Fasano v. Federal Reserve Bank

Opinions of the United

2006 Decisions States Court of Appeals

for the Third Circuit

8-3-2006

Fasano v. Fed Rsrv Bank NY

Precedential or Non-Precedential: Precedential

Docket No. 05-4661

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 05-4661

MAUREEN FASANO

v.

FEDERAL RESERVE BANK OF NEW YORK; RON

HENRY;

CYNTHIA RAMOS; LEROY HOPE; DOTTIE BOYD; KIM

RUSSO; LISA YOUNG; MERTHA JAKUBISZEN,

Appellants

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 03-cv-0672)

District Judge: Honorable Jose L. Linares

Argued June 29, 2006

Before: BARRY, VAN ANTWERPEN, and JOHN R.

GIBSON,* Circuit Judges.

*

Honorable John R. Gibson, United States Circuit Judge for

the Eighth Circuit, sitting by designation.

(Filed: August 3, 2006)

Thomas Baxter, Jr.

Michele H. Kalstein (Argued)

Barry M. Schindler

Federal Reserve Bank of New York

33 Liberty Street, 7th Floor

New York, NY 10045

Counsel for Appellant Federal Reserve Bank of New York

Andrew Dwyer (Argued)

Dwyer & Dunnigan, LLC

17 Academy Street, Suite 1010

Newark, NJ 07102

Counsel for Appellee

Frank A. Chernak

Ballard, Sphar, Andrews & Ingersoll

1735 Market Street, 51st Floor

Philadelphia, PA 19103

Counsel for Amicus Curiae

____

OPINION OF THE COURT

VAN ANTWERPEN, Circuit Judge.

Appellant Federal Reserve Bank of New York brings this

interlocutory appeal of the District Court’s refusal to find

2

appellee Maureen Fasano’s employment claims, based on New

Jersey state law, preempted by the Federal Reserve Act, 12

U.S.C. § 341(Fifth). For the reasons set forth below, we will

reverse and remand with instructions to dismiss Fasano’s

Complaint.

I.

A. Federal Reserve Banks

Because the nature of Federal Reserve Banks is at issue

in this case, we begin by briefly describing their history and

function. The Federal Reserve Bank of New York (“New York

Fed”) is one of twelve Federal Reserve Banks governed by the

Federal Reserve Act (“FRA”), 12 U.S.C. § 221 et seq. The

Federal Reserve Banks were established by Congress in 1913 to

be the “monetary and fiscal agents of the United States.” First

Agric. Nat’l Bank v. State Tax Comm’n, 392 U.S. 339, 356

(1968) (Marshall, J., dissenting). See also Federal Reserve Act

of 1913, Pub. L. No. 63-43, 38 Stat. 251. To aid in achieving

Congress’s goal of insulating them from political pressure, the

Federal Reserve Banks are formed as corporations. 12 U.S.C.

§ 341. Within their respective designated territories, the Federal

Reserve Banks supervise and maintain the nation’s banking

system, examine the national1 and state banks that have

1

Federal Reserve Banks are not “national banks.” “National

bank” denotes banks such as Citibank or Bank of America,

organized under the National Bank Act. 12 U.S.C. § 21 et seq.

Before the passage of the Federal Reserve Act, national banks

formerly performed essential governmental monetary functions

3

purchased memberships in the Federal Reserve System, 12

U.S.C. §§ 325, 481 et seq., and clear checks and deposits

between depository institutions. 12 U.S.C. § 360.

The individual Federal Reserve Banks serve as the

foundation for the Federal Reserve System. The presidents of

the New York Fed and four other Federal Reserve Banks, along

with the Board of Governors of the Federal Reserve System

(“Board of Governors”), constitute the Federal Open Market

Committee, 12 U.S.C. § 263, charged by Congress with:

“maintain[ing] long run growth of the monetary and credit

aggregates commensurate with the economy’s long run potential

to increase production, so as to promote effectively the goals of

maximum employment, stable prices, and moderate long-term

interest rates.” 12 U.S.C. § 225a. The individual Federal

Reserve Banks carry out the monetary policy so formulated.

The Board of Governors, comprising seven Presidential

appointees, 12 U.S.C. § 241, loosely oversees the Federal

Reserve Banks’ operations. 12 U.S.C. § 248(j). The Board of

Governors is empowered to levy assessments on the Federal

Reserve Banks to pay expenses, 12 U.S.C. § 243, and issue

governing regulations, see, e.g., 12 U.S.C. § 248-1.

The Federal Reserve Banks are intimate parts of the

Government’s fiscal structure. In addition to acting as the

such as issuing currency. The Federal Reserve Banks have now

taken over these functions, leaving little difference between

national banks and state-chartered banks. We will attempt to be as

precise as possible when referring to “national banks” as opposed

to Federal Reserve Banks.

4

Government’s fiscal agent, the Federal Reserve Banks serve as

the depository for the United States Treasury. 12 U.S.C. § 391.

The United States, while not a capital stockholder in the Federal

Reserve Banks, is the residual interest-holder in the unlikely

event of a Federal Reserve Bank’s liquidation. 12 U.S.C. § 290.

Congress has on occasion treated the Federal Reserve Banks as

the Government’s own rainy day fund, directing, for example,

the payment of $3.7 billion to the United States Treasury in

2000. 12 U.S.C. § 289; see also Pub. L. No. 103-66, § 3002(b),

107 Stat. 337 (1993) (directing payment of $106 Million to

United States Treasury in 1997; $107 Million to United States

Treasury in 1998). Collectively, the Federal Reserve Banks

carry out the functions of the United States’ central bank –

issuing and maintaining legal tender, i.e., Federal Reserve

Notes; acting as repository of Government funds; and

interacting with foreign countries’ central banks.

While placed by law in a home city, each Federal

Reserve Bank spans at least three states, and eleven are under

the territorial jurisdiction of more than one United States Circuit

Court of Appeals. The New York Fed has responsibility for all

of New York, Puerto Rico, and the United States Virgin Islands,

and parts of New Jersey and Connecticut.

