Opposition Brief — Fasano v. Federal Reserve Bank of New York, 127 S. Ct. 977 (2007) (No. 06-634)

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No. 06-634

“ IN THE

Supreme Court of the United States

MAUREEN FASANO,

Petitioner,

v,

FEDERAL RESERVE BANK OF NEW YORK, et al.,

Respondents.

On PETITION FOR A Writ OF CERTIORARI TO THE

UNITED STaTeEs COURT OF APPEALS

FOR THE THIRD CIRCUIT

BRIEF IN OPPOSITION

Tuomas C. BaxTEr, JR.

MICHELE H. KALSTEIN*

Barry M. SCHINDLER

FEDERAL RESERVE BANK OF NEW YORK

33 Liberty Street |

New York, New York 10045

(212) 720-5000

Counsel for Respondents

* Counsel of Record —

a

ore

205291 g

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

i

COUNTERSTATEMENT OF THE

QUESTIONS PRESENTED

1. Whether a writ of certiorari should be granted where

the Third Circuit correctly found that federal law preempts

the application of two New Jersey employment statutes to

the Federal Reserve Bank of New York, because these New

Jersey statutes impose far greater substantive and procedural

rights and remedies than corresponding federal law, and

thereby frustrate Congressional intent to provide Federal

Reserve Banks with broad employment discretion in the

performance of their federally mandated central banking

functions.

2. Whether a writ of certiorari should be granted where

the Third Circuit Opinion is in harmony with this Court’s

preemption jurisprudence and does not conflict with any

decision of a Court of Appeals or state court of last resort.

eT

li

CORPORATE DISCLOSURE STATEMENT

PURSUANT TO SUPREME COURT RULE 29.6

Respondent Federal Reserve Bank of New York (“New

York Fed”) is a corporation chartered under the laws of the

United States pursuant to the Federal Reserve Act of 1913,

12 U.S.C. § 221 et seg. The New York Fed, a corporate

instrumentality of the United States government, has no

parent company, nor does it have any subsidiaries or affiliates.

Stock of the New York Fed is owned by member commercial

banks within the Second Federal Reserve District. The

stockholders, however, do not control the New York Fed.

Stock of a Federal Reserve Bank is acquired because its

ownership is a condition of membership in the Federal

Reserve System. Federal Reserve Bank stockholders do not

possess a residual equity interest in Reserve Bank assets.

That residual interest remains always with the United States.

lil

TABLE OF CONTENTS

Page

COUNTERSTATEMENT OF THE QUESTIONS

PUREE 56 Wve xdben coed denl setae i

CORPORATE DISCLOSURE STATEMENT

PURSUANT TO SUPREME COURT RULE 29.6

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TABLE OF CITED AUTHORITIES ............ Vv

SUMMARY OF REASONS TO DENY THE

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5, Se ee Ec a ok os we cette oc a eee 2

ih. Fae Pee We, a ko baka oo ween 2

i I kg eet oe ae oc ae 5

Il. PROCEDURAL HISTORY .....--cecss 5

i ee CE 6 oo os ree 5

B. The Motion to Dismiss ............. 6

Il. THE THIRD CIRCUIT OPINION ........ 6

lv

Contents

REASONS FOR DENYING THE PETITION ..... 8

I. THE THIRD CIRCUIT OPINION IS IN

HARMONY WITH THIS COURT’S

PREEMPTION JURISPRUDENCE ....... 8

Il. THERE ARE NO CIRCUIT OR STATE

COURT CONFLICTS WARRANTING

Ge SIE, Spi ake be eee ree. does 1]

A. There Is No Inter-Circuit Conflict ..... 11

1. The Broader Approach .......... 13

2. The Narrower Approach ......... 14

a. Ninth Circuit Jurisprudence... 15

b. The Third Circuit Opinion .... 16

3. Petitioner’s Claims Are Preempted

Under Either the Broader or the

Narrower Approach ............ 17

B. There Is No Conflict with a State Court

Oe a 20

Ce RE: oa cas won ieress ane eakedsewns 22

TABLE OF CITED AUTHORITIES

Page

Cases

A.B.C. v. XYZ Corp., 660 A.2d 1199 (N.J. Super. Ct.

RTI SOE hea eee bad bie ekeeoOeeens 18

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

aE GN SORTED 6 i sini RS ek Rao es 14

Andrews v. Fed. Home Lean Bank of Atlanta,

SOG F206 214 00" Ce. 1999) ok soci vince 14

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

See GE: Be kines bee 13-14

Baker v. Nat’l State Bank, 801 A.2d 1158 (N.J. Super.

Ce. Fe ae Ee or Fao eeecae ws aes 20

Blackburn v. United Parcel Serv., 3 F. Supp. 2d 504

(D.N.J. 1998), aff’d, 179 F.3d 81 (3d Cir. 1999)

Ree eee apo eaneey aed Come en es 19

Bollow v. Fed. Reserve Bank of S.F., 650 F.2d 1093

Ser a BONE 0 ds awe oe eek te 16

English v. Gen. Elec. Co., 496 U.S. 72 (1990) .....

Pe CCU gl wus Res tae ee ed 6,9, 10, 16

Enriquez v. W. Jersey Health Sys., 777 A.2d 365

(NJ. Super. CL Aon. Div. 2001) 2. oc ccecccws 18

vi

Cited Authorities

Page

Evans v. Fed. Reserve Bank of Phila., No. Civ.A.03-

4975, 2004 WL 1535772 (E.D. Pa. July 8, 2004)

SPOS PORE EO PE PE PIPE PENS ee eee were eye 8

Failla v. City of Passaic, 146 F.3d 149 (3d Cir. 1998)

FW SUPE SEC WA pat aD aan ey mne rar eg IS prea ye oe 18, 19-20

Gagliardo v. Connaught Labs., Inc., 311 F.3d 565

SS ES i on ko Sehr e eka 20

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) ... 11

Hernandez v. Montville Twp. Bd. of Educ., 808 A.2d

128 (N.J. Super. Ct. App. Div. 2002), aff’d, 843

ee POON SE SA ok eke ekiwesees 19

Inglis v. Feinerman, 701 F.2d 97 (9" Cir. 1983) ... 16

In re Cahill, 585 A.2d 977 (N.J. Super. Ct. App. Div.

