Buck v. Federal Deposit Insurance , 75 F.3d 1285 ( 1996 )

___________
No. 95-1813
___________
Marjorie Buck, Bryan Hubbard, *
and Carl Leeson, individually *
and as representatives of a *
class of persons similarly *
situated, *
*
Appellants, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri
Federal Deposit Insurance *
Corporation, as receiver for * [PUBLISHED]
the Missouri Bridge Bank, N.A., *
*
Appellee. *
___________
Submitted: December 15, 1995
Filed: February 8, 1996
___________
Before FAGG, Circuit Judge, GARTH,* Senior Circuit Judge, and
WOLLMAN, Circuit Judge.
___________
GARTH, Senior Circuit Judge.
This appeal requires us to decide a matter of first impres-
sion: whether the Worker Adjustment and Retraining Notification
*. The HONORABLE LEONARD I. GARTH, Senior Circuit Judge
for the Court of Appeals for the Third Circuit, sitting
by designation.
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Act (the "WARN Act"), 29 U.S.C. §§ 2101-2109, applies when the
Federal Deposit Insurance Corporation (FDIC), pursuant to 12 U.S.C.
§ 1821(n), organizes a "bridge bank" and then sells the assets of
the "bridge bank" to a healthy successor bank. We hold that the
WARN Act does not apply in such circumstances. Accordingly, we
will affirm the order of the district court granting summary
judgment in favor of the FDIC.
I.
On November 13, 1992, the Federal Deposit Insurance
Corporation (FDIC), pursuant to 12 U.S.C. § 1821(n), organized the
Missouri Bridge Bank, National Association (the "Bridge Bank"), in
order to purchase the assets and assume the liabilities of two
failed banks, Metro North State Bank ("Metro North") and The
Merchants Bank ("Merchants"). The FDIC chose to reduce losses
occasioned by these bank failures through the use of a bridge bank
because the FDIC had determined that the utilization of a bridge or
transition bank presented the "least cost resolution" to the
problem. The FDIC has a number of options for resolving a bank
failure, including, but not limited to, an immediate liquidation,
the sale of the failed bank, or the formation of a transition
bridge bank with an eventual sale to a healthy succeeding bank.
See, e.g., 12 U.S.C. §§ 1821, 1823, 1831o.
Pursuant to the Competitive Equality Banking Act of 1987, as
amended, the FDIC has the authority to establish a bridge bank,
which may be owned in whole or in part by the FDIC. In such a
case, the bridge bank assumes a failed bank's deposits and other
liabilities while acquiring its assets. A bridge bank is chartered
by the FDIC, exists for only a limited time, and is used by the
FDIC as a transition bank until the FDIC can transfer the assets
and liabilities of the failed bank to a healthy institution. See
12 U.S.C. § 1821(n). The bridge bank is funded by the FDIC. The
advantage of using a bridge bank is that it provides the FDIC with
sufficient time to find a purchaser for failed banks.
Although the FDIC possesses a number of methods for resolving
a bank failure, it is statutorily constrained to select the method
which is "the least costly to the deposit insurance fund." 12
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U.S.C. § 1823(c)(4)(A)(ii). In the present case, the FDIC, after
conducting a thorough analysis and comparison of the cost of
various alternatives, see Appendix 187-227, determined that an
orderly auction of assets utilizing a transition bridge bank would
result in savings over the cost of liquidating the two failed
banks, see id. at 197, 209, 211, and would constitute the "least
cost" method for resolving these bank failures, id. at 198.
Acting as receiver for Metro North and Merchants,1 the FDIC
transferred certain assets of the failed banks to the Missouri
Bridge Bank. The Bridge Bank also assumed certain liabilities of
the failed banks, including the insured deposits. The Bridge Bank
retained the employees of Metro North and Merchants.
On February 5, 1993, the FDIC Division of Resolutions met with
potential acquirers of the Bridge Bank and solicited bids.
