Von Rohr v. Reliance Bank

• Decision Date: 21 June 2016
• Docket Number: No. 15-2392,15-2392
• Citation: 826 F.3d 1046
• Parties: Jerry Von Rohr, Plaintiff–Appellant v. Reliance Bank; Federal Deposit Insurance Corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

826 F.3d 1046

Jerry Von Rohr, Plaintiff–Appellant

v.Reliance Bank; Federal Deposit Insurance Corporation, Defendants–Appellees.

No. 15-2392

United States Court of Appeals, Eighth Circuit.

Submitted: April 12, 2016

Filed: June 21, 2016

Elkin L. Kistner, Bick & Kistner, Clayton, MO, for Plaintiff–Appellant.

Christina D. Arnone, Cicely I. Lubben, John W. Moticka, Andrew J. Scavotto, Stinson & Leonard, Kansas City, MO, for Defendant–Appellee Reliance Bank.

Andrew Jared Dober, Daniel Harold Kurtenbach, Jerome A. Madden, Federal Deposit Insurance Corporation, Appellate Litigation, Arlington, VA, for Defendant–AppelleeFederal Deposit Insurance Corporation.

Before GRUENDER and KELLY, Circuit Judges, and ERICKSEN,¹District Judge.

ERICKSEN, District Judge.

Jerry Von Rohr was an executive at Reliance Bank.After the bank terminated Von Rohr, he requested payment for the one year remaining on his employment contract.The Federal Deposit Insurance Corporation(FDIC) advised that the payment was a prohibited “golden parachute,” which the bank could not make without prior agency approval.Von Rohr filed suit against the bank and the FDIC.He alleged a breach of contract under Missouri law and sought a declaration that federal law does not prohibit the payment.The district court² upheld the FDIC determination and granted summary judgment to the bank.Von Rohr appeals.We affirm.

I

For thirteen years, Von Rohr was an executive at the bank, serving initially as chairman, president, and chief executive officer.On June 16, 2011, the bank notified Von Rohr it would not renew his employment agreement when it terminated on September 1, 2011.Von Rohr asserted that his contract did not expire for another year and claimed he was entitled to compensation for that year.The FDIC, in response to an inquiry from the bank, advised that Von Rohr sought a “golden parachute payment,” which the bank could not make without prior FDIC approval.The bank declined to make the payment Von Rohr sought.

On February 5, 2013, Von Rohr filed a complaint against the bank and the FDIC.He alleged he was terminated in breach of his contract and sought $405,000 in damages.He also sought a declaration that any payment compensating him for the termination was not prohibited by federal law.At the parties' joint request, the district court stayed the action while Von Rohr applied to the FDIC for a final agency determination as to whether the compensation sought was a prohibited golden parachute under the Federal Deposit Insurance Act, 12 U.S.C. § 1828(k), and the implementing regulations, 12 C.F.R. § 359.1

The Act defines “golden parachute payment” to include “any payment (or any agreement to make any payment) in the nature of compensation by any insured depository institution ... for the benefit of any institution-affiliated party”(IAP) that is also “contingent on the termination” of the IAP and received when the institution is in “troubled condition.”12 U.S.C. § 1828(k)(4).The regulatory definition largely tracks the statutory definition, except for the contingency clause.While the statute states a golden parachute payment is “contingent on” termination, the regulation states it is “contingent on, or by its terms is payable on or after,” termination.12 C.F.R. § 359.1(f)(1)(i).Once the FDIC determines a payment is a golden parachute, a bank cannot make the payment without FDIC approval.Id. at § 303.244.FDIC regulations list the information an application for approval must contain.Id.This regulatory scheme prevents troubled banks from draining their already low resources with payments to terminated executives, who may have been responsible for the bank's condition.

On October 28, 2013, the FDIC determined that Von Rohr was an IAP seeking a golden parachute from a bank in troubled condition.The FDIC's opinion letter concluded: “It is our opinion that, once Von Rohr was terminated, any payments being sought by Von Rohr from Reliance Bank for services he did not render constitute prohibited golden parachute payments under Part 359.”The FDIC did not address whether to approve an exception because, as the letter stated, Von Rohr did “not meet even the basic application requirements prescribed.”