B. Instant Dispute

Turning to the matter at hand, Maureen Fasano worked

in the New York Fed’s East Rutherford, New Jersey office from

5

2000-2002.2 Fasano initially worked as a currency verification

operator and junior operator, handling and washing currency.

This involved, inter alia, lifting heavy materials one day a week.

On August 15, 2001, Fasano realized that she had not been paid

for overtime she had recorded on her time sheet. On bringing

this to the attention of a supervisor, Fasano saw that her time

sheet had been altered and was told that because no other

employees had submitted overtime, she would not be paid for it.

Fasano met with several supervisors to discuss her complaints,

and was told that she would be paid for the overtime; the

supervisors allegedly asked her not to speak of the incident with

any other employee. Fasano claims a co-worker later told her

the supervisors would try to make Fasano quit for causing

“trouble.”

In September, 2001, Fasano met with the New York

Fed’s Human Resources Department to complain that her pay

was too low for her seniority, and that she had not received a

standard raise. She also met with another supervisor, who asked

whether she thought she was being “prejudiced” against; Fasano

responded “yes.”

In late November, 2001, Fasano was transferred to a

“floater” position, where she was assigned to different rooms

and did heavy lifting each day. Fasano had a preexisting neck

injury that had not previously impacted her employment despite

the one-day-a-week heavy lifting, and Type 1 diabetes that

2

For the purpose of this appeal from a motion to dismiss, we

recite the facts regarding Fasano’s underlying employment claims

as stated in her Complaint.

6

necessitated frequent eating. Fasano believed that her

supervisors at the New York Fed knew of each condition, and

(1) assigned her to the floater position in the hope that she

would injure herself; and (2) prevented her from taking breaks

during her shift to eat. At one point, Fasano complained to

supervisors that the new position was “killing her.”

On December 18, 2001, Fasano injured her back and

allegedly went on long-term disability leave. According to the

New York Fed, Fasano never fully applied for disability

benefits, and never responded to a letter sent to her on July 2,

2002, notifying her that she must either return to work or file a

completed benefits application. Fasano was thereafter

terminated on July 31, 2002.

Fasano then filed this suit in the New Jersey Superior

Court against the New York Fed and various employees, both in

their official and individual capacities, alleging (1) retaliation,

in violation of the New Jersey Conscientious Employee

Protection Act (“CEPA”), N.J. Stat. Ann. § 34:19-1 et seq.

(West 2006); (2) failure to accommodate, in violation of the

New Jersey Law Against Discrimination (“LAD”), N.J. Stat.

Ann. § 10:5-1 et seq. (West 2006); and (3) retaliation, in

violation of the LAD. The New York Fed removed the case to

the United States District Court for the District of New Jersey on

February 14, 2003, pursuant to 12 U.S.C. § 632, and filed a

motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), for lack of

subject matter jurisdiction due to preemption by the Federal

Reserve Act; and Fed.R.Civ.P. 12(b)(6), for failure to state a

claim upon which relief can be granted.

7

On March 31, 2004, the District Court denied the New

York Fed’s Rule 12(b)(1) motion, concluding that a Federal

Reserve Bank is not a federal instrumentality but is instead

treated as a private corporation, and that the Federal Reserve Act

did not preempt any state employment laws, even if they

imposed additional burdens and liabilities beyond federal law

(as did CEPA and LAD). The District Court also denied the

New York Fed’s Rule 12(b)(6) motion as to all claims.

Following initial discovery, the New York Fed filed

counterclaims based on Fasano’s failure to disclose a private

business venture before, during, and after her employment.3

The New York Fed then filed a motion for

reconsideration, which the District Court denied on August 9,

2005. However, the District Court noted a wide split in

authority among courts around the country and a recent contrary

holding by a district court in the Eastern District of

Pennsylvania finding preemption in a nearly-identical case

involving the Federal Reserve Bank of Philadelphia. The

District Court thus granted certification of the question for

interlocutory appeal pursuant to 28 U.S.C. § 1292(b).4 We

3

These counterclaims are not part of this appeal. We reject

Fasano’s argument that by removing the case to the District Court

and filing counterclaims, the New York Fed “conceded” that

subject matter jurisdiction existed and waived its preemption

arguments.

4

The exact question certified by the District Court was

“whether the Federal Reserve Bank is immune from state

employment discrimination law claims, particularly whether the

8

granted permission to appeal on September 23, 2005. On March

14, 2006, we granted the motion of the other 11 Federal Reserve

Banks to proceed as Amici Curiae.

II.

The District Court had jurisdiction pursuant to 12 U.S.C.

§ 632, which provides that all civil suits against Federal Reserve

Banks are “deemed to arise under the laws of the United States

. . . ; and any defendant in any such suit may, at any time before

the trial thereof, remove such suits from a State court into the

district court . . . .” We have jurisdiction over the interlocutory

appeal pursuant to 28 U.S.C. § 1292(b). We exercise plenary

review over issues of subject matter jurisdiction, including

preemption. Travitz v. Northeast Dep’t ILGWU Health &

Welfare Fund, 13 F.3d 704, 708 (3d Cir. 1994).

III.

The New York Fed contends that by virtue of the

Supremacy Clause of the United States Constitution, U.S. Const.

Art. VI, cl. 2, the Federal Reserve Act preempts either wholly or

in part the application of New Jersey’s CEPA and LAD to a

Federal Reserve Bank. In the interest of clarity, we will begin

with a brief summary of the possible forms of preemption, and

FRA preempts state anti-discrimination laws.” Dist. Ct. Op. (Aug.

9, 2005) at *12. The New York Fed did not request

reconsideration or certification of the denial of its Fed.R.Civ.P.

12(b)(6) motion to dismiss, and consequently we will not consider

the substantive merits of Fasano’s claims.

9

then address that alleged by the New York Fed.

In normal preemption cases, we apply the familiar

analysis set forth by the Supreme Court in English v. General

Electric Co., 496 U.S. 72 (1990). See, e.g., Barber v. UNUM

Life Ins. Co. of Am., 383 F.3d 134 (3d Cir. 2004). We recognize

three forms of preemption – express, field, and conflict. “First,

Congress can define explicitly the extent to which its enactments

pre-empt state law.” English, 496 U.S. at 78. “Second, in the

absence of explicit statutory language, state law is pre-empted

where it regulates conduct in a field that Congress intended the

Federal Government to occupy exclusively.” Id. at 79.

