Filed: Jun. 09, 2015
Latest Update: Mar. 02, 2020
Summary: Case: 14-12529 Date Filed: 06/09/2015 Page: 1 of 19 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ No. 14-12529 Non-Argument Calendar _ D.C. Docket No. 1:10-cv-23138-FAM PAUL B. HARRISON, Plaintiff-Appellant, versus OCEAN BANK, a Florida banking corporation, and FEDERAL DEPOSIT INSURANCE CORPORATION, Defendants-Appellees. _ Appeal from the United States District Court for the Southern District of Florida _ (June 9, 2015) Before HULL, JORDAN, and JILL PRYOR, Cir
Summary: Case: 14-12529 Date Filed: 06/09/2015 Page: 1 of 19 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ No. 14-12529 Non-Argument Calendar _ D.C. Docket No. 1:10-cv-23138-FAM PAUL B. HARRISON, Plaintiff-Appellant, versus OCEAN BANK, a Florida banking corporation, and FEDERAL DEPOSIT INSURANCE CORPORATION, Defendants-Appellees. _ Appeal from the United States District Court for the Southern District of Florida _ (June 9, 2015) Before HULL, JORDAN, and JILL PRYOR, Circ..
More
Case: 14-12529 Date Filed: 06/09/2015 Page: 1 of 19
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-12529
Non-Argument Calendar
________________________
D.C. Docket No. 1:10-cv-23138-FAM
PAUL B. HARRISON,
Plaintiff-Appellant,
versus
OCEAN BANK,
a Florida banking corporation, and
FEDERAL DEPOSIT INSURANCE CORPORATION,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(June 9, 2015)
Before HULL, JORDAN, and JILL PRYOR, Circuit Judges.
PER CURIAM:
Plaintiff Paul B. Harrison brought this two-count action in an attempt to
invalidate an administrative decision of the defendant Federal Deposit Insurance
Case: 14-12529 Date Filed: 06/09/2015 Page: 2 of 19
Corporation (the “FDIC”) that effectively nullified Harrison’s prior settlement
agreement with the defendant Ocean Bank. After Ocean Bank terminated his
employment, Harrison threatened to assert claims against Ocean Bank, and under
the terms of the settlement agreement, Harrison would receive $1,000,000 in return
for the release of those claims. The FDIC’s decision to classify the proposed
settlement payments as “golden parachute” payments and to deny Ocean Bank’s
request for approval of the payments, however, had the effect of voiding the
agreement. Harrison contended that the FDIC’s decision was “arbitrary, capricious
and not in accordance with applicable law,” in violation of 5 U.S.C. § 706(2)(A).
The district court (1) granted defendant FDIC’s motion for summary
judgment, (2) denied plaintiff Harrison’s motion for summary judgment, and (3)
dismissed Harrison’s claims against defendant Ocean Bank. Harrison appeals pro
se.
After a review of the record and the parties’ briefs, we affirm.
I. RELEVANT STATUTES AND REGULATIONS
Section 1828(k)(1) of Title 12 of the U.S. Code authorizes the FDIC to
“prohibit or limit, by regulation or order, any golden parachute payment or
indemnification payment.” 12 U.S.C. § 1828(k)(1). Accordingly, the FDIC has
generally prohibited banks from making “golden parachute” payments unless the
bank first obtains approval for the payment from the bank’s primary federal
2
Case: 14-12529 Date Filed: 06/09/2015 Page: 3 of 19
regulator. See 12 C.F.R. § 359.2 (general prohibition on golden parachute
payments); id. § 359.4 (permissible golden parachute payments).
But what is a “golden parachute” payment? Section 1828(k)(4)(A) defines a
“golden parachute” payment, in relevant part, as follows:
The term “golden parachute payment” means any payment (or any
agreement to make any payment) in the nature of compensation by
any insured depository institution or covered company for the benefit
of any institution-affiliated party pursuant to an obligation of such
institution or covered company that—
(i) is contingent on the termination of such party’s affiliation
with the institution or covered company; and—
(ii) is received on or after the date on which—
...
