Amicus Curiae Brief — Bank of America National Trust & Savings Ass'n v. Marques

AOR ERTS HRR Ree Ret mn

. Supreme Court, U.S.

FILED

No. 97-1997 JUL 2 7 1996

“UFFILE UF THE CLERK

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1997

BANK OF AMERICA NATIONAL TRUST

AND SAVINGS ASSOCIATION,

Petitioner,

Vv.

VIRGINIA M. MARQUES,

Respondent.

On Petition for Writ of Certiorari

to the California Court of Appeal

First Appellate District

BRIEF OF THE AMICI CURIAE

AMERICAN BANKERS ASSOCIATION AND

CALIFORNIA BANKERS ASSOCIATION

IN SUPPORT OF PETITIONER

CHRISTOPHER E. CHENOWETH JOHN J. GILL II

CALIFORNIA BANKERS Counsel of Record

ASSOCIATION MICHAEL F. CROTTY

201 Mission Street AMERICAN BANKERS

Suite 2400 ASSOCIATION

San Francisco, CA 94105 1120 Connecticut Ave., NW

(415) 284-6999 Washington, D.C. 20036

(202) 663-5026

July 27, 1998 Attorneys for Amici Curiae

PRESS OF BYRON S. ADAMS # WASHINGTON, D.C. # 1-800-347-8208

i

QUESTION PRESENTED

Whether the National Bank Act, which provides that

National Banks may dismiss any of their officers at

pleasure, preempts the California Fair Employment and

Housing Act which, as applied here, provides that they may

not.

il

TABLE OF CONTENTS

Page

QUESTION PRESENTED .............2:cceseeeeeeeeeeeeeeeeeeeeeees i

TABLE OF AUTHORITIES...............cccsecscsescccenessensens iil

INTEREST OF THE AMICI CURIAE.................-::-seeee 1

REASONS FOR GRANTING THE WRIT ..............-....06 3

The Conflict Among the Courts ...............:cseeeeeeeeeeeees 3

The Importance of the Issue ..............s2:sseeeeeeeeeeeeerees 6

COPS AISI io. svisncccctnescescnesensisicersteaninecemsieeenest 10

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TABLE OF AUTHORITIES

Page

CASES:

Aalgaard v. Merchants National Bank, 224 Cal.

App. 3d 674 (1990), cert. denied, 502 U.S. 901

| TICES GaSe VRB Re ease ie rte ie a NN | snide 5

Ana Leon T. v. Federal Reserve Bank of Chicago,

823 F.2d 928 (6th Cir.), cert. denied, 484 U.S.

a, SME ESTES SSS SG IR Re ee aca 3

Astoria Federal Savings & Loan Association v.

PN, PE Hie, ME CRIED oso viirscccievavecis cesses... 7

Aimerion Vv. FDIC, 117 §. Ct. 666 (1997) ............6..0.......... 6

Barnett Bank v. Nelson, 116 S. Ct. 1103 a sadiiccc cask. 5

Busic v. United States , 446 U.S. 398 RRSP rete Orr 7

Citizens State Bank v. Libertelli, 215 N.J. Super.

ioe, oes A.20 Oo) (NJ. Soper. 1987) ......................... 3

Clifford T. MacEvoy Co. v. United States, 322 U.S.

PENS SIRGE SRE OEP ee ee Ree Disks denhieneinie 7

Confer v. Federal Home Loan Bank, 271 Ill. App.

3d 1061, 649 N.E.2d 476 (Ill. App. 1995) ..................... 4

County of Yakima v. Confederated Tribes and Banks

of Yakima Indian Nation, 502 U.S. 251 (1992)................ 7

iv

Crawford Fitting Co. v. J.T. Gibbons, Inc.,

BRD UES. GET ERG) vans ivessciansesdescscsvsnanisbcasceenenenystan i

Fourco Glass Co. v. Transmirra Products Corp.,

BOSS TTS FEF CII sina viva vc scn cd ccesswtees tedeiviaiesvpndannenas 7

Gunter v. Hutcheson, 674 F.2d 862 (11th Cir.),

cert. denied, 459 U.S. 826, rehearing denied,

459 U.S. 1059 (1982) ......cccccccccsccsrorsccccscsecevecescevecenes G

Kispert v. Federal Home Loan Bank, 778 F. Supp.

