Opinion ID: 3020164
Heading Depth: 3
Heading Rank: 2

Heading: Federal Reserve Act Conflict Preemption

Text: In determining whether the Federal Reserve Act preempts, either in whole or in part, New Jersey’s CEPA and LAD, we wade into murky waters. Our own case law in the area is sparse. We held recently that the “at pleasure” language of § 341(Fifth) bars all contractual employment claims against a Federal Reserve Bank, see Mele v. Fed. Reserve Bank, 359 F.3d 22 251, 255 (3d Cir. 2004), but have not officially addressed the preemption of statutory employment claims. Cf. Sheehan v. Anderson, 2000 U.S. Dist. LEXIS 3048, at  (E.D. Pa. Mar. 17, 2000), aff’d 263 F.3d 159 (3d Cir. 2001) (table) (holding that § 341(Fifth) “preempts any state created employment right,” summarily affirmed). We begin by surveying the limited case law around the country. The Sixth Circuit appears to be the only one of our sister Courts of Appeals to have addressed the preemption issue with regard to the Federal Reserve Act, but it provided no analysis to support its conclusion that a Federal Reserve Bank employee’s state law employment discrimination claims “were preempted by federal law. Section 4, Fifth, of the Federal Reserve Act, 12 U.S.C. § 341, Fifth . . . preempts any statecreated employment right to the contrary.” Ana Leon T. v. Fed. Reserve Bank of Chicago, 823 F.2d 928, 931 (6th Cir. 1987). The Sixth Circuit has since reaffirmed this holding, but added no further explanation. See Arrow v. Fed. Reserve Bank of St. Louis, 358 F.3d 392, 393 (6th Cir. 2004). The well is a bit deeper with regard to national banks and Federal Home Loan Banks, which, as we have noted above, are governed by federal statutes with “at pleasure” clauses identical to that of § 341(Fifth). Two Circuits have explicitly found total preemption of state statutory employment law. The Fourth Circuit has held that “at pleasure” in the Federal Home Loan Bank Act completely preempts state law claims. Andrews v. Fed. Home Loan Bank of Atlanta, 998 F.2d 214, 220 (4th Cir. 1993). The Sixth Circuit found similar total preemption would be accomplished by “at pleasure” in the National Bank Act. 23 Wiskotoni v. Mich. Nat’l Bank-West, 716 F.2d 378, 387 (6th Cir. 1983) (noting that § 24(Fifth) of the National Bank Act “has consistently been construed by both federal and state courts as preempting state law governing employment relations between a national bank and its officers and depriving a national bank of the power to employ its officers other than at pleasure”), reaffirmed by Arrow, 358 F.3d at 394. These “total preemption” holdings suggest that any state-created limitation on the bank’s power would fundamentally, and irreconcilably, conflict with Congress’s intent to grant total, unlimited discretion. See Andrews, 998 F.2d at 220 (“In this case, however, Congress intended for federal law to define the discretion which the Bank may exercise in the discharge of employees. Any state claim for wrongful termination would plainly conflict with the discretion accorded the Bank by Congress.”). Moderating these total preemption holdings are a variety of courts taking the more limited approach of partial conflict preemption of state employment laws. In general, these courts have concluded that § 341(Fifth) (and, analogously, provisions in the National Bank Act and National Home Loan Bank Act) preempts state laws only to the extent that the state laws provide additional remedies or liability beyond the federal antidiscrimination laws (such as Title VII or the ADEA) that have already impliedly amended § 341(Fifth). This has resulted in courts finding certain state laws to not be preempted, because those state laws exactly paralleled federal law. See, e.g., Kroske, 432 F.3d at 989 (“Congress did not intend for § 24(Fifth) [of the National Bank Act] to preempt the WLAD employment discrimination provisions, at least insofar as they are consistent with the prohibited grounds for termination under 24 the ADEA.”) (emphasis added); Moodie v. Fed. Reserve Bank of New York, 831 F. Supp. 333, 337 (S.D.N.Y. 1993) (“The New York State Human Rights Law, with provisions analogous to Title VII, creates no additional employment rights in conflict with the Bank’s status as an employer at will, nor does it place additional constraints on the Bank’s exercise of its statutory powers.”). On the other hand, where the state law at issue went beyond the relevant federal law, courts do not hesitate to find conflict preemption. See, e.g., Evans, 2004 U.S. Dist. LEXIS 13265 (Pennsylvania Human Relations Act preempted, as beyond ADEA or Title VII); Peatros v. Bank of Am., 990 P.2d 539 (Cal. 2000) (California Fair Employment and Housing Act preempted to extent it conflicts with Title VII and ADEA). It is this latter partial conflict preemption