Peatros v. Bank of America, B116465

• Decision Date: 31 December 1998
• Docket Number: No. B116465,B116465
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 68 Cal.App.4th 1284 68 Cal.App.4th 1284, 78 Fair Empl.Prac.Cas. (BNA) 1790, 99 Cal. Daily Op. Serv. 118 Ora PEATROS, Plaintiff and Appellant, v. BANK OF AMERICA NT & SA et al., Defendants and Respondents.

Page 911

80 Cal.Rptr.2d 911

Previously published at 68 Cal.App.4th 1284

68 Cal.App.4th 1284, 78 Fair Empl.Prac.Cas. (BNA) 1790,

99 Cal. Daily Op. Serv. 118

Ora PEATROS, Plaintiff and Appellant, v. BANK OF AMERICA NT & SA et al., Defendants and Respondents.

No. B116465.

Court of Appeal, Second District, Division 5, California.

Dec. 31, 1998.

Review Granted March 31, 1999.

[68 Cal.App.4th 1287] Nikki Tolt, Beverly Hills, for Plaintiff and Appellant.

Paul, Hastings, Janofsky & Walker, Barbra L. Davis, Martin C. Mead, John C. Oakes, Los Angeles, Heller Ehrman White & McAuliffe, Patricia K. Gillette, Cynthia J. Griffith, and Kenneth D. Hoffman, San Francisco, for Defendants and Respondents.

ARMSTRONG, J.

This case presents questions of law concerning the preemptive effect of the National Bank Act on state court employment actions, where the plaintiff-employee is a bank officer. Long-standing California law holds that the Act preempts causes of action based on allegations of breach of an employment agreement. We hold that the preemption applies even if the challenged termination is not initiated by the bank's board, as long as the board ratifies the decision to terminate the officer. We further hold that the Act preempts causes of action under Government Code section 12900 et seq., the Fair Employment and Housing Act ("FEHA").

FACTUAL AND PROCEDURAL SUMMARY

Appellant Ora Peatros ¹ sued her former employer, Bank of America NT & SA ("Bank"), and Gordon Brown, a Bank district manager, bringing causes of action for breach of implied contract, breach of the covenant of good faith and fair dealing implied in that contract, breach of the FEHA, wrongful demotion and termination in violation of public policy, and misrepresentation. Respondents moved for summary judgment on the ground that all causes of action were preempted by the Act. The trial court granted the motion and entered judgment for respondents.

The essential facts at summary judgment were few: appellant began working at the Bank in April of 1992 as a vice-president and officer, by appointment of the Bank's Board of Directors ("the Board"). In March of 1995, appellant was demoted to a position as a financial services representative, a non-officer position. Respondent Gordon Brown informed appellant of her demotion. The reason given was that the Bank had suffered a loss of over $130,000 after appellant granted immediate credit to a customer's deposits of out-of-state checks. In her lawsuit, appellant, who is African-American and was 47 years old at the time of her demotion, contended that her demotion was in truth based on her age and her race. On May 1, 1995, the Board ratified appellant's March 1995 demotion.

Appellant went on medical leave as soon as she was informed of the demotion. She did not return to work. She was fired two years later. The reason given was that Bank policy limited medical leave to 24 months. ² On April 28, 1997, the Board ratified appellant's termination. Appellant contended that the termination was based on her age and race.

DISCUSSION

1. The FEHA Claim

The National Bank Act ("the Act") provides that a national bank's officers serve at the pleasure of its board of directors. (12 U.S.C. § 24.) It "grants specified corporate powers to each national bank, including the power '[t]o elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.' (12 U.S.C. § 24, Fifth, italics added.)" (Wells Fargo Bank v. Superior Court (1991) 53 Cal.3d 1082, 1087, 282 Cal.Rptr. 841, 811 P.2d 1025.)

The Act "has been consistently interpreted to mean that the board of directors of a national bank may dismiss an officer without liability for breach of the agreement to employ." (Mackey v. Pioneer Nat. Bank (9th Cir.1989) 867 F.2d 520, 524.) Aalgaard v. Merchants Nat. Bank, Inc. (1990) 224 Cal.App.3d 674, 274 Cal.Rptr. 81, explained: "[T]he essential Congressional purpose reflected in the 'at pleasure' provision of section 24 (Fifth) was to confer upon the board of directors sweeping powers of dismissal in order to ensure the fiscal integrity of national banks and to instill public confidence in those financial institutions. State-based employment rights which inhibit or reduce the power of the board to dismiss its officers 'at pleasure' thus conflict with section 24 (Fifth) and stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Since these state-based claims would frustrate the full effectiveness of federal law by diminishing the full power of the board to dismiss its officers for the benefit of national banks, they must fall under the supremacy clause." (Id. at p. 692, 274 Cal.Rptr. 81.)

