Edward Veard, Jr. v. F&M Bank

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 17a0453n.06
Case No. 16-5334
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Aug 02, 2017
EDWARD E. VEARD, JR., ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR
v. ) THE MIDDLE DISTRICT OF
) TENNESSEE
F&M BANK, )
)
Defendant-Appellee. )
)
)
BEFORE: BOGGS, SILER, and DONALD, Circuit Judges.
SILER, Circuit Judge. Edward E. Veard, Jr., filed a claim for retaliatory discharge under
the Consumer Financial Protection Act (“CFPA”), and he now appeals from the district court’s
grant of summary judgment in favor of F&M Bank. For the following reasons, we affirm the
district court’s decision.
I.
Veard worked as a Mortgage Loan Originator (“MLO”) for the Hendersonville,
Tennessee, branch of F&M Bank, and was an at-will employee. He reported to Branch Manager
Brian Maggart, who reported to the Mortgage Department’s Operations Manager, Denise
Alexander. Alexander reported to Chief Financial Officer DeWayne Olive. Amanda Dean was
the Mortgage Department’s Compliance Officer.
Case No. 16-5334, Veard v. F&M Bank
As an MLO, Veard was essentially a salesman for the mortgage team and was paid a
commission for the loans he originated and F&M closed. As part of that process, he was
responsible for originating loans and securing documentation from the loan customer, at which
point he would submit the file to a Loan Processor. The Loan Processor would conduct due
diligence and send the file to an Underwriter for a decision.
In November 2013, Veard assisted a husband and wife, the Smiths, with a loan
application.1 Veard thought the loan should be approved and passed the file to a loan processor,
who in turn sent it to underwriter Kelly Pachachi, who conditionally approved the loan request.
Pachachi was concerned that the Smiths had reported a cancellation of debt on their personal tax
returns. Pachachi eventually determined that the cancellation of debt was due to the husband’s
20% ownership in his family’s Limited Liability Company (“LLC”), which had defaulted on a
$3.6 million property loan, and the property was subject to foreclosure. The Smiths received a
tax benefit from the LLC’s default.
Veard disagreed with Pachachi’s assessment that the default affected the risk of loaning
to the Smiths. He argued that the Smiths should not be liable because the LLC, not the Smiths,
was the borrower on the foreclosed property. Veard, Maggart, and Alexander also received
additional information from the Smiths’ CPA and other tax specialists indicating that the Smiths
had strong credit with no delinquencies. In light of this, Veard disputed F&M’s decision that the
cancellation of debt made the Smiths an unacceptable credit risk and averred that F&M was
denying the loan for a false and inaccurate reason.
Around this time, Maggart had Veard send the Smiths’ loan to JP Morgan Chase Bank
(“Chase”) to see if it would purchase the loan. Although Chase originally advised that it would
1
Due to federal privacy laws, the parties use the fictitious name “Smith” to protect the identity of the
borrowers.
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Case No. 16-5334, Veard v. F&M Bank
purchase the loan, it changed its mind after Alexander informed Chase of an IRS Form 1099,
which she believed indicated that Mr. Smith was personally responsible for the foreclosure
because he was a 20% owner of the LLC and because he reported the default on his tax return.
After consulting with Maggart, Veard then advised David Thomas, F&M’s Director of Credit
Administration, about the situation. Veard stated that he had consulted an attorney, who had said
that the foreclosure was not against the Smiths personally, as they were not obligated on the loan.
Later that evening, Veard emailed Alexander and asked for the reason for the denial of the loan;
he stated that if the reason was the foreclosure, then that reason did not exist.
The next day, Alexander sent an email to Veard, Maggart, and Pachachi, stating that “[i]f
our borrower was not responsible [for the foreclosure] it would not have been on his tax return.
I am not discussing this again. Do NOT email David Thomas.” Alexander testified in deposition
that she intended this email to put Veard on notice to stop pursuing the Smith loan; however,
Alexander does admit that Veard, Maggart, and Pachachi continued to discuss the loan after the
email. In the weeks after her email stating that this file was no longer open for discussion,
Alexander, herself, told Mr. Smith that she would submit the file to U.S. Bank for review, and
that if they approved a loan, likely lower than the one originally requested, F&M would close the
loan.
Even after the loan was officially denied in December, Veard continued to pursue the
loan and suggested that F&M not disclose to Chase the tax returns showing the cancellation of
debt. Alexander responded, “Ed, we have knowledge so we are not ignoring.” Veard then
claims that he met with Dean and raised several questions about F&M’s practices. Although
Dean denies the conversation, Veard contends that he followed up on an earlier question about
sending out Adverse Action Notices and stated that “[we] could be liable and I don’t want to be
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Case No. 16-5334, Veard v. F&M Bank
liable for this. I mean, this is something that we should be doing and if we’re supposed to be
doing it, we need to be told.”2 Veard also stated in deposition that he complained about what he
believed was the false and inaccurate reason that Alexander denied the Smiths’ loan.
