[00:00:01] Speaker 00:
Base number 20-5314 et al.

[00:00:04] Speaker 00:
F. Scott Bauer and Jeffrey T. Clark versus Federal Deposit Insurance Corporation, et al.

[00:00:09] Speaker 00:
Southern Community Financial Corporation, et al.

[00:00:12] Speaker 00:
Mr. Stevens for the balance FDIC, et al.

[00:00:15] Speaker 00:
Mr. Grady for the appellees F. Scott Bauer, et al.

[00:00:18] Speaker 00:
Mr. Sorensen, M.A.

[00:00:19] Speaker 00:
Q. Curieye.

[00:00:33] Speaker 04:
May it please the court, Duncan Stevens of the FDIC arguing on behalf of all the defendant's appellants.

[00:00:41] Speaker 04:
And Mr. Paul Sun, who represents the bank, the bank defendants is in the courtroom.

[00:00:49] Speaker 04:
The FDIC had the authority to address the golden parachute applications that were submitted to it under the plain text of the statute and the regulations.

[00:01:00] Speaker 04:
Common Sense likewise supports what the FDIC did here in addressing the Golden Parachute applications because the FDIC had the information it needed to resolve the applications and it would benefit no one for the FDIC to withhold a decision pending the completion of the North Carolina litigation.

[00:01:20] Speaker 04:
Should the court reach the merits of this issue?

[00:01:23] Speaker 04:
We believe that the FTC correctly found that these were golden parachute applications.

[00:01:27] Speaker 02:
Do you think we should reach the merits?

[00:01:30] Speaker 02:
If we hypothetically, if we were to disagree with the district court on its ruling, or should we remand?

[00:01:39] Speaker 04:
I think the court has enough information.

[00:01:40] Speaker 04:
It is a matter of law.

[00:01:42] Speaker 04:
There are no factual disputes.

[00:01:45] Speaker 04:
The parties cross-moved for summary judgment below.

[00:01:47] Speaker 04:
I don't think there are any matters of fact that have to be resolved at trial.

[00:01:53] Speaker 04:
So I think the court has enough information, but we have no position as far as whether it's better for the court to resolve at this point.

[00:02:03] Speaker 02:
The FDIC doesn't have a position on whether it would prefer that we go ahead and decide it now.

[00:02:09] Speaker 04:
No, Your Honor, the FDIC has given, we submit all the court the information it needs to address the question, but does not have a strong view if the court believes that remand is preferable, wants the district court to develop the issues further.

[00:02:26] Speaker 04:
That's not something that the FDIC is going to, is gonna be very concerned about.

[00:02:34] Speaker 04:
So we think, so starting with the authority issue,

[00:02:39] Speaker 04:
There are several features of the statute that we think support what the FDIC did here.

[00:02:45] Speaker 04:
First, the statute covers agreements and not simply payments, not simply golden parachute payments.

[00:02:50] Speaker 04:
And that's significant because many agreements are expressed not in terms of fixed dollar amounts, but in terms of variable amounts, multiples of compensation, payment of life insurance premiums, payment of health benefits.

[00:03:04] Speaker 04:
And given that Congress gave the authority to resolve agreements and not simply payments of definite dollar amounts, we think that supports the idea that Congress was not limiting the FDIC to specific amounts.

[00:03:22] Speaker 04:
And even if the statute didn't include agreements within the definition of golden parachutes, it includes payments without any kind of temporal restriction.

[00:03:31] Speaker 04:
The FDIC can address future payments, anticipated payments, just as well as it can address present payments as long as the information it needs

[00:03:42] Speaker 04:
as long as the information it needs is all presented.

[00:03:46] Speaker 04:
And the fact that Congress said the FDIC can make a limit by regulation or order any golden parachute payment.

[00:03:56] Speaker 04:
It defines golden parachute payment as any payment or any agreement.

[00:04:00] Speaker 04:
And then payment is defined as any direct or indirect transfer of any funds or any assets, any, any, any.

[00:04:06] Speaker 04:
Congress clearly meant to cast a broad net in this statute.

[00:04:10] Speaker 04:
And we think what the FTIC did is well within that broad scope.

[00:04:14] Speaker 02:
FTIC has an explicit procedure for parties to come and ask for authorization to make what has been characterized as a golden parachute payment, right?

[00:04:26] Speaker 02:
try to obtain FDIC approval.

[00:04:28] Speaker 02:
That's the sort of step one, step two that Council for Mr. Clark referenced.

[00:04:37] Speaker 02:
Does the FDIC have a procedure for parties to come and ask the step one question?

[00:04:44] Speaker 02:
I think not.

[00:04:44] Speaker 02:
Everyone tried to shovel this into the, I'm going to call this step two question.

[00:04:48] Speaker 04:
Your honor, there isn't a separate procedure.

[00:04:52] Speaker 04:
In section 359.6, the FTIC simply says, for filing requirements, consult section 303.244.

[00:05:00] Speaker 02:
What authority or what basis was the FDIC making a step one ruling here?

[00:05:07] Speaker 02:
How do parties know they could even ask that from the FDIC?

[00:05:11] Speaker 02:
Is there just an established practice of doing this?

[00:05:14] Speaker 04:
Right.

[00:05:14] Speaker 04:
So if a party wants to know what to do, given that if it's not seeking a full consent and simply seeking the up or down and whether it's a golden parachute payment,

[00:05:24] Speaker 04:
If the party calls up the FDIC, the FDIC will say, you know, look, submit the information you have, and if we need more information, we'll ask for it.

[00:05:33] Speaker 04:
So, while it's not specifically set forth in the regulations, what the FDIC does is interpret Section 303244 broadly enough to encompass

[00:05:43] Speaker 04:
what Bauer and Clark call this, the step one phase.

[00:05:47] Speaker 04:
And if the FDIC needs more information just for step one, it'll ask for it.

[00:05:51] Speaker 04:
And if it doesn't need more information, the FDIC will proceed to a decision based on the information submitted.

[00:05:57] Speaker 04:
So in our view, section 303.244 gives the FDIC the flexibility to ask for more information,

[00:06:05] Speaker 04:
and the flexibility to proceed on the information it does receive.

[00:06:09] Speaker 04:
But there is not a separate set of filer requirements.

[00:06:12] Speaker 04:
There isn't a separate established procedure.

[00:06:15] Speaker 02:
FDIC also said in its decision that the FDIC has consistently maintained that golden parachute payments by a healthy acquirer are subject to the golden parachute rules.

[00:06:26] Speaker 02:
But there were no citations when you said that they have consistently maintained that.

[00:06:30] Speaker 02:
Can you tell me where I can find that?

[00:06:32] Speaker 04:
Sorry, Your Honor, can you repeat the question?

[00:06:35] Speaker 02:
Your brief says that the FDIC's decision here says that they have consistently maintained the Golden Parachute payments by a healthy acquirer, like if it were capital, are subject to the Golden Parachute rules.

[00:06:52] Speaker 02:
but there were no citations when you said they've consistently maintained that.

[00:06:55] Speaker 02:
So where can I find that the FDIC has consistently taken that position?

[00:07:00] Speaker 02:
I understand the rationale of it.

[00:07:02] Speaker 02:
I just would like to know where they've decided that before.

[00:07:05] Speaker 04:
Well, I think the BBX capital case from the 11th Circuit is a good example of that.

