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Mulholland v. Federal Deposit Insurance Corporation

United States District Court, D. Colorado

June 9, 2014

DENNIS L. MULHOLLAND, and ROBERT L. MEUSCH, Plaintiffs,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Bank of Choice, #10380, Defendant.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

CHRISTINE M. ARGUELLO, District Judge.

This matter is before the Court on cross-motions for summary judgment filed by Plaintiffs Dennis Mulholland and Robert Meusch (Doc. # 32), and Defendant Federal Deposit Insurance Corporation ("FDIC") (Doc. # 30).

I. BACKGROUND

This case arises from Executive Salary Continuation Agreements ("Agreements") between Plaintiffs and their former employer, Bank of Choice ("Bank"). Several years after Plaintiffs entered into those Agreements, the FDIC became the Bank's receiver and disaffirmed them. Plaintiffs then filed claims with the FDIC seeking damages arising from the disaffirmed Agreements. The FDIC disallowed those claims.

On May 31, 2012, Plaintiffs timely filed suit against the FDIC in this Court, seeking damages arising from the disallowance of their claims. (Doc. # 1.) Both Plaintiffs and the FDIC filed motions for summary judgment on July 1, 2013. (Doc. ## 30; 32.)[1] The motions are ripe for the Court's review.[2] In addition, the Court considers argument made at a hearing held on these motions, as well as supplemental briefing ordered by the Court at that hearing. See (Doc. ## 52, 53, 54.)

A. UNDISPUTED FACTS

1. The Agreements

Each Plaintiff entered into his Agreement in 2004. (Doc. ## 29-1, 29-2.) Under identical provisions in those Agreements, the Bank agreed to make post-termination benefit payments to each Plaintiff so long as the Bank had not fired him "for cause." (Doc. ## 29-1 at 3-5; 29-2 at 3-5.) The Agreements described these "salary continuation benefits" as "fringe benefits" unrelated to a salary reduction plan or deferred compensation. (Doc. # 29-1 at 2.) They also required the Bank to "establish an accrued liability retirement account for [each Plaintiff] into which appropriate reserves [would] be accrued." ( Id. at 3.) Moreover, "during the terms of [each Agreement]" each Plaintiff would be "one hundred percent (100%) vested in an amount equal to the Bank's accrued liability account balance." ( Id. )

The amount each Plaintiff was to receive from the Bank depended on the circumstances of his termination. Retirement from continuous employment with the Bank at age sixty-five would entitle Mr. Meusch to an "annual benefit" of $60, 000 ( Id. ), and Mr. Mulholland to an "annual benefit" of $40, 000 (Doc. # 29-2 at 3). Each Plaintiff would receive that same amount in the event that the Bank terminated him without cause before he reached sixty-five. (Doc. # 29-1 at 3-5.) In a third scenario, if either Plaintiff voluntarily terminated his employment before turning sixty-five, he would receive as "severance compensation" the accrued balance of his liability reserve account as of the termination date plus interest on the balance that accrued between the termination date and the date of payment. ( Id. at 4.) If either Plaintiff were terminated for cause, he would receive nothing. ( Id. at 5.) The Agreements also provided for scenarios involving each Plaintiff's death or disability. ( Id. at 3-4.) The earliest date on which each Plaintiff could receive payment was upon reaching age sixty-five, with an exception for early or late retirement, which is not at issue here. ( Id. at 2-5) (describing "normal retirement age" beginning of payments following retirement from continuous employment, voluntary termination, and involuntary termination).

2. Procedural History

On July 22, 2011, while Plaintiffs were employed by the Bank, the Colorado Division of Banking closed the Bank and appointed the FDIC as its receiver. (Doc. ## 30 at 2, 5; 32 at 2.) Shortly thereafter, Plaintiff Meusch voluntary resigned his position and Plaintiff Mulholland's employment was involuntarily terminated. Neither Plaintiff had reached retirement age, as defined by the Agreements. (Doc. ## 30 at 2; 33 at 2-3.) On October 17, 2011, the FDIC informed Plaintiffs that any claims they might have had against the Bank needed to be filed with the FDIC on or before October 27, 2011. (Doc. ## 30-8; 30-9.) On or about the same date, Plaintiffs filed claims with the FDIC for the accrued balance of the liability accounts associated with their respective Agreement. See (Doc. ## 32-3; 32-4.)

