F. Bauer v. FDIC

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 7, 2021 Decided July 5, 2022

No. 20-5314

F. SCOTT BAUER AND JEFFREY T. CLARK,
APPELLEES

v.

FEDERAL DEPOSIT INSURANCE CORPORATION,
APPELLANT

SOUTHERN COMMUNITY FINANCIAL CORPORATION, ET AL.,
APPELLEES

Consolidated with 20-5315, 20-5322

Appeals from the United States District Court
for the District of Columbia
(No. 1:18-cv-03047)

Duncan N. Stevens, Counsel, Federal Deposit Insurance
Corporation, argued the cause for appellant. With him on the
briefs were J. Scott Watson, Senior Counsel, Paul K. Sun, Jr.,
Curtis J. Shipley, and Kelly Margolis Dagger.
 2
Christopher T. Graebe argued the cause and filed the
briefs for appellees F. Scott Bauer and Jeffrey T. Clark.

Adam L. Sorensen argued the cause as amicus curiae in
support of the District Court’s Order. With him on the brief
was Joseph R. Palmore, appointed by the court.

Before: MILLETT and KATSAS, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge MILLETT.

MILLETT, Circuit Judge: In the wake of a proposed
merger, two high-level bank executives, F. Scott Bauer and
Jeffrey T. Clark, were fired because they refused to accept a
reduction in the amount of a payment that had been
contractually provided for them if control of the bank changed
hands. Bauer and Clark filed suit in state court against the bank
that terminated them, as well as the bank with which it had
merged. They alleged that they were legally entitled to the full
change-in-control payments set out in their original
employment agreements and other relief.

The banks turned to the Federal Deposit Insurance
Corporation (“FDIC”) for guidance as to whether any
payments made to Bauer and Clark in the state court litigation
would constitute statutorily restricted “golden parachute
payment[s],” 12 C.F.R. § 359.2, and, if so, whether the FDIC
would grant an exception to the general bar on such payments.
After reviewing the parties’ submissions, the FDIC responded
that any such payments would constitute golden parachutes,
and that it would not grant consent for them to be made.
 3
Bauer and Clark then filed suit in federal district court,
challenging the FDIC’s determination as unlawful under the
Administrative Procedure Act (“APA”), 5 U.S.C. § 706(2).

Over the collective objection of the banks, Bauer, Clark,
and the FDIC, the district court declined to reach the merits,
instead holding that the FDIC lacked authority to render a
golden parachute determination at all because the banks’
application to the FDIC did not identify a specific proposed
payment amount.

We reverse. Nothing in the relevant statute or regulations
requires that the FDIC be presented with a precise dollar figure
before it has the power to determine whether a proposed
payment qualifies as a golden parachute payment. As for the
language in the regulations on which the district court relied,
stating that the application “shall contain * * * [t]he cost of the
proposed payment[,]” that provision imposes a procedural
requirement only on the applicant. 12 C.F.R. § 303.244(c)(4).
It does not constrain the FDIC’s authority to act. For those
reasons, we reverse the district court’s holding that the FDIC
exceeded its authority in issuing its golden parachute
determination, and remand for the district court to address the
merits of Bauer’s and Clark’s APA claims.

I

A

Under the Federal Deposit Insurance Act, the FDIC
regulates the activities of both “insured depository
institution[s],” which are banks and savings associations with
deposits insured by the Corporation, and “institution-affiliated
part[ies],” which include the directors, officers, employees, and
controlling shareholders of insured depository institutions. 12
U.S.C. § 1813(c)(2), (u)(1). The FDIC’s responsibilities
 4
include supervising and examining covered institutions to
ensure financial stability and soundness. See id. §§ 1816–
1818, 1822. If the FDIC finds that a bank is engaging in
“unsafe or unsound” practices, the FDIC may issue a consent
order under which it lays out remedial conditions that must be
met and monitors the bank’s compliance with those conditions.
Id. § 1818(b).

