Lippert v. Community Bank, Inc.

• Decision Date: 08 February 2006
• Docket Number: No. 04-16535.,04-16535.
• Citation: 438 F.3d 1275
• Parties: Russell LIPPERT, Plaintiff-Appellant, v. COMMUNITY BANK, INC., a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

438 F.3d 1275

Russell LIPPERT, Plaintiff-Appellant, v. COMMUNITY BANK, INC., a corporation, Defendant-Appellee.

No. 04-16535.

United States Court of Appeals, Eleventh Circuit.

February 8, 2006.

Jeffrey Rex McLauglin, Rodney L. Edmondson, McLaughlin & Edmondson, LLC, Guntersville, AL, for Lippert.

Larry B. Childs, Randall D. Quarles, Waller Lansden Dortch & Davis, LLC, Birmingham, AL, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before ANDERSON, BLACK and CARNES, Circuit Judges.

ANDERSON, Circuit Judge:

Russell Lippert ("Lippert" or "Plaintiff") appeals the district court's grant of summary judgment to his former employer, Community Bank. Lippert argues that Community Bank fired him in retaliation for protected whistleblowing, in violation of 12 U.S.C. § 1831j. We reverse the district court and remand for further proceedings.

I. BACKGROUND

Patrick Frawley ("Frawley"), chairman and C.E.O. of Community Bank, hired Russell Lippert on April 14, 2003, as the Bank's Senior Vice-President and Director of Risk Management. Lippert had previously worked for Community Bank as an independent consultant. The Bank had recently hired Frawley as the leader of a new management team that was working to improve the Bank's regulatory and financial situation after several tumultuous years under the prior management. Because of these prior problems, Community Bank was operating under a cease and desist order and heightened scrutiny from regulatory authorities.

Within a few days of beginning work, Lippert sent a series of memoranda to the Bank's local presidents requesting certain loan information. A few weeks later, on or about May 14, 2003, Lippert sent another series of memoranda to Community Bank President Stacey Mann ("Mann") and Senior Lender Mark Soukup about the Bank's loan grading. On May 23, 2003, Frawley told Lippert that "we need to stop the memo writing campaign." Lippert later acknowledged that he had a strained relationship with several members of the Bank's management.

On May 19, 2003, Lippert sent a letter to an employee at the Federal Deposit Insurance Corporation ("FDIC") and an employee of the Alabama State Banking Department, in which he complained that the Bank's management was resisting his recommendations. In particular, he criticized Community Bank's grading of delinquent loans and the level of the Bank's loss reserve. On May 25, 2003, Lippert sent a letter to the same individuals, in which he complained about the same issues. Lippert then met with an FDIC examiner during the June "visitation" at the Bank. He asserts that he discussed his concerns at that meeting.

Lippert testified that he visited Bank Director and Audit Committee member Jimmie Trotter ("Trotter") at his home on the morning of August 20, 2003, and, in the course of a two- to three-hour discussion concerning Bank matters, told him that he, Lippert, had communicated concerns about the Bank to the FDIC. Trotter disputes that Lippert ever told him about the disclosures. Frawley and the six other board members have stated that Trotter never told them about Lippert's communications with the FDIC. According to Lippert's testimony, Trotter was untroubled by Lippert's disclosures to the FDIC and Trotter revealed that he was considering discussing some of his own concerns with the FDIC and/or state banking authorities.

On August 20, 2003, Lippert presented Frawley with a memorandum dated August 19 that discussed his various concerns about the Bank. Lippert and Frawley discussed this memorandum. After this discussion, Lippert created a new memorandum dated August 20, 2003. On August 21, 2003, Lippert left a copy of his August 20 memorandum in Frawley's office. Lippert then presented the same memorandum at an Audit Committee meeting that day. Lippert contends that the August 19 and August 20 memoranda were nearly identical.

After the meeting, the four members of the Audit Committee met with Frawley and Mann to ask about the issues that Lippert had raised in his memorandum. Frawley and Mann told the members of the Audit Committee about the trouble they had encountered with Lippert's refusal to communicate personally with members of Bank management, and his insistence on using written memoranda to communicate. Including Frawley and Mann, six of the eight directors of Community Bank were present during the discussion after the August 21 Audit Committee meeting. The directors who were present told Frawley that they would support whatever action he took with regard to Lippert's employment.

