Resolution Trust Corp. v. Scott (929 F. Supp. 1001, 1996)

OPINION AND ORDER

BARBOUR, Chief Judge.

This cause is before the Court on the following motions which were filed by the Defendant, Tom Scott, Jr. (“Scott”): (1) Motion for Summary Judgment and for Partial Summary Judgment on Counterclaim; (2) Motion to Strike Plaintiffs Expert Reports Submitted in Opposition to Scott’s Motion for Summary Judgment; and (3) Motion to Strike Inadmissible Proof. Having considered the Motions, Plaintiffs Responses, Defendant’s Rebuttals, all attachments to each, and supporting and opposing memoranda, the Court finds that (1) the Motion for Summary Judgment and for Partial Summary Judgment on Counterclaim is well taken and should be granted; (2) the Motion to Strike Plaintiff’s Expert Reports Submitted in Opposition to Scott’s Motion for Summary Judgment is well taken and should be granted; and (3) the Motion to Strike Inadmissible Proof is not well taken and should be denied. Because the disposition of these motions closes this case, all other pending motions are moot and therefore denied.

I. Factual Background and Procedural History

A. Procedural History

On August 10, 1989, the Office of Thrift Supervision (“OTS”) appointed the Resolution Trust Corporation (“RTC”) as receiver of Unifirst Bank for Savings, F.A. (“Old Uni-first”). On that same date, RTC organized Unifirst Bank for Savings, A Federal Savings and Loan Association (“New Unifirst”), for the purpose of taking over at least some of the assets and liabilities of Old Unifirst. To accomplish this purpose, the RTC as receiver for Old Unifirst entered into a Purchase and Assumption Agreement (“the Agreement”) with New Unifirst which provided, inter alia, for the transfer of certain assets and liabilities from Old Unifirst to New Unifirst. Finally, on that same date, the OTS appointed the RTC as conservator for New Unifirst.

On June 15, 1990, the OTS appointed the RTC as receiver for New Unifirst, and the RTC succeeded to all rights, powers and privileges of New Unifirst, its directors and officers. Pursuant to a contract of sale between the RTC as receiver for New Unifirst and the RTC in its corporate capacity (“RTC Corporate”) dated June 29,1990, the RTC as receiver assigned to RTC Corporate all of its right, title and interest in the claims of New Unifirst. RTC Corporate was thereafter the lawful owner of such claims until December 31, 1995. On that date, RTC Corporate ceased to exist in accordance with the provisions of the Resolution Trust Corporation Completion Act, 12 U.S.C. § 1441a(m)(l) and (2), and the assets and liabilities of RTC Corporate were transferred to the Federal Deposit Insurance Corporation (“FDIC”), which serves as the manager of the Federal Savings and Loan Insurance Corporation (“FSLIC”) Resolution Fund. By Order dated April 29, 1996, this Court granted the Plaintiff’s Motion to substitute the FDIC as the Plaintiff in this matter. The Court noted in that Order that “the FDIC, as an assignee of the claims of the RTC, will be subject to the same affirmative defenses and counterclaims as was the RTC.” April 29, 1996, Order at 3.

On March 22, 1994, the RTC as receiver for New Unifirst filed this action against Scott alleging damages as a result of Scott’s alleged breach of his contractual obligations and fiduciary duties as a director and officer of Old Unifirst. The RTC further alleged causes of action for gross negligence, negligence and negligence per se for the manner in which Scott discharged his duties as a director and officer of Old Unifirst. The Amended Complaint filed on September 2, 1994, charges that Scott caused Old Unifirst to incur damages as a result of three transactions: Manhattan/Bismarck; DMI Investment Corporation; and the Mountain Creek Participation. On December 15, 1994, the parties submitted a Stipulation of Dismissal of DMI Investment Corporation Claims in which the RTC voluntarily dismissed all claims concerning DMI Investment Corporation. By letter dated March 19, 1996, from counsel for the RTC to counsel for Scott, the RTC withdrew all claims concerning the Mountain Creek Participation. Furthermore, this Court has previously dismissed the RTC claims for relief based upon the theories of breach of contract, breach of fiduciary duty, negligence and negligence per se. See June 8,1995, Opinion and Order. Therefore, the only remaining claim of the RTC against Scott is a claim for gross negligence for Scott’s actions concerning the Manhattan/Bismarck series of transactions.

On June 24, 1994, Scott filed his Answer to the Complaint of the RTC and asserted a counterclaim for indemnity based upon an indemnification resolution passed by the Board of Directors of Old Unifirst. Scott prayed for a judgment against the RTC, as receiver for New Unifirst, entitling him to recoup and to offset any award obtained against him as a result of the underlying action and adjudging the RTC liable for attorneys’ fees and expenses incurred by him in defending this action. By Order dated April 18, 1995, this Court denied the RTC Motion to Dismiss the Counterclaim for indemnification asserted by Scott. On November 27, 1995, Scott filed an action against the RTC as receiver for Old Unifirst asserting the same claim for indemnity raised in his counterclaim against the RTC as receiver for New Unifirst. Scott v. RTC, Civil Action No. 3:95cv856BN (Nov. 27, 1995). In that Complaint, Scott asserts that “[ejither the RTC/Unifirst owes the indemnity obligation or both RTC/Unifirst and RTC/New Unifirst owe it.” Complaint at 5, ¶ 18. By Order dated February 15, 1996, that action was consolidated with the present action for all purposes and subsequent proceedings.

Scott has now filed a Motion for Summary Judgment concerning the only remaining claim of the RTC regarding Scott’s alleged gross negligence in his actions concerning the Manhattan/Bismarck transaction. Scott has also moved for summary judgment on his counterclaim for indemnity for the RTC.

B. Industry Background

In the early 1980’s, most savings and loan associations or “thrifts”, including Old Uni-first, held the majority of their assets in long-term, fixed-rate mortgages, reflecting loans made in local markets for homes. These home loans were financed by deposits in the form of savings accounts made primarily by local depositors. These thrifts were statutorily limited by the federal government regarding the rates that they could pay on deposits. The funds from deposits were loaned to homeowners at higher mortgage interest rates, resulting in solid profits for the thrifts as long as residential mortgage rates remained somewhat higher than the rates paid by the thrifts for deposits.

