Amicus Curiae Brief — U.S. Bank Corp. v. Kroske (No. 05-1607)

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A FILED

No. 05-1607 AUG 7 - 2006

— TO Or Time CLERK

SUPREME COURT, U.S.

IN THE

Supreme Court of the United States

October Term 2006

U.S. Bank National Association,

Petitioner,

¥.

Kathy Kroske,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

BRIEF FOR AMICI CURIAE THE CALIFORNIA

BANKERS ASSOCIATION AND THE WASHINGTON

BANKERS ASSOCIATION IN SUPPORT OF

PETITIONER

E. Joshua Rosenkranz Patricia K. Gillette

HELLER EHRMAN LLP Counsel of Record

Times Square Tower Greg J. Richardson

7 Times Square HELLER EHRMAN LLP

New York, NY 10036 333 Bush Street

(212) 832-8300 San Francisco, CA 94104

(415) 772-6000

August 7, 2006 Attorneys for Amici Curiae

QUESTIONS PRESENTED

1. Whether the Ninth Circuit erred in holding,

contrary to the Sixth Circuit and the California Supreme

Court, that the National Bank Act’s grant to national

banks of the power to dismiss their officers “at pleasure,”

12 U.S.C. § 24 (Fifth), fails to preempt a state

employment discrimination law because a_ federal

employment discrimination law enacted by Congress

subsequent to the National Bank Act somehow makes

state law applicable as well.

2. Whether the Ninth Circuit erred in holding,

contrary to the Second and Sixth Circuits and this Court’s

precedents, that a presumption against preemption

permits state laws to apply to national banks despite the

longstanding preemptive force of the National Bank Act.

TABLE OF CONTENTS

Page

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SUMMARY OF ARGUMENT .......:ccccscescossccsccscvssesonsescesesace 2