“Finally, state law is pre-empted to the extent that it

actually conflicts with federal law. Thus, the Court has

found pre-emption where it is impossible for a private

party to comply with both state and federal requirements,

or where state law stands as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress.”

Id. (citations and quotation marks omitted). The presumption

remains against conflict preemption under English where, as

here, the area of law is not traditionally exclusively federal.

C.E.R. 1988, Inc. v. Aetna Cas. & Sur. Co., 386 F.3d 263, 268

(3d Cir. 2004).

On appeal, the New York Fed alleges conflict preemption

instead of field and express preemption. We note, however, that

because the distinction between field and conflict preemption is

often blurry, cases and concepts addressing one may be helpful

10

regarding the other. See, e.g., NE Hub Partners, L.P. v. CNG

Transmission Corp., 239 F.3d 333, 348 (3d Cir. 2001); see also

English, 496 U.S. at 79 n.5.

The New York Fed’s argument is two-fold: First, it

argues that English is inapplicable because of the Federal

Reserve Banks’ alleged status as protected federal

instrumentalities. Under this rationale, preemption is presumed,

absent explicit authorization of suit or application of state law

by Congress. “Where Congress does not affirmatively declare

its instrumentalities or property subject to regulation, the federal

function must be left free of regulation.” Hancock v. Train, 426

U.S. 167, 179 (1976),5 substantive holding superseded by statute

5

Fasano reads Hancock and a later Supreme Court case,

Goodyear Atomic Corp. v. Miller, 486 U.S. 174 (1988), as setting

down a preemption rule solely for federally-owned facilities.

While it is certainly true that both of these cases explicitly

addressed federal facilities, Fasano ignores the Supreme Court’s

language extending the rule equally to both “instrumentalities or

property,” Hancock, 426 U.S. at 179. See also Goodyear, 496 U.S.

at 188 n.1 (White, J., dissenting) (noting that “[t]he Court

recognizes, and I agree, that under our precedents the [federally-

owned] facility here . . . must be treated as a federal instrumentality

for the purpose of applying the Supremacy Clause”). The District

Court correctly noted the consequential equivalence of federal

facilities and instrumentalities with regard to entitlement to

presumptive preemption. Dist. Ct. Op. (Mar. 31, 2004) at *6. We

refer to Hancock and Goodyear not to establish that the New York

Fed is a federal instrumentality, but to explain the consequences of

such instrumentality status.

11

Pub. L. No. 95-96, § 116, 91 Stat. 711 (1977), (emphasis added)

(citation and quotation marks omitted). Second, the New York

Fed argues that even if we apply normal English conflict

preemption, CEPA and LAD impermissibly conflict with 12

U.S.C. § 341 of the Federal Reserve Act, which grants the

Federal Reserve Banks the power to dismiss “at pleasure” any

employee, at least to the extent that CEPA and LAD impose

burdens going beyond those already imposed by federal anti-

discrimination laws.

For the reasons we will now discuss, we conclude that

under either of these approaches – searching for Congressional

authorization for suit versus intent to preempt – Fasano’s

Complaint must be dismissed as preempted by the Federal

Reserve Act.

IV.

While not dispositive here, we first address the New

York Fed’s allegation that Federal Reserve Banks are federal

instrumentalities, entitled to presumptive preemption of state

law claims. Fasano urges us to uphold the District Court’s

conclusion that the Federal Reserve Banks are instead mere

private corporations. Equating “instrumentality” with “federal

agency,” the District Court placed near-dispositive reliance on

a Guidance issued by the Equal Employment Opportunity

Commission (“EEOC”) in 1993 regarding the proper procedures

for filing federal discrimination charges against Federal Reserve

Banks, but which required classifying Federal Reserve Banks as

either “federal agencies” or “private employers.” While it

acknowledged that Federal Reserve Banks have been

12

characterized as federal instrumentalities, the District Court

limited such cases to taxation. We ultimately need not

determine, for the purposes of this case, whether Federal

Reserve Banks are federal instrumentalities in the employment

law field. Even were we to find such instrumentality status,

suits would be permitted up to the level authorized by Congress.

As we explain below, Congress has authorized suits based on

federal anti-discrimination laws, and we see no principled

distinction between such suits and suits based on state anti-

discrimination laws that are exactly analogous to those federal

laws. CEPA and the LAD, however, are far from coincident

with the ADA and federal whistleblower statutes. Thus, suit

based on CEPA and the LAD would lie outside any

authorization of Congress.

Because this is the same conclusion we reach using the

standard English preemption analysis, we decline to formally

reach here whether Federal Reserve Banks should be considered

federal instrumentalities. We note, however, that strong

arguments have been made in favor of such status.6

6

Indeed, several Circuits have found the Federal Reserve

Banks to be federal instrumentalities, albeit in the context of

immunity from taxation. See, e.g., Scott v. Fed. Reserve Bank of

Kansas City, 406 F.3d 532 (8th Cir. 2005) (reaffirming Fed.

Reserve Bank of St. Louis v. Metrocentre Improvement Dist. #1,

657 F.2d 183 (8th Cir. 1981), a taxation case, in the context of the

general application of the Federal Rules of Appellate Procedure);

Fahey v. O’Melveny & Myers, 200 F.2d 420 (9th Cir. 1983); Fed.

Reserve Bank v. Comm’r of Corps. & Taxation, 520 F.2d 221 (1st

Cir. 1975) (reaffirming that Federal Reserve Banks are federal

13

Instrumentality jurisprudence has never been

characterized by particular clarity. However, the District

Court’s decision rested, in several respects, on infirm ground.

