Opinion ID: 70809
Heading Depth: 4
Heading Rank: 4

Heading: the insured depository institution has been

Text: assigned a composite rating by the appropriate Federal banking agency or the Corporation of 4 or 5 under the Uniform Financial Institutions Rating System; or (V) the insured depository institution is subject to a proceeding initiated by the Corporation to terminate or suspend deposit insurance for such institution. (B) Certain payments in contemplation of an event Any payment which would be a golden parachute payment but for the fact that such payment was made before the date referred to in subparagraph (A)(ii) shall be treated as a golden parachute payment if the payment was made in contemplation of the occurrence of an event described in any subclause of such subparagraph. (C) Certain payments not included The term golden parachute payment shall not include— (i) any payment made pursuant to a retirement plan which is qualified (or is intended to be qualified) under section 401 of Title 26 or other nondiscriminatory benefit plan; (ii) any payment made pursuant to a bona fide deferred compensation plan or arrangement which the Board determines, by regulation or order, to be permissible; or (iii) any payment made by reason of the death or disability of an institution-affiliated party. amendment that Congress expressly contemplated that some severance payments will be permissible notwithstanding the fact that payment is contingent on the termination of such parties' affiliation with the institution. 12 U.S.C. § 1828(k)(4)(A)(i). 11 If the FDIC's contingency argument were valid, the golden parachute provision would be wholly unnecessary, because all such contingent payments would be impermissible. Our conclusion is inconsistent with the recent Third Circuit decision in Hennessy v. FDIC, 58 F.3d 908 (3d Cir.1995), and so we pause to explain our differences. In Hennessy, former employees and managers of Meritor Savings Bank (Meritor) sought to recover, inter alia, severance pay under a separation pay plan. Id. at 91213. Under the plan, eligible employees were entitled to severance pay based on their experience and salary. Id. at 913. These benefits were triggered by involuntary termination as a result of lack of work, job elimination, reorganization or reduction-in-force. Id. After Meritor was declared insolvent and the FDIC was appointed receiver, the FDIC repudiated the severance plan. Id. at 914. The court in Hennessy adopted the rule from American Nat'l Bank, 710 F.2d at 1540, that rights and liabilities of a bank and its debtors and creditors are fixed as of the date of the declaration of a bank's insolvency. Hennessy, 58 F.3d at 918. In 11 We are not persuaded otherwise by the footnote to the supplementary information preceding the proposed regulations which reads: Claims for certain benefits may not be provable or constitute actual direct compensatory damages' ... if the institution is placed in receivership. This regulation does not provide otherwise. 60 Fed.Reg. 16,069, 16,077 n. 13 (1995). addition, it applied the language from Kennedy, that a claim must have accrued and become unconditionally fixed on or before the bank's insolvency. Id. Applying these rules to severance payments, the court concluded that because the severance benefits had not vested prior to the FDIC's appointment as receiver, they had not accrued and were, therefore, unrecoverable. Id. Accord FDIC v. Coleman, 611 So.2d 1300 (Fla.App. 4 Dist.1992). Insofar as the court relied on the rule we enunciated in American Nat'l Bank, it misconstrued the meaning of that case. The rule that rights and liabilities are fixed at insolvency, as discussed supra, does not preclude liability for contracts which are to some extent contingent at insolvency. Instead, the common-law rule of provability (of which the rule in American Nat'l Bank is a restatement) precludes liability for claims which did not exist prior to insolvency and for claims which depend on new contractual obligations created after insolvency. To the extent the court in Hennessy relied on Kennedy, it applied rules that belong exclusively in the lease context or misapplied the rules embodying the new contract theory. The FDIC also relies on Bayshore Exec. Plaza Partnership v. FDIC, 750 F.Supp. 507 (S.D.Fla.1990), aff'd on other grounds, 943 F.2d 1290 (11th Cir.1991), to support its contingency argument. Its reliance is misplaced, however, as Bayshore involved a lessor's attempt to recover rent that had accrued one year after the bank's declaration of insolvency. The court simply applied the hoary rule that rights and liabilities are frozen at insolvency, American Nat'l Bank, 710 F.2d at 1540, and the interpretation most courts have given this rule in the lease context to conclude that the FDIC was not liable for the post-insolvency rent. See, e.g., FDIC v. Grella, 553 F.2d 258 (2d Cir.1977). Thus, we hold that the common law provability rules, if they continue to apply, do not bar the enforcement of McMillian's Severance Plan.