Petition for Writ of Certiorari — Rockwood Bank v. Gaia

Supreme Court, U.S

(v) FILED

99 507 SEP 21 1999

N2 :

a

In The

Supreme Court of The United States

October Term 1998

OF

ROCKWOOD BANK

Petitioner,

Vv.

M. MICHAEL GAIA,

Respondent.

4

Petition For A Writ Of Certiorari

To The United States

Court of Appeals For The Eighth Circuit

4

PETITION FOR A WRIT OF CERTIORARI

+

DAVID W. WHITE*

Sloan, Listrom, Eisenbarth

Sloan & Glassman, L.L.C.

10975 Benson Dr., Suite 280

Overland Park, KS 66210

(913) 661-0050

Attorney for Petitioners

*Counsel of Record

UNITED STATES SUPREME COURT DOCUMENT SERVICE.

Post OFFICE BOX 7506@KANSAS CITY, MO 64116@888-453-2424

bSvy

:

QUESTION PRESENTED

FOR REVIEW

During a _ bank examination, should _ the

communications between bank officers and federal bank

examiners be protected by an absolute privilege?

TABLE OF CONTENTS

Question Presssbedl..i.:3: iecosncadabieenunesaceees i

Talile of Contemttsiiicissiedsscdaaiens ance il

Table of Authorities: ..::: dai aeiaienanall iil

Opinions Belew... ice |

Statement of Jurisdiction...................ceeeeee 2

Statutes Involved in the Case..................00 2

Statement of the Cass. :..icsseusssaanee meena 5

Reasons for Granting the Writ.................... ll

THE PETITION SHOULD BE GRANTED BECAUSE IT

IS NECESSARY TO PROTECT BANK-BANK

EXAMINER COMMUNICATION FROM LIABILITY

TO THIRD PARTIES.

COnchisi00.... ..«.+<+0+«s0508enenelneleeannannannne 18

Appendix A. .....+::.s«sse0seenesihileeannnennnnnn A-]

Appendix B.......<s:s0s<sesksaqesenselinenneenaal B-25

ii

————&=———

TABLE OF AUTHORITIES

United States v. Gaubert, 499 U.S. 315, 111 S.

Ct.1267, 113 L. Ed 2d335(1991)........-...0ceeeeees

Briscoe v. La Hue, 460 U.S. 325, 103 S. Ct.

1108, 75 L. Ed 2d 96 (1983)............ce cece eee eee es

United States v. Philadelphia National Bank, 374

U.S. 321, 83 S. Ct. 1715, 10 L. Ed 2d 915 (1963).

Barr v. Matteo, 360 U.S. 564, 79 S. Ct. 1335,

31 1. Ed 2d 1424 (1959)...........ccccceeececeesceeeees

Fahy v. Mallonee, 332 U.S. 245, 67 S. Ct. 1552,

91 L. Ed. 2d 2030 (1947)...........cccccescceessceeees

Mangold v. Analytic Services, Inc., 77 R, 2d

1442 (4th Cir. 1996)...........ccccccccccccecccccccccecs

Slotten v. Hoffman, 999 F. 2d 333 (8th Cir.

In Re the Subpoena Served Upon the

Comptroller of the Currency, 967 F.

2d 630 (D.C. Cir. 1992)...........cccceecceececceeececeeeeeees 12

Jones v. F.D.LC., 748 F. 2d 1400 (10th Cir. 1984)

Gregoire v. Biddle, 177 F. 2d 579 (2nd Cir. 1949)...

Molever v. Lindsey, 289 F. Supp. 832 (E.D.

Mich. 1968)........ccccccccsecccccccccccsccccccscccosccccs

iii

PETITION FOR WRIT OF CERTIORARI

Petitioner Rockwood Bank respectfully prays that a

writ of certiorari issue to review the judgment and opinion

of the United States Court of Appeals for the Eighth Circuit

entered in this proceeding on March 15, 1999.

+

OPINION BELOW

The opinion of the Unite States Court of Appeals

for the Eighth Circuit that gives rise to this petition is that

court’s decision of March 15, 1999, published at 170 F. 3d

833 (1999). It is reproduced in Appendix A hereto (“App.

A”) at page A-3. By order filed June 24, 1999, the Eighth

Circuit denied the petition for rehearing and suggestions for

rehearing en banc. App. A, A-1.

¢

STATEMENT OF JURISDICTION

The judgment of the United States Court of Appeals

for the Eighth Circuit was entered on March 15, 1999. The

Court denied a timely petition for rehearing, or in the

alternative, rehearing en banc on June 24, 1999.

The jurisdiction of this Court is invoked under 28

U.S.C. § 1254 (1).

*

U.S. CONSTITUTIONAL PROVISIONS,

TREATIES, STATUTES, RULES and

REGULATIONS INVOLVED

In the course of or in connection with any

proceeding under this section, or in connection with any

claim for insured deposits or nay examination or

investigation under section 1820(c) of this title, the agency

conduction the proceeding, examination, or investigation or

considering the claim for insured deposits, or any member

or designated representative thereof, including any person

designated to conduct any hearing under this section, shall

have the power to administer oaths and affirmations, to take

or cause to be taken depositions, and to issue, revoke,

quash, or modify subpenas and subpenas duces tecum; and

such agency is empowered to make rules and regulations

with respect to any such proceedings, claims, examinations,

or investigations. The attendance of witnesses and the

production of documents provided for in this subsection

may be required from any place in any State or in any

territory or other place subject to the jurisdiction of the

United States at any designated place where such

proceeding is being conducted.

ooo

Any person who willfully shall fail or refuse to

attend and testify or to answer any lawful inquiry or to

OO EN ee me

produce books, papers, correspondence, memoranda,

contracts, agreements, or other records, if such person's

power so to do, in obedience to the subpoena of the

appropriate Federal banking agency, shall be guilty of a

misdemeanor and, upon conviction, shall be subject to a

fine of not more than $1,000 or to imprisonment for a term

of not more than one year or both.

12 U.S.C. § 1819(a) (Eighth)

(a) In general

Upon June 16, 1933, the Corporation (the Federal

Deposit Insurance Corporation) shall comien a body

corporate and as such shall have power-

Eighth, To make examinations of and to require

information and reports from depository institutions, as

provided in this chapter.