950 (S.D. Ohi0, 1991) ............cceseereeeeeeeeeneeecesereeeeees 4

Mackey v. Pioneere National Bank, 867 F.2d 520

(Sth Cir. 1989) .......ccccscccssccssscvesesccsesecssoeseusgessossesees 8

Mardula v. Rancho Dominguez Bank, 43 Cal.

App.4th 790 (Cal.App. 1996), cert. denied,

A97-%. Cl. FES CP vtiisisiitri eis erirernasciiinse 3,4

Moodie v. Federal Reserve Bank of New York,

831 F. Supp. 333 (S.D. N.Y. 1993) .........seceeeseeseeeseeeees 3

Morton v. Mancari, 417 U.S. 535 (1974) .........c:eeeeeeseeeees 7

Osei-Bonsu v. Federal Home Loan Bank of New York,

726 F. Supp. 95 (S.D. N.Y. 1989).........:cseeeeeeeeeeeeeeeeees 4

Westervelt v. Mohrenstecher, 76 F. 118 (8th Cir.

V

White v. Federal Reserve Bank, 660 N.E. 2d 493

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bile Eee RANE OEE oi yanks’ iavarvacdesasasisseacminebariaee 9

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IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

No. 97-1997

BANK OF AMERICA NATIONAL TRUST AND

SAVINGS ASSOCIATION,

Petitioner,

V.

VIRGINIA M. MARQUES,

Respondent.

On Petition for Writ of Certiorari to the

California Court of Appeal

First Appellate District

BRIEF OF THE AMICI CURIAE

AMERICAN BANKERS ASSOCIATION and

CALIFORNIA BANKERS ASSOCIATION

IN SUPPORT OF PETITIONER'

' No counsel for any party had any role in authoring this

brief and no person other than amici curiae made any

monetary contribution to its preparation or submission.

The American Bankers Association and California

Bankers Association hereby respectfully submit this brief as

amici curiae in support of the Petitioner in accordance with

the provisions of Rule 37.2 of the Supreme Court Rules.

Both parties have consented to the filing of this brief, and

their written consents are filed herewith.

INTEREST OF THE AMICI CURIAE

The American Bankers Association and California

Bankers Association are, respectively, the principal trade

associations for the lending industry nationwide and in the

State of California. As representatives for that industry,

the associations have a vital interest in this case. This case

calls into question the supremacy of provisions of the

National Bank Act (under which national banks have

operated for well over a century) over contrary state law.

If the California Court of Appeal is correct in denying

preemptive effect to Section 24 (Fifth) of the National Bank

Act, then national banks, nationwide, can be subjected to

varied and conflicting obligations with respect to the most

critical of their employment decisions, and, most

particularly, having those critical decisions second-guessed

by state or even municipal authorities in each jurisdiction in

which they operate. State and municipal "fair employment"

officials, of course, have a different agenda than the safe

and sound operation of the national banking system. That

agenda is not denigrated here. But Congress has long since

vested plenary authority elsewhere to regulate the activities

of national banks, leaving no room for supplementation or

displacement by local authorities. Consequently, the case

raises issues that are of considerable concern to the banking

industry at large, and we respectfully submit this brief in

order to address those concerns.

