OFFICE & PROFESSIONAL EMP. INT'L v. FDIC, Civ. A. No. 91-0795 (CRR).

• Citation: 813 F. Supp. 39
• Decision Date: 02 February 1993
• Docket Number: Civ. A. No. 91-0795 (CRR).
• Parties: OFFICE AND PROFESSIONAL EMPLOYEES INT'L UNION, LOCAL 2, et al., Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.
• Court: U.S. District Court — District of Columbia

813 F. Supp. 39

OFFICE AND PROFESSIONAL EMPLOYEES INT'L UNION, LOCAL 2, et al., Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.

Civ. A. No. 91-0795 (CRR).

United States District Court, District of Columbia.

February 2, 1993.

David R. Levinson, Washington, DC, with whom Joseph E. Finley, Baltimore, MD, and Professor Lucinda Finley, Buffalo, NY, were on the brief, for plaintiffs.

Kenneth I. Jonson of Steptoe & Johnson, Washington, DC, with whom Frederick J. Horne was on the brief, for defendant.

CHARLES R. RICHEY, District Judge.

                                            TABLE OF CONTENTS
                  I. INTRODUCTION................................................................ 41
                 II. BACKGROUND.................................................................. 41
                III. DISCUSSION.................................................................. 42
                     A. Because the plain language of the FIRREA statute provides that
                          damages for the repudiated agreement are to be measured when
                          the receiver is appointed and not when the agreement is actually
                          repudiated, the Plaintiffs are not entitled to recover for damages
                          incurred after the receiver's appointment. ....................... 42
                     B. Courts interpreting the plain language of the FIRREA statute have
                          used the appointment of the receiver as the time for measuring
                          damages from contract repudiation. ............................... 44
                     C. Because the bank employees' rights to severance pay had not accrued
                          at the time of the appointment of the receiver, the claims
                          are not cognizable under the terms of the FIRREA statute.......... 45
                

                     D. Because the FIRREA statute makes the repudiation effective as of
                          the date of the receiver's appointment, the receiver's fiduciary
                          duties under ERISA do not require it to pay severance claims for
                          the subsequent termination........................................ 47
                IV. CONCLUSION................................................................... 48
                

I. INTRODUCTION

The above-captioned case comes before the Court on the Defendant's Motion for Summary Judgment and the Plaintiffs' Motion for Partial Summary Judgment. At issue in the case is whether the Defendant, as receiver for an insolvent bank, is liable for severance pay allegedly owed the bank's former employees. The employees were terminated by the receiver after the bank went into receivership, but before the receiver used its statutory powers to formally repudiate the collective bargaining agreement under which the severance pay claim arose. Upon consideration of the Defendant's Motion, the Plaintiffs' Motion, the opposition thereto, the applicable law and the record herein, the Court must grant the Defendant's Motion and deny the Plaintiffs' Motion because the Defendant is not bound by the terms of the severance agreement entered into before the Defendant became the receiver for the insolvent bank. See Fed.R.Civ.P. 56.

The results of this case are mandated by the fundamental purpose of the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"): to "promote the orderly administration of the institution's affairs" by repudiating contracts which would be "burdensome" to perform. 12 U.S.C. § 1821(e). To this end, the Congress has granted broad powers to receivers. The Plaintiffs have not cited, nor has the Court discovered, any reference in the statute or its legislative history to the issue of bank employee benefits or to any possible exception to the general powers of a receiver to repudiate the contracts of an insolvent institution when employee benefits are concerned. Consequently, the Court cannot construct such an exception in this case.

II. BACKGROUND

The facts of the case are relatively straightforward. The Office & Professional Employees International Union, Local 2 ("the Union"), along with a number of individual Plaintiffs, brought suit against the Federal Deposit Insurance Corporation ("the FDIC") as receiver for the National Bank of Washington ("the Bank"). The individual Plaintiffs are former employees of the Bank. The individuals and the Union were parties to a collective bargaining agreement with the Bank that was in effect during August 1990. The collective bargaining agreement provided, inter alia, for severance pay in the event of staff reductions due to economic reasons.¹

On August 1, 1990, the Comptroller of the Currency placed the Bank in conservatorship and appointed a Conservator pursuant to 12 U.S.C. § 203. On August 10, 1990, the Comptroller of the Currency terminated the conservatorship, declared the Bank insolvent, and appointed the FDIC as receiver pursuant to 12 U.S.C. §§ 191, 1821(c). The FDIC, acting as receiver and in preparation for a sale of the Bank, terminated the employment of the Bank's employees on the same day. On August 14, 1990, the FDIC notified an official of the Union that the FDIC was repudiating the collective bargaining agreement then in existence between the Bank and the Union and the employees. A similar notice, in written form, was sent to the Union on August 29, 1990.² The parties do not dispute that the FDIC, through its role as the Bank's receiver, was entitled to repudiate the collective bargaining agreement. See 12 U.S.C. § 1821(e).