From the late 1970’s through the early 1980’s, interest rates soared, and the market value of fixed-rate residential mortgages on the books of the thrifts plunged. Because the thrifts were limited by federal law to paying below-market rates on deposits, many depositors withdrew their money to invest these funds with other types of institutions paying higher rates of return. Federal laws were changed to allow the thrifts to pay higher rates on deposits, but the rates on existing mortgages, which comprised the bulk of the thrifts’ assets, remained low. These fixed-rate mortgages could not be sold at or near face value.

As a result of these market and regulatory forces, in 1981 and 1982, the thrift industry experienced the worst financial operating results since the Great Depression, losing nearly twenty-five percent of the industry’s net book value. During these two years, one-sixth of all federally insured thrifts were merged or liquidated because of inadequate capital. Other conditions aggravated the problems being experienced by the thrifts including the oil and gas boom of the late 1970’s and early 1980’s which soon came to an end and the passage of the Tax Reform Act of 1986 which eliminated certain previously advantageous tax deductions.

The federal government responded to the problems of the thrifts by loosening the capital requirements of the thrifts and seeking ways to strengthen the capital and management of the thrift industry. Thrift policies and procedures for real estate appraisal were revised to help clearly define market value and to give the thrifts more flexibility to restructure problem loans. Specifically, the Federal Home Loan Bank Board (“FHLBB”) developed a forbearance policy concerning the thrifts which provided as follows:

[T]he Board believes it appropriate to employ supervisory policies that will support basically sound, well-managed thrifts in weathering what is believed to be a difficult but temporary period. Implementation will be accomplished by encouraging thrifts to work with their troubled borrowers; by establishing a capital forbearance policy; and by reaffirming that generally accepted accounting principles can be used to permit loan restructuring without loss recognition, where appropriate.

In response to this situation, the Board encourages thrifts to develop work-out strategies with their troubled borrowers in appropriate situations. Entering into work-out plans with borrowers who are experiencing temporary difficulties in meeting their debt service obligations is often in the best interests of all parties. Although examiners will point out to managements the weaknesses that may be present in loans, the Board does not automatically require foreclosure on collateral or acceleration of the maturity of loans. The Board recognizes that downturns in certain sectors of the economy are expected to be transitory. Therefore, lenders may find that the most prudent policy is to restructure loan terms rather than to take more precipitous action, such as foreclosure.

Stewart Report at 21-22 (quoting 2/26/87 FHLBB Policy Statement on Forbearance, 52 Fed.Reg. 6876 (3/5/87) (emphasis added)). The FHLBB also loosened the requirements with regard to property appraisals:

Although the Board recognizes the importance of an appraisal, it believes the value of collateral should not be the sole determinant of asset valuation where, for example, the borrower has other resources for repayment against which the lender has legal recourse.

Stewart Report at 23 (quoting 53 Fed.Reg. 338, 350 (1/6/88)).

Another regulatory response to the thrift crisis was the Management Consignment Program where managers believed to be proven were placed into failed and failing thrifts to help manage their problem assets and contain staggering operating losses. Scott was one of many managers who was asked to assist the FHLBB in this manner. Some insolvent institutions were permitted to operate for months or years if the FHLBB supervisory staff believed that such institutions had good management. The thrift problem was so pervasive that the FHLBB did not have the resources, and the FSLIC did not have the money, to take over every insolvent, federally insured thrift.

Other federal regulations were revised to allow the thrifts to sell their residential mortgage portfolios at a loss and defer the loss over several years by charging only a fraction of the deferred loss against income each quarter, instead of charging off all of the loss at one time. Scott asserts that the reason for this regulatory change was to prevent the thrifts from having to recognize book-value insolvency. The RTC asserts that the reason for allowing this loss deferral was to allow the thrifts to reinvest the loan sale proceeds in higher earning assets. In either case, Old Unifirst elected to sell its residential mortgage portfolio and defer the loss as allowed by the new regulations. The deferred loss amounted to a charge against income of approximately $600,000 each quarter. Obviously, Old Unifirst needed substantial income to offset this loss each quarter.

The Garn-St Germain Depository Institutions Act of 1982 was enacted in substantial part to permit thrifts to operate more like commercial banks. Also, the FHLBB revised its regulations and policies to permit investment by thrifts in higher-yielding, shorter-term, more geographically diverse consumer, commercial and construction loans and other transactions previously considered appropriate investments for commercial banks. Although Unifirst had some experience in commercial lending and finance, it lacked any commercial banking expertise as most of its loan officers had spent their careers underwriting residential mortgage loans. Unifirst retained the executive recruiting department of Peat Marwick to seek out the “best and the brightest” commercial bankers available to provide Unifirst with the commercial banking expertise which it lacked. The employment of Jeb Cloyd, as Chief Operating Officer, and David Guthrie, as Chief Loan Officer, was the result of these recruiting efforts.

C. Structure and Chain of Command of Old Unifirst

Unifirst, as a mutual organization operating under a federal charter, had no shareholders. The institution was “under the direction of a Board of Directors” (“Board”). Federal Mutual Charter at A-2 (hereinafter “Charter”), attached as Exhibit A to the June 27, 1984, Minutes of the Regular Meeting of the Board of Directors (hereinafter “June 27,1984, Minutes”), attached as Exhibit I to Scott’s Motion for Summary Judgment. The Board was elected by the depositors, which had “any and all of the powers of the savings bank not expressly reserved by the Charter to the members.” Bylaws at B-5, attached as Exhibit B to the June 27,1984 Minutes. A majority of directors constituted a quorum, and the act of a majority of directors at a meeting at which there was a quorum was the act of the Board. Id. at B-3. The Bylaws authorized committees of the Board, including an Executive Committee, to exercise the powers of the Board between meetings. Id. at B-4. The Bylaws also authorized the Board to elect “a president, one or more vice-presidents, a secretary, and a treasurer,” whose terms of office were for one year. Id.