3

REASONS FOR GRANTING THE WRIT

The Conflict Among the Courts

In relevant part, Section 24 (Fifth) of the National

Bank Act (12 U.S.C. § 24 (Fifth) (1998)) grants to national

banks the apparently unqualified right to "dismiss [their]

officers or any of them at pleasure." Federal Reserve

Banks similarly have a "dismiss at pleasure" right granted

to them by federal statute, 12 U.S.C. § 341 (1998), as do

Federal Home Loan Banks, 12 U.S.C. § 1432 (1998). In

the latter two cases, the right extends to all employees; in

the case of national banks, it is limited to officers of the

bank such as the Respondent here, a former vice-president

of Bank of America, a national bank. Notwithstanding the

difference in scope of the three statutes on a matter not

relevant to this case, the courts have regularly and, in our

view, correctly construed the "dismissal at pleasure"

language of the three (and, in fact, comparable state

banking laws as well) in pari materia. See, e.g., Mardula

v. Rancho Dominguez Bank, 43 Cal.App.4th 790, 793

(Cal.App. 1996), cert. denied, 117 S. Ct. 1106 (1997):

Citizens State Bank v. Libertelli, 215 N.J.Super. 190, 521

A.2d 867 (N.J. Super. 1987).

In Ana Leon T. v. Federal Reserve Bank of Chicago,

823 F.2d 928 (6th Cir.), cert. denied, 484 U.S. 945

(1987), the Sixth Circuit held that a Michigan state law

prohibition against racial discrimination in employment was

preempted by the comparable provision of the Federal

Reserve Act, but in Moodie v. Federal Reserve Bank of

New York, 831 F.Supp. 333 (S.D. N.Y. 1993), a federal

district court reached the opposite conclusion construing the

same federal law. So did a state court in Ohio in White v.

Federal Reserve Bank, 660 N.E. 2d 493 (Ohio App. 1995).

In Kispert v. Federal Home Loan Bank, 778 F. Supp. 950

(S.D. Ohio, 1991), a federal district court within the Sixth

Circuit applied the reasoning of Ana Leon T. to find that

the dismissal at pleasure provisions governing Federal

Home Loan Banks preempted contrary state law. So did

the Southern District of New York in Osei-Bonsu v.

Federal Home Loan Bank of New York, 726 F. Supp 95

(S.D.N.Y. 1989), a decision whose reasoning was not

followed by the same district court four years later in

Moodie.”

The decision of the court below continues and

exacerbates the conflict among the courts. Marques holds

that state discrimination claims are not preempted by the

National Bank Act in the face of even California state court

precedents that hold the contrary. In Mardulla, for

example, the California Court of Appeal wrote that

section 24, and similar provisions...bar

covered offices and employees from claiming

that their discharge constituted...violation of

state antidiscrimination statutes...

[Cited] cases implement a forceful public

policy that a nationally chartered bank must

be free to remove and replace officers at

will.

Mardulla v. Rancho Dominguez Bank, supra., 43

Cal.App.4th at 793-794.

* See also Confer v. Federal Home Loan Bank, 271 Ill. App.

3d 1061, 649 N.E. 2d 476, 479 (Ill. App. 1995) holding that

a state law “retaliatory discharge" claim was preempted by

the Home Loan Bank law and opining, in dicta, that a state

age discrimination claim would have been preempted, too.

Similarly, in Aalgaard v. Merchants National Bank,

224 Cal.App.3d 674, 692 (1990), cert. denied, 502 U.S.

901 (1991), the court wrote that permitting state law

discrimination claims "would frustrate the full effectiveness

of federal law by diminishing the full power of the board to

dismiss its officers for the benefit of national banks."

It is difficult, if not impossible, to reconcile either

of those conclusions with the outcome of Marques in the

case below. The court below attempts to distinguish away

its Aalgaard precedent on the grounds that Merchants

National Bank was a little national bank and Bank of

America is a big one. Pet. App. at 4a-5a. (Federal equal

employment opportunity laws, but not California state laws,

exempt small employers from coverage. See 29 U.S.C. §

630(b); 42 U.S.C. § 2000e(b)). But there is no basis for

such a distinction in the National Bank Act or in

preemption doctrine generally. State second-guessing of

national bank officer employment decisions either

"frustrates the full effectiveness of federal law" or it does

not. It either "diminish[es] the full power of the board to

dismiss its officers" or it does not. It either "prevent[s] or

significantly interfere[s] with the national bank's exercise

of its powers"’ or it does not. If applicability of state anti-

discrimination laws to national banks does have any of

these effects, the state laws are clearly preempted; if the

state laws do not have any such effect, then they are not

preempted, without regard, either way, for the size of the

bank in question. Yet the California courts reach

conflicting decisions based upon this _ irrelevant

consideration.