Ultimately, the FDIC received seven bids for the purchase of the
Bridge Bank. The FDIC solicited further bids from the two top
bidders, Boatmen's First National Bank ("Boatmen's"), based in
Kansas City, Missouri, and First Bank Systems, based in Minnesota.
On April 2, 1993, the FDIC announced that Boatmen's was the
winning bidder. Pursuant to a Purchase and Assumption Agreement
dated April 23, 1993, Boatmen's purchased certain assets and
assumed certain liabilities of the Bridge Bank. Boatmen's offered
employment to approximately 400 of the 626 employees of the Bridge
Bank.
Plaintiffs Marjorie Buck, Bryan Hubbard and Carl Leeson are
former employees of the failed banks.2 They continued working for
the Bridge Bank when it took over both failing institutions. They
1. On November 13, 1992, the Missouri Commissioner of Finance
("Commissioner") declared Metro North to be insolvent and
appointed the FDIC as the liquidating agent. On November 20,
1992, the Commissioner determined that Merchants was insolvent
and appointed the FDIC as the liquidating agent.
2. Buck and Hubbard are former employees of Merchants and were
retained by Bridge Bank when it acquired the assets of Merchants.
The record does not reveal whether Leeson had worked for
Merchants or for Metro North. For ease of reference, we will
refer to all plaintiffs throughout this opinion by the name of
the first named plaintiff, Buck.
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were not offered employment by Boatmen's. On December 22, 1993,
Buck sued the FDIC as receiver for the Missouri Bridge Bank under
the Worker Adjustment and Retraining Notification Act (the "WARN
Act"), 29 U.S.C. §§ 2101-2109, alleging that Buck had not received
the statutorily mandated sixty-day notice of impending job loss.
On August 2, 1994, the parties filed a Joint Stipulation of
Facts. The stipulations included:
4. Pursuant to 12 U.S.C. § 1821(n), the Missouri
Bridge Bank was to exist for a limited time, as a
transition bank, to effectuate a resolution of
Metro North State Bank ("Metro North") and
Merchants Bank ("Merchants").
* * * *
10. On November 13, 1992, at the time Metro North was
closed, [CEO] Dietz spoke to employees of Metro
North, and made available to employees a written
Message to Employees, and a copy of an FDIC News
Release of that date. . . . The Release stated
that the FDIC expected to return the bank to the
private sector in four to six months.
* * * *
13. On November 20, 1992, at the time Merchants was
closed, [CEO] Dietz spoke to employees of
Merchants, and made available to employees a
written Message to Employees, and a copy of an FDIC
News Release of that date. . . . The Release
stated that the FDIC expected to return the bank to
the private sector in four to six months.
* * * *
30. No formal notification pursuant to 29 U.S.C. § 2101
et seq. (the Worker Adjustment and Retraining
Notification Act or "WARN") was served to employees
of the Missouri Bridge Bank, to the State
dislocated worker unit or to the appropriate unit
of local government, by the Missouri Bridge Bank or
by the FDIC-Receiver.
On August 5, 1994, the FDIC filed a motion to dismiss Buck's
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), or
in the alternative for summary judgment. On August 10, 1994, Buck
moved for partial summary judgment. On November 30, 1994, Buck
also filed a motion to certify the class. On January 13, 1995, the
FDIC filed a motion to redefine the proposed class.
On February 22, 1995, the district court entered its order
granting the FDIC's motion for summary judgment. The district
court's order read:
Accordingly, it is ORDERED that:
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(1) defendant's motion to dismiss or for summary
judgment is GRANTED;
(2) plaintiffs' motion to certify a class is
GRANTED;
(3) defendant's motion to redefine the proposed
class is GRANTED;
(4) all other pending motions are DENIED as moot.
District Court Order (Feb. 22, 1995) at 12.
