Hall v. Great Western Bank, No. B045945

• Court: California Court of Appeals
• Writing for the Court: ARLEIGH M. WOODS
• Citation: 282 Cal.Rptr. 640,231 Cal.App.3d 713
• Parties: , 124 Lab.Cas. P 57,217, 6 IER Cases 1234 Genevieve HALL, Plaintiff and Appellant, v. GREAT WESTERN BANK, Defendant and Respondent.
• Decision Date: 25 June 1991
• Docket Number: No. B045945

Page 640

282 Cal.Rptr. 640 231 Cal.App.3d 713, 124 Lab.Cas. P 57,217, 6 IER Cases 1234 Genevieve HALL, Plaintiff and Appellant,
v.
GREAT WESTERN BANK, Defendant and Respondent. No. B045945. Court of Appeal, Second District, Division 4, California. June 25, 1991.

[231 Cal.App.3d 715] Paul Morantz, for plaintiff and appellant.

Jeffrey J. Hultman and Irene S. George, for defendant and respondent.

ARLEIGH M. WOODS, Presiding Justice.

Appellant Genevieve Hall sued respondent Great Western Bank for wrongful termination of her employment. Her complaint alleged that she was fired because she refused to comply with respondent's instruction to withdraw her application for partial unemployment benefits which she had filed with the Employment Development Department. She alleged that this was the sole reason for her termination, and that the termination violated "public policy, i.e., the rights to lawfully apply for unemployment insurance benefits...." This appeal is taken from an order of the trial court sustaining, without leave to amend, respondent's demurrer to the complaint. ¹

Respondent, a federal savings association ² chartered under section 5 of the Home Owners' Loan Act (HOLA or the Act) ³ and subject to regulations [231 Cal.App.3d 716] promulgated by the Office of Thrift Supervision (OTS or Office) ⁴ based its demurrer, in part, on the assertion that appellant's action for wrongful termination is preempted by one such regulation, 12 Code of Federal Regulations section 563.39. That section provides in relevant part: "(a) General. A savings association may enter into an employment contract with its officers and other employees only in accordance with the requirements of this section.... [p] (b) Required Provisions. Each employment contract shall provide that: [p] (1) The association's board of directors may terminate the officer or employee's employment at any time, but any termination by the association's board of directors other than termination for cause, shall not prejudice the officer or employee's right to compensation or other benefits under the contract. The officer or employee shall have no right to receive compensation or other benefits for any period after termination for cause. Termination for cause shall include termination because of the officer or employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation ... or final cease-and-desist order, or material breach of any provision of the contract." (Italics deleted.)

The trial court apparently sustained respondent's demurrer on the ground that this regulation preempted appellant's action. We use the term "apparently" because we have not been provided with a reporter's transcript, and the clerk's transcript reveals only that the demurrer was sustained without leave to amend. The minute order reflecting this ruling does not specify the ground upon which it was based. ⁵ It appears, however, that it was based on the ground of preemption since that is the only ground upon which respondent based its argument that the demurrer should be sustained without leave to amend.

Appellant contends in this appeal that the trial court erred in reaching this conclusion because Congress did not intend to preempt actions arising from a violation of public policy. Respondent counters that the regulations "expressly preempt any state law purporting to address any aspect of the operations of a federal association." (Original italics.)

[231 Cal.App.3d 717] In support of this contention respondent cites a regulation found at 12 Code of Federal Regulation section 545.2 which provides: "The regulations in this Part 545 are promulgated pursuant to the plenary and exclusive authority of the Office to regulate all aspects of the operations of Federal savings associations, as set forth in section 5(a) of the Act. This exercise of the Office's authority is preemptive of any state law purporting to address the subject of the operations of a Federal savings association."

Although section 563.39 is not included in Part 545, it is referenced by one regulation which is included in Part 545. The regulation, section 545.122, provides: "A Federal savings association, upon specific approval of its board of directors, may enter into employment contracts with its officers and other employees in accordance with § 563.39 of this chapter." (12 C.F.R. § 545.122 (1990).)

The applicable statutory and regulatory law, read in harmony with each other and with interpretive case law, demonstrate that Congress intended that the OTS should be allowed to operate federal savings associations without the necessity of complying with state regulations governing state institutions. (See, e.g., Conference of Fed. Sav. & Loan Assn. v. Stein (9th Cir.1979) 604 F.2d 1256, 1257-1258, affd. by order (1980) 445 U.S. 921, 100 S.Ct. 1304, 63 L.Ed.2d 754, in which it was held that the State of California does not have the power to regulate federal savings associations under its Housing Financial Discrimination Act, and Glendale Fed. Sav. & Loan Assn. v. Fox (C.D.Cal.1978) 459 F.Supp. 903, 904, in which it was held that "due-on-sale" clauses contained in loan instruments of federal savings associations are governed by federal law.) This statutory and regulatory law does not, however, demonstrate a legislative intent that jurisdiction over all disputes involving a federal savings association be vested exclusively in federal courts.

As a general principle, concurrent state courts' jurisdiction is presumed unless federal statutory or regulatory law expressly vests jurisdiction exclusively in the federal courts. (Shea v. First Federal Sav. and Loan Ass'n (1981) 184 Conn. 285, 439 A.2d 997, 1001.) Further, many courts have concluded that concurrent jurisdiction exists over certain issues arising from the operation of federal savings associations because Congress has not occupied the entire regulatory field. For example, in Morse v. Mutual Federal Sav. & Loan Assn. (D.C.Mass.1982) 536 F.Supp. 1271, 1280, a Massachusetts court concluded that a state law prohibiting unfair and deceptive trade practices was not preempted by the Federal Home Owners' Loan Act (HOLA) or by regulations promulgated pursuant to 12 United States Code section 1464. Similarly, it has been held that HOLA did not preempt local consumer protection law concerning maximum interest [231 Cal.App.3d 718] rates on retail installment contracts. (Departamento de Asuntos del Consumidor v. Oriental Federal Sav. (D.Puerto Rico 1986) 648 F.Supp. 1194, 1197.)

Our research has revealed few cases from other jurisdictions which involve the same regulation as the one before us, i.e., section 563.39 as incorporated into part 545. Those few cases discussing section 563.39 reached varying results. For example, in Cole v. Carteret Sav. Bank (L.1988) 224 N.J.Super. 446, 540 A.2d 923, a New Jersey court treated the preemption issue as a choice of law issue rather than a choice of forum issue without discussion of whether the regulation affected subject matter jurisdiction. In Piekarski v. Home Owners Sav. Bank, F.S.B. (D.Minn.1990) 752 F.Supp. 1451, liability was determined in the state court, and the action was then removed to the federal court for determination of damages. In Berry v. American Federal Sav. (Colo.App.1986) 730 P.2d 905, a Colorado court treated the preemption issue as a choice of law question, but applying federal law, dismissed the action.

We find in the regulations before us no express congressional intent to reserve jurisdiction exclusively in the federal courts. Therefore, we conclude that the statement of preemption found in section 545.2 does not affect jurisdiction, and that state courts have concurrent jurisdiction over claims arising under the regulation. ⁶

Where, as here, concurrent jurisdiction exists, federal preemption presents a choice of law issue (Hughes v. Blue Cross of Northern California (1989) 215 Cal.App.3d 832, 263 Cal.Rptr. 850) if there is a conflict between state and federal law. (See Screen Extras Guild, Inc. v. Superior Court, supra, 51 Cal.3d at...