08/26/2019 IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE December 5, 2018 Session

C. BRUCE BATTEN v. COMMUNITY TRUST AND BANKING COMPANY, ET AL.

Appeal from the Circuit Court for Hamilton County No. 10C366 Ward Jeffrey Hollingsworth, Judge ___________________________________

No. E2017-00279-COA-R3-CV ___________________________________

This appeal arises from the trial court’s reconsideration and granting of summary judgment motions that had initially been denied by another judge. We affirm the judgment of the trial court.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the Court, in which D. MICHAEL SWINEY, C.J., joined, and J. STEVEN STAFFORD, P.J., W.S., filed separate dissenting opinion.

John P. Konvalinka and Thomas M. Gautreaux, Chattanooga, Tennessee, for the appellant, C. Bruce Batten.

Gary R. Patrick and Susie Lodico, Chattanooga, Tennessee, for the appellee, Community Trust and Banking Company.

Gary S. Napolitan and M. Andrew Pippenger, Chattanooga, Tennessee, for the appellee, Kathryn Reed Edge.

OPINION I. BACKGROUND

In 2001, Community Trust and Banking Company (“Bank”),1 hired C. Bruce current Base Salary and provide all of the benefits provided in Section 3 until the effective date of his resignation and for thirty-six (36) months thereafter. The Bank shall have the right to terminate Batten’s employment under this Agreement by giving Batten sixty (60) days prior written notice. If the Bank elects to give notice to Batten of termination of his employment under this Agreement, for thirty-six (36) months after the effective date of such termination, the Bank shall pay Batten his then current Base Salary and provide all of the benefits provided in Section 3.

The employment agreement included no outside criteria, standards, or schedules.

In 2009, the Tennessee Department of Financial Institutions (“TDFI”) initiated an examination of Bank. When TDFI completed its report, Batten and other Bank executives attended an “exit meeting” with the examiners on October 22, 2009. During the meeting, TDFI announced that the quality of Bank’s assets had “significantly deteriorated” since its last examination; its earnings were “deficient;” its risk management practices were “inadequate;” its capital levels had “significantly decreased;” its management had committed “significant . . . violations [or] contraventions” of law; and its overall condition had “deteriorated.” TDFI specifically discussed the component and composite ratings that it had assigned to Bank. In the first three quarters of 2009, Bank had posted losses of $1,176,000. Batten did not disagree with TDFI’s appraisal of Bank or the majority of TDFI’s conclusions. He now asserts, however, that although Bank struggled for a portion of the time that he served as president and CEO, the financial troubles could not all be blamed on him. He would note that the financial industry as a whole sustained historic losses and that many banks across the country failed completely. After the exit meeting, Batten signed a document certifying that he would help develop plans to address the numerous deficiencies identified by TDFI.

On November 2, 2009, Bank retained Kathryn Reed Edge, an attorney with the firm that represented Bank, to perform legal services in connection with TDFI’s examination.^[3] Batten, as president of Bank, signed Edge’s engagement letter. Six days later, Edge prepared a “confidential Memorandum” for Bank in which she summarized and addressed the information provided by TDFI at the exit meeting. She noted that the following composite CAMELS ratings were being recommended by TDFI:

Capital Adequacy “3” Asset quality “4” Management “4” Earnings “4” Liquidity “3” Sensitivity “4”

In the early part of December 2009, Edge participated in meetings with TDFI and Bank’s Board of Directors in order to discuss the findings of the examination report and Bank’s financial condition. On December 7, 2009, she prepared a letter to TDFI’s Commissioner, in which she acknowledged the nature of the various ratings that had been “assigned” to Bank. During this time period, Edge addressed with Batten the possibility that Bank might receive some type of formal supervisory action from TDFI.

Batten apparently became concerned about his future with Bank. He met privately with Edge to talk about his possible resignation and discussed with her a provision in the employment agreement that allowed Bank to terminate him “for cause.” Because such an action by Bank would affect his right to receive severance payments, Batten questioned Edge as to whether Bank “could use” its current situation to terminate him “for cause” under the agreement.

