Fasano v. Federal Reserve Bank ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
8-3-2006
Fasano v. Fed Rsrv Bank NY
Precedential or Non-Precedential: Precedential
Docket No. 05-4661
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 05-4661
MAUREEN FASANO
v.
FEDERAL RESERVE BANK OF NEW YORK; RON
HENRY;
CYNTHIA RAMOS; LEROY HOPE; DOTTIE BOYD; KIM
RUSSO; LISA YOUNG; MERTHA JAKUBISZEN,
Appellants
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 03-cv-0672)
District Judge: Honorable Jose L. Linares
Argued June 29, 2006
Before: BARRY, VAN ANTWERPEN, and JOHN R.
GIBSON,* Circuit Judges.
*
Honorable John R. Gibson, United States Circuit Judge for
the Eighth Circuit, sitting by designation.
(Filed: August 3, 2006)
Thomas Baxter, Jr.
Michele H. Kalstein (Argued)
Barry M. Schindler
Federal Reserve Bank of New York
33 Liberty Street, 7th Floor
New York, NY 10045
Counsel for Appellant Federal Reserve Bank of New York
Andrew Dwyer (Argued)
Dwyer & Dunnigan, LLC
17 Academy Street, Suite 1010
Newark, NJ 07102
Counsel for Appellee
Frank A. Chernak
Ballard, Sphar, Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Counsel for Amicus Curiae
____
OPINION OF THE COURT
VAN ANTWERPEN, Circuit Judge.
Appellant Federal Reserve Bank of New York brings this
interlocutory appeal of the District Court’s refusal to find
2
appellee Maureen Fasano’s employment claims, based on New
Jersey state law, preempted by the Federal Reserve Act, 12
U.S.C. § 341(Fifth). For the reasons set forth below, we will
reverse and remand with instructions to dismiss Fasano’s
Complaint.
I.
A. Federal Reserve Banks
Because the nature of Federal Reserve Banks is at issue
in this case, we begin by briefly describing their history and
function. The Federal Reserve Bank of New York (“New York
Fed”) is one of twelve Federal Reserve Banks governed by the
Federal Reserve Act (“FRA”), 12 U.S.C. § 221 et seq. The
Federal Reserve Banks were established by Congress in 1913 to
be the “monetary and fiscal agents of the United States.” First
Agric. Nat’l Bank v. State Tax Comm’n, 392 U.S. 339, 356
(1968) (Marshall, J., dissenting). See also Federal Reserve Act
of 1913, Pub. L. No. 63-43, 38 Stat. 251. To aid in achieving
Congress’s goal of insulating them from political pressure, the
Federal Reserve Banks are formed as corporations. 12 U.S.C.
§ 341. Within their respective designated territories, the Federal
Reserve Banks supervise and maintain the nation’s banking
system, examine the national1 and state banks that have
1
Federal Reserve Banks are not “national banks.” “National
bank” denotes banks such as Citibank or Bank of America,
organized under the National Bank Act. 12 U.S.C. § 21 et seq.
Before the passage of the Federal Reserve Act, national banks
formerly performed essential governmental monetary functions
3
purchased memberships in the Federal Reserve System, 12
U.S.C. §§ 325, 481 et seq., and clear checks and deposits
between depository institutions. 12 U.S.C. § 360.
The individual Federal Reserve Banks serve as the
foundation for the Federal Reserve System. The presidents of
the New York Fed and four other Federal Reserve Banks, along
with the Board of Governors of the Federal Reserve System
(“Board of Governors”), constitute the Federal Open Market
Committee, 12 U.S.C. § 263, charged by Congress with:
“maintain[ing] long run growth of the monetary and credit
aggregates commensurate with the economy’s long run potential
to increase production, so as to promote effectively the goals of
maximum employment, stable prices, and moderate long-term
interest rates.” 12 U.S.C. § 225a. The individual Federal
Reserve Banks carry out the monetary policy so formulated.
The Board of Governors, comprising seven Presidential
appointees, 12 U.S.C. § 241, loosely oversees the Federal
Reserve Banks’ operations. 12 U.S.C. § 248(j). The Board of
Governors is empowered to levy assessments on the Federal
Reserve Banks to pay expenses, 12 U.S.C. § 243, and issue
governing regulations, see, e.g., 12 U.S.C. § 248-1.
The Federal Reserve Banks are intimate parts of the
Government’s fiscal structure. In addition to acting as the
such as issuing currency. The Federal Reserve Banks have now
taken over these functions, leaving little difference between
national banks and state-chartered banks. We will attempt to be as
precise as possible when referring to “national banks” as opposed
to Federal Reserve Banks.
4
Government’s fiscal agent, the Federal Reserve Banks serve as
the depository for the United States Treasury. 12 U.S.C. § 391.
The United States, while not a capital stockholder in the Federal
Reserve Banks, is the residual interest-holder in the unlikely
event of a Federal Reserve Bank’s liquidation. 12 U.S.C. § 290.
