John Grogan, App. v. Seattle Bank, Et Ano, Resps.
195 Wash. App. 500
| Wash. Ct. App. | 2016Background
- Seattle Bank hired John Grogan as chief credit officer with an employment agreement promising three years' severance if his employment ended within 12 months after a change in control.
- The FDIC designated the Bank as "troubled" and issued supervisory actions before the change in control and Grogan's resignation.
- After Grogan resigned, he claimed $540,000; the parties settled for amounts subject to FDIC approval because FDIC rules limit "golden parachute" payments to institution-affiliated parties (IAPs) while troubled.
- The FDIC denied applications to pay Grogan the full severance plus attorney fees, costs, and interest, treating those amounts in the aggregate as a golden parachute exceeding the 12-month exception and refusing approval.
- The trial court initially ordered payment of one year's salary and later vacated other orders; after FDIC approval to pay one year's salary, the Bank paid and the trial court dismissed the case; Grogan appealed.
Issues
| Issue | Plaintiff's Argument (Grogan) | Defendant's Argument (Bank/FDIC) | Held |
|---|---|---|---|
| Whether state court must follow FDIC determination that aggregate payments (severance + fees/costs/interest) are a golden parachute | Attorney fees/costs/interest are not "compensation" and thus not part of golden parachute; state award should be enforceable | FDIC interpretation treats all payments for Grogan's benefit as aggregate compensation subject to parachute limits; federal regulation controls | Held for defendant: FDIC determination preempts state court authority; state court cannot order payments contrary to FDIC direction |
| Whether attorney fees awarded by state court fall within FDIC's golden parachute rule | Fees fall outside the regulation and exceptions (including IRC analogies and statutory exceptions) | Fees are for the benefit of the IAP and thus included when assessing aggregate parachute limits; agency has authority to interpret regulations | Held for defendant: fees, costs, and interest may be considered part of a golden parachute for FDIC approval purposes |
| Whether an exception (12 C.F.R. §359.1(f)(2)(vi)) for payments required by state statute excludes attorney-fee awards | Grogan: statutory fee awards are excepted from "golden parachute" definition and need not be submitted to FDIC | FDIC: the agreement expressly subjects payments to FDIC rules; agency may require prior approval where institution is troubled | Held for defendant: FDIC interpretation controls; state-law exception did not permit circumventing FDIC approval in this context |
| Standard of deference to FDIC interpretations in preemption context | Grogan: Christensen suggests less deference to agency letters; court should disregard FDIC letters if wrong | FDIC/Bank: agency determinations on regulation interpretation are entitled to preclusive effect for preemption analysis; supremacy clause governs | Held for defendant: Christensen's deference rule (Chevron/step limits) does not undercut federal preemption; FDIC determinations preempt conflicting state-court orders |
Key Cases Cited
- Annechino v. Worthy, 175 Wn.2d 630 (state appellate review standard for summary judgment)
- Stevedoring Servs. of Am., Inc. v. Eggert, 129 Wn.2d 17 (defense of federal preemption in state actions)
- Inlandboatmen's Union of the Pac. v. Dep't of Transp., 119 Wn.2d 697 (federal regulations have preemptive effect)
- Sola Elec. Co. v. Jefferson Elec. Co., 317 U.S. 173 (contracts conflicting with federal law cannot be enforced)
- Christensen v. Harris Cnty., 529 U.S. 576 (deference principles for agency interpretations of federal law)