SE ce vi Od RR RSS SCO ERO Le Cae wake 18

_ Koslow v. Commonwealth of Pa., 302 F.3d 161

Sh: SOE 5 49 Ve dK cae SERED EUR EONS 20

Kroske v. US Bank Corp., 432 F.3d 976 (9® Cir.),

cert. denied, 127 S. Ct. 157 (2006) .... 12, 14, 15, 16

Mackey v. Pioneer Nat’! Bank, 867 F.2d 520 (9" Cir.

ESE AES PRA ae he SSL S Seite 9, 16

vii

Cited Authorities

Page

Marinelli v. City of Erie, Pa., 216 F.3d 354 (3d Cir. -

Tara ane ars Bee NE Bye ye eos py ee ca args FL 18-19

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

2, BP eren pape Mery gt Renee prat ok Se ore ihe ae 7,8

Melcher v. Fed. Open Mkt. Comm., 644 F. Supp. 510

(D.D.C. 1986), aff’d, 836 F.2d 561 (D.C. Cir.

SEE i caches ackle le scune kee sees anes 8

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

Inc., 68 F. Supp. 2d 455 (D.N.J. 1999) ........ 20

-Peatros v. Bank of Am., 990 P.2d 539 (Cal. 2000) .... 21

Rouse v. Farmers State Bank of Jewell, Iowa,

866 F. Supp. 1191 (N.D. Iowa 1994) .......... 20

Sargent v. Cent. Nat’l Bank & Trust Co., 809 P.2d

Re BOOED a8 is ewe R Oke ed one ees. (21

Schaefer v. State Ins. Fund, 207 F.3d 139 (2d Cir.

Pre re eee Nearer en pie Sy Ler er atN 19

Shaw v. Delta Air Lines, 463 U.S. 85 (1983) ...... 9

Sheehan v. Anderson, 263 F.3d 159 (3d Cir. 2001),

aff’z, No. 98-5516, 2000 WL 288116 (E.D. Pa.

Rl 0 0a Es oi ho hc eee eee es 14

vill

Cited Authorities

Page

Soules v. Mount Holiness Mem’! Park, 808 A.2d 863

(N.J. Super. Ct. App. Div. 2002) .........04%- 18

Sperry v. Fla. ex rel. Fla. Bar, 373 U.S. 379 (1963)

sewing Md veo Rae EDA Sp eee kee ll

Sutton v. United Air Lines, 527 U.S. 471 (1999) ... = 18

Talbott v. Bd. of County Comm'rs of Silver Bow

Conmty, 139 UB. SSR CISPE) onic vector vives 8-9

United States v. Albertini, 472 U.S. 675 (1985) ....10-11

U.S. Shipping Bd. Emergency Fleet Corp. v. W. Union

Telegraph Co., 275 U.S. 415 (1928) .......... 7

Walleri v. Fed. Home Loan Bank of Seattle, 83 F.3d

BS F5 OO Ge, BO in ii ACNE AE 16

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

Cente CE i: BS ask Fen ck keds chic 20

Constitution and Statutes

ce: CE Oe WE Se an ok 5 eS ees |

12 USA. B20 6 6 ak VOR ase eeee eee 1g, 35

2 USS. Be OO oh od hese’ i, 2

ix

Cited Authorities

Page

EE a 4

EE a asap eeesceestevevesune 3

EE ee 2

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IE Sewn vscvceusvecsevasecsesesss | 4

a 4

es da hake bane o's veke es ess 3

SE ME cava tewdcervecvtresveres 3

aS Si ) passim

12 U.S.C. § 341 (Bighth) ...............0. 00. 2

Rs 4 4

I ecu da erence eusevecevesoees 3

EMME eave yacdswesrdcereseccecers 4

EE oles Wve vivew ba bv eee eveeeees 3

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Cited Authorities

; Page

ES 8 oa Ts RR emer eee ee Pye ee intestine 5, 21

5S Vaan @ RERMEED 5 cs Vetvnacdwccecieeavens 1]

Ce en REED cen ka arse eae ewenens 7, 14, 17, 19

Se MA ee STE ce bicd kb cee cise kaxeen tee 3

pp ie ae Be ee ee Pee meer er ee 3

42 U.S.C. § 12101 et seq. ... , (ice teen ewe ewes 6

Ee Fae Sf Boe power Pere vey rey 18

Re Use MAE hai bow eter ates se pet Enieeae 18

GE UIA GAGES. a heaved CAL gaa es OER ~18

Pub. L. No. 103-66, § 3002(b), 107 Stat. 337 (1993)

Livhs ko cev keen eu eth webeeniedavceae trees 4

N.J. Stat. Ann. § 10:5-1 of 9@@. . oc cccccvccees 5

N.J. Stat. Ann. § 34:19-1 ef seg. ... 2... cece 5

Regulations and Rules

UF eee Os SOE oe ar be ce ede tee caer 4

PCOe we We ee 4

xi

Cited Authorities

Page

ST I atria. Si a We Wah din shee Wide 3

MM As Ge habs Cia eke ee wees 11, 20, 21

Rules of Organization § 3(a), III Fed. Res. Reg. Serv.

