Fenno v. Mountain West Bank

• Decision Date: 04 August 2008
• Docket Number: No. DA 07-0439.,DA 07-0439.
• Citation: 2008 MT 267,345 Mont. 161,192 P.3d 224
• Parties: Daniel FENNO, Plaintiff and Appellant, v. MOUNTAIN WEST BANK, Defendant and Appellee.
• Court: Montana Supreme Court

192 P.3d 224

2008 MT 267

345 Mont. 161

Daniel FENNO, Plaintiff and Appellant, v. MOUNTAIN WEST BANK, Defendant and Appellee.

No. DA 07-0439.

Supreme Court of Montana.

Submitted on Briefs May 21, 2008.

Decided August 4, 2008.

Rehearing Denied September 10, 2008.

For Appellant: Michael J. San Souci, Attorney at Law, Bozeman, Montana.

For Appellee: Frederick F. Sherwood, Reynolds, Motl & Sherwood, Helena, Montana.

Justice BRIAN MORRIS delivered the Opinion of the Court.

¶ 1 Daniel Fenno (Fenno) appeals from an order of the First Judicial District Court, Lewis and Clark County, granting Mountain West Bank's (Mountain West) motion for summary judgment. We reverse and remand.

¶ 2 Fenno presents the following issues for review:

¶ 3 Whether the District Court properly concluded that federal law preempted Fenno's state wrongful discharge claim.

¶ 4 Whether the District Court properly determined that Fenno qualified as a bank officer for purposes of the National Banking Act's (the National Act) "at pleasure" provision.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 5 Mountain West is a nationally chartered bank. Mountain West employed Fenno as an internal audit officer responsible for reviewing policies and procedures. Fenno also served as secretary of two Mountain West Bank branch's boards of directors. Fenno discovered what he believed to be a potential irregularity in a Mountain West loan transaction in June 2005. Fenno believed that the irregular loan transaction may have involved misconduct by a Mountain West executive.

¶ 6 Fenno reported the irregularity to Mountain West management. Fenno also informed Mountain West management that he intended to report the irregularity to the bank's audit committee. Fenno reported the irregularity to the audit committee and the bank's executive committee. Fenno alleged that his reporting of the irregularity prompted Mountain West to begin stripping Fenno of his duties and responsibilities. Mountain West removed Fenno from the two boards of directors and reduced his salary. Mountain West suspended Fenno completely in August 2006. Mountain West finally terminated Fenno in September 2006.

¶ 7 Fenno sued Mountain West under the Montana Wrongful Discharge from Employment Act (WDEA). Sections 39-2-901, et seq., MCA. Fenno alleged that Mountain West had discharged him in retaliation for Fenno's having reported a potential violation of public policy. Fenno sought both actual and punitive damages. Mountain West moved to dismiss, or, in the alternative, for summary judgment, on the grounds that federal law preempted Fenno's claim under the WDEA. Mountain West argued that Fenno's claim fell under the National Act's "at pleasure" provision. 12 U.S.C. § 24 (Fifth). This provision permits national banks to dismiss bank officers at their pleasure. 12 U.S.C. § 24 (Fifth).

¶ 8 The District Court considered both the "at pleasure" clause and 12 U.S.C. § 1831j(a)(1). Section 1831j(a)(1) protects national bank employees from discrimination in retaliation for reporting possible bank misconduct to any federal banking agency or to the U.S. Attorney General. The District Court analyzed these two statutes in conjunction with the WDEA. The court determined that the more specific federal statutes conflicted with the WDEA's more general prohibition on termination in retaliation for an employee's reporting of a violation of public policy. This perceived conflict led the District Court to conclude that the federal statutes preempted the WDEA and granted summary judgment to Mountain West. Fenno appeals.

STANDARD OF REVIEW

¶ 9 We review de novo a district court's decision to grant summary judgment. Prosser v. Kennedy Enterprises, Inc., 2008 MT 87, ¶ 10, 342 Mont. 209, ¶ 10, 179 P.3d 1178, ¶ 10. We use the same criteria applied by the district court under M.R. Civ. P. 56. Prosser, ¶ 10. Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." M.R. Civ. P. 56(c). We draw all reasonable inferences in favor of the party opposing summary judgment. Prosser, ¶ 10.

DISCUSSION

¶ 10 Whether the District Court properly concluded that federal law preempted Fenno's state wrongful discharge claim.

