Rosenberger v. United Community Bancshares, Inc

2017 IL App (1st) 161102
SIXTH DIVISION
Opinion filed: February 24, 2017
No. 1-16-1102
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
TERRANCE J. ROSENBERGER, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant and Cross-Appellee, ) Cook County
)
v. )
) No. 14 L 2807
UNITED COMMUNITY BANCSHARES, INC., )
successor by merger to COMMERCIAL )
BANCSHARES CORPORATION, a Delaware )
corporation, ) Honorable
) James E. Snyder,
Defendant-Appellee and Cross-Appellant. ) Judge, Presiding.
______________________________________________________________________________
PRESIDING JUSTICE HOFFMAN delivered the judgment of the court, with opinion.
Justices Rochford and Delort concurred in the judgment and opinion.
OPINION
¶1 The plaintiff, Terrance J. Rosenberger, filed the instant action against the defendant,
United Community Bancshares, Inc. (UCB), successor by merger to Commercial Bancshares
Corporation, alleging it breached his employment contract by failing to pay him severance
benefits. The circuit court granted UCB's motion for summary judgment, finding that the
doctrine of legal impossibility excused its performance since the severance benefits amounted to
a "golden parachute," which is prohibited by section 1828(k) of the Federal Deposit Insurance
Act (FDIA) (12 U.S.C. § 1828(k) (2012)). Rosenberger appeals, arguing that the court erred in
granting summary judgment because he falls within the so-called "white knight" exception to the
No. 1-16-1102
prohibition against golden parachute payments. UCB cross-appeals, contending in the
alternative that summary judgment was appropriate because Rosenberger's employment was
terminated for cause, thus precluding his entitlement to severance benefits. For the reasons
which follow, we dismiss UCB's cross-appeal, reverse the circuit court's judgment, and remand
for further proceedings.
¶2 The following factual recitation is taken from the pleadings, affidavits, and depositions
of record.
¶3 UCB, successor by merger to Commercial Bancshares Corporation, is a bank holding
company and CenTrust Bank, N.A. (CenTrust) is a wholly owned subsidiary of UCB that
operates a community bank in Northbrook, Illinois. As a member of the Federal Deposit
Insurance Corporation (FDIC), CenTrust is subject to FDIC regulations.
¶4 Prior to the events at issue here, in 2011, Rosenberger and James McMahon became
interested in investing in a community bank after the bank they previously worked at, Park
National Bank, failed. Rosenberger and McMahon, along with a third individual, Gerard
Buccino, formed a company, United Financial Holdings Group, Inc. (United Financial), for the
purpose of raising capital and acquiring a majority interest in a troubled community bank in the
Chicago area.
¶5 Rosenberger and McMahon identified CenTrust as a candidate for acquisition.
According to a "Strategic Plan," CenTrust was founded in 2006 and, by 2008, losses quickly
emerged as a result of a "global liquidity crisis" that impacted the United States and local
economies. Due to the declining value of commercial real estate, CenTrust experienced losses,
which required additional capital to be committed to its loan-loss reserves. At some point, the
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Office of the Comptroller of the Currency (OCC) entered into an "Operating Agreement" with
CenTrust, subjecting it to heightened regulatory oversight.
¶6 In January 2012, after months of planning and negotiating with UCB and federal
regulators, United Financial entered into a Stock Purchase Agreement with UCB, whereby
CenTrust would receive $7 million in new capital and Rosenberger, McMahon, and Buccino
would be hired as CenTrust's new management team. The $7 million in new capital improved
CenTrust's capital reserves above the minimum "Tier 1" regulatory levels.
¶7 On February 1, 2012, UCB hired Rosenberger to serve as CenTrust's chief lending
officer. His Employment Agreement provided an initial term of three years with a base salary of
$200,000 per year, subject to annual increases in "an amount not less than the increase to the
Consumer Price Index for the prior twelve months[.]" Rosenberger's compensation package also
included a car allowance, reimbursement of country club and athletic club dues, a 401(k) plan,
and discretionary bonuses. Relevant here, section 4(e) of the Employment Agreement entitled
Rosenberger to severance benefits:
"(e) Severance Compensation. If this Agreement is terminated by the
Company prior to the expiration of the Employment Period for any reason other
than Cause, *** then the Employee shall be entitled to receive in a single payment
*** an amount equal to two times his annual base salary then in effect."
Section 16 of the Employment Agreement defined "cause," in pertinent part, as "the failure to
follow the Company's reasonable instructions with respect to the performance of the Employee's
duties." Section 3 of the Employment Agreement, in turn, defined Rosenberger's duties as
follows:
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"3. Duties. Employee shall serve as Chief Lending Officer of the
Company and will, under the direction of the Board of Directors, faithfully and to
the best of his ability perform the duties of President [sic] and Chief Lending
Officer of the Company as assigned by the Board of Directors from time to time."