ENG ay tie ee ow ieee yaw eee a Oks 4

Other Authorities

91 Fed. Res. Bull. S12 GOOS) 2... ccc cv cece 4

Board of Governors of the Federal Reserve System,

The Federal Reserve System: Purposes &

Functions (9" ed. 2005), available at http://

www.federalreserve.gov/pf/pf.htm ..........5. 8

http://www federalreserve.gov/otherfrb.htm ...... 4

Robert L. Stern et al., Supreme Court Practice

SP I csv aa bs Lad es wees ie nid et 12, 13

l

SUMMARY OF REASONS TO

DENY THE PETITION

The Supremacy Clause mandates that federal law “shall

be the Supreme law of the Land .. . [the] Laws of any State

to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2.

This case concerns whether the Supremacy Clause permits a

plaintiff to bring claims against a Federal Reserve Bank and

its employees under state employment laws that provide

greater substantive and procedural rights and remedies than

the corresponding federal laws. The Third Circuit, like every

other Court of Appeals that has considered this issue, has

found that the “dismiss at pleasure” provision of the Federal

Reserve Act, 12 U.S.C. § 341 (Fifth) (“Section 341 (Fifth)”),

preempts the application of such laws to Federal Reserve

Banks and their employees. ;

Petitioner has presented no compelling reasons why her

Petition for a Writ of Certiorari (“Petition” or “Pet.”) should

be granted. First, Petitioner fails to demonstrate that the Third

Circuit’s August 3, 2006 Opinion and Order (“Third Circuit

Opinion”) conflicts with a decision of this Court, or that the

Third Circuit decided an important federal question that

should be settled by this Court. Second, Petitioner fails to

demonstrate that the Third Circuit Opinion conflicts with a

decision of another Court of Appeals or a state court of last

resort.

Accordingly, the Petition should be denied.

2

STATEMENT OF THE CASE

I. THE PARTIES

A. The New York Fed

The New York Fed is one of twelve Federal Reserve

Banks chartered pursuant to the Federal Reserve Act of 1913

(“FRA”), 12 U.S.C. § 221 et seg. Congress created the

Federal Reserve to serve as the central bank of the United

States. The Federal Reserve consists of the twelve Federal

Reserve Banks, the Board of Governors of the Federal

Reserve System (“Board of Governors”), and the Federal

Open Market Committee (“FOMC”). The Board of

Governors, which consists of seven members nominated

by the President and confirmed by the Senate, see 12 U.S.C.

§ 241, and the FOMC are both independent agencies of the

United States government. The New York Fed, together with

the other eleven Federal Reserve Banks, constitutes the

operational component of the nation’s central bank.

Federal law sets forth the power and authority of the

Federal Reserve Banks. Through its employees, each Federal

Reserve Bank, including the New York Fed, performs a

myriad of central banking functions prescribed by federal

law that are designed to develop, implement and foster the

monetary and fiscal objectives of the United States to serve

the public interest. The functions performed by Federal

Reserve Banks require a high degree of uniformity in order

to ensure consistent application of national policy.

First, Federal Reserve Banks issue and distribute the

nation’s legal tender, Federal Reserve Notes. See 12 U.S.C.

§ 341 (Eighth). This function is particularly relevant, because

3

Petitioner worked in the New York Fed’s cash issuance and

processing operation. (See Pet. at 6.)

Second, Federal Reserve Banks act as the banker for the

United States government. As such, the New York Fed is a

depository of U.S. government funds. See 12 U.S.C. § 391.

The New York Fed acts as fiscal agent for the United States

Department of the Treasury (“Treasury”), such as by issuing

and redeeming U.S. government securities. See id. The New

York Fed also serves as the international operating arm of

the Federal Reserve, maintaining accounts for foreign central

banks and conducting certain investment and trading

activities on their behalf.

Third, the Federal Reserve establishes U.S. monetary

policy through the FOMC, whose mandate is to direct and

regulate the execution of that policy to serve the goals of

“maximum employment, stable prices, and moderate long-

term interest rates.” 12 U.S.C. § 225a. The New York Fed

executes federal monetary policy as contemplated by federal

law through “open-market operations,” where the New York

Fed purchases and sells government securities. See 12 U.S.C.

§ 263(b). The money that is paid or received as a result of

these operations respectively restricts or expands the nation’s

money supply.

Fourth, Federal Reserve Banks carry out federal banking

policy and ensure the safety and soundness of the nation’s

banking system. Federal Reserve Banks~-supervise various

financial institutions-within their regional Federal Reserve

Districts, pursuant to power delegated by the Board of

Governors. See 12 U.S.C. §§ 248(k), 325, 338, 625, 1844(c),

3105; 12 C.F.R. § 265.2.

4

Fifth, federal law sets uniform reserve requirements to

ensure the solvency of depository institutions, and requires that

these reserves are to be held by the Federal Reserve Banks.

See 12 U.S.C. § 461; 12 C.E.R. pt. 204. In addition, federal law

provides for Federal Reserve Banks to maintain a liquid banking

system by acting as lender of last resort through Discount

Window loans. See 12 U.S.C. §§ 343-52, 461(b)(7); 12 C.E.R.

pt. 201.

Pursuant to federal law, each Federal Reserve Bank must

operate within the territorial boundaries of its Federal Reserve

District. Consequently, Federal Reserve Banks do not have the

choice of where they do business, and thus to which state laws

they would be subject. Each of the twelve Federal Reserve

Districts spans multiple states, and all but one span multiple

federal judicial circuits. See 12 U.S.C. § 222; 91 Fed. Res. Bull.

312 (2005); http://www federalreserve.gov/otherfrb.htm

(displaying map of the twelve Federal Reserve Districts). The

New York Fed is located in the Second Federal Reserve District,

which consists of New York, Puerto Rico, the United States

Virgin Islands, and parts of New Jersey and Connecticut. Rules

of Organization § 3(a), III Fed. Res. Reg. Serv. 4 8-012; 91 Fed.

Res. Bull. 312 (2005).

Unlike companies engaged in private enterprise, Federal .

