Office and Professional Employees Intern. Union, Local 2 v. F.D.I.C.
| Decision Date | 01 July 1994 |
| Docket Number | No. 93-5093,93-5093 |
| Citation | 27 F.3d 598 |
| Parties | 146 L.R.R.M. (BNA) 2720, 307 U.S.App.D.C. 148, 63 USLW 2034, 128 Lab.Cas. P 11,125, 18 Employee Benefits Cas. 1905 OFFICE AND PROFESSIONAL EMPLOYEES INTERNATIONAL UNION, LOCAL 2, Stephen Wilder, Jacqueline Warren, Jean Benjamin, Pamela Bland, Delores Clay, Barbara Samuels, Loretta Scott, Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Federal Deposit Insurance Corporation, as Receiver of National Bank of Washington, Riggs National Bank, Appellees. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeal from the United States District Court for the District of Columbia (90cv2454).
David R. Levinson, Washington, DC, argued the cause, for appellants. With him on the briefs was Lucinda M. Finley, Buffalo, NY.
Jaclyn C. Taner, Counsel, F.D.I.C., Washington, DC, argued the cause, for appellees. With her on the brief were Ann S. DuRoss, Asst. Gen. Counsel, Colleen B. Bombardier, Sr. Counsel, and Lawrence H. Richmond, Counsel, F.D.I.C., Washington, DC.
Before: WALD, SILBERMAN and RANDOLPH, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
Appellants, a union and the terminated bank employees it represents, appeal the district court's determination that the FDIC, as receiver, is not liable for severance payments under a collective bargaining agreement that the agency repudiated. We reverse.
The National Bank of Washington and the Union were parties to a collective bargaining agreement that provided, inter alia, that if a reduction of staff was necessary for economic reasons, the Bank would make severance payments to the terminated employees. Employees who had worked for the Bank for more than six months but less than one year were entitled to one week of pay upon termination. Those who had worked for more than one year were to receive two weeks' pay for each year of service.
On August 10, 1990, the Comptroller of the Currency declared the Bank insolvent and appointed the FDIC as its receiver pursuant to 12 U.S.C.A. Secs. 191, 1821(c) (West 1989). Prior to its appointment, the FDIC had engaged in negotiations to sell the Bank to Riggs National Bank. Riggs and the FDIC agreed that the former would purchase the Bank's assets but would not employ its existing staff. Accordingly, on the same day that the FDIC was appointed receiver, FDIC officials notified Bank employees gathered at various branches that they were being laid off and told at least some that severance payments would not be made. Four days later, on August 14, 1990, FDIC officials met with union representatives and formally repudiated the collective bargaining agreement, as the agency is permitted to do under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). See id. Sec. 1821(e)(1)(A).
In accordance with statutory procedures, the employees filed claims with the FDIC for severance pay, accrued vacation pay and health benefits. After the agency refused to honor the employees' claims, the union filed suit on their behalf. The FDIC acquiesced partially and processed the claims for vacation pay and health benefits, leaving severance pay as the only controverted item. The district court initially dismissed the case on grounds that the union lacked standing to bring the claims of Bank employees, a decision that we reversed in Office & Professional Employees Int'l Union, Local 2 v. FDIC, 962 F.2d 63 (D.C.Cir.1992). On remand, the district court granted summary judgment to the government on the merits. See Office & Professional Employees Int'l Union, Local 2 v. FDIC, 813 F.Supp. 39 (D.D.C.1993). The court determined that the employees' rights to severance pay under the agreement had not accrued at the moment of the insolvency because they were contingent upon the employees' termination--which did not occur until after the FDIC was appointed receiver. The court reasoned that the FDIC's repudiation of the collective bargaining agreement--although not formally effected until four days after the employees were terminated--"relates back" to the moment of insolvency because FIRREA limits the FDIC's liability for such repudiation to damages "determined as of the date of the appointment of the ... receiver." 12 U.S.C.A. Sec. 1821(e)(3)(A)(ii)(I) (West 1989). Therefore, the court concluded, the FDIC is not liable for severance pay under FIRREA.
