Frobose v. American Sav. and Loan Ass'n of Danville

• Decision Date: 31 July 1998
• Docket Number: No. 97-1432,97-1432
• Citation: 152 F.3d 602
• Parties: 136 Lab.Cas. P 58,466, 14 IER Cases 363 Rosemary FROBOSE, Plaintiff-Appellant, v. AMERICAN SAVINGS AND LOAN ASSOCIATION OF DANVILLE, a state chartered federally insured savings and loan, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 602

152 F.3d 602

136 Lab.Cas. P 58,466, 14 IER Cases 363

Rosemary FROBOSE, Plaintiff-Appellant, v. AMERICAN SAVINGS AND LOAN ASSOCIATION OF DANVILLE, a state chartered federally insured savings and loan Defendant-Appellee.

No. 97-1432.

United States Court of Appeals Seventh Circuit.

Argued Dec. 12, 1997.

Decided July 31, 1998.

Susan Bogart (argued), Chicago, IL, for Plaintiff-Appellant.

James C. Kearns, Heyl, Royster, Voelker & Allen, Urbana, IL, Karen L. Kendall (argued), Heyl, Royster, Voelker & Allen, Peoria, IL, for Defendant-Appellee.

Before CUMMINGS, ROVNER, and DIANE P. WOOD, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

Rosemary Frobose lost her job with the American Savings and Loan Association of Danville, Illinois after she reported certain loan irregularities to state and federal regulators. She contends that her discharge, as well as her ouster from the association's board of directors and her status as an officer, were in retaliation for these disclosures. She filed suit pursuant to the whistleblower protection provisions of the Federal Deposit Insurance Act, 12 U.S.C. § 1831j(a), asserting a number of state law claims in addition to her federal retaliation claim. The district court granted summary judgment in favor of the association on the retaliation claim as well as the bulk of her state claims and dismissed the one surviving state claim without prejudice. Frobose challenges the entry of summary judgment on her section 1831j claim and her state-law retaliatory discharge and "false light" claims. Although we conclude that summary judgment was warranted as to her false light claim, we agree that questions of material fact precluded summary judgment on the federal and state retaliation claims. We therefore reverse in part and return the case to the district court for further proceedings.

I.

As summary judgment was entered against Frobose below, we are obligated to assume the truth of the evidence she has presented and to grant her the benefit of any reasonable inferences arising from that evidence. Our recitation of the facts accordingly is one that is favorable to Frobose. See, e.g., Held v. Held, 137 F.3d 998, 999 (7th Cir.1998).

Frobose worked for the American Savings and Loan Association of Danville for over thirty years. She served as a loan officer for most of those years, and immediately prior to her discharge in 1992 Frobose was in charge of Federal Housing Administration home improvement loans, although her day-to-day responsibilities were not limited to these loans alone. She also served as the corporate secretary and security officer and held a seat on the association's board of directors.

Late in 1990 or early the following year, Frobose came across a loan file which lacked appropriate documentation. Frobose had neither originated nor processed the loan, which made it likely that either Rand Campbell (president and managing officer of the association) or Robert Blagg (vice-president and, like Frobose, a loan officer) had done so. When Frobose ascertained that the loan had never been submitted to the board of directors for approval, she brought the matter to Campbell's attention. Campbell assured her that he would take care of the matter.

In mid-1991, Frobose discovered another thirty-five loan files that were missing key documents, such as the loan application, credit check, a note or lien or other security or collateral, or the credit terms. Again it appeared that the loans involved had not been disclosed to or approved by the board, and again it appeared to her that either Campbell or Blagg had originated and/or processed the loans. Frobose reported the irregularities to Campbell, who again assured her that they would be taken care of, and also to Leslie Hahne, chairman of the board of directors.

Frobose also became concerned with certain irregularities in the paperwork underlying a series of mortgage and share loans totaling in excess of $500,000 to Don and Linda Carlson. Campbell previously had retained outside counsel to assess the propriety of these loans, and Frobose believed that certain deficiencies flagged by the attorney had not been addressed. She brought her concerns to the attention of board member Thomas Meyer.