We will treat the district court's order as an order granting
summary judgment rather than a Rule 12(b)(6) dismissal because the
district court relied upon materials apart from the complaint. See
Gibb v. Scott, 958 F.2d 814, 816 (8th Cir. 1992) (holding that "a
motion to dismiss pursuant to Rule 12(B)(6) 'must be treated as a
motion for summary judgment when matters outside the pleadings are
presented and not excluded by the trial court.'") (quoting Woods v.
Dugan, 660 F.2d 379, 380 (8th Cir. 1981) (per curiam)); Sherwood
Med. Indus., Inc. v. Deknatel, Inc., 512 F.2d 724, 725 n.2 (8th
Cir. 1975).
While we do not rely on matters outside the complaint in
ruling on the applicability of the WARN Act to bridge banks, the
district court did in resolving the issues presented to the
district court. In doing so, the district court had to treat the
FDIC motion to dismiss as a motion for summary judgment and apply
the relevant standards for summary judgment.3
3. The standards for dismissing a complaint under Rule 12(b)(6)
and the standards for granting summary judgment are substantially
different. Compare 5A Charles A. Wright & Arthur R. Miller,
Federal Practice and Procedure § 1357 (2d ed. 1990) with 10 id.
§§ 2716, 2725. See also 5A id. § 1366; 10 id. § 2713. Hence an
order of the district court granting "defendant's motion to
dismiss or for summary judgment," without specifying the
particular ruling which disposes of the issue or case is
inappropriate, particularly when review is sought. A district
court's order should be precise and not leave the reviewing court
uncertain as to the district court's basis for disposition or the
standard utilized in its ruling.
Orders framed in the alternative such as the order entered
here are disfavored. However, inasmuch as we decide only the
threshold issue of the applicability of the WARN Act to bridge
banks, the district court's form of order does not affect our
holding. In the instant case, because we decide the
applicability of the WARN Act to bridge banks as a matter of law,
and without reference to facts, we attach no significance to the
(continued...)
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The district court provided three alternative grounds for its
decision: (1) the WARN Act did not apply to a financial
institution closed by a government agency; (2) the Bridge Bank fell
within the WARN Act exemption for "temporary facilities"; and (3)
the complaint was fatally defective because it failed to allege
that at least fifty employees at a single site of employment were
dismissed. The district court then granted certification of the
class as redefined by the FDIC, but denied all other pending
motions as moot. Buck filed a timely notice of appeal on March 20,
1995.
II.
The district court had jurisdiction over plaintiffs' WARN Act
claim pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 2104(5). We
have jurisdiction over the district court's final order dismissing
the complaint under 28 U.S.C. § 1291.
We also exercise plenary review over a grant of summary
judgment. Hardin v. Hussmann Corp., 45 F.3d 262, 264 (8th Cir.
1995). Summary judgment should be granted "if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law." Fed. R. Civ. P. 56(c). We must
view the evidence in the light most favorable to the nonmovant.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).
Where the party moving for summary judgment does not bear the
burden of proof at trial, that party must demonstrate "that there
is an absence of evidence to support the non-moving party's case."
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving
party satisfies this requirement, the burden shifts to the
3. (...continued)
distinction between dismissal under Rule 12(b)(6) and summary
judgment under Rule 56. If matters of fact were involved, notice
to the nonmovant would undoubtedly be required when the district
court converted the FDIC's motion to dismiss to a motion for
summary judgment.
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nonmovant who "must set forth specific facts showing that there is
a genuine issue for trial." Anderson, 474 U.S. at 248.
III.
The Worker Adjustment and Retraining Notification Act (the
"WARN Act"), 29 U.S.C. § 2101-2109, mandates that covered emplo-
yers4 provide employees (or their union) sixty days notice of a
plant closing5 or mass layoff.6 Subject to certain conditions and
exceptions, employers generally must notify each "affected
employee" or "each representative of the affected employees," as
well as certain state government officials. See 29 U.S.C.
