Segarra v. Fed. Reserve Bank of N.Y.
| Decision Date | 23 April 2014 |
| Docket Number | No. 13 Civ. 7173RA.,13 Civ. 7173RA. |
| Citation | 17 F.Supp.3d 304 |
| Parties | Carmen SEGARRA, Plaintiff, v. FEDERAL RESERVE BANK OF NEW YORK, Michael Silva, Michael Koh, and Johnathon Kim, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Linda Jeffries Stengle, Stengle Law, Boyertown, PA, for Plaintiff.
David Lawrence Gross, Thomas Matthew Noone, Federal Reserve Bank of New York, New York, NY, for Defendants.
Plaintiff Carmen Segarra was employed as a Senior Bank Examiner by Defendant Federal Reserve Bank of New York (“FRBNY”) until she was terminated on May 23, 2012. She alleges that FRBNY fired her because she concluded that the subject of her examination, The Goldman Sachs Group, Inc. (“Goldman Sachs”) did not have a firmwide conflict-of-interest policy. In the instant action she asserts that Defendants violated the whistleblower protection provisions of the Federal Deposit Insurance Act (“FDIA”), 12 U.S.C. § 1831j, and raises various state law claims.
Before the Court is Defendants' motion to dismiss the First Amended Complaint (“FAC”) under Fed.R.Civ.P. 23(b)(6) and Plaintiff's motion seeking leave to file a Second Amended Complaint. For the following reasons, the Court concludes that Plaintiff has failed to state a claim under § 1831j and declines to exercise supplemental jurisdiction over her remaining state law claims. It also concludes that filing a Second Amended Complaint would be futile and denies Plaintiff's motion to do so.
Defendant FRBNY is one of twelve Reserve Banks that, together with the Board of Governors, comprise the Federal Reserve System. (FAC ¶¶ 15, 17.) Among other tasks, the Federal Reserve System is responsible for developing and executing the nation's monetary policy, supervising and regulating banking institutions, and assisting the federal government in its financing operations. (Id. ¶ 16.) In its supervisory role, it “evaluate[s] the overall safety and soundness” of banking organizations by assessing an “organization's risk-management systems, financial condition, and compliance with applicable banking laws and regulations.” (Id. ¶ 26.)
Segarra, a lawyer, was hired by FRBNY as a Senior Bank Examiner on October 31, 2011, after serving in a variety of positions for several major banking institutions. (Id. ¶ 14.) Defendant Johnathon Kim, who was Segarra's supervisor, met with her shortly after she arrived and explained that she would be examining Goldman Sachs's conflict-of-interest policy and the firm's role in several transactions that had attracted the attention of regulators. (Id. ¶ 35.) The remaining Defendants named in this action—Michael Silva and Michael Koh—were “responsible for managing the relationship between Goldman and Defendant FRBNY, not for performing examinations of Goldman,” although, according to Plaintiff, they “frequently and improperly held themselves out as having supervisory authority over Carmen's work as a bank examiner.” (Id. ¶¶ 42–43.)
Plaintiff alleges that Defendant Kim instructed her to use a document known as “SR 08–08” as “the basis for her investigation of Goldman.” (Id. ¶ 35.) As described in the following sections, the parties dispute the proper characterization of SR 08–08—a dispute that has important consequences for Plaintiff's claim. Defendants assert that SR 08–08 is “an advisory letter published in 2008 by the Board of Governors' Division of Bank Supervision and Regulation (hence, ‘SR’),” which “contains ‘clarification as to the Federal Reserve's views' regarding ‘a firmwide approach to compliance risk management and oversight.’ ” (Defs.' Mem. of Law at 4 ).) Plaintiff, on the other hand, asserts that this document is a regulation “promulgated ... under the [Federal Reserve] Board's authority to issue banking supervision regulations.” (FAC ¶ 38.) The parties agree, however, that SR 08–08 states that “[o]rganizations supervised by the Federal Reserve, regardless of size and complexity, should have effective compliance risk management programs,” and that the document provides a list of the components of an effective risk management program. (Id. ¶ 39; Gross Decl. Ex. A at 3.)