After the termination, the bank employees sought to recover the severance pay to which they were allegedly entitled under the collective bargaining agreement. The employees filed appropriate claims with the FDIC in accordance with 12 U.S.C. § 1821. The FDIC declined to honor the severance pay claims.³ The Plaintiffs brought suit pursuant to 12 U.S.C. § 1821(d)(6), seeking to recover the severance pay as outlined in the collective bargaining agreement. Plaintiffs assert that both the FIRREA statute, 12 U.S.C. § 1821, and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, provide for the enforcement of the Plaintiff's severance pay claims. The case, which originally only involved the Union, was dismissed by this Court on November 30, 1990, on the grounds that the Union lacked standing to raise the claims of the employees. This Court's decision was reversed and remanded by the Court of Appeals, 962 F.2d 63 (D.C.Cir.1992). After remand, the case was consolidated with another action involving similar claims by other employees.⁴ The Defendant has filed a Motion for Summary Judgment, claiming that it is not liable for the severance pay. The Plaintiffs have responded, and also seek summary judgment.

Summary judgment is awarded when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Where there is a properly supported motion for summary judgment, the adverse party may not rest upon the "mere allegations or denials" of its pleadings, but must set forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); see Lujan v. National Wildlife Federation, 497 U.S. 871, 110 S.Ct. 3177, 3188-89, 111 L.Ed.2d 695 (1990). The moving party is also entitled to summary judgment upon a showing that there is an absence of evidence supporting an essential element of the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In this case, the statutes in question do not provide for the recovery of severance pay under the facts as set forth by the Plaintiffs. Consequently, the Defendant is entitled to summary judgment.

III. DISCUSSION

A. Because the plain language of the FIRREA statute provides that damages for the repudiated agreement are to be measured when the receiver is appointed and not when the agreement is actually repudiated, the Plaintiffs are not entitled to recover for damages incurred after the receiver's appointment.

FIRREA was passed by Congress "as a response to the growing crisis in the nation's banking and savings and loan industries." Telematics Int'l, Inc. v. NEMLC Leasing Corp., 967 F.2d 703, 705 (1st Cir.1992). The statute confers broad powers on receivers. Gross v. Bell Sav. Bank, 974 F.2d 403, 407 (3rd Cir.1992). 12 U.S.C. § 1821(e), the relevant portion of the statute, governs contracts entered into by a bank before the appointment of a receiver. The interpretation of the statute best begins with the words contained within the statute. See Bayshore Exec. Plaza Partnership v. FDIC, 943 F.2d 1290, 1292 (11th Cir.1991) (applying the statute at issue in the instant case).

12 U.S.C. § 1821(e)(1) provides, in relevant part, that:

A receiver for any insured depository institution may disaffirm or repudiate any contract or lease ... the performance of which the ... receiver ... determines to be burdensome; and the disaffirmance or repudiation of which the ... receiver determines ... will promote the orderly administration of the institution's affairs.

The receiver must decide whether to repudiate a preexisting contract "within a reasonable period" following the appointment of the receiver. § 1821(e)(2).⁵

In the instant case, the FDIC determined, in accordance with § 1821(e)(1), that the Bank's continued performance under the collective bargaining agreement would be burdensome and that repudiation of the agreement would assist in the administration of the receivership. Therefore, the agreement was repudiated. Exactly when the repudiation occurred is disputed by the parties. However, the determination of whether the repudiation took place upon notice to the employees, as the Defendant contends, or upon notice to the Union, as the Plaintiffs contend, is not material to the decision reached by the Court today. The Court assumes that the repudiation was made on August 14, the date the Union was informed of the FDIC's decision to repudiate the contract.

A receiver may not...