Reserve Banks do not seek profits, but are required to transfer

their net earnings to the Treasury. See 12 U.S.C. § 290. The

United States always retains the residual capital interest in the

Federal Reserve Banks. See id. Congress has on occasion treated

the Federal Reserve Banks as the government’s own rainy day

fund, directing, for example, the payment of over $3.7 billion

to the Treasury in 2000. See 12 U.S.C. § 289. See also Pub. L.

No. 103-66, § 3002(b), 107 Stat. 337 (1993) (directing payment

of $106 million to Treasury in 1997 and $107 million in 1998).

B. Petitioner

Petitioner is a former employee of the New York Fed.

(See Appendix to Petition (“App.”) at 5a-6a.) Petitioner

worked in the New York Fed’s cash issuance and processing

operation, conducted out of the New York Fed’s operations

center in East Rutherford, New Jersey, from October 2000

through December 2001, when she went out on paid medical

leave for an injury she allegedly sustained at work. (App. at

6a.) Petitioner was terminated on July 31, 2002 after she

failed to either return to work or file an application for

disability benefits. (/d.)

Il. PROCEDURAL HISTORY

A. The Complaint

On or about December 19, 2002, Petitioner filed suit in

New Jersey Superior Court against the New York Fed and

seven New York Fed employees. Petitioner’s claims arise

solely under two New Jersey employment statutes, namely,

the Conscientious Employee Protection Act (“CEPA”), N.J.

Stat. Ann. § 34:19-1 et seg., and the New Jersey Law Against

Discrimination (“LAD”), N.J. Stat. Ann. § 10:5-1 et seq.

Petitioner alleged that her “handicaps” under the LAD are

neck and back injuries, and diabetes treatable with moderate

modifications in diet. (App. at 6a.) On February 14, 2003,

Respondents removed the action to the United States District

Court for the District of New Jersey pursuant to 12 U.S.C.

§ 632, the FRA’s removal provision, which provides that all

suits against Federal Reserve Banks are deemed to “arise

under the laws of the United States.”

6

B. The Motion to Dismiss

In June 2003, Respondents moved to dismiss the

Complaint. Among other things, Respondents sought

dismissal pursuant to Fed. R. Civ. P. 12(b)(1) on federal

preemption grounds because the FRA conflicts with and thus

preempts the application of the LAD and CEPA to a Federal

Reserve Bank. As Respondents explained in their motion,

this is so for two reasons. First, Federal Reserve Banks,

including the New York Fed, are instrumentalities of the

United States performing federal functions and are

presumptively immune from state regulation unless Congress

has explicitly authorized that regulation. Second, even under

traditional preemption analysis, Petitioner’s LAD and CEPA

claims are preempted by the FRA because the LAD and CEPA

conflict with federal law and frustrate Congressional intent

to provide Federal Reserve Banks with wide latitude in their

employment decisions. ~

The District Court initially denied Respondents’ motion

in an order dated March 31, 2004, but later certified its

decision for interlocutory appeal pursuant to 28 U.S.C.

§ 1292(b). (See App. at 31a.)

lil. THE THIRD CIRCUIT OPINION

On August 3, 2006, the Third Circuit issued a unanimous

opinion reversing the District Court’s March 31, 2004 order.

The Third Circuit analyzed the LAD and CEPA under the

traditional preemption analysis set forth in English v. General

Electric Co., 496 U.S. 72 (1990), and recognized that these

State statutes far exceeded the substantive, procedural, and

remedial provisions of the Americans with Disabilities Act

of 1990 (“ADA”), 42 U.S.C. § 12101 et seq., and the federal

7

whistleblower protection statute, 12 U.S.C. § 1831) (“Section

1831j”). The Third Circuit held that the expansive scope of

the LAD and CEPA “frustrates the Congressional purpose

behind § 341(Fifth), as impliedly amended by the ADA and

12 U.S.C. § 1831j,” and that the LAD and CEPA were thus

preempted by federal law. (App. at 25a n.10.)

Because the Third Circuit found the English preemption

analysis to be dispositive, the court did not find it necessary

“to reach the broader, albeit amply supportable, conclusion

that the New York Fed is a federal instrumentality.” !

(App. at 14a.) The Third Circuit noted, however, “that strong

arguments have been made in favor of such status,” and that,

in the case of federal instrumentalities, state law is preempted

absent express Congressional authorization to the contrary.

(App. at 12a.) The Third Circuit thus suggested independent

grounds for finding that the LAD and CEPA are preempted

with respect to the New York Fed and its employees based

on the instrumentality status of the New York Fed.

1. The concept that Federal Reserve Banks are instrumentalities

of the United States for purposes of preemption analysis is as old as

Supremacy Clause analysis itself. See McCulloch v. Maryland, 17

U.S. (4 Wheat.) 316, 436-37 (1819) (Bank of the United States, the

predecessor to the Federal Reserve, was an “instrument” of the U.S.

and should be treated like the sovereign for purposes of preemption

analysis). See also U.S. Shipping Bd. Emergency Fleet Corp. v.

W. Union Telegraph Co., 275 U.S. 415, 425-26 (1928) (recognizing

Federal Reserve Banks as federal “instrumentalities’’).

8

REASONS FOR DENYING THE PETITION

I. THE THIRD CIRCUIT OPINION IS INHARMONY

WITH THIS COURT’S PREEMPTION

JURISPRUDENCE

The Third Circuit Opinion is in harmony with one of

this Court’s most venerable precedents, McCulloch v.

Maryland. In McCulloch, the Court considered whether a

Maryland statute could be applied to the Bank of the United

States, the nation’s central bank. The Court held that states

have no power “to retard, impede, burden, or in any manner

control” the operations of the nation’s central bank absent

express Congressional authorization. McCulloch, 17 U.S.

(4 Wheat.) at 436.

The Federal Reserve Act created Federal Reserve Banks,

the modern-day successor to the Bank of the United States.