> Barnett Bank v. Nelson, 116 S. Ct. 1103, 1109 (1996).

Clearly, therefore, state and federal appellate courts,

and state and federal trial courts have taken irreconcilable

positions on the question whether the National Bank Act

officer employment provisions and comparable provisions

applicable to Federal Reserve Banks and Federal Home

Loan Banks preempt state antidiscrimination laws. Those

conflicts among the courts have arisen over the course of

at least a decade of litigation and will continue to plague

the bench and the bar in the absence of a definitive

resolution of the issue by this Court.

The Importance of the Issue

The court below concluded that, despite the plain

language of Section 24 (Fifth), "under federal law, a

national bank may no longer exercise the power to dismiss

at pleasure an officer who can show her termination was

discriminatory." Pet. App. at 9a. That being the case, the

court goes on, “once that power is diminished by

Congress's determination to outlaw discriminatory

terminations, it is hard to see how the public trust rationale

mandates ‘a national standard for the dismissal of bank

officers'" Jd. at 8a. The court below, likewise too lightly,

also dismisses an expressed concern for the need of

uniform national standards in the governance of national

banks: "To invoke the concept of ‘uniformity,’ however, is

not to prove its need." /d. At 7a. (quoting Atherton v.

FDIC, 117 S. Ct. 666, 671 (1997)).

The decision of the court below is based upon a

fundamentally flawed premise. It assumes that the federal

equal employment opportunity laws apply to national bank

officer employment decisions. If that is so, the court

reasons, then state fair employment laws to the same effect

as the federal laws are not inconsistent with federal law

considered as a whole, and are not preempted. But it is not

at all clear that Title VII and the Age Discrimination in

Employment Act ("ADEA") do apply in this context.

Certainly, national banks have and claim no exemption

from these statutes with respect to their employment of

non-officer personnel. But officers are different. They are

made so by Section 24 (Fifth) of the National Bank Act, a

section of the law that was left unaltered by the Congress

when it enacted ADEA and Title VII and thereafter.

ADEA and Title VII are laws of general

applicability. They govern the activities of "employers."

29 U.S.C. § 623; 42 U.S.C. § 2000e-2. Section 24 (Fifth),

on the other hand, is of quite limited and specific

applicability. By its own terms, it governs the employment

practices of one discrete and identified class of employer,

and even then, only those employment practices that pertain

to the banks’ officers. It is a most common rule of

statutory construction, endorsed over and over again by this

Court’, that a specific statute is deemed to control over a

general one where the two would otherwise be in conflict.

Moreover, this Court regularly holds that "repeals

by implication will not be recognized, insofar as two

statutes are capable of co-existence, ‘absent a clearly

expressed congressional intent to the contrary.'" Astoria

Federal Savings & Loan Association v. Solimino, 501 U.S.

104, 109 (1991) (citing Morton v. Mancari, 417 U.S. 535,

551 (1974)). See also County of Yakima v. Confederated

* See, e.g., Crawford Fitting Co. v. J.T. Gibbons, Inc., 482

U.S. 437, 445 (1987); Busic v. United States, 446 U.S. 398,

406 (1980), Fourco Glass Co. v. Transmirra Products

Corp., 353 U.S. 222, 228-229 (1957), Clifford F. MacEvoy

Co. v. United States, 322 U.S. 102, 107 (1944).

8

Tribes and Bands of Yakima Indian Nation, 502 U.S. 251,

262 (1992). And yet to hold that the federal equal

employment opportunity laws govern national bank officer

employment decisions necessarily assumes that a portion of

the National Bank Act has been repealed by implication.

Nothing in the text of the equal employment opportunity

laws or the legislative history surrounding the enactment of

those laws evidences any intent of Congress to do so or

even any indication that Congress considered the matter at

all, one way or the other.

