In this week's Alabama Law Weekly Update, we consider two recent opinions from the United States Court of Appeals for the Eleventh Circuit. The first case addresses the application of the FDIC's “golden parachute” rule. The second case analyzes the dismissal of wrongful foreclosure and lender liability claims pursuant to the Rooker-Feldman doctrine.
Harrison v. Ocean Bank, 14-12529, 2015 WL 3555801 (11th Cir. 2015)
Eleventh Circuit Finds That Settlement Of Employment Tort Claims Constitutes “Golden Parachute” Under 12 U.S.C. § 1828(k)(1)
In Harrison v. Ocean Bank, the Eleventh Circuit addressed the application of the FDIC's prohibition on “golden parachute” compensation to settlement payments paid to a former employee.
Per 12 U.S.C. § 1828(k)(1) and implementing regulations, the FDIC is authorized to “prohibit or limit” any “golden parachute payment” made by any insured depository institution or covered company to a current or former employee. What constitutes a “golden parachute” payment is defined as any payment “in the nature of compensation by any insured depository institution or covered company for the benefit of any institution-affiliated party” that “is contingent on the termination of such party's affiliation” and is received after one of three triggering dates, including for purposes of Harrison, the date on which a bank is determined to be in a “troubled condition.” 12 U.S.C. § 1828(k)(4)(A).
In Harrison, the Eleventh Circuit focused on construing the phrase “in the nature of compensation.” The plaintiff inHarrison had been an employee of Ocean Bank, but was terminated from his employment and thereafter filed suit against Ocean Bank for wrongful termination, whistleblower retaliation, defamation, and related claims. The bank and the plaintiff settled the case, and the proceeds of the settlement were put in an interest-bearing escrow account.
At the time of plaintiff's termination, and at the time of settlement, the bank had been designated as being in a “troubled condition” by the FDIC. The “troubled condition” designation triggered the application of the FDIC's golden parachute rules. Accordingly, the bank sought approval from the FDIC before dispersing the settlement funds, asking the FDIC to determine that the settlement funds were not a golden parachute payment or to authorize payment even if it were classified as a golden parachute. The FDIC found that the payments were, in fact, golden parachute payments and prohibited the payment thereof.
The plaintiff filed suit to challenge the FDIC's decision to prohibit the payment. The district court granted summary judgment in favor of the FDIC. The primary legal issue before the Eleventh Circuit was whether a settlement of tort claims was “in the nature of compensation” for purposes of the golden parachute regulation.
The Eleventh Circuit found that the settlement payments at issue were in the nature of compensation. First, the court noted that both the applicable statute and regulation, by addressing payments in the nature of compensation (rather than simply “compensation” alone), were drafted to apply broadly. The court further noted that the statutes and regulations provide for expansive readings of other, related terms applicable to “golden parachutes,” and as such, what constituted a payment in the nature of compensation should be defined broadly as well. In this case, the payments in question arose out of the employer-employee relationship. Indeed, element of the settlement payment were specifically allocated to “back pay.” As the payments related directly to the plaintiff's position as an employee of the bank, they were “plainly compensatory in nature,” even though they were paid as part of a litigation settlement and not in the normal course of business. Accordingly, the Eleventh Circuit affirmed the judgment on appeal.
Cavero v. One West Bank FSB, 14-14369, 2015 WL 3540388 (11th Cir. 2015)
Eleventh Circuit Affirms Dismissal Of Consumer Claims Under Rooker-Feldman Doctrine
Cavero v. One West Bank addresses the application of the Rooker-Feldman doctrine to lender liability and wrongful foreclosure claims after Florida state court entered a final judgment on the bank's foreclosure lawsuit.
The plaintiff in Cavero filed suit in federal district court, alleging claims relating to wrongful foreclosure and lender liability, including claims for violation of RESPA, TILA and the FDCPA, along with Florida state consumer claims. The district court dismissed the suit under the Rooker-Feldman doctrine.
The Rooker-Feldman doctrine is premised on the principle that, among federal courts, only the U.S. Supreme Court may exercise appellate authority over a state-court judgment. Consequently, a federal district court is without jurisdiction to review the final judgment of a state court. Particularly, the doctrine applies to cases that are “brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon MobilCorp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).
Importantly, the Rooker-Feldman doctrine is not limited merely to re-litigating issues that were raised in state court, but also applies to claims that are “inextricably intertwined” with the state court's judgment. That is, if a party has a reasonable opportunity to raise the federal claim in state court, the fact that the party did not do so does not preclude application of the Rooker-Feldman doctrine.
In Cavero, the bank had initiated and successfully concluded foreclosure proceedings in a Florida state court. The Eleventh Circuit found that the effect of that judgment was to recognize “the validity of the debt” and to authorize foreclosure on the plaintiff's property. The plaintiff could have, but did not, assert the federal and state consumer claims that formed the basis of the lawsuit. Because the claims in the plaintiff's complaint attacked the validity of the debt and propriety of foreclosure, the Eleventh Circuit found that such claims were “inextricably intertwined” with the foreclosure judgment. Accordingly, the claims could not be heard by a federal district court under the Rooker-Feldman doctrine. The dismissal was affirmed.