Opinion ID: 3062189
Heading Depth: 3
Heading Rank: 2

Heading: Impracticability and the Meyer Letter

Text: We next consider whether it was impracticable for the Bank to make the settlement payment. “Impracticability of performance is a legal justification or excuse for nonperformance of a contractual obligation.” Central Kan. Credit Union v. Mutual Guar. Corp., 102 F.3d 1097, 1102 (10th Cir. 1996) (citing Restatement (Second) of Contracts § 261 (1981)). “After a contract is made, if a party’s performance is made impracticable by the occurrence of an event, the nonoccurrence of which was a basic assumption upon which the contract was made, that party is -9- relieved of the obligation.” Id. The dispositive principle is § 264 of the Restatement, which provides: If the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order, that regulation or order is an event the non-occurrence of which was a basic assumption on which the contract was made. Restatement (Second) Contracts § 264 (1981). The Meyer letter established that the Federal Reserve refused to authorize the settlement payment as a prohibited golden parachute. This excuses the Bank’s obligation to perform. See Whitlock Constr., Inc. v. S. Big Horn Cnty. Water Supply Joint Powers Bd., 41 P.3d 1261, 1267 (Wyo. 2002) (excusing parties’ performance because contingency of state approval did not occur). Mr. Martinez maintains that the Meyer letter is inadmissible hearsay, but the letter was not hearsay at all. Hearsay is an out-of-court statement offered “to prove the truth of the matter asserted in the statement.” Fed. R. Evid. 801(c)(2). The Meyer letter was not admitted to show the propriety of the Federal Reserve’s decision, but to show that the Federal Reserve refused to authorize the payment. Under these circumstances, the letter was not hearsay, and the Bank’s performance was excused under the doctrine of impracticability. C. Exceptions to the Golden Parachute Restrictions We turn then to Mr. Martinez’s contention that the settlement payment is excepted from the golden parachute restrictions. Mr. Martinez argues that under 12 C.F.R. § 359.1(f)(2), his settlement was excluded from the golden parachute - 10 - restrictions as either non-discriminatory severance pay, see id. § 359.1(f)(2)(v), or pay owed to him under state law, see id. § 359.1(f)(2)(vi). The problem with this argument, however, is that Mr. Martinez either waived or forfeited it by failing to raise it in the district court. See Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1127-28 (10th Cir. 2011) (holding that legal theories advanced for the first time on appeal are waived if omitted intentionally or forfeited if omitted through neglect). In the district court, Mr. Martinez did not argue that his settlement payment fell under an enumerated exception to the golden parachute regulations. Instead, he argued that the settlement agreement was enforceable without regard to the golden parachute regulations. He urged the court to consider only the four corners of the contract and asserted that if regulators wanted to invoke the regulations to stop the payment, they should intervene, establish standing, and either object to the entry of judgment or wait until he attempted to execute on the judgment. See Aplt. App. at 139-40, 168. Then at the evidentiary hearing, Mr. Martinez repeatedly objected to evidence suggesting that the golden parachute regulations barred his payment. See, e.g., id. at 239-40 (objecting to the Meyer letter and the June 14, 2010 notice from Federal Reserve that Bank was in a “troubled condition”); id. at 291 (arguing that the Meyer letter should be stricken). Although the Bank responded that the evidence was relevant to establish the impracticability of its performance, not the propriety of the Federal Reserve’s application of the golden parachute regulations, see id. at 317-18, Mr. Martinez insisted the evidence was unreliable, see id. at 314 (arguing that - 11 - Mr. Meyer should be subject to cross-examination to show “why . . . [his] opinion may not be supported by foundation or may be incorrect”). The district court clarified that it was not reviewing the Federal Reserve’s application of the golden parachute regulations, let alone any of the exceptions now invoked by Mr. Martinez. As the court explained: [T]he issue here is not a review of agency action. We’re not here to ascertain whether the Federal Reserve [Board’s] decision was arbitrary, capricious or not adequately supported. We are here to inquire into the efforts of Rocky Mountain Bank, both past and current, in terms of meeting its burden to show that their – that they have impracticability or impossibility available to them as a defense. Id. at 319. Moreover, the court’s recognition that the golden parachute restrictions applied was predicated not on its own independent analysis of the regulations but on the Federal Reserve’s June 14, 2010, notice that the Bank was in a troubled condition. Indeed, as the court observed: One effect of the “troubled condition” determination is that [the Bank] was “generally prohibited from making, or entering into an agreement to make, a severance payment to any officer, director, or employee without the prior written approval of the [Federal Reserve] and the Federal Deposit Insurance Corporation [FDIC]. Id. at 197 (quoting the Federal Reserve’s June 14, 2010, notice). Although the court noted the specific regulatory exceptions Mr. Martinez now relies upon, the court never evaluated those exceptions because Mr. Martinez never invoked them. The only exception the court did consider was whether the Bank or Mr. Martinez might have sought authorization under 12 C.F.R. § 359.4(a)(4) if either of them could have certified that Mr. Martinez was not substantially responsible for - 12 - the Bank’s troubled condition. But the evidence demonstrated that the Bank had conducted a good-faith inquiry into whether it could make the required certification and had appropriately concluded that it could not. And since there was no evidence that Mr. Martinez had attempted to make the required certification himself, the court recognized that § 359.4(a)(4) was not available. Apart from this provision, the court did not consider any other exceptions because Mr. Martinez did not raise them. Accordingly, we decline to consider in the first instance whether Mr. Martinez’s settlement payment falls under an exception to the golden parachute restrictions. D. Bank’s Request to Seal Finally, we consider the Bank’s request to seal Volume One of the supplemental appendix, as well as other documents in the main appendix. The Bank submitted Volume One of the supplemental appendix under seal, but the clerk directed the Bank to show cause why these documents should remain under seal given our presumption in favor of public access. In response, the Bank claims the materials are protected from public disclosure under the bank examination privilege. See In re Bankers Trust Co., 61 F.3d 465, 471 (6th Cir. 1995). Moreover, the Bank says the same privilege applies to certain documents in the main appendix. Although the Bank does not specify which documents in the main appendix should be sealed, it appears that the Bank seeks to protect from public disclosure any documents that were sealed in the district court, including the parties’ briefs on the motion to enforce the settlement agreement; the Bank’s motion for a judgment of impracticability; the - 13 - court’s order granting a judgment of impracticability; and the court’s Rule 54(b) certification. The district court sealed these and other documents, as well as the evidentiary hearing transcripts. Mr. Martinez objects to the sealed volume of the supplemental appendix. He says it contains hearsay evidence that should not have been submitted to the district court and was not considered by the district court. Consequently, Mr. Martinez asks that we strike Volume One of the supplemental appendix. We deny the Bank’s request to seal any of the materials in either the supplemental appendix or the main appendix. The Bank has not shown that its interests in protecting regulatory communications or matters potentially detrimental to its business “outweigh the public interests in access” to the judicial records. See Colony Ins. Co. v. Burke, 698 F.3d 1222, 1241 (10th Cir. 2012). And because the sealed volume of the supplemental appendix has no impact on our disposition, we grant Mr. Martinez’s request to strike Volume One of the supplemental appendix and direct the clerk to return those materials to the Bank.