is free to rebut the presumption, and the fact-finder is free to reject it. Under the circumstances, the court held, “it seems wise to permit the use of federal statutes and regulations as a benchmark for prudent conduct.” Id. at 1065. Musacchio is distinguishable because in Arizona the presumption is mandatory, not permissive. Thus, in California, even were violations of the regulations assumed, defendants would be entitled to present evidence that they acted as would persons of reasonable prudence under the circumstances, who desired to comply with the law. See Arney v. United States, 479 F.2d 653, 660 (9th Cir.1973). In this regard, the negligence per se claims advanced in both Musacchio and Eason were in legal and practical effect ordinary negligence claims. Other courts have dismissed negligence per se claims based on federal regulations in general, and HOLA regulations in particular. In Sanford Street Local Dev. Corp. v. Textron, Inc., 768 F.Supp. 1218 (W.D.Mich.1991), vacated on other grounds, 805 F.Supp. 29 (W.D.Mich.1991), the court dismissed plaintiffs claim for negligence per se based on alleged violations of the Toxic Substance Control Act (“TSCA”), 15 U.S.C. §§ 2601-29, on the grounds that Congress’ decision not to provide an action for money damages preempted that theory of claim: A negligence per se claim alleging a violation of the [Toxic Substances Control Act] is little different than an implied right of action under the TSCA for money damages. Since the latter is not available because of Congress’ desire to provide aggrieved parties with only equitable remedies, this court finds that the former is preempted as well. 768 F.Supp. at 1224. In FSLIC v. Olano, 1989 WL 54226 at 1 (E.D.La.), the court rejected plaintiffs contention that violation of HOLA regulations should be considered negligence per se and should give rise to a private remedy. The Olano court focused solely on the issue of whether HOLA impliedly authorizes a private remedy; it did not consider whether a negligence per se claim may be advanced despite there being no private remedy under HOLA. Id. In the recent decision of RTC v. Hess, 820 F.Supp. 1359 (D.Utah 1993), a case which involves many of the same parties as are involved in this action, the court considered a challenge to a claim of negligence per se brought under federal common law with respect to a state chartered, federally insured savings and loan association. During the period in question in Hess, officers and directors could be held liable under Utah law for ordinary negligence. Id. at 1365. However, the Hess defendants could not be found liable for negligence per se under Utah law because the case did not involve a dangerous instrumentality. Id. at 1368 n. 14. Hess joined other courts in holding that there is no implied right of action under HOLA. However, the court determined that the lack of an implied private right of action under HOLA does not necessarily preclude the use of particular HOLA regulations to prescribe the standard of care in a federal common law claim for negligence per se: There is a distinct difference between bringing a private cause of action derived from the HOLA regulations themselves, and using those same regulations as a standard of care where the underlying cause of action is based on separate statutory or common law. Id. at 1368, citing Pratico v. Partland Terminal Co., 783 F.2d 255, 264-65 (1st Cir.1985); Dixon v. International Harvester Co., 754 F.2d 573, 581 (5th Cir.1985). The Hess court determined that HOLA regulations may be used as a standard of care in a claim for negligence per se if two requirements are met. 820 F.2d 1368. First, a separate underlying cause of action for negligent mismanagement must exist under federal common law. Id. Second, the HOLA regulations establishing the standard of care must satisfy the traditional elements of negligence per se. Id. As to the first requirement, the Hess court found that application of federal common law with regard to federally chartered savings and loan institutions is appropriate due to the uniquely federal interests of establishing a uniform approach to director liability. Id. However, the court found that the same justification for the application of federal common law does not exist in the case of state chartered, federally insured savings and loan associations. Id. at 1370. Accordingly, the court did not determine whether HOLA regulations meet the traditional elements of negligence per se. Id. at 1370. The cases cited in Hess in support of the distinction between an implied private cause of action under HOLA and a negligence per se claim using the HOLA regulations as the standard of care, Pratico and Dixon, supra, both involved the application of a negligence per se claim to an alleged violation of Occupation Safety and Health Administration (OSHA) regulations. In Pratico and Dixon, the underlying causes of action were negligence (Pratico) and strict liability and negligent design (Dixon). In such cases, [allowing OSHA regulations to act as ‘guides for the determination of the standards of care,’ should not be viewed as expanding the liability of employers. The doctrine of negligence per se does not have the effect of turning reasonable, nontor-tious behavior into unreasonable, tortious behavior. Rather it simply allows the presence of a statutory regulation to serve as irrefutable evidence that particular conduct is unreasonable. Pratico, 783 F.2d at 265. Arizona courts have adopted legislative standards of conduct when the duties they reflect are recognized at common law. Ontiveros v. Borak, 136 Ariz. 500, 667 P.2d 200 (1983). In Ontiveros, the Arizona Supreme Court, sitting en banc, held that tavern owners are under a duty to exercise due care in ceasing to furnish intoxicants to customers in order to protect members of the public who might be injured as a result of the customer’s increased intoxication. The court found the duty of due care to exist as a matter of common law and of statute; specifically A.R.S. § 4-244(14), which prohibits the serving of alcohol to an intoxicated person. 