Although a termination without cause entitled Rosenberger to a lump sum severance payment,
section 28(e) of the Employment Agreement provided that: "Any payments made to Executive
pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance
with Section 18[28](k) [of the FDIA] (12 U.S.C. § 1828(k))."
¶8 On July 25, 2012, following a regulatory examination by the OCC, CenTrust consented
to the entry of an order ("Consent Order"), which required it to acquire and maintain increased
amounts of capital, reduce the level of nonperforming loans, and improve its operations. The
Consent Order set forth various duties required of the board of directors and management to
bring CenTrust into compliance with banking regulations. As a result of the Consent Order,
CenTrust was designated an institution in "troubled condition." See 12 C.F.R. § 303.101(c)
(2012).
¶9 On April 13, 2013, Rosenberger received an annual performance evaluation for 2012. In
the evaluation, an executive committee of UCB's board of directors stated that it was not
satisfied with Rosenberger's performance, finding his due diligence on "loan and OREO" to be
"poor" and the lack of loan growth, "not acceptable." It further noted that "booking new, quality
loans" is "critical to the overall value of the organization" and that "Rosenberger occasionally
fails to exhibit proficiency in some of his responsibilities." The executive committee
acknowledged, however, that Rosenberger "followed" the board of directors' policies and
procedures and the provisions of the July 25, 2012, Consent Order.
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¶ 10 On August 19, 2013, the executive committee provided Rosenberger with a "mid-year
review." In that review, the executive committee observed that Rosenberger's "pipeline of new
loans is increasing," but that the "new loans actually funded are seriously deficient and must be
increased." Although the executive committee "offered suggestions" to generate new loans—
e.g., opening "an office in Hinsdale solely for loans" and implementing "an active local calling
program"—it did not specifically instruct Rosenberger to follow through on those suggestions.
¶ 11 In a memorandum dated October 15, 2013, the executive committee informed
Rosenberger that he was underperforming and not "meeting [his] duties pursuant to Paragraph 3
of [his] Employment Agreement." According to the memo, the Bank budgeted approximately
$56 million in new loans to be funded through September 30, 2013, but only $35 million had
been funded, running a negative variance of over $20 million. The executive committee stated:
"As a result, the [executive committee] is not satisfied with the
performance of your duties as Chief Loan Officer and wishes to immediately
implement a performance correction plan regarding your employment. These
steps are taken in an effort to improve the performance of your duties and in
accomplishing the Company's overall goals of generating new loans and
becoming profitable.
Below are areas of serious deficiencies in key areas where the [executive
committee needs to see substantial improvement by year-end and would like a
weekly progress report from you relating to the following items[.]"
The Performance Correction Plan, as set forth in the October 15, 2013, memorandum, goes on to
list, in 17 bullet points, the "Key Areas/ Reasonable Instructions" that Rosenberger was to
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address in his weekly progress report. Following the list of bullet points, the executive
committee stated as follows:
"Terry, the [executive committee] is eager to have you remedy these
matters promptly and no later than the end of this quarter, December 31, 2013,
and would welcome a meeting to further discuss this Performance Correction
Plan. Please feel free to contact Jim McMahon or Harry Stinespring to schedule a
meeting upon your receipt and review of this letter."
¶ 12 On October 21, 2013, Rosenberger accepted the executive committee's invitation and met
with McMahon and Stinespring to discuss the Performance Correction Plan. According to
Rosenberger's affidavit, he told McMahon and Stinespring that he believed the performance
correction plan was unreasonable since his performance was being evaluated against a budget
that was drafted in February 2013 without his input, was not approved by the OCC, and was
superseded by an August 2013 budget. He also believed that the executive committee's request
for weekly progress reports was unreasonable since monthly reporting is the industry standard.
Nevertheless, he informed McMahon and Stinespring that he intended to respond, in writing, to
the executive committee's Performance Correction Plan.