See Melcher v. Fed. Open Mkt. Comm., 644 F. Supp. 510,

521-22 (D.D.C. 1986), aff'd, 836 F.2d 561 (D.C. Cir. 1987)

(recounting the history of the nation’s central bank). Congress

intended the Federal Reserve Banks to play a major role in

developing, implementing and fostering the monetary and

fiscal policies of the United States. See Board of Governors

of the Federal Reserve System, The Federal Reserve System:

Purposes & Functions at 6-11 (9" ed. 2005), available at

http://www federalreserve.gov/pf/pf.htm.

Congress intended Section 341 (Fifth) “to allow the

federal reserve banks the ‘greatest latitude possible’ in

terminating their employees” in order to maintain the public

trust. Evans v. Fed. Reserve Bank of Phila., No. Civ.A.03-

4975, 2004 WL 1535772, at *5 (E.D. Pa. July 8, 2004) (citing

Talbott v. Bd. of County Comm'rs of Silver Bow County, 139

U.S. 438, 443 (1891) (noting Congressional intent to create

9

national banking system with “uniform operation”); Mackey

v. Pioneer Nat’l Bank, 867 F.2d 520, 526 (9" Cir. 1989)).

Petitioner argues that the LAD and CEPA are not

preempted because the ADA applies to the New York Fed,

and the ADA “itself purports to preserve state laws that

provide greater protections for disabled employees.” (Pet. at

22.) This Court has rejected Petitioner’s “double saving

clause” argument as “simplistic.” Shaw v. Delta Air Lines,

463 U.S. 85, 101 n.22 (1983).* As the Court recognized, “the

double saving clause argument, taken to its logical extreme,

would save almost all state laws from pre-emption.” Jd. The

Court soundly rejected this approach. Jd. The Third Circuit

Opinion followed suit, noting:

[i]t would be a mistake . . . to argue that because

the ADA preempts neither the Federal Reserve Act

nor CEPA or LAD, the Federal Reserve Act cannot

have such preemptive force.

(App. at 25a n.10.)

Petitioner also argues that Congress did not intend

Section 341 (Fifth) to preempt state law because “that

provision actually says not one word about state law.”

(Pet. at 24.) Under Petitioner’s view, a court would look only

2. Petitioner tries to distinguish Shaw by pointing out that the

federal statute in that case included an explicit preemption provision.

(See Pet. at 25 n.6 ) This point, however, is irrelevant. Regardless of

whether preemption is express or implied, a court must examine

Congressional intent. See English, 496 U.S. at 78-79 (“Pre-emption

fundamentally is a question of congressional intent, and when

Congress has made its intent known through explicit statutory

language, the courts’ task is an easy one.”) (internal citation omitted).

10

to whether Congress has expressly preempted a state law,

thereby ignoring the well-settled tenets of field and conflict

preemption. See, e.g., English, 496 U.S. at 79 (“in the absence

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

it regulates conduct in a field that Congress intended the

Federal Government to occupy exclusively” or “to the extent

that it actually conflicts with federal law”) (emphasis added).

Petitioner claims that the Third Circuit held that the LAD

and CEPA were preempted “simply because they provided

remedies or procedures that varied from federal employment

laws.” ? (Pet. at 25.) To the contrary, the Third Circuit held

that the LAD and CEPA go far beyond their federal analogs

with respect to both remedies and substantive protections.

(See App. at 26a-28a.)

Lastly, Petitioner argues that the Third Circuit made a

“radical departure from this Court’s jurisprudence by holding

that any purported ‘conflict’ required the state law to be

preempted in its entirety” and by refusing to “pare back” the

LAD and CEPA to exactly match their federal analogs.

(Pet. at 27 (emphasis added).) Again, Petitioner is incorrect.

The Third Circuit exercised proper judicial restraint by

refusing to rewrite language enacted by the New Jersey

legislature, and thus properly dismissed Petitioner’s LAD

and CEPA claims. See United States v. Albertini, 472 U.S.

675, 680 (1985) (“Statutes should be construed to avoid

constitutional questions, but this interpretative canon is not

3. Petitioner relies on cases that considered, in the absence of

a-federal remedy, the preemption of state causes of action that seek

to enforce federal requirements, such as with respect to package

labeling. (See Pet. at 25-26.) Those cases are inapposite because

Petitioner is not seeking to enforce any federal requirement.

11

\

a license for the judiciary to rewrite language enacted by the

legislature.”). See also Sperry v. Fla. ex rel. Fla. Bar, 373

U.S. 379, 384 (1963) (state law “must yield when

incompatible with federal legislation”) (citing Gibbons v.

Ogden, 22 U.S. (9 Wheat.) 1, 211 (1824) (internal quotation

omitted)).

The Third Circuit Opinion is in perfect harmony with

relevant decisions of this Court. Therefore, this Court should

deny the Petition. See Sup. Ct. R. 10(c).

Il, THERE ARE NO CIRCUIT OR STATE COURT

CONFLICTS WARRANTING CERTIORARI

Petitioner attempts to portray a deepening divide among

the courts that have considered the preemptive effect of the

“dismiss at pleasure” provisions of the “federal Bank Acts.”

(See Pet. at 13-19.) Contrary to Petitioner’s suggestion, the

Third Circuit Opinion represents a growing consensus as to

the proper preemption analysis with respect to Section 341

(Fifth).

A. There Is No Inter-Circuit Conflict

Petitioner argues that four Circuits—the Third, Fourth,

Sixth, and Ninth Circuits—“have now developed at least

three divergent approaches to whether the ‘dismiss at

pleasure’ language preempts state employment laws, leaving

4. Congress included virtually identical “dismiss at pleasure”

provisions in the FRA, Section 341 (Fifth); the Natronal Bank Act

(“NBA”), 12 U.S.C. § 24 (Fifth) (“Section 24 (Fifth)”); and the

Federal Home Loan Bank Act (“FHBLA”), 12 U.S.C. § 1432(a).

