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HICKS v. RESOLUTION TRUST CORP.

June 11, 1991

JOHN HICKS, Plaintiff,
v.
RESOLUTION TRUST CORPORATION as Receiver for CLYDE FEDERAL SAVINGS and LOAN ASSOCIATION, SYLVIA MEIDEMA, ROBERT ROPA, VALERIAN MUSSELMAN, NICHOLAS LASH, ERNEST MELICHAR, STEVEN KUROSKI, LYDIA FRANZ, and the Estate of ERWIN KUCERA, Defendants


George W. Lindberg, United States District Judge.


The opinion of the court was delivered by: LINDBERG

GEORGE W. LINDBERG, UNITED STATES DISTRICT JUDGE

 John Hicks filed his fourth amended complaint against Resolution Trust Corporation ("RTC"), as receiver for Clyde Federal Savings and Loan Association ("Clyde Federal"), and against several former members of the Clyde Federal board of directors, in both their individual and official capacities. The complaint alleges claims under 42 U.S.C. §§ 1985(3) and 1986 for conspiracy to violate plaintiff's civil rights (Count I), a claim under 12 U.S.C. § 1831j for violation of the Depository Institution Employee Protection Remedy ("whistle blower statute") (Count II), and a pendent state law claim for intentional infliction of emotional distress (Count III).

 In ruling on defendants' motions to dismiss, the court accepts as true all well-pleaded allegations of fact set forth in plaintiff's fourth amended complaint. Plaintiff was fired after seven months of employment at Clyde Federal for informing Federal Home Loan Bank Board ("FHLBB") officials that Clyde Federal was not in compliance with the Federal Community Reinvestment Act ("CRA"), 12 U.S.C. § 2901 et seq. (1977). Plaintiff, a vice-president, was in charge of CRA compliance at Clyde Federal. The CRA requires lending institutions to delineate a CRA community and adopt a CRA statement. The goal of the CRA is to help meet the credit needs of local communities including low and moderate income areas. Pursuant to CRA regulations, institutions must make certain mortgages available to low and moderate income markets and advertise the availability of the mortgages. The FHLBB is empowered to promulgate certain record keeping and mechanical requirements and regulate CRA activities. The FHLBB is also the investigatory branch of the CRA and conducts periodic investigations of institutions to insure CRA compliance.

 On February 16, 1987, plaintiff submitted a written report to the FHLBB examiners indicating that Clyde Federal was not in compliance with the CRA. The report stated that Clyde Federal had made no specific investments in projects related to CRA compliance, that it currently was not providing VA and FHA loans, and that it advertised only in a northwest community local paper and a magazine circulated to mortgage bankers, financial institutions and persons in the real estate business. Several days later, plaintiff met with one of the CRA examiners and discussed these issues of CRA noncompliance. Plaintiff cited Clyde Federal's lack of involvement with community groups in low and moderate income areas and reported that the seminars Clyde Federal offered as community participation were not directed toward the expansion of lending activity as required by the CRA. Defendants subsequently discharged plaintiff for advising the FHLBB of Clyde Federal's failure to comply with the CRA.

 Shortly after his termination in 1987, plaintiff initiated this suit against Clyde Federal and the individual defendants. On March 15, 1990, the court dismissed plaintiff's third amended complaint with prejudice. 736 F. Supp. 812. On May 23, 1990, the court vacated the dismissal and granted plaintiff leave to file a fourth amended complaint. The court limited the complaint to only one claim for violation of the federal whistle blower statute: "Plaintiff's fourth amended complaint shall include . . . only those facts, as indicated in this opinion, relevant to plaintiff's claim concerning his discharge in alleged violation of 12 U.S.C. § 1831j for reporting Clyde's noncompliance with the CRA to the FHLBB." Hicks v. Resolution Trust Corp., 738 F. Supp. 279, 287 (N.D.Ill. 1990). The order also directed plaintiff to file a copy of the fourth amended complaint with the appropriate federal banking agency pursuant to 12 U.S.C. § 1831j(b). Id.