STATEMENT OF THE CASE

Respondent, M. Michael Gaia (“Gaia”), was hired

by Petitioner, Rockwood Bank (“Rockwood”) to be its

Executive Vice President in March, 1992. In that capacity

he reported directly to the Bank’s president, Joseph Lunt

(“Lunt”). In a meeting with two members of the Bank’s

Board of Directors on September 22, 1994, Gaia was

informed that the Board was dissatisfied with his job

performance and gave him an ultimatum of demotion to the

position of Vice President - Business Development or

termination. On September 26, 1994, Gaia again met with

the two Board members and Lunt and agreed to accept the

demotion, and a reduced salary of $40,000.

In January, 1995, the Missouri Division of Finance

conducted an examination of the Bank and issued its Report

of Examination. In the Confidential Section of that report

reference was made specifically to Gaia:

“Mike Gaia has been demoted from

Executive Vice President. His primary

responsibility is now business development.

His efforts to complete assigned tasks such as

policy revisions and implementation of the loan

grading system have failed. President Lunt

appeared very displeased with Mr. Gaia’s weak

performance and stated that he has an indefinite

probationary period to produce results. In

addition, President Lunt stated that he has

created much animosity among the Board of

Directors.”

On February 24, 1995, Lunt wrote a Performance

Appraisal on Gaia, and rated his overall performance as

“average, acceptable performance” to “below average,

minimally acceptable performance.” Thereafter in June,

1995, the Federal Deposit Insurance Corporation (FDIC”)

conducted an examination of the Bank. Included in the

Confidential Section of the Report of Examination was

mention of Gaia:

“The minutes of a Personnel Committee

meeting on May 25, 1995 disclosed that

President Lunt was recommending that Vice

President Mike Gaia be fired. Then questioned,

President Lunt stated that Mr. Gia [sic] had not

lived up to expectations since his employment.

Mr. Lunt felt he would have the Board’s support

in this matter and hoped to be able to interview

shortly for an Executive Officer who would

effectively take Mr. Gaia’s place.”

A copy of the Report of Examination, including the

Confidential Section, was provided to the Missouri

Division of Finance.

At approximately the same time as the FDIC exam,

Gaia began efforts, along with others, to form a new bank

in south St. Louis County. The bank was to be named the

Concord Bank, and its charter application identified Gaia as

its proposed president. Concord’s application was received

by the Missouri Division of Finance in August, 1995. Ms.

Debra Hardman, Senior Bank Examiner, who was assigned

by the Commissioner of Finance to review and analyze the

application, developed concerns about Gaia’s suitability to

be Concord Bank’s president. Specifically, she had

concerns about discrepancies in his resume and what she

perceived as a failure on Gaia’s part in key areas of

responsibility with Rockwood Bank.

Earl Manning, the Commissioner of the Missouri

Division of Finance, had the ultimate responsibility for

reviewing the charter application. He, too, had concerns

about Gaia. As a result, Manning contacted the principal

organizer of the Concord Bank, and informed him of his

concerns. Thereafter, Gaia requested a meeting with the

Commissioner, at which time Mr. Manning described to

Gaia his reservations about Gaia’s suitability as Concord’s

president. Manning attributed his opinions to the Reports

of Examination on Rockwood Bank and Gaia’s resume.

Manning stated that he did not believe that Gaia was being

completely candid with the Division, and was especially

concerned about Gaia’s demotion from Executive Vice

President to Vice President - Business Development. At

the end of the meeting Gaia left with Manning a

memorandum, dated September 22, 1994, which described

his version of the events regarding his demotion.

In early November, 1995, Manning informed the

organizers of Concord Bank that he had not changed his

decision concerning Gaia. The Bank responded on

November 9, 1995, by withdrawing Gaia’s name for the

Concord Bank presidency and substituting another person

who was acceptable to Commissioner Manning. Thereafter,

Gaia wrote to Manning asking for the reasons behind his

decision. The Commissioner replied in his letter to Gaia

dated December 7, 1995, in relevant part:

“Based on your experience at the

Rockwood Bank, largely reflected in your

memo of September 22, 1994, we are unable to

find the requisite confidence should you be the

chief administrative officer or have primary

responsibility for the loan portfolio. We do not

object to your serving Concord Bank in the

area of business development or in some other

capacity in the bank in which you would

operate under direct supervision of an

executive officer.”

On December 8, 1995, Gaia left his employment

with Rockwood Bank. While he contended that he was

involuntarily terminated, the Bank contended that he

submitted his resignation. On December 11, 1995, Gaia

began his employment with Concord Bank as Vice

President for Business Development.

Gaia filed his Complaint with the U.S. District

Court for the Eastern District of Missouri on August 1,

1996. His complaint contained three counts: (1) Age

discrimination in violation of the Age Discrimination in

Employment Act, (2) Age discrimination in violation of

the Missouri Human Rights Act, and (3) Slander. The case

was tried to a jury on August 11-14, 1997. The jury

returned its verdict in favor of Rockwood on the age

10

discrimination counts, but in Gaia’s favor on the slander

count. It awarded him actual damages of $200,000 and

punitive damages of $75,000. Said judgment is attached in

Appendix B at page B-25. Following denial of the post-

trial motions,(See Appendix B at pg. B-27) this Appeal was

filed.

REASONS FOR GRANTING THE WRIT

THE PETITION SHOULD BE GRANTED BECAUSE IT

IS. NECESSARY TO PROTECT BANK-BANK

EXAMINER COMMUNICATION FROM LIABILITY

TO THIRD PARTIES.

In an effort to promote societal and governmental

goals, the law recognizes various privileges and

immunities. One area of commerce that has not been fully

examined for the need of such privileges and immunities is

banking. Federal Courts have consistently recognized the

11

need to protect the internal deliberations of banking

regulatory agencies. In Re the Subpoena Served Upon the

Comptroller of Currency, 967 F. 2d 630, 633 (D.C. Cir.

1992). Accordingly, both qualified and absolute privileges

have been extended to them in specific circumstances.

This case involves an issue of first impression:

Should the communications between bank officers and

federal bank examiners during a bank examination be

protected by an absolute privilege? To date, other than the

Appellate Court in this case, no federal court has been

presented this question. Yet, it is a question that must be

answered as the frequency of inquiries into these

communications are increasing.