¶ 13 In a letter addressed to the executive committee, dated October 30, 2013, Rosenberger
criticized its decision to judge his performance based upon "an unreasonable budget" that was
rejected by the OCC "as imprudent and placing the Bank at risk of failure." He disputed the
executive committee's assertion that he had not fulfilled his duties under the Employment
Agreement and noted that, aside from his alleged underperformance with respect to the loans, the
Performance Correction Plan failed to identify how he did not to perform his duties.
Rosenberger concluded the letter by stating:
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"I will work with whomever the [executive committee] designates to
develop an efficient format for the weekly reports requested in the 'Performance
Correction Plan[.]' * * *.
***
The Performance Correction Plan is an arbitrary document based on an
incorrect assumption to the Bank's budget and is an ill-designed attempt to 'make
a record' to support some future action. For the reasons above, the Performance
Correction Plan is rejected, although I will work with the [executive committee]
on weekly reporting and prioritizations." (Emphasis added.)
¶ 14 Six days later, on November 5, 2013, UCB's board of directors terminated Rosenberger's
employment. A letter that Rosenberger received stated that UCB "hereby terminates the
[Employment] Agreement for cause effective immediately." The letter did not state any reasons
for the termination of his employment.
¶ 15 In March 2014, Rosenberger filed a single-count complaint in the circuit court of Cook
County against UCB, alleging breach of contract. He asserted that UCB breached his
Employment Agreement by failing to increase his salary on February 1, 2013, by 1.6%, the
amount the Consumer Price Index increased over the prior twelve months; failing to reimburse
him for his country club dues; and refusing to pay him $406,400 in severance benefits.
¶ 16 In its answer to the complaint, UCB denied the allegations that it failed to increase
Rosenberger's salary or reimburse him for his country club dues. It admitted, however, that it
had not tendered payment of severance benefits. As affirmative defenses, UCB alleged, inter
alia, that its performance was excused under the doctrine of legal impossibility because
Rosenberger's severance would be a "golden parachute payment," which is barred by section
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1828(k) of the FDIA (12 U.S.C. § 1828(k) (2012)). UCB also asserted that Rosenberger is not
entitled to severance benefits under the terms of the Employment Agreement as he was
discharged for cause.
¶ 17 In August 2015, UCB moved for "partial summary judgment" on Rosenberger's claim
for severance benefits. 1 In its motion, UCB did not dispute that Rosenberger's Employment
Agreement was a valid and enforceable contract or that Rosenberger had not been paid the
severance benefits provided for in section 4(e) of that agreement. Rather, UCB asserted that
Rosenberger seeks to recover a golden parachute payment that is prohibited by federal banking
regulations. According to UCB, under applicable federal regulations, banks in "troubled
condition" are barred from making golden parachute payments without the consent of the
appropriate federal banking agency and the written concurrence of the FDIC. Since there is no
evidence that either the OCC or FDIC consented to the payment of Rosenberger's severance
benefits, UCB contends it is impossible for it to perform without violating federal banking
regulations. Alternatively, UCB argued that summary judgment in its favor is appropriate
because there is no genuine issue of material fact that Rosenberger was discharged for cause and,
as a consequence, he is not entitled to severance benefits under the terms of the Employment
Agreement. UCB supported its motion with the deposition testimony of McMahon and
Rosenberger, the Employment Agreement, Consent Order, the performance evaluations, and
written correspondence between Rosenberger and the executive committee.
1
Actually, UCB's motion was a motion for a summary determination of major issues
pursuant to section 2-1005(d) of the Code of Civil Procedure (735 ILCS 5/2-1005(d) (West
2014)). It is not a motion for partial summary judgment, which permits a party to seek the entry
of summary judgment on one or more, but less than all, of the counts of a multi-count complaint.
735 ILCS 5/2-1005(a)-(c) (West 2014)); Chicago Transit Authority v. Clear Channel Outdoor,
Inc., 366 Ill. App. 3d 315, 323 (2006).
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¶ 18 In opposing the motion, Rosenberger conceded that the golden parachute provisions of
the FDIA apply to his severance benefits. He argued, however, that a question of fact was
created based upon evidence that he was hired as a "white knight" to rescue CenTrust from
economic failure and, therefore, falls within an exception to rules prohibiting golden parachute
payments. He further asserted that UCB should have applied to the appropriate federal agency
for an exception to the golden parachute regulation and that its failure to do so was a breach of
the implied duty of good faith and fair dealing. Finally, Rosenberger disputed UCB's contention
that he was discharged for "cause" as defined in section 16 of the Employment Agreement.