From 1984 to 1989, Unifirst was the largest thrift in Mississippi, with over $865 million in assets, 24 branches in 14 cities and 475 employees. Unifirst had at least 12,000 loans of various types and at least 60,000 savings accounts. Scott could not be and was not directly involved in every transaction at Unifirst during this period. Scott asserts that he had no direct, day-to-day responsibility for the details of the Manhattan transaction, and that such details were left to a myriad of loan officers, vice-presidents, senior vice-presidents and finally executive vice-presidents which are the only persons who reported to him. The RTC asserts that Scott’s authority and responsibility regarding the Manhattan transaction was not limited to broad administrative responsibility, and that as a member of the Executive Committee and as President of Unifirst, Scott had responsibility for “taking corrective action insuring legal compliance and advising his Board of Directors of all relevant facts impacting any decision in regard to these transactions.” Plaintiff’s Response to Defendant’s Itemization of Material Facts at 6, ¶ 69.

The parties do not dispute that as President, Scott had management oversight of every aspect of the Unifirst organization, from deposit acquisition to the management of employee benefits to the purchase of office supplies. Scott also had responsibilities as one of ten members of the Board of Directors and as one of six members of the Executive Committee of the Board. Scott was not Chairman of the Board.

The accounting firm of Peat Marwick audited Unifirst on a regular basis. Unifirst also had a compliance officer, who reported directly to the Audit Committee of the Board, charged with ensuring that Unifirst complied with applicable laws and regulations. The Audit Committee included and was chaired by outside directors. The Board of Directors required the attendance of the General Counsel for Unifirst, Tom Scott, III, (“Scott, III”) at every meeting.

In accordance with the structure outlined above, the process for prior approval of any transaction in excess of $1,000,000 usually began at the level of one or more vice-presidents, who then made recommendations to senior vice-presidents. These senior vice-presidents then made recommendations to the executive vice-president for the department involved in the transaction, who would then review the transaction. This series of recommendations and reviews usually occurred through the work of officer committees. After approval by the appropriate officers, the officers recommended approval by an appropriate committee of the Board. If the Board Committee approved of the transaction, such approval was then reported to the Board. Scott asserts that this review procedure was followed with regard to the Manhattan transaction which is the only transaction being questioned in this case. The RTC contends, however, that the direction came from the top, specifically from Scott, and that Scott had the authority to reject a transaction at any point prior to approval. The RTC agrees, however, that Scott had no individual authority to approve the Manhattan transaction, which required approval by a proper committee of the Board and/or the full Board. On both the Executive Committee and the Board, Scott possessed one vote concerning the approval of the loans for the Manhattan transaction.

The Board and its Executive Committee included outside directors who were independent and respected businessmen. General Louis Wilson, a member of the Executive Committee, was a former Commandant of the Marine Corps, a member of the Joint Chiefs of Staff, winner of the Congressional Medal of Honor, and a member of the Board of Directors of Merrill, Lynch, Flour Corporation, Louisiana Land and Exploration and Jackson Redevelopment Authority. James Campbell, a member of the Executive Committee, was President of Mississippi School Supply and was a member of the boards of directors for Trustmark National Bank and BellSouth. Don Lutken, President of Mississippi Power & Light, and Dr. Harvey Johnston, a respected Jackson surgeon, were also on the Board.

D. Manhattan/Bismarck Project

The cast of characters in this ease is quite extensive. The following is a list of these persons and a brief description of the role that each played with regard to the circumstances giving rise to this litigation.

• Tom Scott, Jr.: President and Chief Executive Officer of Old Unifirst and a member of the Board of Directors and of the Executive Committee of that Board. Scott voted to approve the series of loans for the Manhattan transaction.

• Tom Scott, III: General Counsel to Old Unifirst and the son of Tom Scott, Jr. Scott, III, was also in favor of making the loans for the Manhattan transaction and was intricately involved in working with various Unifirst officers concerning the details of those loans.

• Jeb Cloyd: Employed as Chief Financial Officer by Old Unifirst in March or April, 1984, as a result of the efforts of Peat Marwick to find the “best and the brightest” commercial bankers for Old Unifirst. His responsibility was to enhance the capital position of Old Uni-first, and he reported directly to Scott.

• David Guthrie: Employed as Chief Lending Officer by Old Unifirst in June, 1987, as a result of the efforts of Peat Marwick to find the “best and the brightest” commercial bankers for Old Unifirst. Guthrie reported directly to Cloyd and was one of three authors, along with Cloyd and Scott, III, of a May 3, 1988, memo to the Board which recommended increasing the loan on the Manhattan transaction to $15,775,000, in order to complete the rehabilitation of the project. Guthrie was also on the Special Assets Committee which was responsible for handling the Manhattan transaction on a day-to-day basis.

• J. Sessions Roland, III: Employed by Old Unifirst in July, 1984, as a loan trainee, directly out of college. Roland was eventually promoted to Manager of the Commercial Loan Department in August, 1989, and received the title of Vice-President at that time. Until then, Roland reported directly to Shelton McKay, who was also a Vice-President. Roland was on the Special Assets Committee which was responsible for handling the Manhattan transaction on a day-to-day basis.

• Raymond Miller: Employed by Unifirst, Inc., a subsidiary of Old Unifirst, in late 1985, to participate in various projects involving real estate acquired for profit and properties acquired by Old Unifirst through foreclosure, i.e., REO (real estate owned). Miller became the head of the REO Department when it was created in 1986 or 1987. Miller, accompanied by architect, Rick Barron, traveled to New Orleans to view the Westchase property in September, 1986, and provided a rough estimate for rehabilitation of the entire project. Miller was also on the Special Assets Committee which was responsible for handling the Manhattan transaction on a day-to-day basis.

• Bill Huddleston: A Senior Vice-President at Old Unifirst who began his tenure there in January, 1958, and was responsible for accounting and data processing. Huddleston reported directly to Scott, and also served as a member of the Board of Directors, as the Secretary of the Executive Committee and as a member of the Loan Committee.

• Ronald Benitez: Real estate developer in New Orleans who developed the Manhattan/Bismarck project through his company, Manhattan Limited Partners.

