A recent California Appellate decision spells out a possible defense for some banks in discrimination cases. Specifically, the court held that state discrimination laws are preempted by the National Banking Act for certain national bank employees. For national banks in Connecticut (and indeed in other states), the decision is worth a review to determine if it applies.
In Ramanathan v. Bank of America, No. A113611 (Cal. Ct. App. Sept. 25, 2007), the Appellate Court was asked to review whether a "Vice President" was an "officer" under the National Banking Act, such that his state law claims, including race discrimination claims, would be preempted. The Court held that because the employee was not actually performing the duties of his "Vice President", he should not be considered an "officer". Therefore, it reversed summary judgment to the bank and remanded for further proceedings.
The Court provided the following background:
Section 24 (Fifth) of the National Bank Act (“NBA”) provides the following powers to a duly organized national banking association: “To elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.” (12 U.S.C.A. § 24 (Fifth).) Courts have long recognized that the power conferred by Section 24 (Fifth) on national banks to dismiss its officers “at pleasure” is protected by the doctrine of preemption from all state law claims filed by their former officers for breach of an employment agreement. …
Courts have also acknowledged the doctrine of preemption protects national banks that dismiss their officers under Section 24 (Fifth) from state law discrimination claims filed by their former officers, although in this regard, courts have differed on whether such preemption is total or partial. …
In our view, the key issue on appeal is whether [the plaintiff] was an “officer” of the Bank under Section 24 (Fifth). …
[W]e hold that where an employee asserts his or her position as “Vice-President” is not vested with any of the duties or responsibilities normally associated with such a positio … then to obtain summary judgment on preemption grounds under Section 24 (Fifth) the Bank must show the employee is “an officer” of the bank….
The court then followed four broad factors to review whether an employee is an officer.
First, he or she holds an office created by the board of directors and listed in the bank’s bylaws.
Second, he or she is appointed by the board of directors, either directly or pursuant to a delegation of board authority set forth in the bylaws.
Third, he or she has the express legal authority to bind the bank in its transactions with borrowers, depositors, customers, or other third parties by executing contracts or other legal instruments on the bank’s behalf.
Fourth, his or her decision-making authority, however it might be limited by bank rule or policy, relates to fundamental banking operations in such a manner as to affect potentially the public’s trust in the banking institution.
For national banks out there, this case discusses at length a valuable defense for employment claims. But one cautionary note, the preemption of state laws may not apply to federal discrimination claims. And recall that this applies to national banks, not state banks.
For attorneys who represent indivdiuals, filing a federal discrimination charge (bypassing state law) may be one way to avoid this whole area entirely. Nevertheless, given the power of preemption, this defense is worth exploring further when representing a national bank.