One of the financial practices the FDIC closely
superintends is the doling out of so-called “golden parachute
payment[s].” 12 U.S.C. § 1828(k)(1). These are large
payments promised in advance to executives in the event that
they are fired or the company is acquired. See Wollschlager v.
FDIC, 992 F.3d 574, 578 (6th Cir. 2021). Companies may
promise golden parachute payments to entice sought-after
executives or to ensure that those executives act in the best
interests of the company even when doing so might put them
out of a job (as in the case of a merger or takeover). But making
good on those promised payments may put more financial
stress on an already struggling institution or unjustly reward
those who contributed to the financial woes of the institution.

The Federal Deposit Insurance Act expressly provides that
the FDIC “may prohibit or limit, by regulation or order, any
golden parachute payment[.]” 12 U.S.C. § 1828(k)(1). The
Act’s technical definition of “golden parachute payment” is:

any payment (or any agreement to make any
payment) in the nature of compensation by any
insured depository institution or covered
company for the benefit of any institution-
affiliated party pursuant to an obligation of such
institution or covered company that—
 5
(i) is contingent on the termination of such
party’s affiliation with the institution or
covered company; and

(ii) is received on or after the date on which
* * * the institution’s appropriate
Federal banking agency determines that
the insured depository institution is in a
troubled condition[.]

12 U.S.C. § 1828(k)(4)(A).

The FDIC’s regulatory definition of “golden parachute
payment” largely tracks that of the statute, though it adds that
(1) the payment can be made by the insured depository
institution itself or that institution’s holding company, (2) the
recipient can be either a former or current institution-affiliated
party, (3) the payment can be contingent on, or by its terms
payable on or after, the termination of the party’s affiliation,
and (4) the payment can be received on or after, or be made in
contemplation of, the institution falling into a financially
troubled condition. Compare 12 C.F.R. § 359.1(f), with 12
U.S.C. § 1828(k)(4)(A). The regulations also clarify that, to
qualify as a golden parachute, the payment must be made to a
party whose affiliation with the institution is terminated at a
time when the institution is in a troubled condition. 12 C.F.R.
§ 359.1(f)(1)(iii).

The Act directs the FDIC to “prescribe, by regulation, the
factors to be considered” in prohibiting or limiting golden
parachute payments, adding that those factors “may include[,]”
among other things, “[w]hether there is a reasonable basis to
believe that the institution-affiliated party is substantially
responsible for * * * the troubled condition of the depository
institution[,]” and whether “the payment reasonably reflects
 6
compensation earned over the period of employment[.]” 12
U.S.C. § 1828(k)(2)(B)(iii), (k)(2)(F)(i).

The FDIC’s regulations generally prohibit golden
parachute payments, stating that “[n]o insured depository
institution * * * shall make or agree to make any golden
parachute payment, except as provided in this part.” 12 C.F.R.
§ 359.2. The regulations then identify four narrow exceptions
to that prohibition. See Id. § 359.4(a). One exception is if the
FDIC “determines that such a payment or agreement is
permissible[.]” Id. § 359.4(a)(1). But for that exception to
apply, the applicant seeking FDIC consent must “demonstrate
that it does not possess and is not aware of any information”
indicating “a reasonable basis to believe, at the time such
payment is proposed to be made,” that the anticipated recipient
of the payment “is substantially responsible for * * * the
troubled condition” of the institution. Id. § 359.4(a)(4).

The regulations also provide that, in determining whether
to make an exception, the FDIC “may consider: (1) [w]hether,
and to what degree, the [recipient] was in a position of
managerial or fiduciary responsibility; (2) [t]he length of time
the [recipient] was affiliated with the [financial institution], and
the degree to which the proposed payment represents a
reasonable payment for services rendered over the period of
employment; and (3) [a]ny other factors or circumstances
which would indicate that the proposed payment would be
contrary to the intent” of the statute or regulations. 12 C.F.R.
§ 359.4(b) (emphasis added).

