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Fasano v. Federal Reserve Bank of New York

August 3, 2006


On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 03-cv-0672) District Judge: Honorable Jose L. Linares.

The opinion of the court was delivered by: Van Antwerpen, Circuit Judge.


Argued June 29, 2006

Before: BARRY, VAN ANTWERPEN, and JOHN R. GIBSON,*fn1 Circuit Judges.


Appellant Federal Reserve Bank of New York brings this interlocutory appeal of the District Court's refusal to find appellee Maureen Fasano's employment claims, based on New Jersey state law, preempted by the Federal Reserve Act, 12 U.S.C. § 341(Fifth). For the reasons set forth below, we will reverse and remand with instructions to dismiss Fasano's Complaint.


A. Federal Reserve Banks

Because the nature of Federal Reserve Banks is at issue in this case, we begin by briefly describing their history and function. The Federal Reserve Bank of New York ("New York Fed") is one of twelve Federal Reserve Banks governed by the Federal Reserve Act ("FRA"), 12 U.S.C. § 221 et seq. The Federal Reserve Banks were established by Congress in 1913 to be the "monetary and fiscal agents of the United States." First Agric. Nat'l Bank v. State Tax Comm'n, 392 U.S. 339, 356 (1968) (Marshall, J., dissenting). See also Federal Reserve Act of 1913, Pub. L. No. 63-43, 38 Stat. 251. To aid in achieving Congress's goal of insulating them from political pressure, the Federal Reserve Banks are formed as corporations. 12 U.S.C. § 341. Within their respective designated territories, the Federal Reserve Banks supervise and maintain the nation's banking system, examine the national*fn2 and state banks that have purchased memberships in the Federal Reserve System, 12 U.S.C. §§ 325, 481 et seq., and clear checks and deposits between depository institutions. 12 U.S.C. § 360.

The individual Federal Reserve Banks serve as the foundation for the Federal Reserve System. The presidents of the New York Fed and four other Federal Reserve Banks, along with the Board of Governors of the Federal Reserve System ("Board of Governors"), constitute the Federal Open Market Committee, 12 U.S.C. § 263, charged by Congress with: "maintain[ing] long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." 12 U.S.C. § 225a. The individual Federal Reserve Banks carry out the monetary policy so formulated. The Board of Governors, comprising seven Presidential appointees, 12 U.S.C. § 241, loosely oversees the Federal Reserve Banks' operations. 12 U.S.C. § 248(j). The Board of Governors is empowered to levy assessments on the Federal Reserve Banks to pay expenses, 12 U.S.C. § 243, and issue governing regulations, see, e.g., 12 U.S.C. § 248-1.

The Federal Reserve Banks are intimate parts of the Government's fiscal structure. In addition to acting as the

such as issuing currency. The Federal Reserve Banks have now taken over these functions, leaving little difference between national banks and state-chartered banks. We will attempt to be as precise as possible when referring to "national banks" as opposed to Federal Reserve Banks.

Government's fiscal agent, the Federal Reserve Banks serve as the depository for the United States Treasury. 12 U.S.C. § 391. The United States, while not a capital stockholder in the Federal Reserve Banks, is the residual interest-holder in the unlikely event of a Federal Reserve Bank's liquidation. 12 U.S.C. § 290. Congress has on occasion treated the Federal Reserve Banks as the Government's own rainy day fund, directing, for example, the payment of $3.7 billion to the United States Treasury in 2000. 12 U.S.C. § 289; see also Pub. L. No. 103-66, § 3002(b), 107 Stat. 337 (1993) (directing payment of $106 Million to United States Treasury in 1997; $107 Million to United States Treasury in 1998). Collectively, the Federal Reserve Banks carry out the functions of the United States' central bank -- issuing and maintaining legal tender, i.e., Federal Reserve Notes; acting as repository of Government funds; and interacting with foreign countries' central banks.