PA TRTINIE Ss srccstviishicssiontietcamnatataicaipeduacmicauncigransdapibiaiea 3

[.. CERTIORARI SHOULD BE GRANTED

BECAUSE FEDERAL AND STATE

COURTS ARE SHARPLY DIVIDED

ABOUT WHETHER AND HOW MUCH

THE NATIONAL BANK ACT

SRR ee Se 6 A Ce Bel OE v sesissvicnsedevnceisttnindereceroneninayes 3

A. The Circuits Are Hopelessly Split As to

Whether State Employment

Discrimination Laws Are Entirely

PE icsinteinisieaa tidal i chatnieiienacntcaieiai 5

1. The Ninth Circuit’s opinion is in

direct conflict with opinions of the

Fourth and Sixth Circuits. ..........cccccoverseererssccoees 6

iii

2. Outcomes can depend on whether a

case is litigated in state or federal

. Even Courts that Agree that the

National Bank Act Preempts State Law

Discrimination Claims Are Split on the

Scope of Preemption, with the Ninth

Circuit Adding to the Confusion. .....................00+2- 10

THE ISSUE IS IMPORTANT BECAUSE

SUBSTANTIAL DIFFERENCES

BETWEEN STATE AND FEDERAL

EMPLOYMENT DISCRIMINATION

STATUTES ABOUND, FRUSTRATING

CONGRESS’S DESIRE FOR UNIFORM

FEDERAL STANDARDS

A. State Employment Discrimination Law

Differs from Federal Law in Numerous

. The Numerous Distinctions, and the

Uncertainty Surrounding Preemption,

Undermine Congress’s Goals

CONCLUSION

TABLE OF AUTHORITIES

Page

Cases

Ana Leon T. v. Fed. Reserve Bank of Chi.,

o> cele Fae Clie CIR. BGG) sesso shincinnicesesesniiincenivccnies 6, 10

Andrews v. Fed. Home Loan Bank of Atlanta,

DIB P26 214 (OB Cit, 1993) cc ccciccvoicesesccccosseteorsectcessosias 6,7

Arrow vy. Fed. Reserve Bank,

SOS IS F9e CO A, BW) saceiwciecsstottacetenpsnnsoviorion 4,6, 10

Beneficial Nat'l Bank v. Anderson,

BB Rg 2: ) GHRAANGREC ESE Oe SRaeN em InO NDE Is oa OAT: 4

Blaney v. Int'l Ass'n of Machinists and

Aerospace Workers, Dist. No. 1,

87 P.3d 757 (Wash. 2004)......... Siaaiovenetadvenlelineuesacieriin 15

Brown v. Scott Paper Worldwide Co.,

Be a Ee es BI ciiitsccdnssiscbbecciestaceniinzonmigaacnainan 17

Commodore Home Sys., Inc. v. Superior Ct.,

GE Fe Ee Sie PR is tiie ha bickiteansttivecrcitasincseoporsiin 15

DeRonde v. Regents of Univ. of Cal.,

625 P. 2d 220 (Cal. 1981),

Cari, dambed, 454 US. BSZ- GG) occ ccccccseconcssssccsecspnccctssese 9

Desert Palace, Inc. v. Contra Costa,

Se Fes We CIPS D icsdcaiessinscetabteiininseubapsammsinckcannmeabiiins 15

Evans v. Fed. Reserve Bank of Philadelphia,

No. Civ.A.03-4975,

2004 WL 1535772 (E.D. Pa. 2004)............sccsessssssseerees 1]

Fasano v. Fed. Reserve Bank of New York,

No. 05-4661 (3d Cir. Aug. 3, 2006) ............:secceeeseees 11,12

Iacampo v. Hasbro, Inc.,

Pe EE CaP ataks POD pevacevintescnceqeccewniotensemopeeses 17

Inglis v. Feinerman,

701 F.2d 97 (9th Cir. 1983),

cert. denied, 464 U.S. 1040 (1984)... ccc eceeesceeeeeeeeees 4

James v. Fed. Reserve Bank of New York,

No. 01-CV-1106(RJD)(VVP),

2005 WL 1889859 (E.D.N.Y Aug. 8, 2005) ....... eee 7

Katsiavelos v. Fed. Reserve Bank of Chicago,

No. 93 C 7724,

1995 WL 103308 (N.D. Ill. Mar. 3, 1995) .0...... cece eeeee 7

Kroske v. U.S. Bank Corp.,

432 F.3d 976 (9th Cir. 2005),

as amended on denial of reh'g (Feb. 13, 2006)....... passim

Martini v. Boeing Co.,

945 P.2d 248 (Wash. App. I,7),

GE FTL B20 4S CGR. 1999). .2ccceccccccccesceseeesssvessccevenee 17

McKay v. Acorn Custom Cabinetry, Inc.,

ae ee 0, BIR cin vceccdbtncsesicis:tninensovienecnasiseited 15

Mele v. Fed. Reserve Bank,

ee Ce Ge DO ivdecnhteaccetccackassicnviecinncvancssabinatstid 4

Miller v. Maxwell's Int’l, Inc.,

991 F.2d 583 (9th Cir. 1993),

cert. denied by Miller v. La Rosa,

510 U.S. 1109 (1994),

reh'g denied 511 U.S. 1048 (1994)

Moodie v. Fed. Reserve Bank of New York,

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

Moodie v. Fed. Reserve Bank of New York,

835 F. Supp. 751 (S.D.N.Y. 1993)

Nordyke v. King,

44 P.3d 133 (Cal. 2002)

Peatros v. Bank of America NT&SA,

990 P.2d 539 (Cal. 2000)

Rachid v. Jack In the Box, Inc.,

376 F.3d 305 (5" Cir. 2004)

Romano v. Rockwell Int’l, Inc.,

926 P.2d 1114 (Cal. 1996)

St. Peter v. Ampack-Division of Gatewood Prods.,

484 S.E.2d 481 (W. Va. 1997)

Sutton v. United Air Lines, Inc.,

527 U.S. 471 (1999)

Taléott v. Bd. of Com’rs of Silver Bow County,

139 U.S. 438 (1891)

Univ. of Cal. Regents v. Bakke,

438 U.S. 265 (1978)

Vivian v. Madison,

601 N.W.2d 872 (Iowa 1999)

Walrath v. Sprinkel,

121 Cal: Rptr. 2d 806 (Cal. Ct. App. 2002)

Westervelt v. Mohrenstecher,

76 F. 118 (8th Cir. 1896)

White v. Fed. Reserve Bank,

660 N.E.2d 493 (Ohio Ct. App. 1995)

Winarto v. Toshiba Am. Elecs. Components, Inc.,

274 F.3d 1276 (9th Cir. 2001)

Statutes

42 U.S.C. § 1981a(b)(3)

Age Discrimination in Employment Act of 1967,

29 U.S.C. §§ 621 et seq.:

Fe are eG OE IIE so icinhuh sicaincddintadarsieamesbdetvinavimenseaeds 5

29 U.S.C. § 626(b)

Americans With Disabilities Act,

42 U.S.C. § 12102(2)(A):

42 U.S.C. § 12102(2)(A)

Civil Rights Act of 1964, Title VII,

42 U.S.C. §§ 2000¢ et seq.:

BE cis Be BO EINE. vschcrccssssncesesiscssessnccecsaseoscbetencons 5

42 U.S.C. §§ 2000e-5(c)

42 U.S.C. § 2000e-5(e)(1)

42 U.S.C. § 2000e-5(f)(1)

Viii

Federal Home Loan Bank Act,

12 U.S.C. § 1432(a):

Bde Ry ct ttcas Te oe dice uieccisccnvaseescosesstoveverdscesees 4

Federal Reserve Act,

12 U.S.C. § 341(Fifth):

BF Ce Ay a ic ea peieitin id cs cncddictccesocoeneveveoees 4

National Bank Act,

12 U.S.C. § 21 et seq.:

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Vi Otek: Rak 0 90 BN ee 13

Wash. Admin. Code § 162-08-071(5)..ss...csssessssssessssssesesen 16

Washington Law Against Discrimination,

Wash. Rev. Code §§ 49.60.010-.400:

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INTEREST OF AMICI CURIAE'

Amici curiae, the California Bankers Association

(“CBA”) and the Washington Bankers Association

(“WBA”), are nonprofit professional associations

established more than a century ago. Each represents

most of the depository financial institutions in the State

of California and the State of Washington, respectively.