On May 20, 2014, the district court upheld the FDIC's determination.On May 28, 2015, the district court entered summary judgment for the bank, finding that the FDIC's determination made the bank's performance under the contract impossible.Von Rohr filed a timely appeal challenging the agency action and the grant of summary judgment.

II

We review de novothe district court's decision to uphold the FDIC's determination.SeeEl Dorado Chemical Co. v. EPA , 763 F.3d 950, 955(8th Cir.2014).A reviewing court must set aside an agency action where it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”5 U.S.C. § 706(2)(A).An agency action is arbitrary or capricious if “the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.”El Dorado Chemical , 763 F.3d at 955–56.

A

Von Rohr first argues the agency determination is not worthy of deference because it is inconsistent with FDIC positions taken elsewhere.The Supreme Court has stated that deference is unwarranted where the agency's interpretation does not reflect the agency's “fair and considered judgment,” which “might occur when the agency's interpretation conflicts with a prior interpretation.”Christopher v. SmithKline Beecham Corp. , ––– U.S. ––––, 132 S.Ct. 2156, 2166, 183 L.Ed.2d 153(2012).

Von Rohr points to two documents that he claims reveal inconsistencies.First, he cites to a footnote in an FDIC guidance document stating that golden parachute restrictions “do not apply to the payment of salaries or bonuses.”The FDIC's action, though, accords with this statement.The agency's letter barred post-termination payments to Von Rohr“for services he did not render.”Nothing in the FDIC's opinion prevented Von Rohr from receiving salary and bonuses owed to him for work he had performed.

Von Rohr also cites to the FDIC's position in Harrison v. Ocean Bank , 614 Fed.Appx. 429(11th Cir.2015).In Harrison, a bank in troubled condition terminated an executive, who threatened to sue for discrimination and whistleblower retaliation, among other claims.Id. at 432.Though no suit was filed, the bank agreed to a $1 million settlement, subject to FDIC approval.Id.The FDIC determined the settlement was a golden parachute and did not approve an exception.Id. at 433.The district court upheld the FDIC.Id. at 435–36.On appeal to the Eleventh Circuit Court of Appeals, the FDIC stated in a footnote that “[a]ffirmance would not preclude terminated IAPs such as Harrison from litigating in court the merits of their claims.”

Von Rohr argues this footnote is at odds with the FDIC's position limiting his ability to litigate his claim.However, Harrison involved statutory claims, while Von Rohr brought only a contract claim.The agency has consistently held that section 1828(k) does not preclude payment of damages for statutory claims.It has not taken the same position with regard to contract claims.As discussed in the next section, the agency's distinction between statutory and contract claims is reasonable.

There is also some discussion in the briefs about whether to extend Chevron and Auer deference to the agency.Chevron deference applies when an agency interprets ambiguous language in its enabling statute.Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694(1984).Auer deference applies when an agency interprets ambiguous language in its own regulation.Auer v. Robbins , 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79(1997).As discussed below, the outcome in this matter hinges on the definition of “contingent.”The FDIC relies on the dictionary meaning of the word.Black's Law Dictionary defines “contingent” to mean: “Dependent on something that might or might not happen in the future; conditional.”(10th ed. 2014).Because the agency treats the word as unambiguous and relies on its dictionary meaning, the issue of Chevron and Auer deference is irrelevant.We simply rely on the word's common and dictionary meaning too.

B

Von Rohr challenges the agency determination that he seeks payment “contingent on” his termination, as necessary to meet the definition of “golden parachute payment” in section 1828(k).He concedes the payment otherwise satisfies the statutory definition.

Von Rohr argues the payment is not contingent on termination because he would have received the same amount if he had worked for the one year left on his contract instead of being terminated.Von Rohr might be correct that the contract contemplated two ways he could become entitled to the same amount.But this does not mean the agency determination was arbitrary.One could reasonably characterize the payment obligation as contingent on either Von Rohr's termination or his continued employment.If a third event occurred, such as Von Rohr choosing to quit, the obligation would not arise.³Von Rohr alleged the bank came to owe the payment because of his termination, not because of services he rendered.The agency therefore determined the payment was contingent on termination.We cannot find that this determination was arbitrary or capricious.

Von Rohr argues the FDIC should regulate only those arrangements that specifically contemplate compensation solely in the event of termination.Von Rohr's approach, though, would create a giant loophole.Banks and executives could structure their agreements to allow for post-termination payments that would function as golden parachutes but...