By ALLISSA KLINE
Business First

A lawsuit filed by ousted bank president Kathleen Flemming against the now-defunct Waterford Village bank has been moved from state court to federal court.

The July 29 petition for removal - which transfers the case from state Supreme Court in Erie County to the U.S. District Court for Western New York - is necessary because the Federal Deposit Insurance Corp., as receiver of the bank, is now a defendant in the case and any legal action in which it is involved must take place under federal law.

The case, which alleges that Flemming was unlawfully terminated last summer, currently is on hold. It seeks monetary damages totaling $460,000 for breach of contract as well as an unspecified amount resulting from lost wages due to defamation.

Attorneys for the bank expect that a countersuit filed by the bank earlier this year also will be moved to federal court.

"I expect sometime in the near future that that case will be removed as well," attorney Andrew Burns said. "We would be in discussions with the FDIC about that, and we've not had any specific discussions about the removal of that case."

It's been a tumultuous time for Waterford Village Bank and its shareholders. Late in the day July 24, the state Banking Department shut down the startup, saying the bank was undercapitilized. It is now under FDIC receivership, which means the FDIC assumes all rights and operations of the bank and will liquidate its assets and liabilities.

Evans Bank N.A., meanwhile, signed a purchase-and-assumption agreement with the FDIC to assume Waterford Village Bank's $56 million in deposits. Terms of that deal have not been announced. The single-branch facility in Clarence has been operating as Evans Bank since July 27.

Some have wondered whether Waterford Village Bank shareholders will file suit against the bank's directors and officers for mismanagement of the bank. Joseph Makowski, attorney for shareholder Hormoz Mansouri, said his client has not filed a claim.

"I've received no instructions from (Mansouri)," Makowski said. "I think people are evaluating it. It's in a wait-and-see mode."

Makowski said he isn't aware of any claims filed by other shareholders.

The bank's attorneys say they don't believe shareholders have any claims to make.

"You make an investment, and if the investment goes down, that doesn't mean you have a claim," Burns said. "There are obvious risks in being a shareholder of a startup bank. Just because the bank failed doesn't mean shareholders have any viable cause of action against anybody."