On Friday, August 22, 2003, and Monday, August 25, 2003, Lippert met with the FDIC audit team that was on-site at the Bank. Lippert was the Bank's point man in dealings with the FDIC auditors while they were preparing for their examination, which was to take place in September. Lippert asserts that he discussed with the FDIC examiners the same concerns that he raised in his August 19/20 memorandum.

Meanwhile, on Friday, August 22, 2003, Frawley gave notice for a special Board of Directors meeting to be held on Monday, August 25, 2003. Under the Board's operating rules, Frawley was required to give at least 24-hour notice of a special meeting of the Board of Directors. On Monday, August 25, 2003, seven members of the Board of Directors unanimously approved a motion to give Frawley authority to take whatever action he deemed appropriate regarding Lippert's employment, including termination. Frawley consulted the eighth director after the meeting, and that director agreed with the authority given to Frawley. On Tuesday, August 26, 2003, Frawley terminated Lippert. The next day Ron Mitchell from the FDIC called Frawley and expressed concern over Lippert's termination.

On October 6, 2003, Lippert filed an action against Community Bank, alleging that he was fired in retaliation for his whistleblowing revelations to the FDIC in violation of 12 U.S.C. § 1831j.¹ On August 2, 2004, Community Bank filed a motion for summary judgment. On September 10, 2004, the district court denied the motion. On September 15, 2004, Community Bank filed a motion for reconsideration. On October 26, 2004, the district court granted Community Bank's motion, vacated its prior opinion, and entered judgment against Lippert on all counts. In ruling against Lippert on the whistleblower claim now challenged on appeal, the district court held that Lippert's internal reports to the Bank's Audit Committee and Board of Directors were not protected disclosures under the statute, even though Frawley and the Board knew that such reports would inevitably come to the attention of the FDIC in its audits. The district court also held that, although Lippert did make protected disclosures directly to the FDIC,² Lippert failed to demonstrate a genuine issue of material fact that either Frawley or the Board of Directors had knowledge that Lippert was thus communicating with the FDIC, and without such knowledge, the court concluded that Lippert's protected conduct could not have been a contributing factor in the decision to terminate Lippert.

Lippert now appeals the district court's decision granting summary judgment in favor of the Bank on his § 1831j whistleblower claim. Contrary to the district court, and on the basis of the totality of the evidence adduced in this summary judgment record, we conclude that a reasonable jury could find that the decision-maker³ did know of Lippert's communications directly with the FDIC; thus, we reverse. Before discussing that evidence, however, we first set out our standard of review in Part II, the applicable law in Part III.A, the significance of Lippert's internal reports in Part III.B, and finally we discuss the evidence in Part III.C.

II. STANDARD OF REVIEW

This Court reviews de novo the grant of a motion for summary judgment. Rojas v. Florida, 285 F.3d 1339, 1341 (11th Cir. 2002). Our discussion of Lippert's internal reports involves a question of statutory construction, which is reviewed de novo. United States v. Frye, 402 F.3d 1123, 1126 (11th Cir.2005). Summary judgment is appropriate "if 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 judgment as a matter of law." Fed.R.Civ.P. 56(c).

III. DISCUSSION

A. Applicable Law

Lippert alleges that Community Bank fired him in retaliation for "whistleblowing" in violation of 12 U.S.C. § 1831j(a)(1). This statute provides:

No insured depository institution may discharge or otherwise discriminate against any employee with respect to compensation, terms, conditions, or privileges of employment because the employee (or any person acting pursuant to the request of the employee) provided information to any Federal Banking agency or to the Attorney General regarding —

(A) a possible violation of any law or regulation; or

(B) gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety;

by the depository institution or any director, officer, or employee of the institution.

12 U.S.C. § 1831j(a)(1). The statute is part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), as amended by the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA").

Section 1831j adopted the legal burdens of proof from the Whistleblower Protection Act ("WPA"), 5 U.S.C. § 1221(e)(1). 12 U.S.C. 1831j(f). Under this Act, an employee must prove that his protected disclosure was "a contributing factor" in the adverse personnel action. 5 U.S.C. § 1221(e)(1). According to the WPA:

The employee may demonstrate that the disclosure was a contributing factor in the personnel action through circumstantial evidence, such as evidence that —

(A) the official taking the personnel action knew of the...