According to Batten, he specifically asked Edge if she was aware of any reason why he might not receive his severance benefits, and she replied that she was not aware of anything that would result in the severance not being paid. He claims that Edge never disclosed to him that, due to the findings of TDFI, Bank would certainly be assigned a composite CAMELS score of 4; that, when a financial institution is assigned a CAMELS score of 4, pursuant to applicable federal regulations, it constitutes a troubled condition; and that such a bank is barred from making payments that constitute golden parachutes. Batten argues that Edge never informed him that his severance package could be considered a golden parachute. He claims that during their discussions, Edge advised him to tender his notice of termination to Bank in December 2009, as opposed to waiting, so that Batten would not be listed as CEO in Bank’s upcoming capital circular.

After his conversations with Edge, Batten decided to voluntarily resign from Bank. Although Edge did not personally represent him, Batten asked her to compose his notice of termination. She forwarded a proposed draft to him by email with the following statement:

Corky, I think this meets the requirements for notice under your employment agreement. Feel free to change it, but you may not want to be too specific about why you are tendering your resignation when you are. You may want to consult your own counsel about this, as well, as we discussed. What the Bank will want you to sign is a separation agreement that sets out what they are paying you and providing certain releases. This is customary and for both your protection and the Bank’s. When you are ready to deliver this to Ken Hamilton, I can draw up that agreement for the bank.

Until you tell me you are ready to deliver this, I won’t talk to anyone about this, but we cannot wait long because we must amend the offering circular and prepare for management transition before we start talking to investors. I will need to talk with Greg and Ken Hamilton sooner than later.

I know how hard this is for you. Thank you for calling me about it. I hope the conversation helped you.

Upon his review, Batten requested that Edge add a sentence about his need to stop working because of his health, claiming that the work-related stress was affecting him and, also, that he was not physically capable of doing his job any longer. The revised notice provided, in part, as follows:

I have determined, after much debate and upon consultation with my health care provider, that the stressful and challenging position I hold at the Bank is contributing to my deteriorating health and that it is in my best interest and the best interest of my family that I tender my resignation.

In a later deposition, Batten testified that he “couldn’t deal with the stress” – “mentally or physical” – of running Bank. He asserted that his health was deteriorating so much that it impaired his ability to work at Bank.

Batten tendered the resignation letter on the morning of December 21, 2009. He offered to help smooth the transition to the next CEO and requested that Bank pay him three-years’ worth of contractual severance pay:

Pursuant to Section 4, Payments to Batten upon Termination, of my Amended and Restated Employment Agreement dated May 23, 2005, I may terminate my employment under the Employment Agreement by resigning upon not less than 60 days prior written notice to the Bank. The Bank is obligated to pay me my “then current Base Salary and provide all of the benefits provided in Section 3 [of the Employment Agreement] until the effective date of my resignation and for thirty-six (36) months thereafter.”

After the notice was received, Bank placed Batten on medical leave, blocked his access to his email account and computer, and changed the locks on the building where he had worked. In response to Bank’s actions, Batten’s counsel thereafter sent a letter to Edge demanding assurances that Bank intended to perform its obligations relative to the severance benefits.

In mid-January 2010, during the 60-day period following Batten’s resignation notice, TDFI sent Bank the final version of its report. Regulators concluded that Bank was an “unsound,” “deficient,” and “ineffectively” managed financial institution. Around a month later, Bank received a letter from the Federal Deposit Insurance Corporation (“FDIC”), stating that Bank was officially in a “troubled condition”4 pursuant to federal law. FDIC informed Bank that, among other restrictions, it could not make any “golden parachute payment or excess nondiscriminatory severance plan payment” to any officer or director without FDIC authorization. On February 19, 2010, Edge’s law firm sent a letter to Batten stating that Bank would not “presently” tender the post-termination compensation. Thereafter, on March 10, 2010, Batten filed his complaint against Bank and Edge personally, alleging claims for breach of contract and quantum meruit/unjust enrichment. He subsequently amended his complaint to assert a claim for negligence against Edge.

