Court Opinion

ID: 9488467
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:46:34.725577+00
Date Added: 2024-06-11T17:52:54.804005
License: Public Domain

SETH, Circuit Judge,
dissenting.
I must respectfully dissent from the majority opinion herein.
In my view, a description of one meeting between the Wyoming and federal regulators with the directors of the Lusk State Bank, together with a little background, demonstrates why I cannot agree with the majority.
The Federal Reserve Bank of Kansas City, by reason of its examinations of the Lusk State Bank, and the problems therein revealed, required a “Written Agreement” between the Federal Reserve and the Bank to cover specific problems, with corrective action required. The opinion of the federal regulators was that the Bank management could not correct the errors, the many violations of regulations. The Agreement dated June 1, 1990 was signed for the Bank.
State regulators also involved in examina- ' tions were concerned over violations of regulations, but no serious concern was expressed '-over the immediate financial condition of the Bank. The basic problem to the state regulators apparently was that the directors and officers, especially the Plaintiff, were not responding to the results of examinations of the Bank, the specific errors, and also there were no adequate policies as to important aspects of the operations. Finally, the regulators, both the Federal Reserve Bank of Kansas City and the Wyoming regulators, the Defendants herein, decided to hold a meeting on April 29 with the directors of the Lusk State Bank to be held not in Lusk, but in Cheyenne.
The Meeting of April 29
As mentioned, the meeting was arranged by the regulators, and they decided who should attend. Those attending were Mr. McBride of the Kansas City Federal Reserve and Mr. Yorke from the Denver Federal Reserve. A lady from the Kansas City Federal Reserve made a detailed presentation of the defects shown in the Bank’s last examinations. The Defendants from the Wyoming regulatory agency were, of course, there. The Lusk State Bank directors were there, with one absent; the Plaintiff was present as president and a director of the Bank; as were the Bank attorney and the Bank CPA. All had been summoned from Lusk to Cheyenne.
There were introduced, without any explanation as to why they were at the meeting, two officers of the Wyoming Department of Criminal Investigation. There was, however, during the meeting a discussion of criminal penalties that the directors of the Bank might be liable for.
Defendant Mecca, in her presentation at the meeting, advised the directors that each one could be liable for a $370,000 civil penalty for bank failure in the past to conform to regulations. For Defendant Mecca’s testimony the Defendants sought out a single past violation of a regulation which could cause the federal authorities to assess a civil money penalty at the largest daily rate. This she quantified in her presentation at the meeting. This was the $370,000 against each director. Defendant Mecca testified at trial that there was no authority under Wyoming law to assess such a penalty. Thus she was using a penalty which could only be assessed *553by the federal regulators. There was no indication in the record that any such action was in any way contemplated by the federal regulators although they had some new authority to do so. Mrs. Mecca also mentioned the possible criminal penalties in her statements at the meeting. The officers of the Wyoming Department of Criminal Investigation were present, as mentioned.
The Plaintiff as Bank president was given fifteen minutes to respond to the extended federal and state regulators’ presentations. After the initial meeting the regulators had another but separate meeting with the directors; however, Plaintiff was not permitted to attend although he was a Bank director.
The meeting itself included what was apparently a good presentation of the Bank’s problems by the lady from the Kansas City Federal Reserve, and many problems were so described. However, thereafter very serious implications of the actions by the state regulators, the Defendants, are apparent. These were:
Their “threat,” and it must be so described, of the possible $370,000.00 civil penalty for one violation in the past for each director was obviously intended to accomplish the removal by the Board of Plaintiff. It had been mentioned before several times that there were possible civil money penalties, but this was the first time they had been quantified for one violation and the impact had to be significant at the very least.
Also, to bring up the matter of general criminal penalties at that time was another threat orchestrated by having then present the two officers of the Wyoming Department of Criminal Investigation.
Another significant event at “the meeting” was the presentation of and request by the Defendants that all the directors sign, in due course, a document of four or five pages titled “Letter of Understanding” between the Wyoming Division of Banking and the Lusk State Bank. This contained detailed requirements:
The first requirement was that if the “Bank” did not comply with Sections 2 through 11, and 13 through 16a, of the Letter, “as determined by the Examiner, will result in the. board of directors’ removal of President, Director and CEO Gene F. Lenz from office and his membership on the Bank’s board of directors.” (Emphasis added.)