Congress has on occasion treated the Federal Reserve Banks as
the Government’s own rainy day fund, directing, for example,
the payment of $3.7 billion to the United States Treasury in
2000. 12 U.S.C. § 289; see also Pub. L. No. 103-66, § 3002(b),
107 Stat. 337 (1993) (directing payment of $106 Million to
United States Treasury in 1997; $107 Million to United States
Treasury in 1998). Collectively, the Federal Reserve Banks
carry out the functions of the United States’ central bank –
issuing and maintaining legal tender, i.e., Federal Reserve
Notes; acting as repository of Government funds; and
interacting with foreign countries’ central banks.
While placed by law in a home city, each Federal
Reserve Bank spans at least three states, and eleven are under
the territorial jurisdiction of more than one United States Circuit
Court of Appeals. The New York Fed has responsibility for all
of New York, Puerto Rico, and the United States Virgin Islands,
and parts of New Jersey and Connecticut.
B. Instant Dispute
Turning to the matter at hand, Maureen Fasano worked
in the New York Fed’s East Rutherford, New Jersey office from
5
2000-2002.2 Fasano initially worked as a currency verification
operator and junior operator, handling and washing currency.
This involved, inter alia, lifting heavy materials one day a week.
On August 15, 2001, Fasano realized that she had not been paid
for overtime she had recorded on her time sheet. On bringing
this to the attention of a supervisor, Fasano saw that her time
sheet had been altered and was told that because no other
employees had submitted overtime, she would not be paid for it.
Fasano met with several supervisors to discuss her complaints,
and was told that she would be paid for the overtime; the
supervisors allegedly asked her not to speak of the incident with
any other employee. Fasano claims a co-worker later told her
the supervisors would try to make Fasano quit for causing
“trouble.”
In September, 2001, Fasano met with the New York
Fed’s Human Resources Department to complain that her pay
was too low for her seniority, and that she had not received a
standard raise. She also met with another supervisor, who asked
whether she thought she was being “prejudiced” against; Fasano
responded “yes.”
In late November, 2001, Fasano was transferred to a
“floater” position, where she was assigned to different rooms
and did heavy lifting each day. Fasano had a preexisting neck
injury that had not previously impacted her employment despite
the one-day-a-week heavy lifting, and Type 1 diabetes that
2
For the purpose of this appeal from a motion to dismiss, we
recite the facts regarding Fasano’s underlying employment claims
as stated in her Complaint.
6
necessitated frequent eating. Fasano believed that her
supervisors at the New York Fed knew of each condition, and
(1) assigned her to the floater position in the hope that she
would injure herself; and (2) prevented her from taking breaks
during her shift to eat. At one point, Fasano complained to
supervisors that the new position was “killing her.”
On December 18, 2001, Fasano injured her back and
allegedly went on long-term disability leave. According to the
New York Fed, Fasano never fully applied for disability
benefits, and never responded to a letter sent to her on July 2,
2002, notifying her that she must either return to work or file a
completed benefits application. Fasano was thereafter
terminated on July 31, 2002.
Fasano then filed this suit in the New Jersey Superior
Court against the New York Fed and various employees, both in
their official and individual capacities, alleging (1) retaliation,
in violation of the New Jersey Conscientious Employee
Protection Act (“CEPA”), N.J. Stat. Ann. § 34:19-1 et seq.
(West 2006); (2) failure to accommodate, in violation of the
New Jersey Law Against Discrimination (“LAD”), N.J. Stat.
Ann. § 10:5-1 et seq. (West 2006); and (3) retaliation, in
violation of the LAD. The New York Fed removed the case to
the United States District Court for the District of New Jersey on
February 14, 2003, pursuant to 12 U.S.C. § 632, and filed a
motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), for lack of
subject matter jurisdiction due to preemption by the Federal
Reserve Act; and Fed.R.Civ.P. 12(b)(6), for failure to state a
claim upon which relief can be granted.
7
On March 31, 2004, the District Court denied the New
York Fed’s Rule 12(b)(1) motion, concluding that a Federal
Reserve Bank is not a federal instrumentality but is instead
treated as a private corporation, and that the Federal Reserve Act
did not preempt any state employment laws, even if they
imposed additional burdens and liabilities beyond federal law
(as did CEPA and LAD). The District Court also denied the
New York Fed’s Rule 12(b)(6) motion as to all claims.
Following initial discovery, the New York Fed filed
counterclaims based on Fasano’s failure to disclose a private
business venture before, during, and after her employment.3
The New York Fed then filed a motion for
reconsideration, which the District Court denied on August 9,
2005. However, the District Court noted a wide split in
authority among courts around the country and a recent contrary
holding by a district court in the Eastern District of
Pennsylvania finding preemption in a nearly-identical case
involving the Federal Reserve Bank of Philadelphia. The
District Court thus granted certification of the question for
interlocutory appeal pursuant to 28 U.S.C. § 1292(b).4 We
3
These counterclaims are not part of this appeal. We reject
Fasano’s argument that by removing the case to the District Court
and filing counterclaims, the New York Fed “conceded” that
subject matter jurisdiction existed and waived its preemption
arguments.