(III) the institution’s appropriate Federal banking agency
determines that the insured depository institution is in a
troubled condition (as defined in the regulations
prescribed pursuant to section 1831i(f) of this title).
12 U.S.C. § 1828(k)(4)(A). An “institution-affiliated party” includes “any director,
officer, [or] employee” of the insured bank. Id. § 1813(u).
Pursuant to 12 U.S.C. § 1828(k), the FDIC has promulgated a regulation in
12 C.F.R. § 359.1(f) that further defines “golden parachute” payments, in relevant
part, as follows: (1) “any payment (or any agreement to make any payment)” by an
FDIC-insured bank; (2) “in the nature of compensation”; (3) “for the benefit of any
current or former” employee; (4) that “[i]s contingent on, or by its terms is payable
on or after, the termination” of the employee’s employment by the bank; and (5) is
3
Case: 14-12529 Date Filed: 06/09/2015 Page: 4 of 19
or would be received on or after a determination by the FDIC that the insured bank
is “in a troubled condition.”1 12 C.F.R. § 359.1(f)(1). Under regulation
§ 359.1(k), a “payment” is further defined as “[a]ny direct or indirect transfer of
any funds” and “[t]he conferring of any benefit.” Id. § 359.1(k)(1), (3).
This § 1828(k)(4) statute, as further defined by the § 359.1 regulations, is
just one of the numerous restrictions and controls that arises when an insured bank
is in a “troubled condition,” see, e.g., id. §§ 371.1–371.5 (maintenance of records
by banks in a troubled condition); the restrictions are designed to protect the capital
of the troubled bank and the regulatory insurance fund.
II. FACTUAL BACKGROUND
1
The regulation states, in relevant part:
The term golden parachute payment means any payment (or any agreement to
make any payment) in the nature of compensation by any insured depository
institution or an affiliated depository institution holding company for the benefit
of any current or former IAP pursuant to an obligation of such institution or
holding company that:
(i) Is contingent on, or by its terms is payable on or after, the termination
of such party’s primary employment or affiliation with the institution or
holding company; and
(ii) Is received on or after, or is made in contemplation of, any of the
following events:
...
(C) A determination by the insured depository institution’s or
depository institution holding company’s appropriate federal
banking agency, respectively, that the insured depository
institution or depository institution holding company is in a
troubled condition, as defined in the applicable regulations of the
appropriate federal banking agency (§ 303.101(c) of this chapter).
12 C.F.R. § 359.1(f)(1).
4
Case: 14-12529 Date Filed: 06/09/2015 Page: 5 of 19
A. Harrison’s Termination and Settlement Agreement
Harrison served as senior vice president and chief appraiser for Ocean Bank
for about a year from October 22, 2007, until October 24, 2008, when the bank
involuntarily terminated his employment. 2 Following his termination, Harrison
threatened to file a lawsuit against Ocean Bank, alleging various claims arising out
of alleged mistreatment by Ocean Bank and its management during his
employment and in connection with his termination. Specifically, Harrison
threatened to assert claims of defamation; intentional infliction of emotional
distress; whistleblower retaliation, in violation of state and federal laws; and
discrimination, harassment, and retaliation, in violation of state law and Title VII
of the Civil Rights Act of 1964.
Although no lawsuit was filed, Harrison and Ocean Bank engaged in pre-suit
mediation to avoid litigation costs. Mediation yielded a settlement agreement
signed on March 6, 2009. Under the terms of the settlement, Ocean Bank agreed
to pay Harrison $1,000,000, attributable to Harrison’s claimed damages for lost
back pay; non-pecuniary compensatory damages for emotional distress,
humiliation, and loss of dignity; and attorney’s fees. The sum included $78,000
for “back pay,” $589,000 for “alleged compensatory damages,” and $333,000 for
2
Harrison was an at-will employee of Ocean Bank and had no written employment
agreement with the bank. Harrison received an annual salary of $150,000, and he collected a
$20,000 signing bonus and quarterly bonuses totaling $31,125.
5
Case: 14-12529 Date Filed: 06/09/2015 Page: 6 of 19
“attorney’s fees and costs.” The settlement agreement provided that Harrison
“acknowledges that these payments are consideration to which he is not already
entitled.” The funds were deposited in an interest-bearing escrow account.