In this case, the Federal Deposit Insurance

Corporation (“FDIC”) conducted a special examination of

the Rockwood Bank in June, 1995. During that

examination the bank examiner reviewed minutes of the

12

bank’s Personnel Committee, and asked Bank President

Joseph Lunt about their contents. Both the minutes and

Lunt’s response were included in the Examination Report.

Respondent M. Michael Gaia, the subject of the minutes

and Lunt’s comments, was able, at trial, to use the contents

of the Examination Report to prove his claim of slander

against the Bank. Such a use of the contents Report runs

contrary to the banking regulatory scheme. Instead, those

remarks should have been protected by an absolute

privilege, thus making them unavailable to Gaia for use at

trial.

Federal courts recognize that banking is one of the

most regulated industries in this country. Fahey v.

Mallonee, 332 U.S. 245, 250, 67 S. Ct. 1552, 91 L. Ed 2d

2030 (1947). Such regulation is necessary to ensure that

the economy remains safe and secure. United States v.

Philadelphia National Bank, 374 U.S. 321, 329, 83 S.Ct.

13

OO — — —

1715, 10 L. Ed. 2d 915 (1963). As part of the regulatory

scheme, the FDIC is empowered to conduct examinations

of member banks to determine the soundness of their

operations, policies and management. 12 U.S.C. § 1819 (a)

(Eighth); United States v. Gaubert, 499 U.S. 315, 333, 111

S. Ct. 1267, 113 L. Ed. 2d 335 (1991). As part of the

examination process, bank examiners conduct interviews of

bank officers, and those officers are legally required to

cooperate and fully answer the examiners questions.

Failure to do so may result in criminal liability for the

officer and a penalty being levied against the bank. 12

U.S.C. § 1818(n).

When inquiring about the soundness of a bank’s

management, the examiner may ask bank management to

specifically comment about certain officer’s performance.

Due to the statutory mandates, management is required to

be fully candid with the examiner. At the same time,

according to the 8th Circuit’s decision in this case, those

comments may be subject to review by outsiders should the

subject of the comments bring an action against the bank

involving his employment. Bank management,

accordingly, is put into a quandary: is it to be fully candid

with the bank examiner and give subjective evaluations of

performance, or does it edit its comments with the fear in

mind that someday a jury may review these comments as

part of some employment related litigation?

Bank management should not be put into such a

conflicting position. Instead, its communications with the

examiner, particularly as they relate to the employee

performance, should be protected by an absolute privilege,

thus immunizing them from liability to third parties Slotten

v. Hoffman, 999 F. 2d 333, 335 (8th Cir. 1993). The U.S.

Eighth Circuit Court of Appeals, in the instant case, held

that an absolute privilege is not justified. Instead, the

15

privilege should be qualified. While a qualified privilege

does provide some protection, it still exposes the comments

of bank management to outside scrutiny in order to order to

determine whether they were made maliciously or not.

Such a result would have a chilling effect. on bank-

examiner communications. The fear will always be that no

matter what is said, a jury will have the opportunity to

determine whether it was said with a malicious intent or

not. The threat of such a review would be ever-present, and

would stifle bank-examiner communications reflecting an

attitude that it is better to be cautious and safe, rather than

fully candid and risk potential liability. Judge Learned

Hand recognized a similar chilling effect then discussing

the need for public officials to be protected by an absolute

privilege. Gregoire v. Biddle, 177 F. 2d 579 (2nd Cir.

1949):

EE

“[I]t is impossible to know whether the claim is

well founded until the case has been tried, and that to

submit all officials, the innocent as well as the guilty, to the

burden of a trial and to the inevitable danger of its outcome

would dampen the ardor of all but the most resolute, or the

most irresponsible, in the unflinching discharge of their

duties.”

Id., 581. This Court has made similar findings when

warranted. Barr v. Matteo, 360 U.S. 564, 570-574, 79 S.

Ct. 1335 31 Ed. 2d 1434 (1959).

The only way to promote full and candid disclosure

is to protect these communications with absolute privilege

as the societal goal is superior to the need to protect the

individual’s rights. Briscoe v. La Hue, 460 U.S. 325, 333-

334, 103 S. Ct. 1108, 75 L. Ed. 2d 96 (1983); Mangold v.

Analytic Services, Inc., 77 F. 3d 1442, 1447 (4th Cir.

1996). As bank examiners have already been given the

17

protection of absolute immunity when discussing a bank’s

performance, the banker who responds to the examiner's

questions should be protected likewise. Molever_v.

Lindsey, 289 F. Supp. 832, 834-835 (E.D. Mich. 1968).

This Court is in the best position to clarify and resolve this

issue. The granting of this Petition for Writ of Certiorari is

necessary and justified to ensure that uniform application of

the law takes place throughout the nationwide banking

system. Jones v. F.D.LC., 748 F. 2d 1400, 1402 (10th Cir.

1984).

18

CONCLUSION

For the foregoing reasons, the Petition for Writ of

Certiorari should be granted.

Respectfully submited,

SLOAN, LISTROM, EISENBARTH,

SLOAN & GLASSMAN, L.L.C.

12 Corporate Woods Suite 280

10975 Benson Drive

Overland Park, KS 66210

(913) 661-0050 FAX (913) 661-0008

DAVID W. WHITE

Counsel of Record for Petititoner

19

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

+

UNITED STATES COURT OF APPEALS

FOR THE EIGHT CIRCUIT

No. 97-4122EMSL

M. Michael Gaia, .

*

Plaintiff-Appellee,

* Order Denying Petition for

V. * Rehearing and for Rehearing

EnBanc

*

Rockwood Bank, a Missouri

bank corporation °

Defendant-Appellant, *

Earl Manning, Commissioner*

of Finance of the Stateof *

Missouri; °

Federal Deposit Insurance *

Corporation; The Missouri *

Apdx A - 1

Bankers Association; ”

Missouri Commissioner .

of Finance °

Amicion behalfof *

Appellant. :

The petition for rehearing on banc is denied.

petition for rehearing by the panel is also denied.