4
The exact question certified by the District Court was
“whether the Federal Reserve Bank is immune from state
employment discrimination law claims, particularly whether the
8
granted permission to appeal on September 23, 2005. On March
14, 2006, we granted the motion of the other 11 Federal Reserve
Banks to proceed as Amici Curiae.
II.
The District Court had jurisdiction pursuant to 12 U.S.C.
§ 632, which provides that all civil suits against Federal Reserve
Banks are “deemed to arise under the laws of the United States
. . . ; and any defendant in any such suit may, at any time before
the trial thereof, remove such suits from a State court into the
district court . . . .” We have jurisdiction over the interlocutory
appeal pursuant to 28 U.S.C. § 1292(b). We exercise plenary
review over issues of subject matter jurisdiction, including
preemption. Travitz v. Northeast Dep’t ILGWU Health &
Welfare Fund, 13 F.3d 704, 708 (3d Cir. 1994).
III.
The New York Fed contends that by virtue of the
Supremacy Clause of the United States Constitution, U.S. Const.
Art. VI, cl. 2, the Federal Reserve Act preempts either wholly or
in part the application of New Jersey’s CEPA and LAD to a
Federal Reserve Bank. In the interest of clarity, we will begin
with a brief summary of the possible forms of preemption, and
FRA preempts state anti-discrimination laws.” Dist. Ct. Op. (Aug.
9, 2005) at *12. The New York Fed did not request
reconsideration or certification of the denial of its Fed.R.Civ.P.
12(b)(6) motion to dismiss, and consequently we will not consider
the substantive merits of Fasano’s claims.
9
then address that alleged by the New York Fed.
In normal preemption cases, we apply the familiar
analysis set forth by the Supreme Court in English v. General
Electric Co., 496 U.S. 72 (1990). See, e.g., Barber v. UNUM
Life Ins. Co. of Am., 383 F.3d 134 (3d Cir. 2004). We recognize
three forms of preemption – express, field, and conflict. “First,
Congress can define explicitly the extent to which its enactments
pre-empt state law.” English, 496 U.S. at 78. “Second, in the
absence of explicit statutory language, state law is pre-empted
where it regulates conduct in a field that Congress intended the
Federal Government to occupy exclusively.” Id. at 79.
“Finally, state law is pre-empted to the extent that it
actually conflicts with federal law. Thus, the Court has
found pre-emption where it is impossible for a private
party to comply with both state and federal requirements,
or where state law stands as an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress.”
Id. (citations and quotation marks omitted). The presumption
remains against conflict preemption under English where, as
here, the area of law is not traditionally exclusively federal.
C.E.R. 1988, Inc. v. Aetna Cas. & Sur. Co., 386 F.3d 263, 268
(3d Cir. 2004).
On appeal, the New York Fed alleges conflict preemption
instead of field and express preemption. We note, however, that
because the distinction between field and conflict preemption is
often blurry, cases and concepts addressing one may be helpful
10
regarding the other. See, e.g., NE Hub Partners, L.P. v. CNG
Transmission Corp., 239 F.3d 333, 348 (3d Cir. 2001); see also
English, 496 U.S. at 79 n.5.
The New York Fed’s argument is two-fold: First, it
argues that English is inapplicable because of the Federal
Reserve Banks’ alleged status as protected federal
instrumentalities. Under this rationale, preemption is presumed,
absent explicit authorization of suit or application of state law
by Congress. “Where Congress does not affirmatively declare
its instrumentalities or property subject to regulation, the federal
function must be left free of regulation.” Hancock v. Train, 426
U.S. 167, 179 (1976),5 substantive holding superseded by statute
5
Fasano reads Hancock and a later Supreme Court case,
Goodyear Atomic Corp. v. Miller, 486 U.S. 174 (1988), as setting
down a preemption rule solely for federally-owned facilities.
While it is certainly true that both of these cases explicitly
addressed federal facilities, Fasano ignores the Supreme Court’s
language extending the rule equally to both “instrumentalities or
property,” Hancock, 426 U.S. at 179. See also Goodyear, 496 U.S.
at 188 n.1 (White, J., dissenting) (noting that “[t]he Court
recognizes, and I agree, that under our precedents the [federally-
owned] facility here . . . must be treated as a federal instrumentality
for the purpose of applying the Supremacy Clause”). The District
Court correctly noted the consequential equivalence of federal
facilities and instrumentalities with regard to entitlement to
presumptive preemption. Dist. Ct. Op. (Mar. 31, 2004) at *6. We
refer to Hancock and Goodyear not to establish that the New York
Fed is a federal instrumentality, but to explain the consequences of
such instrumentality status.
11
Pub. L. No. 95-96, § 116, 91 Stat. 711 (1977), (emphasis added)
(citation and quotation marks omitted). Second, the New York
Fed argues that even if we apply normal English conflict
preemption, CEPA and LAD impermissibly conflict with 12
U.S.C. § 341 of the Federal Reserve Act, which grants the
Federal Reserve Banks the power to dismiss “at pleasure” any
employee, at least to the extent that CEPA and LAD impose
burdens going beyond those already imposed by federal anti-
discrimination laws.