• Stewart Juneau: Real estate developer who was an associate of Benitez and who participated heavily in the negotiations concerning the Manhattan transaction. Juneau met repeatedly with officers of Old Unifirst concerning the Manhattan transaction but never met Scott until the day of Juneau’s deposition in January, 1996.

Unifirst had struggled with the Westchase Apartments (a/k/a Manhattan/Bismarck Apartments) for approximately fourteen years by 1987. Unifirst made the original long-term loan on the developed apartment complex in 1973. The Board was therefore aware of the history of this property before the transactions which are at issue in this case took place. Unifirst foreclosed on the property in 1985 after the owners filed for bankruptcy. At foreclosure, the loan balance was approximately $3,950,000. An appraisal of the property in 1985, in connection with getting the property released from bankruptcy, valued the property at $4,185,000. At this point in time, the property was in extremely poor condition, and most of the units were vacant. The structures on the property were continuing to deteriorate, and most were uninhabitable.

The full amount of the Unifirst investment in the property was classified as a scheduled item while the property was in bankruptcy and later in 1985 when Unifirst foreclosed. The officers and directors of Unifirst began to consider various alternatives for dealing with the Manhattan property. The officers obtained a signed contract from Riley Stogner to buy the property for $4,185,000 subject to obtaining financing. This contract fell through when it became clear that Stogner could not obtain the necessary financing to pay for the property.

According to Scott, remaining in possession of the property was not a desirable option. The RTC asserts that holding the property and recognizing the loss was a more desirable option than the course of conduct pursued by Unifirst. However, the RTC agrees that after repossession of the property, the potential for additional loss to Uni-first, as the mortgagee in possession of the property, was a reality. Furthermore, insurance was difficult to obtain due to the number of uninhabited buildings. Unifirst was also concerned with securing the uninhabited units because of the potential for harm to young children who lived in the complex and neighborhood. In March, 1986, one resident claims that he fell from the second story balcony and suffered severe injuries. This resident later sued Unifirst for over $800,000, and the insurance carrier canceled coverage. Along with the issues of insurance and liability, ad valorem taxes and utility bills continued to accrue as the property further deteriorated.

After the sale to Stogner fell through, Unifirst began to analyze the cost of renovating the property. Ray Miller, along with architect, Rick Barron, inspected the property in September, 1986, and concluded that the roofs would begin to cave in within a year and a half to two years unless some prompt action was taken to preserve the asset. Miller Dep. at 126, attached as Exhibit R to Scott’s Motion for Summary Judgment. Miller also reported that renovation of the project would cost approximately $10,000 per unit. Id. at 38-43. Miller stressed that the figure was only a rough estimate.

Unifirst then began communicating with Ronald Benitez, a New Orleans real estate developer, concerning a proposal for renovating the property. Benitez became interested in the property because of several positive trends which were occurring in Harvey, Louisiana, where Westchase was located. Juneau Dep. at 14-20, attached as Exhibit D to Scott’s Motion for Summary Judgment. Harvey is considered a part of the New Orleans metropolitan area and is known as the West Bank. A new bridge was being constructed across the Mississippi River which would connect the West Bank directly to downtown New Orleans. Benitez and Juneau believed that the new bridge would create a demand for apartments on the West Bank which had not previously existed. Also, Manhattan Boulevard, the street on which Westchase was located, was being widened from two to four lanes, as part of a major commitment by the City of Harvey. The City wanted Manhattan Boulevard to serve as a major artery to feed major retail traffic corridors on the West Bank. Presumably because of this commitment by the City to widen Manhattan Boulevard, several major retail and public construction projects were beginning, including a Sam’s Superstore, a post office and a library. Id. The developers had also heard that the apartment complex across the street, Westview, was going to be redeveloped. Id. at 58. For these reasons, Benitez began to try to buy Westchase from Unifirst.

Benitez made a proposal that Unifirst loan him the money to buy the Westchase property ($4.2 million) and that he be advanced an additional $1 million to begin rehabilitation of a limited number of units. The plan was for Benitez to seek other methods of financing, such as tax-free bonds, to pay off the loan to Unifirst after only limited renovation was completed. The Executive Committee adopted this proposal on March 18, 1987. Scott, as a member of the Executive Committee, had one vote concerning this loan. The minutes of that meeting state that “[i]t is the intent of the purchaser to seek financing through the issuance of tax exempt bonds as rehabilitation proceeds.” March 18, 1987, Minutes of Executive Committee, attached as composite Exhibit L to Scott’s Motion for Summary Judgment. The full Board reviewed the transaction at its regular meeting on March 25, 1987. Thus, the property was sold to Benitez for a $4.2 million promissory note secured by the property, and a $1 million dollar construction loan was advanced to Benitez for the rehabilitation of three of the twenty-eight buildings on the property and certain common areas. These loans were non-recourse to Benitez and were due within one year. The Executive Committee and the Board knew that the loans could not be repaid within one year and that other sources of financing were intended to pay off these loans. Although Unifirst retained the risk of any decline in the value of the property, by selling the property to Benitez, Unifirst was no longer the mortgagee-in-possession, and therefore transferred its exposure for premises liability and its obligations to pay ad valorem taxes.

Despite the protests of the RTC to the contrary, the record is replete with evidence that the parties did in fact pursue the option of tax-free bond financing for the Westchase project. Letters of inducement, which are necessary prior to the issuance of such bonds, were issued by the Louisiana Public Facilities Authority for the project. Benitez worked with Frazer Lanier on a plan to get the bonds issued and placed with investors. The intent of Unifirst was to get out of the Westchase project altogether as soon as alternative financing could be arranged. A portion of the loan proceeds and/or income from the property would be used to pay Benitez a management fee to oversee the construction and to manage the property. However, all other available proceeds from cash flow, the sale of tax credits, tax-exempt bonds or any other method of financing would go to Unifirst until Unifirst was paid in full with a reasonable rate of return. Juneau Dep. at 75. Therefore, in order for Benitez to reap any substantial benefits from the project, he had to get Unifirst out by paying off his loan. Id.