Any entity seeking the FDIC’s consent to a golden
parachute payment must submit an application to the
appropriate FDIC regional director. 12 C.F.R. § 303.244(b).
That application “shall contain[:]”
 7
(1) The reasons why the applicant seeks to
make the payment;
(2) An identification of the institution-affiliated
party who will receive the payment;
(3) A copy of any contract or agreement
regarding the subject matter of the filing;
(4) The cost of the proposed payment and its
impact on the institution’s capital and
earnings;
(5) The reasons why the consent to the payment
should be granted; and
(6) Certification and documentation as to each
of the points cited in § 359.4(a)(4)
[including that the recipient of the payment
is not substantially responsible for the
troubled condition of the institution].
Id. § 303.244(c).

B

1

Bauer and Clark were senior executives at Southern
Community Bank and Trust and the bank’s holding company,
Southern Community Financial Corporation (collectively,
“Southern Community”). Bauer founded the bank and was its
Chief Executive Officer and Chairman of the Board of
Directors. Clark joined the bank in its first year and served in
the roles of President and Chief Commercial Banking Officer.

In 2006 and 2007, Bauer and Clark entered into a series of
employment agreements with Southern Community. Under
the agreements, Southern Community had the right to
 8
terminate Bauer and Clark without cause as long as it provided
60 days’ notice. If they were terminated without cause, Bauer
and Clark would be entitled to their most recent base salary for
the unexpired term of the employment agreement. But if a
change in control of Southern Community occurred during the
term of the employment agreement, such as through a merger,
Bauer and Clark would be entitled to a lump-sum cash payment
equal to three times their annual compensation. The estimated
total amount of these change-in-control payments was
$4,869,087 for Bauer and $2,588,444 for Clark.

The employment agreements specified that they would “be
binding upon * * * any successor” to Southern Community,
and that Southern Community would “require any successor
* * * to expressly assume and agree to perform [the
employment agreements] in the same manner and to the same
extent [Southern Community] would be required to perform if
no such succession had occurred.” Joint Appendix (“J.A.”)
154; accord J.A. 206.

During the Great Recession of 2007–2009, Southern
Community began to experience financial difficulties, and in
2011, it entered into a consent order with the FDIC, giving the
agency supervisory authority over it. As part of the consent
order, Southern Community was deemed to be in a “troubled
condition” under the Federal Deposit Insurance Act and its
implementing regulations.

The consent order required Southern Community to
maintain a certain amount of capital on hand, to prepare a
written plan to improve its financial condition, and to send
regular progress reports to the FDIC and other regulators. It
also required Southern Community’s Board of Directors to
increase its supervision of the bank and hire an independent
 9
third party to review and produce a report on the bank’s
management and practices.

The external reviewer hired by Southern Community
subsequently concluded that deficiencies in Bauer’s and
Clark’s management styles and performance had contributed to
the bank’s financial troubles. The review recommended that
they be assigned to positions of lesser responsibility.

In March 2012, Southern Community entered into a
merger agreement with Capital Bank. One of Capital Bank’s
merger conditions required certain employees, including Bauer
and Clark, to enter into amended employment agreements. The
amended agreements would have substantially reduced the
amount of the change-in-control payments to which Bauer and
Clark were entitled. Bauer and Clark refused to sign the
amended agreements. Southern Community then issued
notices of termination without cause to Bauer and Clark,
effective September 22, 2012. The merger between Southern
Community and Capital Bank closed on October 1, 2012.

2

In November 2014, Bauer and Clark filed suit against
Southern Community and Capital Bank in North Carolina state
court, alleging breach of contract, tortious interference with
contract and prospective economic advantage, and unfair and
deceptive trade practices. Bauer v. Southern Cmty. Fin. Corp.,
No. 14-CVS-7208 (N.C. Super. Ct. Feb. 11, 2016). They
alleged that Southern Community had breached its contractual
obligation to ensure that its successor assume and agree to
perform the terms of their original employment agreements,
including the obligation to provide the full change-in-control
payments. They also asserted that, but for Capital Bank’s
tortious interference in requiring them to sign the amended
employment agreements, they would have been retained as
 10
employees of the new merged entity and continued to receive
compensation and benefits. Bauer and Clark sought judgment
against the banks “in an amount to be determined at trial,”
treble damages under North Carolina’s unfair and deceptive
trade practices law, and attorneys’ fees. J.A. 133.