[00:07:10] Speaker 04:
Because what happened in that case, similar to this case, was that a troubled institution was acquired by a healthy institution.

[00:07:17] Speaker 04:
The healthy institution acquired, inherited with that acquisition,

[00:07:22] Speaker 04:
the troubled institution's severance obligations.

[00:07:25] Speaker 04:
And the executives there argued, well, the payors here would be healthy institutions, so the Golden Parachute provision doesn't apply.

[00:07:33] Speaker 04:
And the 11th Circuit said no.

[00:07:36] Speaker 04:
The focus of the Golden Parachute Statute is obligations incurred by troubled institutions.

[00:07:43] Speaker 04:
And the fact that they might hand off their obligations to a healthy institution doesn't change the applicability of the statute.

[00:07:49] Speaker 04:
The Devin Circuit explained that if that were the case, it would be fairly easy to get around the Golden Parachute Statute just by creating some other shell companies, some non-banking institution, something that is outside the scope of troubled institution parameters.

[00:08:04] Speaker 04:
And pay presto, you have

[00:08:06] Speaker 04:
something other than a golden parachute.

[00:08:08] Speaker 04:
So the 11th Circuit was pretty clear in BBX that when there is a healthy acquirer, it doesn't change the applicability of the statute if it kicked in for a troubled institution in the first place.

[00:08:21] Speaker 02:
The decision also said that they have consistently treated

[00:08:25] Speaker 02:
Court claims arising out of claims disputes over golden parachute payments as covered by the prescriptions on golden parachutes, but again didn't have citations.

[00:08:37] Speaker 02:
Where can I find citations to that?

[00:08:39] Speaker 04:
Well, I think the Harrison case also from the 11th circuit is a good example of that because in Harrison, the 11th circuit.

[00:08:46] Speaker 02:
FDIC decisions.

[00:08:47] Speaker 02:
He was going to point me to a case for each one of these, but you said consistently.

[00:08:51] Speaker 02:
So I had thought there would be a body of like FDIC case law on these two propositions.

[00:08:58] Speaker 02:
It's what you're talking about is positions they have taken in litigation.

[00:09:00] Speaker 04:
Right, so it's the positions that the FDIC have taken in litigation follow on from decisions by the FDIC on the administrative level.

[00:09:11] Speaker 04:
So while the FDIC's golden parachute decisions are not, there isn't a public body of them

[00:09:16] Speaker 04:
So it's difficult to point to the decisions on the administrative level.

[00:09:21] Speaker 04:
What the FTIC has done is reflected at least in a couple of instances on the appellate level.

[00:09:27] Speaker 04:
And in Harrison, there was a wide variety of tort claims presented.

[00:09:32] Speaker 04:
a settlement agreement was entered into, or at least proposed, to resolve the tort claims.

[00:09:37] Speaker 04:
And the 11th Circuit found that all of the claims reflected in the settlement agreement, including the tort claims, including statutory tort claims, were covered by the Golden Parachute Statute.

[00:09:49] Speaker 04:
So that is one example of courts deeming... Let me ask you a question that goes to whether I

[00:09:57] Speaker 06:
completely understand your position here.

[00:10:01] Speaker 06:
Is it your position, the FDIC's position, that it didn't need to know

[00:10:08] Speaker 06:
the amount of a proposed payment or what the potential was because this was a troubled institution and these two individuals, officers, who were involved were responsible for putting the bank into that state and therefore no matter what the payment would be, we would reject

[00:10:30] Speaker 04:
Yes, Your Honor, that's correct.

[00:10:32] Speaker 04:
Because the regulations, Section 359.4, the regulations make the responsibility issue a threshold factor that comes before the discretionary analysis that's in 359.4B, which would include the cost.

[00:10:48] Speaker 06:
Now, you've also framed it up in terms of the corporation waiving requirements

[00:10:56] Speaker 06:
with respect to a bank coming to them and asking for approval.

[00:11:03] Speaker 06:
Did you make a waiver argument in the district court?

[00:11:06] Speaker 06:
I can't find that you did.

[00:11:08] Speaker 04:
Your honor, when the district court asked for briefing on this issue, I don't believe we raised that waiver point.

[00:11:15] Speaker 04:
But it is a secondary point, because we don't think there's anything for you to do.

[00:11:17] Speaker 04:
We'll never get to that under your... Right.

[00:11:20] Speaker 04:
It's not necessary to... That's why I asked you the first question.

[00:11:23] Speaker 04:
Sure.

[00:11:23] Speaker 04:
and it's not necessary to reach the waiver point if in fact there were no requirements on the FDIC to waive and that's we think that's the case here given given that under the 359-4 analysis you never get to the cost issue and 303-244 doesn't in any way constrain the FDIC.

[00:11:41] Speaker 02:
Just one more question for you and that is Mr. Bauer and Clark say that in their North Carolina litigation they have raised

[00:11:53] Speaker 02:
a distinct claim, not about collecting golden parachute payments, but about what you characterize as golden parachute payments, but about collecting, about their, they would have, with absent capital's interference, they would have been able to just continue their employment and continue getting a salary.

[00:12:12] Speaker 02:
Not any of the terms from the changing conditions.

[00:12:18] Speaker 02:
Just,

[00:12:19] Speaker 02:
We wouldn't have been fired.

[00:12:20] Speaker 02:
I could have kept working, kept in my job, maybe retired in three years.

[00:12:25] Speaker 02:
Where does the FDIC explain how that claim constitutes a golden parachute?

[00:12:32] Speaker 04:
A couple of points, Your Honor.

[00:12:33] Speaker 04:
First, that theory that they would have continued as employees of Capital Bank wasn't presented to the FDIC.

[00:12:41] Speaker 04:
It wasn't in the application.

[00:12:42] Speaker 04:
So you will not find it in the FDIC's final determinations.

[00:12:46] Speaker 02:
So is that aspect of the North Carolina litigation not displaced by decision that claim can go forward?

[00:12:53] Speaker 02:
I mean, they can all go forward.

[00:12:55] Speaker 02:
I guess it would be a pointless thing, but you're not saying and say they won damages for the equivalent of two or three more years of salary.

[00:13:03] Speaker 02:
just salary that they would have had because they would have continued employment, whatever a jury finds the amount is.

[00:13:08] Speaker 02:
That would not be covered, or the FDIC just hasn't taken a position on that claim?

[00:13:13] Speaker 04:
Well, the FDIC didn't take a position on the administrative level.

[00:13:16] Speaker 04:
Now, we've suggested in our briefs before the court that it wouldn't change the Golden Parachute Analysis.

[00:13:22] Speaker 02:
And the reason it wouldn't change is that... Does Channery allow you in the brief to make that decision for the FDIC?

[00:13:30] Speaker 02:
Sorry, say it one more time.

[00:13:31] Speaker 02:
Does Channery allow you to make that decision for the FDIC in your brief?

[00:13:35] Speaker 04:
On an issue that wasn't presented to the agency, I don't think Channery is going to speak to that.

[00:13:41] Speaker 04:
I don't think Channery is going to foreclose the agency.

[00:13:44] Speaker 02:
So you're now trying to add, the brief would be adding an aspect of decision that just wasn't there.

[00:13:53] Speaker 04:
I agree, Your Honor, but under the circumstances, I think generally allows an agency enough flexibility to respond in litigation to new theories presented in the litigation.