First, the EEOC Guidance is of questionable relevance. The

EEOC’s 1993 Enforcement Guidance on Coverage of Federal

Reserve Banks (No. N-915-002) addressed whether Federal

Reserve Banks were “private employers covered by the private

sector provisions” of Title VII, or instead “executive agencies

covered under the federal sector provisions.” Purely for the

purpose of clarifying which procedures govern the filing and

disposition of complaints, the EEOC concluded that the Federal

Reserve Banks were “private employers.” However, the EEOC

in that matter was presented with only two choices – “executive

agency” or “private employer.” Contrary to Fasano’s assertions

on appeal, we have more than two available choices in our

lexical pantheon. The New York Fed does not claim to be part

of the United States Government, but instead an instrumentality

thereof. We thus discern little persuasive value in the EEOC’s

determination simply that Federal Reserve Banks are not

“executive agencies” within the specific meaning of federal

instrumentalities, as held in Fed. Reserve Bank of Boston v.

Comm’r of Corps. & Taxation, 499 F.2d 60 (1st Cir. 1974)). We

note, however, the decisions of the Massachusetts, New York,

Wisconsin, Washington, and Des Moines Human Rights or Equal

Rights commissions, all disclaiming employment discrimination

jurisdiction over Federal Reserve Banks because of their status as

federal instrumentalities. See Br. of Amici Curiae Federal Reserve

Banks at 14-16.

14

statutes.7 Whether or not an entity is a federal instrumentality

for Supremacy Clause analysis is a different question from

whether an instrumentality is a federal agency for a specific

statute.

We also take issue with the contention that federal

instrumentalities do not exist beyond the field of taxation. See,

e.g., United States Postal Serv. v. Flamingo Indus. (USA) Ltd.,

540 U.S. 736 (2004) (Postal Service is a federal instrumentality

for antitrust purposes); Federal Land Bank v. Priddy, 295 U.S.

229 (1935) (federal land banks held at the time to be federal

instrumentalities for attachment of property purposes).

Moreover, while we acknowledge that the Supreme Court has

been less than crystal clear in elucidating a test for federal

instrumentalities, the mere fact that the Federal Reserve Banks

are organized in the corporate form does not itself prevent them

from being federal instrumentalities. As the New York Fed

correctly notes, the Bank of the United States in the bedrock

case of McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819),

was found to be a federal instrumentality despite its corporate

status.

Furthermore, Federal Reserve Banks indeed possess

many of the hallmarks of federal instrumentalities. Emergency

7

For similar reasons, we reject reliance on Lewis v. United

States, 680 F.2d 1239 (9th Cir. 1982), wherein the Ninth Circuit

held Federal Reserve Banks not to be covered under the Federal

Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671 et seq., as that statute

defines “federal agency” and “federal instrumentality” especially

narrowly.

15

Fleet Corp. v. Western Union Tel. Co., 275 U.S. 415, 425-26

(1928) (“Instrumentalities like the national banks or the federal

reserve banks, in which there are private interests, are not

departments of the Government. They are private corporations

in which the Government has an interest.”). For example,

Federal Reserve Banks are surely “virtually . . . an arm of the

Government.” Dep’t of Employment v. United States, 385 U.S.

355, 359-60 (1966) (finding the Red Cross to be a federal

instrumentality). Like the Red Cross, Federal Reserve Banks

are not profit-seeking enterprises. Ultimately, the Federal

Reserve Banks are “not private business. The policy of the

Federal Reserve Banks is governed by the policy of the United

States with regard to them.” Am. Bank & Trust Co. v. Fed.

Reserve Bank of Atlanta, 256 U.S. 350, 359 (1921). Thus, we

question the District Court’s ultimate conclusion that Federal

Reserve Banks are, by their nature, wholly private corporations.

As we have indicated, however, we are not required to

reach the broader, albeit amply supportable, conclusion that the

New York Fed is a federal instrumentality. As we discuss

below, Fasano’s Complaint must be dismissed as preempted by

the Federal Reserve Act where the state grounds for the suit –

CEPA and the LAD – impermissibly frustrate Congress’s intent

to provide the Federal Reserve Banks with the widest latitude

possible in personnel decisions.

V.

It is the New York Fed’s second argument – that suit

alleging violations of New Jersey’s CEPA and LAD conflicts

with the Federal Reserve Act and is therefore preempted – that

16

we find dispositive. Both statutes indisputably impose

substantive and procedural burdens well beyond those imposed

by federal law, and thereby frustrate Congressional intent to

provide the Federal Reserve Banks with relatively unfettered

employment discretion. We will reverse on this ground, and

remand for the dismissal of Fasano’s Complaint.

In Part A to follow, we lay out the boundaries of the main

preemptive language contained in the Federal Reserve Act, as

implicitly amended by the ADA and the federal banking

whistleblower statute, 12 U.S.C. § 1831j. In Part B, we adopt

the holding of courts which have found conflict preemption

where a state employment law grants greater substantive,

procedural, or remedial protections than those already permitted

by the ADA and 12 U.S.C. § 1831j. In Part C, we conclude that

New Jersey’s CEPA and LAD both go far beyond what is

permitted by the Federal Reserve Act, and are therefore

preempted as applied to the New York Fed.

A. Federal Reserve Act § 341(Fifth)

We “start[] with the basic assumption that Congress did

not intend to displace state law.” C.E.R. 1988, Inc., 386 F.3d at

268 (quoting Bldg. & Const. Trades Council of Metro. Dist. v.

Assoc. Builders & Contractors of Mass./R.I., Inc., 507 U.S. 218,

224 (1993)). Conflict preemption arises in the absence of

specific preemption language, where an individual is unable to

follow both federal and state laws simultaneously, or where the

state law “would frustrate the federal scheme.” Allis-Chalmers

Corp. v. Lueck, 471 U.S. 202, 209 (1985); see also English, 496

U.S. at 79 (“where state law stands as an obstacle to the

17

accomplishment and execution of the full purposes and

objectives of Congress”). We recently explained that “federal

and state law need not be contradictory on their faces for

preemption to apply. It is sufficient that the state law ‘impose[s]

. . . additional conditions’ not contemplated by Congress.”

Surrick v. Killion, 449 F.3d 520, 2006 U.S. App. LEXIS 13618,

at *31 (3d Cir. June 2, 2006) (quoting Sperry v. Florida, 373

U.S. 379, 385 (1963)) (alteration in original).

