Amicus Curiae Brief — Home Savings of America, FSB v. Maynard

No. 94-258

In The

Supreme Court of the United States

October Term, 1994

°

HOME SAVINGS OF AMERICA, FSB,

Petitioner,

VS.

MARCELLA T. MAYNARD,

Respondent.

*

On Petition For Writ Of Certiorari

To The Court Of Appeal Of The State of California

Second Appellate District

+

MOTION FOR LEAVE TO FILE BRIEF AND BRIEF

OF THE TEXAS SAVINGS AND COMMUNITY

BANKERS ASSOCIATION, CONNECTICUT

BANKERS ASSOCIATION, COMMUNITY BANKERS

ASSOCIATION OF NEW YORK STATE AND

CALIFORNIA LEAGUE OF SAVINGS INSTITUTIONS

AS AMICI CURIAE IN SUPPORT OF THE PETITION

°

James Parrick MULkiEN

Counsel of Record

Manart, PHeves & PHILLIPS

11355 West Olympic Boulevard

Los Angeles, California 90064

310-312-4000

Attorneys for Amict Curtae

COCKLE LAW BRIEF PRINTING CO, (800) 225-6964

OR CALI WLECT (402) 342-2531

ee et eon ee ee ee ee a ee ee ee ea eee

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MOTION FOR LEAVE TO FILE BRIEF OF THE TEXAS

SAVINGS AND COMMUNITY BANKERS ASSOCIA-

TION, CONNECTICUT BANKERS ASSOCIATION,

COMMUNITY BANKERS ASSOCIATION OF NEW

YORK STATE AND CALIFORNIA LEAGUE OF SAV-

INGS INSTITUTIONS AS AMICI CURIAE IN SUP-

PORT OF THE PETITION

The Texas Savings and Community Bankers Associa-

tion, Connecticut Bankers Association, Community

Bankers Association of New York State and California

League of Savings Institutions (collectively “amici”

hereby move, pursuant to Rule 37 of the Rules of this

Court, for leave to file the attached brief amici curiae in

support of the petition for certiorari. Consent to the filing

of this brief has been obtained from counsel for peti-

tioner.! Amici have been unable to secure the consent of

counsel for the respondent.

Amici are voluntary trade associations of Texas, Con-

necticut, New York and California, collectively made up

of numerous state and federally chartered thrifts. Amici’s

federal thrift members, like all federal thrifts, exist under

and operate pursuant to the Home Owners’ Loan Act, 12

U.S.C. §§ 1461-1470, and implementing regulations of the

United States Office of Thrift Supervision, 12 C.F.R.

§§ 563.39 and 545.2 (collectively, the “Regulations”).

Amici share petitioner’s concern about the decision of

the California Court of Appeal, which erroneously held

that state-law implied contract claims are not preempted

by the Regulations. For years, many of amici’s member

1 A copy of the consent letter is being filed concurrently

with the Clerk of the Court.

federal thrifts have operated with the understanding that

all employment contracts must be (i) in writing, and (ii)

approved by the thrift’s board of directors. The Regula-

tions specifically so provide. If, as suggested by the Cali-

fornia Court of Appeal’s decision, thrifts are to be

subjected to the varying implied contract laws of the

states, many may suddenly be burdened with myriad

obligations they never knew they had. This departure

will disrupt the uniform federal rule governing operation

of federal thrifts, and place thrifts in certain states at a

competitive disadvantage due to the additional obliga-

tions arising out of their states’ implied contract laws.

Accordingly, amici request leave to file this brief, and

they urge reversal of the California Court of Appeal.

WHEREFORE, amici respectfully request that their

motion be granted.

Dated: September 9, 1994

Respectfully submitted,

James Patrick MULKEEN

Counsel of Record

Manatt, PHetps & PHILLIPS

Attorneys for Amici Curiae

TABLE OF CONTENTS

Page

SES ETS 1

INTEREST OF AMICI ...........--220ccceeeeeeeee: 1

REASONS FOR GRANTING THE WRIT .........-- 1

1. THERE IS A CONFLICT IN THE STATE-COURT

ics iy y cavtruienwnsnes: 2

Il. THIS COURT SHOULD GRANT REVIEW TO

RESOLVE THE CONFLICT ...........-.0000-+- 5

cc eh aca sea ee de ncssceasereses ne

ii

TABLE OF AUTHORITIES

CASES

Aiello v. United Air Lines, Inc., 818 F.2d 1196 (5th

SE rae res

Berry v. American Fed. Sav., 730 P.2d 905 (Colo. Ct.