Plaintiff's FAC provides a discursive account of the seven months she spent at FRBNY and includes a number of conclusory allegations (see, e.g., FAC ¶ 139), and over fifty pages of handwritten notes and meeting minutes . The gravamen of the FAC, however, can be summarized as follows: Plaintiff concluded that Goldman Sachs lacked a conflict-of-interest program that complied with SR 08–08; Defendants Kim, Koh, and Silva obstructed her examination and ultimately asked her to change her conclusions; and Plaintiff was terminated from FRBNY because she refused to comply. (See, e.g., id. ¶ 133.)
In particular, Plaintiff alleges that at a meeting on December 8, 2011, Goldman Sachs “stated it had no firmwide conflict of interest policy.” (Id. ¶ 51.) Later that day, at an “impromptu meeting” among FRBNY personnel, Defendant Silva “expressed concern that Goldman would suffer significant financial harm if consumers and clients learned the extent of Goldman's noncompliance with rules on conflict of interest.” (Id. ¶ 57.) Plaintiff further alleges that after additional discussions with Goldman Sachs, she met with FRBNY's “Legal and Compliance risk team,” which “agreed Goldman's failure to comply with SR 08–08 warranted mention in the annual report and/or examination letter to be issued by FRBNY to Goldman.” (Id. ¶ 99.) When Plaintiff explained this conclusion in an email to Silva, Koh, and Kim, Kim responded that Plaintiff's “email was ‘premature.’ ” (Id. ¶ 121.) Several days later, (Id. ¶ 126.) Three days after Plaintiff refused to change her findings, she was terminated from FRBNY “because her bank examination found that Goldman had no conflict of interest program in compliance with SR08–08 and because Carmen refused Defendants' unlawful request to change her examination findings.” (Id. ¶ 133.)
Plaintiff filed the instant action on October 10, 2013, and filed the FAC on December 4, 2013. (Dkt. nos. 1, 24.) Defendants moved to dismiss, and the Court heard oral argument on the motion on April 4, 2014.
To withstand a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although the Court must credit each allegation in the FAC, it need not accept as true “a legal conclusion couched as a factual allegation.” Id.
In the FAC, Plaintiff asserts six causes of action: (1) a violation of the FDIA whistleblower protection statute, 12 U.S.C. § 1831j ; (2) a violation of New York General Business Law § 349, which prohibits “deceptive acts and practices” directed at consumers; (3) “wrongful termination in violation of public policy”; (4) breach of an implied-in-fact employment contract; (5) negligence in employment against FRBNY; and (6) “conspiracy.”1
In her sole federal cause of action, Plaintiff alleges that she engaged in a protected activity in her employment as a bank examiner and was fired as a result, in violation of 12 U.S.C. § 1831j. As relevant here, § 1831j provides:
12 U.S.C. § 1831j(a)(2). Whistleblower protection was first added to the FDIA in 1989 after the savings and loan crisis, see Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub.L. No. 101–73, § 932, 103 Stat. 183, 494, and this provision assumed its current form through amendments in the early 1990s, see Resolution Trust Corporation Completion Act, Pub.L. No. 103–204, § 21, 107 Stat. 2369, 2406 (1993); Federal Deposit Insurance Corporation Improvement Act of 1991, Pub.L. No. 102–242, § 251, 105 Stat. 2236, 2332.
Drawing on the text of the statute and case law interpreting it, Defendants first assert that claims against individual employees are not cognizable under § 1831j. Rather, they argue, the statute provides a cause of action only against the institution, agency, or bank that employed the aggrieved plaintiff. (Defs.' Mem. of Law at 7–8.) The Court agrees.
The first sentence of 1831j(a)(2) defines which actors are subject to its...
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