“Pre-emption fundamentally is a question of

congressional intent.” English, 496 U.S. at 78-79. Therefore,

“the first step in determining whether . . . claims are preempted

is to evaluate the statute and regulations for evidence of

congressional intent.” C.E.R. 1988, Inc., 386 F.3d at 270.

The key preemptive language in the Federal Reserve Act

is contained in 12 U.S.C. § 341(Fifth),8 which states that a

8

Consistent with past practice, we note that for the purpose

of analyzing § 341(Fifth), we may look to analogous provisions of

the Federal Home Loan Bank Act, 12 U.S.C. § 1432(a) (“and to

dismiss at pleasure such officers, employees, attorneys, and

agents”), the National Bank Act, 12 U.S.C. § 24(Fifth) (“dismiss

such officers or any of them at pleasure”), and cases interpreting

these statutes. See Mele v. Fed. Reserve Bank, 359 F.3d 251, 255

(3d Cir. 2004) (analyzing both Federal Reserve Act and Federal

Home Loan Bank Act cases); Kroske v. US Bank Corp., 432 F.3d

976 (9th Cir. 2005), as amended 2006 U.S. App. LEXIS 3367

(Feb. 13, 2006) (considering in parallel Federal Reserve Act and

Federal Home Loan Bank Act); Arrow v. Fed. Reserve Bank of St.

18

Federal Reserve Bank shall have the power:

“To appoint by its board of directors a president, vice

presidents, and such officers and employees as are not

otherwise provided for in this Act, to define their duties,

require bonds for them and fix the penalty thereof, and

to dismiss at pleasure such officers or employees.”

(emphasis added)

The New York Fed argues, consistent with the decisional law of

several Circuits and other courts, that this “at pleasure”

language precludes the application of state employment

discrimination or whistleblower laws that restrict “at pleasure”

dismissal, or, at the very least, preempts such state laws to the

extent they impose additional burdens beyond federal law such

as the ADA, which already apply to the Federal Reserve Banks.

The District Court followed several other courts and concluded

instead that no preemption occurred, regardless of the additional

burdens imposed by CEPA and LAD above and beyond federal

law, and regardless of the inconsistencies each Federal Reserve

Bank would face from various state and local laws. According

to this rationale, because Title VII applies to Federal Reserve

Banks, then § 341(Fifth) permits employment discrimination

laws to limit the Banks’ discretion in firing. Therefore, the

Louis, 358 F.3d 392 (6th Cir. 2004) (noting identical holdings

under Federal Reserve Act and National Bank Act); Andrews v.

Fed. Home Loan Bank of Atlanta, 998 F.2d 214 (4th Cir. 1993)

(citing Federal Reserve Act in support of ruling on Federal Home

Loan Bank Act).

19

argument goes, state discrimination laws would not conflict

with § 341(Fifth) even if the state laws impose additional

burdens beyond federal law because they have a common

purpose.

In order to fully analyze § 341(Fifth), we must also ask

what effect, if any, the passage of the ADA and federal

whistleblower statute had on this far older language in the

Federal Reserve Act. Section 341(Fifth) was originally enacted

almost a hundred years ago. Federal Reserve Act of 1913, Pub.

L. No. 63-43, ch. 6, § 4, 38 Stat. 254. Subsequent amendment

in 1935 left the original “at pleasure” language unchanged, and

merely clarified that a president and vice presidents could be

appointed.9 Act of August 23, 1935, ch. 614, § 201, 49 Stat.

703. The ADA, by contrast, was enacted in 1990, Pub. L. No.

101-336, 104 Stat. 328, 42 U.S.C. § 12101 et seq., and has been

applied to Federal Reserve Banks. See, e.g., Wernick v. Fed.

Reserve Bank of New York, 91 F.3d 379 (2d Cir. 1996). The

federal banking whistleblower statute, 12 U.S.C. § 1831j, as

applicable to Federal Reserve Banks, was enacted in 1991. Act

of December 19, 1991, Pub. L. No. 102-242, § 251(a)(1)-(3),

105 Stat. 2331.

In order to reconcile the applicability of these federal

9

As originally enacted, § 341(Fifth) read: “To appoint by its

board of directors, such officers and employees as are not

otherwise provided for in this Act, to define their duties, require

bonds of them and fix the penalty thereof, and to dismiss at

pleasure such officers or employees.”

20

statutes limiting the Federal Reserve Banks’ discretion in

personnel decisions with § 341(Fifth)’s grant of broad power to

dismiss employees “at pleasure,” we are compelled to conclude

that the ADA and 12 U.S.C. § 1831j impliedly amended § 341.

See Kroske v. US Bank Corp., 432 F.3d 976, 989 (9th Cir.

2005), as amended 2006 U.S. App. LEXIS 3367 (Feb. 13,

2006); Evans v. Fed. Reserve Bank of Phila., 2004 U.S. Dist.

LEXIS 13265 (E.D. Pa. July 8, 2004); Peatros v. Bank of Am.,

990 P.2d 539 (Cal. 2000). We are aware that implicit

amendment or repeal is rare in the law. “The cardinal rule is

that repeals by implication are not favored.” Posadas v. Nat’l

City Bank, 296 U.S. 497, 503 (1936). We may find such repeal

or amendment only if “the two acts are in irreconcilable conflict,

or [if] the later statute covers the whole ground occupied by the

earlier and is clearly intended as a substitute for it . . . .” Id. at

504. We have said that “[w]henever possible, the two statutes

should be read in order to give effect to both.” Tineo v.

Ashcroft, 350 F.3d 382, 391 (3d Cir. 2003).

We are concerned here only with the first category of

implied amendment, as neither the ADA nor 12 U.S.C. § 1831j

“covers the whole ground occupied” by Federal Reserve Act §

341. These statutes do, however, “irreconcilabl[y] conflict.”

Section 341(Fifth) grants Federal Reserve Banks the

absolute, unlimited power to dismiss an employee. The ADA

and 12 U.S.C. § 1831j, on the other hand, prohibit a Federal

Reserve Bank from dismissing an employee on the ground of a

covered disability, from refusing to grant an employee’s request

for an accommodation, or from dismissing an employee for

having filed a complaint alleging a violation of law. Thus, a

21

Federal Reserve Bank’s absolute unconditioned legal right to

dismiss under § 341(Fifth), is made illegal under the ADA and

12 U.S.C. § 1831j. Such a fundamental conflict is not “merely

cosmetic,” or one “that relates to anything less than the

operative legal concepts.” Tineo, 350 F.3d at 391.