A significant portion of these banks are national banks

organized pursuant to the National Bank Act (“NBA”),

12 U.S.C. §21 et seq. These member national banks

range in size from large employers such as Bank of

America, National Association and Wells Fargo Bank,

N.A., each operating within and outside the Ninth

Circuit, to far smaller national banks, such as Chino

Commercial Bank, N.A., Coast National Bank, and

Inland Community Bank N.A., each operating primarily

within state borders.

Regardless of their size, as employers, the member

national banks rely on the NBA’s specific provision that

permits national banks to dismiss officers “at pleasure.”

12 U.S.C. § 24(Fifth). The Ninth Circuit’s decision that

the NBA’s at-pleasure provision may be limited by state

statutes is at odds with opinions of several other federal

and state courts from other jurisdictions—including state

courts within the Ninth Circuit itself—regarding the

' By letters filed with the Clerk of the Court, Petitioner and

Respondent have consented to the filing of this brief. This brief was

prepared in its entirety by amici curiae and their counsel. No

monetary contribution toward the preparation or submission of this

brief was made by any person other than amici curiae, their

members, and their counsel.

scope of preemption. The result is that national banks

have no definitive guidance as to what state laws, if any,

apply to them and when. Amici therefore have a strong

interest in the resolution of the preemption question

raised by Petitioner.

SUMMARY OF ARGUMENT

Over a century ago, this Court recognized that the

NBA sprang out of Congress’s imperative to create a

national banking system “with uniform operation”

governed exclusively by federal law, free from state

interference. Talbott v. Bd. of Com’rs of Silver Bow

County, 139 U.S. 438 (1891). But now, national banks

have no clear, much less definitive guidance as to what

employment laws apply to them and when. The Ninth

Circuit stands in direct conflict with the Fourth and Sixth

Circuits on the question of whether state employment

discrimination statutes are preempted by the NBA and

similar federal bank acts. The Ninth Circuit ruling also

jurther muddles confusion among the lower courts as to

the scope of preemption when state employment laws are

inconsistent with comparable federal laws.

Consequently, depending upon where a suit is filed, a

national bank can be always subject to state law, never

subject to it, or sometimes subject to it and sometimes

not. And when the national bank is subject to state law,

it may be subject to some provisions and not others. The

answér in some states—like California—depends on

whether the case is brought in the state courthouse or in

the federal courthouse across the street. Where Congress

wanted harmony, the lower courts have yielded

cacophony. For this reason alone, certiorari should be

granted to clarify once and for all what employment laws

apply to the banks organized under federal law, and how.

Resolution of these conflicts is of fundamental

importance to the national banks. The 50 states, the

District of Columbia, and federal territories all have

enacted their own employment discrimination statutes,

many with standards different from federal law and from

each other. Subjecting national banks to these competing

standards would undermine Congress’s goal of ensuring

national banks a uniform, federal standard and insulating

them from state intrusion. Thus, in the hopes of restoring

the uniform federal regulation that Congress intended—

or at least providing national banks with certainty on

what laws control—amici urge this Court to grant

certiorari.

ARGUMENT

I. CERTIORARI SHOULD BE GRANTED BECAUSE

FEDERAL AND STATE COURTS ARE SHARPLY

DIVIDED ABOUT WHETHER AND HOW MUCH

THE NATIONAL BANK ACT PREEMPTS STATE

LAW.

This Court long ago recognized that the NBA sprang

from Congress’s imperative to create a national banking

system “with uniform operation”—under federal law—

free from a dizzying and potentially disruptive maze of

state and local regulation. Talbott v. Bd. of Com’rs of

Silver Bow County, 139 U.S. 438 (1891). Because

national banks served such an important role in

protecting the national economy and promoting a national

currency—especially during the Civil War era, when the

relevant provisions of the NBA were passed—Congress

made it a point to erect a wall insulating the national

banks from hostile states bent on destroying them and

ensuring that federal law alone would govern their most

important functions. See Beneficial Nat'l Bank v.

Anderson, 539 U.S. 1, 10 (2003).

One of the protections Congress adopted to protect

national banks from hostile state regulators, and subject

' them to a uniform regime of federal regulation, was the

tule giving national banks complete discretion in

disntissing officers free from intrusive state regulation.

Congress authorized national banks “to appoint a

president, vice president, cashier, and other officers,

define their duties, . . . [and] dismiss such officers or any

of them at pleasure, and appoint others to fill their

places.” 12 U.S.C. § 24(Fifth). Congress chose the same

“at pleasure” dismissal language to achieve the same

goals in the Federal Reserve Act (“FRA”) and Federal

Home Loan Bank Act (“FHLBA”), 12 U.S.C.