FDIC’s regulations allow a financial institution that is in a troubled condition and IAPs [institution-affiliated parties]5 like Batten to request permission to make otherwise prohibited golden parachute payments. 12 C.F.R. §§359.0(b), 359.4(a)(1), (4), 359.6. On May 16, 2011, Bank’s president at the time sent a letter to FDIC inquiring whether the entity would allow payment of the severance benefits to Batten. Bank represented to FDIC that, “Community Trust does not believe that the approximately $600,000 that would be paid to Batten qualifies as deferred compensation. The payment being requested would not have been compensation that would have been payable to Mr. Batten during the course of his employment and thus cannot be qualified as “deferred compensation.” According to Batten, this statement was directly contrary to the terms of the employment agreement, noting the fact that Bank set up the Deferred Compensation Account, contributed to it on a monthly basis, accrued a liability on its financial statements relative to the payment of the severance benefits, and specifically characterized the severance benefits as deferred compensation on its financial records. On June 24, 2011, FDIC responded to Bank that, “based upon the information provided,” it appeared that the severance benefits do not “fit any type of plan described in the regulation, and that the payment would qualify as a “golden parachute.” FDIC further informed Bank that it would need to get its consent before making the payment.

Bank did not make such a request to FDIC pursuant to 12 C.F.R. § 359.4(a)(4) until August 2, 2012, over two and a half years after Batten’s resignation. In its August 2, 2012 letter, Bank stated that it “is unable to make the certifications required by 12 C.F.R. § 359.4(4)(i) through (iv) or advocate for consent to make the payment due to our belief that Batten’s performance as CEO and President did cause him to be substantially responsible for Community Trust’s troubled condition.” According to Bank, it had learned that Batten had established lending policies that negatively implicated numerous federal and state laws, incentivized the extension of excessive loans, and participated in questionable self-dealing with Bank insiders.^[6] On August 14, 2012, FDIC responded to

institution holding company; (2) Any other person who has filed or is required to file a change-in-control notice with the appropriate federal banking agency under section 7(j) of the Act (12 U.S.C. 1817(j)); (3) Any shareholder (other than a depository institution holding company), consultant, joint venture partner, and any other person as determined by the appropriate federal banking agency (by regulation or case-by-case) who participates in the conduct of the affairs of an insured depository institution or depository institution holding company; and (4) Any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in: Any violation of any law or regulation, any breach of fiduciary duty, or any unsafe or unsound practice, which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured depository institution or depository institution holding company.

12 C.F.R. § 359.1.

Bank’s August 12 letter, and requested that Bank provide the certifications required under section 359.4(a)(4) by August 27, 2012. When Bank failed to comply with FDIC’s demands, on August 30, 2012, FDIC sent correspondence advising that Bank’s request was deemed “abandoned.”

Although Bank’s Rule 30.02(6)7 representative had testified on July 16, 2010, that Bank was not claiming Batten had been terminated for cause, on April 26, 2012, Bank’s Board of Directors voted to retroactively terminate Batten’s employment, effective February 20, 2010:

WHEREAS, the Company has recently completed its written discovery responses, required by the Litigation, and has recently reviewed all documents related to Batten’s performance as CEO and President of the Company from May 30, 2001 through his resignation on December 21, 2009;

WHEREAS, upon careful review of the above-referenced documents, the Board finds, in its good faith opinion, that Batten was guilty of conduct justifying termination for Cause, within the meaning of the Employment Agreement, based on the following reasons: Batten is guilty of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, willful failure to perform stated duties as defined by the Board’s and the Company’s policies, willful violation of the laws, rules and regulations as described in [TDFI]’s Examination Report for the examination beginning October 5, 2009 which materially and negatively affected the Company. The Board further finds that Batten’s behavior was willful, as defined by the Employment Agreement, in that it demonstrated an intentional or reckless disregard for the duties and responsibilities he owed to the business of the Company. It is therefore,

RESOLVED, that Batten shall be terminated for Cause pursuant to Section 7 of the Employment Agreement effective as of February 20, 2010, and that Batten shall not have the right to receive compensation or other benefits after said date; and, it is,

FURTHER RESOLVED, that the proper officers of the Company are hereby authorized and directed to take all such action as they, and any of them, deem necessary or advisable to carry out the full intent and purpose of the foregoing resolution.