¶ 11 This Court recognizes three ways in which federal law may preempt state law. Vitullo v. International Broth. of Elec., 2003 MT 219, ¶ 14, 317 Mont. 142, ¶ 14, 75 P.3d 1250, ¶ 14. Congress may include a preemption clause in the federal statute that provides expressly that state law will not apply in the area governed by the federal statute. Vitullo, ¶ 14; Favel v. American Renovation and Const. Co., 2002 MT 266, ¶ 40, 312 Mont. 285, ¶ 40, 59 P.3d 412, ¶ 40. Federal law may supersede state law when the state law actually conflicts with the federal law. This "conflict preemption" occurs either when one cannot comply with both state and federal law, or when "`the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Favel, ¶ 40 (quoting Hillsborough County v. Automated Medical Labs., 471 U.S. 707, 713, 105 S.Ct. 2371, 2375, 85 L.Ed.2d 714 (1985)). Congress also may imply its intent to preempt state law in a particular area where the regulation of the area is so comprehensive that it is reasonable to conclude that Congress intended to "occupy the field" and to leave no room for supplementary state regulation. Vitullo, ¶ 14; Favel, ¶ 40.

¶ 12 This Court starts with the presumption that the historic powers of the states "were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Vitullo, ¶ 15; Favel, ¶ 39 (both quoting Sleath v. West Mont Home Health Services, 2000 MT 381, ¶ 23, 304 Mont. 1, ¶ 23, 16 P.3d 1042, ¶ 23). A party will overcome the presumption against preemption only by "evidence of a clear and manifest intent of Congress to preempt state law." Favel, ¶ 39 (internal citations and quotation marks omitted). National banks, such as Mountain West, remain generally subject to state laws, "unless those laws infringe the national banking laws or impose an undue burden on the performance of the banks' functions." Anderson Nat Bank v. Luckett, 321 U.S. 233, 248, 64 S.Ct. 599, 607, 88 L.Ed. 692 (1944).

¶ 13 The District Court analogized from decisions of the Ninth Circuit Court of Appeals to reach its conclusion that the federal statutes preempted Fenno's WDEA claim. These federal cases previously had interpreted state law in relation to the National Act's "at pleasure" provision and whistleblower provision. We first analyze these federal decisions to determine their applicability to Fenno's WDEA claim.

¶ 14 The District Court relied particularly on Kroske v. U.S. Bank Corp., 432 F.3d 976 (9th Cir.2005), cert. denied, ___ U.S. ___, 127 S.Ct. 157, 166 L.Ed.2d 38 (2006)). The Ninth Circuit considered whether the National Act's "at pleasure" provision preempted the plaintiff's state age discrimination claim. Kroske, 432 F.3d at 980. The court determined that the National Act's "at pleasure" provision impliedly had been repealed to the extent necessary to effectuate the Age Discrimination in Employment Act (ADEA). Kroske, 432 F.3d at 987. The court applied the general conflict preemption rule to establish that the federal statutes did not conflict with the state age discrimination statute. Kroske, 432 F.3d at 987-89. The court relied upon the fact that the state statute "mirrors the substantive provisions of the ADEA and is interpreted consistently with the ADEA." Kroske, 432 F.3d at 987.

¶ 15 The District Court also relied upon the Ninth Circuit's decision in Mackey v. Pioneer Nat. Bank, 867 F.2d 520 (9th Cir. 1989). There a state bank officer alleged wrongful discharge pursuant both to his employment contract and to state tort law. The bank fired the officer after he had been accused of sexual harassment. Mackey, 867 F.2d at 522. The court determined that the National Act's "at pleasure" provision preempted the contract claim as a matter of law. Mackey, 867 F.2d at 525. The court considered whether the National Act also preempted the officer's state law tort claim. Mackey, 867 F.2d at 525-26. The court cited its general disapproval of substituting tort for contract claims. Mackey, 867 F.2d at 526. The court further reasoned that "[t]he purpose of the provision in the [National Act] was to give those institutions the greatest latitude possible to hire and fire their chief operating officers, in order to maintain the public trust." Mackey, 867 F.2d at 526.

¶ 16 The District Court distinguished Kroske on the basis that the WDEA's retaliatory discharge provision did not mirror the substantive provisions of the federal whistleblower statute. The District Court further noted that the federal statute identifies specific employee actions for which a bank may not carry out a retaliatory discharge — reporting information regarding a possible violation of federal law or regulation, or bank mismanagement. 12 U.S.C. § 1831j(a)(1). The District Court pointed out that the WDEA, by contrast, prohibits termination generally if "it was in retaliation for the employee's refusal to violate public policy or for reporting a violation of public policy." Section 39-2-904(1)(a), MCA. Thus, the District Court interpreted the federal statutes as affording Mountain West great latitude to fire its officers similar to the latitude afforded by the court in Mackey.

¶ 17 The District Court concluded that federal law protects employees who report violations to a federal agency or the U.S. Attorney General specifically, where the WDEA does not identify to whom the employee must report violations in order to qualify for protection. Section 39-2-904(1)(a), MCA. The District Court did not provide, however, any...