For the reasons we will now discuss, we conclude that
under either of these approaches – searching for Congressional
authorization for suit versus intent to preempt – Fasano’s
Complaint must be dismissed as preempted by the Federal
Reserve Act.
IV.
While not dispositive here, we first address the New
York Fed’s allegation that Federal Reserve Banks are federal
instrumentalities, entitled to presumptive preemption of state
law claims. Fasano urges us to uphold the District Court’s
conclusion that the Federal Reserve Banks are instead mere
private corporations. Equating “instrumentality” with “federal
agency,” the District Court placed near-dispositive reliance on
a Guidance issued by the Equal Employment Opportunity
Commission (“EEOC”) in 1993 regarding the proper procedures
for filing federal discrimination charges against Federal Reserve
Banks, but which required classifying Federal Reserve Banks as
either “federal agencies” or “private employers.” While it
acknowledged that Federal Reserve Banks have been
12
characterized as federal instrumentalities, the District Court
limited such cases to taxation. We ultimately need not
determine, for the purposes of this case, whether Federal
Reserve Banks are federal instrumentalities in the employment
law field. Even were we to find such instrumentality status,
suits would be permitted up to the level authorized by Congress.
As we explain below, Congress has authorized suits based on
federal anti-discrimination laws, and we see no principled
distinction between such suits and suits based on state anti-
discrimination laws that are exactly analogous to those federal
laws. CEPA and the LAD, however, are far from coincident
with the ADA and federal whistleblower statutes. Thus, suit
based on CEPA and the LAD would lie outside any
authorization of Congress.
Because this is the same conclusion we reach using the
standard English preemption analysis, we decline to formally
reach here whether Federal Reserve Banks should be considered
federal instrumentalities. We note, however, that strong
arguments have been made in favor of such status.6
6
Indeed, several Circuits have found the Federal Reserve
Banks to be federal instrumentalities, albeit in the context of
immunity from taxation. See, e.g., Scott v. Fed. Reserve Bank of
Kansas City, 406 F.3d 532 (8th Cir. 2005) (reaffirming Fed.
Reserve Bank of St. Louis v. Metrocentre Improvement Dist. #1,
657 F.2d 183 (8th Cir. 1981), a taxation case, in the context of the
general application of the Federal Rules of Appellate Procedure);
Fahey v. O’Melveny & Myers, 200 F.2d 420 (9th Cir. 1983); Fed.
Reserve Bank v. Comm’r of Corps. & Taxation, 520 F.2d 221 (1st
Cir. 1975) (reaffirming that Federal Reserve Banks are federal
13
Instrumentality jurisprudence has never been
characterized by particular clarity. However, the District
Court’s decision rested, in several respects, on infirm ground.
First, the EEOC Guidance is of questionable relevance. The
EEOC’s 1993 Enforcement Guidance on Coverage of Federal
Reserve Banks (No. N-915-002) addressed whether Federal
Reserve Banks were “private employers covered by the private
sector provisions” of Title VII, or instead “executive agencies
covered under the federal sector provisions.” Purely for the
purpose of clarifying which procedures govern the filing and
disposition of complaints, the EEOC concluded that the Federal
Reserve Banks were “private employers.” However, the EEOC
in that matter was presented with only two choices – “executive
agency” or “private employer.” Contrary to Fasano’s assertions
on appeal, we have more than two available choices in our
lexical pantheon. The New York Fed does not claim to be part
of the United States Government, but instead an instrumentality
thereof. We thus discern little persuasive value in the EEOC’s
determination simply that Federal Reserve Banks are not
“executive agencies” within the specific meaning of federal
instrumentalities, as held in Fed. Reserve Bank of Boston v.
Comm’r of Corps. & Taxation, 499 F.2d 60 (1st Cir. 1974)). We
note, however, the decisions of the Massachusetts, New York,
Wisconsin, Washington, and Des Moines Human Rights or Equal
Rights commissions, all disclaiming employment discrimination
jurisdiction over Federal Reserve Banks because of their status as
federal instrumentalities. See Br. of Amici Curiae Federal Reserve
Banks at 14-16.
14
statutes.7 Whether or not an entity is a federal instrumentality
for Supremacy Clause analysis is a different question from
whether an instrumentality is a federal agency for a specific
statute.
We also take issue with the contention that federal
instrumentalities do not exist beyond the field of taxation. See,
e.g., United States Postal Serv. v. Flamingo Indus. (USA) Ltd.,
540 U.S. 736 (2004) (Postal Service is a federal instrumentality
for antitrust purposes); Federal Land Bank v. Priddy, 295 U.S.
229 (1935) (federal land banks held at the time to be federal
instrumentalities for attachment of property purposes).