 Several of the individual defendants *fn1" have filed a motion to strike and/or dismiss with prejudice Counts I and III, plaintiff's civil rights and intentional infliction of emotional distress claims. Defendants contend that the court's May 23, 1990 order limited plaintiff's fourth amended complaint to only one claim for violation of the federal whistle blower statute. As plaintiff filed these additional civil rights and intentional infliction of emotional distress claims without seeking leave of court, defendants contend that Counts I and III should be dismissed with prejudice for plaintiff's failure to comply with the May 23, 1990 court order.

 Defendant Sylvia Meidema has filed a motion to strike and dismiss plaintiff's complaint in its entirety. Defendant contends that Counts I and III fail to state claims for violation of plaintiff's civil rights and intentional infliction of emotional distress. Defendant also alleges that Count II should be dismissed against the individual defendants because the whistle blower statute only provides a remedy against a federally insured depository institution and not against its officers, directors or employees.

 Defendant RTC has also filed a motion to dismiss Count II, or in the alternative for summary judgment, contending that plaintiff's conduct in providing false reports to the CRA precludes recovery under the whistle blower statute.

 For the following reasons, Count I of plaintiff's fourth amended complaint is dismissed with prejudice; Count II is dismissed with prejudice as to the individual defendants; summary judgment is granted in favor of defendant RTC and against the plaintiff on Count II; Count III is dismissed without prejudice for lack of pendent jurisdiction.

 A. Failure to Comply with the Court's May 23, 1990 Order

 Defendants argue that Counts I and III should be dismissed for plaintiff's failure to comply with the court's May 23, 1990 order. Federal Rule of Civil Procedure 41(b) provides that the court may dismiss a complaint with prejudice for plaintiff's failure to comply with any court order. Defendants contend that the May 23, 1990 order granted plaintiff permission to file a fourth amended complaint only as to the alleged whistle blower violation. Plaintiff not only filed a claim for violation of the whistle blower statute (Count II), but also filed a claim for violation of plaintiff's civil rights (Count I) and a claim for intentional infliction of emotional distress (Count III). Defendants contend that Counts I and III should be dismissed with prejudice because plaintiff filed these additional claims in contravention of the May 23, 1990 order and without seeking leave of court. Defendants note that plaintiff has had numerous opportunities to properly plead his grievances and should not be allowed to add claims at this late stage of the pleadings.

 While it is true that plaintiff has had many opportunities to perfect his complaint, Rule 15(a) of the Federal Rules of Civil Procedure permits a party to amend his pleading by "leave of court . . . which shall be freely given when justice so requires". Fed.R.Civ.P. 15(a); Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). Since the May 23, 1990 court order granted plaintiff permission to amend his complaint only as to the whistle blower violation, plaintiff should have requested leave of court to file the additional claims contained in Counts I and III. However, plaintiff's failure to do so is not fatal to his complaint since the grant or denial of an opportunity to amend is within the court's discretion. Foman, 371 U.S. at 182.

 The Seventh Circuit has held that a complaint merely serves to put the defendant on notice and is to be freely amended as the case develops, as long as the amendments do not unfairly surprise or prejudice the defendant. Toth v. USX Corp., 883 F.2d 1297 (7th Cir. 1989). The claims in Counts I and III are based upon the same set of facts, as in Count II, plaintiff's claim for violation of the whistle blower statute. To allege a violation of the whistle blower statute, the plaintiff must show that the defendant, a federally insured depository institution, discharged plaintiff for providing information to any Federal banking agency or the Attorney General regarding a possible violation of any law or regulation by the defendant institution, its officers, directors or employees. In Count I, plaintiff alleges that Clyde Federal's CRA violations had the effect of discriminating against low income minorities. Plaintiff alleges that by firing him for disclosing the CRA violations, defendants could continue their practice of "redlining" and not make any mortgages to minorities. By failing to comply with the CRA and by discharging him for disclosing Clyde ...


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