App. 1986) ..-..-.-. cece cede cece cece ree esees

Carbone v. Atlantic Richfield Co., 204 Conn. 460, 528

A.2d 1137 (19B7) 2.2.2.2 cece reese c cer eceeeeess

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987) ..

Coelho v. Posi-Seal Intern., Inc., 208 Conn. 106, 544

re By 26.) Sener ree

Cole v. Carteret Sav. Bank, 224 N.J. Super. 446, 540

SE error rer

Dynan v. Rocky Mountain Fed. Sav. & Loan, 792 P.2d

631 (Wyo. Sup. Ct. 1990) .....--.- seer eee eee

Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458

eg Ree recer rere sor rr:

Finley v. Aetna Life and Casualty Company, 202

Conn. 190, 520 A.2d 208 (1987) .......---+++5-

Hawkins v. Peoples Fed. Sav. & Loan Ass'n, 155

Mich. App. 237, 399 N.W.2d 484 (1986) .....--

Heller v. Champion Intern. Corp., 891 F.2d 432 (2d

rere errr tr ro ae

Magnan v. Anaconda Industries, Inc., 193 Conn. 558,

479 A.2d 781 (1984) ..... 2c cece eee eee e eens

Morgan v. Jack Brown Cleaners, Inc., 764 S.W.2d 825

(Tex. App. 1989)......-5 20:2 cece eee ee erences

Page(s)

ill

TABLE OF AUTHORITIES - Continued

Page(s)

Ohanian v. Avis Rent A Car System, Inc., 779 F.2d

ar Ee A.) ror were weer errr 3

Paris v. Northeast Sav. Ass'n, No. CV 910398144,

1994 Conn. Super. LEXIS 1412 (June 1, ee ee 4

Sholer v. Security Fed. Sav. & Loan Ass'n, 736 F.

Supp. 1083 (D.N.M. 1990).......-..--.0 20sec eee 5

United Transportation Union v. Brown, 694 S.W.2d

620 (Tex. App. 1985). ..........26 eee cctecceecesnees 2

Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 443

RE GE Ci occas a ee eee eee ee 3

STATUTES

12 U.S.C. GB 2461-1470. 2.6 6.5 ow ci cece eee ctnnes

12 C.ER. G@ 563.99 and 546.2 ..2 nc cc cccnccecnicyess 1,5

RULES

Supreme Court R. at | ee 2 Dene ony arienee 6, ok Peer 4

BRIEF OF AMICI

INTEREST OF AMICI

Amici, the Texas Savings and Community Bankers

Association, Connecticut Bankers Association, Commu-

nity Bankers Association of New York State and Califor-

nia League of Savings Institutions, urge that the petition

of Home Savings of America, FSB, be granted. Amici

respectfully refer the Court to the description of their

interest presented in the motion for leave to file brief, to

which this brief is attached.

¢

REASONS FOR GRANTING THE WRIT

This case presents a question that has divided both

the state and federal courts.. The question is whether

federal law — the Home Owners’ Loan Act (“HOLA”) and

its implementing regulations* - preempts a federal thrift

employee’s state-law wrongful-discharge claim, where

the claim is based on an alleged implied employment

contract forbidden by federal law.

Amici believe that this question was resolved by the

United States Office of Thrift Supervision (“OTS”) in

promulgating certain regulations, exercising authority

delegated by Congress in the HOLA. The continuing

disarray among the state and federal courts, however,

demonstrates that this is an issue on which this Court's

guidance is needed.

2 12 U.S.C. §§ 1461-1470; 12 C.F.R. §§ 563.39, 545.2.

I.

THERE IS A CONFLICT IN THE

STATE-COURT DECISIONS

There is a conflict in the state-court decisions that

this Court should resolve.

Amici share petitioner’s concern about the decision of

the California Court of Appeal. It formerly was the case,

uniformly throughout the United States, that the employ-

ment relationship was presumptively terminable at will.