[00:14:03] Speaker 04:
But I do want to come back to Your Honor's point because if Bauer and Clark have different theories that were never presented to the FDIC in the first round, that they want to file another Golden Parachute application about,

[00:14:18] Speaker 04:
They can do so.

[00:14:20] Speaker 04:
We have not told Bauer and Clark, this is it.

[00:14:23] Speaker 04:
You can never come back to us.

[00:14:25] Speaker 04:
All the FTIC did was address what was presented to it.

[00:14:29] Speaker 04:
And if this theory wasn't part of it, they can seek a golden parachute determination as that theory.

[00:14:36] Speaker 06:
Now, the corporation says that the bank, whichever one it is, cannot make a payment because of our golden parachute rules, right?

[00:14:49] Speaker 06:
What if the North Carolina court says you are hereby ordered to make payment to these two individuals?

[00:14:59] Speaker 06:
What do you do then?

[00:15:02] Speaker 04:
we would encourage the bank to appeal the appeal that the judgment of the state court.

[00:15:08] Speaker 04:
Um, but it's, it's in our, it's, it is our view that the supremacy clause would, um, would prevent the bank from making a payment that, that is forbidden by federal law and not withstanding that a state court, that a state court feels otherwise.

[00:15:24] Speaker 06:
You have a litigating authority to seek an injunction.

[00:15:29] Speaker 04:
to seek an injunction directly against the court?

[00:15:32] Speaker 04:
Against the bank.

[00:15:36] Speaker 04:
We certainly could do so.

[00:15:39] Speaker 04:
I don't know that the question has ever arisen of the FDIC bringing its own suit to enjoin a bank from making a golden parachute payment.

[00:15:48] Speaker 06:
Well, I guess what I'm getting at is that your decision here is not something that voids the state court litigation.

[00:15:59] Speaker 06:
You don't have any authority to tell the parties that they can't go forward with their case, right?

[00:16:06] Speaker 06:
Correct.

[00:16:08] Speaker 04:
But the bank defendants could, and we think it would be a complete defense to the claims in the litigation that the FDIC has said, you can't make these payments.

[00:16:17] Speaker 04:
That would be illegal.

[00:16:19] Speaker 04:
I mean, that is a defense under state law that we think would carry the day if it... There's an ancient doctrine.

[00:16:26] Speaker 06:
I can't remember the last case that was decided.

[00:16:29] Speaker 06:
It's called primary jurisdiction.

[00:16:31] Speaker 06:
Are you familiar with that?

[00:16:33] Speaker 06:
I've encountered it, Your Honor, though it's been a while.

[00:16:35] Speaker 06:
Yeah.

[00:16:37] Speaker 06:
If a federal agency has the primary jurisdiction to regulate a particular activity and there's a lawsuit going on, then the court, after a proper motion, refers the matter to the agency.

[00:16:52] Speaker 06:
It's much more complicated than that in a nutshell is what it is.

[00:16:56] Speaker 04:
Right, and it does sometimes happen, as here, that there is state court litigation simultaneous with the FDIC's Golden Parish determination, but I don't know that the issue has arisen of coming into direct conflict in that way.

[00:17:11] Speaker 02:
Haven't they stayed in the state court litigation?

[00:17:16] Speaker 02:
Yes.

[00:17:16] Speaker 02:
Okay, so the state court is sort of something like that, by staying in its litigation pending the FDIC decision.

[00:17:21] Speaker 04:
Right.

[00:17:22] Speaker 04:
And we think the state's board, by entering the state, recognizes that the FDIC's determination is going to be going to be significant here.

[00:17:31] Speaker 04:
And so it's certainly everyone's hope that this sort of conflict wouldn't arise.

[00:17:36] Speaker 02:
Any more questions?

[00:17:38] Speaker 02:
Right.

[00:17:38] Speaker 02:
Thank you very much.

[00:17:38] Speaker 02:
We'll give you a couple of minutes for rebuttal.

[00:17:40] Speaker 04:
Thank you.

[00:17:58] Speaker 01:
I'm Chris Gravey.

[00:17:59] Speaker 01:
I represent Scott Bauer and Jeff Clark.

[00:18:02] Speaker 01:
Let me first say that we are obviously requesting that the court address this matter on the merits.

[00:18:08] Speaker 01:
I'm pleased to hear the FDIC doesn't oppose that, and we hope the court will take this matter up on the merits.

[00:18:14] Speaker 01:
I'd like to speak directly, if I may, Your Honors, to the questions that were asked on the bench during Mr. Stevens' argument.

[00:18:22] Speaker 01:
The Congress, the first assertion Mr. Stevens made, Congress intended to cast a broad net.

[00:18:28] Speaker 01:
It didn't intend to cast it that broadly because it regulated only golden parachute payments.

[00:18:34] Speaker 01:
And so, ipso facto, all payments that are not golden parachute payments

[00:18:38] Speaker 01:
are not within the scope of the regulation.

[00:18:41] Speaker 01:
And so unless the damages that we're seeking in the state court action would qualify as golden parachute payments under the strict definition in the regulations, they're not within the scope of the FDIC's authority to prohibit.

[00:18:55] Speaker 01:
And that's what's going on.

[00:18:56] Speaker 02:
Let me just back up one thing on the question of the district court's decision here.

[00:19:01] Speaker 02:
You don't, I just want to confirm, you don't complain in any way that you were injured by the decision of the FDIC to go forward and make a decision without that particular piece of information about the amount in dispute.

[00:19:15] Speaker 01:
I'm not sure I follow your question.

[00:19:16] Speaker 02:
You don't claim, you don't disagree.

[00:19:19] Speaker 02:
I'll try it again.

[00:19:20] Speaker 02:
Your position is that you fully agree that the FDIC could go forward and decide the applications that were submitted to it without having the precise amount of money in dispute before it.

[00:19:34] Speaker 01:
We do.

[00:19:34] Speaker 01:
We believe that the amount requirement is a requirement of 303.244, which is an application to make a payment.

[00:19:42] Speaker 01:
And as the amicus argued better than I did, what was going on here was not an application to make a payment.

[00:19:47] Speaker 01:
It was an application to prevent one.

[00:19:49] Speaker 01:
And so this was strictly constrained to the step one inquiry.

[00:19:55] Speaker 01:
Are these damages that we're seeking in the state court action, do they implicate the golden parachute rules at all?

[00:20:01] Speaker 01:
Are they seeking golden parachute payments?

[00:20:03] Speaker 02:
And so we believe the FDIC- So you aren't injured by the FDIC's willingness to go forward and decide the matters that were submitted to it?

[00:20:11] Speaker 01:
We are, no.

[00:20:14] Speaker 02:
But then, but just to clarify, go ahead, make your sense.

[00:20:17] Speaker 01:
We are we are not injured by the fact that the FDIC made a final determination without knowing the amount.

[00:20:26] Speaker 02:
And when you say that, do you say you're not injured by the step one decision or also the with your great phrasing phraseology?

[00:20:33] Speaker 02:
Also their step two decision, but they also made a discretionary decision.

[00:20:38] Speaker 01:
We are not challenging the discretionary decision.

[00:20:41] Speaker 01:
We made that clear in the district court.

[00:20:42] Speaker 01:
I believe Judge Leon.