approach which we find persuasive, and count ourselves fortunate to have the benefit of a very well-reasoned opinion of Judge Padova of the Eastern District of Pennsylvania, issued after the District Court’s initial opinion in the instant case. See Evans, 2004 U.S. Dist. LEXIS 13265. Evans involved an employee of the Federal Reserve Bank of Philadelphia who sued the Philadelphia Fed and various employees for alleged discrimination and retaliation. After surveying the same available case law we have referenced above, Judge Padova concluded that “the ‘dismiss at pleasure’ language in the Federal Reserve Act preempts the application of state anti-discrimination laws which expand the rights and remedies available under federal antidiscrimination laws.” Id. at . Because the Pennsylvania Human Relations Act at issue in Evans significantly expanded both the substantive and the procedural remedies available to a plaintiff relative to the remedies available under the ADEA and 25 Title VII, Judge Padova “dismiss[ed] Plaintiff’s state law claims in their entirety.” Id. at . We adopt the same partial conflict preemption approach. We first reject the District Court’s conclusion that Mele defined the outward limit of the preemptive power of “at pleasure,” such that only contractual employment claims are preempted. Mele did not address statutory claims as we are faced with today, and did not so limit itself. Logically, “at pleasure” cannot be limited to contractual claims. As the Ninth Circuit has noted, “it would make little sense to allow state tort claims to proceed, where a former bank officer’s contract claims are barred [by the National Bank Act].” Mackey v. Pioneer Nat’l Bank, 867 F.2d 520, 526 (9th Cir. 1989). The same rationale applies to permitting statutory claims where contractual claims would be barred – any discretion granted to the Federal Reserve Banks by Congress would be mooted by the possibility of having to face statutory employment claims. See id. (“The effect would be to substitute tort for contract claims, thus subjecting the national bank to all the dangers attendant to dismissing an officer. The purpose of the provision in the National Bank Act was to give those institutions the greatest latitude possible to hire and fire their chief operating officers, in order to maintain the public trust.”). Federal Reserve Act § 341(Fifth), as impliedly amended by the ADA and 12 U.S.C. § 1831j, preempts any state employment law that goes beyond the remedies and protections provided by those federal laws. Such “additional” provisions – including provision for unlimited punitive damages, individual liability on the part of employees, and coverage of less severe disabilities – would conflict with Congress’s intent to provide 26 Federal Reserve Banks with the broadest latitude possible in carrying out their statutory duties, while giving due recognition to the applicability of the ADA and 12 U.S.C. § 1831j’s requirements. In this sense, additional state remedies surely “stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” English, 496 U.S. at 79. Moreover, as we recently noted in Surrick: “If preemption only applied to state laws that directly contradict federal laws, federal laws could be effectively nullified by state laws prohibiting those acts that are incident to, but not specifically authorized by, federal law. Under such a regime, state officials would have a ‘virtual power of review’ over federal laws.” Surrick, 449 F.3d at ____, 2006 U.S. App. LEXIS 13618, at  (quoting Sperry, 373 U.S. at 385). Thus, broad state employment laws cannot apply to the Federal Reserve Banks when those state laws “prohibit[] those acts that are incident to” Federal Reserve Banks dismissing “at pleasure” their employees, within the bounds of the ADA and 12 U.S.C. § 1831j.10 10 In such an intricate area of the law, we believe it is important to be clear about which statutes we are addressing. We reiterate that we are dealing with the direct preemptive effect of the Federal Reserve Act, § 341(Fifth), and not with the indirect preemptive effect of the ADA or 12 U.S.C. § 1831j. The ADA, for example, explicitly saves state anti-discrimination statutes from 27 In sum, we are persuaded that the wisest approach when faced with an entity undeniably crucial to the federal monetary system, to which Congress has clearly expressed the intent to grant the broadest possible power and right to dismiss employees, is to limit remedies to those already authorized by Congress. We need not take a position on whether state remedies exactly consonant with the ADA and 12 U.S.C. § 1831j would similarly offend “the full purposes and objectives of Congress.” As we detail below, by no stretch of the imagination can CEPA or the LAD be said to “parallel” or “mirror” their federal counterparts.