136 Ariz. at 511, 667 P.2d at 211. The court drew the following distinction: In the case at bench, we adopt a standard of duty by applying recognized theories of tort liability. We are not creating some new concept previously unrecognized at common law.... The situation is different where the cause of action is of a nature wholly unknown to common law and where, therefore, no cause of action will exist unless the statute under consideration expressly confers a private right of action. Id. at 510 n. 3, 667 P.2d at 210 n. 3. As stated above, the RTC does not dispute that the HOLA regulations do not grant it an implied private cause of action. Thus, through its assertion of a state law negligence per se claim, the RTC is attempting to impose on the defendants a duty unknown in Arizona common law. Such an outcome would be particularly inappropriate where, as here, the action involves a state chartered savings and loan association and, under FIR-REA, the extent of officer and director liability is determined in accordance with state law. The court concludes that under Arizona law, an alleged violation of a HOLA regulation cannot form the duty and breach components of a negligence per se claim directed against officers and directors of a state chartered savings and loan association. Given this conclusion, the Court need not consider whether the HOLA regulations otherwise meet the traditional elements of a negligence per se claim. VII. Breach of Duty of Care (Fourth Claim) . The fourth claim of the complaint alleges that the Southwest defendants owed Southwest and its shareholders, depositors and insurer of accounts a fiduciary duty to exercise the utmost care, skill, diligence and good faith while carrying out their functions as directors and officers. The claim incorporates the preceding 107 paragraphs of the complaint and alleges that as a direct and proximate result of these breaches of the Southwest Defendants’ duty of care, plaintiff has suffered damages exceeding $197 million. Defendants have moved to dismiss this claim, based on FIRREA and the business judgment rule arguments, discussed above, and defendants’ arguments are hereby rejected for the reasons discussed above. VIII. Breach of the Duty of Loyalty (Fifth Claim) The fifth claim of the complaint alleges that the Southwest defendants, owed Southwest and its shareholders, depositors and insurer of accounts a fiduciary duty of loyalty to fully disclose any and all information concerning their dealings with prospective borrowers or investment partners before acting with regard to any loans or investments, and to always place the interests of Southwest and its shareholders, depositors and insurer of accounts ahead of their own personal interests. Complaint at ¶ 123. The duties are alleged to have arisen, at least in part, upon express and implied contractual obligations. Id. Defendants have moved to dismiss this claim for failure to state a claim upon which relief can be granted. The duty of loyalty “springs from the prohibition against self-dealing that is inherent in a director’s fiduciary relationship with the corporation and its shareholders.” Shoen, 167 Ariz. at 65, 804 P.2d at 794. As the Arizona Supreme Court announced in Atkinson v. Marquart, 112 Ariz. 304, 306, 541 P.2d 556, 558 (1975) and repeated in Master Records, Inc. v. Bachman, 133 Ariz. 494, 497, 652 P.2d 1017, 1020 (1982): In Arizona a director of a corporation owes a fiduciary duty to the corporation and its stockholders ... This duty is in the nature of a trust relationship requiring a high degree of care on the part of the director ... [A] director does not breach his fiduciary duty so long as he acts honestly and in good faith and breaches no specific duty owing to the corporation ... If there is a showing that a director is personally interested in a transaction, the business judgment rule does not apply, and the burden shifts to the defendant to show that the transaction is fair and serves the best interests of the corporation. Shoen, 167 Ariz. at 65, 804 P.2d at 794. A director is not personally interested so long as he neither “appear[ed] on both sides of a transaction nor expect[ed] to derive any personal benefit from it” Blumenthal, 155 Ariz. at 128, 745 P.2d at 186. Citing Master Records v. Backman and Atkinson v. Marquart, supra, the Southwest defendants assert that in order for a director to be liable for breach of the duty of loyalty, Arizona law requires that a director must further his or her own personal interest through a course of conduct causing “deliberate injury” to the corporation. Both Master and Atkinson involved claims that defendants were engaging in the same business as the corporation to which they allegedly owed a duty of loyalty; claims that are not present in the case at bar. The Arizona Supreme Court, first in Atkinson, then in Backman, announced: It is not the fact of engaging in a competing business that gives rise to liability. It is the additional circumstances which show a course of conduct of causing deliberate injury to the business and reputation of the corporation that supports a finding of bad faith and resulting liability. 