After the banks’ motion to dismiss was denied, they sought
guidance from the FDIC as to whether the monetary relief
sought by Bauer and Clark in the lawsuit would constitute a
prohibited golden parachute. In September 2016, the banks
submitted a letter to the regional FDIC director with the subject
line, “12 C.F.R. § 303.244 Application as to Golden Parachute
Payments Sought by F. Scott Bauer and Jeffrey T. Clark[.]”
J.A. 90. The letter stated that the banks were “unable to certify
that [Bauer and Clark] had no substantial responsibility for the
Bank’s troubled condition[,]” as required by 12 C.F.R.
§ 359.4(a)(4) for a payment to receive FDIC approval. J.A. 96.
They also asked whether the FDIC would consent to the banks
making such payments even though they were unable to
provide the required certification.

In response, Bauer and Clark filed their own letter with the
FDIC, arguing that the prohibition on golden parachutes was
not implicated in their lawsuit because any relief they could
receive would be paid post-merger by Capital Bank, a non-
troubled financial institution. They asked that the FDIC issue
a determination making clear that the relevant statute and
regulations would “not preclude Capital Bank from settling or
paying a judgment” in the state court action. J.A. 655.

In June 2017, the FDIC issued its decision, concluding that
“[t]he change-in-control payments sought in the [s]tate [c]ourt
[a]ction * * * meet the golden parachute payment definition”
in the FDIC regulations. J.A. 812. The agency reasoned that:
(1) “Bauer and Clark are [institution-affiliated parties] of
 11
[Southern Community]”; (2) “[t]he change-in-control
payments sought * * * arise directly from the [employment
agreements] and under their terms would have been paid to
Bauer and Clark at or following their termination”; and (3)
Southern Community “terminated Bauer[’s] and Clark’s
employment * * * at a time when [it was] in [a] troubled
condition.” J.A. 812. The FDIC determined that not only
would the change-in-control payments sought in Bauer’s and
Clark’s breach-of-contract claim constitute golden parachutes,
so too would any recovery based on Bauer’s and Clark’s tort
claims and any attorneys’ fees. It explained that such relief
would constitute a benefit to Bauer and Clark arising out of the
same set of facts as the contract claims directly seeking change-
in-control payments.

The FDIC rejected Bauer’s and Clark’s argument that the
change-in-control payments would not be golden parachutes
because they would be paid by non-troubled Capital Bank. The
FDIC noted that it “has consistently maintained that golden
parachute payments by a healthy acquirer are subject to the
Golden Parachute Rules to prevent [institution-affiliated
parties] from circumventing the golden parachute regulation as
a result of the timing or the structure of a purchase by a healthy
acquirer.” J.A. 813.

Next, the FDIC said that it would not consent to payment
of the golden parachutes because the banks did not certify that
Bauer and Clark were not substantially responsible for
Southern Community’s troubled condition. The FDIC
explained that this “lack of appropriate certifications
independently warrants denial of the applications[.]” J.A. 813.
The FDIC also determined that, based on the available
information, the banks could not have provided such a
certification because Bauer and Clark were in fact substantially
responsible for Southern Community’s troubled condition.
 12
The agency noted that Bauer’s and Clark’s high-level executive
positions and their “substantial managerial and fiduciary
responsibility” put them “in a position to make decisions and
policies regarding the [b]ank that directly contributed to [the
bank’s] troubled conditions.” J.A. 814. “This factor alone
would [also] independently support denial of the
applications[,]” the FDIC concluded. J.A. 814. Consequently,
the FDIC declared that it “could not concur in the payments to
Bauer and Clark in any amount[,]” J.A. 816, and “denie[d] the
application in its entirety,” J.A. 809.

The state court litigation was then stayed to allow Bauer
and Clark to challenge the FDIC’s golden parachute
determination in federal court.