Batten asserts that prior to April 26, 2012, no one informed him that he had allegedly engaged in illegal or unlawful conduct, that he had been dishonest or incompetent, that he had breached his fiduciary duty, or that he had willfully failed to perform his stated duties as Bank’s employee. According to Batten, at all times, he relied upon Lloyd Congdon, Bank’s Executive Vice President, Senior Leader, and Senior Credit Officer to ensure that Bank’s loans were legally compliant. Batten stresses that Bank did not fail under his watch and, in fact, its assets were improving at the time he resigned. He notes two years of litigation occurred before Bank began blaming him.

Although Batten, as an IAP, had standing to seek permission from FDIC to have Bank make the severance payments, the record does not reveal any action on his part in this regard. He would have been required to demonstrate, among other things, that he “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” (1) that he committed any fraudulent act, breach of trust or fiduciary duty, (2) that he is responsible for the failure of the bank, or (3) that he has committed a material violation of banking laws and regulations that has had a material effect on the bank. 12 C.F.R. § 359.4(4); see also 12 U.S.C. § 1828(2).

In January 2013, Bank moved for summary judgment. According to Bank, the enforceability of the employment agreement between it and Batten was contingent upon continued regulatory approval of Bank’s operations, which ceased when TDFI concluded its 2009 examination. Bank further argued that Batten breached the agreement by failing to faithfully perform his duties under the employment agreement. Additionally, Bank asserted that the payments sought by Batten constituted an impermissible golden parachute not subject to any statutory exceptions. Edge also sought summary judgment on Batten’s negligence claim, arguing that the alleged misrepresentations about which Batten complained concerned future matters rather than misstatements of present fact.

The trial judge over the case at the time, Jacqueline Bolton,8 denied the motions for summary judgment, finding disputed issues of material fact present. We denied a requested Rule 9 application for an interlocutory appeal.

Once the case was back before the trial court, Bank filed a motion for revision on October 1, 2015, under Rule 54.02 of the Tennessee Rules of Civil Procedure. The trial court accepted Bank’s argument that there had been a change in the law concerning the summary judgment standard since Judge Bolton’s denial of Bank’s original summary judgment motion. Bank further convinced Judge Jeff Hollingsworth that the severance package constituted a “golden parachute” as that term is defined by FDIC regulations, and, because Bank was considered by FDIC to be a “troubled institution,” it would be illegal for Bank to pay Batten the sums set forth in the employment agreement. The trial court, thereafter, reversed the earlier rulings on the dispositive motions. In its January 4, 2017, memorandum and order, the court set forth the following reasons for granting Bank’s motion:

Batten cannot prove that the conditions precedent for payment of the Severance Benefits were met. . . . Paragraph 19 clearly contemplates one condition being the loss of the Bank’s charter . . . and the continued regulatory approval of the Bank’s operations. Wording of the contract is clear and this Court cannot reconcile the findings of the [TDFI] and the FDIC with the term “regulatory approval.” Therefore, it is the finding of the Court that the Bank met its burden on summary judgment in regard to that provision of the contract. Batten has not been able to produce evidence to create an issue of fact on that issue.

...

FDIC refused permission to make a payment the FDIC defined as a “golden parachute.” . . . The FDIC told the Bank that, based on the information it had at the time, it could not allow the payment. However, if the Bank would make certain assertions concerning Batten’s noninvolvement with the problems suffered by the Bank, the FDIC might reconsider. The only way the Bank could have responded to that would be to make assertions concerning Batten’s noninvolvement, knowing at the time that the assertions were, at least from the Bank’s point of view, not true. This Court is not aware of any duty the Bank had to make what it considers untrue statements to the federal agency which regulates it. In any case, Paragraph 19 clearly states that the continuation of the agreement was contingent upon regulatory approval. At the time Batten’s resignation became effective, the Bank did not enjoy regulatory approval.

...

Finally, it is undisputed that the FDIC informed the Bank that it was prohibited from making the payments without FDIC consent. If this Court ordered the Bank to make those payments, that would be in direct conflict with federal law. - 10 -

Under these circumstances, federal law preempts. Mr. Batten may pursue his remedies in the federal system.