An appraisal was prepared by Real Estate Valuations and Consultants, Inc. (“REVAC”) on September 28, 1987, which concluded that the market value of the property, as completed, would be $6.1 million and the investment value, as completed, would be $12 million. REVAC Appraisal, attached as Exhibit M to Scott’s Motion for Summary Judgment. The appraiser concluded that it was not feasible to renovate the property using conventional financing, but that it was feasible to renovate by the issuance of tax-free bonds. Id. at 43; see also Juneau Dep. at 70. By 1987, this method of refinancing troubled real estate by the issuance of tax-free bonds was well established. Benitez Dep. at 43-45, attached as Exhibit C to Scott’s Motion for Summary Judgment; Juneau Dep. at 24; Miller Dep. at 38, 166. Although the RTC disputes that bond financing was ever an option, the RTC states the following in its Response: “Admittedly, Benitez and Unifirst did turn to an exploration of tax exempt AAA rated bonds which might carry a lower interest rate.” Plaintiffs Response at 26.

As renovation of the first three buildings proceeded, extensive latent defects were discovered which increased the cost of the partial renovation substantially. As a result of these defects, the contractor experienced significant cost overruns, and Unifirst finally advanced at least $2,820,000 under four commitments from March, 1987, to March, 1988, to complete renovation of the three residential buildings and common areas; work on five other buildings to prevent further deterioration; interest carry and soft costs. As soon as renovation on the first three buildings was complete, most of the units were promptly rented.

The market for unrated tax-free bonds dried up, and discussions then began concerning the issuance of AAA rated tax-free bonds. Credit enhancement was required for the issuance of such bonds including a letter of credit from Unifirst. There were also discussions concerning what rights Uni-first would have in the event of a default on the bonds and a call on its letter of credit. The officers at Unifirst decided not to issue a letter of credit and began analyzing the feasibility of an advance by Unifirst of the funds needed to complete the Westchase renovation.

To evaluate the feasibility of complete renovation of Westchase, Unifirst retained in-house and outside architects and construction experts to inspect the property and determine alternative ways to proceed. The Unifirst officers reviewed alternatives for complete and partial razing of the buildings. Unifirst obtained two extensive analyses of the cost of construction from Dunn Construction of Jackson, Mississippi, and Vernon Weaver of New Orleans. Furthermore, the real estate market for apartments and condominiums was extensively studied and analyzed internally and by third-party consultants. Three construction bids were submitted and analyzed. After all of this study was completed, a memo to the Executive Committee, dated May 2, 1988, was prepared by David Guthrie, Jeb Cloyd and Tom Scott, III, recommending that an additional $6,880,000 necessary to complete the renovation, together with interest carry on the total balance outstanding and the additional soft costs, be advanced to Benitez to complete the rehabilitation of Westchase. Memo attached as Exhibit GG to Scott’s Motion for Summary Judgment. In that memo, the officers informed the executive committee that Dunn Construction did not think that renovation was feasible, and Weaver thought renovation was feasible. Id. After evaluating all of the evidence presented, the officers recommended that the funds be advanced to complete the project. Id. Guthrie made a presentation to the Executive Committee which included slides of the progress of the project and an explanation of its location. If the Executive Committee accepted this recommendation, the principal balance outstanding would be increased to $15,7775,000, which included the balance outstanding when Unifirst foreclosed in 1985, plus all funds advanced for the first phase of renovation, with accrued interest for over two years and soft costs.

At least one member of the committee, General Wilson, had personally visited the property on several occasions. Wilson met with Benitez and discussed the potential for the property if fully renovated. Wilson also independently concluded that the New Orleans economy was reviving. Furthermore, Wilson felt that he could use his influence to have military personnel at nearby naval facilities referred to Westchase for their apartment needs. During this time, President Reagan’s 600-ship navy was being completed resulting in the revival of nearby shipyards. Navy personnel awaiting duty and those on leave needed suitable apartments. The housing officer at the naval base assured Wilson that his personnel would be directed to the apartments.

Several factors, other than the value of the property, contributed to the recommendation by the officers, including the widening of Manhattan Boulevard, the building of a Sam’s Superstore, among other projects, and the building of the new Mississippi River bridge which would cut travel time from Westchase to downtown New Orleans to less than fifteen minutes. The recommendation also stressed that Benitez had been able to keep the renovated units 100% occupied, with a 40-person waiting list. Furthermore, Benitez agreed to personally guarantee the completion of the contract; that is, Benitez would be personally liable for any amounts over the estimated cost to complete the project.

As added protection for the advancement of more funds to Benitez, Unifirst employed R. J. Dansereau, Jr., ALA of Metairie, Louisiana, to provide inspections and draw reports on a bi-weekly basis. This control helped to assure that the work would be completed in a timely manner and that the quality of workmanship met the requirements of the contract.

Scott acknowledges that each of the Uni-first officers involved in this transaction had reservations about whether to proceed with the complete renovation of the project. However, two of the most important facts in this case, which the RTC admits, are as follows:

1. It is undisputed, and all witnesses in this case have confirmed emphatically, that countless man-hours and substantial expense were incurred to analyze Unifirst’s best options before proceeding with complete renovation.

2. Because total renovation had been thoroughly analyzed, Unifirst’s loan officers knew the cost of construction and the projected rentals from the renovated units.

Scott’s Itemization of Facts at 25, ¶¶ 249-50. Both the Executive Committee and the full Board approved the advancement of the funds to complete the renovation of West-chase. The complete Executive Committee minutes and the written recommendation to the Executive Committee were attached to the minutes of the Board meeting approving the Westchase loan. Defendant Scott had one vote on the Executive Committee and the full Board for each of these decisions.

On May 25, 1988, Guthrie recommended that Unifirst advance $3,700,000 to Benitez for the purchase of the Westview Apartments across the street from Westchase. Guthrie made an oral presentation to the Executive Committee supported by a written memorandum explaining the advantages and disadvantages of making the loan. The advantages included the following:

1) the average per unit construction cost of both projects would be lowered;

2) Benitez could develop both projects under compatible federal rent subsidy programs;

3) the loan would include a guaranty by Benitez of the purchase money, with both projects cross-collateralized and cross-defaulted, with the result that Unifirst would gain the value of Westview as security for Westchase; and

4) the loan would guarantee that no incompatible developments existed in close proximity to Westchase which could reduce its property value.