The court below ignored those principles and

dismissed out of hand well over a century of precedent that

has established (not just "invoked") the need, not only for

uniformity in the treatment of national banks, but also for

the safety and soundness of those banks.

The Eighth Circuit, as long ago as 1896, held that

the purpose of Section 24 (Fifth) was to codify -the

“observation and experience...that it is essential to the

safety and prosperity of banking institutions that the active

officers, to whose integrity and discretion the moneys and

property of the bank and its customers are intrusted, should

be subject to immediate removal whenever the suspicion of

faithlessness or negligence attaches to them. High credit is

indispensable to the success and prosperity of a bank."

Westervelt v. Mohrenstecher, 76 F. 118, 122 (8th Cir.

1896). The Ninth Circuit agreed -- 93 years later --

holding that the purpose of Section 24 (Fifth) "was to give

those institutions the greatest latitude possible to hire and

fire their chief operating officers, in order to maintain the

public trust." Mackey v. Pioneer National Bank, 867 F.2d

520, 526 (9th Cir. 1989). Thus, courts have recognized the

overriding importance of vesting broad discretion in bank

boards both before and after enactment of the various

federal and state anti-discrimination statutes.

Nevertheless, the court below belittles those

holdings, saying that “public trust in a large financial

institution such as Bank of America is no longer based

primarily on community confidence in the personal

integrity of its individual officers." Pet. App. at 8a, n. 5.

To the extent that might be true, it supports, rather than

detracts from, the petitioner's contention that federal law

preempts contrary state law in this case. If anything has

replaced "integrity" as a factor in the "public trust" of

banks, it is federal deposit insurance, which was created

during the Depression precisely in order to promote

confidence in the nation's banking system. Gunter v.

Hutcheson, 674 F.2d 862, 870 (11th Cir.), cert. denied,

459 U.S. 826, rehearing denied, 459 U.S. 1059 (1982).

The Federal Deposit Insurance Corporation, an agency of

the United States government, was created to administer a

deposit insurance fund, 12 U.S.C. §§ 1821-1823.

Consequently, there is a distinct interest of the federal

government itself, in addition to the interests of the

customers of banks, in the safety and soundness of the

banks. Prior to the enactment of the Federal Deposit

Insurance Act, Congress saw fit to entrust the "integrity"

of national bank officers to the bank's board of directors.

After creation of Federal deposit insurance, Congress did

not see fit to withdraw that function from banks' boards, at

least in the first instance, but did choose to supplement

board supervision with a grant of authority to the

Comptroller of the Currency (in the case of national banks)

to remove an officer of a national bank who has violated

any law or regulation or who has engaged in unsafe or

unsound practices in connection with the bank. Pub. L. 89-

695, § 202 (1966) (12 U.S.C. § 1818(e)).

10

Thus, the "public trust" in national banks that was

important in the last century has remained important to this

day, though perhaps in part for different reasons. Congress

has elected how it wishes to support and affirm that public

trust through its regulation of national bank officer

employment practices--by a bank's board of directors in the

first instance, and then by supervision of the Comptroller

of the Currency. The statutes leave no room for second-

guessing by state fair employment practices laws that do

not place such safety and soundness concerns in the balance

with the putative concerns of persons the state laws were

designed to serve. The California Court of Appeal's

cavalier disregard of such a critical matter of national and

federal concern should not stand unreviewed and

unchanged.

CONCLUSION

For all of the reasons stated herein and in the bank's

Petition for Writ of Certiorari, we respectfully urge the

Court to grant that Petition.

Respectfully submitted,

CHRISTOPHER CHENOWETH JOHNJ. GILL Ill

CALIFORNIA BANKERS Counsel of Record

ASSOCIATION MICHAEL F. Crotty

201 Mission Street AMERICAN BANKERS

Suite 2400 ASSOCIATION

San Francisco, CA 94105 1120 Connecticut Ave. N.W.

(415) 284-6999 Washington, DC 20036

(202) 663-5026

Attorneys for Amici Curiae

July 27, 1998