[00:20:46] Speaker 01:
cited us for changing course to use his phrase that we are we are not challenging the discretionary determination.

[00:20:52] Speaker 01:
We are not challenging the discretionary determination.

[00:20:55] Speaker 01:
You're all about step one.

[00:20:57] Speaker 01:
We're all in that these are not golden parachute.

[00:20:59] Speaker 02:
All right.

[00:20:59] Speaker 02:
Just want to make sure I was clear on that.

[00:21:01] Speaker 01:
Let me address some of the some of the case law that that Mr. Stevens cited.

[00:21:06] Speaker 01:
Your Honor, Judge Millett, I believe you asked, what's your citation for the assertion that the FDIC has consistently maintained that healthy acquirers are subject to the rule?

[00:21:16] Speaker 01:
What I would start with there is, where have they set it in the regulation?

[00:21:20] Speaker 01:
Because it's nowhere in the regulation you'll find the word, you'll not find the word successor, you'll not find the word acquirer anywhere in the regulation.

[00:21:28] Speaker 01:
You'll also not find it in any of the official guidance from the FDIC.

[00:21:32] Speaker 01:
And so if you look at the financial institution letter, which is in the joint appendix, financial institution letter 66-10, which is JA-51, you can read that entire document and you'll find nothing about

[00:21:46] Speaker 01:
healthy acquirers or successors.

[00:21:48] Speaker 01:
In fact, when the FDIC in its official guidance is telling the world what these regulations govern, you just have to look at bullet point number one in their guidance on golden parachutes where they begin with the highlights.

[00:22:02] Speaker 01:
And bullet one is golden parachute payments refer to amounts paid by troubled entities to an institution affiliated party that are contingent on the IAP's termination.

[00:22:14] Speaker 01:
Bullet two,

[00:22:15] Speaker 01:
The FDI Act and its implementing rules preclude troubled institutions, those rated composite four or five or meeting other criteria, for making golden parachute payment, except as provided by the rules.

[00:22:28] Speaker 01:
Nothing about successors.

[00:22:30] Speaker 02:
Well, it does cover affiliated holding companies.

[00:22:34] Speaker 01:
Correct.

[00:22:35] Speaker 01:
And Capital Bank was a completely unaffiliated third party and doesn't fall within affiliated holding company.

[00:22:40] Speaker 01:
And so it also puts the FDIC's interpretation at odds with the Treasury rule governing TARP payments.

[00:22:50] Speaker 01:
And Southern Community also had received TARP money where Treasury in the interim final rule, and we cited this in our briefing, makes clear that healthy acquirers are not subject to the golden parachute restrictions after acquisition, nor are the highly compensated employees.

[00:23:07] Speaker 01:
subject to them.

[00:23:09] Speaker 01:
And so this rule puts the FDIC directly at odds with the philosophy anyway of the Treasury Department's corresponding rule.

[00:23:18] Speaker 02:
Well, they can coexist.

[00:23:19] Speaker 02:
You're not suggesting a conflict.

[00:23:21] Speaker 01:
They can't.

[00:23:22] Speaker 01:
I'm not saying they have to agree.

[00:23:23] Speaker 02:
Sometimes different agencies make different decisions.

[00:23:26] Speaker 01:
Understood, Your Honor.

[00:23:28] Speaker 01:
The BBX capital case.

[00:23:30] Speaker 01:
This was not a case where a successor was responsible for a payment.

[00:23:35] Speaker 01:
That opinion, although that opinion is

[00:23:37] Speaker 01:
It's a little bit opaque, I will say, but that opinion is clear when you dig into it.

[00:23:42] Speaker 01:
If you look back in the record, that it was it was bank.

[00:23:46] Speaker 01:
It was BBX, Bancorp.

[00:23:48] Speaker 01:
a troubled institution that agreed to make those payments.

[00:23:53] Speaker 01:
It was not BB&T, which was the healthier prior.

[00:23:55] Speaker 01:
BB&T had no contractual obligation to make any payments to these executives.

[00:24:02] Speaker 01:
And so that was a case where a troubled institution was going to be responsible for making payments on a change in control.

[00:24:10] Speaker 01:
That's what the golden parachute rules are about.

[00:24:12] Speaker 02:
Likewise- Well, I hear you had a provision that said

[00:24:16] Speaker 02:
Southern, the troubled company, had an obligation to make sure the successor, capital, it had a contractual obligation to make sure the successor assumed that responsibility.

[00:24:28] Speaker 07:
Correct.

[00:24:28] Speaker 02:
Now, why would the golden parachute provisions not apply to something like that?

[00:24:36] Speaker 01:
Well, for numerous reasons, John, the first is that this is a payment that is not required to be made by a troubled institution.

[00:24:42] Speaker 01:
And so the purpose of the rules to protect protect and preserve the assets of troubled institutions simply aren't implicated by a healthy institution making payments.

[00:24:52] Speaker 01:
Second, this was a single trigger change in control.

[00:24:55] Speaker 01:
It doesn't fall within.

[00:24:56] Speaker 01:
the contingent on or by its terms payable on or after termination, which is a definitional element of the rule that these single trigger change in control payments were due from the successor simply by the change in control.

[00:25:12] Speaker 01:
There was no termination required for these change in control payments to be triggered.

[00:25:17] Speaker 01:
And so for those two reasons, this is distinct from a situation where a troubled institution has an obligation to make a change in control payment

[00:25:26] Speaker 01:
prior to acquisition.

[00:25:29] Speaker 01:
None of the assets of Southern Community Bank were implicated here in the least.

[00:25:34] Speaker 01:
This was all the healthy acquirer.

[00:25:36] Speaker 01:
Let me speak briefly to some of these other issues, Your Honor.

[00:25:39] Speaker 01:
The Harrison case, you asked about tort claims.

[00:25:42] Speaker 01:
You said, what about the independent tortious conduct of Capital Bank here?

[00:25:49] Speaker 01:
We have claims for tortious interference with contract and tortious interference with prospective advantage.

[00:25:54] Speaker 01:
What about those claims?

[00:25:55] Speaker 01:
Those are targeting the independent conduct of an institution that's never been troubled and doesn't implicate the assets of a troubled institution.

[00:26:01] Speaker 01:
And they say, well, we consistently treat tort claims and Harrison.

[00:26:05] Speaker 01:
Harrison were, what the executive had done in Harrison was simply to assert a basket of claims against the bank.

[00:26:14] Speaker 01:
Everything from breach of contract to civil rights violations, intentional infliction of emotional distress, they threw the kitchen sink at the troubled institution.

[00:26:22] Speaker 01:
And the troubled institution proposed to pay a million dollars of its troubled institution money to the executive.

[00:26:29] Speaker 01:
And the FDIC prohibited that.

[00:26:32] Speaker 01:
Fine.

[00:26:33] Speaker 01:
It's prohibiting payments, Golden, it's prohibiting payments by a troubled institution.

[00:26:37] Speaker 01:
And the fact that the executive repackaged its contract claim against a troubled institution as a tort claim made no difference.

[00:26:44] Speaker 01:
That's fine.

[00:26:45] Speaker 01:
That's not this case.

[00:26:47] Speaker 01:
This is a claim against a third party, a never troubled institution based on its own independent force's conduct.

[00:26:54] Speaker 01:
That's it.

[00:26:55] Speaker 01:
There's nothing in the language of the regulation or the statute that could possibly be read to immunize healthy institutions from liability or their own torsious conduct.