Now, however, a state jurisprudence of “wrongful dis-

charge” has arisen. A key component of that area of law

is the implied employment contract doctrine, in which

juries are allowed to decide on a case-by-case basis

whether some right of job security existed. The law in this

area varies from state to state. Amicus Texas Savings and

Community Bankers Association notes that its state law is

not unlike California’s;> a jury can find an implied

employment contract based on such factors as an oral

agreement not to fire an employee without good cause, or

=~ documents, such as employee manuals and hand-

books, that are not employment contracts (let alone

board-approved employment contracts).4 Roughly similar

3 The leading California cases were described and cited in

the petition.

4 E.g., Morgan v. Jack Brown Cleaners, Inc., 764 S.W.2d 825,

826 (Tex. Ct. App. 1989) (at-will relationship may be modified

by the parties’ agreement, including an oral agreement); United

Transp. Union v. Brown, 694 S.W.2d 630, 632 (Tex. Ct. App. 1985)

(upholding wrongful discharge claim based upon breach of

employee manual); Aiello v. United Air Lines, Inc., 818 F.2d 1196,

1199-1200 (5th Cir. 1987) (applying Texas law; personnel man-

uals and employee handbooks may create enforceable rights

limiting an employer’s right to terminate at will).

is the law in Connecticut. Amicus Connecticut Bankers

Association notes that contract claims in that state can be

based on employee handbooks and oral statements -

again, even without board approval.* In New York, state

law is somewhat more favorable to employers; yet, even

there, amicus Community Bankers Association of New

York State notes, oral contract claims can arise without

the memorial of a writing and certainly without the

approval of an employer's board of directors.® Thus, all

amici share the concern expressed by petitioner: that state

5 E.g., Finley v. Aetna Life and Casualty Co., 202 Conn. 190,

520 A.2d 208, 213 (1987) (representations ina personnel manual

may form the basis of an express or implied contract between

employer and employee), overruled on other grounds, 626 A.2d

719 (1993); accord Magnan v. Anaconda Ind., Inc., 193 Conn. 558,

479 A.2d 781, 785 (1984) (recognizing that an enforceable prom-

ise to discharge employee only for just cause may arise out of

employee manual or other representations); Carbone v. Atlantic

Richfield Co., 204 Conn. 460, 528 A.2d 1137, 1142 (1987) (whether

employment manual gives rise to implied contract is a question

of fact to be determined by the trier of fact); Coelho © Post-Seal

Int'l, Inc., 208 Conn. 106, 544 A.2d 170, 174 (1988) (finding

implied-in-fact contract that employee would not be terminated

except for just cause based upon oral assurance of job security);

Heller v. Champion Int'l Corp., 891 F.2d 432, 435 (2d Cir. 1989)

(applying Connecticut law; an implied employment contract

claim, based upon employee manuals, company memoranda,

performance evaluations and oral assurances, presented a jury

question precluding summary judgment).

6 E.g., Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 443 N.E.2d

441, 445 (1983) (employee who alleged that he was discharged in

violation of company handbook stated claim for breach of

implied employment contract), Ohanian v. Avis Rent A Car Sys.,

Inc., 779 F.2d 101, 106-107 (2d Cir. 1985) (applying New York

law; an oral agreement for lifetime employment is outside the

statute of frauds).

contract law, if it ignores the preemptive force of the

federal requirement of a board-approved writing, effec-

tively precludes a thrift’s board of directors from exercis-

ing the control over its employment obligations

envisioned — indeed, required - by federal law. The

result: unknown (and unknowable) employment-con-

tract-for-life claims.

While the California court’s decision on the preemp-

tion issue does not by its terms carry precedential weight

in the states in which several of the amici’s members

operate, the issue nevertheless is of national significance.

Indeed, there is a conflict in the state-court cases on the

subject.” California’s line of cases on the preemption issue

‘s in accord with New Jersey’s rule. Cole v. Carteret Sav.

Bank, 224 N.J. Super. 446, 540 A.2d 923, 926 (1988) (no

preemption; the federal regulations are designed to

enforce employment contracts, not preclude their forma-

tion). Connecticut seems to be in agreement. Paris v.

