Rouse v. Farmers State Bank of Jewell, Iowa

• Decision Date: 29 September 1994
• Docket Number: No. C C92-3055.,C C92-3055.
• Citation: 866 F. Supp. 1191
• Parties: Denny Franklin ROUSE, Plaintiff, v. FARMERS STATE BANK OF JEWELL, IOWA, David H. Hill, and Hill Investment Co., Defendants.
• Court: U.S. District Court — Northern District of Iowa

866 F. Supp. 1191

Denny Franklin ROUSE, Plaintiff, v. FARMERS STATE BANK OF JEWELL, IOWA, David H. Hill, and Hill Investment Co., Defendants.

No. C C92-3055.

United States District Court, N.D. Iowa, Central Division.

September 29, 1994.

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Gerald W. Crawford, Crawford Law Firm, Des Moines, IA, for plaintiff.

Nicholas V. Critelli, Jr., Nick Critelli Associates, Des Moines, IA, for defendants.

MEMORANDUM OPINION

BENNETT, District Judge.

                                                 TABLE OF CONTENTS
                  I. PROCEDURAL BACKGROUND.                                                  1197
                 II. THE MOTION TO AMEND.                                                    1198
                III. STANDARDS FOR SUMMARY JUDGMENT.                                         1199
                 IV. FINDINGS OF FACT.                                                       1201
                     A. Undisputed Facts                                                     1201
                     B. Disputed Facts                                                       1201
                  V. LEGAL ANALYSIS.                                                         1202
                     A. The Whistle-Blower Count                                             1202
                        1. Personal Liability of Bank Director Under § 1831j            1203
                        2. Liability Of The Bank Under 1831j                                 1204
                           a. Burdens Of Proof                                               1204
                           b. Rouse's Participation In the Alleged Misconduct He Disclosed   1210
                     B. The Wrongful Discharge Count                                         1210
                     C. The Claim For Breach Of Covenant Of Good Faith And Fair Dealing      1213
                     D. The Age Discrimination Claim                                         1214
                     E. The Intentional Infliction of Emotional Distress Claim               1215
                 VI. LACK OF A FEDERAL QUESTION.                                             1219
                VII. CONCLUSION.                                                             1220
                

This lawsuit arises out of the termination of a bank officer who was the president, cashier, and chief executive officer of the bank following examination of the bank by state and federal bank examiners. The officer's complaint alleges discharge in violation of a federal "whistle-blower" protection statute, 12 U.S.C. § 1831j, and state law claims of wrongful discharge, breach of covenant of good faith and fair dealing, age discrimination, and infliction of emotional distress. Defendants, the bank, bank holding company, and majority stockholder, have jointly moved for summary judgment on all claims on the grounds that there is a lack of evidence to generate a material issue of fact or that the claims are barred as a matter of law.

I. PROCEDURAL BACKGROUND

Plaintiff Denny Franklin Rouse filed his complaint in this action on July 10, 1992, following his termination on November 15, 1991, as president, cashier, and chief executive officer of defendant Farmers State Bank of Jewell, Iowa (Bank). Additional defendants are David H. Hill, who is chairman of the board of directors for the Bank and owner, through a wholly owned holding company, defendant Hill Investment Co. (HIC), of a majority of the outstanding shares of the Bank. Rouse's complaint is in five counts. Count I alleges that Rouse was discharged in violation of the "whistle-blower" provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1831j. Count II alleges wrongful discharge of an "at will" employee contrary to public policy in violation of Iowa law. This count alleges that Rouse's discharge was without just cause, in violation of a reasonable expectation of permanent employment, occurred without prior complaint concerning his conduct and while he was performing his duties adequately. Count III alleges breach of an implied covenant of good faith and fair dealing and asks this court to recognize such a cause of action under Iowa law. Count IV alleges age discrimination in violation of Iowa Code Ch. 216 (1993). Count V alleges infliction of emotional distress in violation of Iowa common law on the ground that discharging Rouse constituted outrageous conduct.¹ Rouse demanded a jury trial of this action. On September 19, 1994, Rouse moved for leave to amend the complaint to add a sixth count alleging defamation.

Defendants answered the original complaint on October 2, 1992, and additionally asserted affirmative defenses. Defendants asserted that Rouse's state law claims were preempted by 12 U.S.C. § 1831j, that Rouse was not entitled to "whistle-blower" protection under 12 U.S.C. § 1831j because he deliberately caused and participated in the alleged violation of laws or regulations he allegedly reported to the FDIC, that Rouse was an "at-will" employee terminable with or without cause, that Rouse's claims of emotional distress were barred by operation of the Iowa Workers Compensation Act, Iowa Code Ch. 85, and that Rouse was terminated for good cause and legitimate business concerns, including misconduct.

