Why it matters

The National Bank Act (NBA) preempts a lawsuit filed by a bank vice president seeking to recover under Florida’s Whistleblower Act, the Eleventh Circuit Court of Appeals has ruled. The VP claimed that he was terminated in violation of the state statute after he objected to what he believed were improper banking practices at a U.S. Bank branch office. Affirming a district court’s dismissal of the suit, a majority of the federal appellate panel found a “significant conflict” between the Florida statute and the NBA, which permits banks to dismiss officers “at pleasure.” The majority held that the “at pleasure” language precludes any “limitation on the power of a bank to remove its officers” pursuant to the NBA, finding support in similar decisions from the Fourth, Sixth and Ninth Circuits. A dissenting opinion expressed serious concerns about the finding that a few words from a federal law passed in 1864 could “reemerge—like mummies from their tomb” to preempt a state law 150 years later, writing that the majority “vastly overestimates” congressional intent. The decision leaves national banks—at least in the Eleventh Circuit and in other circuits following the same line of reasoning—free from liability under state whistleblower statutes, although employees may still bring suit under federal law. This is significant, given the growing popularity of whistleblower claims by terminated employees throughout the country. Retaliatory terminations for reporting noncompliance to regulators is still likely to be alleged in state bank wrongful termination cases. Whistleblower claims pursued by current employees who have not yet been terminated should not be directly impacted.

Detailed discussion

Marc Wiersum was hired on March 15, 2013, as a vice president and wealth management consultant for the Naples office of U.S. Bank. During his two-month employment at the federally chartered bank, Wiersum claimed to have witnessed credit conditioned upon asset management, in violation of 12 U.S.C. Section 1972.

Wiersum objected to what he believed were “unlawful tying arrangements” and refused to participate in them. He was terminated by U.S. Bank in May 2013. He then filed a single-count complaint in Florida federal court alleging that the bank wrongfully terminated him in violation of the Florida Whistleblower Act (FWA).

U.S. Bank moved to dismiss the suit. The bank argued that the case was preempted by the National Bank Act (NBA), which permits federally chartered banks to dismiss officers “at pleasure” pursuant to 12 U.S.C. Section 24 (Fifth). A federal court judge agreed, dismissing the suit with prejudice, and Wiersum appealed.

A panel of the Eleventh Circuit Court of Appeals affirmed the dismissal in a split decision, finding that the FWA is in “direct conflict” regarding the at-pleasure termination provision of the NBA and, therefore, preempted by the federal law.

“[W]e hold the at-pleasure provision of the NBA preempts Wiersum’s claim under the FWA for wrongful discharge under Florida law, because the FWA is in direct conflict with the NBA,” the majority wrote.

The panel first examined the language of both statutes. The NBA states: “a national banking association … 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, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.”

As for the FWA, the relevant provision provides “[a]n 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.”

Congress made the policy decision granting banks broad discretion to dismiss bank officials, in an effort to maintain public trust without state regulatory interference, the court said. And in conflict preemption cases where federal law is found to be in irreconcilable conflict with state law such that compliance with both statutes results in a physical impossibility, federal law wins.

Or, as the majority wrote, “There is no contest. The NBA is the congressional act that governs all national banks in the United States. The ability of the board of directors of a national bank to dismiss its officers ‘at pleasure’ is clear and unequivocal, as the federal-circuit courts that have addressed this issue have concluded.”

Arguing that the “majority’s holding works to disrupt the careful balance between state and federal interests,” the dissenting opinion took issue with the passage of time between the two laws. “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 Marc Wiersum’s retaliation claim under the Florida Whistleblower’s Act. 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.”

Judge Beverly B. Martin said the majority “vastly overestimates Congress’s limited intent when it included those three words,” as “a careful analysis of the historical context of the NBA’s enactment suggests that its purpose was ‘quite narrow.’” The “at pleasure” language was an attempt to deal with typical terms of employment in the 19th century, the dissent said, and should not be used to rebut the presumption against preemption.

“The consequences of the majority’s ruling are worrying,” the dissent added. “The majority denies bank officers—of which there are thousands nationwide—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.”

To read the opinion in Wiersum v. U.S. Bank, click here.