In exchange for the settlement payments, Harrison released any and all
claims he had against Ocean Bank, including any claims relating to his
employment, as well as those claims relating to his termination. Harrison also
agreed that he would “not re-apply for employment or seek reinstatement” at
Ocean Bank and that Ocean Bank would have “no obligation to re-employ [him] in
the future.”
The settlement agreement, however, was conditional. At the time of
Harrison’s termination and the execution of the agreement, the FDIC had classified
Ocean Bank as being in a “troubled condition,” pursuant to 12 C.F.R. § 303.101(c).
As such, Ocean Bank was generally prohibited from making “golden parachute”
payments without first obtaining the approval of the FDIC. See 12 U.S.C.
§ 1828(k); 12 C.F.R. §§ 359.2 and 359.4(a). The settlement agreement provided
that Harrison and Ocean Bank “understand that this Agreement is subject to
approval by the Federal Deposit Insurance Corporation (‘FDIC’), as the primary
bank regulator of Ocean Bank, and the Florida Office of Financial Regulation
(‘OFR’).” The agreement further provided that the settlement would “become[ ]
6
Case: 14-12529 Date Filed: 06/09/2015 Page: 7 of 19
null and void without penalty to any party if the Agreement is not approved by the
FDIC and the OFR.”
On March 16, 2009, Ocean Bank requested approval of the settlement
agreement from the FDIC. 3 In its letter requesting approval from the FDIC, Ocean
Bank stated that it “did not believe there was any merit to Harrison’s claims” but
made “a business decision” to engage in pre-suit mediation and settle the claims.
Ocean Bank further stated that, “[a]lthough [it did] not believe that the payments to
Harrison under the Settlement Agreement constitute ‘golden parachute’ payments,
in an abundance of caution, [Ocean Bank] made the Settlement Agreement subject
to the consent of the FDIC . . . .”
In April 2009, the FDIC informed Ocean Bank that it considered the
proposed settlement payments to be “golden parachute” payments, as defined by
12 C.F.R. § 359.1(f). On October 20, 2009, the FDIC denied Ocean Bank’s
request for approval of the settlement. The FDIC reiterated its conclusion that the
proposed settlement payments would constitute “golden parachute” payments. The
FDIC, however, did not explain in any more detail why it classified the Ocean
Bank payments as “golden parachute” payments under the relevant statute and
regulations. Rather, the FDIC stated that approving the settlement would “set[ ] a
3
On March 16, 2009, Ocean Bank also requested the approval of the OFR. On March 20,
OFR replied to Ocean Bank’s request, stating that, because “the settlement payment to Mr.
Harrison does not violate any law or regulation which this office is responsible for enforcing, the
Office of Financial Regulation takes no position on the payment to Mr. Harrison.”
7
Case: 14-12529 Date Filed: 06/09/2015 Page: 8 of 19
dangerous precedent for settlements should the Bank wish to terminate other
employees who have not performed to their expectations.” The FDIC also stated
that the “material the Bank provided to support the settlement does not make a
compelling case to settle the matter at this time.”
B. Harrison’s First Lawsuit
On January 11, 2010, Harrison filed a two-count lawsuit against Ocean Bank
and the FDIC. Harrison alleged, inter alia, that the FDIC’s decision was “arbitrary,
capricious, erroneous, and unjustifiable” under the Administrative Procedure Act
(“APA”), see 5 U.S.C. § 706(2), because it was “without any analysis or legal
justification.”
The FDIC and Harrison eventually filed competing motions for summary
judgment. 4 Harrison argued, inter alia, that the FDIC’s decision was “arbitrary and
capricious” because the FDIC “fail[ed] to provide any rationale, explanation, or
justification for its decision” to classify the proposed settlement payments as
“golden parachute” payments. Harrison also contended that the FDIC’s conclusion
that the proposed settlement payments would constitute “golden parachute”
payments was “arbitrary, capricious, erroneous, and contrary to the statutory and
4
While Harrison’s first lawsuit was pending—and thus after the FDIC denied Ocean
Bank’s request for approval of the settlement agreement—Ocean Bank and Harrison agreed to an
alternative settlement, in which Harrison would receive $529,000. On May 19, 2010, Ocean
Bank submitted a formal request for the FDIC’s approval of the alternative settlement. The
FDIC denied approval of the alternative settlement “for the same reasons that the original Golden
Parachute application was denied.”