In regard to Edge, the trial court noted as follows:

As Edge argues in her motion, the misrepresentation, if it was such, is about a future event. The only misrepresentation Batten accuses Edge of making is her failure to warn him that he might lose the Severance Package in Paragraph 4. Edge argues that, even if that is true, it is a misrepresentation concerning a future event for which there can be no recovery. . . . It is clear that, even if Edge’s failure to mention the adverse effects of Batten’s resignation was a misrepresentation, it related to what might happen in the future. At the time Edge failed to issue the warning Batten claims should have been made, the report of the TDFI had been issued. However, it was after his resignation notice that the FDIC issued its ruling that the Bank was a troubled institution. It was also after he submitted his resignation that the FDIC notified the Bank it needed consent to make the payment. As a matter of law, Batten cannot recover against Edge for the fact that he did not receive the Severance Package.

After the ruling in its favor from the trial court, Bank filed a motion for attorneys’ fees. The trial court granted the motion over Batten’s objection and awarded Bank $294,965.18. In its memorandum opinion and order entered on October 27, 2017, the court held that because it granted Bank’s summary judgment motion, “the Bank prevailed in this litigation” and was entitled to an award of its’ reasonable attorney’s fees pursuant to Paragraph 16 of the employment agreement. The court noted that the “case clearly involved a dispute about the Agreement. . . .” Batten then filed a timely notice of appeal.

II. ISSUES

We restate the issues raised by Batten in this appeal as follows:

A. Whether it was error to grant the second motion for summary judgment filed by Edge and the motion for revision filed by Bank;

B. Whether it was error to limit and/or refuse Batten the opportunity to obtain information and documents pertaining to the communications among appellees and FDIC and/or - 11 -

TDFI, the drafts of Batten’s separation agreement prepared by Edge, and the circumstances and/or preparation of a financial institution letter by FDIC.

C. Whether it was error to grant the application for attorney’s fees filed by Bank.

Bank’s issues are restated as follows:

A. Whether the trial court correctly ruled that the condition of Batten’s contract was unsatisfied.

B. Whether Batten demonstrated that the trial court abused its discretion with respect to any of the discovery rulings.

C. Whether Bank was the prevailing party and the trial court properly awarded Bank’s attorneys’ fees under the parties’ contract.

Edge’s issues are restated as follows:

A. Whether the appeal is barred by the law of the case doctrine.

B. Whether the trial court correctly held that Batten may not recover for negligent misrepresentation of a future fact.

C. Whether Batten can show that he reasonably or justifiably relied on anything that Edge told him, as Edge specifically told him to consult his own attorney.

D. Because Batten resigned due to his health, it does not matter what, if anything, Edge said to him about the agreement or the timing of his decision – nothing she said (or failed to say) caused his alleged harm because he had to resign.

E. Whether Batten may recover for Edge’s failure to disclose information that was readily available to him.

III. STANDARD OF REVIEW

We review the trial court’s findings of fact de novo upon the record. Tenn. R. - 12 -

App. P. 13(3). Those findings are presumed to be correct unless the evidence preponderates otherwise. Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 308 (Tenn. 2009) (citing Tenn. R. App. P. 13(d)). We review the trial court’s conclusions of law de novo with no presumption of correctness. McLarty v. Walker, 307 S.W.3d 254, 257 (Tenn. Ct. App. 2009). We note that contract interpretation is a question of law. Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999).

In Rye v. Women’s Care Center of Memphis, MPLLC, 477 S.W.3d 235 (Tenn. 2015), the Tennessee Supreme Court articulated the proper standard for summary judgment:

Summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Tenn. R. Civ. P. 56.04. We review a trial court’s ruling on a motion for summary judgment de novo, without a presumption of correctness. Bain v. Wells, 936 W.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist Healthcare-Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing so, we make a fresh determination of whether the requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been satisfied. Estate of Brown, 402 S.W.3d 193, 198 (Tenn. 2013) (citing Hughes v. New Life Dev. Corp., 387 S.W.3d 453, 471 (Tenn. 2012)). . . .

Id. at 250.