We must conclude, therefore, that to the extent that the

ADA and 12 U.S.C. § 1831j irreconcilably conflict with §

341(Fifth), these statutes have impliedly amended § 341(Fifth)

to grant a Federal Reserve Bank “a limited power to dismiss any

of its officers at pleasure by its board of directors, not extending

to dismissal” on grounds prohibited by the ADA or 12 U.S.C. §

1831j. Peatros, 990 P.2d at 549-50. The corollary, as we

conclude below, is that “as impliedly amended by [the ADA and

12 U.S.C. § 1831j, § 341(Fifth)] bestows a qualified immunity

from liability arising from its exercise, allowing only specified

relief, with limits and/or bars against compensatory and/or

punitive damages.” Peatros, 990 P.2d at 550. Our only

remaining task is to determine whether, as impliedly amended

by the ADA and 12 U.S.C. § 1831j, § 341(Fifth) of the Federal

Reserve Act preempts the application of CEPA or the LAD to

a Federal Reserve Bank’s dismissal of an employee.

B. Federal Reserve Act Conflict Preemption

In determining whether the Federal Reserve Act

preempts, either in whole or in part, New Jersey’s CEPA and

LAD, we wade into murky waters. Our own case law in the area

is sparse. We held recently that the “at pleasure” language of §

341(Fifth) bars all contractual employment claims against a

Federal Reserve Bank, see Mele v. Fed. Reserve Bank, 359 F.3d

22

251, 255 (3d Cir. 2004), but have not officially addressed the

preemption of statutory employment claims. Cf. Sheehan v.

Anderson, 2000 U.S. Dist. LEXIS 3048, at *19 (E.D. Pa. Mar.

17, 2000), aff’d 263 F.3d 159 (3d Cir. 2001) (table) (holding

that § 341(Fifth) “preempts any state created employment

right,” summarily affirmed).

We begin by surveying the limited case law around the

country. The Sixth Circuit appears to be the only one of our

sister Courts of Appeals to have addressed the preemption issue

with regard to the Federal Reserve Act, but it provided no

analysis to support its conclusion that a Federal Reserve Bank

employee’s state law employment discrimination claims “were

preempted by federal law. Section 4, Fifth, of the Federal

Reserve Act, 12 U.S.C. § 341, Fifth . . . preempts any state-

created employment right to the contrary.” Ana Leon T. v. Fed.

Reserve Bank of Chicago, 823 F.2d 928, 931 (6th Cir. 1987).

The Sixth Circuit has since reaffirmed this holding, but added no

further explanation. See Arrow v. Fed. Reserve Bank of St.

Louis, 358 F.3d 392, 393 (6th Cir. 2004).

The well is a bit deeper with regard to national banks and

Federal Home Loan Banks, which, as we have noted above, are

governed by federal statutes with “at pleasure” clauses identical

to that of § 341(Fifth). Two Circuits have explicitly found total

preemption of state statutory employment law. The Fourth

Circuit has held that “at pleasure” in the Federal Home Loan

Bank Act completely preempts state law claims. Andrews v.

Fed. Home Loan Bank of Atlanta, 998 F.2d 214, 220 (4th Cir.

1993). The Sixth Circuit found similar total preemption would

be accomplished by “at pleasure” in the National Bank Act.

23

Wiskotoni v. Mich. Nat’l Bank-West, 716 F.2d 378, 387 (6th Cir.

1983) (noting that § 24(Fifth) of the National Bank Act “has

consistently been construed by both federal and state courts as

preempting state law governing employment relations between

a national bank and its officers and depriving a national bank of

the power to employ its officers other than at pleasure”),

reaffirmed by Arrow, 358 F.3d at 394. These “total preemption”

holdings suggest that any state-created limitation on the bank’s

power would fundamentally, and irreconcilably, conflict with

Congress’s intent to grant total, unlimited discretion. See

Andrews, 998 F.2d at 220 (“In this case, however, Congress

intended for federal law to define the discretion which the Bank

may exercise in the discharge of employees. Any state claim for

wrongful termination would plainly conflict with the discretion

accorded the Bank by Congress.”).

Moderating these total preemption holdings are a variety

of courts taking the more limited approach of partial conflict

preemption of state employment laws. In general, these courts

have concluded that § 341(Fifth) (and, analogously, provisions

in the National Bank Act and National Home Loan Bank Act)

preempts state laws only to the extent that the state laws provide

additional remedies or liability beyond the federal anti-

discrimination laws (such as Title VII or the ADEA) that have

already impliedly amended § 341(Fifth). This has resulted in

courts finding certain state laws to not be preempted, because

those state laws exactly paralleled federal law. See, e.g.,

Kroske, 432 F.3d at 989 (“Congress did not intend for §

24(Fifth) [of the National Bank Act] to preempt the WLAD

employment discrimination provisions, at least insofar as they

are consistent with the prohibited grounds for termination under

24

the ADEA.”) (emphasis added); Moodie v. Fed. Reserve Bank

of New York, 831 F. Supp. 333, 337 (S.D.N.Y. 1993) (“The

New York State Human Rights Law, with provisions analogous

to Title VII, creates no additional employment rights in conflict

with the Bank’s status as an employer at will, nor does it place

additional constraints on the Bank’s exercise of its statutory

powers.”). On the other hand, where the state law at issue went

beyond the relevant federal law, courts do not hesitate to find

conflict preemption. See, e.g., Evans, 2004 U.S. Dist. LEXIS

13265 (Pennsylvania Human Relations Act preempted, as

beyond ADEA or Title VII); Peatros v. Bank of Am., 990 P.2d

539 (Cal. 2000) (California Fair Employment and Housing Act

preempted to extent it conflicts with Title VII and ADEA).