Rosenberger relied upon the same evidentiary material as UCB, and in addition, attached his own
affidavit.
¶ 19 On December 22, 2015, Rosenberger voluntarily dismissed his claims for unpaid salary
and country club dues, leaving only his claim for severance pay.
¶ 20 On March 28, 2016, the circuit court granted UCB's motion for "partial" summary
judgment, finding that any severance payment would constitute a prohibited golden parachute
thereby rendering UCB's performance legally impossible. The court observed that, while there is
some evidence in the record suggesting that Rosenberger qualified as a "white knight," there is
no evidence that federal regulators consented to the payment and, absent consent, UCB is
prohibited from paying Rosenberger his severance benefits. Because the court previously
granted Rosenberger's motion to voluntarily dismiss his claims for unpaid compensation and
country club dues, the summary judgment entered on the issue of legal impossibility was the
equivalent of a summary judgment entered on the entire remaining complaint. As to UCB's
contention that Rosenberger is not entitled to severance pay based upon his termination for
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"cause," the court determined that summary judgment in UCB's favor on that ground was not
appropriate. This appeal followed.
¶ 21 As a preliminary matter, we note that UCB's cross-appeal asks this court to affirm the
circuit court's summary judgment ruling on alternative grounds. However, as our supreme court
has explained, "[a] party cannot complain of error which does not prejudicially affect it, and one
who has obtained by judgment all that has been asked for in the trial court cannot appeal from
the judgment." Material Service Corp. v. Department of Revenue, 98 Ill. 2d 382, 386 (1983).
Thus, where the circuit court grants summary judgment in favor of a party, that party cannot file
a cross-appeal to seek relief from the summary judgment order. Dowe v. Birmingham Steel
Corp., 2011 IL App (1st) 091997, ¶ 25. For that reason, we must dismiss UCB's cross-appeal.
We note, however, we consider the arguments it raises in its cross-appeal since "an appellee may
argue in support of the judgment on any basis which appears in the record." Hayes v. Board of
Fire & Police Commissioners, 230 Ill. App. 3d 707, 710 (1992).
¶ 22 As this matter comes to us on appeal from the entry of summary judgment, our review is
de novo, applying the same legal standards as did the circuit court. Standard Mutual Insurance
Co. v. Lay, 2013 IL 114617, ¶ 15. Summary judgment is appropriate where the pleadings,
depositions, admissions, and affidavits on file establish the absence of a genuine issue of material
fact, and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c)
(West 2014); Sollami v. Eaton, 201 Ill. 2d 1, 6 (2002). The purpose of a motion for summary
judgment is to determine the existence or absence of a genuine issue as to any material fact; it
cannot be used to resolve a disputed fact. Illinois State Bar Association Mutual Insurance Co. v.
Law Office of Tuzzolini & Terpinas, 2015 IL 117096, ¶ 14. When ruling on a motion for
summary judgment, the court must strictly construe all evidentiary material against the movant
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while liberally construing all of the evidentiary material in favor of the opponent. Williams v.
Manchester, 228 Ill. 2d 404, 417 (2008). If the evidentiary material before the court could lead
to more than one reasonable conclusion or inference, the court must adopt the conclusion or
inference which is most favorable to the opponent of the motion. Brandt v. Time Insurance Co.,
302 Ill. App. 3d 159, 164 (1998). Summary judgment is a drastic remedy which results in the
disposition of a case without a trial and, as such, should not be granted unless the right of the
movant is free from doubt. Bruns v. City of Centralia, 2014 IL 116998, ¶ 12.
¶ 23 As his sole assignment of error, Rosenberger argues that the circuit court erred in
granting summary judgment in UCB's favor because a genuine issue of material fact exists on the
question of whether UCB's performance under section 4(e) of the Employment Agreement was
excused under the doctrine of legal impossibility.
¶ 24 "The doctrine of legal impossibility, or impossible performance, excuses performance of
a contract only when performance is rendered objectively impossible either because the subject
matter is destroyed or by operation of law." (Emphasis added.) Innovative Modular Solutions v.