[00:27:06] Speaker 01:
Finally, as to the waiver argument, it's just simply not accurate.

[00:27:12] Speaker 01:
We in our in our letters to the FDIC, we made clear.

[00:27:18] Speaker 02:
Well, first of all, when you talk about waving the

[00:27:23] Speaker 02:
straight-up employment claim?

[00:27:24] Speaker 02:
What waiver are you talking about?

[00:27:27] Speaker 01:
They claim that we've waived the argument that we would have become employees of Capital Bank had you performed, or we would have... They say you waived it, that you just didn't present it to them, that they weren't ruling upon that claim.

[00:27:40] Speaker 01:
But we did present it to them, is what I'm saying to you, Your Honor.

[00:27:43] Speaker 02:
Would you reason the FDIC is ruling upon that or not?

[00:27:46] Speaker 01:
I believe the FDIC so fundamentally misunderstood what our claims are about that it should have ruled on it.

[00:27:55] Speaker 01:
It was before the FDIC, but one of the errors the FDIC made was simply assuming, oh, you're looking for termination payments from a troubled institution.

[00:28:04] Speaker 01:
And it doesn't matter that they were acquired later.

[00:28:07] Speaker 01:
This is Hill v. Bancorp, the end.

[00:28:12] Speaker 01:
And they simply didn't take into account all the information before them, including the actual language of the tortious interference claim.

[00:28:21] Speaker 01:
This is JA 129, where we point out that but for the tortious interference, the agreements would have continued in effect indefinitely had Capital Bank not intentionally and wrongfully induced Southern community to terminate

[00:28:34] Speaker 01:
That's part of our torsion interference claim in our letters.

[00:28:38] Speaker 01:
All right, can you?

[00:28:40] Speaker 02:
Which paragraph?

[00:28:40] Speaker 01:
J.A.

[00:28:41] Speaker 01:
129, your honor.

[00:28:42] Speaker 02:
Which paragraph are you in?

[00:28:43] Speaker 02:
Sorry.

[00:28:44] Speaker 02:
Is that 115?

[00:28:45] Speaker 02:
The agreements were... J.A.

[00:28:50] Speaker 01:
129 is the fourth claim for relief in the amended complaint.

[00:28:53] Speaker 02:
That paragraph 115, is that what you were reading from?

[00:28:55] Speaker 01:
Paragraph 115, yes, your honor.

[00:28:58] Speaker 01:
I would also point out that in order to be sure that the FDIC understood what we were talking about,

[00:29:04] Speaker 01:
We actually put in, this is at JA 352, we actually put in all caps boldface print in our letter, because we understand that this is not self-evident, this may not be their daily fare.

[00:29:16] Speaker 01:
We put into our letter, quote, Southern community breached the agreements by failing to ensure that Capital Bank assume and agree to perform the agreements, not for failing to make change in control payments before the merger closed.

[00:29:30] Speaker 01:
We also continued on

[00:29:32] Speaker 01:
And said when entering and this is this is in the same in the same letter may carry over into the into the next page, but in the same letter, we said when entering into the merger agreement, southern communities alternatives were a require the capital bank assume and perform as required by the contracts be.

[00:29:53] Speaker 01:
If Capital Bank refused to assume and perform to forego the deal and honor the contracts, that is, they will remain employees of Southern Community and continue on, which, by the way, was rapidly recovering, had gone from a loss to profitability.

[00:30:10] Speaker 01:
And that's why they were such an attractive target for Capital Bank.

[00:30:13] Speaker 01:
But the argument that we never said anything to the FDIC about that theory is simply wrong on the facts.

[00:30:20] Speaker 01:
And it's revealed by the claims relief

[00:30:22] Speaker 01:
in the complaint and by our letter to the FDIC.

[00:30:25] Speaker 01:
Your Honor, if I could have just a couple of minutes for rebuttal to the amicus.

[00:30:31] Speaker 02:
You get a couple of minutes for rebuttal.

[00:30:34] Speaker 01:
I'm sorry, I didn't mean to cut off any further questions.

[00:30:36] Speaker 02:
No, I think there's no more questions.

[00:30:37] Speaker 02:
Thank you very much.

[00:30:38] Speaker 03:
Thank you.

[00:30:50] Speaker 05:
May it please the Court, Adam Sorensen, on behalf of the Court of Court and Amicus.

[00:30:56] Speaker 05:
I'd like to begin with the authority question under the statute and go back to Your Honor's question about what exactly is the FDIC's authority for claiming that all legal claims fall under the definition of golden parachute payments.

[00:31:12] Speaker 05:
And I think it's important to draw the distinction specifically about the Harrison case that my friend mentioned.

[00:31:16] Speaker 05:
In that case, there were no claims filed.

[00:31:18] Speaker 05:
It was a settlement agreement for a definite amount, $1 million, presented to the FDIC as part of an application under this very reticulated statute.

[00:31:27] Speaker 05:
And the FDIC was able to determine by reading the settlement agreement, the proposed terms, and the amount, that this was obviously, and it was an agreement because it was proposed that they would pay this, and it was in the nature of compensation.

[00:31:39] Speaker 05:
And I think that's really the key language in the statute, that to know whether something falls within the ambit of the FDIC's authority in this area,

[00:31:48] Speaker 05:
We have to know whether it's a payment or agreement in the nature of compensation.

[00:31:52] Speaker 05:
And I think that's really the critical information that was missing here.

[00:31:55] Speaker 05:
This was not just a box that was left unchecked on the application.

[00:31:59] Speaker 05:
The missing information about the payment, the cost and impact on this institution could not have been provided at this stage in the litigation.

[00:32:09] Speaker 05:
And I think that the district were correctly recognized

[00:32:11] Speaker 05:
that further development of the plaintiff's theories of liability in the state court or some form of settlement agreement would have provided the FDIC the information that they needed to make this just threshold determination of whether is this an issue that is within their authority to begin with.

[00:32:27] Speaker 07:
We conclude that under these circumstances, the FDIC might not have had enough information to approve the payment, but it did have enough information to reject the payment.

[00:32:47] Speaker 05:
So I think in order to reject or approve the payment, Your Honor, it would have to know whether it was a golden parachute payment.

[00:32:54] Speaker 05:
So the statute gives them authority to limit or prohibit golden parachute.

[00:33:00] Speaker 05:
And to know whether it falls into that bucket or not, I think they need a few basic pieces of information.

[00:33:05] Speaker 05:
They need to know the amount and they need to know what is the nature of the liability to determine whether it's in the nature of the compensation.

[00:33:14] Speaker 05:
So I definitely think that they could have said we need more information or they could have said our general view of this kind of liability is that it falls under the statute.

[00:33:24] Speaker 05:
But that's not what they did.

[00:33:25] Speaker 07:
They said that they say they say exactly what Judge Randolph posited earlier, which is we don't need to know the amount because our our determination is that a payment in any amount would be inappropriate.

[00:33:42] Speaker 05:
So I think that would answer what the plaintiffs call the step two question, which is, assuming that this is a golden parachute payment, would we allow it?

[00:33:52] Speaker 05:
But I think the FDIC has long recognized, for example, that statutory claims, such as discrimination claims, are simply not payments or agreements to make payments or give rise to them within the meaning of this particular statute.