12

the jurisprudence in this area in considerable disarray.”

(Pet. at 3.) This is incorrect.

Every Court of Appeals that has addressed this issue has

uniformly found that the FRA’s “dismiss at pleasure” provision

(as well as the analogous provisions in the NBA and FHLBA),

at a minimum, preempts state employment laws like the LAD

and CEPA, which provide greater substantive and procedural

rights and remedies than corresponding federal laws.° No federal

appellate court has concluded that any Federal Reserve Bank

anywhere is subject to state employment laws that provide

greater substantive or procedural rights or remedies than federal

5. In fact, earlier this term, the Court denied a petition for

certiorari in Kroske v. US Bank Corp., 432 F.3d 976 (9" Cir.),

cert. denied, 127 S. Ct. 157 (2006), which alleged conflicts between

Circuit and state courts—including conflicts with the Third Circuit

Opinion—nearly identical to those asserted in the instant Petition.

6. Petitioner argues that the Third Circuit Opinion also conflicts

with district court decisions on this issue. This argument is inapposite.

See Robert L. Stern et al., Supreme Court Practice 237 (8th ed. 2002)

(“The Supreme Court will not grant certiorari to review a decision

of a federal court of appeals merely because it is in direct conflict

on a point of federal law with a decision rendered by a district court,

whether in the same circuit or in another circuit.”).

Nonetheless, nearly every district court that has considered this

issue has held that the “dismiss at pleasure” provisions in the FRA,

NBA and FHLBA preempt state employment laws like the LAD and

CEPA, which provide greater substantive and procedural rights and

remedies than corresponding federal laws. (See App. at 22a-23a

(discussing cases).)

13

law.’ Even Petitioner concedes that every Court of Appeals that

has addressed the preemptive scope of the “dismiss at pleasure”

provisions has agreed, at a minimum, that these provisions

preempt state employment law “to the extent there [are] any

significant variations between state and federal law.” (Pet. at

17 (emphasis added).)

==

The only difference is the method used to reach the same

result. As discussed in more detail below, the Fourth and Sixth

Circuits have taken a broader approach to the instant preemption

analysis, while the Third and Ninth Circuits have adopted a

narrower approach. This difference does not rise to the level of

conflict necessary to merit a grant of certiorari. See Stern et al.,

supra note 6, at 225 (to justify a grant of certiorari, “there must

be a real or ‘intolerable’ conflict on the same matter of law or

fact”).

1. The Broader Approach

The Fourth and Sixth Circuits have adopted the broader

approach that the “dismiss at pleasure” language preempts-

all employment rights created by state law. See Arrow v. Fed.

7. By omitting relevant portions of quotations or taking

quotations out of context, Petitioner mischaracterizes Respondents’

briefs below to claim that the New York Fed has conceded the

existence of a conflict on the instant preemption issue. (See, e.g.,

Pet. at 8, 10, 13.) Petitioner is wrong. Respondents have always

recognized that the Courts of Appeals are in harmony with respect

to the “dismiss at pleasure” provisions’ preemptive effect on state

laws that provide greater substantive and procedural rights and

remedies than federal anti-discrimination laws. Respondents argued

below that the District Court’s decision stood in direct conflict with

the holdings of other Circuits and of district courts within the Third

Circuit on important Constitutional issues. The Third Circuit Opinion

has now resolved this conflict.

14

Reserve Bank of St. Louis, 358 F.3d 392, 393 (6" Cir. 2004)

(affirming dismissal of plaintiff's Kentucky employment law

claims against Federal Reserve Bank because Section 341

(Fifth) “applies to preempt state employment rights”);

Andrews v. Fed. Home Loan Bank of Atlanta, 998 F.2d 214,

220 (4" Cir. 1993) (FHLBA “dismiss at pleasure” provision

preempts state employment law claims against Federal Home

Loan Banks); Ana Leon T. v. Fed. Reserve Bank of Chi., 823

F.2d 928, 931 (6th Cir. 1987) (FRA “dismiss at pleasure”

provision “preempts any state-created employment right”

against a Federal Reserve Bank). See also Sheehan v.

Anderson, 263 F.3d 159 (3d Cir. 2001), aff’g, No. 98-5516,

2000 WL 288116, at * 5 (E.D. Pa. Mar. 17, 2000) (summarily

affirming district court holding that Section 341 (Fifth)

“preempts any state created employment right”). -

The Third Circuit here declined to take a position with

respect to the approach adopted by the Fourth and Sixth

Circuits, because it was not necessary to consider “whether

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

§ 1831j would similarly offend ‘the full purposes and

objectives of Congress’” in order to decide the appeal. (App.

at 25a.)

2. The Narrower Approach

Here, the Third Circuit followed the preemption analysis

employed by the Ninth Circuit in Kroske v. US Bank

Corp. (See App. at 23a (finding Ninth Circuit approach

“persuasive”).) The Third and Ninth Circuits found that the

“dismiss at pleasure” provisions of the FRA, NBA and

FHLBA do not preempt state employment laws that are

consistent with federal anti-discrimination laws, but do

preempt any state employment laws that are inconsistent—

15

i.e., that provide more expansive rights and remedies than

those available under federal law.

a. Ninth Circuit Jurisprudence

The Ninth Circuit articulated this approach in Kroske,

where it considered whether age discrimination claims

against a national bank under the Washington Law Against

Discrimination (“WLAD”) were preempted by the NBA’s

“dismiss at pleasure” provision, Section 24 (Fifth). The Ninth

Circuit noted that Section 24 (Fifth) conflicted with the later-

enacted Age Discrimination in Employment Act (“ADEA”).

Kroske, 432 F.3d at 987-88. The Ninth Circuit concluded

that the “dismiss at pleasure” provision of Section 24 (Fifth)

was impliedly amended, “but only to the extent necessary to

give effect to the ADEA,” and no further. Jd. at 987.