Thus, long-standing California law holds that the Act "preempts all state law causes of action by a bank officer for breach of an employment agreement." (Wells Fargo Bank v. Superior Court, supra, 53 Cal.3d at p. 1088, 282 Cal.Rptr. 841, 811 P.2d 1025.) Preempted causes of action include claims that the discharge or demotion constituted breach of a written employment contract, breach of an oral promise or implied agreement for continued employment, breach of the implied covenant of good faith and fair dealing, and claims of tortious discharge in violation of public policy. (Mardula v. Rancho Dominguez Bank (1996) 43 Cal.App.4th 790, 797, 51 Cal.Rptr.2d 63; Lavelle v. BankAmerica Corp. (1998) 66 Cal.App.4th 1368, 78 Cal.Rptr.2d 609.)

The principle question posed by this appeal is whether the Act also preempts FEHA claims. Two California cases have held that, with some limits, it does not. (Marques v. Bank of America (1997) 59 Cal.App.4th 356, 69 Cal.Rptr.2d 154; Lavelle v. BankAmerica Corp., supra, 66 Cal.App.4th 1368, 78 Cal.Rptr.2d 609.) We cannot agree, and hold instead that the Act preempts FEHA causes of action.

We begin our discussion with the basic principles applicable to a preemption analysis. "Under the Supremacy Clause of the United States Constitution (art. VI, cl.2), federal law preempts state law where Congress so intends. (Fidelity Federal Sav. and Loan Assn. v. de la Cuesta (1982) 458 U.S. 141, 153 [73 L.Ed.2d 664, 675, 102 S.Ct. 3014, 3022] [hereafter de la Cuesta ].) ... Since M'Culloch v. State of Maryland (1819) 17 U.S. (4 Wheat) 316 , the United States Supreme Court has consistently held that federal preemption of state laws requires a clear congressional intent. Thus, preemption exists only where there is a ' "clear and manifest purpose of Congress" ' to foreclose a particular field to state legislation. (Jones v. Rath Packing Co. (1977) 430 U.S. 519, 525 [51 L.Ed.2d 604, 97 S.Ct. 1305], quoting Rice v. Santa Fe Elevator Corp. (1947) 331 U.S. 218, 230 [91 L.Ed. 1447, 1459, 67 S.Ct. 1146, 1152].) [p] Congressional intent to preempt state law may be established in one of three ways. First, Congress may expressly state that the field is preempted. (California Federal S. & L. Assn. v. Guerra (1987) 479 U.S. 272, 280 [93 L.Ed.2d 613, 622-623, 107 S.Ct. 683, 689].) Second, congressional intent will be inferred where the regulatory scheme is ' "so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it" ' or where ' "the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject." ' (De la Cuesta, supra, 458 U.S. 141, 153 [73 L.Ed.2d 664, 675, 102 S.Ct. 3014, 3022].) Whether state laws are preempted expressly or by implication, all state law in the field, whether conflicting or consistent with federal law, is preempted. (KVUE, Inc. v. Austin Broadcasting Corp. [Moore](5th Cir.1983) 709 F.2d 922, 931, affd. (1984) 465 U.S. 1092, [80 L.Ed.2d 114, 104 S.Ct. 1580].) Finally, even in the absence of express or implied preemption of all state regulation in a given area, 'state law is nullified to the extent that it actually conflicts with federal law.' (458 U.S. at p. 153 [73 L.Ed.2d at p. 675, 102 S.Ct. at p. 3022].)" (Fenning v. Glenfed, Inc. (1995) 40 Cal.App.4th 1285, 1290-1291, 47 Cal.Rptr.2d 715.)

The Act does not explicitly preempt state laws and, for the reasons fully set forth in Aalgaard v. Merchants Nat. Bank, Inc., supra, it is not an example of sufficiently pervasive regulation to make field preemption applicable. If there is preemption here, it is found in the doctrine of conflict preemption. (Aalgaard v. Merchants National Bank, supra, 224 Cal.App.3d at pp. 686-688, 274 Cal.Rptr. 81.) Under that doctrine, "The 'controlling principle' ... is that 'any state legislation which frustrates the full effectiveness of federal law is rendered invalid by the Supremacy Clause.' [Citation.]" (Id. at p. 688, 274 Cal.Rptr. 81.)

Our analysis must take into account the fact that since the enactment of the Act, Congress has restricted the at-pleasure authority of national banks by making them subject to federal anti-discrimination laws, the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq., and 42 U.S.C. § 2000 et seq. ("Title VII".) Three California cases, Aalgaard v. Merchants Nat. Bank, Inc., supra; Marques v. Bank of America, supra, 59 Cal.App.4th 356, 69 Cal.Rptr.2d 154; and Lavelle v. BankAmerica Corp., supra, 66 Cal.App.4th 1368, 78 Cal.Rptr.2d 609 have engaged in preemption analysis which considers the interaction of the Act, the federal anti-discrimination laws, and FEHA. ³

Aalgaard v. Merchants Nat. Bank, Inc., supra, considered a discrimination claim brought by a former officer of a national bank. The Court found that plaintiff's FEHA cause of action for age discrimination was preempted, rejecting the plaintiff's argument that the existence of the ADEA meant that there was no preemption. The Court noted that the ADEA...