Grogan v. Seattle Bank, — Wn. App. —, — P.3d — (Div. I 8/22/16) (Leach, Schindler, Becker).

FDIC Determination Prohibiting Bank from Paying Executive More than One Year?s Severance by also Paying Prevailing Plaintiff Attorneys? Fees and Costs Preempts State Court Order of Such Fees and Costs

Employee was chief credit officer of a bank. His contract provided that he was entitled to three years? severance if his employment ended within 12 months of a change in control. The bank did not seek pre-approval of the agreement from the FDIC. The bank?s later sole shareholder sold its shares and the new shareholders elected a new board of directors. Employee resigned. The bank disputed a change in control occurred and said it needed FDIC approval to pay anything.

Employee sued for breach of contract. The parties reached a $500,000 settlement, almost three years of salary, subject to FDIC approval. The FDIC said it would approve only one-year, $180,000. The trial court ordered the bank to obtain permission to pay the one year of severance. Before the FDIC responded, the trial court awarded the employee more than $300,000 in attorneys? fees and costs. The FDIC then said that the attorneys? fees and costs would count towards the golden parachute ceiling and it would only approve $180,000 total. The parties then agreed to a total $250,000 settlement inclusive of fees and costs. The FDIC rejected it as exceeding one-year. The trial court then ordered to bank to get FDIC approval for $180,000. The FDIC approved, the bank paid that amount, and the court dismissed the case.

The employee appealed. The appellate court affirmed.? It ruled that FDIC regulations generally prohibit golden parachutes to certain employees such as the plaintiff. ?The FDIC has also adopted an exception allowing 12 months of severance when there is a change in control. The employee argued the bank should never have asked the FDIC whether attorneys? fees and costs should be included in the 12-month cap. ?The court didn?t really address that argument. ?Instead, the court held that the Supremacy Clause prohibits a state court from revisiting the FDIC?s determination that the fees and costs should be included in the 12-month cap.