A trial court’s decision regarding “discovery matters will not be reversed on appeal unless a clear abuse of discretion is demonstrated.” Benton v. Snyder, 825 S.W.2d 409, 416 (Tenn. 1992). An abuse of discretion occurs when the trial court applies incorrect legal standards, reaches an illogical conclusion, bases its decision on a clearly erroneous assessment of the evidence, or employs reasoning that causes an injustice to the complaining party. State v. Banks, 271 S.W.3d 90, 116 (Tenn. 2008).

Our Tennessee Supreme Court has summarized the standard of review applicable to a trial court’s decision regarding a reasonable attorney’s fee as follows:

[A] determination of attorney’s fees is within the discretion of the trial court and will be upheld unless the trial court abuses its discretion. We presume that the trial court’s discretionary decision is correct, and we consider the evidence in the light - 13 -

most favorable to the decision. The abuse of discretion standard does not allow the appellate court to substitute its judgment for that of the trial court . . . .

Little v. City of Chattanooga, No. E2013-00838-COA-R3-CV, 2014 WL 605430, at *3 (Tenn. Ct. App. Feb. ^[14], 2014) (citing Wright ex rel. Wright v. Wright, 337 S.W.3d 166, 176 (Tenn. 2011)).

IV. DISCUSSION

“Golden Parachute”

Batten asserts that the severance benefits do not constitute a golden parachute payment because they fall squarely within one or more of the exceptions to the definition of a “golden parachute” contained in 12 C.F.R. § 359.1(f)(2)(ii), (iii) and (iv). If an exception is deemed applicable and the severance benefits are not a golden parachute, then there is no reason to seek approval under the provisions of 12 C.F.R. § 303.244.

The Federal Deposit Insurance Act (“the FDIA”) authorizes FDIC to prescribe regulations pertaining to insured depository institutions. See 12 U.S.C. § 1828. Section 1828(k) empowers FDIC to prohibit certain payments by financial institutions to executive officers. The term “golden parachute payment” means “any payment to a senior executive officer for departure from a company for any reason, except for payments for services performed or benefits accrued.” 12 U.S.C. § 5221(a)(2). FDIC’s regulations define a “golden parachute payment” as follows:

(1) The term golden parachute payment means any payment (or any agreement to make any payment) in the nature of compensation by any insured depository institution holding company for the benefit of any current or former IAP [Institution-affiliated party] pursuant to an obligation of such institution or holding company that:

(i) Is contingent on, or by its terms is payable on or after, the termination of such party’s primary employment or affiliation with the institution or holding company; and

(ii) Is received on or after, or is made in contemplation of, any of the following events:

(A) The insolvency (or similar event) of the insured depository institution which is making the payment or bankruptcy or insolvency (or similar event) of the - 14 -

depository institution holding company which is making the payment; or (B) The appointment of any conservator or receiver for such insured depository institution; or (C) determination by the insured depository institutions or depository institution holding company’s appropriate federal banking agency, respectively, that the insured depository institution or depository institution holding company is in a troubled condition, as defined in the applicable regulations of the appropriate federal banking agency (§ 303.101(c) of this chapter); or

(D) The insured depository institution is assigned a composite rating of 4 or 5 by the appropriate federal banking agency or informed in writing by the Corporation that it is rated a 4 or 5 under the Uniform Financial Institutions Rating System of the Federal Financial Institutions Examination Council, or the depository institution holding company is assigned a composite rating of 4 or 5 or unsatisfactory by its appropriate federal banking agency; or

(E) The insured depository institution is subject to a proceeding to terminate or suspend deposit insurance for such institution; and

(iii) (A) Is payable to an IAP whose employment by or affiliation with an insured depository institution is terminated at a time when the insured depository institution by which the IAP is employed or with which the IAP is affiliated satisfies any of the conditions enumerated in paragraphs (f)(1)(ii)(A) through (E) of this section, or in contemplation of any of these conditions; or

(B) Is payable to an IAP whose employment by or affiliation with an insured depository institution holding company is terminated at a time when the insured depository institution holding company by which the IAP is employed or with which the IAP is affiliated satisfies any of the conditions enumerated in - 15 - paragraphs (f)(1)(ii)(A), (C) or (D) of this section, or in contemplation of any of these conditions.