The court amended the scheduling order in this matter on three occasions, in part because of a serious accident involving Hill. Jury trial was finally set for October 17, 1994. On August 11, 1993, in an order amending the scheduling order, the court set November 1, 1993, as a deadline for motions to amend pleadings under Federal Rule of Civil Procedure 15. While the parties sought and received from the court various extensions of other deadlines, the November 1, 1993 deadline for motions to amend was never extended. The deadline for dispositive motions was set for August 15, 1994. On that date, defendants filed the present motion for summary judgment. Rouse resisted the motion on September 9, 1994, and defendants filed a reply on September 16, 1994.

Hearing was held on the motion for summary judgment and on Plaintiff's motion to amend on September 27, 1994. Rouse was represented by counsel Gerald W. Crawford, Crawford Law Firm, Des Moines, Iowa. Defendants Bank, HIC, and Hill were represented by counsel Nicholas V. Critelli, Jr., Nick Critelli Associates, Des Moines, Iowa. These matters are now fully submitted.

II. THE MOTION TO AMEND

The court will first consider Rouse's motion to amend, then turn to consideration of defendants' motion for summary judgment. On September 19, 1994, Rouse moved for leave to amend the complaint to add a sixth count alleging defamation. Fed. R.Civ.P. 15(a) states that leave to amend "shall be freely given when justice so requires." However, the policy favoring liberal allowance of amendment does not mean that the right to amend is absolute. Thompson-El v. Jones, 876 F.2d 66, 67 (8th Cir.1989). The Supreme Court has interpreted Rule 15(a) to mean that "absent a good reason for denial — such as undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of the amendment — leave to amend should be granted." Id. (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962)). The court must consider the prejudice to the opponent, whether additional discovery would be required, and whether the court's docket would be adversely affected. Elema-Schonander, Inc. v. K.C.F. Medical Supply, 869 F.2d 1124 (8th Cir.1989).

Grant or denial of leave to amend is within the trial court's discretion, Butler v. City of North Little Rock, Ark., 980 F.2d 501, 506 (8th Cir.1992), but the trial court should state reasons for its denial of a motion to amend. See Twin City Const. v. Turtle Mountain Indians, 911 F.2d 137, 139 (8th Cir.1990) (refusal to state reasons for denial suggests abuse of discretion); Thompson-El v. Jones, 876 F.2d 66, 67 n. 3 (8th Cir.1989) (trial court's failure to articulate its reasons for denying the motion is not per se an abuse of discretion but is not good policy).

In the present case, however, Rouse's motion to amend comes well after the applicable scheduling deadline — some ten months late. Pursuant to Fed.R.Civ.P. 16(b), the court has the authority to enter scheduling orders. Fed.R.Civ.P. 16(b) states, in pertinent part, that a court's scheduling order "shall not be modified except upon a showing of good cause and by leave of the district judge or, when authorized by local rule, by a magistrate judge." Fed.R.Civ.P. 16(b) (Emphasis added). The reason for the "good cause" requirement for modification of a court's scheduling order is that

such orders and their enforcement are regarded as the essential mechanism for cases becoming trial-ready in an efficient, just, and certain manner. The control of these schedules is deliberately reposed in the court, and not in counsel, so that this end may be achieved. Public Citizen v. Liggett Group, Inc., 858 F.2d 775, 790 (1st Cir.1988), cert. denied, 488 U.S. 1030, 109 S.Ct. 838, 102 L.Ed.2d 970 (1989); Compagnie Nationale Air France v. Port of New York Authority, 427 F.2d 951 (2nd Cir.1970); Forstmann v. Culp, 114 F.R.D. 83, 85 (M.D.N.C.1987); Gestetner Corp. v. Case Equipment Co., 108 F.R.D. 138, 141 (D.Me.1985).

Kramer v. The Boeing Company, 126 F.R.D. 690, 696 (D.Minn.1989). A scheduling order is an important tool in controlling litigation. Jochims v. Isuzu Motors, Ltd., 145 F.R.D. 507, 510 (S.D.Iowa 1992). A magistrate judge's scheduling order "is not a frivolous piece of paper, idly entered, which can be cavalierly disregarded by counsel without peril." Gestetner Corp. v. Case Equip. Co., 108 F.R.D. 138, 141 (D.Me.1985). Scheduling orders have become increasingly critical to the district court's case management responsibilities because "it is well known that we litigate these days under the burden of heavy caseloads and clogged court calendars." Id.

The court in Geiserman v. MacDonald, 893 F.2d 787 (5th Cir.1990), also observed that the flouting of...