8
Case: 14-12529 Date Filed: 06/09/2015 Page: 9 of 19
regulatory language and intent” because the proposed payments were not “in the
nature of compensation,” as required by 12 U.S.C. § 1828(k)(4)(A) and 12 C.F.R.
§ 359.1(f).
On July 23, 2010, the district court granted Harrison’s motion for summary
judgment, denied the FDIC’s motion, and remanded the issue to the FDIC for
further proceedings. Specifically, the district court found that the FDIC’s decision
to classify the proposed settlement payments as “golden parachute” payments “was
arbitrary and capricious under the APA for its failure to articulate its reasoning
behind the decision.”
Because the district court concluded that the FDIC failed to explain its
rationale, it did “not address whether the FDIC reached the correct decision in
finding that the Settlement Agreement was a golden parachute payment” and thus
did not consider Harrison’s argument that the proposed settlement payments were
not “in the nature of compensation.” The district court’s order merely remanded
the issue to the FDIC for further proceedings, where the FDIC could articulate its
reasoning for classifying the payments as such.
C. The FDIC’s Decision on Remand
On July 30, 2010, one week after the district court remanded the “golden
parachute” issue to the FDIC, Ocean Bank sent a letter to the FDIC, requesting
that, “[i]n the event that the FDIC again concludes that the settlement payment
9
Case: 14-12529 Date Filed: 06/09/2015 Page: 10 of 19
meets the definition of a ‘[g]olden [p]arachute’ under the regulations,” the FDIC
nonetheless approve the settlement.
On August 5, 2010, the FDIC issued a final agency decision denying
approval of the proposed settlement payments. In that decision, the FDIC again
concluded that the proposed settlement payments would constitute “golden
parachute” payments. Specifically, the FDIC stated as follows:
Pursuant to 12 C.F.R. § 359.1(f)(1), any payment payable to a current
or former institution-affiliated party (“IAP”) on or after the
termination of his employment by the institution and received on or
after the Bank is in troubled condition is a golden parachute payment.
A payment is defined as any direct or indirect transfer of funds and
the conferring of any benefit. 12 C.F.R. § 359.1(k)(1) and (2).
The FDIC’s decision then applied that definition to Harrison. It stated that
Harrison was an institution-affiliated party, that Ocean Bank was in troubled
condition, and that “[t]he payment of funds was to be made after Harrison’s
termination from the Bank, and is made contingent on his termination.” Turning to
Harrison’s argument that the proposed payments were not “in the nature of
compensation,” under 12 U.S.C. § 1828(k)(4)(A) and 12 C.F.R. § 359.1(f)(1), the
FDIC decision explained why the settlement payments to Harrison would be “in
the nature of compensation” under the statute and regulations:
While 12 C.F.R. § 359.1(f)(1) defines a golden parachute
payment to be a payment in the “nature of compensation,” the term
“compensation” was intended to be broadly construed in the
regulation. The payment at issue not only arose out of the employer-
employee relationship, but includes elements of back pay, front pay,
10
Case: 14-12529 Date Filed: 06/09/2015 Page: 11 of 19
and “compensatory damages.” All of the proposed amounts are
considered to be compensation to Harrison for his termination, and
thus constitute compensation for purposes of the regulation. A
payment to avoid litigation that otherwise satisfies the definition of a
golden parachute is covered by the regulation. Some of the central
purposes of this regulation are to prevent the improper disposition of
institution assets and to protect the financial soundness of insured
depository institutions, depository institution holding companies, and
the federal deposit insurance fund. Our decision that the proposed
payment to Harrison under the Agreement constitutes a golden
parachute payment is consistent with those purposes.