(5128-010199)

June 24, 1999

Order Entered at the Direction of the Court:

Clerk, U.S. Court of Appeals, Eighth Circuit

Apdx A -2

UNITED STATES COURT OF APPEALS

FOR THE EIGHT CIRCUIT

No. 97-4122/98-1081EM

Rockwood Bank, °

Defendant-Appellant/ *

Cross-Appellee, ” Appeal from the United

V. ° States District Court for

m the Eastern District of

M. Michael Gaia, * Missouri

Plaintiff-Appellee/ *

*

Cross-Appellant

Submitted: November 16, 1998

Filed: March 15, 1999

Apdx A - 3

Before RICHARD S. ARNOLD and FAGG, Circuit Judges,

and DAWSON", District Judge.

DAWSON, District Judge,

Rockwood Bank appeals following a judgment in a

defamation action brought by a bank employee after the

president of the bank made certain statements about the

employee to bank examiners during routine bank

examinations. The employee, M. Michael Gaia, who had

been demoted by the bank, sought other employment and was

listed as the proposed president within the charter application

forms for a new bank. Because of the comments made by the

president that were contained within the reports of bank

examiners, the Missouri Commissioner of Finance refused to

grant the new bank charter as long as Gaia was listed as

'The Honorable Robert T. Dawson, United States

District Judge for the Western District of Arkansas, sitting by

designation.

president, Gaia filed suit for age discrimination and

defamation; a jury found for the bank on the discrimination

claim but awarded Gaia actual and punitive damages on the

slander claim.

For reversal, Rockwood Bank contends that because

of the very nature of bank examinations, its communications

with bank examiners are protected by either an absolute or

qualified privilege entitling the bank to immunity from civil

liability. Rockwood Bank also contends that the

communications were not defamatory. For reversal on the

cross-appeal, Gaia contends that the district court’s

instructions to the jury on the issues of illegal age

discrimination were not correct statements of the law. We

reject the contentions of both and AFFIRM the decision of the

district court.

Jurisdiction of this court is proper under the provisions

of 28 U.S.C. §§ 636(c)(3),1291 and 1294.

Apdx A - 5

I. Factual Background

In March, 1992, the Board of Directors of Rockwood

Bank voted to hire Gaia as executive vice president of the

bank over the objections of the bank president. At the time

Gaia was hired, he was fifty-five years old and had twenty-

one years of experience as a bank officer and fifteen of

experience as a bank president. Gaia was considerably older

and more experienced than the acting president of Rockwood

Bank. According to Gaia, the bank president told him that he

had wanted to hire someone younger and less experienced

than Gaia because such a person would have been easier to

train. From the beginning of their professional relationship,

tensions existed between the bank president and Gaia, with

the bank president continually criticizing and expressing

dissatisfaction with Gaia’s performance. The record contains

evidence that the bank president did not provide Gaia with a

specific job description or duties and responsibilities; that he

Apdx A - 6

instructed Gaia to perform clerical tasks not typically

assigned to senior level executives and failed to provide him

with training; and that he directed Gaia not to perform other

clerical tasks which Gaia deemed necessary to process

customers’ business. In addition Gaia’s personnel file was

filled with memoranda and notes regarding his performance

and his file was shown to be much more detailed and

extensive than the file of any other bank employee. Despite

the frequent fault-finding by the bank president, Rockwood’s

Board of Directors appeared satisfied with Gaia’s

performance and granted him salary and benefit increases and

stock options every year that Gaia served as executive vice-

president.

In September 1994, the bank president was able to

convince the Board that Gaia was not fulfilling his duties in

an acceptable manner. Despite Gaia’s attempts to defend

himself and persuade the Board that he was being wrongly

Apdx A - 7

disparaged by the bank president, the Board gave Gaia an

ultimatum either to accept a demotion or be terminated. Gaia

agreed to the demotion. However, the working relationship

between Gaia and the bank president remained strained and

Gaia eventually came to believe that his days at Rockwood

Bank were numbered. In the summer of 1995, Gaia began

looking for other employment. During this time, Gaia was

approached by a group of investors who were organizing a

new bank about the possibility of naming Gaia as the

president of the new bank. In due course, Gaia was fisted as

the proposed president of the new bank seeking to organize

under a state banking charter.

At or about the time of Gaia’s demotion, routine bank

examinations were conducted by the FDIC and Missouri

Division of Finance. During the course of these

examinations, the bank examiners discussed with

Rockwood’s president the job performance of Gaia and other

Apdx A - 8

employees. While the bank president’s comments were

contained within the confidential section of both reports, they

were not included in the reports of examination made

available to the bank, its board, the president, or Gaia. The

comments were contained in the full reports of both

examinations, and it was the full reports that the Missouri

Bank Commission reviewed in connection with the

application for the new bank charter which proposed Gaia as

its president.

The language concerning Gaia in the report of the

FDIC examination that was conducted in June 1995 was as

follows, to-wit:

The minutes of a Personnel Committee

meeting on May 25, 1995, disclosed that

President Lunt was recommending that Vice

President Mike Gaia be fired. When

questioned, President Lunt stated that Mr, Gia

Apdx A - 9

[sic] had not lived up to expectations since his

employment. Mr. Lunt felt he would have the

Board’s support in this matter and hoped to be

able to interview shortly for an Executive

Officer who would effectively take Mr. Gaia’s

place.

The language within the report of the Missouri

Division of Finance examination conducted in January 1995

was similar and was as follows, to-wit:

Mike Gaia has been demoted from Executive

Vice President to Vice President. His primary 2

responsibility is now business development.

His efforts to complete assigned tasks such as i

policy revisions " implementation of the

loan grading system have failed. President

Lunt appeared very displeased with Mr.

Gaia’s weak performance and stated that he,

Apdx A - 10

has an indefinite probationary period to

produce results. In addition, President Lunt

stated that he has created much animosity

among the Board of Directors.

Based largely upon these confidential comments, the

Missouri Bank Commission reached a decision and advised

the directors of the newly formed bank that their charter

would be approved only if Gaia was not president. Gaia was

then offered a lesser position with the new bank. On or about

December 8, 1995, Gaia left his employment at Rockwood

Bank and a few weeks later took the lesser position offered at

the new bank. Gaia contends that Rockwood’s president fired

him without the approval of the Board of Directors, while

Rockwood contends that Gaia resigned to accept the offer of

other employment.