Moreover, while we acknowledge that the Supreme Court has
been less than crystal clear in elucidating a test for federal
instrumentalities, the mere fact that the Federal Reserve Banks
are organized in the corporate form does not itself prevent them
from being federal instrumentalities. As the New York Fed
correctly notes, the Bank of the United States in the bedrock
case of McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819),
was found to be a federal instrumentality despite its corporate
status.
Furthermore, Federal Reserve Banks indeed possess
many of the hallmarks of federal instrumentalities. Emergency
7
For similar reasons, we reject reliance on Lewis v. United
States, 680 F.2d 1239 (9th Cir. 1982), wherein the Ninth Circuit
held Federal Reserve Banks not to be covered under the Federal
Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671 et seq., as that statute
defines “federal agency” and “federal instrumentality” especially
narrowly.
15
Fleet Corp. v. Western Union Tel. Co., 275 U.S. 415, 425-26
(1928) (“Instrumentalities like the national banks or the federal
reserve banks, in which there are private interests, are not
departments of the Government. They are private corporations
in which the Government has an interest.”). For example,
Federal Reserve Banks are surely “virtually . . . an arm of the
Government.” Dep’t of Employment v. United States, 385 U.S.
355, 359-60 (1966) (finding the Red Cross to be a federal
instrumentality). Like the Red Cross, Federal Reserve Banks
are not profit-seeking enterprises. Ultimately, the Federal
Reserve Banks are “not private business. The policy of the
Federal Reserve Banks is governed by the policy of the United
States with regard to them.” Am. Bank & Trust Co. v. Fed.
Reserve Bank of Atlanta, 256 U.S. 350, 359 (1921). Thus, we
question the District Court’s ultimate conclusion that Federal
Reserve Banks are, by their nature, wholly private corporations.
As we have indicated, however, we are not required to
reach the broader, albeit amply supportable, conclusion that the
New York Fed is a federal instrumentality. As we discuss
below, Fasano’s Complaint must be dismissed as preempted by
the Federal Reserve Act where the state grounds for the suit –
CEPA and the LAD – impermissibly frustrate Congress’s intent
to provide the Federal Reserve Banks with the widest latitude
possible in personnel decisions.
V.
It is the New York Fed’s second argument – that suit
alleging violations of New Jersey’s CEPA and LAD conflicts
with the Federal Reserve Act and is therefore preempted – that
16
we find dispositive. Both statutes indisputably impose
substantive and procedural burdens well beyond those imposed
by federal law, and thereby frustrate Congressional intent to
provide the Federal Reserve Banks with relatively unfettered
employment discretion. We will reverse on this ground, and
remand for the dismissal of Fasano’s Complaint.
In Part A to follow, we lay out the boundaries of the main
preemptive language contained in the Federal Reserve Act, as
implicitly amended by the ADA and the federal banking
whistleblower statute, 12 U.S.C. § 1831j. In Part B, we adopt
the holding of courts which have found conflict preemption
where a state employment law grants greater substantive,
procedural, or remedial protections than those already permitted
by the ADA and 12 U.S.C. § 1831j. In Part C, we conclude that
New Jersey’s CEPA and LAD both go far beyond what is
permitted by the Federal Reserve Act, and are therefore
preempted as applied to the New York Fed.
A. Federal Reserve Act § 341(Fifth)
We “start[] with the basic assumption that Congress did
not intend to displace state law.” C.E.R. 1988, Inc., 386 F.3d at
268 (quoting Bldg. & Const. Trades Council of Metro. Dist. v.
Assoc. Builders & Contractors of Mass./R.I., Inc., 507 U.S. 218,
224 (1993)). Conflict preemption arises in the absence of
specific preemption language, where an individual is unable to
follow both federal and state laws simultaneously, or where the
state law “would frustrate the federal scheme.” Allis-Chalmers
Corp. v. Lueck, 471 U.S. 202, 209 (1985); see also English, 496
U.S. at 79 (“where state law stands as an obstacle to the
17
accomplishment and execution of the full purposes and
objectives of Congress”). We recently explained that “federal
and state law need not be contradictory on their faces for
preemption to apply. It is sufficient that the state law ‘impose[s]
. . . additional conditions’ not contemplated by Congress.”
Surrick v. Killion, 449 F.3d 520, 2006 U.S. App. LEXIS 13618,
at *31 (3d Cir. June 2, 2006) (quoting Sperry v. Florida, 373
U.S. 379, 385 (1963)) (alteration in original).
“Pre-emption fundamentally is a question of
congressional intent.” English, 496 U.S. at 78-79. Therefore,
“the first step in determining whether . . . claims are preempted
is to evaluate the statute and regulations for evidence of
congressional intent.” C.E.R. 1988, Inc., 386 F.3d at 270.
