The Fourth Circuit Holds That the At-Pleasure Provision of the National Bank Act Preempts State Law Claims for Wrongful Discharge

April 3, 2008

In a case of first impression, the Fourth Circuit held on April 1 that the at-pleasure provision of the National Bank Act, 12 U.S.C. § 24 (Fifth), preempts state law claims for wrongful discharge. Schweikert v. Bank of America, N.A., No. 06-2137, 2008 U.S. App. LEXIS 6919 (4th Cir. April 1, 2008). Section 24(Fifth) of the NBA provides that national banks have the power:

[t]o elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.

12 U.S.C. § 24 (Fifth). The Fourth Circuit had previously interpreted the at-pleasure provision of the Federal Home Loan Bank Act and held that state law claims were preempted by the at-pleasure provision in that act. Andrews. v. Fed. Home Loan Bank of Atlanta, 998 F.2d 214, 220 (4th Cir. 1993). In Andrews, the Court concluded that “[a]ny state claim for wrongful termination would plainly conflict with the discretion accorded the Bank by Congress.” The Fourth Circuit‘s decision in Schweikert does not discuss at length Congress’ intent behind the at-pleasure provision, but the Ninth Circuit did in Mackey v. Pioneer National Bank, 867 F.2d 520 (9th Cir. 1989), which was cited by the Court in Schweikert. The Mackey Court explained that: “the purpose of the provision in the National Bank Act was to give those institutions the greatest latitude possible to hire and fire their Chief Operating Officers, in order to maintain the public trust.”

In its decision, the Fourth Circuit rejected Schweikert’s arguments that he was not an officer within the meaning of the NBA and that he was not dismissed by the board. First, the Court disagreed with Schweikert’s contention that the term “other officer” as used in the NBA is limited to officers having unique or special power or authority within the bank. Schweikert was a Senior Vice President and earned $135,000 per year. The Board of Directors approved his appointment to the Senior Vice President position, an officer title of the Bank. Thus, Schweikert was an officer within the meaning of the NBA.

The Court also rejected Schweikert’s argument that the Board’s ratification of his dismissal was insufficient to invoke the preemptive effect of the NBA. The Court wrote: “An action recorded in the minutes of a board of directors is an action taken by that board. To hold otherwise would essentially insulate boards of directors from liability for their decisions.”

Thus, the Fourth Circuit affirmed the District Court’s dismissal of Schweikert’s state common law wrongful or abusive discharge claim. In doing so, the Fourth Circuit provided helpful clarification about the preemptive effect of the at-pleasure provision of the NBA.