The litigation by Gaia was filed following the

commencement of his employment at the newly formed bank.

Apdx A - 11

With regard to the claim of age discrimination the issues of

pretext concerning the bank’s proffered explanation for

Gaia’s demotion and whether Gaia voluntarily resigned or

was discharged from his position at Rockwood Bank were

thoroughly litigated. At the close of evidence, the district

court gave the following instruction to the jury:

Plaintiff must prove by a preponderance of the

evidence that his age was the determining

factor in the Defendant’s decisions to demote

and discharge him. Age is the determining

factor if Plaintiff would not have been

demoted and discharged except for his age.

The jury returned a verdict in favor of Rockwood

Bank on Gaia’s age discrimination claim and in favor of Gaia

on the defamation claim. The jury awarded Gaia $200,000 in

actual damages and $75,000 in punitive damages upon

making a finding of actual malice.

Apdx A - 12

Il. Discussion

A. Absolute or Qualified Immunity from Liability

The first issue the Court shall address is whether any

privilege exists that would shield a bank, its officers or board

members from civil liability for allegedly defamatory

comments made to bank examiners during the course of a

routine examination of the bank. Rockwood Bank contends

that the district court erred when it failed to recognize that the

bank is entitled to immunity from liability for statements

made to bank examiners in the course of routine bank

examinations because those statements are protected by either

an absolute or qualified privilege. This is a case of first

impression, and amicus briefs have been filed by the Missouri

Commissioner of Finance, the Missouri Bankers Association,

and the Federal Deposit Insurance Corporation, who argue

that public policy must allow full and complete comment and

disclosure in connection with any bank examination without

Apdx A - 13

fear of litigation.

Although there are some federal implications because

of the involvement of the Federal Deposit Insurance

Corporation (FDIC), Missouri law governs Gaia’s slander

claim against Rockwood as well as the claim of absolute or

qualified privilege for the statements made by Rockwood’s

president to the Missouri Division of Finance. Jn re IBP

Confidential Bus, Documents Litigation, 797 F.2d 632, 639

(8th Cir. 1986)(citing Webster v. Sun Co., 790 F.2d 157, 160

(D.C.Cir. 1986)). Whether a statement is absolutely

privileged is a question of law which we review de novo,

Scott Fetzer Company v. Williamson, 101 F.3d 549, 553 (8th

Cir. 1996); Wright v. Over-The-Road & City Transfer

Drivers, Helpers, Dockmen and Warehousemen, 945 S.W.2d

481, 490 (Mo.App, 1997).

Missouri courts adhere to the common law principle

that “statements made during the proceedings of a judicial or

Apdx A - 14

quasi-judicial body are absolutely privileged if they are

relevant to the issues before the body,” Remington v. Wal-

Mart Stores, Inc., 817 S.W.2d 571, 574 (Mo.App.

1991)(citations omitted); see also Hester v. Barnett, 723

S.W.2d 544 (Mo.App. 1987); Pulliam v. Bond, 406 S.W.2d

635 (Mo. 1966). Absolute immunity for participants in a

judicial or quasi-judicial process is “necessary to assure that

judges, advocates, and witnesses can perform their respective

functions without harassment or intimidation.” Butz v.

Economou, 438 U.S. 478, 512, 98 S.Ct. 2894, 2913, 57

L.Ed.2d 895 (1978). The question, therefore, becomes

whether routine bank examinations may be considered

judicial or quasi-judicial proceedings entitling participants to

absolute immunity. In reaching a determination of this issue,

it is appropriate to inquire into the characteristics of the

particular examinations that took place at Rockwood Bank to

see if they were typical of the judicial process in order to

Apdx A - 15

warrant absolute immunity for those who took part in them.

In determining if a particular proceeding is quasi-

judicial in nature, Missouri courts are guided by whether the

administrative agency exercised “such traditional judicial

powers as the conducting of hearings at which witnesses may

be summoned and examined, documents subpoenaed, and

judgments handed down. . .” Wright, Id at 491, quoting

Remington, Id at 574 (citatio: s omitted). We have previously

held that the term “quasi judicial” applies “where the function

of the administrative body under consideration involves the

exercise of discretion in the application of legal principles to

varying factual situations and requires notice and hearing.”

M. C. Mock v. Chicago, Rock Island and Pacific Railroad

Co., 454 F.2d 131,134 (8th Cir. 1972). In Butz, the Supreme

Court noted that “the safeguards built into the judicial process

tend to reduce the need for private damages actions as a

means of unconstitutional conduct. . . .Advocates are

Apdx A - 16

restrained not only by their professional obligations, but by

the knowledge that their assertions will be contested by their

adversaries in open court. Jurors are carefully screened to

remove all possibility of bias. Witnesses are, of course,

subject to the rigors of cross-examination and the penalty of

perjury.” Butz, 438 U.S. at 512, 98 S.Ct. at 2913.

While Missouri case law recognizes the existence of

absolute privilege in some administrative proceedings, it has

not extended that privilege as far as the Appellant now seeks.

In Li, et al. v. Metropolitan Life Insurance Co., Inc., 955

S.W.2d 799 (Mo. App. 1997), it was held that the allegedly

defamatory contents of a letter written by an insurance agent

and provided to the Missouri Department of Insurance

pursuant to an inquiry into specific allegations of

misrepresentation by the agent was protected by absolute

privilege. The court reasoned that the inquiry by the

Department constituted a quasi-judicial function because the

Apdx A - 17

Fr amenee

Department was investigating specific complaints about the

agent that were brought by the appellants themselves.

We recognize that both the FDIC and the Missouri

Division of Finance possess quasi-judicial powers in that they

may administer oaths, compel the attendance of witnesses and

the production of records and other documents.’ In addition,

they both have statutory authority to issue cease and desist

orders.’ It is also widely accepted that the reports prepared by

the examiners are protected by law from disclosure.‘

*Mo.Rev.Stat. §§ 361.130, 160 (1994); 12 U.S.C. §§

1818(n), 1820(c); 12 C.F.R. §§ 308.144 (1998) et seq.

*Mo.Rev.Stat, § 361.260 (1994); 12 U.S.C. § 1818(b)

& (c).