§ 341(Fifth) and 12 U.S.C. § 1432(a), which has led the

courts to interpret these provisions coextensively, see,

e.g., Mele v. Fed. Reserve Bank, 359 F.3d 251, 255 (3d

Cir. 2004); Arrow v. Fed. Reserve Bank, 358 F.3d 392,

394 (6th Cir. 2004); Inglis v. Feinerman, 701 F.2d 97, 98

(9th Cir. 1983), cert. denied 464 U.S. 1040 (1984).

To be sure, this at-pleasure provision—reposing in

federal banks complete discretion in decisions about

which employees were not fit to keep their jobs—served

goals beyond uniformity and insulation from hostile

states. Congress considered it important to grant federal

banks the unfettered discretion to terminate officers at

will “whenever the suspicion of faithlessness or

negligence attaches to them” without fear of potential

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

Cir. 1896). Without that latitude, Congress feared, the

public’s trust in federal banks would wane, and citizens

would favor local, community banks over national banks.

While Congress has since limited this discretion with the

enactment of federal employment discrimination laws

like Title VII of the Civil Rights Act of 1964 (“Title

VII”), 42 U.S.C. §§ 2000e et seg., and the Age

Discrimination in Employment Act of 1967 (“ADEA”),

29 U.S.C. §§ 621 et seq., it has never wavered from the

imperative of ensuring uniform dismissal standards under

federal law for all national banks.

The lower courts have demolished any semblance of

uniform federal standards. The courts of appeals are

irreconcilably split over the most fundamental question

of whether state employment discrimination laws can be

directed against national banks at all. The lower courts

are also confused about the scope of preemption where

state law employment discrimination claims are

inconsistent with federal standards. The result is

contrary to Congress’s intent in regards to national

banks. National banks are distinct from other national

employers because Congress has mandated that

distinction by providing for a uniform regulatory system

regarding the dismissal of officers. The chaos created by

the current state of the law, however, now puts national

banks in a worse position than other national employers,

not knowing whether the patchwork of state and federal

regulations will apply to their employees. This

eviscerates the uniform system of exclusively federal

regulation that Congress envisioned.

A. The Circuits Are Hopelessly Split As to

Whether State Employment Discrimination

Laws Are Entirely Preempted.

The split among the courts of appeals is direct and

irreconcilable. The result is not just differing preemption

rules from one jurisdiction to the next, but, in some

states, differing rules depending upon whether the case is

litigated in state or federal court.

1. The Ninth Circuit’s opinion is in direct

conflict with opinions of the Fourth and

Sixth Circuits.

A national bank facing a state law discrimination

claim like Ms. Kroske’s will receive diametrically

opposite rulings depending upon where it is sued.

If the officer files the claim in a federal court within

the Fourth or Sixth Circuit, or in a California state court,

the claim will be dismissed. These courts have held that

state employment discrimination laws purporting to

regulate national banks necessarily conflict with

congressional intent and are thus completely preempted.

Ana Leon T. v. Fed. Reserve Bank of Chi., 823 F.2d 928,

931 (6th Cir. 1987) (holding that Michigan’s employment

discrimination statute was preempted by the FRA);

Arrow v. Fed. Reserve Bank of St. Louis, 358 F.3d 392,

393 (6th Cir. 2004) (affirming dismissal of Kentucky

employment law claims because at pleasure provision of

the FRA “applies to preempt state employment rights”);

Andrews v. Fed. Home Loan Bank of Atlanta, 998 F.2d

214, 220 (4th Cir. 1993) (applying Sixth Circuit

precedent in the analogous context of a wrongful

termination dispute); Peatros v. Bank of America

NT&SA, 990 P.2d 539, 559, 563 (Cal. 2000) (plurality

holding that state statute entirely preempted by the

NBA). As the Fourth Circuit put it: “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 afforded by Congress.” Andrews, 998

F.2d at 220 (emphasis added).

If, however, the officer brings the claim in a federal

court within the Ninth Circuit, or in certain other states,

the claim will survive. The Ninth Circuit, joining other

courts, has now held that the federal banking laws do not

preempt state employment discrimination laws with

regulatory and remedial schemes that are completely

different from federal discrimination laws so long as they

are substantively comparable to federal employment

laws. See, e.g., White v. Fed. Reserve Bank, 660 N.E.2d

493, 496 (Ohio Ct. App. 1995) (the dismissal-at-pleasure

provision only creates an at-will employment agreement;

since states may carve out exceptions to at-will

employment, the FRA does not preempt state-created

exceptions); Moodie v. Fed. Reserve Bank of New York,

831 F. Supp. 333, 337 (S.D.N.Y. 1993) (the at-pleasure

provision of FRA does not mean that “Congress intended

that section to exempt the Federal Reserve Banks, in the

area of employment discrimination, from statutes or

regulations of the states in which they operate,

particularly when the state statutory scheme is consistent

with federal legislation”); Moodie v. Fed. Reserve Bank

of New York, 835 F. Supp. 751 (S.D.N.Y. 1993); see also

James v. Fed. Reserve Bank of New York, No. 01-CV-

1106(RJD)(VVP), 2005 WL 1889859, *7 (E.D.N.Y Aug.