Apparently Campbell did not follow through on the loan irregularities to Frobose's satisfaction. At the January 1992 meeting of American's board of directors, Frobose advised the board that she and Campbell had been at odds over certain personnel problems--including the missing documentation in loan files handled by Campbell and Blagg--for some time. ¹ She requested the board's assistance in addressing these issues because, in her view, Campbell had not dealt with them. The board declined to act, however, concluding that these were management questions that Campbell should handle. After that meeting, Frobose attempted on several occasions to discuss the loan file irregularities with individual members of the board--including board chairman Hahne and directors Meyer and William Ingram--but in each instance was rebuffed.

When Frobose learned in March 1992 that the Office of Thrift Supervision (OTS) would be conducting a periodic review of the association's affairs in April, she decided to take her concerns about the loan irregularities and American's failure to act on them to the examiners. On April 7, 1992, Frobose met briefly with representatives of both the OTS and the Office of the (Illinois) Commissioner of Savings and Residential Finance (OCSRF). American's board of directors met the following day. At that meeting, Frobose distributed the following statement, dated April 7, to the directors:

Fellow Board Members:

For quite some time, there has existed certain matters in this office that have caused me grave concerns as director and officer. File documentation, regulations, internal control and proper management.

I have attempted to bring these matters to the attention of other members and as a result have been accused of going behind the back of management and have been told that is grounds for removal.

My paramount concern, as director is, and always has been, the welfare of this Association.

Inasmuch as I have been unable to secure proper attention of management and board in these matters, I feel it is my fiduciary duty as director, to call these matters to the attention of the State and Federal Examiners.

I regret the necessity to go outside the office, however the inter-personal situation between myself and Mr. Blagg has resulted in my inability to address these matters otherwise.

(Plaintiff's Ex. 14.) Federal and state regulators attended this meeting at the invitation of Frobose.

On the following day, April 9, Campbell wrote the following letter chastising Frobose, in part, for involving the examiners This is to notify you that your action with regard to the involvement of State and Federal Examiners in our April 8th board meeting was both unnecessary and not in the best interest of this association. Furthermore, it is my opinion that such action was prompted not by your concern for the welfare of the institution but rather your desire to solve your own personal conflicts with other members of the staff.

Your statement dated April 7th issued to the board is, at best, misleading and, at worst, completely false. The statement implies that the board has somehow refused to consider your concerns. With the exception of your complaining about personnel problems which you raised at the January board meeting, no other items have ever been put on the agenda or brought up at regular meetings of the board. To imply that such efforts have been ignored because you are a woman is an affront to the integrity of every member of this board and does not even warrant a response.

By requesting that the examiners be present at our meeting you implied that matters concerning the Carlson mortgage and share loans would not be brought to their attention in the normal course of the examination, and that somehow this board has failed to meet its responsibility with regard to dealing with these problems. I resent the implication that as managing officer, I would even consider such action or that the remainder of the board would allow it to happen. At no time during my years as managing officer of this institution have any matters of safety and soundness been withheld from the board of directors or from the examiners.

While I respect your right as a board member to raise concerns to the examiners I question your motives and the manner in which it was done. Your action at the January board meeting and the April board meeting has brought our relationship to an all time low. Your lack of respect for me and the other members of the board certainly reduces your effectiveness as an officer and director of this institution.

I feel it is only fair to put these statements in writing so that you fully understand the basis from which future management decisions will be made.

(Plaintiff's Ex. 16.) Frobose interpreted the final paragraph of Campbell's letter as a "veiled threat of [her] termination." (Plaintiff's Ex. 17.) She circulated copies of his letter to the directors along with a cover letter of her own apprising them that she would view her termination as the type of retaliatory conduct proscribed by the whistleblower protection provisions of the FDIA. (Id.) She also disputed Campbell's charge that she had not previously raised her concerns with the board, noting that she had attempted to do so informally with a number of board members on multiple occasions.

Meanwhile, the OTS and the OCSRF conducted an examination at American from April 6 to April 30, 1992, and on May 27, 1992, the federal and state examiners presented their findings to the board. The OTS report (formally transmitted to American on July 14) criticized American for a variety of "unsafe and unsound practices which warrant[ed] the immediate attention of both the board of directors...