The key preemptive language in the Federal Reserve Act
is contained in 12 U.S.C. § 341(Fifth),8 which states that a
8
Consistent with past practice, we note that for the purpose
of analyzing § 341(Fifth), we may look to analogous provisions of
the Federal Home Loan Bank Act, 12 U.S.C. § 1432(a) (“and to
dismiss at pleasure such officers, employees, attorneys, and
agents”), the National Bank Act, 12 U.S.C. § 24(Fifth) (“dismiss
such officers or any of them at pleasure”), and cases interpreting
these statutes. See Mele v. Fed. Reserve Bank, 359 F.3d 251, 255
(3d Cir. 2004) (analyzing both Federal Reserve Act and Federal
Home Loan Bank Act cases); Kroske v. US Bank Corp., 432 F.3d
976 (9th Cir. 2005), as amended 2006 U.S. App. LEXIS 3367
(Feb. 13, 2006) (considering in parallel Federal Reserve Act and
Federal Home Loan Bank Act); Arrow v. Fed. Reserve Bank of St.
18
Federal Reserve Bank shall have the power:
“To appoint by its board of directors a president, vice
presidents, and such officers and employees as are not
otherwise provided for in this Act, to define their duties,
require bonds for them and fix the penalty thereof, and
to dismiss at pleasure such officers or employees.”
(emphasis added)
The New York Fed argues, consistent with the decisional law of
several Circuits and other courts, that this “at pleasure”
language precludes the application of state employment
discrimination or whistleblower laws that restrict “at pleasure”
dismissal, or, at the very least, preempts such state laws to the
extent they impose additional burdens beyond federal law such
as the ADA, which already apply to the Federal Reserve Banks.
The District Court followed several other courts and concluded
instead that no preemption occurred, regardless of the additional
burdens imposed by CEPA and LAD above and beyond federal
law, and regardless of the inconsistencies each Federal Reserve
Bank would face from various state and local laws. According
to this rationale, because Title VII applies to Federal Reserve
Banks, then § 341(Fifth) permits employment discrimination
laws to limit the Banks’ discretion in firing. Therefore, the
Louis, 358 F.3d 392 (6th Cir. 2004) (noting identical holdings
under Federal Reserve Act and National Bank Act); Andrews v.
Fed. Home Loan Bank of Atlanta, 998 F.2d 214 (4th Cir. 1993)
(citing Federal Reserve Act in support of ruling on Federal Home
Loan Bank Act).
19
argument goes, state discrimination laws would not conflict
with § 341(Fifth) even if the state laws impose additional
burdens beyond federal law because they have a common
purpose.
In order to fully analyze § 341(Fifth), we must also ask
what effect, if any, the passage of the ADA and federal
whistleblower statute had on this far older language in the
Federal Reserve Act. Section 341(Fifth) was originally enacted
almost a hundred years ago. Federal Reserve Act of 1913, Pub.
L. No. 63-43, ch. 6, § 4, 38 Stat. 254. Subsequent amendment
in 1935 left the original “at pleasure” language unchanged, and
merely clarified that a president and vice presidents could be
appointed.9 Act of August 23, 1935, ch. 614, § 201, 49 Stat.
703. The ADA, by contrast, was enacted in 1990, Pub. L. No.
101-336, 104 Stat. 328, 42 U.S.C. § 12101 et seq., and has been
applied to Federal Reserve Banks. See, e.g., Wernick v. Fed.
Reserve Bank of New York, 91 F.3d 379 (2d Cir. 1996). The
federal banking whistleblower statute, 12 U.S.C. § 1831j, as
applicable to Federal Reserve Banks, was enacted in 1991. Act
of December 19, 1991, Pub. L. No. 102-242, § 251(a)(1)-(3),
105 Stat. 2331.
In order to reconcile the applicability of these federal
9
As originally enacted, § 341(Fifth) read: “To appoint by its
board of directors, such officers and employees as are not
otherwise provided for in this Act, to define their duties, require
bonds of them and fix the penalty thereof, and to dismiss at
pleasure such officers or employees.”
20
statutes limiting the Federal Reserve Banks’ discretion in
personnel decisions with § 341(Fifth)’s grant of broad power to
dismiss employees “at pleasure,” we are compelled to conclude
that the ADA and 12 U.S.C. § 1831j impliedly amended § 341.
See Kroske v. US Bank Corp., 432 F.3d 976, 989 (9th Cir.
2005), as amended 2006 U.S. App. LEXIS 3367 (Feb. 13,
2006); Evans v. Fed. Reserve Bank of Phila., 2004 U.S. Dist.
LEXIS 13265 (E.D. Pa. July 8, 2004); Peatros v. Bank of Am.,
990 P.2d 539 (Cal. 2000). We are aware that implicit
amendment or repeal is rare in the law. “The cardinal rule is
that repeals by implication are not favored.” Posadas v. Nat’l
City Bank, 296 U.S. 497, 503 (1936). We may find such repeal
or amendment only if “the two acts are in irreconcilable conflict,
or [if] the later statute covers the whole ground occupied by the
earlier and is clearly intended as a substitute for it . . . .” Id. at
504. We have said that “[w]henever possible, the two statutes
should be read in order to give effect to both.” Tineo v.
Ashcroft, 350 F.3d 382, 391 (3d Cir. 2003).