3

Bauer and Clark brought an APA action in federal district
court, challenging the FDIC’s determination that any recovery
they obtained in the state court litigation would be a prohibited
golden parachute payment. See Bauer v. FDIC, 486 F. Supp.
3d 93, 97 (D.D.C. 2020). They made clear, however, that they
were not challenging the FDIC’s secondary, discretionary
determination that it would not grant permission for the banks
to make an otherwise prohibited payment. The FDIC moved
for judgment on the administrative record, the banks moved for
summary judgment, and Bauer and Clark cross-moved for
summary judgment.

The district court then directed the parties to file
supplemental briefs addressing a matter not raised by any
party: “Whether the FDIC acted inconsistently with 12 C.F.R.
§ 303.244 by issuing a decision about hypothetical damages
payments or settlement payments at issue in the ongoing North
Carolina state court action.” J.A. 9. The FDIC, the banks,
Bauer, and Clark all agreed that the FDIC had acted in
 13
accordance with its regulations in issuing a golden parachute
determination despite the ongoing nature of the state court
action and urged the court to review the merits of the FDIC’s
determination.

The district court disagreed. It held that the FDIC lacked
authority to issue a final decision on the banks’ golden
parachute application because the decision was “based on
hypothetical payments in ongoing litigation.” Bauer, 486 F.
Supp. 3d at 99–100. The court relied on 12 C.F.R. § 303.244,
which states that an application for an FDIC determination
“shall contain[,]” among other things, “[t]he cost of the
proposed payment and its impact on the institution[.]” Id.
§ 303.244(c), (c)(4). The court reasoned that this language
unambiguously requires that the applicant “put forward the
planned, actual amount of the golden parachute[,]” and does
not permit the FDIC “to make a final determination on a
hypothetical payment that might be forthcoming from ongoing
litigation.” Bauer, 486 F. Supp. 3d at 100. The court added
that without a proposed payment amount, “too much [would
be] left unknown”—for example, which claims would be
successful, how much Bauer and Clark would be entitled to in
damages, and who would be responsible for paying the
damages—“for the FDIC to make a proper exercise of its
discretion[.]” Id. at 101 n.6.

The district court clarified that the FDIC is not
“categorically prohibited from reviewing a request under
[Section] 303.244 while underlying litigation is pending.”
Bauer, 486 F. Supp. 3d at 101 n.5. “But such a request would
have to include the specific payment sought in the underlying
litigation.” Id. The court noted that, here, the parties could not
agree on a specific proposed payment, or even a proposed
payment range.
 14
Based on its conclusion that the FDIC had acted outside of
its authority, the district court vacated the FDIC’s final
determination as contrary to law. The court expressly declined
to reach the merits of the FDIC’s decision. Accordingly,
Bauer’s and Clark’s motion for summary judgment was
granted in part and denied in part, and both the FDIC’s motion
for judgment on the administrative record and the banks’
motion for summary judgment were denied.

The FDIC, banks, Bauer, and Clark all appealed. While
continuing to disagree about the merits, they uniformly agree
that the district court was wrong to conclude that the FDIC
exceeded its authority in issuing the golden parachute
determination without knowing the exact amount of the
proposed payment. This court consolidated the three appeals
and appointed an amicus curiae to defend the district court’s
decision.1

II

The district court exercised jurisdiction under 28 U.S.C.
§ 1331. This court has jurisdiction under 28 U.S.C. § 1291.