§ 2102(a). An employer who fails to satisfy the statutory notice
requirements is subject to civil liability. An "aggrieved
employee" may bring a civil action to collect "back pay for each
day of the violation . . . and . . . benefits under an employee
benefit plan . . ., including the cost of medical expenses incurred
during the employment loss which would have been covered under an
4. Under the WARN Act, an "employer" is defined as "any business
enterprise that employs (A) 100 or more employees, excluding
part-time employees; or (B) 100 or more employees who in the
aggregate work at least 4,000 hours per week (exclusive of hours
of overtime) . . . ." 29 U.S.C. § 2101(a)(1).
5. The term "plant closing" is statutorily defined as "the
permanent or temporary shutdown of a single site of employment,
or one or more facilities or operating units within a single site
of employment, if the shutdown results in an employment loss at a
single site of employment during any 30-day period for 50 or more
employees excluding any part-time employees . . . ." 29 U.S.C.
§ 2101(a)(2).
6. A "mass layoff" is statutorily defined as
a reduction in force which --
(A) is not the result of a plant closing; and
(B) results in an employment loss at the single
site of employment during any 30-day period for --
(i)(I) at least 33 percent of the employees
(excluding any part-time employees); and
(II) at least 50 employees (excluding any part-
time employees); or
(ii) at least 500 employees (excluding any part-
time employees).
29 U.S.C. § 2101(a)(3).
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employee benefit plan if the employment loss had not occurred." 29
U.S.C. § 2104(a)(1). The employer's liability is capped at a
maximum of (1) sixty days back pay and benefits or (2) one-half the
number of days the employee was employed by the employer, see id.,
and is reduced by the amount of any wages paid by the employer to
the employee during the period, see id. at § 2104(a)(2).
In ruling for the FDIC, the district court held that the WARN
Act does not apply to the FDIC's closure of a bridge bank. To
reach this conclusion, the district court relied primarily on
Office & Professional Employees Int'l Union Local 2 v. FDIC, 138
F.R.D. 325 (D.D.C. 1991), rev'd on other grounds, 962 F.2d 63 (D.C.
Cir. 1992) (hereinafter "OPEIU").
In OPEIU, the court dismissed a WARN Act claim against the
FDIC as receiver for a failed bank (the National Bank of
Washington), reasoning that
[w]hen the federal authorities take over the bank and
shut it down, there is no employer to give notice. The
former bank owners do not own the bank; nor did they
close the bank. Moreover, the federal government is
precisely not an employer if it is shutting the bank
down.
Id. at 327.
In an attempt to distinguish OPEIU, Buck notes that in OPEIU,
the failed National Bank of Washington, which was shut down by the
FDIC, was owned and operated privately, whereas here the Missouri
Bridge Bank was owned and operated for a period of time by a
government agency, the FDIC. Buck calls particular attention to
the fact that in contrast to OPEIU, in the present case the FDIC
owned and operated the Bridge Bank until it transferred the Bridge
Bank's assets to Boatmen's. Buck argues that OPEIU has no
application here because in that case, the FDIC acted only in its
capacity as a regulator when it liquidated the National Bank of
Washington, whereas in this case, the FDIC acted both as a
regulator and as an employer. Thus Buck concludes that as an
employer, the FDIC had to comply with the WARN Act.
We are not persuaded by Buck's argument. Buck concedes that
the WARN Act would not have come into play if the FDIC had
liquidated both Metro North and Merchants in November 1992. Buck
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also agrees that if, as a result of the immediate closing of these
two banks, all employees had been terminated, the WARN Act would
not have been applicable. In our view, it must therefore follow
that Congress intended that the FDIC must a fortiori be able to
take a less drastic action (i.e. creating a bridge bank and
terminating less than half the work force some five months later)
without incurring liability under the WARN Act. Subjecting the
FDIC to the strictures of the WARN Act, under the present
circumstances, could severely hinder the FDIC's ability to resolve
bank failures as efficiently and expeditiously as it did here.
Buck argues, however, that Congress did intend that the WARN
Act apply to bridge banks. In support of this proposition, Buck
cites to the legislative history of the statute. Specifically,
Buck notes that Congress failed to enact an amendment proposed by
Senator Gramm, which would have created an express exception for
troubled financial institutions closed by government regulators.