In January 2014, in response to a request from Mr. Smith and without Alexander’s
knowledge, Veard created a new loan file and submitted the loan documents from the Smiths’
2013 denied file to U.S. Bank. Using white-out, Veard also altered an IRS form that the Smiths
had signed in November 2013 to change the date of the submission of the file to comply with
U.S. Bank guidelines. Smith agrees that he never received express authorization to submit the
file, but he claims that Maggart knew he was submitting the file and did not stop him from doing
so; however, Alexander had no knowledge of the file upload. That evening, Alexander learned
from Maggart that Veard had uploaded the file, and the next morning, she emailed Olive about
the issue as she was concerned the file upload could affect the bank’s bonding and insurance.
The email explained the timeline of the Smith file, including Alexander’s directive not to discuss
the application again, Veard’s continued communication with investors and others in the office,
and her concerns about this behavior. Alexander worried that due to his “desperate personality,”
Veard was becoming a “lender liability” that F&M could not control. Alexander then contacted
U.S. Bank to alert them that the Smith file had not proceeded through normal F&M channels and
should be cancelled.
Alexander later told Olive about what she perceived to be insubordinate actions by Veard
regarding the Smiths’ loan file, including its submission to U.S. Bank. Alexander told Olive that
Veard would not accept her decision on the file and had continued to work on the file after being
told not to do so. At the end of the conversation both Alexander and Olive believed that Veard’s
2
In fall 2013, Veard had spoken with Dean and Alexander about whether F&M should send out Adverse
Action Notices and what would happen if it had not been doing so. Dean said that F&M was “supposed to be”
sending the notices, and Alexander said “it wouldn’t be good” if F&M had not been mailing the notices.
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Case No. 16-5334, Veard v. F&M Bank
conduct was insubordinate and the file upload could hurt F&M’s bonding coverage. After
speaking to management in HR and with Maggart to get his perspective on the situation, Olive
terminated Veard in January 2014.
In July 2014, Veard filed an administrative complaint with the Occupational Safety and
Health Administration (“OSHA”), alleging a claim under the CFPA. OSHA did not issue a final
determination within 210 days, so, in April 2015, Veard filed a complaint in federal court,
claiming retaliation under the CFPA and Tennessee common law. The district court granted
summary judgment in favor of F&M, and Veard appealed the court’s decision regarding his
CFPA claim.3
II.
We review a district court’s grant of summary judgment de novo. Laster v. City of
Kalamazoo, 746 F.3d 714, 726 (6th Cir. 2014).
The relevant provision of the CFPA under which this retaliation claim was brought
provides as follows:
No covered person or service provider shall terminate . . . any covered employee
. . . by reason of the fact that such employee . . . [has] provided, caused to be
provided, or is about to provide or cause to be provided, information to the
employer . . . relating to any violation of, or any act or omission that the employee
reasonably believes to be a violation of, any provision of this title or any other
provision of law that is subject to the jurisdiction of the Bureau, . . . [or] objected
to, or refused to participate in, any activity, policy, practice, or assigned task that
the employee . . . reasonably believed to be in violation of any law, rule, order,
standard, or prohibition, subject to the jurisdiction of, or enforceable by, the
Bureau.
12 U.S.C. § 5567(a).
3
Veard has abandoned his common-law claim on appeal.
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Case No. 16-5334, Veard v. F&M Bank
In order to establish a prima facie case of retaliation under the CFPA, Veard has the
burden of “showing that any behavior described in paragraphs (1) through (4) of subsection (a)
was a contributing factor in the unfavorable personnel action alleged in the complaint.” Id. §
5567(c)(3)(A). If he makes out a successful prima facie case, F&M must demonstrate by clear
and convincing evidence “that the employer would have taken the same unfavorable personnel
action in the absence of that behavior.” Id. § 5567(c)(3)(B).
The prima facie elements that Veard must establish are that “(1) he engaged in protected
activity; (2) the employer knew or suspected, either actually or constructively, that he engaged in
the protected activity; (3) he suffered an unfavorable personnel or employment action; and (4)
the protected activity was a contributing factor in the unfavorable action.” Rhinehimer v. U.S.
Bancorp Invs., Inc., 787 F.3d 797, 805 (6th Cir. 2015).4 The district court found that Veard
failed to meet the first element as he did not engage in a protected activity under the CFPA. It
then found that even if Veard made out a prima facie case, his claim would still fail as F&M
offered clear and convincing evidence that it would have terminated his employment in the
absence of any protected activity.
A.
The first question we must address is whether Veard engaged in protected activity under
the statute. Veard alleges that his conduct with regard to both the Adverse Action Notices and
the Smiths’ loan qualifies as protected activity.
1.
At a meeting in 2013, Veard asked if F&M was supposed to be mailing Adverse Action
Notices, and Dean replied in the affirmative. Veard later asked Alexander what would happen if
4
“There are variations . . . [of types of retaliation claims], but the essential framework remains the same.”
