Bunn v. Fed. Deposit Ins. Corp.
908 F.3d 290
7th Cir.2018Background
- James Bunn was Executive VP (and a director) of Valley Bank Illinois; the bank was FDIC-insured and experienced supervisory downgrades beginning in 2009 and a CAMELS 5 rating in April 2013.
- Bunn had a Salary Continuation Agreement (2003; operative 2008) that provided various termination benefits including a "change of control" termination payment payable within 60 days if terminated within 12 months after a change of control.
- Valley Bank owned two life-insurance policies insuring Bunn; the Agreement described benefits as unsecured obligations payable from general assets and conditioned on compliance with applicable federal law.
- The Illinois regulator closed Valley Bank on June 20, 2014; the FDIC accepted appointment as receiver and transferred assets under a purchase-and-assumption agreement.
- As receiver the FDIC disaffirmed the Agreement, rejected Bunn’s proof of claim (~$230k–$240k or alternatively the cash value of the life policies), and Bunn sued; the district court granted summary judgment for the FDIC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the change-of-control benefit is a "golden parachute payment" under 12 U.S.C. §1828(k) | Bunn contended the Agreement provided a compensatory benefit he was owed after termination | FDIC argued the payment is contingent on termination and occurred after receiver appointment/CAMELS 4, so it fits the statutory definition | Court: Payment is a golden parachute payment and thus prohibited |
| Whether the benefit falls within the bona fide deferred compensation plan exception (12 C.F.R. §359.1(d)) | Bunn argued the Agreement qualifies as a nonqualified deferred compensation plan (and referenced compliance with 26 U.S.C. §409A) | FDIC argued Bunn produced no evidence satisfying the threshold criteria or the seven specific requirements in §359.1(d)(3) | Court: Bunn failed to show the Agreement meets threshold or the §359.1(d)(3) criteria; exception not met |
| Whether Valley Bank ‘‘segregated assets / recognized accrued liability’’ under GAAP to satisfy §359.1(d)(3)(vi) | Bunn pointed to bank-owned life policies and a $4.3M aggregate ledger accrual for executive benefits | FDIC/record lacked evidence of any accrual or trust specifically attributable to Bunn’s Agreement or that the policies were earmarked as required | Court: Evidence insufficient; aggregate accrual did not show an accrued liability for Bunn specifically |
| Whether Bunn proved damages from FDIC disaffirmance | Bunn sought ~$240k or cash surrender values of the policies | FDIC argued legality of the benefit bars recovery; also lack of concrete evidence of Bunn-specific accrued liability | Court: No damages because payment was prohibited and Bunn failed to show compensable loss |
Key Cases Cited
- Veluchamy v. FDIC, 706 F.3d 810 (7th Cir.) (FDIC-Receiver succeeds to failed bank's rights and acts like a trustee)
- FDIC v. Ernst & Young LLP, 374 F.3d 579 (7th Cir.) (FDIC-Receiver acquires failed bank's assets and legal interests)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (standard for genuine issue of material fact at summary judgment)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (party moving for summary judgment may show absence of evidence to support opponent’s case)
- Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (U.S. 2018) (interpretive note on disjunctive statutory language)
- Johnson v. Advocate Health & Hosps. Corp., 892 F.3d 887 (7th Cir.) (courts will not hunt for arguments or evidence for a party; undeveloped arguments are waived)