May 25, 1988, Memorandum, attached to May 25,1988, Minutes of Executive Committee Meeting, attached as composite Exhibit L to Scott’s Motion for Summary Judgment. The Executive Committee heard, reviewed and approved Guthrie’s recommendation concerning Westview on May 25, 1988. Subsequently, on June 22, 1988, Scott made a report to the Board concerning the approval by the Executive Committee of the Westview loan. The full Board approved the report. June 22, 1988, minutes of the Board meeting, attached as composite Exhibit L to Scott’s Motion for Summary Judgment.

On September 8, 1988, the Commercial Loan Officer’s Committee met, and Sessions Roland recommended approval of a loan request from Thoreau Investment Corporation to acquire the six remaining scattered lots within the Westview Apartments area. The Committee recommended to the Board Loan Committee that $715,000 be advanced for the purchase of these lots. Sept. 8,1988, minutes of the Commercial Loan Officer’s Committee, attached as composite Exhibit L to Scott’s Motion for Summary Judgment. On September 21, 1988, the Board Loan Committee approved the recommendation for Unifirst to advance $715,000 to Benitez for the purchase of these lots. Sept. 21, 1988, minutes of the Board Loan Committee, attached as composite Exhibit L to Scott’s Motion for Summary Judgment.

The loan officers of Unifirst continued to analyze not only refinancing by tax-free bonds, but also the sale of tax credits, the use of block grants and other specialized financing mechanisms to pay off the Unifirst loans for Westchase and Westview. Months before the August 10,1989, takeover of Unifirst by the RTC, Unifirst had commitments for the sale of tax credits. These committed proceeds were to be used to reduce the principal amount which Unifirst had loaned on this property. As noted previously, the $5.6 million obtained from the sale of these tax credits was used to pay the RTC after the takeover of Unifirst.

During this entire period of time, Unifirst was being examined by the FHLBB and audited by Peat Marwick. It was not until the 1988 examination by the FHLBB examiner that the Unifirst procedures used in considering and approving the Westehase/Westview transactions were criticized. Stewart Report at 33. No formal investigations or enforcement proceedings regarding Unifirst were recommended to the FHLBB Office of General Counsel or Office of Enforcement during the entire period covered by the RTC Complaint. Furthermore, there was no criticism by Peat Marwick at any point of the Unifirst accounting procedures concerning the Westchase/Westview transactions. General Wilson, as the Chairman of the Board Audit Committee, arranged meetings between the outside directors on the Audit Committee and personnel from Peat, Marwick, so that the accountants could tell the outside directors any information outside the presence of management. Peat, Marwick never raised any questions about any of the transactions involved in this case during those meetings.

It was during this period of time that Scott, and the other Unifirst officers, were recognized by the FHLBB as being quite capable:

Management is considered very strong in the operations area, attributable to its proficiency in the accounting function. President Scott is noted as being well versed in the establishment of branch offices that are well-managed and profitable; therefore, we believe that, in acquiring operations across state lines, President Scott would continue to strive to form efficient and capable management teams.

Stewart Report at 34 (quoting 5/5/88 Memorandum from Supervisory Agent Kielborn to Acquisition File).

The RTC took over Unifirst on August 10, 1989. After this takeover, Benitez and his companies obtained a release of the Unifirst loans by taking the following steps:

1) Paying the RTC $100,000 in cash from their own sources, along with $9,625,000 raised from refinancing and selling tax credits on Westchase;

2) Giving the RTC a note for $275,000.

Defendant’s Itemization of Material Facts at 32, ¶352. In exchange for this payment, Benitez received a release of approximately $21 million which Unifirst had invested in this property, as well as a release of Benitez’ personal guaranty of $4,770,000. Both properties have been more than 95% occupied since the RTC release. The properties have been marketed by Benitez as the “Miracle on Manhattan.” Benitez’ company received an award for the “best redevelopment in the country” for the completed Westview project by the National Association of Counties. The properties have continued to perform well, have exceeded all projections and remain the newest apartments on the West Bank. Juneau Dep. at 116-17.

E. Scott’s Counterclaim for Indemnification

Scott asserts that applicable statutes, regulations and the bylaws of Old Unifirst require the indemnification of an officer or director of Unifirst when suit is brought against that person for actions taken in his official capacity if that officer or director receives a final judgment on the merits in his favor. See 12 CFR § 545.121; Bylaws of Unifirst at B-7, attached as Exhibit B to the June 27, 1984, Minutes. Scott further asserts that the Agreement between the RTC as receiver for Old Unifirst and New Unifirst transferred this indemnity obligation to New Unifirst. By Order dated April 18,1995, this Court concluded that certain portions of the Agreement were ambiguous precluding summary judgment in favor of Scott at that time. April 18, 1995, Opinion and Order at 18-20. The Court will reconsider this ruling in light of the evidence which is now before the Court.

II. Summary Judgment Standard

Rule 56 of the Federal Rules of Civil Procedure states in relevant part that summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The United States Supreme Court has held that this language “mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing to establish the existence of an essential element to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); see also Moore v. Mississippi Valley State Univ., 871 F.2d 545, 549 (5th Cir.1989); Washington v. Armstrong World Indus., 839 F.2d 1121, 1122 (5th Cir.1988).

The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record in the case which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552-53. The movant need not, however, support the motion with materials that negate the opponent’s claim. Id. As to issues on which the non-moving party has the burden of proof at trial, the moving party need only point to portions of the record that demonstrate an absence of evidence to support the non-moving party’s claim. Id. at 323-324, 106 S.Ct. at 2552-53. The non-moving party must then go beyond the pleadings and designate “specific facts showing that there is a genuine issue for trial.” Id. at 324, 106 S.Ct. at 2553.

Summary judgment can be granted only if everything in the record demonstrates that no genuine issue of material fact exists. The district court, therefore, must not “resolve factual disputes by weighing conflicting evidence, ... since it is the province of the jury to assess the probative value of the evidence.” Kennett-Murray Corp. v. Bone, 622 F.2d 887, 892 (5th Cir.1980). Summary judgment is improper where the court merely believes it unlikely that the non-moving party will prevail at trial. National Screen Serv. Corp. v. Poster Exchange, Inc., 305 F.2d 647, 651 (5th Cir.1962).