It is this latter partial conflict preemption approach which

we find persuasive, and count ourselves fortunate to have the

benefit of a very well-reasoned opinion of Judge Padova of the

Eastern District of Pennsylvania, issued after the District Court’s

initial opinion in the instant case. See Evans, 2004 U.S. Dist.

LEXIS 13265. Evans involved an employee of the Federal

Reserve Bank of Philadelphia who sued the Philadelphia Fed

and various employees for alleged discrimination and

retaliation. After surveying the same available case law we

have referenced above, Judge Padova concluded that “the

‘dismiss at pleasure’ language in the Federal Reserve Act

preempts the application of state anti-discrimination laws which

expand the rights and remedies available under federal anti-

discrimination laws.” Id. at *16. Because the Pennsylvania

Human Relations Act at issue in Evans significantly expanded

both the substantive and the procedural remedies available to a

plaintiff relative to the remedies available under the ADEA and

25

Title VII, Judge Padova “dismiss[ed] Plaintiff’s state law claims

in their entirety.” Id. at *21.

We adopt the same partial conflict preemption approach.

We first reject the District Court’s conclusion that Mele defined

the outward limit of the preemptive power of “at pleasure,” such

that only contractual employment claims are preempted. Mele

did not address statutory claims as we are faced with today, and

did not so limit itself. Logically, “at pleasure” cannot be limited

to contractual claims. As the Ninth Circuit has noted, “it would

make little sense to allow state tort claims to proceed, where a

former bank officer’s contract claims are barred [by the National

Bank Act].” Mackey v. Pioneer Nat’l Bank, 867 F.2d 520, 526

(9th Cir. 1989). The same rationale applies to permitting

statutory claims where contractual claims would be barred – any

discretion granted to the Federal Reserve Banks by Congress

would be mooted by the possibility of having to face statutory

employment claims. See id. (“The effect would be to substitute

tort for contract claims, thus subjecting the national bank to all

the dangers attendant to dismissing an officer. The purpose of

the provision in the National Bank Act was to give those

institutions the greatest latitude possible to hire and fire their

chief operating officers, in order to maintain the public trust.”).

Federal Reserve Act § 341(Fifth), as impliedly amended

by the ADA and 12 U.S.C. § 1831j, preempts any state

employment law that goes beyond the remedies and protections

provided by those federal laws. Such “additional” provisions –

including provision for unlimited punitive damages, individual

liability on the part of employees, and coverage of less severe

disabilities – would conflict with Congress’s intent to provide

26

Federal Reserve Banks with the broadest latitude possible in

carrying out their statutory duties, while giving due recognition

to the applicability of the ADA and 12 U.S.C. § 1831j’s

requirements. In this sense, additional state remedies surely

“stand[] as an obstacle to the accomplishment and execution of

the full purposes and objectives of Congress.” English, 496

U.S. at 79.

Moreover, as we recently noted in Surrick:

“If preemption only applied to state laws that directly

contradict federal laws, federal laws could be effectively

nullified by state laws prohibiting those acts that are

incident to, but not specifically authorized by, federal

law. Under such a regime, state officials would have a

‘virtual power of review’ over federal laws.”

Surrick, 449 F.3d at ____, 2006 U.S. App. LEXIS 13618, at *32

(quoting Sperry, 373 U.S. at 385). Thus, broad state

employment laws cannot apply to the Federal Reserve Banks

when those state laws “prohibit[] those acts that are incident to”

Federal Reserve Banks dismissing “at pleasure” their

employees, within the bounds of the ADA and 12 U.S.C. §

1831j.10

10

In such an intricate area of the law, we believe it is

important to be clear about which statutes we are addressing. We

reiterate that we are dealing with the direct preemptive effect of the

Federal Reserve Act, § 341(Fifth), and not with the indirect

preemptive effect of the ADA or 12 U.S.C. § 1831j. The ADA, for

example, explicitly saves state anti-discrimination statutes from

27

In sum, we are persuaded that the wisest approach when

faced with an entity undeniably crucial to the federal monetary

system, to which Congress has clearly expressed the intent to

grant the broadest possible power and right to dismiss

employees, is to limit remedies to those already authorized by

Congress. We need not take a position on whether state

remedies exactly consonant with the ADA and 12 U.S.C. §

1831j would similarly offend “the full purposes and objectives

of Congress.” As we detail below, by no stretch of the

imagination can CEPA or the LAD be said to “parallel” or

“mirror” their federal counterparts.

C. CEPA and LAD

Because § 341(Fifth) preempts state employment laws

that provide remedies beyond those permitted in the ADA or 12

U.S.C. § 1831j, what remains is to determine whether CEPA or

the LAD are indeed such expansive laws. We hold that they are,

and are therefore preempted to the extent of these divergences.

We will adopt the Evans approach and decline to usurp the New

direct preemption, and does not preempt the Federal Reserve Act.

It would be a mistake, however, to argue that because the ADA

preempts neither the Federal Reserve Act nor CEPA or LAD, the

Federal Reserve Act cannot have such preemptive force. See Shaw

v. Delta Air Lines, 463 U.S. 85, 101 n.22 (1983) (argument

“simplistic” and properly rejected); Evans, 2004 U.S. Dist. LEXIS

13265, at *19-20. Application of CEPA or the LAD frustrates the

Congressional purpose behind § 341(Fifth), as impliedly amended

by the ADA and 12 U.S.C. § 1831j. See supra Part V.A.

28

Jersey legislature’s province by rewriting these state laws.

Therefore, we will remand the case to the District Court with

instructions to dismiss Fasano’s Complaint.

Both the LAD and CEPA go well beyond their federal

counterparts. See Dist. Ct. Op. (Mar. 31, 2004) at *18-23. For

example, neither the ADA nor 12 U.S.C. § 1831j11 permit

individual damages liability on the part of employees. Koslow

v. Pennsylvania, 302 F.3d 161, 178 (3d Cir. 2002) (ADA). The

LAD permits the imposition of individual liability on an

employee who has aided or abetted barred acts. Tarr v. Ciasulli,

853 A.2d 921 (N.J. 2004). Of particular importance to an

employer, the LAD permits an employee to directly pursue a

claim in Superior Court, without first pursuing an administrative

complaint. Hernandez v. Region Nine Hous. Corp., 684 A.2d

1385, 1389 (N.J. 1996).