8, 2005); Katsiavelos v. Fed. Reserve Bank of Chicago,

No. 93 C 7724, 1995 WL 103308 (N.D. Ill. Mar. 3,

1995).

There is no way to reconcile these two lines of

authority. No amount of percolation in the lower courts

will resolve the conflict. The split will remain, and likely

deepen, until this Court intervenes to resolve the conflict.

2. Outcomes can depend on whetiecr a case is

litigated in state or federal court.

To make matters worse, the same national bank can

see different outcomes in the same discrimination claims

based solely upon whether the claim is litigated in the

state court or in a federal court next door.

If a bank officer brings a state law discrimination

claim in federal court in California, the claim will

survive, according to the Ninth Circuit. But if the same

officer brings the same state law discrimination claim in

California state court, the claim will not survive. The

California Supreme Court has unanimously held that the

NBA preempts California’s employment discrimination

statute to some degree, Peatros v. Bank of America

NT&SA, 990 P.2d 539 (Cal. 2000), with a majority of the

Court holding that the NBA preempts state law

discrimination claims entirely. Jd. at 563 (Brown, J.,

dissenting), 559 (Kennard, J., concurring).? The majority

? Justice Brown’s opinion was fashioned as a dissent because four of

the other seven justices, for different reasons, held that summary

judgment had been inappropriate, whereas Justice Brown would

have upheld summary judgment. For this reason, the opinion by

Justice Mosk is labeled the “lead opinion” in California because

along with a concurrence by Justice Kennard, it formed the majority

to overturn summary judgment. But Justice Brown's views on the

scope of preemption represents the law of California, because it

garnered four votes.

In her Brief in Opposition, Respondent erroneously asserts that

Peatros is not precedential law in California because Justice

Brown's decision is labeled as a dissent to the holding of the court.

(Resp.'s Opp. Br. at 11-12.) Contrary to what she states, however,

California courts, including the California Supreme Court, count

opinions of justices who dissented in the result but concurred as to a

(footnote continued...)

reasoned that allowing states to impose their own

substantive laws would frustrate Congress’s vision of

uniform federal standards. Peatros, 990 P.2d at 563

(Brown, J., dissenting).

An Ohio employment discrimination lawsuit presents

the flip side of the same jurisdictional crapshoot. If the

state discrimination claim is brought in state court, it will

(continued from previous page)

point of law to determine whether in any plurality decision there is a

majority opinion as to a rule of law. See, e.g., DeRonde v. Regents

of Univ. of Cal., 625 P.2d 220, 223-24 (Cal. 1981), cert. denied 454

U.S. 832 (1981) (following rule of law laid down by four dissenting

justices and one concurring justice of the U.S. Supreme Court in

Univ. of Cal. Regents v. Bakke, 438 U.S. 265 (1978)). Respondent

also refers to several California cases that cite to Justice Mosk’s

lead opinion for support on issves of law. (Resp.’s Opp. Br. at 12-

13 & n.3.). While she is correc: that Justice Mosk’s opinion is cited

as persuasive authority in these cases, in each case the citation is to

a rule of law unanimously agreed upon in Peatros. For instance, in

Nordyke v. King, 44 P.3d 133, 138 (Cal. 2002), the California

Supreme Court cited to Justice Mosk’s opinion for the unremarkable

proposition that partial preemption does not wholly invalidate a

statute. Every Justice in Peatros agreed this was the law; the

question in that case was not what effect partial preemption by the

NBA would have, but whether NBA preemption was partial at all.

Thus, Nordyke does not alter the precedential value of Justice

Brown’s and Justice Kennard’s opinion in Peatros. Likewise, every

other case cited by Respondent relies on Justice Mosk’s opinion as

properly stating the standard to determine if preemption exists.

Again, the proper standard was something agreed upon by all

justices in Peatros, the plurality resulted in the application of the

standard to the state statute at issue. Suffice it to say that not one of

the cases cited by Respondent follows Justice Mosk's specific

Opinion on whether the NBA partially preempts the FEHA as

precedential. Under California law, Justice Mosk’s opinion is not

precedential on that particular question.

survive. See White v. Fed. Reserve Bank, 660 N.E. 2d at

496. But if the bank can remove it to federal court, the

claim will be dismissed. See Ana Leon T. v. Fed. Reserve

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

that Michigan’s employment discrimination statute was

preempted by the FRA); Arrow, 358 F.3d at 393 (same).

A national bank’s susceptibility to a state law

discrimination charge, then, can depend not just upon the

state, and not just on whether the officer files the lawsuit

in state or federal court, but on the fortuity of whether the

bank is a citizen of the state in which the lawsuit is filed.

The current law assures national banks about as much

uniformity and certainty as a game of Russian roulette.