We review the district court’s adjudication of the parties’
cross-motions for summary judgment de novo. Defenders of
Wildlife v. Zinke, 849 F.3d 1077, 1082 (D.C. Cir. 2017).
Likewise, purely legal questions of statutory and regulatory

1 The court appointed Joseph R. Palmore as amicus curiae to
argue in support of the district court’s decision. He, along with co-
counsel Adam L. Sorensen, have ably discharged that duty, and the
court greatly appreciates their service.
 15
interpretation are reviewed de novo. United States v. Wilson,
290 F.3d 347, 352 (D.C. Cir. 2002).2

III

The FDIC’s golden parachute decision came in two
distinct steps. At Step One, the FDIC determined whether the
proposed payments constitute golden parachutes within the
statutory and regulatory definitions, and so are generally
proscribed. See 12 C.F.R. § 359.2. At Step Two, the FDIC
decided whether to nevertheless make a discretionary
exception under the regulations and permit the payments. See
id. § 359.4(a).3

The district court ruled that the FDIC lacked authority to
act at all on the golden parachute application. That was legal
error with respect to both Steps of the FDIC’s decisional
process.

2 The FDIC contends that its interpretation of the Federal
Deposit Insurance Act warrants Chevron deference. FDIC Opening
Br. 41 n.15 (citing Chevron U.S.A. Inc. v. Natural Res. Def. Council,
467 U.S. 837 (1984)). Amicus counters that an interpretation implicit
in a letter issued by a Deputy Regional Director in the course of an
informal adjudication is not the type of authoritative agency position
entitled to Chevron deference. See Amicus Br. 30–31. We need not
address the applicability of Chevron deference because, employing
the “traditional tools of statutory construction,” the “intent of
Congress” on “the precise question at issue * * * is clear.” 467 U.S.
at 842, 843 n.9.
3 See Bauer and Clark Opening Br. 3–4 (laying out this two-
step framework).
 16
A

1

The Federal Deposit Insurance Act and its implementing
regulations straightforwardly authorize the FDIC, upon
request, to provide its views on whether certain payments
would qualify as golden parachutes. Nothing conditions that
authority on the parties’ identification of a precise dollar
amount for the payment.

The Act gives the FDIC general authority to “prohibit or
limit * * * any golden parachute payment[.]” 12 U.S.C.
§ 1828(k)(1). A necessary predicate to exercising that
authority is determining what counts as a golden parachute
payment under the statute. See id. § 1828(k)(4)(A). Recall that
a “golden parachute payment” is defined as (1) “any payment
(or any agreement to make any payment) in the nature of
compensation[,]” (2) by a depository institution “for the benefit
of any institution-affiliated party[,]” (3) based on an obligation
of the institution that “is contingent on the termination of such
party’s affiliation with the institution[,]” (4) that is “received
on or after the date on which” the institution is determined to
be in a “troubled condition[.]” Id. The statute’s plain text does
not require a predetermined amount of payment.

Neither does determining whether those four statutory
elements are met require having a precise payment amount in
hand. The FDIC, after all, can readily decide whether money
exchanged as a result of a settlement or judgment would
constitute a “payment” (a “direct or indirect transfer of any
funds[,]” 12 U.S.C. § 1828(k)(5)(C)), “in the nature of
compensation[,]” id. § 1828(k)(4)(A), without knowing how
much money would be exchanged. Similarly, the amount of a
proposed payment is completely irrelevant to determining
whether that payment would be made by a depository
 17
institution and “for the benefit” of an institution-affiliated
party. Id. So too with the inquiry into whether the payment
would be contingent on the termination of that party’s
affiliation with the institution. And certainly determining when
the payment would be made—whether before, on, or after the
date when the institution is deemed to be in a “troubled
condition”—does not require knowing how much the payment
would be. Id.

Consistent with the statute, FDIC regulations state that, as
a general matter, no financial institution “shall make or agree
to make any golden parachute payment[.]” 12 C.F.R. § 359.2
(emphasis added). The use of “any” highlights that the
presumptive prohibition applies regardless of the payment
amount.