As the district court noted, the FDIC’s formal denial letter “finishe[d] with
three bullet points on the FDIC’s general view of the Settlement’s relationship to
Ocean Bank’s best interests”:
“[T]he total proposed payment of $1,000,000 under the
Agreement is excessive in relation to Harrison’s compensation, duties,
and short tenure at the Bank[.]”
“[T]he total proposed settlement payment and the amount the
Bank would pay directly are significant” and “[t]his amount
represents a significant charge to the Bank’s already battered earnings
and troubled financial position.”
“[T]here has been no demonstration that the payment to
Harrison would be a long-term savings to the Bank” and it “might set
a dangerous precedent for settlements should the Bank wish to
terminate other employees who have no[t] performed to
expectations.”
Accordingly, the FDIC concluded that the proposed settlement payment
“meets all of the terms of the golden parachute definition in 12 C.F.R. § 359.1(f).”
11
Case: 14-12529 Date Filed: 06/09/2015 Page: 12 of 19
As a result of the FDIC’s decision, Ocean Bank has not made any payment
pursuant to the settlement agreement. 5 Ocean Bank, however, has kept the funds
in the interest-bearing escrow account.
D. Harrison’s Second Lawsuit
On August 31, 2010, following the FDIC’s final decision, Harrison filed this
action—a two-count lawsuit against Ocean Bank and the FDIC. Harrison
fashioned Count I as a “Declaratory Judgment of Contract” and sought (1) a
declaratory judgment that the proposed settlement payments would not be “golden
parachute” payments under 12 C.F.R. § 359.1(f), (2) an order directing the FDIC to
approve the payments, (3) an order directing Ocean Bank to release and disburse
the escrowed funds, and (4) costs and attorney’s fees. Harrison labeled Count II
“Declaratory Relief under APA” and requested the same relief as sought in Count
I, except to add a request that the district court declare that the FDIC’s decision
was “not in accordance with applicable law.”
Harrison and the FDIC eventually filed competing motions for summary
judgment. Harrison contended that the FDIC’s decision was “arbitrary, capricious
and not in accordance with applicable law” because, inter alia, the proposed
settlement payments were not “in the nature of compensation.”
5
Because the FDIC also rejected the alternative settlement agreement, see supra note 5,
Ocean Bank also has not made any payments to Harrison pursuant to that document.
12
Case: 14-12529 Date Filed: 06/09/2015 Page: 13 of 19
The FDIC argued that the proposed settlement payments were “in the nature
of compensation” because “the proposed payment included substantial
‘compensation’ for claims arising out of his termination of employment, as well as
for ‘back pay.’” The FDIC further asserted that the payments were deniable under
both the statute and regulations, as follows:
Harrison cannot plausibly assert that the proposed payment is not
“compensation” within the meaning of the regulation. The FDIC
submits that the application would be deniable under the terms of 12
U.S.C. § 1828(k)(4), without even resorting to the definition in
Regulation § 359.1(k). . . .
[T]he language of the Settlement Agreement describes the payments
as “compensation” and this falls squarely under the FDIC’s statutes
and regulation. The back pay component of the settlement cannot
possibly be argued not to be “compensation.” Further, the damages
were described in the Agreement as “compensatory.”
On June 30, 2011, the district court entered an order (1) granting the FDIC’s
motion for summary judgment and (2) denying Harrison’s motion for summary
judgment. The district court found “no evidence that the FDIC’s determination
was arbitrary or capricious.” Specifically, the district court noted the following:
In the [August 5, 2010 final agency decision], the FDIC defines
payment pursuant to 12 C.F.R. § 359.1(k)(1) and 12 C.F.R.
§ 359.1(k)(2) as any direct or indirect transfer of any funds and the
conferring of any benefit. The FDIC categorizes Harrison as an
institution affiliated party (“IAP”) pursuant to the regulation after
brief description of his title and length of employment with Ocean
Bank. . . .
The FDIC then details its application of the regulation to the
termination and resulting Settlement to Harrison. The FDIC explains
13
Case: 14-12529 Date Filed: 06/09/2015 Page: 14 of 19
its rationale that the term compensation “was intended to be broadly
construed in the regulation.” It also states that “[a]ll the proposed
amounts are considered to be compensation to Harrison for his
termination, and thus constitute compensation for purposes of the
regulation.” The FDIC analysis continues, explaining that it applied
the regulation in an attempt [to] follow the central purposes of the
regulation as it interprets it.