[00:34:06] Speaker 05:
So I don't think that they would claim that if they were presented with a discrimination claim, like in Sterling Savings Bank case, that they could offer any opinion on whether that's allowed or not, because it's simply not the kind of claim that falls within their authority.

[00:34:22] Speaker 05:
And it wouldn't matter.

[00:34:25] Speaker 02:
Amount wouldn't matter there.

[00:34:26] Speaker 02:
And if amount wouldn't matter here, I get why some other things.

[00:34:30] Speaker 02:
But I don't know why you have to know the amount, know whether something is in the nature of compensation.

[00:34:36] Speaker 05:
So I think there are two answers to that question.

[00:34:40] Speaker 05:
Specifically to the nature of compensation, I think the uncertainty over the amount is fundamentally related to the uncertainty over the nature of the claim.

[00:34:49] Speaker 02:
So for example, can you say that again?

[00:34:50] Speaker 02:
I didn't hear.

[00:34:51] Speaker 05:
So I think the uncertainty over the amount is related to the uncertainty over the nature of the claim and whether it's in the nature of compensation.

[00:34:59] Speaker 05:
So in, for example, in Von Ruhr, the Eighth Circuit case, which the FDIC points to as sort of an example of where you could have a claim that has not been reduced to judgment or settlement, that was a simple contract claim for a known amount.

[00:35:14] Speaker 05:
And I think if you have a simple claim in the nature of compensation,

[00:35:18] Speaker 05:
You're going to know in advance what the amount is because it will be apparent from the from the compensation agreement.

[00:35:25] Speaker 05:
The uncertainty here and the reason I'm not sure that's true at all.

[00:35:32] Speaker 02:
I mean, first of all, with the jury have been bound.

[00:35:35] Speaker 02:
Award that precise amount in the non war case.

[00:35:38] Speaker 05:
So I don't know that they would be bound to award that exact dollar amount, but I do.

[00:35:45] Speaker 05:
But I do think that the application itself would specify that that was the amount at issue and that was what was being sought.

[00:35:55] Speaker 05:
And I also think it would have been clear that the basis for that amount was compensation itself.

[00:36:01] Speaker 05:
So in many of the cases that the FDIC cites or the proposition that, well, we'll never know an exact dollar amount.

[00:36:08] Speaker 05:
Almost all of those cases do actually have a specific dollar amount.

[00:36:12] Speaker 05:
And those that don't have a calculable amount.

[00:36:14] Speaker 05:
So they'll say, three years salary, and we know that the base salary is $200,000.

[00:36:20] Speaker 05:
And it's not to say that the FDIC needs to know.

[00:36:23] Speaker 02:
They had asserted amounts in this place.

[00:36:25] Speaker 02:
It was four million something for Mr. Bauer, and I think two million something for Mr. Clark.

[00:36:31] Speaker 02:
That was submitted.

[00:36:32] Speaker 02:
That was before them.

[00:36:33] Speaker 02:
The FDIC had numbers in front of it.

[00:36:38] Speaker 05:
So that figure was in the application.

[00:36:40] Speaker 05:
It was not in the decision.

[00:36:41] Speaker 05:
And I do not read the decision.

[00:36:43] Speaker 02:
It doesn't have to be in the decision.

[00:36:44] Speaker 02:
It's a different thing to say now, because the rule only requires it to be in the application.

[00:36:49] Speaker 05:
I think that the application was not limited

[00:36:57] Speaker 05:
So what the what the application asked for and what the decision delivered was a statement that all claims arising out of the state court suit, be it statutory court contract or otherwise would inevitably give rise to prohibited golden parachute.

[00:37:15] Speaker 05:
And I think that was just a premature assessment at this stage before the series of mature because

[00:37:23] Speaker 02:
The numbers in there might be debated, the numbers that were provided, the amounts of, I don't understand how the provision of those numbers made it premature.

[00:37:31] Speaker 02:
One might imagine other arguments for why it was premature or not.

[00:37:35] Speaker 02:
I'm not going to have this particular thing that the district court was focused on makes the difference by itself.

[00:37:42] Speaker 05:
So I think that the,

[00:37:46] Speaker 05:
The amount is relevant, not just because it speaks to the nature of these claims.

[00:37:55] Speaker 05:
It's also evident that it's the FDIC and Congress considered it necessary to give a full evaluation.

[00:38:02] Speaker 05:
So in the statutory factors that the Congress deemed relevant, this consideration, they asked the FDIC or gave it authority to consider whether these payments would be reasonable.

[00:38:16] Speaker 02:
and I think it's more focused on the fact that this is litigation claims say it's not litigation and southern wants to know whether it can make a payment it's going to terminate these guys and wants to know if it can when it does make this payment under under the terms of the contract and or even hypothesize another case where it's just crystal clear if i'm terminated by you um

[00:38:40] Speaker 02:
While our business is in a troubled condition, you have to give me two times the salary of the highest paid officer in the company.

[00:38:51] Speaker 02:
We're not in litigation.

[00:38:53] Speaker 02:
And so the troubled entity comes to the FDIC and says, is this a golden parachute payment and can we make it?

[00:39:03] Speaker 02:
But just on the step one question, would this be a golden parachute payment?

[00:39:07] Speaker 02:
Is it your position they couldn't answer that without first having someone tell them what two times the highest paid salary is in the company?

[00:39:16] Speaker 05:
No, Your Honor.

[00:39:17] Speaker 05:
I think that if the amount is fundamentally calculable, then that's entirely... Because it's calculable as opposed to on its face.

[00:39:25] Speaker 02:
It's in the teeth of the golden parachute by its terms.

[00:39:28] Speaker 05:
So I think, well, I think that situation would be different in a few different respects.

[00:39:32] Speaker 05:
First, I don't take the district court's opinion to hold that the FDIC cannot give guidance on its view of the law or advise parties on its view of the law.

[00:39:43] Speaker 05:
I think that the FDIC here relied on and used a very particular font of authority in issuing a application decision under Section 303.25.

[00:39:55] Speaker 02:
And I think we know from that section and the- What more did it do than tell the parties, here's our view on these, you know, people can debate them, but here is our view on the status of these claims.

[00:40:07] Speaker 02:
It didn't order the trial court to do anything.

[00:40:09] Speaker 02:
It didn't direct parties to dismiss their litigation.

[00:40:12] Speaker 02:
So what more did it do here?

[00:40:15] Speaker 05:
It denied the application under 303-244 and sort of made a final determination that no matter what the party submitted, that none of the claims in this suit could give rise to a permissible payment.

[00:40:31] Speaker 02:
They just provided their opinion.

[00:40:33] Speaker 02:
Maybe it was more definitive or covered more territory than people can debate whether they should have, but it just told them their opinion.

[00:40:41] Speaker 05:
I respectfully, I would just dispute the premise.

[00:40:44] Speaker 05:
I don't think it was merely offering opinion.

[00:40:46] Speaker 05:
I think it was relying on this particular font of authority under 30244 with these particularized requirements.

[00:40:54] Speaker 06:
Aside from the portion of the North Carolina complaint seeking attorney's fees, what other parts of the complaint or claims are unrelated to the

[00:41:11] Speaker 06:
the payments that these gentlemen claim they were entitled to upon leaving the bank.

[00:41:18] Speaker 05:
So I want to be careful in staking out my position here.