Hazel Crest School District, 2012 IL 112052, ¶ 37. The doctrine has been narrowly applied
based upon judicial recognition that the purpose of contract law is to allocate the risks that might
affect performance and that performance should be excused only in extreme circumstances. YPI
180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 403 Ill. App. 3d 1, 6 (2010). One
particular example of impossibility excusing performance is an intervening governmental
regulation or order. Restatement (Second) of Contracts § 264 (1981). Significantly, however,
the doctrine does not apply to excuse performance as long as it lies within the power of the
promisor to remove the obstacle to performance. Downs v. Rosenthal Collins Group, LLC, 2011
IL App (1st) 090970, ¶ 39. The party advancing the doctrine has the burden of proving
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impossibility. Michigan Avenue National Bank v. State Farm Insurance Companies, 83 Ill. App.
3d 507, 514 (1980).
¶ 25 In this case, UCB's impossibility defense is based upon section 1828(k) of the FDIA.
Under the FDIA and its implementing regulations, the FDIC "may prohibit or limit, by
regulation or order, any golden parachute payment." 12 U.S.C. 1828(k) (2012); see also 12
C.F.R. § 359.0 et seq. (2012). As is relevant here, a golden parachute is:
"any payment (or any agreement to make any payment) in the nature of
compensation by any insured depository institution *** for the benefit of any
institution-affiliated party pursuant to an obligation of such institution *** that—
(i) is contingent on the termination of such party's affiliation with the
institution ***; and—
(ii) is received on or after the date on which—
***
(III) the institution's appropriate Federal banking agency
determines that the insured depository institution is in a troubled
condition (as defined in the regulation prescribed pursuant to
section 1831i(f) of this title)[.]" 12 U.S.C. § 1828(k)(4)(A) (2012).
An "institution-affiliated party" (IAP) includes "[a]ny director, officer, employee, or controlling
stockholder *** of *** an insured depository institution or depository institution holding
company[.]" 12 C.F.R. § 359.1(h)(1) (2012). By regulation, no insured depository institution or
depository institution holding company may make or agree to make a golden parachute payment,
except as provided by the express regulatory process. 12 C.F.R. § 359.2 (2012).
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¶ 26 Although Rosenberger concedes that the severance benefits provided for in his
Employment Agreement constitute a golden parachute, he argues that UCB cannot rely upon the
impossibility defense because he qualifies under the "white knight" exception to the prohibition
against golden parachute payments. More specifically, he asserts that UCB cannot rely on the
impossibility defense because it had the ability to seek government approval for the severance
payment, but had failed to do so.
¶ 27 As Rosenberger correctly observes, section 1828(k) does not prohibit all golden
parachute payments. Rather, section 1828(k)(2) grants authority to the FDIC to develop
regulations for determining which termination payments should, and should not, be made. The
FDIC regulations set forth limited exceptions for a depository institution or depository institution
holding company, such as USB, to make what would otherwise be a prohibited golden parachute
payment. Specifically, a golden parachute payment may be made if and to the extent that:
"(1) The appropriate federal banking agency, with the written concurrence
of the [FDIC], determines that such a payment or agreement is permissible; or
(2) Such an agreement is made in order to hire a person to become an IAP
either at a time when the insured depository institution or depository institution
holding company satisfies or in an effort to prevent it from imminently satisfying
any of the criteria set forth in § 359.1(f)(1)(ii), and the institution's appropriate
federal banking agency and the Corporation consent in writing to the amount and
terms of the golden parachute payment. * * *; or
(3) Such a payment is made pursuant to an agreement which provides for a
reasonable severance payment, not to exceed twelve months salary, to an IAP in
the event of a change in control of the insured depository institution; provided,
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however, that an insured depository institution or depository institution holding
company shall obtain the consent of the appropriate federal banking agency prior
to making such a payment ***." 12 C.F.R. § 359.4(a)(1)-(3) (2012).
¶ 28 Qualifying for any of these exceptions requires a two-step process. First, the applicant or
Rosenberger must certify to the appropriate federal banking agency that:
"it does not possess and is not aware of any information, evidence, documents or
other materials which would indicate that there is a reasonable basis to believe, at
the time such payment is proposed to be made, that:
(i) The IAP has committed any fraudulent act or omission, breach of trust
or fiduciary duty, or insider abuse with regard to the depository institution or
depository institution holding company that has had or is likely to have a material
adverse effect on the institution or holding company;
(ii) The IAP is substantially responsible for *** the troubled condition, as
defined by applicable regulations of the appropriate federal banking agency, of
the insured depository institution, depository institution holding company or any
insured depository institution subsidiary of such holding company;
(iii) The IAP has materially violated any applicable federal or state
banking law or regulation that has had or is likely to have a material effect on the
insured depository institution or depository institution holding company[.]" 12
C.F.R. § 359.4(a)(4)(i)-(iii) (2012).
