Tiede v. Cortrust Bank, N.A.

• Decision Date: 16 April 2008
• Docket Number: No. 24529.,24529.
• Citation: 2008 SD 31,748 N.W.2d 748
• Parties: Dorothy TIEDE, Plaintiff and Appellant, v. CORTRUST BANK, N.A., Defendant and Appellee.
• Court: South Dakota Supreme Court

748 N.W.2d 748

2008 SD 31

Dorothy TIEDE, Plaintiff and Appellant, v. CORTRUST BANK, N.A., Defendant and Appellee.

No. 24529.

Supreme Court of South Dakota.

Considered on Briefs January 7, 2008.

Decided April 16, 2008.

Ron J. Volesky of Volesky Law Firm, Huron, South Dakota, Attorney for plaintiff and appellant.

Michael A. Henderson of Cadwell, Sanford, Deibert & Garry, Sioux Falls, South Dakota, Deanne Watts Hay, Carrie Ann Gohn Barney of Parker & Hay, L.L.P, Topeka, Kansas, Attorneys for defendant and appellee.

ZINTER, Justice.

[¶ 1.] Dorothy Tiede brought this retaliatory discharge action against CorTrust Bank, alleging that she was discharged for filing Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) after senior bank officials told her not to file them. The reports were allegedly required under the Bank Secrecy Act (BSA), 31 U.S.C. § 5311 (2001). CorTrust moved for judgment on the pleadings asserting: that Tiede's state law claim, arising under the public policy exception to the at-will employment doctrine, was preempted by the National Bank Acts (NBA), 12 U.S.C. § 24 (Fifth); and, that her action violated policies underlying the BSA. The circuit court granted CorTrust's motion on the ground of preemption and dismissed. We reverse and remand.

I.

[¶ 2.] CorTrust is a national bank organized under the law of the United States with its principal place of business in Mitchell, South Dakota. Tiede had been employed with CorTrust for twenty-six years. At the time of her termination, Tiede was employed as an assistant cashier, assistant vice president, and bank secrecy officer.

[¶ 3.] Tiede's duties included overseeing compliance with the BSA, which required the filing of SARs and CTRs with the Internal Revenue Service. According to Tiede, she was told on several occasions by senior bank officials to disregard filing SARs and CTRs with respect to certain CorTrust customers. Notwithstanding these admonitions, Tiede continued to file the reports.

[¶ 4.] CorTrust terminated Tiede on February 2, 2005. Tiede then brought this retaliatory discharge suit, alleging that she was terminated in retaliation for filing the SARs and CTRs. She specifically contended that her failure to file the reports would have violated federal banking law and constituted a felony under the BSA. Therefore, she alleged that she was wrongfully discharged under South Dakota's public policy exception to the at-will employment doctrine.

[¶ 5.] CorTrust moved for a judgment on the pleadings. In connection with its motion, CorTrust filed an affidavit of CorTrust's chief financial officer. Tiede submitted a responsive affidavit. The circuit court granted CorTrust's motion, concluding that Tiede's claim was preempted by the NBA.

II.

[¶ 6.] Procedurally, although this matter was initiated as a motion to dismiss, both parties submitted matters outside the pleadings, neither side objected, and the circuit court did not exclude them. Because evidence outside the pleadings was considered without objection, "we review the [circuit] court's ruling as a motion for summary judgment." Flandreau Pub. Sch. Dist. No. 50-3 v. G.A. Johnson Const. Inc., 2005 SD 87, ¶ 6, 701 N.W.2d 430, 434 (citing Tibke v. McDougall, 479 N.W.2d 898, 903-04 (S.D. 1992) (providing that when the record indicates that matters outside of the pleadings were considered by the court, motions to dismiss are reviewed and disposed of as motions for summary judgment)). "Because we review this matter as a summary judgment, we `restrict our review to determining whether the record before us discloses any genuine issues of material fact and, if not, whether the ... court committed any errors of law.'" Id. ¶ 7 (citation omitted). Because this case ultimately involves questions of law and statutory interpretation, we review the circuit court's interpretation de novo. See State v. Burdick, 2006 SD 23, ¶ 6, 712 N.W.2d 5, 7.

III.

[¶ 7.] Tiede alleges that she was discharged in retaliation for her refusal to discontinue filing SARs and CTRs on certain CorTrust customers. She contends that as the bank secrecy officer, she was required to file these reports or risk criminal prosecution under the BSA. CorTrust responds that Tiede's discharge claim is preempted because it conflicts with federal law granting national banks the power to discharge its officers at-will. CorTrust relies on a provision of the NBA that gives a nationally chartered bank 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, ... [and] dismiss such officers or any of them at pleasure, and appoint others to fill their places.