Appellants do not challenge the FDIC's authority to repudiate the contract. Under the statute, the FDIC, within a reasonable time after being appointed receiver, may repudiate any contract that it thinks burdensome. See 12 U.S.C.A. Sec. 1821(e)(1) (West 1989). The issue before us is the extent of the FDIC's liability for damages. On that subject, FIRREA provides:
(3) Claims for damages for repudiation
Except as otherwise provided in subparagraph (C) and paragraphs (4), (5), and (6), the liability of the conservator or receiver for the disaffirmance or repudiation of any contract pursuant to paragraph (1) shall be--
(i) limited to actual direct compensatory damages; and
(ii) determined as of--
(I) the date of the appointment of the conservator or receiver; or
(II) in the case of any contract or agreement referred to in paragraph (8), the date of the disaffirmance or repudiation of such contract or agreement.
For purposes of subparagraph (A), the term "actual direct compensatory damages" does not include--
(i) punitive or exemplary damages;
(ii) damages for lost profits or opportunity; or
(iii) damages for pain and suffering.
Id. Sec. 1821(e) (emphasis added).
The union claims that the employees are entitled to severance pay as "actual direct compensatory damages" stemming from the repudiations. The FDIC counters with a two-pronged argument, that appellants have no cognizable legal claim and alternatively that the damages they seek do not qualify under the statute. The district court, accepting the FDIC's first prong, determined that the FDIC could terminate the Bank employees without incurring any liability for severance pay because at the time the FDIC was appointed receiver the employees' contractual rights to severance pay had not yet "accrued"; the employees have valid claims only after they are terminated. We disagree. The employees had a right to severance pay as of the date of the appointment--albeit a contingent one--and that right should be treated essentially the same as the right to accrued vacation pay or health benefits.
That severance payments are not paid unless and until an employee is terminated (laid-off) for economic reasons, while significant for determining the value of the payments at any given time, does not mean that the right to such severance payments is worthless until the date of termination. If the Bank, for instance, had repudiated the collective bargaining agreement and the union had chosen to sue for damages under section 301 of the Taft-Hartley Act rather than, as would be typical, for enforcement of the agreement, the district court surely would be obliged to award the value of the repudiated severance pay provisions as damages to the employees. So viewed, the employees' right to severance pay is, contrary to the district judge's assumption, "vested." It is part of the employee's compensation package which, like health or life insurance, has a real present value (discounted, as we explain below, by the likelihood that the contingency triggering payment will not occur).
We do not quarrel with the district court's conclusion that no significance attaches to the fact that the FDIC formally repudiated the contract four days after the employees were terminated; under (e)(3)(A)(ii)(I), the FDIC's repudiation relates back to the date of its appointment--at least for purposes of measuring the FDIC's liability. The damages for which the FDIC is responsible are, by statute, to be determined as of the date of the appointment of the receiver. That means that the value of the severance payments under the agreement should be discounted for the risk that the employees would not be discharged for economic reasons--for instance, that the employees would quit, retire, die, or be discharged for misconduct. 1 (In this case, since the appointment of the FDIC and the termination of the employees both occurred on the same date--thereby eliminating the contingencies--it is not necessary to so discount the value of the severance payments.) Such questions, however, deal not with whether appellants have a claim but rather with how much the claim is worth. It is established that the general rule requiring reasonable certainty in damages--"that all damages resulting necessarily and immediately and directly from the breach are recoverable, and not those that are contingent and uncertain,"Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 250, 75 L.Ed. 544 (1931)--applies only to the former question and not to the latter. See id.; see also 1 ROBERT DUNN, RECOVERY OF DAMAGES FOR LOST PROFITS Sec. 1.3, at 11 (4th ed. 1992) (). In this case, although the obligation to pay attaches only if an employee were laid off for economic reasons, it can hardly be suggested that this sort of protection lacks any immediate value--particularly after the last few years of "downsizing" in the American labor market. 2
The FDIC points to cases under ERISA which hold that severance benefits are not "vested" under that statute and therefore the employer has the right to terminate such benefits. See, e.g., Reichelt v. Emhart Corp., 921 F.2d 425, 430 (2d. Cir.1990), cert. denied, 501 U.S. 1231, 111 S.Ct. 2854, 115 L.Ed.2d 1022 (1991); Adams v. Avondale Indus., Inc., 905 F.2d 943, 947 (6th Cir.), cert. denied, 498 U.S. 984, 111 S.Ct. 517, 112 L.Ed.2d 529 (19...
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