B. Even Courts that Agree that the National Bank

Act Preempts State Law Discrimination Claims

Are Split on the Scope of Preemption, with the

Ninth Circuit Adding to the Confusion.

To say that the courts are split over whether the NBA

preempts state employment discrimination laws barely

scratches the surface of the conflict. Even among

jurisdictions that hold that the NBA preempts state

employment discrimination laws, the courts § are

hopelessly split as to the scope of the preemption.

Before the Ninth Circuit weighed in, there were

already two conflicting camps. On one side is the view

(adopted in California, as well as the Fourth and Sixth

Circuits) that the NBA preempts state law completely.

Peatros, 990 P.2d at 563 (Brown, J., dissenting). Any

less robust form of preemption would burden the state

courts and administrative agencies with a cumbersome

preemption analysis of every procedural advantage or

remedial device available. /d. at 563. This would be “a

high price to pay for a cause of action that merely

duplicates remedies already available under Title VII and

ADEA.” Id.; see Fasano v. Fed. Reserve Bank of New

York, No. 05-4661 (3d Cir. Aug. 3, 2006) (holding that

FRA preempts state law provisions completely unless

state statutes are exactly the same as_ federal

counterparts) (approving Evans v. Fed. Reserve Bank of

Philadelphia, No. Civ.A.03-4975, 2004 WL 1535772, at

*6 (E.D. Pa. 2004) (endorsing “practical” preemption,

but when a state statute has any provisions that expand

either the rights or remedies permitted by federal law, the

statute conflicts with federal law and must be preempted

in its entirety; courts, particularly federal courts, should

not be rewriting state statutes)).

On the other side is the view that the NBA preempts

state employment discrimination statutes, but only

“partially’—only to the extent that the remedial

provisions are in synch. Peatros, 990 P.2d at 553 (Mosk,

J.). Thus, by this view, state law claims for age and race

discrimination should not be dismissed entirely because

federal law, too, prohibits age and race discrimination.

Id. at 552. But the remedies available under state law

cannot exceed the federal remedies. /d. Thus, for

example, the minority faction of the California Supreme

Court held that federal law, which caps damages,

preempts the state statute to the extent that it allows

unlimited compensatory and punitive damages. /d.

Into this fray entered the Ninth Circuit with what

appears to be yet a third approach. At first blush, the

Ninth Circuit appears to hold that the NBA does not

preempt the Washington Law Against Discrimination

(““WILAD”), Wash. Rev. Code §§ 49.60.010-.400, at all,

simply because both the WLAD and the ADEA prohibit

termination of employees for being 40 or over. Kroske v.

U.S. Bank Corp., 432 F.3d 976, 988-89 (9th Cir. 2005),

as amended on denial of reh'g (Feb. 13, 2006). On

closer inspection, however, it becomes apparent that the

holding is more limited. Recognizing “Congress’s intent

to create a national banking system with ‘uniform and

universal operation through the entire territorial limits of

the country,’” the Ninth Circuit hinted that it would

preempt “state law prohibitions against discriminatory

terminations that are mot consistent with federal anti-

discrimination laws.” /d. at 989 (emphasis added)

(quoting Talbott v. Bd. of Com’rs of Silver Bow County,

139 U.S. 438 (1891)). The key for the Ninth Circuit is

whether the state statute “substantively mirrors a claim

under the ADEA” or another federal anti-discrimination

statute. Jd. at.989.

The court does not explain what it means for a state

claim to “substantively mirror” a federal one. Is it, as the

quoted language suggests, only when the grounds for

termination enumerated in the state statute are the same

as those covered by federal law? In that case, perhaps an

age discrimination claim would be preempted only when

the comparable federal law provides no redress—~as

would be the case, for example, if state law would allow

a 38-year-old to sue for age discrimination, contrary to

the federal law that requires the employee to be 40 years

old. Or does a state law “substantively mirror” federal

law only to the extent that the remedies and procedures

are the same? Cf Fasano v. Fed. Reserve Bank of New

York, No. 05-4661 (3d Cir. Aug. 3, 2006) (holding that

state statutes that differ in remedies are preempted by

FRA even when substantive protected categories may be

the same). In that case, as we shall see, many attributes

of the WLAD remedy would fail the test.

Whatever the answer in the Ninth Circuit, there is no

disputing that even the courts that agree that the NBA

preempts state employment discrimination laws do not

speak with one voice as to the scope of the preemption.

And, again, the disagreements are unlikely to resolve

themselves until this Court intervenes.

fl. THE ISSUE IS IMPORTANT BECAUSE

SUBSTANTIAL DIFFERENCES BETWEEN

STATE AND FEDERAL EMPLOYMENT

DISCRIMINATION STATUTES ABOUND,

FRUSTRATING CONGRESS’S DESIRE FOR

UNIFORM FEDERAL STANDARDS.

The conflicts among the lower courts have practical

ramifications precisely because the differences between

state and federal employment discrimination laws can be

so substantial. We briefly review the types of differences

that abound, and then explore how those differences

affect the national banks.