Thaddeus-X v. Blatter, 175 F.3d 378, 387 (6th Cir. 1999) (en banc). Thus, we apply the same four-part framework
in the CFPA, although it is a relatively new statute.
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Case No. 16-5334, Veard v. F&M Bank
the notices were not mailed, and Alexander responded that “it wouldn’t be good.” Veard alleges
that he spoke to Dean again, although Dean denies this conversation, and stated that “[w]e could
be liable [for failing to mail the notices] and I don’t want to be liable for this.” He also claims he
mentioned contacting an attorney. During his deposition, when Veard was asked why he thought
the conversation with Dean should be interpreted as protected opposition versus simply asking
questions, he replied, “I guess just the way I presented the question or the way I was questioning
it was that we were wrong, that we need to get the attorney involved because this is not right.”
This does not rise to the level of protected activity. Veard argues that the district court
erred because Veard was not required to report the alleged wrongful conduct to any particular
person or to someone outside of F&M Bank and that his discussion with Alexander and Dean
should qualify as protected activity. The problem, however, is not that Veard failed to report the
issue to someone outside the bank, but that he did not oppose any failure to send the notices; he
merely asked questions. Talking to Dean and Alexander about the Adverse Action Notices
appears to be no more than seeking confirmation and clarification of what he should do in the
future, not an objection to behavior he deemed unlawful. Veard’s assertion that the way he
presented the question to Dean was enough to convey opposition does not support his contention
that his actions were protected. Veard is not alleging that F&M instructed MLOs not to send the
notices, and, in fact, his conversations confirmed that Alexander and Dean knew notices should
be sent and that there could be problems if the notices were not mailed. Accordingly, the district
court did not err when finding that Veard’s actions regarding the Adverse Action Notices were
not a protected activity.
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Case No. 16-5334, Veard v. F&M Bank
2.
As to Veard’s actions regarding the Smiths’ loan, the district court found that Veard
failed to show that his complaints and discussions with F&M management were protected
activities. Under the statute, Veard must prove that he reasonably believed the actions of F&M
violated the law. 12 U.S.C. § 5567(a). Reasonable belief requires both a subjective and
objective component. That is, Veard must show that he actually believed F&M’s conduct
violated the CFPA and that a reasonable person in his position would have believed F&M
violated the act. See Rhinehimer, 787 F.3d at 811.
The district court first found that based on the record Veard subjectively believed F&M
was violating the CFPA based on its handling of the Smiths’ loan. Neither party challenges this
finding. However, the district court then found that Veard’s belief was not objectively
reasonable, as “a reasonable MLO could not have believed that the facts known to Veard
concerning the Smiths’ loan amounted to a violation of the [CFPA] or otherwise justified his
belief that illegal conduct was occurring.” Rhinehimer discussed the issue of determining an
objective belief as follows:
[T]he issue of objective reasonableness should be decided as a matter of law only
when no reasonable person could have believed that the facts [known to the
employee] amounted to a violation or otherwise justified the employee's belief
that illegal conduct was occurring. If, on the other hand, reasonable minds could
disagree about whether the employee's belief was objectively reasonable, the issue
cannot be decided as a matter of law. . . . [T]he reasonableness of the employee's
belief will depend on the totality of the circumstances known (or reasonably albeit
mistakenly perceived) by the employee at the time of the complaint, analyzed in
light of the employee's training and experience.
787 F.3d at 811–12 (internal citations and quotation marks omitted).
Veard now argues that he presented evidence from which a jury could find that a
reasonable MLO would have believed that Alexander denied the Smiths’ loan for a false and
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Case No. 16-5334, Veard v. F&M Bank
misleading reason. The record shows that the Smiths claimed a cancellation of debt on their
personal tax return, and Veard testified that the Smiths received a tax benefit related to the
foreclosure of the LLC for which the husband was a 20% owner. The question F&M was trying
to decide was how risky it would be to lend money to the Smiths, based on this foreclosure.
Even though Mr. Smith was only a minority owner of the LLC and not a guarantor on the loan,
the LLC had experienced a multi-million dollar default that was claimed on the Smiths’ tax
return. Veard fails to cite any law that shows F&M could not consider the foreclosure when
making its decision,5 and as the district court pointed out, Veard’s deposition shows a “singular,
unreasonable focus” on closing the Smiths’ loan such that he failed to consider the situation
objectively, including that other financial institutions also thought the Smiths posed a credit risk.
Even if F&M’s discretionary decision to deny the loan was based on a misunderstanding of tax
law or policy, Veard fails to show that an objectively reasonable MLO would consider relying
negatively on a multi-million default claimed on a personal tax return to be a misleading or false
reason to deny a loan. Just because Veard disagreed with F&M’s decision does not mean that
F&M’s actions were unlawful under the CFPA. As such, Veard fails to make out a prima facie
case.
AFFIRMED.
5
In fact, the Equal Credit Opportunity Act states that a creditor may “consider any information obtained”
when deciding whether to make a loan, so long as the information is not used to discriminate on a prohibited basis.
12 C.F.R. § 202.6(a).
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