Group of professionals discuss finance

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Banking and Finance Law Daily, May 5, 2015

National Bank Act preempts bank VP’s state-law whistleblower claim

By Lisa Milam-Perez, J.D.

Addressing a question of first impression in the circuit, the U.S. court of Appeals for the Eleventh Circuit refused to revive a bank vice president’s Florida Whistleblower Act (FWA) claim that he was wrongfully discharged for raising objections to what, in his view, were improper banking practices. The state-law claim was preempted by the National Bank Act, the divided appeals court panel held. Judge Martin dissented (Wiersum v. U.S. Bank, May 5, 2015, Fay, P.).

During his brief stint as vice president and wealth management consultant for the federally chartered U.S. Bank, NA, the employee contended that he witnessed the conditioning of credit upon asset management in violation of 12 U.S.C. §1972. Concluding that this practice amounted to an unlawful tying arrangement, he refused to participate, and consequently was fired. Dismissing with prejudice the FWA claim that followed, a federal district court judge in Florida concluded that his suit was barred by the NBA, under which banks are entitled to dismiss their officers “at pleasure.”

State vs. federal law. At issue was conflict preemption, which forecloses a state law claim to the extent there is a “significant conflict” between the state law and a federal statute—and which required the Eleventh Circuit to construe the allegedly competing provisions of the NBA and FWA. Under the NBA, a national bank “shall have 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 …at pleasure, and appoint others to fill their places” (12 U.S.C.§24 (Fifth)). On the other hand, the FWA provides that an employer “may not take any retaliatory personnel action against an employee because the employee has … [o]bjected to, or refused to participate in, any activity, policy, or practice of the employer which is in violation of a law, rule, or regulation.”

Persuasive authority. To the majority, the matter was fairly simple. The majority opinion noted that the Florida Supreme Court has concluded that the NBA’s at-pleasure provision precludes any “limitation on the power of a bank to remove its officers” under the NBA. The U.S. Court of Appeals for the Fourth Circuit has, too, addressing the precise issue before the Eleventh Circuit here in the case of a Maryland-based Bank of America officer, and finding the at-pleasure provision preempts a state-law claim for wrongful discharge. The U.S. Courts of Appeals for the Sixth and Ninth Circuits agree, the majority opinion said. And, although not precise precedent, the Supreme Court has recognized the principle of conflict preemption in cases where compliance with both state and federal law is a “‘physical impossibility,’” the appeals court further noted.

Consistent with these courts, the Eleventh Circuit held the NBA’s at-pleasure provision barred the underlying wrongful discharge claim. In finding preemption, the appeals court cited in a footnote the policy determination on the part of Congress in enacting the statute that such “broad discretion to dismiss specified bank officials was necessary to maintain public trust.”

At-pleasure = at-will? “Today’s majority holds that when Congress passed the National Banking Act (NBA) in 1864, it intended—150 years later—for the three words ‘dismiss at pleasure’ to preempt [the employee’s] retaliation claim under the Florida Whistleblower’s Act,” wrote a skeptical Judge Martin in dissent. “If the majority is right, those three words will also serve to preempt every state employment-law protection not mirrored in federal law for thousands of bank officers in this Circuit.” In the dissent’s view, the majority’s expansive reading of the statute “vastly overestimates Congress’s limited intent when it included those three words,” and also “ignores our long-standing presumption against preemption.”

Martin rejected the notion that in enacting the NBA, Congress intended for the statute to set aside state employment protections for bank officers. In her view, the at-pleasure provision is more akin to standard employment-at-will principles—meaning simply that bank officers were at-will rather than “term” employees. Unlike today, in the eighteenth and early nineteenth centuries, when ongoing employment for an unspecified term was the presumption, such a notion could not otherwise be merely assumed, thus Congress felt the need to expressly so legislate. In doing so, “Congress simply intended to free banks from the constraints of the year-term presumption that existed in employment law at the time,” according to Martin. “My understanding is consistent with that of other courts that have examined the history of the NBA.” There was simply no evidence Congress intended the NBA to preclude state-law retaliation clams, she argued.

“Incongruous result.” While the majority supported its interpretation by citing the Congressional purpose of maintaining public trust in banking institutions, its “enforcement of this broad policy choice by preempting current state laws causes an incongruous result,” Martin continued. She noted, in fact, that the Florida statute at issue here was in accord with the Congressional goal of ensuring public confidence in the banking system. “Under the majority’s reasoning, then, Congress assured that banks can dismiss officers freely to maintain public trust, but at the same time left states free to protect employees from demotion, temporary suspensions, and other punishments short of firing. This renders the NBA a strangely under-inclusive attempt to achieve the goals that the majority believes Congress had in mind.”

Open season on bank officers? “The consequences of the majority’s ruling are worrying,” Martin continued, in that the holding serves to deny thousands of bank officers the protection of state employment laws. “Most obviously, bank officers are no longer protected by anti-retaliation statutes like the Florida law at issue here. But neither will bank officers any longer enjoy the protection of state and local anti-discrimination laws that offer protections the federal anti-discrimination regime does not.”

Notably, the Florida chapter of the National Employment Lawyers Association filed an amicus curiae brief in the case, concerned too about the implications of a holding that the NBA preempts such laws. But the majority rejected NELA’s “speculative” predictions, pointing out that bank officers continue to have a federal remedy at their disposal to redress discriminatory treatment. In this case, the bank officer would have been able to file a suit under the Dodd-Frank Act whistleblower protection provisions (12 U.S.C. 1831j) if he had first reported his concerns to the appropriate regulator.

Nor was the majority swayed by the dissent’s dire prognostications. “The dissent imagines far-fetched scenarios that could result from interpreting § 24 (Fifth) as it was written by Congress, if the board of directors of a national bank were to dismiss officers for personal predilections rather than business reasons,” it countered. “That has not been the experience for 150 years, manifested by decisions of other federal circuit courts that have addressed this issue during that time.”

The case is No. 14-12289.

Attorneys: Jesse Leland Skipper (Law Offices of Jesse L. Skipper, PA) for Marc Wiersum. Kristen Marie Fiore (Akerman LLP) for U.S. Bank National Association.

Companies: U.S. Bank National Association

MainStory: TopStory AlabamaNews DirectorsOfficersEmployers FloridaNews GeorgiaNews Preemption

Banking and Finance Law Daily

Introducing Wolters Kluwer Banking and Finance Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.