However, Buck relies on statements made by opponents of the
amendment during debates on the measure:
Employees are not less entitled to notice because their
employer is a bank rather than a steel mill or an auto
plant. . . .
. . .
. . . [F]urthermore, most layoffs under circumstances of
a FDIC or FSLIC assisted merger are slow and gradual.
The people who are laid off are not suddenly laid off
. . . . [M]ost employees are laid off over a period of
time . . . .
Mr. President, where there are more than 50 laid
off, I cannot for the life of me understand why bank
employees are not like other human beings, why they
should not be told in advance . . . .
134 Cong. Rec. at S8,624-25 (June 27, 1988). Buck asserts that
Congress's refusal to enact the Gramm amendment, which would have
made the WARN Act inapplicable to the FDIC's bridge bank action,
evinces a legislative intent to subject the FDIC to the notice
requirements of the WARN Act.
To the contrary, we can just as easily read the legislative
history to support exactly the opposite proposition. That is, we
infer from the legislature's failure to enact an express exemption
that such an exemption was unnecessary. In other words, Congress
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understood that the WARN Act did not cover the actions of the FDIC
in resolving bank failures and thus no additional legislation or
amendatory legislation was necessary.
Indeed, Senator Metzenbaum, sponsor of the WARN Act, in
arguing against the Gramm amendment, explained:
[T]he amendment seems to reflect concern that advance
notice might interfere with [the] ability of [the FDIC]
or [the] Federal Home Loan Bank Board to step in and
close banks that are in danger of closing or failing;
[b]ut the amendment is unnecessary, because as the
Chairman of the Banking Committee has already pointed
out, the bill does not cover that situation at all.
The bill requires notice to be given by employers.
But when the appropriate banking agency moves in to close
a bank, the closing is by the Federal Government, not by
the employer itself.
The Government action in such a situation is
analogous to police closing down a gambling operation or
public health authorities closing down a restaurant that
violates the health code. The bill on its face simply
does not apply.
Id. at S16,047 (emphasis added).
The comments of the Department of Labor (DOL), the agency
charged with enforcing the WARN Act, are also instructive on this
point:
The Federal Home Loan Bank Board (FHLBB) specifical-
ly commented on the application of WARN to its activities
and those of the Federal Savings and Loan Insurance Cor-
poration (FSLIC) in the current savings and loan (S & L)
banking crisis. FHLBB argues that, because of its statu-
tory mandate, it should not be considered an employer
when it or the FSLIC closes a bank. The Department
agrees that under the statutory scheme of the deposit
insurance laws, neither the Board nor the FSLIC, which
are exercising strictly governmental authority in
ordering the closing, are to be considered as employers.
54 Fed. Reg. 16,042, 16,045 (Apr. 20, 1989) (emphasis added).
Finally, relying on Finkler v. Elsinore Shore Associates, 781
F. Supp. 1060 (D.N.J. 1992), Buck argues that we should analyze
FDIC-ordered closures of bridge banks under the "unforeseeable
business circumstance" exception of the WARN Act. Under that
exception, "[a]n employer may order a plant closing or mass layoff
before the conclusion of the 60-day period if the closing or mass
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layoff is caused by business circumstances that were not reasonably
foreseeable as of the time that notice would have been required."
29 U.S.C. § 2102(b)(2)(A). If the exception is applicable, an
employer must nevertheless "give as much notice as is practicable
and . . . give a brief statement of the basis for reducing the
notification period." Id. at § 2102(b)(3). Buck's reliance on
Finkler, however, is misplaced.
In Finkler, former casino employees brought a WARN Act claim
against the owners of a casino which had been closed by order of
the New Jersey Casino Control Commission. Id. at 1061.
Originally, the district court granted summary judgment in favor of
defendants on the grounds that the WARN Act does not apply to
closings ordered by the government. Id. Upon motion for
reconsideration under Federal Rules of Civil Procedure 59(e), the
district court reversed its earlier ruling and denied the
defendants' motion for summary judgment. Id.
