Piszel v. United States

• Decision Date: 18 August 2016
• Docket Number: 2015–5100
• Citation: 833 F.3d 1366
• Parties: Anthony Piszel, Plaintiff–Appellant v. United States, Defendant–Appellee
• Court: U.S. Court of Appeals — Federal Circuit

833 F.3d 1366

Anthony Piszel, Plaintiff–Appellant

v.United States, Defendant–Appellee

2015–5100

United States Court of Appeals, Federal Circuit.

Decided: August 18, 2016

Michael V. Rella , Murphy & McGonigle, P.C., New York, NY, argued for plaintiff-appellant. Also represented by James K. Goldfarb ; William E. Donnelly , Washington, DC.

David A. Harrington , Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Benjamin C. Mizer, Robert E. Kirschman, Jr., Franklin E. White, Jr.

Gregory P.N. Joseph , Joseph Hage Aaronson LLC, New York, NY, for amici curiae Louise Rafter, Josephine Rattien, Stephen Rattien, Pershing Square Capital Management, L.P. Also represented by Mara Leventhal, Sandra Myndelle Lipsman, Christopher James Stanley .

Rebecca LeGrand , LeGrand Law PLLC, Washington, DC, for amicus curiae The National Black Chamber of Commerce.

Before Dyk, Schall, and Hughes^* , Circuit Judges.

Dyk

, Circuit Judge.

Mr. Anthony Piszel appeals from a judgment of the United States Court of Federal Claims (“the Claims Court”) dismissing his complaint against the United States for failure to state a claim. That complaint alleged a taking and illegal exaction resulting from a statute and regulations barring the payment of so-called “golden parachute” compensation upon his termination as an employee of the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Because we agree that Mr. Piszel's complaint fails to state a claim on which relief can be granted, we affirm.

BACKGROUND

I

The question here is whether a government prohibition on making golden parachute payments to terminated employees of Freddie Mac constitutes a taking or an illegal exaction.

Mr. Piszel is a former employee of Freddie Mac. According to his complaint, Mr. Piszel began working as the chief financial officer (“CFO”) of Freddie Mac in November of 2006. As part of his compensation package, Mr. Piszel was to receive a signing bonus of $5 million in Freddie Mac restricted stock units that would vest over four years, an annual salary of $650,000, and performance-based incentive compensation of roughly $3 million a year in restricted stock. In addition, Mr. Piszel's employment agreement provided that in the event of his termination without cause, Mr. Piszel would receive a lump-sum cash payment of double his annual salary and that certain restricted stock units would continue to vest. These types of termination payments are often referred to as “golden parachute payments.” The payments at issue here are alleged to have a value in excess of $7 million.

Freddie Mac is a government sponsored enterprise, meaning that it is a privately owned but publicly chartered financial services corporation created by the United States. See 12 U.S.C. § 1452

. Pursuant to its charter, Freddie Mac was created to “provide stability in the secondary market for residential mortgages” and “to promote access to mortgage credit throughout the Nation” by “increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing.” See 12 U.S.C. § 1716. As such, Freddie Mac was authorized to purchase and sell residential mortgages from various banks, including “any ... financial institution the deposits or accounts of which are insured by an agency of the United States.” Id. § 305(b), 84 Stat. at 454 (codified as amended at 12 U.S.C. § 1454(b) ).

At the time that Mr. Piszel accepted his position, Freddie Mac was regulated by the Office of Federal Housing Enterprise Oversight (“OFHEO”) pursuant to the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. See Pub. L. No. 102–550, § 1311, 106 Stat. 3672

, 3944 (1992). Mr. Piszel alleged in his complaint that his employment contract was reviewed and approved by OFHEO. Mr. Piszel alleged that he performed his job as CFO as a “strong leader” with “excellent performance.” J.A. 30–31.

