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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2007

## Text

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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 —

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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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py FG) Bee 5) | yy BER eee een ibaemrRs Ors ill
TABLE OF CITED AUTHORITIES ............ Vv
SUMMARY OF REASONS TO DENY THE
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SEAL REIT E Ge EEE CR a ¥.0 NK 0 o0.0 8 6 deed 2
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
I Es GN wich cevasereceeceeveses 3
I 3
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

p

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_1706%3A2. Public record. Not legal advice.