12 U.S.C. § 24 (Fifth) (emphasis added). CorTrust contends that this language clearly expresses Congress's intent that the hiring and firing decision of national bank officers is vested in the bank board of directors, who have the power to dismiss the bank officers "at pleasure." Therefore, CorTrust maintains that Tiede's state retaliatory discharge claim conflicts with federal law and is preempted by the Supremacy Clause of the United States Constitution.

[¶ 8.] This Court has previously recognized federal banking preemption in a wrongful termination claim brought by a bank officer. In Weber v. First Fed. Bank, 523 N.W.2d 720 (S.D.1994), the plaintiff was discharged from his position as chief executive officer and president of a federally chartered savings bank. He sued for wrongful termination and the circuit court entered judgment for the bank, holding that analogous federal regulations on bank employment relations (implementing the Home Owners' Loan Act of 1933) preempted South Dakota state law claims for wrongful termination. This Court affirmed, recognizing the nature of employment relations under federal banking laws:

Federal mutual savings banks are required to "operate under bylaws that contain provisions that comply with all requirements specified by the [Office of Thrift Supervision.]" 12 C.F.R. § 544.5(a). Certain regulations list the powers of the board of directors of an association, including the power to fix the compensation of officers and employees, remove any officer or employee at any time with or without cause, and enter into and terminate employment contracts. 12 C.F.R. §§ 544.5(b)(11)(ii), 563.39(a)-(b).

Id. at 721. We concluded that this analogous language preempted the plaintiff's wrongful termination claim. Id. at 722.

[¶ 9.] Tiede, however, argues that Weber is distinguishable because Weber involved a claim for wrongful termination, which is an employment claim in contract. Tiede contends that her retaliatory discharge action is not a claim arising out of contractual employment rights, but is a tort claim arising out of public policy.¹ CorTrust responds that South Dakota does not distinguish between retaliatory discharge in tort and wrongful termination in contract. CorTrust relies on Johnson v. Kreiser's, Inc., 433 N.W.2d 225, 227 (S.D. 1988), as support for this proposition.

[¶ 10.] In Johnson, this Court adopted a public policy exception to the employment at-will doctrine. A wrongful termination claim was permitted to the extent that the employee's discharge violated a mandated public policy, specifically those that involve criminal or unlawful acts. Id. at 227; see also Peterson v. Glory House of Sioux Falls, 443 N.W.2d 653 (S.D.1989) (acknowledging the public policy exception, but declining to expand its parameters). In order to bring a cause of action for wrongful termination under South Dakota's public policy exception, "the employee has the burden of proving that the dismissal violates the clear mandate of public policy." Id.

[¶ 11.] In adopting this exception to the at-will employment doctrine, this Court recognized "that an employer becomes subject to tort liability if its discharge of an employee contravenes some well established public policy." Id. (emphasis added). Inconsistently, however, this Court also stated that a contract action for wrongful discharge was the "more appropriate" remedy:

An employee has a cause of action for wrongful discharge when the employer discharges him in retaliation for his refusal to commit a criminal or unlawful act. It is repugnant to public policy to expect an employee to commit such acts in order to save his job. Consequently, we carve out this exception to the at-will doctrine[.] In doing so, we conclude that a contract action for wrongful discharge is more appropriate than a tort action. A contract action is predicated on the breach of an implied provision that an employer will not discharge an employee for refusing to perform a criminal or unlawful act.

Id. at 227 (emphasis added).

[¶ 12.] This Court later considered another discharge claim in Niesent v. Homestake Mining Co. of Cal., 505 N.W.2d 781 (S.D.1993). In Niesent, an employee was discharged after filing a workers compensation claim. He commenced an action against his former employer claiming: (1) that the discharge violated an employment agreement; and (2) that the discharge was wrongful retaliation for filing a workers' compensation claim under the public policy exception to the employment at-will doctrine. Id. at 782. Summary judgment was entered in favor of the employer on both causes of action. This Court affirmed dismissal of the first claim involving termination under the employment agreement (a contract claim), but reversed and remanded on the wrongful discharge claim involving retaliation for a violation of public policy. In disposing of the causes of action differently, this Court implicitly recognized a distinction between a contractual "wrongful termination" and the public policy tort of retaliatory discharge. This Court did so by affirming dismissal of the wrongful termination claim (involving breach of contract) because the collective bargaining agreement made the probationary employee's employment...