The Ninth Circuit then considered whether Section 24

(Fifth), as impliedly amended by the ADEA, preempted the

WLAD claims in question. The Ninth Circuit recognized that

Congress intended “to create a national banking system with

uniform and universal operation through the entire territorial

limits of the country.” Jd. at 989 (internal citation and

quotation omitted). The court acknowledged that state anti-

discrimination law that is not consistent and is more

expansive than federal anti-discrimination law “may frustrate

the congressional purpose of uniform regulation” of banking

across the nation. Jd. The court held that only state

employment laws that “substantively mirror[]” federal anti-

discrimination law may be applied. Jd.

The Ninth Circuit concluded that the WLAD claim in

question was not preempted by the NBA “dismiss at pleasure”

provision because the WLAD provision at issue “mirrors the

16

substantive provisions of the ADEA and is interpreted

consistently with the ADEA.” /d. at 987. However, the court

held that the NBA “dismiss at pleasure” provision did

preempt the application of state anti-discrimination law that

is more expansive than federal law. /d. at 987-89. The court

also reaffirmed several of its past decisions that go at least

this far.* Jd. at 984-85. See Walleri v. Fed. Home Loan Bank

of Seattle, 83 F.3d 1575, 1582 (9" Cir. 1996) (FHLBA’s “at-

pleasure” provision preempted state wrongful discharge

claim); Mackey, 867 F.2d at 526 (state tort claims against

national bank are preempted by Section 24 (Fifth)); Inglis v.

Feinerman, 701 F.2d 97, 99 (9" Cir. 1983) (FHLBA’s “at-

pleasure” provision preempted state wrongful discharge

claim); Bollow v. Fed. Reserve Bank of S.F., 650 F.2d 1093,

1098 (9" Cir. 1981) (Federal Reserve Bank employee’s claims

alleging right to pre-termination hearing under state law

conflicted with and were preempted by Section 341 (Fifth)).

b. The Third Circuit Opinion

Like the Ninth Circuit in Kroske, the Third Circuit

applied the traditional preemption analysis set forth by this

Court in English. (See App. at 9a, 16a.) The Third Circuit

observed that “Congress has clearly expressed the intent to

grant the broadest possible power and right to dismiss

8. Petitioner mistakenly claims that Kroske held that the “dismiss

at pleasure” language was limited only to contractual claims. (See Pet.

at 16.) Petitioner, however, ignores the Ninth Circuit’s lengthy discussion

of how the “dismiss at pleasure” language preempts both contract and

tort claims, incliding wrongful discharge claims. See Kroske, 432 F.3d

at 984-85. Further, the Ninth Circuit explicitly recognized that the

“dismiss at pleasure” language could preempt “state law prohibitions

against discriminatory termination that are not consistent with federal

anti-discrimination laws.” Jd. at 989.

17

employees” to Federal Reserve Banks, entities that are

“undeniably crucial to the federal monetary system.” (/d. at ~

25a.) The Third Circuit noted that the ADA and Section 1831)

impliedly amended Section 341 (Fifth) by limiting a Federal

Reserve Bank’s power to dismiss its employees on grounds

prohibited by the later-enacted federal anti-discrimination

laws, but no further. (/d. at 19a-20a.)

The Third Circuit concluded that Section 341 (Fifth), as

impliedly amended by the ADA and Section 1831), “preempts

any state employment law that goes beyond the remedies

and protections provided by those federal laws,” because such

provisions “conflict with Congress’s intent to provide Federal

Reserve Banks with the broadest latitude possible in carrying

out their statutory duties, while giving due recognition to

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

requirements” and thus “stand[] as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress.” (/d. at 24a (internal quotation and

citation omitted).)

Both the Third and Ninth Circuits allow the application

of state employment laws that mirror federal law, and preempt

state employment laws that do not. Contrary to Petitioner’s

suggestion, the Third and Ninth Circuits are in harmony with

respect to their preemption methodology.

3. Petitioner’s Claims Are Preempted Under Either

the Broader or the Narrower Approach

The Third Circuit noted the clear differences between

the ADA and Section 1831j, on the one hand, and the LAD

and CEPA, on the other. (See App. at 26a-29a.) The LAD

protects individuals with temporary and insubstantial

18

impairments, while the ADA only protects individuals with

impairments that substantially limit one or more major life

activities. See Failla v. City of Passaic, 146 F.3d 149, 154

(3d Cir. 1998) (recognizing inconsistent standards between

“the [LAD’s] definition of ‘handicapped,’ as compared to

the [ADA’s] definition of ‘disability’”); Soules v. Mount

Holiness Mem’l Park, 808 A.2d 863, 866 (N.J. Super. Ct.

App. Div. 2002) (“LAD’s definition of handicap, and its

scope, is not comparable to the definitions and scope of

handicap or disability under the ADA”).’

Importantly, the very conditions Plaintiff alleges in her

LAD claims—neck and back injuries and diabetes treatable

with moderate modifications in diet (App. at 6a)—are not

disabilities entitled to protection by the ADA. See Sutton v.

United Air Lines, 527 U.S. 471, 482 (1999) (disability exists

only where an impairment substantially limits a major life

activity, not where it might be limiting if mitigating measures

were not taken); Marinelli v. City of Erie, Pa., 216 F.3d 354,

362-63 (3d Cir. 2000) (neck and arm pain that rendered

9. The definition of “handicap” or “disability” under the LAD

may encompass conditions expressly excluded from the ADA’s

definition of “disability,” such as gender identity disorders,

paraphilia, and drug addiction. Compare 42 U.S.C. §§ 12114(a),

12208 & 12211(b) (transsexualism, exhibitionism, pedophilia,

voyeurism, transvestitism and drug addiction excluded from ADA’s

definition of disability) with Enriquez v. W. Jersey Health Sys., 777

A.2d 365, 374-77 (N.J. Super. Ct. App. Div. 2001) (transsexualism

can qualify as handicap under LAD because unlike the ADA, the

LAD “is very broad” and does not require condition to “restrict any

major life activities to any degree”) and A.B.C. v. XYZ Corp., 660

A.2d 1199, 1200 (N.J. Super. Ct. App. Div. 1995) (“handicap” under

LAD may include mental illness of a psychosexual variety, like

exhibitionism) and In re Cahill, 585 A.2d 977, 978-79 (N.J. Super.