A. State Employment Discrimination Law Differs

from Federal Law in Numerous Ways.

Differences in Protected Categories. Several states

extend discrimination law well beyond the reach of

federal law. For example, unlike federal law, 21 states

(including both Washington and Californiz) prohibit

termination because of marital status, and 16 (again

including both Washington and California) prohibit

discrimination on the basis of sexual orientation. Other

states variously prohibit discrimination on the basis of

familial status, Or. Rev. Stat. § 659A.309; Pa. Stat. Ann.

tit. 43, § 953; place of birth, Vt. Stat. Ann. tit. 21 § 495;

criminal record, 775 Ill. Comp. Stat. 5/7-103; Wis. Stat.

§ 111.321; public assistance, Minn. Stat. § 363A.08;

N.D. Cent. Code, § 14-02.4-03; and political affiliation,

D.C. Code § 2-1402.11. The District of Columbia goes

further, prohibiting termination based on_ personal

appearance or, indeed, “any reason other than that of

individual merit.” D.C. Code § 2-1401.01.

Even within the categories otherwise protected by

federal law, state and federal law differ in significant

ways. For example, under the ADEA, only an employee

who is 40 or older can claim age discrimination.

Numerous states expand this category, either by allowing

a plaintiff of any age to claim age discrimination or by

allowing anyone from age 18 and up to do so (five states

and D.C.).

Likewise, the federal Americans With Disabilities Act

protects persons with disabilities from discrimination.

Under this federal law, to be disabled, a plaintiff must

prove he or she suffers from a condition that

“substantially limits” a “major life activity.” 42 U.S.C.

§ 12102(2)(A); Sutton v. United Air Lines, Inc., 527 U.S.

471, 482-83 (1999). Several states including California

and Connecticut have enacted far broader definitions of

who is “disabled” under state law, thereby increasing

protections ts persons not covered under federal law.

Cal. Gov’t Code § 12926.1(c); Conn. Gen. Stat. § 46a-

60(a).

Differences in What Employers Are Covered. There

are also differences in what employers are covered. Title

VII applies only to employers of 15 or more employees;

the ADEA applies only to employers of 20 or more. In

contrast, 35 states and the District of Columbia apply

their laws to employers of fewer than 15 employees.

Remedial Differences. Various states also offer

remedial schemes that differ substantially from federal

law. Title VII and other federal laws place strict limits

on the nature and amount of compensatory and punitive

damages, including emotional distress damages, capping

them at $300,000. 42 U.S.C. § 1981la(b)(3). The ADEA

does not even allow for emotional distress damages, and

replaces punitive damages with double the amount of

economic damages if the plaintiff establishes willful

misconduct. 29 U.S.C. § 626(b). In contrast, most

states, including both Washington and California, allow

limitless awards for emotional distress or punitive

damages and have no double damages provisions. See,

e.g., Wash. Rev. Code § 49.60.030(f)(2); Blaney v. Int'l

Ass'n of Machinists and Aerospace Workers, Dist. No. 1,

87 P.3d 757, 759, 762-63 (Wash. 2004) (WLAD provides

for all actual damages incurred); Commodore Home Sys.,

Inc. v. Superior Ct., 649 P.2d 912, 918 (Cal. 1982)

(unlimited compensatory and punitive damages available

under California law).

Different Defenses. The defenses available under

federal statutes are not always available under state law.

To take one example that seems especially salient in this

case, federal law allows an employer to invoke a “mixed

motive” defense, see, e.g., Rachid v. Jack In the Box,

Inc., 376 F.3d 305, 311 (5 Cir. 2004), which is

unavailable under the WLAD, see McKay v. Acorn

Custom Cabinetry, Inc., 898 P.2d 284, 293-94 (Wash.

1995) (Madsen, J., dissenting) (noting WLAD does not

recognize mixed motive cases). This defense applies to

an employer who has taken a protected characteristic into

account in its termination decision. The defense, if it

applies, absolves the employer of liability if the employer

establishes it would have made the same decision without

regard to the impermissible consideration. Desert

Palace, Inc. v. Contra Costa, 539 U.S. 90, 99 (2003).

Procedural Differences. There are also vast

procedural differences between the federal and state

{

‘

systems. For instance, many federal statutes, including

Title VII, require administrative exhaustion before the

employee files a suit. 42 U.S.C. § 2000e-5(f)(1). The

reason for administrative exhaustion is that Congress has

determined that a federal agency, the EEOC, has

specialized ability to investigate and root out invidious

practices. Five states, including Washington, do not

require such exhaustion for claims. 12 states, including

California, imbue the state agencies with more authority

than Congress has given the EEOC, such as permitting

them to award relief calculated to deter future violations,

including attorneys fees’ and costs, e.g., Alaska Stat.

§ 18.80.130, or administrative fines, e.g., N.H. Rev. Stat.

Ann. § 354-A:21.