III. Analysis

A. Gross Negligence Standard

The parties agree that section 81-5-105 of the Mississippi Code defines the standard of care applicable to a bank officer or director and whether such a person may be held personally hable to a banking corporation or its successor for any alleged losses. That statute provides in relevant part as follows:

A director or officer of a bank ... shall not be held personally liable to the corporation or its successor ... for monetary-damages unless the director or officer acted in a grossly negligent manner as defined in subsection (5) of this section or engaged in conduct which demonstrates a greater disregard of the duty of care than gross negligence, such as intentional tortious conduct or intentional breach of his duty of loyalty or intentional commission of corporate waste.

Miss.Code Ann. § 81-5-105(2) (Supp.1995). Scott asserts, and the RTC does not dispute, that there is no statutory provision which allows an officer or director to be held vicariously hable for any alleged gross negligence committed by other officers or directors. Thus, under the express language of the statute, Scott may be held liable only if his own acts or omissions rise to the level of gross negligence.

As previously noted, the only remaining claim in this matter is a claim for gross negligence. There are no allegations that Scott engaged in any intentional conduct or that he breached any duty of loyalty to Uni-first. This case is unlike many other RTC cases which were initiated due to the criminal wrongdoing, self-promotion, illegal pyramiding schemes or loans to family members by the named defendants. The RTC does include a section in its brief entitled “Defendant’s Personal Interests in Avoiding Loss Recognition.” Plaintiffs Response at 10-14. This section berates Scott for his “lifestyle” as the President of Unifirst and includes allegations that Scott entertained lavishly at Unifirst’s expense; carried his wife on trips abroad; arranged for his son, Tom Scott, III, to obtain the job as general counsel for Uni-first; and received raises from 1985 through 1988 amounting to over $100,000. Id. As noted by Scott in his reply, the RTC failed to include any allegations of self-interest in the Amended Complaint. Memorandum of Authorities in Reply at 9. The Amended Complaint only contains allegations of alleged breaches of underwriting and management standards. Id. Thus, according to Scott, any attempted amendment of the RTC allegations at this late stage should not be allowed.

The Court agrees that the RTC did not include any “self-interest” allegations in the Amended Complaint. Furthermore, the RTC did not make any formal request, by filing a motion to amend, to assert such allegations. Therefore, any attempt to rely on these allegations to support the instant motion will not be allowed. The Court notes, however, that the allegations asserted by the RTC amount to no more than a failed attempt to justify the initiation of this lawsuit against Scott. The RTC belief that Scott spent too much Unifirst money attending conferences and having lavish parties “equipped with butlers, maids and huge floral arrangements,” Plaintiffs Response at 11, is not a sufficient reason to institute litigation and tax the resources of the Defendant and this Court.

Because the only remaining claim in this matter is a claim for Scott’s alleged gross negligence, the Court must determine the meaning of that phrase. The Mississippi statute setting forth the standard of care for bank officers and directors contains a definition for gross negligence:

As used in this section, the term “gross negligence” means a reckless disregard of, or a carelessness amounting to gross indifference to, the best interests of the bank ... and involves a substantial deviation below the standard of care expected to be maintained by a reasonably careful person under like circumstances.

Miss.Code Ann. § 81-5-105(5) (Supp.1995). The statute also, to some degree, defines what is not gross negligence by setting forth the situations when a director of a bank will not be held liable for his official actions:

A director of a bank ... shall, in the performance of his duties, be fully protected in relying in good faith on the records of the bank ... and in relying in good faith upon information, opinions, reports or statements presented to him, to the bank ..., to the board of directors or to any committee thereof by any of the bank’s ... officers or employees or by any committee of the board of directors, or by any counsel, appraiser, engineer or independent or certified public accountant selected with reasonable care by the board of directors or any committee thereof or by any officer having the authority to make such selection or by any other person as to matters the director in good faith believes are within such selected person’s professional or expert competence, such person having been selected in good faith by the board of directors or any committee thereof or any officer having the authority to make such selection.

Miss. Code Ann. § 81-5-105(3) (Supp.1995). Thus, the RTC must present evidence which is sufficient to create a genuine issue of material fact concerning (1) whether Scott acted with gross negligence, and (2) whether his actions constituted a substantial deviation below the standard of care expected of a reasonably careful person under like circumstances.

Even though the statute provides a “definition” for gross negligence, the parties do not agree concerning what this term actually means under Mississippi law. Scott asserts that gross negligence is an extreme and callous disregard for the interests of Unifirst such that Scott had no legitimate basis for taking the actions he did with regard to the Westchase/Westview transactions. Defendant’s Memorandum of Authorities in Support at 7-8 (citing various cases which have interpreted the terms “reckless disregard” and “gross indifference” in other contexts). The RTC asserts that “the clear meaning of the statute is that a reckless, careless, or indifferent bank officer may be held liable when his conduct ‘involves a substantial deviation below the standard of care’ expected of bank officers.” Plaintiffs Response at 40-41. The RTC further asserts that if Scott’s definition of gross negligence is correct, the Mississippi statute, rather than defining gross negligence, attempts to abrogate the gross negligence standard set forth in 12 U.S.C. § 1821(k). See 12 U.S.C. § 1821(k); RTC v. Miramon, 22 F.3d 1357, 1363 n. 9 (5th Cir.1994) (noting in dicta that state law cannot disallow an action for gross negligence, but declining to address the issue of “insulation [of an officer or director from liability] by forgiving state legislation”). The Court disagrees.

The Court finds that Mississippi, by employing the definition for gross negligence in Miss.Code Ann. § 81-5-105(5), has not enacted a statute which is contrary to federal law. The terms used to describe gross negligence, “reckless disregard” and “gross indifference,” do not denote intentional or willful conduct, nor do these terms refer to conduct which is merely reckless or careless. The usages and connotations of these two terms is perhaps unlimited. For these purposes, however, these terms as used to define “gross negligence” do not describe a specific type of conduct but rather a range of conduct that lies somewhere between simple negligence and willful, intentional conduct:

[E]ven though courts frequently speak as if simple and gross negligence were subject to simple and distinct classification and application, in truth there is no exact standard as to what conduct constitutes negligence or gross negligence in a given situation:

It is perhaps unnecessary to attempt to define with precision the degree of care and prudence which directors must exercise in the performance of their duties. The degree of care required depends upon the subject to which it is to be applied, and each case has to be determined in view of all the circumstances.