Contrary to Buck's reading of Finkler, however, the district
court in that case did not hold that all government-ordered
closings are to be treated under the "unforeseeable business cir-
cumstances" exception. Rather, in discussing various government-
ordered closings, the Finkler court explicitly recognized that in
situations analogous to the instant bridge bank sale by the FDIC,
certain government-ordered closings are entirely exempt from the
statute whether or not the closings were foreseeable:
Therefore, based on our reading of the language of
the WARN Act in conjunction with the Department of Labor
regulations and the legislative history, we hold that
government ordered closings are not generally exempted
from the WARN Act. Such closings are only entirely
exempt when they are "absolute," such as the closing of
a bank by the FHLBB, where "the previous ownership is
ousted from control" and the government "assumes control
of the enterprise" such that "there is not employer to
give notice." Other government ordered closings are to
be treated under the unforeseeable business exception to
the Act . . . .
Id. at 1065 (quoting 54 Fed. Reg. 16,054) (emphasis added).
The DOL, in promulgating its final rule under the WARN Act,
also recognized a distinction between "absolute" closings, which
are exempt from the Act, and other closings "which are the direct
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result of governmental action . . . to which after the fact notice
is applicable." 54 Fed. Reg. 16,054. Specifically, the DOL
explained:
The Department notes an important difference between
the closings discussed above and the absolute closing of
a saving and loan institution by the FHLBB. In the case
discussed above, the employer remains in control of its
business. The employer can remedy the conditions that
caused the closing and reopen the business. In the cause
[sic] of an absolute closing or shut-down of a[n] S & L,
in contrast, the previous ownership is ousted from
control of the institution and the FSLIC assumes control
of the enterprise. In this case, there is no employer to
give notice and the after the fact notice requirement
cannot be imposed, since the S & L employer has been
removed.
Id.
The Finkler court denied the defendants' motion for summary
judgment because the defendants had "failed to point to undisputed
facts which show[ed] that the closing of the [casino] was a
government ordered closing analogous to the closing of a bank by
the FHLBB." Finkler, 781 F. Supp. at 1067. That is, the
defendants had failed to demonstrate that the operation of the
casino exercised by the conservator appointed by the Casino Control
Commission was as absolute as the closing of a bank by the FHLBB.
Indeed, the district court emphasized: "No evidence has been
proffered by defendants that shows they were actually 'ousted from
control' of the casino when the Commission ordered the closing."
Id. at 1066.
Here, in contrast, the Board of Directors and the management
of the Bridge Bank were undeniably and effectively "ousted from
control" upon the sale of the assets of the Bridge Bank to
Boatmen's, and the closing of the Bridge Bank was without question
"absolute." The management of the Bridge Bank could not "remedy
the conditions that caused the closing and reopen the business."
54 Fed. Reg. 16,054. Finally, the Bridge Bank ceased to exist as
of the date that Boatmen's purchased the assets and assumed the
liabilities of the Bridge Bank. In sum, we conclude that the WARN
Act does not apply to a circumstance such as this.
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IV.
The FDIC proffers two alternative grounds for affirming the
district court's decision: (1) bridge banks, because they are
inherently "temporary" in nature, fall squarely within the
temporary facilities exemption of the WARN Act, see 29 U.S.C.
§ 2103(1); and (2) the complaint was properly dismissed because it
failed to plead that at least fifty employees at a single site of
employment were affected by the reduction in force. Having held
that the WARN Act does not apply to the closing of a bridge bank by
the FDIC, we need not reach or address these two issues. In
addition, because neither party challenged the district court's
certification of the class, we do not address that aspect of the
district court's order either.
VI.
For the foregoing reasons, we will affirm the February 22,
1995 order of the district court which ruled in favor of the FDIC
on the ground that the WARN Act did not apply to the Missouri
Bridge Bank.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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