12 C.F.R. § 359.1(f)(1). The purpose of the golden parachute regulations is to “prevent[] executives who have been terminated from troubled depository institutions from draining money from those institutions.” Vaught v. Fed. Deposit Ins. Corp., No. 3:16-CV-507, 2018 WL 5098531 at[*12] (E.D. Tenn. Apr. ^[4], 2018).

Several broad categories of payments that would otherwise fall under the definition set forth in 12 C.F.R. § 359.1(f)(1) are listed as exceptions:

(2) Exceptions. The term golden parachute payment shall not include:

… (ii) Any payment made pursuant to a benefit plan as that term is defined in paragraph (c) of this section; or (iii) Any payment made pursuant to a bona fide deferred compensation plan or arrangement as defined in paragraph (d) of this section; or

(iv) Any payment made by reason of death or by reason of termination caused by the disability of an institution-affiliated party.

12 C.F.R. § 359.1(f)(2). Batten asserts that the severance benefits under the employment agreement fall within the enumerated exceptions to prohibited golden parachute payments listed above. See sections 359.1(f)(2)(ii), (iii) and (iv). According to Batten, questions of fact exist, relative to whether the three exceptions apply in this case, which preclude the entry of summary judgment in favor of Bank.

Employee Welfare Benefit Plan

Batten claims that upon the execution of his employment agreement, Bank set up an account (“the Deferred Compensation Account”) into which funds were placed on a monthly basis over the course of his employment for the purpose of facilitating the payment of the severance benefits. According to Batten, Bank’s financial records, produced during discovery, confirm the existence of the account, as well as the fact that Bank considered the funds contained therein to constitute deferred compensation. During his deposition, a bank representative admitted that the Deferred Compensation Account was carried as a liability on Bank’s books and that, as of December 2009, the balance in

- 16 -

the account was in excess of $350,000.9 Batten therefore contends that the severance benefits are payable to him pursuant to an “employee welfare benefit plan” and do not constitute a golden parachute.

FDIC does not preclude severance benefits if they are paid pursuant to “any plan, contract, agreement or other arrangement which is an ‘employee welfare benefit plan’ as that term is defined in section 3(1) of the Employee Retirement Income Security Act [“ERISA”] of 1974, as amended (29 U.S.C. § 1002(1)), or other usual and customary plans such as dependent care, tuition reimbursement, group legal services or cafeteria plans. . . .” 12 C.F.R. § 359.1(f)(2)(ii). 29 U.S.C. § 1002(1) provides as follows:

(1) The terms “employee welfare benefit plan” . . . mean any plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, . . . disability, . . . unemployment, or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions).

29 U.S.C. § 1002(1). Batten notes that in Caldwell v. PNC Financial Services Group, Inc., 835 F.Supp. 2d 510 (S.D. Ohio 2011), the court found as follows:

Since 29 U.S.C. § 186(c) refers to severance benefits, the Sixth Circuit has held that severance plans are included in the definition of 29 U.S.C. § 1002(1)(B). See Shahid v. Ford Motor Co., 76 F.3d 1404, 1409 (6th Cir. 1996). The Supreme Court has also held that “plans to pay employees severance benefits, which are payable only upon termination of employment, are employee welfare benefit plans.” Massachusetts v. Morash, 490 U.S. 107, 116, 109 S.Ct. 1668, 104 L.Ed. 2d 98 (1989).

Caldwell, 835 F.Supp.2d at 516. Accordingly, Batten contends that Bank’s obligation to provide him the severance benefits falls squarely within the definition in 29 U.S.C. 1002(1). See DuBrul v. Citrosuco North America, Inc., 892 F.Supp.2d 892, 906 (S.D. Ohio 2012); Williams v. Wright, 927 F.2d 1540, 1545 (11th Cir. 1991); Biggers v. Wittek Indus., 4 F.3d 291, 297 (4th Cir. 1993); Evanoff v. Banner Mattress Co., 526 F.Supp.2d 810, 816 fn. ^[2] (N.D. Ohio 2007) (citing B-T Dissolution, Inc. v. Provident Life and