‘See Mo.Rev.Stat. § 361.070 (1994). The bank

examination privilege is a qualified privilege which shields

from discovery agency opinions or recommendations, and it

is discussed in some detail within Jn Re Subpoena Served

Upon the Comptroller of the Currency, 967 F.2d 630 (D.C.

Cir. 1992). In that case, the court stated:

Because bank supervision is_ relatively

Apdx A - 18

However, we are of the opinion that the routine bank

examinations conducted at Rockwood Bank in 1995 should

not be accorded status as quasi-judicial proceedings. While

the examinations were conducted according to law, they were

not inquiries instituted after a determination that the bank

may have been engaging in unsafe or unsound practices. Nor

were the examinations commenced pursuant to specific

informal and more or less continuous, so too

must be the flow of communication between

the bank and the regulatory agency. Bank

management must be open and forthcoming in

response to the inquiries of bank examiners,

and the examiners must in turn be frank in

expressing their concerns about the bank.

These conditions simply could not be met as

well if communications between the bank and

its regulators were not privileged. . . .

Nonetheless, the discovery of bank examination

information is not absolutely precluded.

Id. at 634 (Citations omitted). See also, Jn Re Mid Atlantic

Corporation Shareholder Litigation, 1994 WL 750664, 2

(D.C. Cir. 1994).

complaints or requests for investigation. There is no evidence

that either of the bank regulatory agencies was even

contemplating the initiation of a quasi-judicial proceeding

against the bank. As such, the routine examinations of

Rockwood Bank by the Missouri Division of Finance and the

FDIC may not even be considered preliminary steps to quasi-

judicial proceedings. We also think it is important to note

that the safeguards usually associated with judicial

proceedings were not present during the examinations: no

hearing was noticed or held; the persons whose comments

were solicited were not under oath; and there was no

opportunity for cross-examination. We hold that a routine

bank examination does not qualify as a quasi-judicial

proceeding and that statements made in the course of such

examinations are not protected by absolute privilege.°

‘Following oral argument in this matter, the Appellant

Rockwood Bank submitted to the Clerk an additional citation,

as is permitted by Rule 28(j) of the Federal Rules of

Apdx A - 20

We do not believe that, by declining to extend

absolute immunity to those who provide statements to bank

regulators during routine examinations, the free flow of

information necessary for effective bank regulation will be

unduly hindered. While the public policy concerns raised by

the appellant and others are well taken and important, they are

suitably met by affording qualified immunity to the

participants.

Appellate Procedure. Rockwood Bank contends that 31

U.S.C. § 5318(g)(3) affords absolute immunity to the bank in

this case. Section 5318(g)(3) is included within the “money-

laundering” statutes and is designed to protect the bank, its

board of directors, officers, employees, or agents, from civil

liability in connection with the disclosure of information

regarding “‘any suspicious transaction relevant to a possible

violation of law or regulation.” The sole basis for the

defamation claim was the language contained within the

examination reports. We do not find that the record supports

the argument that the bank president’s statements were

intended to disclose a suspicious transaction relevant to a

possible illegality. Therefore, this section is of no assistance

to the bank under these circumstances.

Apdx A - 21

In Missouri qualified sill may be available for

a person who makes a statement subject to a duty to someone

who has a corresponding duty. Rice v. Hodapp, 919 S.W.2d

240,244 (Mo. 1996); Carter v. Willert Home Products, 714

S.W.2d 506, 513 (Mo, 1986). Qualified immunity will

protect the person from liability for making false or

defamatory statements if it can be shown that the comments

were made without actual malice. Actual malice means “that

the statements were made with knowledge that they were

false or with reckless disregard for whether they were true or

false at a time when defendant had serious doubts as to

whether they were true.” Carter, 714 S.W.2d at 512. With

this definition in mind, those providing information to bank

regulators only have a duty to refrain from making statements

that are known to be false or with reckless disregard for their

truthfulness. We find that, under these circumstances,

qualified immunity will facilitate the free flow of

Apdx A - 22

communications between bank regulators and _ those

participating in routine examinations and at the same time

shield individuals from malicious defamation.

Rockwood Bank contends that the bank president had

a legal obligation to fully cooperate and disclose information

to the bank examiners and, therefore, those communications

would be subject to a qualified immunity for claims of

defamation, citing Luan v. Union Electric Co., 166 S.W.2d

1065 (Mo. 1942). However, before the doctrine of qualified

immunity will shield the bank from liability for the allegedly

defamatory comments and responses of the bank president, it

must be determined that the bank president made the

comments to the bank examiners without actual malice.

In this case, the jury specifically found malice on the

part of Rockwood Bank. The following instruction was given

to the jury:

Apdx A - 23

Instruction No. 23: If you find the issues in

favor of Plaintiff, and if you believe that

Defendant made the _ statements, with

knowledge that they were false or with

reckless disregard for whether they were true

or false at a time when Defendant had serious

doubt as to whether they were true, then in

addition to any damages to which you find

Plaintiff entitled under the foregoing

paragraph, you may award Plaintiff an

additional amount as punitive damages in

such sum as you believe will serve to punish

Defendant and to deter it and others from like

conduct.

In Instruction No. 24, the trial court instructed the jury that:

[t]he burden is upon Plaintiff to cause you to

believe by clear and convincing evidence the

Apdx A - 24

propositions of fact required for the recovery

of punitive damages as submitted in. . .

Instruction No. 23.

By way of response, in its verdict the jury awarded $200,000

in actual damages and $75,000 in punitive damages.

While the instruction admittedly was directed toward

the damage portion of the plaintiff's complaint, the jury

nonetheless concluded that malice was present in connection

with the comments made to the bank examiners. Since

malice was found, the comments made by the bank president

to the examiners would not qualify for qualified immunity.

We find that the district court did not err by deciding that the

comments made by the bank president were not protected by

absolute or qualified privilege. Accordingly, the judgment of

the district court is affirmed on this issue.

Apdx A - 25

B. Evidence From Which the Jury Could Have

Found Malice.

The second issue Appellant presents for appeal is

whether the district court erred by denying the appellant’s

renewed motion for judgment as a matter of law. In addition

to its contention that the bank president’s comments were

protected by an absolute or qualified privilege, Appellant

argues that if the comments were protected by a qualified

privilege, then there was insufficient evidence from which the

jury could have found that the comments were made with

actual malice.