In letters dated October 19, 2011, the FDIC notified Plaintiffs that it had disaffirmed the Agreements as burdensome, as authorized by 12 U.S.C. § 1821(e). (Doc. ## 30-10; 30-11.) The letters also advised Plaintiffs of their right to file claims arising from the disaffirmance with the FDIC within ninety days. ( Id. ) On January 11, 2012, Plaintiffs' counsel emailed an FDIC representative, requesting that the FDIC honor Plaintiffs claims. (Doc. # 32-5.) In letters dated April 5, 2012, the FDIC informed Plaintiffs that it had disallowed their claims, explaining that neither Plaintiff's retirement benefits had vested when the Bank entered FDIC receivership. (Doc. ## 32-6; 32-7.) According to the letters, "the benefits remained subject to a triggering event that had not occurred as of such date ( i.e., the Claimant's reaching his retirement age of sixty-five (65), or dying, becoming disabled, voluntary [ sic ] terminating his employment, or having his employment involuntarily terminated without cause)." ( Id. )

II. STANDARD OF REVIEW

A. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. In analyzing the evidence on a motion for summary judgment, this Court must view the factual record and draw reasonable inferences in favor of the non-moving party. Kidd v. Taos Ski Valley, Inc., 88 F.3d 848, 851 (10th Cir.1996). "There is no genuine issue of material fact unless the evidence, construed in the light most favorable to the non-moving party, is such that a reasonable jury could return a verdict for the non-moving party." Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004). Further, "[t]o defeat a motion for summary judgment, evidence, including testimony, must be based on more than mere speculation, conjecture, or surmise." Id.

B. THIS COURT'S REVIEW OF PLAINTIFFS' CLAIMS

In their filings, Plaintiffs state that the FDIC did not argue that the Agreements constitute prohibited golden parachutes until it filed its response to Plaintiffs' summary judgment motion. (Doc. # 38 at 1.) Plaintiffs also argue that the FDIC must have agreed that 12 C.F.R. § 359.7 did not bar Plaintiffs' claims because the FDIC did not cite or refer to the regulation in the letters disallowing their claims. (Doc. # 33 at 6.) As such, Plaintiffs appear to argue that the FDIC cannot rely on grounds not discussed in its administrative letters.

It is a long established rule that a court may uphold an administrative order only upon the same grounds as the agency relied upon in making that administrative order. See, e.g., Southern Utah Wilderness Alliance v. Office of Surface Mining Reclamation & Enforcement, 620 F.3d 1227, 1236 (10th Cir. 2010) (emphasis added) (citing SEC v. Chenery Corp., 318 U.S. 80, 95 (1943)). In this case, however, the Court is not deciding whether to uphold an administrative order. Following the FDIC receiver's disallowance of Plaintiffs' claims, Plaintiffs had the choice either to seek administrative review or to file suit on the claim in federal court. See 12 U.S.C. § 1821(d)(6). Plaintiffs chose to file suit on their claims in federal court, which initiated a new lawsuit. Consequently, the Court is not deciding whether to uphold the FDIC's orders disallowing Plaintiffs' claims. Instead, the Court determines de novo whether Plaintiffs may recover damages on their claims. See id. ("claimant may request administrative review of the claim... or file suit...."); see also Bank of America National Association v. Colonial Bank, 604 F.3d 1239, 1247 (11th Cir. 2010) ("statutory right to de novo review in federal district court"). Thus, the Court is free to consider any arguments properly raised in this proceeding by the parties and is not limited to the reasons that the FDIC stated in disallowing Plaintiffs' claims.

"Although an agency's interpretation or application of a statute is a question of law reviewed de novo, the Court must give deference to the agency's construction of a statutory provision it is charged with administering." Knyal v. Officer of Comptroller of Currency, No. C 02-2851, 2003 WL 26465939, *10 (N.D. Cal. 2003) (slip copy) (citing Bear Lake Watch, Inc. v. FERC, 324 F.3d 1071, 1073 (9th Cir. 2003); Brower v. Evans, 257 F.3d 1058, 1065 (9th Cir. 2001); Eisinger v. F.LR.A., 218 F.3d 1097, 1100-01 (9th Cir. 2000)); see also Lockheed Martin Corp. v. Admin. Review Bd., U.S. Dep't of Labor, 717 F.3d 1121, 1131 (10th Cir. 2013). When a statute is silent or ambiguous on a particular point, the court may defer to the agency's interpretation. See ...


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