[00:41:23] Speaker 05:
I do not take the position that the plaintiffs do that their claims will certainly not give rise to prohibited payments.

[00:41:31] Speaker 05:
And I also don't take the position that I read the FDIC today.

[00:41:35] Speaker 06:
I'm sorry.

[00:41:37] Speaker 05:
I don't take the same position that plaintiffs do that their complaint will necessarily never give rise to prohibited payments.

[00:41:46] Speaker 05:
And I also don't take the position that the FDIC does that it will inevitably.

[00:41:52] Speaker 05:
I think I would just want to be careful in counting my answer in that I think there's uncertainty.

[00:41:57] Speaker 05:
And I can point you to the to the particular issues that I think have given rise to the uncertainty.

[00:42:02] Speaker 05:
The payment has to be made before the FDIC can forbid it.

[00:42:07] Speaker 05:
No, Your Honor.

[00:42:08] Speaker 05:
I think reading the statute and regulations, an agreement would not require money to change hands.

[00:42:13] Speaker 05:
You could have an agreement to make a payment, but I do think that there has to be a particular payment proposed whether or not it has yet changed hands.

[00:42:21] Speaker 02:
There has to be a jury judgment.

[00:42:22] Speaker 02:
There has to be a judgment from the jury?

[00:42:23] Speaker 05:
No, Your Honor.

[00:42:26] Speaker 05:
I think a settlement agreement would constitute an agreement to make a payment.

[00:42:29] Speaker 02:
So if they don't settle, the FDIC could do nothing until there's a judgment from the jury.

[00:42:35] Speaker 05:
It's not that they could do nothing.

[00:42:37] Speaker 05:
I think that if they're not presented with a concrete proposed payment, that the statute has not conferred them authority to act in those circumstances.

[00:42:46] Speaker 05:
But also, I think that you don't have to go that far because that's really not this case.

[00:42:50] Speaker 05:
Here, we're not presented with a situation like von Rohr, where you have one simple contract claim for a definite known amount.

[00:42:58] Speaker 05:
Here we have, I think, a lot of uncertainty and to judge Randolph's question about what exactly is going to be the nature of liability here.

[00:43:08] Speaker 05:
Are there going to be damages for tortious misconduct, which is unrelated to direct enforcement of the compensation terms of the contract?

[00:43:17] Speaker 05:
I don't read those answers to be clearly answered by the complaint.

[00:43:22] Speaker 06:
Do you agree with the district court that there's something amiss by the FDIC rendering an advisory opinion?

[00:43:33] Speaker 06:
FDIC is not bound by Article 3 of the Constitution.

[00:43:36] Speaker 06:
There's nothing wrong with that, is there?

[00:43:39] Speaker 05:
No, and I didn't read the district court to be saying that the FDIC could not give parties guidance on its view of the law.

[00:43:48] Speaker 05:
I think what it meant by advisory opinion is that there are certain pieces of information that are just fundamentally unknown.

[00:43:55] Speaker 05:
We don't yet know the amount of any payment.

[00:43:58] Speaker 05:
We don't yet know the legal basis for recovery.

[00:44:01] Speaker 05:
And I read the district court to be saying that because those claims are hypothetical, that is what renders this what he called an advisory opinion, not that the agency can't somehow offer the party's guidance.

[00:44:17] Speaker 02:
Colleagues don't have any further questions?

[00:44:21] Speaker ?:
No.

[00:44:23] Speaker 02:
All right, Mr. Shorenson, you were appointed by the court to defend the judgment of the district court, and we are very grateful for your assistance.

[00:44:30] Speaker 05:
Thank you, Your Honor.

[00:44:34] Speaker 02:
Okay.

[00:44:34] Speaker 02:
Mr. Stevens, we'll give you two minutes.

[00:44:36] Speaker 04:
Thank you, Your Honor.

[00:44:42] Speaker 04:
I'll do my best to be brief.

[00:44:44] Speaker 04:
Responding to Mr. Gravey, just a couple points.

[00:44:51] Speaker 04:
It was the changing control that, in BBX, the changing control terminated the executive's affiliation with the troubled institution.

[00:44:59] Speaker 04:
Here,

[00:45:00] Speaker 04:
The affiliation was nominally terminated a little bit before, about eight days before.

[00:45:10] Speaker 04:
But either way, it comes to the same thing.

[00:45:13] Speaker 04:
Their affiliations with Southern community, even if the terminations didn't happen eight days before, were terminated when Southern community ceased to exist.

[00:45:23] Speaker 04:
The obligations were still those of Southern community, of the troubled institution.

[00:45:27] Speaker 04:
And BBX is essentially is,

[00:45:30] Speaker 04:
It presents essentially the same situation as this case.

[00:45:34] Speaker 02:
It seems like they did, they sent their complaint and they did present this plain sort of employment, for each of the employment contract, the right to keep working as an employee claim.

[00:45:44] Speaker 02:
It was in the papers before the FDIC.

[00:45:46] Speaker 02:
So are you here representing that the FDIC did not make a decision on whether that particular claim, if credited by a jury, would constitute a golden parachute?

[00:45:59] Speaker 04:
Or none.

[00:46:00] Speaker 04:
I want to be more precise on that, Your Honor.

[00:46:03] Speaker 04:
What was not presented to the FTIC was the theory that they would have become employees of the successor institution, which is a different theory.

[00:46:11] Speaker 04:
And what is presented in the briefs before this court, but it was not presented to the FTIC.

[00:46:16] Speaker 04:
What was presented to the FTIC was the idea that absent capital bank coming along and interfering with this relationship,

[00:46:25] Speaker 04:
they would, Southern community would have stuck around and they would have continued being some employees of Southern community.

[00:46:32] Speaker 04:
So that's a different theory.

[00:46:33] Speaker 04:
And the idea is Southern community would have continued to exist.

[00:46:38] Speaker 02:
It interfered with their continued employment.

[00:46:41] Speaker 02:
And everyone knew that Southern was gonna get absorbed by capital.

[00:46:45] Speaker 02:
And so they would have just gone on like I assume a lot of other Southern employees did after the merger and just keep on working.

[00:46:51] Speaker 02:
I don't think anyone thought they were gonna continue as Southern employees.

[00:46:55] Speaker 02:
Southern employees, Southern ceased to exist, did it not?

[00:46:58] Speaker 04:
Yeah, and their theory is that they would have continued being Southern.

[00:47:04] Speaker 04:
And as I understand it, that they, that Southern would have continued to exist.

[00:47:08] Speaker 04:
So that there wouldn't have been, there wouldn't have been a merger.

[00:47:14] Speaker 04:
But what was not presented to the FDIC was the idea that they would have become employees of the successor institution.

[00:47:22] Speaker 04:
And that's why I'm saying that the theory was not presented to the FDIC.

[00:47:28] Speaker 06:
Is the FDIC decentralized?

[00:47:33] Speaker 06:
I'm sorry?

[00:47:34] Speaker 06:
Is the corporation decentralized?

[00:47:38] Speaker 06:
decentralized.

[00:47:39] Speaker 06:
Right.

[00:47:40] Speaker 06:
Can decisions binding decisions over the signature of the FDIC be made by a region?

[00:47:48] Speaker 04:
Yes, they can.

[00:47:50] Speaker 04:
Where does that authority come from?