The statutes of limitations also vary between federal

and state law. Title VII requires a plaintiff to file an

administrative charge of discrimination within 180 days

of the alleged misconduct and, after receiving a “right to

sue” notice, the plaintiff has 90 days to file a civil

complaint.” 42 U.S.C. §§ 2000e-5(c), 2000e-5(e)(1),

2000e-5(f)(1). The ADEA provides a two year statute of

limitations for non-willful violations. In contrast, 15

States, including Washington and California, expand the

deadlines to file administrative charges longer than 180

days and give eriployees more time to file civil actions.

Cal. Gov’t Code §§ 12960(b), 12965(d) (in California,

employees have a year after a right to sue issues to file a

civil complaint); Wash. Admin. Code § 162-08-071(5);

> This 180 days to file an initial charge is expanded to 300 days if a

state does not have a deferral agency. 42 U.S.C. § 2000e-S(e)(1).

Currently, all but four states have deferral agencies.

Martini v. Boeing Co., 945 P.2d 248 (Wash. App. 1997),

aff'd 971 P.2d 45 (Wash. 1999) (three year statute of

limitations applies to actions under WLAD).

Moreover, states differ from federal law as to what act

begins the running of the statute of limitations. Under

federal law, notice of a pending termination is sufficient

to begin the time period to file suit. California, by

contrast, does not start the clock until the actual

employment action takes place. Romano v. Rockwell

Int'l, Inc., 926 P.2d 1114, 1127 (Cal. 1996).

Differences in individual Liability. Finally, federal

law and state law may differ in terms of the liability

borne by individual managers who make termination

decisions. Title VII and the other federal laws do not

permit individual liability for termination decisions. See

Miller v. Maxwell's Int’l, Inc., 991 F.2d 583 (9th Cir.

1993), cert. denied by Miller v. La Rosa, 510 U.S. 1109

(1994), reh’g denied 511 U.S. 1048 (1994). In contrast,

at least four states, including Washington and California,

authorize individual liability, thus subjecting bank

managers to liability for their decisions to terminate bank

officers. See Brown v. Scott Paper Worldwide Co., 20

P.3d 921, 926 (Wash. 2001); Walrath v. Sprinkel, 121

Cal. Rptr. 2d 806 (Cal. Ct. App. 2002) (supervisors

personally liable for retaliation under California statute);

Winarto v. Toshiba Am. Elecs. Components, Inc., 274

F.3d 1276, 1288 (9th Cir. 2001) (same).*

* See also lacampo v. Hasbro, Inc., 929 F. Supp. 562 (D.R.1. 1996):

St. Peter v. Ampack-Division of Gatewood Prods., Inc., 484 $.E.2d

481 (W. Va. 1997); Vivian v. Madison, 601 N.W.2d 872 (lowa

1999).

B. The Numerous Distinctions, and the

Uncertainty Surrounding Preemption,

Undermine Congress’s Goals.

Congress wanted national banks to be subject to

uniform federal standards not for aesthetic reasons, but

for practical ones. To ensure public trust in nationally

chartered banks, national banks had to have the latitude

to make quick, decisive employment decisions, and to

make these decisions consistently regardless of where the

particular officer happens to sit.

When national banks are subject to competing or

unclear standards, this goal cannot be achieved.

Employers do not decide whether to terminate an officer

in a vacuum. Even armed with a strong business

justification for the termination, a prudent employer

evaluates whether the decision carries with it the danger

of a lawsuit, what the potential liability could be, and

what procedural advantages and disadvantages it will

face in eventual litigation. Differences in substantive

rights, remedies, and procedures affect the calculus

profoundly, as does uncertainty as to which body of law

governs the decision and any dispute that follows in its

wake.

For example, a national bank deciding whether to fire

a poor-performing officer for perfectly valid business

reasons might reach different conclusions depending

upon whether the officer could avail himself of a cause of

action under state law that would not exist under federal

law. Similarly, a bank manager may respond differently

to a bank officer’s misconduct depending upon whether

the manager faces personal liability for a termination.

In each situation, the bank’s response might be

precisely the opposite of what Congress intended under

Section 24(Fifth), erring on the side of retaining the

officer, rather than exercising the power granted by

Congress to take appropriate employment action.

The calculus is equally affected by the damages

differential. A bank deciding whether to fire an officer

of questionable ethics might well reach different

conclusions depending upon whether the termination

could expose the bank to limitless punitive damages. The

institutional response, again, could be to be to retain

officers rather than—as Congress intended—‘immediate

removal whenever the suspicion of faithlessness or

negligence attaches to” an officer. Westervelt v.

Mohrenstecher, 76 F. 118, 122 (8th Cir. 1896).

In short, a national bank’s response to the same exact

situation will differ significantly based solely on where

the bank officer is located. That is exactly the opposite

result intended by Congress. The Ninth Circuit’s

decision confuses and confounds these issues. The open

question of NBA preemption thus has practical effects

warranting review by this Court.

CONCLUSION

This Court should grant the Petition for Writ of

Certiorari.

Respectfully submitted,