While placed by law in a home city, each Federal Reserve Bank spans at least three states, and eleven are under the territorial jurisdiction of more than one United States Circuit Court of Appeals. The New York Fed has responsibility for all of New York, Puerto Rico, and the United States Virgin Islands, and parts of New Jersey and Connecticut.

B. Instant Dispute

Turning to the matter at hand, Maureen Fasano worked in the New York Fed's East Rutherford, New Jersey office from 2000-2002.*fn3 Fasano initially worked as a currency verification operator and junior operator, handling and washing currency. This involved, inter alia, lifting heavy materials one day a week. On August 15, 2001, Fasano realized that she had not been paid for overtime she had recorded on her time sheet. On bringing this to the attention of a supervisor, Fasano saw that her time sheet had been altered and was told that because no other employees had submitted overtime, she would not be paid for it. Fasano met with several supervisors to discuss her complaints, and was told that she would be paid for the overtime; the supervisors allegedly asked her not to speak of the incident with any other employee. Fasano claims a co-worker later told her the supervisors would try to make Fasano quit for causing "trouble."

In September, 2001, Fasano met with the New York Fed's Human Resources Department to complain that her pay was too low for her seniority, and that she had not received a standard raise. She also met with another supervisor, who asked whether she thought she was being "prejudiced" against; Fasano responded "yes."

In late November, 2001, Fasano was transferred to a "floater" position, where she was assigned to different rooms and did heavy lifting each day. Fasano had a preexisting neck injury that had not previously impacted her employment despite the one-day-a-week heavy lifting, and Type 1 diabetes that necessitated frequent eating. Fasano believed that her supervisors at the New York Fed knew of each condition, and (1) assigned her to the floater position in the hope that she would injure herself; and (2) prevented her from taking breaks during her shift to eat. At one point, Fasano complained to supervisors that the new position was "killing her."

On December 18, 2001, Fasano injured her back and allegedly went on long-term disability leave. According to the New York Fed, Fasano never fully applied for disability benefits, and never responded to a letter sent to her on July 2, 2002, notifying her that she must either return to work or file a completed benefits application. Fasano was thereafter terminated on July 31, 2002.

Fasano then filed this suit in the New Jersey Superior Court against the New York Fed and various employees, both in their official and individual capacities, alleging (1) retaliation, in violation of the New Jersey Conscientious Employee Protection Act ("CEPA"), N.J. Stat. Ann. § 34:19-1 et seq. (West 2006); (2) failure to accommodate, in violation of the New Jersey Law Against Discrimination ("LAD"), N.J. Stat. Ann. § 10:5-1 et seq. (West 2006); and (3) retaliation, in violation of the LAD. The New York Fed removed the case to the United States District Court for the District of New Jersey on February 14, 2003, pursuant to 12 U.S.C. § 632, and filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), for lack of subject matter jurisdiction due to preemption by the Federal Reserve Act; and Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted.

On March 31, 2004, the District Court denied the New York Fed's Rule 12(b)(1) motion, concluding that a Federal Reserve Bank is not a federal instrumentality but is instead treated as a private corporation, and that the Federal Reserve Act did not preempt any state employment laws, even if they imposed additional burdens and liabilities beyond federal law (as did CEPA and LAD). The District Court also denied the New York Fed's Rule 12(b)(6) motion as to all claims. Following initial discovery, the New York Fed filed counterclaims based on Fasano's failure to disclose a private business venture before, during, and after her employment.*fn4

The New York Fed then filed a motion for reconsideration, which the District Court denied on August 9, 2005. However, the District Court noted a wide split in authority among courts around the country and a recent contrary holding by a district court in the Eastern District of Pennsylvania finding preemption in a nearly-identical case involving the Federal Reserve Bank of Philadelphia. The District Court thus granted certification of the question for interlocutory appeal pursuant to 28 U.S.C. § 1292(b).*fn5 We granted permission to ...

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