[00:47:52] Speaker 04:
Well, the FDIC board has executed delegations of authority that in many cases reach the regional directors.

[00:47:59] Speaker 04:
So here the Division of Risk Management Supervision has authority over Golden parachutes and specifically the regional director within the RMS division.

[00:48:07] Speaker 06:
That's why I asked whether it's decentralized.

[00:48:09] Speaker 06:
Right.

[00:48:10] Speaker 06:
Some agencies are not.

[00:48:12] Speaker 06:
Right.

[00:48:13] Speaker 06:
The only binding agency decision has to come out of their headquarters in Washington.

[00:48:19] Speaker 06:
This one came out of

[00:48:21] Speaker 06:
the region, right?

[00:48:22] Speaker 06:
It wasn't even the regional director that made it, it was an assistant, wasn't it?

[00:48:27] Speaker 04:
I think there's been a sub-delegation by the regional director to an assistant regional director, but the authority comes, it came from the board originally, but the board is, the FDIC's board, but the FDIC's board has delegated this authority.

[00:48:43] Speaker 04:
Is that in CFR?

[00:48:46] Speaker 04:
The delegations are not on the CFR, but they are on the FTIC's website.

[00:48:50] Speaker 04:
I think there's a footnote in our brief that explains the delegation issue.

[00:49:00] Speaker 04:
I assume I'm out of time, so I'll be extremely brief.

[00:49:05] Speaker 04:
As to the meeknesses argument regarding needing to know the amount, it's simply not definition in the statute.

[00:49:12] Speaker 04:
The statute addresses payments.

[00:49:15] Speaker 04:
It doesn't make a specific payment for a specific amount part of the definition.

[00:49:23] Speaker 04:
And I guess I should clarify, because right at the outset, I talked about reaching the merits of this case, and I talked about the FTSE's position.

[00:49:33] Speaker 04:
I suspect the banks would like very much for this court to reach the merits of this case.

[00:49:39] Speaker 04:
to reach the merits of the Golden Parachute issue.

[00:49:41] Speaker 04:
And since the banks are not arguing separately, they haven't had that opportunity.

[00:49:45] Speaker 04:
But I know that they have been litigating this for many years, and they would prefer to not make it a 20-year saga when it's already been almost 10.

[00:49:55] Speaker 02:
OK.

[00:49:55] Speaker 02:
My colleagues have any further questions?

[00:49:58] Speaker 02:
Great.

[00:49:58] Speaker 02:
Thank you very much.

[00:49:58] Speaker 04:
Thank you.

[00:50:02] Speaker 02:
Mr. Rabey, we'll give you two minutes as well.

[00:50:10] Speaker 01:
Let me take up some of the issues that have come up in the preceding two arguments.

[00:50:15] Speaker 01:
On the issue of substantial responsibility, I want to be clear that in 359.4, substantial responsibility is only relevant when an institution is applying for permission to make a payment.

[00:50:26] Speaker 01:
It's one of the factors that the FDIC has to take into account.

[00:50:29] Speaker 01:
It doesn't transmute a non-golden parachute payment into a golden parachute payment.

[00:50:36] Speaker 01:
And so the FDIC is finding that

[00:50:38] Speaker 01:
We believe incorrect that Mr. Bowers are substantially responsible has nothing to do with whether any of the payments at issue here are golden parachute payments.

[00:50:48] Speaker 01:
Second, the Amicus are said, I believe I got this right.

[00:50:53] Speaker 01:
If the number is calculable, it's okay.

[00:50:57] Speaker 01:
And as I read that, there needs to be some measure of damages available, some way to calculate it.

[00:51:03] Speaker 01:
And that's true here.

[00:51:04] Speaker 01:
There are measures of damages under North Carolina law for breach of contract.

[00:51:08] Speaker 01:
You're entitled to be put in the position you would have been in had the contract been performed.

[00:51:12] Speaker 01:
And it's the same with tortious interference.

[00:51:14] Speaker 01:
Although our law is less well-developed on measure of damages, you're entitled to any actual damages resulting from the tortious interference.

[00:51:22] Speaker 01:
And so they are calculable, and there's a difference between calculable and calculated.

[00:51:28] Speaker 01:
This goes to the issue of bifurcation as the example that I raised in our briefing, that this is no different from a determination of liability and then a separate subsequent determination of actual damages, the number down the road.

[00:51:42] Speaker 01:
Your Honor, this is a final word.

[00:51:46] Speaker 01:
This court and the Supreme Court have been clear that an agency is not entitled to stretch its regulations beyond their language, that the FDIC could pass regulations governing these sorts of payments that we're seeking in our state court action, and they haven't.

[00:52:03] Speaker 01:
This attempt to impose Golden Parachute rules on successor healthy institutions simply goes beyond what the language will bear.

[00:52:11] Speaker 01:
They're making a new rule without giving anyone opportunity to comment on that rule or to take any position on its wisdom.

[00:52:19] Speaker 01:
And so we would ask the court to- Yes, just one quick question.

[00:52:21] Speaker 01:
Of course.

[00:52:22] Speaker 02:
The FDIC's characterization of your claim, what I call the pure employment contract claim,

[00:52:31] Speaker 02:
Is it right that it was premised on Southern, that their merger are not happening and Southern continuing to exist?

[00:52:38] Speaker 02:
When I was reading, I thought it was also that you would have continued on as employees of capital, but that can be totally my mistake.

[00:52:45] Speaker 01:
If Southern Community had performed its contract, it would have either gotten capital to assume and agree to perform the employment contracts, it would have, I believe Your Honor, used the word seamlessly, it would have seamlessly become employees of capital in the merger.

[00:53:02] Speaker 01:
And Capital would have been the employer under the contract just as Southern Community was the employer before, but they would have been a healthy, non-troubled employer not subject to the Golden Parish.

[00:53:11] Speaker 06:
If the contract provision was unenforceable because of the reasons given by the FDIC, there can be no tortious interference with an unenforceable contract, isn't there?

[00:53:27] Speaker 01:
If the court concludes that it was unenforceable, that Southern Community could not have gotten capital to assume and agree to perform the contracts, yes.

[00:53:42] Speaker 01:
I want to be clear, Judge Randolph, that we're not saying Southern Community owed termination payments when they fired Mr. Bauer and Mr. Clark.

[00:53:50] Speaker 01:
And so Capitalist successor is responsible for those payments that Southern Community otherwise owed.

[00:53:55] Speaker 01:
That's not our case.

[00:53:57] Speaker 01:
That's the Hill case that's cited in the briefing.

[00:53:59] Speaker 01:
That's not this case.

[00:54:00] Speaker 01:
What we're saying is, had they performed, Bauer and Clark would have become employees of Capital, a non-troubled institution.

[00:54:09] Speaker 01:
Or if Capital takes a position in litigation that, well, then the merger would have been off.

[00:54:17] Speaker 01:
We wouldn't have done that deal.

[00:54:19] Speaker 01:
And then the Southern community had performed its contractual obligations to Bauer and Clark to insist on

[00:54:25] Speaker 01:
capitals assuming and agreeing to perform the contracts, then they would have bow and Clark would have continued on as employees of Southern community.

[00:54:32] Speaker 01:
Thank you.

[00:54:33] Speaker 01:
Thank you, your honor.

[00:54:37] Speaker 02:
Thank you.

[00:54:37] Speaker 02:
The case is submitted.