The denial of a motion for judgment as a matter of law

is subject to de novo review by this court. Denesha v.

Farmers Ins. Exchange, 161 F.3d 491, 497 (8", Cir.

1998)(citations omitted). The appellate court will not reverse

a jury verdict for insufficient evidence unless “after viewing

the evidence in the light most favorable to the verdict, it

Apdx A - 26

concludes that no reasonable juror could have returned a

verdict for the non-moving party”. Jd. Further, in reviewing

a denial of a motion for judgment as a matter of law, the court

must, 1) consider the evidence in the light most favorable to

the non-moving party, 2) assume that all conflicts were

resolved in favor of the non-moving party, 3) assume as

proved all facts that the non-moving party’s evidence tended

to prove, 4) give the non-moving party the benefit of all

favorable inferences that may reasonably be drawn from the

proved facts, and 5) deny the motion unless all the evidence

points one way and is susceptible of no reasonable inferences

sustaining the non-moving party’s position. Denesha, 161

F.3d at 497 (citations omitted).

The Appellant submits that since the jury rejected

Gaia’s claim that the bank president harbored ill-will towards

Gaia solely because of his age, the jury had no factual basis

for attributing any bad motives at all to the bank president.

Apdx A - 27

This logic misses the point. A finding of actual malice in the

context of determining whether qualified immunity protects

Rockwood Bank from liability does not necessarily depend

upon a demonstration of a motive in the form of ill-will or

animosity. As previously discussed, actual malice means that

the statements were made by the bank president when he

knew them to be false or with reckless disregard for their

truthfulness at a time when he had serious doubts as to

whether they were true. Although the jury did not believe

that age discrimination was the motive behind the defamatory

comments, it was nonetheless reasonable for the jury to

conclude that the bank president made statements about

Gaia’s job performance that he knew were false or with

reckless disregard for their truthfulness. Reviewing the

evidence in a light most favorable to Gaia, there was ample

evidence from which the jury could have inferred both motive

and actual malice. There was evidence that Gaia was hired

Apdx A - 28

over the bank president’s objections, and that he gave Gaia

vague and confusing instructions about his job duties as

executive vice-president in an effort to build a case of

incompetence against Gaia. In spite of Gaia’s assertions that

his job performance was more than adequate which he

supported with empirical data, the bank president persisted in

his criticisms of Gaia for not meeting expectations and placed

numerous memos and notes in Gaia’s personnel file in order

to bolster the perception of Gaia’s allegedly lackluster

performance. There was no dispute that the bank president

made the comments to the bank examiners, and the jury found

that either the bank president knew he was making false

statements about Gaia’s job performance or that he acted with

reckless disregard for the truth. Therefore, the district court

did not err in denying appellant’s renewed motion for

judgment as a matter of law made on the basis that there was

no proof of malice.

Apdx A - 29

C. Whether the Allegedly Slanderous Remarks

Were Defamatory.

Appellant’s next point on appeal is that the district

court erred by denying Appellant’s motion for a new trial.

We apply a deferential standard in our review of a district

court’s denial of a motion for a new trial. ““The [district]

court’s decision will not be reversed by a court of appeals in

999

the absence of a clear abuse of discretion.”” Keenan v.

Computer Associates Intern., Inc., 13 F.3d 1266, 1269 (8th

Cir. 1994)(citing Lowe v. E.J. DuPont de Nemours & Co., 802

F.2d 310, 310-11 (8th Cir. 1986)(citations omitted)). The key

question is whether a new trial should have been granted to

avoid a miscarriage of justice. Keenan, 13 F.3d at 1269

(citations omitted).

Appellant contends that the jury’s verdict was against

the weight of the evidence as the allegedly slanderous

comments made by Rockwood’s president were not

Apdx A - 30

defamatory as a matter of law. In Missouri, whether language

is defamatory and actionable is a question of law to be

decided by the court, and the court must determine whether a

statement claimed to be slanderous is reasonably capable of

defamatory meaning. See Ampleman v. Scheweppe, 972

S.W.2d 329,331 (Mo.App. E.D. 1998). “In exercising this

function trial and appellate courts are required ‘to determine

whether the communication reasonably conveyed the

meaning ascribed to it by plaintiff and, if so, whether the

399

meaning was defamatory in character,” Ampleman, 972

S.W.2d at 331 (citing Carey v. Pulitzer Publishing Co., 859

S.W.2d 851, 855 (Mo.App.E.D. 1993).

Comments that tend to harm a person in his business

or profession are one of the traditional categories of slander

per se. Carter v. Willert Home Products, Inc., 714 S.W.2d

506, 509 (Mo. 1986). The words used by the defendant must

impute to the plaintiff a lack of knowledge, skill, capacity, or

Apdx A - 31

fitness to perform his duties. Brown v. Kitterman, 443

S.W.2d 146, 154 (Mo. 1969). To be actionable, the words

“must strike at a person’s professional competence.” Nazeri

v. Missouri Valley College, 860 S.W.2d 303, 311 (citation

omitted). A statement that “tends to so harm the reputation of

another as to lower him in the estimation of the community or

to deter third persons from associating or dealing with him”

is defamatory in character. Kennedy v. Jasper, 928 S.W.2d

395, 399-400 (Mo.App.E.D. 1996). We find that the district

court did not abuse its discretion in finding that the comments

made by the president of Rockwood Bank reasonably

conveyed the meaning ascribed to them by plaintiff, i.e., that

Gaia lacked the knowledge, skill, capacity or fitness to

perform the duties of executive vice president. It is clear that

the meaning of the words is defamatory and actionable.

Rockwood claims that the court erred in denying its

motion for a new trial because some of the objectionable

Apdx A - 32

remarks are true, and that the others are constitutionally

protected expressions of opinion. “Whether an alleged

Statement is capable of being treated as an opinion or as an

assertion of fact is a question of law for the trial court.”