(Paragraph break added).
The district court also concluded that “the FDIC adequately explained to
Harrison the manner in which it applied 12 C.F.R. § 359.1(f) to Harrison’s
Settlement Agreement and how that application led to it to determine the
Agreement to be a golden parachute payment. The FDIC was the agency required
to make the determination and in doing so, it provided the rationale for its
determination in its letter . . . dated August 5, 2010.”
Harrison timely appealed. 6
III. STANDARD OF REVIEW
Federal courts review a challenge to an agency decision under the standard
set forth by the APA. See 5 U.S.C. § 706; see also Fund for Animals, Inc. v. Rice,
6
In its June 30, 2011 order, the district court did not specify whether Harrison’s claims
against Ocean Bank survived its order. And the district court’s order of final judgment stated
that “judgment [was] entered in favor of the Defendant [FDIC] and against Plaintiff [Harrison].”
The order of final judgment made no mention of Ocean Bank.
On August 6, 2012, this Court sua sponte dismissed Harrison’s initial appeal for lack of
jurisdiction because the “district court’s June 30, 2011 order [was] not final as to all claims and
parties, and the court [had] not entered a certification” pursuant to Rule 54(b) of the Federal
Rules of Appellate Procedure. On April 30, 2014, the district court entered an order dismissing
all claims against Ocean Bank and an amended final judgment in favor of the FDIC and Ocean
Bank. This appeal now follows.
14
Case: 14-12529 Date Filed: 06/09/2015 Page: 15 of 19
85 F.3d 535, 541 (11th Cir. 1996). The APA provides, in relevant part, that a
court shall “hold unlawful and set aside agency action, findings, and conclusions”
that are “arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2). We apply this same standard on appeal
that the district court applied below. See Fund for
Animals, 85 F.3d at 541.
IV. DISCUSSION
As an initial matter, we agree with the district court’s thorough analysis as to
(1) the FDIC’s determination that Harrison was an “institution affiliated party,” (2)
the FDIC’s conclusion that Ocean Bank was in “troubled condition,” and (3) the
sufficiency of the rationale provided by the FDIC. As to these issues, Harrison has
failed to establish that the FDIC’s decision was “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” See 5 U.S.C. § 706(2)(A).
Thus, to the extent Harrison claims the district court erred on these three points, we
conclude that the district court did not err and is due to be affirmed.
Harrison’s only argument that requires further consideration is his
contention that the proposed settlement payments were not “in the nature of
compensation,” pursuant to 12 U.S.C. § 1828(k)(4)(A), and thus the FDIC’s
15
Case: 14-12529 Date Filed: 06/09/2015 Page: 16 of 19
decision was “not in accordance with law,” under 5 U.S.C. § 706(2)(A). Harrison
contends that the FDIC thus lacked the authority to prohibit those payments. 7
A. Review of Agency Regulations
We begin with the well-settled principle that, “[w]hen Congress has
‘explicitly left a gap for an agency to fill, there is an express delegation of
authority to the agency to elucidate a specific provision of the statute by
regulation,’ and any ensuing regulation is binding in the courts unless procedurally
defective, arbitrary or capricious in substance, or manifestly contrary to the
statute.” United States v. Mead Corp., 533 U.S. 218, 227,
121 S. Ct. 2164, 2171
(2001) (quoting Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S.
837, 843–44,
104 S. Ct. 2778, 2782 (1984)).
Furthermore, “[a]n agency’s interpretation of its own regulations is
‘controlling unless plainly erroneous or inconsistent with the regulation.’” Sierra
Club v. Johnson, 436 F.3d 1269, 1274 (11th Cir. 2006) (quoting Auer v. Robbins,
519 U.S. 452, 461,
117 S. Ct. 905, 911 (1997)). We offer the same level of
deference to agency interpretations even where an agency interprets terms
concerning the scope of the agency’s authority. See City of Arlington, Tex. v.