The LAD unquestionably protects a broader range of

11

While no Circuit appears to have directly held that 12

U.S.C. § 1831j does not permit individual liability, several District

Courts have so held, with no contrary authority brought to our

attention. See, e.g., Rouse v. Farmers State Bank, 866 F.2d 1191

(N.D. Iowa 1994); Hicks v. Resolution Trust Corp., 767 F. Supp.

167 (N.D. Ill. 1991). The Fifth Circuit has held that 12 U.S.C. §

1831j “applies only to the actors named in the statute,” the only

actors being certain types of institutions. Nowlin v. Resolution

Trust Corp., 33 F.3d 498, 503 (5th Cir. 1994). The District Court

accepted that CEPA provided for individual liability, in contrast to

12 U.S.C. § 1831j. Dist. Ct. Op. (Mar. 31, 2004) at *22.

29

“disabilities” or “handicaps” than the ADA. The ADA limits

covered disabilities to those which “substantially limit[] one or

more of the major life activities.” 42 U.S.C. § 12102(2)(A). In

contrast, Fasano would be able to prove disability under the

LAD by merely showing, for example, “physical disability,

infirmity, malformation or disfigurement which is caused by

bodily injury, birth defect or illness . . . any degree of paralysis,

amputation, lack of physical coordination . . . or any mental,

psychological or developmental disability . . . which prevents

the normal exercise of any bodily or mental functions.” N.J.

Stat. Ann. § 10:5-5(q) (West 2006). The LAD, therefore,

imposes a significantly “lower standard” than the ADA. Failla

v. City of Passaic, 146 F.3d 149, 154 (3d Cir. 1998); see also

Motley v. New Jersey State Police, 196 F.3d 160, 165 n.5 (3d

Cir. 1999) (noting the “more stringent ADA standard”). Accord

Viscik v. Fowler Equip. Co., 800 A.2d 826 (N.J. 2002). The

LAD also expands the recovery options available to a successful

plaintiff. See, e.g., Lanni v. New Jersey, 259 F.3d 146, 149 (3d

Cir. 2001) (unlike ADA, a LAD award “may reflect any risk of

nonpayment of a fee assumed by counsel” and apply a multiplier

enhancement). LAD damages are uncapped. Baker v. Nat’l

State Bank, 801 A.2d 1158, 1165-66 (N.J. Super. Ct. App. Div.

2002).

The differences are also apparent with respect to CEPA.

CEPA provides extremely “broad protections against employer

retaliation.” Mehlman v. Mobil Oil Corp., 707 A.2d 1000, 1008

(N.J. 1998); see also id. (“[A]t the time of its enactment [CEPA

was described as] the most far-reaching ‘whistleblower statute’

in the nation.”). CEPA allows for individual employee liability,

Palladino ex rel. United States v. VNA of S. N.J., Inc., 68 F.

30

Supp. 2d 455, 474 (D.N.J. 1999), while as noted above, 12

U.S.C. § 1831j does not. 12 U.S.C. § 1831j protects a Federal

Reserve Bank employee from retaliation for disclosing

suspected wrongdoing to a very circumscribed list of entities:

the Bank itself, a federal banking agency, or the Attorney

General. 12 U.S.C. § 1831j(a)(2). By contrast, CEPA permits

an employee to complain to any public body, N.J. Stat. Ann. §

34:19-3 (West 2006), about virtually any topic, even those

within the employee’s own control.

In sum, Fasano’s belated attempt to claim that the LAD

and CEPA are merely parallel and consonant with the ADA and

12 U.S.C. § 1831j is meritless. We conclude that both CEPA

and the LAD provide remedies and substantive protections that

go far beyond their federal analogs. These additional

provisions, by further limiting the New York Fed’s ability to

exercise the broad “dismiss at pleasure” discretion granted it by

Congress, frustrate that Congressional purpose, and cannot be

applied to Federal Reserve Banks due to conflict preemption.

The final matter we must address is whether our proper

course of action is to dismiss Fasano’s Complaint or to attempt

to pare back CEPA and the LAD to exactly match the ADA and

12 U.S.C. § 1831j.

We conclude that we would be ill-suited for the latter

task. We agree with Judge Padova that instead of attempting to

“essentially rewrite the relevant provisions of the [CEPA and

LAD] to parrot Federal anti-discrimination law,” and “risk

frustrating the intent of the publicly elected legislature which

enacted the [CEPA and LAD] in the first place,” dismissal is

31

appropriate. See Evans, 2004 U.S. Dist. LEXIS 13265, at *21.

There is simply no way to give full effect to such state laws

while picking and choosing which parts of them may apply. For

example, as noted above the LAD does not require exhaustion

of administrative remedies; a plaintiff elects whether to proceed

in the administrative arena, or in court, but a final decision in

either forum is binding and renders the other forum unavailable.

Were we to graft the ADA’s exhaustion requirement onto the

LAD, we would transform formerly final, binding administrative

determinations into non-binding preliminaries to litigation. We

will not step on the toes of the New Jersey legislature in this or

any other like manner.

VI.

New Jersey undoubtedly has a very strong interest in

requiring employers to abstain from discriminatory practices, the

range of which New Jersey has chosen to define as broadly as

possible. Nonetheless, “preemption analysis does not involve a

balancing of state and federal interests. Once it is determined

that there is a conflict between a valid federal law and a state

law, the state law must give way.” Surrick, 449 F.3d at ___,

2006 U.S. App. LEXIS 13618, at *36. State anti-discrimination

laws that do not mirror their federal analogs cannot be validly

applied to the New York Fed by virtue of conflict preemption

with § 341(Fifth) of the Federal Reserve Act.

For the foregoing reasons, we conclude that Fasano’s

Complaint must be dismissed due to the preemption of her state

law claims by the Federal Reserve Act. Accordingly, we will

reverse and remand the case.

32