The sections of the Letter referred to above contained general basic plans and policy matters as well as specific requirements. There were two or three references to civil money penalties. One states that violations of written agreements can lead to federal civil penalties. Others contained specific restrictions/changes in lending practices, depreciation and renewal of loans. The Bank had 60 days to comply. Compliance was to be monitored solely by the State Examiner.
The Letter, presumably, was to bring about important, basic and thorough changes in the Bank’s method of doing business. It was to be signed by all directors. Noncompliance as to several provisions would require the directors to fire the Plaintiff, as mentioned.
This discussion of “the Letter” needed some detail as it must be put in the context of the other “events” at the meeting. The Letter was very important to the Wyoming regulators. They apparently had consulted with the Wyoming Attorney General. It was complete and carefully prepared presumably to bring the Bank into “compliance.” The Defendants so indicated. This Letter submitted at the meeting built on and was timed with the “threats” of dollars as well as the mention of criminal consequences with the attendance of the two officers of the Wyoming Department of Criminal Investigation at the meeting.
However, a great and sudden change came about as to the Letter and the significance of the meeting. This was demonstrated shortly after the meeting by the statement of the Defendants that the Board really did not have to sign the Letter at all if it fired the Plaintiff. And for this surprising and fundamental change all it took was a phone call to Defendant Mecca. Thus the recited purpose and the detailed provisions of the Letter were really of no significance and all disappeared. The only purpose of it all was to have the Board fire Plaintiff. This purpose was so accomplished in an improper way, and, in my view, in violation of Plaintiffs *554constitutional rights. The state statutory procedure is clear for authorized removal of a bank officer. It must be mentioned that this was the “spring of 1991.” The Defendants in their Answer to Plaintiffs Complaint herein had stated:
“13. Answering ¶ 13, Defendants Dewey and Mecca admit that in the spring of 1991, the Defendants, based upon numerous statutory violations, sought the removal of the plaintiff as an officer and director of the Lusk State Bank.”
The requirements of Wyoming Statute Section 13-3-104 were avoided.
Other Issues
The above description of the Cheyenne meeting of April 29, and the Letter with its demise, is sufficient to decide several basic issues. Thus it demonstrates that the Defendants were not entitled to qualified immunity. Their actions went far beyond Wyoming Statute Section 13-3-104 relating to the removal of bank officers. The Defendants acknowledged they were familiar with the statute.
The same description also constitutes an adequate demonstration of third party interference by state officials with Plaintiffs employment with the Bank. If it was “at will” between the individual and his employer, as the trial court stated, it is necessary to consider and decide whether the doctrine of third party interference should be applied as the doctrine is, of course, well established. See F.D.I.C. v. Mallen, 486 U.S. 230, 108 S.Ct. 1780, 100 L.Ed.2d 266 (1988); Greene v. McElroy, 360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959); Truax v. Raich, 239 U.S. 33, 36 S.Ct. 7, 60 L.Ed. 131 (1915); DiMartini v. Ferrin, 889 F.2d 922 (9th Cir.); Chernin v. Lyng, 874 F.2d 501 (8th Cir.1989). The jury found there was “interference” under state law with the employment contract, but found state law immunity. Thus the trial court was in error in an application of “at will” employment doctrine as determinative in these circumstances.
The Plaintiff had a protected property interest in employment in his position as the Bank president. Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985). The trial court concluded that Plaintiff had a protected property interest as a director and this is what was demonstrated. The trial court did not hold that the protected property interest was in the holding company.
Our decision cannot be influenced by the results of examinations by the state or federal regulators. We are not concerned whether there was cause for removal of Plaintiff as President or not. Instead, the matters before us concern the methods used and acts by the Defendant state regulators in bringing about Plaintiffs removal.
Again, I cannot agree with the majority opinion, and would reverse on the basic issues discussed above and remand for a new trial within the provision of this dissent.