Academic journal article ABA Banking Journal

FDIC Can Shoot Down More Now: Harrison Decision Impacts Deals with Departed

Academic journal article ABA Banking Journal

FDIC Can Shoot Down More Now: Harrison Decision Impacts Deals with Departed

Article excerpt

Restrictions on golden parachute and indemnification payments to institution-affiliated parties ("IAPs") under FDIC rules are something with which most banking lawyers are very familiar. FDIC can restrict potentially abusive payments to IAPs by troubled financial institutions that are contingent on the IAP leaving the bank. (This power was added to the Federal Deposit Insurance Act in 1990.) While FDIC's "golden parachute" rules are most frequently invoked when scrutinizing executive employment contracts, a very recent decision by the U.S. District Court for the Southern District of Florida solidifies a more expansive interpretation of these regulations by FDIC.

[ILLUSTRATION OMITTED]

The case is Harrison v. Ocean Bank, et al, Case No. 10-23138-CIV-Moreno (S.D. Fla., June 30, 2011). The opinion in Harrison sustained a decision by FDIC to invalidate an agreement between a bank and a former employee to settle a claim that the employee was wrongfully terminated by the institution. Rather than immediately commencing litigation, the bank and the former employee took part in pre-filing mediation that eventually yielded a settlement agreement. The terms of the settlement included provisions for the bank to pay the employee a measure of compensatory damages as well as back pay and attorney fees.

Significantly (and, as it turns out, rather prudently), the settlement agreement also included a provision making the settlement contingent upon obtaining the approval of FDIC and the bank's state chartering authority, despite the fact that the bank took the position that the settlement did not constitute a golden parachute. At the time of the settlement, the bank was deemed to be in a troubled condition, triggering the FDIC's golden parachute regulations. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.