On July 30, 2008, facing great turmoil in the national housing market and the potential collapse of Freddie Mac, Congress passed the Housing and Economic Recovery Act of 2008 (“HERA”). Pub. L. No. 110–289, 122 Stat. 2654 (2010)

(codified at 12 U.S.C. § 4511 et seq. ). At the time, Freddie Mac, along with its sister bank the Federal National Mortgage Association (“Fannie Mae”), owned or guaranteed about half of the nation's $12 trillion mortgage market. The act significantly restructured the regulatory framework for Freddie Mac, establishing the Federal Housing Finance Agency (“FHFA”) to replace OFHEO as the primary regulator of Freddie Mac. See 12 U.S.C. § 4511. In addition, the act significantly clarified and expanded the powers of the FHFA to act as a conservator or receiver for Freddie Mac should the mortgage giant get into serious financial trouble. See id. § 4617. As a conservator, the FHFA would “immediately succeed to all rights, titles, powers, and privileges of the regulated entity” and could “take over the assets of and operate the regulated entity with all the powers of the shareholders, the directors, and the officers of the regulated entity.” Id. § 4617(b)(2). The FHFA as conservator was given the explicit power to “disaffirm or repudiate any contract,” after which damages for the breach would be limited to “actual direct compensatory damages.” Id. § 4617(d)(1).

Additionally, and apart from the powers vested in the conservator to disaffirm contracts, the act contained a limit on “golden parachutes”: it authorized the Director of the FHFA to “prohibit or limit, by regulation or order, any golden parachute payment.” Id. § 4518(e)(1). The statute defined a “golden parachute payment” as “any payment ... that is contingent on the termination of [a] party's affiliation with [Freddie Mac]” and that is received on or after Freddie Mac is declared insolvent, placed in conservatorship or receivership, or is in financial trouble. Id. § 4518(e)(4)(A). The section also provided that “any payment made pursuant to a bona fide deferred compensation plan or arrangement which the Director determines, by regulation or order, to be permissible” is not a “golden parachute payment.” Id. § 4518(e)(4)(C)(ii).

Congress did not outright prohibit all golden parachute payments,¹ but rather left it to the Director of the FHFA to develop regulations determining which payments should, and should not, be made. Congress provided a number of “factors to be considered by the Director in taking any action” pursuant to his new authority. Id. § 4518(e)(2). Specifically, Congress stated that the Director should consider:

(A) whether there is a reasonable basis to believe that the affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the regulated entity that has had a material effect on the financial condition of the regulated entity;

(B) whether there is a reasonable basis to believe that the affiliated party is substantially responsible for the insolvency of the regulated entity, the appointment of a conservator or receiver for the regulated entity, or the troubled condition of the regulated entity (as defined in regulations prescribed by the Director);

(C) whether there is a reasonable basis to believe that the affiliated party has materially violated any applicable provision of Federal or State law or regulation that has had a material effect on the financial condition of the regulated entity;

(D) whether the affiliated party was in a position of managerial or fiduciary responsibility; and

(E) the length of time that the party was affiliated with the regulated entity, and the degree to which—

(i) the payment reasonably reflects compensation earned over the period of employment; and

(ii) the compensation involved represents a reasonable payment for services rendered.

Id.

The Director issued regulations implementing the statute on September 16, 2008. See 73 Fed. Reg. 53356–01 (2008)

(codified at 12 C.F.R. § 1231). These regulations generally prohibited all payments within the statutory definition of “golden parachute payments,” but listed several scenarios in which such a payment could be made, for example, when a regulated entity requests to make a payment and can demonstrate that the person involved did not commit any wrongdoing. See 12 C.F.R. § 1231.3(b) (2014).

The government placed Freddie Mac into conservatorship on September 7, 2008, because, according to FHFA's website, there was “substantial deterioration in the housing markets that severely damaged Fannie Mae and Freddie Mac's financial condition and left them unable to fulfill their mission without government intervention.” J.A. 34. Mr. Piszel alleges the following in his complaint: about two weeks later, on September 22, 2008, the Director of the FHFA, acting in his capacity and under his authority as Freddie Mac's regulator, sent a letter to Freddie Mac's CEO stating that he had “determined that [Mr. Piszel] should be terminated effective close of business today ‘without cause.’ ” Id. 35. The letter further provided that Freddie Mac should not pay Mr. Piszel a severance payment nor “any salary beyond the date of the cessation of Mr. Piszel's employment, any annual bonus for 2008 [or] any further vesting of stock grants.” Id.

As alleged, the letter stated that the basis for this decision was the newly-enacted golden parachute section of HERA and the implementing regulations. As a result of the letter, Freddie Mac terminated Mr. Piszel and, according to Mr. Piszel, “refused to provide him with any of the benefits to which he was contractually entitled under his employment agreement, including his $1.3 million termination payment and the remainder of the restricted stock units that were granted to him as a signing bonus and were required to continue vesting after his termination.” Id. 36.²

II

Mr. Piszel filed suit against the United States on August 1, 2014, nearly six years after ...