112 Ariz. at 306, 541 P.2d at 558. These cases do not support defendants’ assertion that the RTC must show “deliberate injury” in order to state a claim of breach of the duty of loyalty based on allegations of conflicts of interests in certain transactions. Certain defendants also argue that Arizona law concerning conflicts of interest is codified in A.R.S. § 10-041, which provides that a transaction or contract between a corporation and one of its directors is not necessarily void or voidable simply because of such relationship. The statute, enacted in 1975, does not address whether a director involved in the transaction or contract may have otherwise breached his fiduciary duties to the corporation; rather, the statute addresses the validity of the transaction or contract at issue. a. Executive Bonuses The following allegations are set forth in paragraphs 91-95 of the complaint: In January, 1986 Southwest’s board approved a Short Term Management Incentive Plan (“Incentive Plan”). Defendants Dean, Fan-nin, Griffith, Kerr, Lewis and Newell voted in favor of the Incentive Plan, under which the executives of Southwest were to receive cash bonuses determined on the basis of Southwest’s net income for 1986 and individual executive performances. The Incentive Plan allegedly motivated the Southwest Defendants to make and approve more loans (whether prudent or not), to book large, unearned fees and points on loans, to modify and extend nonperforming loans, to disguise joint ventures and investments as loans and to report improperly certain amounts as income, all to increase Southwest’s apparent income so that certain Southwest defendants would receive larger bonuses. To calculate executive bonuses, the Southwest defendants used Southwest’s reported net income, $26 million, when Southwest should have reported a loss in 1986. The claim is that Southwest defendants disregarded an executive’s individual performance in calculating the 1986 bonuses and each executive was given a 100 percent score on his evaluation form. By inaccurately reporting net income for 1986 and by manipulating the Incentive Plan, the Southwest defendants paid special bonuses to certain Southwest officers totaling $1,081,580 and including $195,000 to Lewis, $100,000 to Snow and Mirabella and $36,792 to Reese. These special bonuses are alleged to have violated 12 C.F.R. § 563.17(b) (1976) and came at a time when the normal Christmas bonuses were reduced or eliminated for lower level employees. i Dean, Fannin, Griffith, Kerr and Newell Defendants Dean, Kerr, Fannin, Griffith and Newell (the “outside” directors) have moved to dismiss the breach of the duty of loyalty claim on the ground that the complaint fails to allege that they received any personal benefit by approving the Incentive Plan. Consolidated Motion to Dismiss Count V at 5-6. The RTC responds that allegations of corporate waste state a claim for breach of duty of loyalty. The RTC also argues that the duty of loyalty may be implicated where a director approves transactions or decisions that favor his business associates. Response at 26, citing Drobbin v. Nicolet Instrument Corp., 631 F.Supp. 860 (S.D.N.Y.1986). In a lengthy reply, the outside directors argue that the allegations relating to the Incentive Plain are insufficient to state a claim for breach of the duty of loyalty and that corporate waste is not equivalent to a claim for breach of the duty of loyalty. Moreover, they argue that they cannot breach their duty of loyalty by simply approving corporate transactions benefitting other officers or directors. Consolidated Reply at 20-26. Allegations of excessive executive compensation implicate a director’s duty of loyalty to the corporation. See, The Business Judgment Rule at 87. Normally, such compensation is measured by a reasonableness standard. Id.; Wyles v. Campbell, 77 F.Supp. 343, 346-47 (D.Del.1948) (“where corporate funds are applied to incentive or other compensation of corporate officers, such remuneration must bear a reasonable relation to the value of the services for which the funds are applied”). The question of the reasonableness of a corporate officer’s compensation is ordinarily a question of fact, as such an inquiry may involve consideration of the services rendered, time devoted to the company, difficulties involved, responsibilities assumed, successes achieved, corporate earnings, and other relevant facts and circumstances. See Liability of Corporate Officers and Directors, § 4.10 at 142. The complaint alleges, inter alia, that the directors disregarded the executives’ individual performance, inaccurately reported net income and manipulated the Incentive Plan. As these allegations must be taken as true for purposes of the motions presently before the Court, dismissal of the breach of the duty of loyalty claims directed against defendants Dean, Fannin, Griffith, Kerr and Newell would be inappropriate. ii. Lems, Snow, Reese and Mirabella Defendants Lewis and Snow have also moved to dismiss the breach of the duty of loyalty claim as it relates to executive bonuses. Defendants Reese and Mirabella have joined in the motions to dismiss filed by the other defendants. Defendant Lewis’ principal argument is that “[t]here are no allegations that he profited personally, that he was on both sides of a transaction, or that he was dealing with himself.” Lewis’ Motion to Dismiss at 14. However, the complaint alleges that, as a director, Lewis voted in favor of the Incentive Plan, and as Southwest’s President and Chief Executive Officer, he received a bonus of approximately $195,000 under the Plan. Complaint at ¶ 91, 95. Given the allegations in the complaint concerning inaccurate reporting of net income, disregard of individual performance and manipulation of the Incentive Plan, dismissal would inappropriate. As stated earlier in this memorandum order, the issue before the Court is not whether the plaintiff ultimately will prevail on the merits; dismissal may be granted only if it appears “beyond doubt” that the plaintiff can prove no set of facts entitling it to relief. The complaint does not allege that defendant Snow was a member of Southwest’s board of directors or was on the compensation committee. In his motion to dismiss, Snow argues that the complaint merely alleges that he breached his duty of loyalty by having his performance evaluated by the directors and by accepting a bonus voted on by the Southwest board of directors. Thus, Snow argues that the complaint lacks any factual allegations to support a claim for breach of the duty of loyalty. Defendant Snow’s argument ignores paragraph 92 of the complaint, which alleges that the Incentive Plan motivated the Southwest defendants “to make and approve more loans (whether prudent or not), to book large, u