Washington Bancorporation v. Said, 812 F.Supp. 1256, 1265 (D.D.C.1993) (quoting Briggs v. Spaulding, 141 U.S. 132, 147, 11 S.Ct. 924, 929, 35 L.Ed. 662 (1890)).

The Court finds that Scott’s definition of gross negligence essentially tracks the wording of the statute. The RTC definition, using such terms as reckless, careless and indifferent, is a thinly-veiled attempt to hold Scott to a simple negligence, rather than a gross negligence, standard. If this case were to proceed to trial, the Court would be required to instruct the jury using the precise language contained in section 81-5-105(5), and it could be considered error for the Court not to do so. See FDIC v. Mijalis, 15 F.3d 1314, 1319-20 (5th Cir.1994) (discussing propriety of gross negligence instruction under Louisiana law in bank director liability case regarding a statute substantially similar to the Mississippi statute).

The Mississippi statute, portions of which have been quoted at length previously, also defines, in general, the duty of care owed by an officer or director to a bank:

Bank ... officers and directors shall be deemed to stand in a fiduciary relationship to their bank ... and shall discharge the duties of their respective positions in good faith and with that diligence, care, judgment and skill as provided in subsection (2) of this section. Nothing contained in this section shall derogate from any indemnification authorized by either state or federal law.

Miss.Code Ann. § 81-5-105(1) (Supp.1995). Prior to the enactment of this statute, Mississippi allowed recovery of damages for a breach of the duty of care by an officer or director “that an ordinarily prudent person would reasonably be expected to exercise in a like position and under similar circumstances ____” Omnibank v. United Southern Bank, 607 So.2d 76, 84 (Miss.1992) (quoting Principles of Corporate Governance, § 4.01(a)). This standard is one of simple negligence which was subject to a well-settled common law defense known as the business judgment rule. Id. at 85. That rule is as follows:

A director or officer who makes a business judgment in good faith fulfills the duty ... [of care] if the director or officer:

(1) is not interested ... in the subject of the business judgment; ■

(2) is informed with respect to the subject of the business judgment to the extent the director or officer reasonably believes to be appropriate under the circumstances; and

(3) rationally believes that the business judgment is in the best interests of the corporation.

Id. (quoting Principles of Governance, § 4.01(e)). This standard is an objective one and should not be analyzed from the viewpoint of the particular officer or director involved. Id. Because Omnibank pre-dates the statute under consideration in this ease, it provides a standard from which to begin an analysis of the statute. The Court notes, however, that the statute apparently was enacted, at least in part, to overrule the Omnibank standard. The Mississippi Supreme Court, in applying the new, statutory “gross negligence” standard, would be required to hold an officer or director to some standard greater than the one set forth in Omnibank. Thus, the statutory gross negligence standard requires a greater degree of proof by the RTC, as the Plaintiff in this matter, than the Omnibank simple negligence standard, as qualified by the business judgment rule.

B. Was Scott Grossly Negligent?

The Court finds as a matter of law that regardless of the interpretation given to Miss.Code Ann. § 81-5-105 by the Mississippi Supreme Court, the RTC has presented no genuine issues of material fact regarding Scott’s alleged gross negligence under that statute. The RTC has made broad allegations but has failed to support these allegations with any concrete proof of Scott’s alleged gross negligence. The record is replete with examples of the care exercised by the Unifirst officers and directors in attempting to formulate a “workout” plan for the Westchase loan. Scott, with the Board of Directors, in attempting to maintain Uni-first as a going concern, felt that it was in the best interest of Unifirst not to declare a loss on Westchase, but rather to attempt to recover some, if not all, of the Unifirst investment in the project. They took a businessman’s gamble by holding their cards and staying in the game. They could have chosen to stop any further Unifirst losses by folding and getting out of the game. However, if they had chosen that option, Unifirst would have no prospect of “winning the game” by recovering its investment in the property. They thought that Unifirst had a good hand, but that Unifirst could not win unless it stayed in the game. The events subsequent to the RTC takeover of Unifirst have proven that Scott and the rest of the directors at Unifirst were right in making the decisions to invest further in the West-chase/Westview properties.

In analyzing Scott’s actions in this matter, the Court will set forth various portions of the record which directly contradict the assertions of the RTC. Because the evidence submitted by the parties is so vast, the Court will not attempt to set forth every supporting and dissenting opinion regarding the transactions in this case. The Court need not make such an attempt in order to find that Scott was not “grossly negligent” in voting to approve the loans at issue in this case. The Court need only conclude that Scott had legitimate reasons for voting to approve the Westchase/Westview series of transactions. In fact, even analyzing Scott’s actions under the Omnibank standard, the Court finds that Scott’s actions are protected by the business judgment rule as set forth in that ease. Finally, the Court will address the RTC contention that the expert reports submitted by it are sufficient to create a genuine issue of material fact in this case.

Initially, the RTC has a proximate causation problem. Scott had only one vote on the Executive Committee and on the full Board. All of the Board of Directors were trying to keep Unifirst open. Scott, as the President of Unifirst, no doubt had considerable influence over the other members of the Executive Committee and the Board. Furthermore, the individual members of the Board probably listened very closely to Scott’s preferences concerning how to vote on various loans. However, the Board consisted of very prominent and experienced businessmen who knew or should have known of their own personal liability with regard to serving on the Board of Unifirst. Wilson, as a member of the Executive Committee of the Board, went to New Orleans to view the property to independently determine whether he thought the Westchase loan should be declared a loss or worked out. Wilson also testified that Scott was not a “monopolizer of conversation” in the Board or Executive Committee meetings. Dep. of Wilson at 76. Even though Scott may have had influence over .the Board, there is no allegation, much less any proof, that he forced any Board member or Executive Committee member to vote to approve the Westchase/Westview loa