986 F.2d 569 (1st Cir. 1993), 92-1542, Howell v. F.D.I.C.

Docket Nº:92-1542.
Citation:986 F.2d 569
Party Name:Bruce A. HOWELL, et al., Plaintiffs, Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION as receiver for Eliot Savings Bank, Defendant, Appellee.
Case Date:February 17, 1993
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

Page 569

986 F.2d 569 (1st Cir. 1993)

Bruce A. HOWELL, et al., Plaintiffs, Appellants,



Savings Bank, Defendant, Appellee.

No. 92-1542.

United States Court of Appeals, First Circuit

February 17, 1993

Heard Feb. 6, 1993.

Page 570

Edwin A. McCabe with whom Karen Chinn Lyons, Joseph P. Davis, III, The McCabe Group, and Lawrence Sager, Cambridge, MA, were on brief for plaintiffs, appellants.

Lawrence H. Richmond, Counsel, with whom Ann S. DuRoss, Asst. Gen. Counsel, Colleen B. Bombardier, Sr. Counsel, F.D.I.C., Washington, DC, John C. Foskett, Michael P. Ridulfo and Deutsch Williams Brooks DeRensis Holland & Drachman, P.C., Boston, MA, were on brief for defendant, appellee.

Before BREYER, Chief Judge, HIGGINBOTHAM, Senior Circuit Judge, [*] and BOUDIN, Circuit Judge.

BOUDIN, Circuit Judge.

Appellants in this case are former officers of a failed bank. They sued the FDIC as the bank's receiver when the FDIC disallowed their claims for severance pay under their contracts with the bank. The district court sustained the FDIC, reasoning that Congress had restricted such claims. Although the statute in question is not easily construed and the result is a severe one, we believe that the officers' claims fail, and we sustain the district court.

The facts, shorn of flourishes added by the parties, are simple. In 1988 and 1989, the four appellants in this case were officers of Eliot Savings Bank ("Eliot") in Massachusetts. In November 1988, when Eliot was undergoing financial strain, Eliot made an agreement with Charles Noble, its executive vice president, committing the bank to make severance payments (computed under a formula but apparently equivalent to three years' salary) if his employment were terminated. In August 1989, the bank entered into letter agreements with three other officers--appellants Bruce Howell, Patricia McSweeney, and Laurence Richard--promising them each a year's salary as severance in the event of termination. Finally, in December 1989 a further letter agreement was made with Noble, reaffirming the earlier agreement with him while modifying it in certain respects.

The agreements make clear that they were not intended to alter the "at will" employment relationship between Eliot and the officers. The bank remained free to terminate the officers, subject to severance payments, and (so far as appears) the officers were not bound to remain for any fixed term. The letter agreements with the three officers other than Noble state that the severance payments were promised in consideration of the officers' "willingness to remain" in the bank's employ; and the same intent can be gleaned from the two agreements with Noble. The weakened financial condition of the bank is adverted to in each of the four 1989 agreements.

At some point in 1989 the FDIC began to scrutinize closely Eliot's affairs. The officers allege, on information and belief, that the FDIC and the bank agreed that Eliot

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would take steps to retain its qualified management; and the complaint states that the FDIC "knew and approved" of the four letter agreements made in 1989. The officers also contend that they were advised by experienced counsel at a respected law firm that the severance agreements were valid and would withstand an FDIC receivership if one ensued. It is further alleged that, in December 1989, the FDIC and the bank entered into a consent order that provided that the bank would continue to retain qualified management.

Eliot failed and was closed on June 29, 1990. The FDIC was appointed its receiver. Within two months, the officers were terminated. The officers then made administrative claims for their severance benefits pursuant to applicable provisions of FIRREA, 12 U.S.C. §§ 1821(d)(3), (5), the statute enacted in 1989 to cope with the torrent of bank failures. 1 In October 1990, the FDIC disallowed the claims, stating that the claims violated public policy. Although the FDIC letter is not before us, it apparently is based upon the FDIC's general opposition to what are sometimes called "golden parachute payments," a subject to which we will return. Following the disallowance, the officers pursued their option, expressly provided by FIRREA, to bring an original action in federal district court. 12 U.S.C. § 1821(d)(6).

In their district court complaint, the officers asserted claims against the FDIC for breach of contract, for breach of the contracts' implied covenant of fair dealing, and for detrimental reliance. The FDIC moved to dismiss or for summary judgment. Thereafter, the officers sought to amend their complaint by adding a promissory estoppel claim and by explicitly naming the FDIC in its "corporate capacity" as well as in its capacity as receiver. In a bench decision, the district judge ruled that the FDIC had lawfully repudiated the contracts between Eliot and the officers and that under FIRREA there were no compensable damages for the resulting breach. As for the promissory estoppel claim, the court deemed it "futile" and refused to allow the amendment; the court referred to the general principle that estoppel does not operate against the government and to the FDIC's broad grant of authority under FIRREA. The officers then sought review in this court.


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