¶ 29 Second, and notwithstanding the fact that the requisite certifications as outlined in 12
C.F.R. § 359.4(a)(4) have been made, the FDIC "may consider" the following in exempting
certain payments from the golden parachute restrictions:
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"(1) [w]hether, and to what degree, the IAP was in a position of
managerial or fiduciary responsibility;
(2) [t]he length of time the IAP was affiliated with the insured depository
institution or depository institution holding company, and the degree to which the
proposed payment represents a reasonable payment for services rendered over the
period of employment; and
(3) [a]ny other factors or circumstances which would indicate that the
proposed payment would be contrary to the intent of section 18(k) of the [FDIA]
or this part." 12 C.F.R. § 359.4(b)(1)-(3) (2012).
¶ 30 Under the regulations, either UCB or Rosenberger could have applied to the FDIC and
the OCC for a determination that the severance pay provided in section 4(e) of the Rosenberger's
Employment Agreement is permissible. 2 However, there is nothing in the record suggesting that
either UCB or Rosenberger ever requested the FDIC and the OCC to approve disbursement of
the severance payments.
¶ 31 In urging reversal of the circuit court's grant of summary judgment, Rosenberger asserts
that the severance payment could be approved by the FDIC because he qualifies under the "white
knight" exception in 12 C.F.R. § 359.4(a)(2) (2012). Accordingly, Rosenberger maintains that
an impossibility defense is not available to UCB, as it could have secured regulatory approval to
2
The Employment Agreement did not obligate either Rosenberger or UCB to obtain the
FDIC's approval. That is, neither party expressly agreed that they would obtain the necessary
government approval. Consequently, we cannot say that either party was solely responsible for
satisfying the condition precedent and assumed the risk of failing to do so. This is not to say,
however, that the parties had no obligation to seek the FDIC's approval. Although the
Employment Agreement did not require UCB to obtain the FDIC's approval, we believe that
UCB was still bound by the implied covenant of good faith and fair dealing to seek the required
authorization. See Martinez v. Rocky Mountain Bank, 540 Fed. Appx. 846, 851 (8th Cir. 2013).
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pay the severance payment under the Employment Agreement. He cites Hill v. Commerce
Bancorp, Inc., No. 09-3685 RBK/JS, 2012 WL 694639 (D.N.J Mar. 1, 2012), in support of his
argument.
¶ 32 In Hill, a former executive sued for breach of his employment contract after his former
employer, Commerce Bancorp, refused to pay his severance allowance. The bank moved for
summary judgment arguing that it could not pay the executive's severance package because such
payment would constitute a golden parachute prohibited under the FDIA. It also argued that the
severance package did not fall under any of the enumerated exceptions to the golden parachute
regulations. Id. *2. In denying the bank's motion for summary judgment, the district court
began its analysis by noting that both parties were "equally eligible to apply for the exception to
the golden parachute restrictions, as long as they are able to certify to the [points in 12 C.F.R.
§ 359.4(a)(4)]," but that neither party submitted an application. Id. *8. Although the court was
"perplexed" by the executive's refusal to even consider filing the application himself, the court
nevertheless found a genuine issue of material fact as to whether it was objectively impossible
for the bank to perform under the contract by seeking agency approval for the golden parachute
payment. Id. *10. The court reasoned that the bank failed to present any evidence
demonstrating that it could not make the requisite certification under section 359.4(a)(4).
Specifically, the bank presented no evidence demonstrating that it had a reasonable basis to
believe that the executive engaged in a disqualifying act that " 'has had or is likely to have a
material adverse effect' on [the bank]." Id. *9 (quoting 12 C.F.R. § 359.4(a)(4) (2012)). Thus,
because "there remain[ed] a genuine question of material fact as to whether or not [the bank is]
able to make the *** certification[s] [necessary to apply for an exception], [the bank] cannot be
afforded summary judgment on their contractual impossibility defense." Id.