Nazeri, 860 S.W.2d at 314. “The test to be applied to an

ostensible ‘opinion’ is whether a reasonable fact finder could

conclude that the statement implies an assertion of objective

fact.” Id at 314 (citing Milkovich v. Lorain Journal Co., 497

US. 1, 21, 110 S.Ct. 2695,2707, 111 L.Ed.2d 1 (1990)). The

Missouri Supreme Court has also held that the “issue of

falsity relates to the defamatory facts implied by a statement--

in other words, whether the underlying statement about the

plaintiff is demonstrably false.” Nazeri, 860 S.W.2d at 314.

We find that the district court did not abuse its discretion in

concluding that there was a question of fact as to whether

some of the statements made by the bank president about

Gaia’s job performance were true. We also find no abuse of

Apdx A - 33

discretion by the district court in finding that the “opinions”

offered by the bank president implied assertions of objective

fact regarding Gaia’s abilities as a bank officer.

Appellant next contends that the district court erred in

denying its motion for a new trial because there was no causal

link between the slanderous comments and Gaia’s damages.

There was no abuse of discretion when the district court

found that the evidence supported the jury’s determination

that the decision of the Missouri Division of Finance to

approve the new bank charter only if Gaia’s name was

withdrawn as the proposed president was based upon the

slanderous comments contained in the reports of the bank

examiners. Therefore, the denial of Rockwood’s motion for

a new tnial is affirmed in all respects on the defamation issue.

D. Appropriate Jury Instruction as to the Law on

Pretext.

The sole remaining issue for determination is whether

Apdx A - 34

the jury was properly instructed as to the law on pretext in the

age discrimination claims brought by Appellee Gaia. The

trial court has broad discretion in instructing the jury. Cross

v. Cleaver, 142 F.3d 1059, 1067 (citing Ryther v. KARE 11,

108 F.3d 832, 846 (8th Cir. 1997)(en banc)(citations

omitted)). When reviewing an instruction on appeal, the

appellate court must decide whether the instruction fairly and

adequately states the applicable law. Jd. We have previously

held, and do so again today, that in a discrimination case

where pretext is alleged, the plaintiff must prove that the

prohibited factor was the determining factor, not merely a

determining factor, in the adverse employment decision. See

Foster v. University of Arkansas, 938 F.2d 111, 115 (8th Cir.

1991). This was not a mixed-motives case. The issue for the

jury was whether the adverse employment action was caused

by the plaintiff's age or by legitimate business factors. As we

understand the record, these motives were mutually exclusive.

Apdx A - 35

In addition, we note that the instruction in question carefully

advised the jury that “[a]ge is the determining factor if

Plaintiff would not have been demoted and discharged except

for his age.” This is a correct statement of the law.

Accordingly, we affirm the district court’s denial of Gaia’s

motion for a new trial.

Ill. Conclusion

For the reasons stated above, the judgment and orders

of the district court are AFFIRMED in all respects.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS,

EIGHTH CIRCUIT

Apdx A - 36

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APPENDIX B

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

File Stamped

/s/Aug 15 1997

U.S. DISTRICT COURT

EASTERN DISTRICT OF MO

ST. LOUIS

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

M. MICHAEL GAIA, )

Plaintiff )

V. )No. 4:96CV1559 FRB

ROCKWOOD BANK, )

Defendant. )

Apdx B - 37

JUDGMENT

This action came before the court and a jury for trial,

the undersigned United States Magistrate Judge presiding,

with consent of the parties, pursuant to 28 U.S.C. § 636 (c) .

The jury having rendered its verdicts,

IT IS HEREBY ORDERED AND ADJUDGED

that plaintiff M. Michael Gaia recover nothing of defendant

Rockwood Bank on plaintiff's claim of age discrimination in

violation of the Age Discrimination in Employment Act, 29

U.S.C. §§ 623, et seq.

ITIS FURTHER ORDERED AND ADJUDGED that

plaintiff M. Michael Gaia recover nothing of defendant

Rockwood Bank on plaintiffs claim of age discrimination in

violation of the Missouri Human Rights Act, Mo. Rev. Stat.

§§ 213.010, et seq.

IT IS FURTHER ORDERED AND ADJUDGED

that plaintiff M. Michael Gaia shall recover of defendant

Apdx B - 38

Rockwood Bank the sum of Two Hundred Thousand and

00/100 Dollars ($200,000.00) in actual damages, and

Seventy-Five Thousand and 00/100 Dollars ($75,000.00) in

punitive damages, on plaintiff's state law claim of slander.

ds/ Frederick R. Buckles

UNITED STATES MAGISTRATE JUDGE

Dated this /s/Sth day of August, 1997,

Apdx B - 39

apace: . : ” eb 2 er

Pewee en we = in ite da IRE Pe TEMES . . iz > i. 8 ‘ ik aa a » “a res os a

Lol SR RI SS RIE CEES RP eR i i mii at sa as as y a

; . ; i

‘ - :

File Stamped

U.S. District Court

Eastern District

St. Louis

PC:PARTIES

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

M. MICHAEL GAIA, )

Plaintiff )

v. ) No. 4:96CV1559 FRB

ROCK WOOD BANK, )

Defendant. )

Apdx B - 40

ORDER

Presently pending before the court are Plaintiff's

Motion for New Tnial on Plaintiffs Age Discrimination

Claims (filed August 25, 1997/Docket No. 43), and

Defendant's Renewed Motion for Judgment as a Matter of

Law, or In the Alternative, Motion for New Trial (filed

August 28, 1997/Docket No. 44). All matters are pending

before the undersigned United States Magistrate Judge, with

consent of the parties, pursuant to 28 U.S.C. § 636 (c).

All of the issues raised in the pending motions were

raised by the parties either prior to or during the trial of the

case. After consideration of the pending motions and

memoranda and Memoranda in Opposition, the undersigned

concludes that the rulings previously made by the Court were

proper and correct for the reasons previously stated by the

Court, all of which are a matter of record.

Apdx B - 41

Therefore,

IT IS HEREBY ORDERED that Plaintiff's motion

for New Trial on Plaintiff's Age Discrimination Claims

(Docket No. 43) is denied.

IT IS FURTHER ORDERED that Defendant’s

Renewed Motion for judgment as a Matter of'Law, or In the

Alternative, Motion for New Trial (Docket No 44) is denied.

(s/ Frederick R. Buckles

UNITED STATES MAGISTRATE JUDGE

Dated this 14th day of October, 1997.

Apdx B - 42