Ct. App. Div. 1991) (LAD recognizes morphine abuse as a handicap).

19

plaintiff unable to lift objects greater than ten pounds, operate

snow plow or do household chores did not render plaintiff

“disabled” under ADA because impairment did not

substantially limit a major life activity); Failla, 146 F.3d at

152 (plaintiff's back condition determined at trial to be

handicap under the LAD, but not disability under the ADA);

Schaefer v. State Ins. Fund, 207 F.3d 139, 142-43 (2d Cir.

2000) (non-insulin dependent diabetes, when medicated, did

not meet definition of disability under ADA absent substantial

limitation of major life function).

CEPA is also broader in scope than the federal

whistleblower protection statute. Section 1831) only protects

against retaliation for disclosing circumscribed types of

suspected wrongdoing to a circumscribed list of entities.

CEPA, in contrast, “permits an employee to complain to any

public body about virtually any topic, even those within the

employee’s own control.” (App. at 28a (internal citation

omitted).) See also Hernandez v. Montville Twp. Bd. of Educ.,

808 A.2d 128, 132 (N.J. Super. Ct. App. Div. 2002), aff'd,

843 A.2d 1091 (N.J. 2004) (school custodian’s complaints

that it took a week for clogged toilet to be repaired and single

light bulb to be changed were cognizable under CEPA, even

though these repairs lay within custodian’s own area of

responsibility). In fact, CEPA has been described as the “most

far reaching whistleblower statute in the nation.” Blackburn

v. United Parcel Serv. , 3 F. Supp. 2d 504, 517 (D.N.J. 1998),

aff'd, 179 F.3d 81 (3d Cir. 1999) (internal quotations and

citation omitted).

Moreover, the LAD and CEPA allow for individual

liability, while the ADA and Section 1831j do not. (App. at

26a-28a.) Compare Failla, 146 F.3d at 158 (adopting the

Restatement (Second) of Torts standard for aiding and

20

abetting liability under the LAD) and Palladino ex rel. United

States v. VNA of S. N.J., Inc., 68 F. Supp. 2d 455, 474 (D.N.J.

1999) (holding that CEPA provides for individual liability)

with Koslow v. Commonwealth of Pa., 302 F.3d. 161, 178

(3d Cir. 2002) (no individual liability available under the

ADA) and Rouse v. Farmers State Bank of Jewell, Iowa, 866

F. Supp. 1191, 1203-04 (N.D. lowa 1994) (no private right

of action against individuals under federal whistleblower

protection statute).

The LAD further expands the remedies available under

the ADA in the area of compensatory and punitive damages.

(See App. at 27a.) The ADA caps these damages. Gagliardo

v. Connaught Labs., Inc., 311 F.3d 565, 570 (3d Cir. 2002).

In contrast, there is no such limit under the LAD. Sze Baker

v. Nat’l State Bank, 801 A.2d 1158, 1169 (N.J. Super. Ct.

App. Div. 2002).

The LAD and CEPA impose rights and remedies far

greater than the applicable federal laws. Therefore, under

either the broader or the narrower approaches adopted by

the Circuits, Petitioner’s LAD and CEPA claims ure

preempted by federal law.

B. There Is No Conflict with a State Court of Last

Resort

Petitioner argues that two state courts of last resort

take a different position than the Third Circuit Opinion

with respect to the preemptive effect of Section 341 (Fifth).'®

10. Petitioner also argues that one lower state court opinion—White

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

conflicts with the Third Circuit Opinion. (See Pet. at 17-18.) A putative

conflict with a lone lower state court opinion, however, is not a

recognized basis for granting certiorari. See Sup. Ct. R. 10.

21

(See Pet. at 17-18.) These claimed differences do not provide

the compelling reasons necessary to grant certiorari.

First, the two cases Petitioner relies on did not even

involve Section 341 (Fifth) or Federal Reserve Banks."' There

is unlikely ever to be a conflict between federal and state

courts on the interpretation of Section 341 (Fifth). Congress

expressly granted federal courts original jurisdiction in any

case in which a Federal Reserve Bank is a party, and gave

Federal Reserve Banks the right to remove any case to federal

court, regardless of whether the case involves a federal

question or diversity of citizenship. See 12 U.S.C. § 632.

Therefore, issues pertaining to Federal Reserve Banks

generally have been decided by federal courts.

Second, Petitioner concedes that the “lead opinion” in

Peatros v. Bank of America, 990 P.2d 539 (Cal. 2000),

“appears to mirror the Ninth Circuit’s holding in Kroske”

(Pet. at 18), which, as discussed above, is consistent with

the Third Circuit Opinion.

In sum, Petitioner has pointed to no conflict with a Court

of Appeals or a state court of last resort that would warrant a

grant of certiorari. See Sup. Ct. R. 10(a).

11. Indeed, Sargent v. Central Natioial Bank & Trust Co., 809

P.2d 1298 (Okla. 1991), did not even concern state anti-

discrimination laws.

22

CONCLUSION

Petitioner has not met her burden of establishing a

compelling reason for this Court to grant the Petition.

Therefore, for the foregoing reasons, the Petition should be

denied.

Respectfully submitted,

Tuomas C. Baxter, Jr.

MICHELE H. KALSTEIN*

Barry M. SCHINDLER

FEDERAL RESERVE BANK OF NEW YORK

33 Liberty Street

New York, New York 10045

(212) 720-5000

Counsel for Respondents

* Counsel of Record