F.C.C., 569 U.S. ___, ___,
133 S. Ct. 1863, 1868–69 (2013).
7
All of Harrison’s arguments on appeal not otherwise discussed in this opinion are wholly
without merit.
16
Case: 14-12529 Date Filed: 06/09/2015 Page: 17 of 19
However, a regulation may be “parroting regulation”—a regulation that uses
the same terms as the statute authorizing the agency to issue the regulation. See
Gonzales v. Oregon, 546 U.S. 243, 257,
126 S. Ct. 904, 916 (2006). Where a
plaintiff challenges an agency’s application of a parroting regulation, the question
for the courts “is not the meaning of the regulation but the meaning of the statute.”
Id.
B. Regulation § 359.1
The regulatory definition of “golden parachute” payments in § 359.1(f)(1)
clarifies the meaning of several statutory terms in 12 U.S.C. § 1828(k)(4). For
example, the regulation broadly defines the statutory phrase “institution affiliated
party,” see 12 U.S.C. § 1828(k)(4)(A), to include “any current or former”
employee, see 12 C.F.R. § 359.1(f)(1). In addition, the regulation expansively
defines agreements that are “contingent on [an employee’s] termination,” see 12
U.S.C. § 1828(k)(4)(A)(i), to include any agreement to make a payment that “by its
terms is payable on or after” the termination of the employee, see 12 C.F.R.
§ 359.1(f)(1)(i). Furthermore, the regulation adopts a broad interpretation of the
statute’s use of the word “termination,” see 12 U.S.C. § 1828(k)(4)(A)(i), by
specifying that the “termination” of an employee includes the termination of the
employee’s “primary employment” (and, thus, not necessarily all employment)
with the bank, see 12 C.F.R. § 359.1(f)(1)(i).
17
Case: 14-12529 Date Filed: 06/09/2015 Page: 18 of 19
While the regulation itself does not define “in the nature of compensation,”
the FDIC’s decision in this case, in interpreting the statute, returned to the
phrase—contained in both the statute and the regulation—and explained that its
modifying language—“in the nature of”—meant that “compensation” was to be
construed broadly. In explaining its interpretation, the FDIC relied heavily on the
purpose of the statute and the regulation, as noted above:
Some of the central purposes of this regulation are to prevent
the improper disposition of institution assets and to protect the
financial soundness of insured depository institutions, depository
institution holding companies, and the federal deposit insurance fund.
Our decision that the proposed payment to Harrison under the
Agreement constitutes a golden parachute payment is consistent with
those purposes.
It is debatable here whether interpretation of the phrase—“in the nature of
compensation”—remains a question of statutory construction, not a question of
interpreting agency regulations with the deference that is due to an agency
interpretation. See Gonzales, 546 U.S. at 257, 126 S. Ct. at 916. While the
regulations do not define that precise phrase, they do provide an expansive reading
of other terms surrounding that phrase to provide further context for interpreting
“in the nature of compensation.” And there is no requirement that every word in a
statute be defined in a regulation for deference to apply.
In any event, whether deference or de novo review is required, we conclude
that Harrison has not shown the FDIC’s interpretation of “in the nature of
18
Case: 14-12529 Date Filed: 06/09/2015 Page: 19 of 19
compensation” as applied to his specific proposed settlement payments was
erroneous. Both the statute § 1828(k)(4) and regulation § 359.1(f)(1) employ the
phrase “in the nature of” before the term “compensation.” The phrase “in the
nature of” signals that the term “compensation” should be construed broadly. Put
simply, the settlement agreement purports to pay Harrison $1,000,000 in
compensation related to the termination of his affiliation with the bank. The sum
includes $78,000 for “back pay,” $589,000 for “alleged compensatory damages,”
and $330,000 for “attorney’s fees and costs.” These payments are plainly
compensatory in nature and relate directly to Harrison’s position as senior vice
president and chief appraiser at the bank. These payments would not have been
offered in the absence of Harrison’s termination as an officer and employee of
Ocean Bank.
V. CONCLUSION
For the all the foregoing reasons, we affirm the district court’s grant of
summary judgment in favor of the FDIC.
AFFIRMED.
19
