Opinion ID: 1120784
Heading Depth: 3
Heading Rank: 3

Heading: Prior decisions on delegation

Text: Wells Fargo contends all applicable precedent permits the delegation of the power of a national bank's board of directors under section 24 to discharge officers at pleasure. To the contrary, the few relevant decisions are either less compelling than Wells Fargo contends or contrary to its position. In Wiskotoni v. Michigan Nat. Bank-West, supra, 716 F.2d 378, the court rejected a national bank's preemption defense under section 24 in a wrongful discharge action by a former branch manager. The bank relied on a provision in its bylaws that characterized branch managers as officers. The court found this not to be dispositive because of the requirement in section 24 that officers be appointed and discharged by the bank's board of directors. The plaintiff in Wiskotoni had been neither appointed nor discharged by his bank's board. He had been hired by the bank's president and discharged by a subsequent president. The evidence further showed this was the bank's usual practice, i.e., the president, not the board of directors, appointed and terminated branch managers. The court held the branch manager was not an officer under section 24. (716 F.2d at p. 387.) Unlike our case, the bank in Wiskotoni did not argue that its bylaws delegated the board's at-pleasure discharge power to the banks' president. As a matter of practice, however, the board had apparently delegated (or attempted to delegate) this power. The court found that to be insufficient under section 24. Because a purported delegation in a bank's bylaws was not at issue, Wiskotoni is not entirely apposite to this case. But to the extent it dealt with discharge by a senior officer rather than a board of directors, the case undermines Wells Fargo's argument that delegation is permitted. In Mackey, supra, 867 F.2d 520, the court affirmed judgment in favor of a national bank in a wrongful discharge action by a former branch manager. In doing so, the court stated that a national bank's board of directors may assign the performance of their duties to an executive committee.  ( Id., at p. 525, italics added.) The board of directors, by means of a resolution, had delegated its discharge power to an executive committee of the board of directors itself. That committee of directors decided to terminate the plaintiff, and its decision was subsequently ratified by the full board. In contrast, here the Wells Fargo board was in no way involved in plaintiffs' terminations. The Mackey court was not confronted with and did not purport to uphold terminations like those in this case, which were carried out through an elaborate chain of delegations and subdelegations and which were never subjected to board approval or ratification. In McWhorter v. First Interstate Bank (1984) 67 Ore.App. 435 [678 P.2d 766] ( McWhorter I ), the Oregon appellate court reversed the dismissal of a discharged vice-president and branch manager's contract claims for wrongful discharge. The court made clear that section 24 does not apply unless a discharge is by a bank's board of directors. (678 P.2d at p. 768.) The bank contended this requirement was met if the board properly delegated its authority to senior officers. The case was before the court on a motion to dismiss (the equivalent of a demurrer in California), and the court avoided the issue by relying on the plaintiff's allegation in his complaint that he had not been discharged by the bank's board. The decision, therefore, provides no guidance on the precise issue before us, but it did stress the importance of discharge by a board of directors. After McWhorter I, supra, 678 P.2d 766, the defendant bank obtained summary judgment based on a purported delegation from the bank's board to its president. As in McWhorter I, the Oregon appellate court reversed the judgment. The court again avoided the question of whether the board could delegate its discharge power but concluded that, if the power could be delegated, the purported delegation before the court was insufficient. ( McWhorter v. First Interstate Bank (1986) 81 Ore.App. 132 [724 P.2d 877, 879] ( McWhorter II ).) Because the court again avoided deciding the delegation issue, the decision provides no support for Wells Fargo's argument or direct guidance to us. Wells Fargo also points to two federal trial court decisions. In Mahoney v. Crocker Nat. Bank, supra, 571 F. Supp. 287 ( Mahoney ), the court also rejected a national bank's defense under section 24. As in the present case, the defendant bank's bylaws delegated to specified personnel the board of directors' power to discharge officers. The bank failed to establish, however, that discharge powers had been delegated to the persons who actually effected the plaintiffs' terminations. Because this failure defeated the bank's argument, Mahoney does not support Wells Fargo's position. In reaching its conclusion, however, the Mahoney court, supra, 571 F. Supp. 287, expressly declined to read section 24 as meaning that the dismissal at pleasure defense can be asserted only when the board of directors itself makes the dismissal. (571 F. Supp. at p. 290, original italics.) We are not persuaded by this trial court dictum. The court relied on Paragraph Sixth but did not analyze that provision, and its conclusion was ipse dixit. As explained above, we find any reliance on Paragraph Sixth unpersuasive. We also note that Mahoney was decided before Wiskotoni v. Michigan Nat. Bank-West, supra, 716 F.2d 378, and Mackey, supra, 867 F.2d 520, the two federal appellate decisions addressing the issue, both of which suggest that delegation of dismissal authority to officers (rather than to a committee of the board) is not permitted. The Mahoney court, supra, 571 F. Supp. 287, noted a conclusion by the Comptroller of the Currency that: The board of directors of a national bank may not delegate responsibility for its duties but may assign the performance thereof. (12 C.F.R. § 7.4425 (1987).) Wells Fargo also points to this statement as support for its view. Initially, this conclusion is characterized by the comptroller himself as a mere Interpretive Ruling. ( Batterton v. United States (1977) 432 U.S. 416, 425, fn. 9 [53 L.Ed.2d 448, 456, 97 S.Ct. 2399] ([A] court is not required to give effect to an interpretive regulation.).) Moreover, any attempt to discern Congress's intent in 1864 from an administrative interpretation issued more than a century later is inevitably an exercise in speculation. ( General Electric Co. v. Gilbert (1976) 429 U.S. 125, 142 [50 L.Ed.2d 343, 358, 97 S.Ct. 401] [emphasizing importance of contemporaneous interpretation and declining to give weight to agency interpretation issued only eight years after the statute was enacted].) Finally, the comptroller's general statement is beside the point. As we have explained, the power of a national bank's board of directors to delegate its powers is not the issue. We are concerned only with the effect of such delegation on the discharge-at-pleasure defense under section 24. As to that question, there is no indication the comptroller has expressed any view. Nor do we find guidance in the trial court's decision in Holland v. Bank of America (S.D.Cal. 1987) 673 F. Supp. 1511, in which the court relied on section 24 to reject a branch manager's claim of wrongful demotion. The court noted the bank's alternative contentions that it could unilaterally decide whom to appoint as an officer and that it could delegate the power of dismissal. With no discussion of either section 24 or prior decisions, the court stated merely that, The bank's position is meritorious. (673 F. Supp. at p. 1516.) The Court of Appeal in the present case correctly recognized Holland to be a very loose analysis of the issue. Holland is not only unpersuasive; it is inapposite. The plaintiff there had been demoted, not discharged. Section 24 contains no provision restricting to directors the power to demote. Demotion is certainly a different, and arguably a less significant management decision, than discharge. In short, we find no compelling authority in the cases on the issue of delegation. On balance, however, the cases, especially those decided by the federal appellate courts, suggest that delegation of the power to discharge officers at pleasure is either not permitted or is permitted only to a committee of the board itself. (See, e.g., Mackey, supra, 867 F.2d 520, 525.) No court has approved under section 24 a procedure similar to the one adopted by Wells Fargo in this case  a long and complex chain of purported delegations.