Northeast Savings Association, No. CV 910398144, 1994

Conn. Super. LEXIS 1412, at *24-25 (June 1, 1994) (citing

Cole with approval). Meanwhile, as the petition points

7 See Supreme Court R. 10.1(b), (c). Frequently this Court

looks for a conflict in the federal circuits as a test for granting

certiorari. It is not surprising that there is no federal circuit

conflict on the question presenied here, as most state-law

wrongful discharge lawsuits are filed in state court. The exis-

tence of the preemption defense is not a basis for removal. E.g.,

Caterpillar, Inc. v. Williams, 482 U.S. 386, 392-93 (1987) (state-law

contract claim held not removable to federal court, notwith-

standing the possible defense of federal preemption). Thus, the

interstate conflict in the state-court decisions on the federal

preemption issue should motivate this Court to grant certiorari.

out, the California-New Jersey-Connecticut preemption

rule flatly conflicts with decisions from New Mexico,*

Michigan,’ Colorado,!° and Wyoming.!!

Il.

THIS COURT SHOULD GRANT REVIEW

TO RESOLVE THE CONFLICT

This Court should grant review to resolve the con-

flict; there should be a uniform nationa! rule. The law of

federal preemption by definition should not vary from

state to state. That is so for an important practical reason.

With the current disarray in the state decisions, there ts

no level playing field for thrifts in the various states. It is

no secret that the world of financial services today 1s

competitive to an unprecedented extent. State (and to

8 Sholer v. Security Fed. Sav. & Loan Ass'n, 736 F. Supp. 1083,

1085 (D.N.M. 1990) (state implied contract law is preempted by

12 C.F.R. § 563.39, which establishes “the presumption that,

absent a written employment contract, the defendant could not

have entered into any specific employment relationship with

the plaintiff which exceeded the scope of an at-willemployment

relationship’).

9 Hawkins v. Peoples Fed. Sav. & Loan Ass'n, 155 Mich. App

237, 399 N.W.2d 484, 487-488 (1986) (HOLA and corresponding

OTS regulations preempt state law implied contract claims).

10 Berry v. American Fed. Sav., 730 P.2d 905, 906 (Colo. Ct.

App. 1986) (since plaintiff lacked a written, board-approved

employment contract, the claim was preempted by 12 CER.

§ 563.39).

1 Dynan v. Rocky Mountain Fed. Sav. é& Loan, 792 P.2d 631,

639 (Wyo. 1990) (federal regulations preempt conflicting Wyo-

ming law regarding employment contracts).

some extent international) borders increasingly are irrele-

vant. Money flows where the market dictates. Because of

the state-by-state inconsistency in preemption law, thrifts

in New Jersey, California and Connecticut operate at a

competitive disadvantage compared to those in other

states.

It is true, of course, that in general states are free to

set the rules for businesses that operate within their

borders. Contract law, in particular, is an area appro-

priately left to the states. It is normally up to each state to

decide for itself whether or not to be a hospitable place to

do business. But an exception exists for federal thrifts.

The HOLA was enacted because Congress sought to

make a “ ‘radical and comprehensive response to the

inadequacies of existing state systems.’ ” Fidelity Fed. Sav.

& Loan Ass'n v. de la Cuesta, 458 U.S. 141, 160 (1982)

(citation omitted). Congress decreed that federal law

would control “ ‘the powers and operations of every Fed-

eral savings and loan association from its cradle to its

corporate grave.’ ” Id. at 145 (citation omitted). In so

doing, Congress made clear that one of its primary regu-

latory objectives was to ensure that savings and loans -

and the federal regulators that may have to take them

over — are not saddled with unknown and indeterminate

obligations. The Regulations were designed precisely to

make a savings association’s board of directors account-

able for maintaining a written record of, and approving,

all employment contracts to which an institution is

bound. While the Regulations to some extent benefit

thrifts themselves, it is important to emphasize that the

Regulations also benefit the public by helping to stabilize

the thrift industry. The recent crisis in both thrifts and

banks has made clear that taxpayer dollars are at stake;

when the industry falters, the taxpayer pays. Thus, a

uniform regime of prudent legal rules applicable to thrifts

ultimately protects the public.

_ In this industry, in sum, Congress mandated a uni-

form federal rule. It now is this Court’s task to fashion

one.

CONCLUSION

For the foregoing reasons, amici respectfully urge this

Court to grant the petition and reverse the judgment

below.

DATED: September 9, 1994

Respectfully submitted,

James Patrick MULKEEN

Counsel of Record

Manatt, PHeves & PHILLIPS

11355 West Olympic Boulevard

Los Angeles, California 90064

310-312-4000

Attorneys for Amici Curiae