We are concerned here only with the first category of
implied amendment, as neither the ADA nor 12 U.S.C. § 1831j
“covers the whole ground occupied” by Federal Reserve Act §
341. These statutes do, however, “irreconcilabl[y] conflict.”
Section 341(Fifth) grants Federal Reserve Banks the
absolute, unlimited power to dismiss an employee. The ADA
and 12 U.S.C. § 1831j, on the other hand, prohibit a Federal
Reserve Bank from dismissing an employee on the ground of a
covered disability, from refusing to grant an employee’s request
for an accommodation, or from dismissing an employee for
having filed a complaint alleging a violation of law. Thus, a
21
Federal Reserve Bank’s absolute unconditioned legal right to
dismiss under § 341(Fifth), is made illegal under the ADA and
12 U.S.C. § 1831j. Such a fundamental conflict is not “merely
cosmetic,” or one “that relates to anything less than the
operative legal concepts.” Tineo, 350 F.3d at 391.
We must conclude, therefore, that to the extent that the
ADA and 12 U.S.C. § 1831j irreconcilably conflict with §
341(Fifth), these statutes have impliedly amended § 341(Fifth)
to grant a Federal Reserve Bank “a limited power to dismiss any
of its officers at pleasure by its board of directors, not extending
to dismissal” on grounds prohibited by the ADA or 12 U.S.C. §
1831j. Peatros, 990 P.2d at 549-50. The corollary, as we
conclude below, is that “as impliedly amended by [the ADA and
12 U.S.C. § 1831j, § 341(Fifth)] bestows a qualified immunity
from liability arising from its exercise, allowing only specified
relief, with limits and/or bars against compensatory and/or
punitive damages.” Peatros, 990 P.2d at 550. Our only
remaining task is to determine whether, as impliedly amended
by the ADA and 12 U.S.C. § 1831j, § 341(Fifth) of the Federal
Reserve Act preempts the application of CEPA or the LAD to
a Federal Reserve Bank’s dismissal of an employee.
B. Federal Reserve Act Conflict Preemption
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 *19 (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 state-
created 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 anti-
discrimination 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 anti-
discrimination laws.” Id. at *16. 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 *21.
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 *32
(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.
C. CEPA and LAD
Because § 341(Fifth) preempts state employment laws
that provide remedies beyond those permitted in the ADA or 12
U.S.C. § 1831j, what remains is to determine whether CEPA or
the LAD are indeed such expansive laws. We hold that they are,
and are therefore preempted to the extent of these divergences.
We will adopt the Evans approach and decline to usurp the New
direct preemption, and does not preempt the Federal Reserve Act.
It would be a mistake, however, to argue that because the ADA
preempts neither the Federal Reserve Act nor CEPA or LAD, the
Federal Reserve Act cannot have such preemptive force. See Shaw
v. Delta Air Lines, 463 U.S. 85, 101 n.22 (1983) (argument
“simplistic” and properly rejected); Evans, 2004 U.S. Dist. LEXIS
13265, at *19-20. Application of CEPA or the LAD frustrates the
Congressional purpose behind § 341(Fifth), as impliedly amended
by the ADA and 12 U.S.C. § 1831j. See supra Part V.A.
28
Jersey legislature’s province by rewriting these state laws.
Therefore, we will remand the case to the District Court with
instructions to dismiss Fasano’s Complaint.
Both the LAD and CEPA go well beyond their federal
counterparts. See Dist. Ct. Op. (Mar. 31, 2004) at *18-23. For
example, neither the ADA nor 12 U.S.C. § 1831j11 permit
individual damages liability on the part of employees. Koslow
v. Pennsylvania, 302 F.3d 161, 178 (3d Cir. 2002) (ADA). The
LAD permits the imposition of individual liability on an
employee who has aided or abetted barred acts. Tarr v. Ciasulli,
853 A.2d 921 (N.J. 2004). Of particular importance to an
employer, the LAD permits an employee to directly pursue a
claim in Superior Court, without first pursuing an administrative
complaint. Hernandez v. Region Nine Hous. Corp., 684 A.2d
1385, 1389 (N.J. 1996).
The LAD unquestionably protects a broader range of
11
While no Circuit appears to have directly held that 12
U.S.C. § 1831j does not permit individual liability, several District
Courts have so held, with no contrary authority brought to our
attention. See, e.g., Rouse v. Farmers State Bank, 866 F.2d 1191
(N.D. Iowa 1994); Hicks v. Resolution Trust Corp., 767 F. Supp.