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¶ 33 Similarly, here, UCB presented no evidence demonstrating that it applied for an
exception to make the severance payment. Nor has UCB pointed to any evidence showing that it
could not make the necessary certification under section 359.4(a)(4). Indeed, McMahon testified
in his deposition that he is not aware of any fraudulent acts or omissions committed by
Rosenberger, and he denied that Rosenberger committed any breach of fiduciary duty, insider
abuse, or violated any federal or state banking law or regulations. He also stated that
Rosenberger was not responsible for UCB's troubled condition. Thus, McMahon's testimony,
coupled with the fact that there is no evidence in the record that Rosenberger engaged in a
disqualifying act that "has had or is likely to have a material adverse effect" on UCB (see 12
C.F.R. § 359.4(a)(4) (2012)), creates a genuine issue of material fact as to whether UCB could
have sought, and received, agency approval for the severance payment to Rosenberger. See Hill
No. 09-3685 RBK/JS, 2012 WL 694639, *9; cf. Rohr v. Reliance Bank, 826 F.3d 1046, 1053
(8th Cir. 2016) (summary judgment appropriate where employee failed to submit any evidence to
rebut the bank's evidence showing that it could not make the certification).
¶ 34 We conclude, therefore, that the circuit court erred in granting summary judgment in
UCB's favor on grounds that its performance under the Employment Agreement was rendered
objectively impossible by operation of law.
¶ 35 Having found that UCB is not entitled to summary judgment on grounds of contractual
impossibility, we next address UCB's contention that, pursuant to the terms of the Employment
Agreement, Rosenberger is not entitled to severance benefits since he was terminated for cause.
¶ 36 We begin by noting that the parties do not argue that the Employment Agreement is
ambiguous. "Where the terms of an agreement are unambiguous, the parties' intent must be
determined solely from the language of the agreement itself, and it is presumed that the parties
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inserted each provision deliberately and for a purpose." Jameson Realty Group v. Kostiner, 351
Ill. App. 3d 416, 426 (2004). The terms of an agreement, if unambiguous, should generally be
enforced as they appear, and those terms will control the rights of the parties. Batson v. The Oak
Tree, Ltd., 2013 IL App (1st) 123071, ¶ 35.
¶ 37 In this case, the Employment agreement permitted UCB to terminate Rosenberger's
employment for cause. Section 16 of the Employment Agreement defined "cause," in pertinent
part, as "the failure to follow the Company's reasonable instructions with respect to the
performance of the Employee's duties."
¶ 38 Generally, "[t]he burden is on the employer to prove that the employee was guilty of
conduct justifying termination." Foster v. Springfield Clinic, 88 Ill. App. 3d 459 (1980).
Moreover, whether an employee engaged in misconduct or disobeyed reasonable orders, is a
question for the trier of fact to resolve. Mitchell v. Jewel Food Stores, 142 Ill. 2d 152, 165
(1990); Lukasik v. Riddell, Inc., 116 Ill. App. 3d 339, 346 (1983).
¶ 39 Here, UCB asserts that it terminated Rosenberger for cause based upon his failure to
follow reasonable instructions. Specifically, it claims that the undisputed evidence shows that
Rosenberger "disagreed with and rejected" the Performance Correction Plan and failed to follow
the executive committee's reasonable instructions to provide it with weekly progress reports.
¶ 40 Based upon our review of the record, we find that genuine issues of fact exist as to
whether Rosenberger failed to follow the executive committee's instructions, as set forth in the
Performance Correction Plan dated October 15, 2013, to provide it with weekly progress reports.
The record contains evidence demonstrating that Rosenberger met with McMahon and
Stinespring on October 21, 2013, to discuss the Performance Correction Plan and, in a letter to
the executive committee, dated October 30, 2013, he stated that he "will work with whomever
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the [executive committee] designates to develop an efficient format for the weekly reports ***."
Although Rosenberger expressed willingness to follow the executive committee's instructions,
his employment was terminated six days later on November 5, 2013. Based on this evidence,
reasonable minds could differ as to whether Rosenberger failed to follow the executive
committee's instructions relating to weekly progress reports. We conclude, therefore, that a
genuine issue of material fact exists as to whether Rosenberger's conduct constituted cause for
UCB to terminate his employment.
¶ 41 For the foregoing reasons, we conclude that the circuit court erred in granting summary
judgment in UCB's favor. We, therefore, reverse the circuit court's judgment and remand for
further proceedings. UCB's cross-appeal is dismissed.
¶ 42 Reversed and remanded; cross-appeal dismissed.
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