Supreme Court Backs FDIC in S&L; Firings : Workplace: The agency routinely dismisses the officers of failed thrifts. An Oakland executive sued for lack of due process.
WASHINGTON — Reversing a verdict in a California case, the U.S. Supreme Court on Tuesday shielded federal agencies such as the Federal Deposit Insurance Corp. from having to pay monetary damages for firing employees in violation of their constitutional rights.
The 9-0 ruling in favor of the FDIC protects the agency from potentially huge payments to officers of more than 1,750 savings and loans taken over by federal regulators since 1986. The FDIC routinely dismisses the senior officers of troubled thrifts, even if they did not engage in any wrongdoing.
The decision throws out a $130,000 verdict won by an executive who contended that he was fired without due process when federal regulators took control of the Oakland-based thrift for which he worked.
Under the doctrine of sovereign immunity, the government generally cannot be sued for damages. There are exceptions, however. Congress can authorize suits against a government agency. The U.S. 9th Circuit Court of Appeals said Congress did just that when it created the Federal Savings and Loan Insurance Corp. and its successor, the FDIC.
By law, these agencies can “sue and be sued†under certain circumstances, and the appeals court relied on this provision to uphold the fired executive’s damage claim against the FDIC.
That conclusion set off alarms in the Justice Department, which told the high court that the decision “threatens dramatic interference with this nation’s efforts to deal with failed financial institutions.â€
The court concurred, in an opinion written by Justice Clarence Thomas.
In 1982, Oakland-based Fidelity Savings and Loan was losing an average of $5 million a month when federal regulators intervened. John H. Meyer, an executive vice president, was fired by FDIC officials without a hearing to contest the matter.
Meyer contended that the FDIC had taken away his job “without due process of law,†and a jury awarded him $130,000. The 9th Circuit Court upheld the judgment on the grounds that the FDIC is open to such lawsuits.
But in his opinion, Thomas said, “If we were to recognize a direct action for damages against federal agencies, we would be creating a potentially enormous financial burden for the federal government.â€
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