167 (N.D. Ill. 1991). The Fifth Circuit has held that 12 U.S.C. §
1831j “applies only to the actors named in the statute,” the only
actors being certain types of institutions. Nowlin v. Resolution
Trust Corp., 33 F.3d 498, 503 (5th Cir. 1994). The District Court
accepted that CEPA provided for individual liability, in contrast to
12 U.S.C. § 1831j. Dist. Ct. Op. (Mar. 31, 2004) at *22.
29
“disabilities” or “handicaps” than the ADA. The ADA limits
covered disabilities to those which “substantially limit[] one or
more of the major life activities.” 42 U.S.C. § 12102(2)(A). In
contrast, Fasano would be able to prove disability under the
LAD by merely showing, for example, “physical disability,
infirmity, malformation or disfigurement which is caused by
bodily injury, birth defect or illness . . . any degree of paralysis,
amputation, lack of physical coordination . . . or any mental,
psychological or developmental disability . . . which prevents
the normal exercise of any bodily or mental functions.” N.J.
Stat. Ann. § 10:5-5(q) (West 2006). The LAD, therefore,
imposes a significantly “lower standard” than the ADA. Failla
v. City of Passaic, 146 F.3d 149, 154 (3d Cir. 1998); see also
Motley v. New Jersey State Police, 196 F.3d 160, 165 n.5 (3d
Cir. 1999) (noting the “more stringent ADA standard”). Accord
Viscik v. Fowler Equip. Co., 800 A.2d 826 (N.J. 2002). The
LAD also expands the recovery options available to a successful
plaintiff. See, e.g., Lanni v. New Jersey, 259 F.3d 146, 149 (3d
Cir. 2001) (unlike ADA, a LAD award “may reflect any risk of
nonpayment of a fee assumed by counsel” and apply a multiplier
enhancement). LAD damages are uncapped. Baker v. Nat’l
State Bank, 801 A.2d 1158, 1165-66 (N.J. Super. Ct. App. Div.
2002).
The differences are also apparent with respect to CEPA.
CEPA provides extremely “broad protections against employer
retaliation.” Mehlman v. Mobil Oil Corp., 707 A.2d 1000, 1008
(N.J. 1998); see also id. (“[A]t the time of its enactment [CEPA
was described as] the most far-reaching ‘whistleblower statute’
in the nation.”). CEPA allows for individual employee liability,
Palladino ex rel. United States v. VNA of S. N.J., Inc., 68 F.
30
Supp. 2d 455, 474 (D.N.J. 1999), while as noted above, 12
U.S.C. § 1831j does not. 12 U.S.C. § 1831j protects a Federal
Reserve Bank employee from retaliation for disclosing
suspected wrongdoing to a very circumscribed list of entities:
the Bank itself, a federal banking agency, or the Attorney
General. 12 U.S.C. § 1831j(a)(2). By contrast, CEPA permits
an employee to complain to any public body, N.J. Stat. Ann. §
34:19-3 (West 2006), about virtually any topic, even those
within the employee’s own control.
In sum, Fasano’s belated attempt to claim that the LAD
and CEPA are merely parallel and consonant with the ADA and
12 U.S.C. § 1831j is meritless. We conclude that both CEPA
and the LAD provide remedies and substantive protections that
go far beyond their federal analogs. These additional
provisions, by further limiting the New York Fed’s ability to
exercise the broad “dismiss at pleasure” discretion granted it by
Congress, frustrate that Congressional purpose, and cannot be
applied to Federal Reserve Banks due to conflict preemption.
The final matter we must address is whether our proper
course of action is to dismiss Fasano’s Complaint or to attempt
to pare back CEPA and the LAD to exactly match the ADA and
12 U.S.C. § 1831j.
We conclude that we would be ill-suited for the latter
task. We agree with Judge Padova that instead of attempting to
“essentially rewrite the relevant provisions of the [CEPA and
LAD] to parrot Federal anti-discrimination law,” and “risk
frustrating the intent of the publicly elected legislature which
enacted the [CEPA and LAD] in the first place,” dismissal is
31
appropriate. See Evans, 2004 U.S. Dist. LEXIS 13265, at *21.
There is simply no way to give full effect to such state laws
while picking and choosing which parts of them may apply. For
example, as noted above the LAD does not require exhaustion
of administrative remedies; a plaintiff elects whether to proceed
in the administrative arena, or in court, but a final decision in
either forum is binding and renders the other forum unavailable.
Were we to graft the ADA’s exhaustion requirement onto the
LAD, we would transform formerly final, binding administrative
determinations into non-binding preliminaries to litigation. We
will not step on the toes of the New Jersey legislature in this or
any other like manner.
VI.
New Jersey undoubtedly has a very strong interest in
requiring employers to abstain from discriminatory practices, the
range of which New Jersey has chosen to define as broadly as
possible. Nonetheless, “preemption analysis does not involve a
balancing of state and federal interests. Once it is determined
that there is a conflict between a valid federal law and a state
law, the state law must give way.” Surrick, 449 F.3d at ___,
2006 U.S. App. LEXIS 13618, at *36. State anti-discrimination
laws that do not mirror their federal analogs cannot be validly
applied to the New York Fed by virtue of conflict preemption
with § 341(Fifth) of the Federal Reserve Act.
For the foregoing reasons, we conclude that Fasano’s
Complaint must be dismissed due to the preemption of her state
law claims by the Federal Reserve Act. Accordingly, we will
reverse and remand the case.
32