The regulations also provide that otherwise-prohibited
golden parachute payments can be made if the FDIC permits
them. See 12 C.F.R. § 359.4. Those regulations would be
meaningless unless the FDIC can police the boundaries of what
counts as a golden parachute in the first place. And like the
statutory definition, the regulatory definition of “golden
parachute payment” makes no mention of the amount of
payment, and its criteria do not depend on such a
determination. See 12 C.F.R. § 359.1(f)(1) (“The term golden
parachute payment means any payment (or any agreement to
make any payment) in the nature of compensation * * * for the
benefit of any current or former” institution-affiliated party that
is “contingent on, or by its terms is payable on or after, the
termination of [the recipient’s] primary employment or
affiliation with the institution[,]” if the payment “[i]s received
on or after” the institution is in a troubled condition and the
termination occurred while the institution was in a troubled
condition.).
 18
In this case, the FDIC found at Step One that the critical
elements of the golden parachute definition were met: Bauer
and Clark are former institution-affiliated parties who were
terminated when Southern Community was in a troubled
condition, and they are seeking payments tied to and payable
after the termination of their affiliation with Southern
Community. Having so concluded, the FDIC was able to
determine that a payment from the banks to Bauer and Clark
“in any amount” would constitute a golden parachute. J.A. 816
(emphasis added); cf. Von Rohr v. Reliance Bank, 826 F.3d
1046, 1049 (8th Cir. 2016) (Even though Von Rohr sought a
specific amount in breach-of-contract damages, the FDIC
determined that “any payments being sought by Von Rohr”
from the bank “constitute[d] prohibited golden parachute
payments[.]”) (emphasis added).

The FDIC’s answer would be the same regardless of
whether the litigation resulted in a $1 or $1,000,000 payment
to Bauer and Clark. So for the parties to spend years and
countless resources litigating to a judgment that the FDIC can
readily tell in advance will be a forbidden golden parachute,
whatever the amount, would be a fool’s errand.

2

In concluding that the FDIC lacks authority to opine on
whether the proposed payment would be a golden parachute,
the district court relied principally on 12 C.F.R. § 303.244’s
direction that the application seeking the FDIC’s consent to a
golden parachute payment “shall contain * * * [t]he cost of the
proposed payment[.]” Id. § 303.244(c)(4); see id. § 303.244(c)
(detailing the contents of an “application” for FDIC
consideration). That regulation is doubly inapplicable in that
(1) it governs what information the person seeking the FDIC’s
views must provide, not the actions of the FDIC itself, see id.
 19
§ 303.244(b)–(c), and (2) it applies only to the Step Two
discretionary determination by the FDIC, not the predicate Step
One question of whether the payment constitutes a golden
parachute in the first place.

To be fair to the district court, the banks themselves
labeled their letter a “12 C.F.R. § 303.244 Application” for
FDIC permission to make a Step Two golden parachute
payment. They presumably did so because there is no parallel
regulation providing instructions on how to obtain a Step One
determination. See generally 12 C.F.R. Part 303 (“Filing
Procedures”); see also Oral Arg. Tr. 6:7–15 (“Does the FDIC
have a procedure for parties to come ask the [S]tep [O]ne
question?” “Your Honor, there isn’t a separate procedure.”).

But that does not change the FDIC’s legal authority to
determine what qualifies as a golden parachute as part of its
statutory responsibility to “prohibit or limit * * * any golden
parachute payment[.]” 12 U.S.C. § 1828(k)(1). That authority,
instead, is grounded squarely in the text of the Federal Deposit
Insurance Act and its implementing regulations, which do not
limit the FDIC’s decisions to those payments for which a
precise dollar amount has already been assigned.

3

Taking a different tack than the district court, Amicus
argues that the statutory definition of the word “payment”
forbids the FDIC to address the golden parachute status of
potential monetary relief in litigation while that case is still
pending. Amicus points out that Congress only authorized the
FDIC to prohibit “golden parachute payment[s],” and that
“payment” is defined in the statute as “any direct or indirect
transfer of any funds or any asset[.]” Amicus Br. 23 (emphasis
added) (quoting 12 U.S.C. § 1828(k)(5)(C)). “[U]ncertain
claims in a contested lawsuit are not a ‘payment’ under the
 20
statute[,]” Amicus argues, “because they do not necessarily
involve a ‘transfer’ of funds or assets.” Amicus Br. 23 (citation
omitted). He adds that “[w]hile a settlement or judgment might
entail such a ‘transfer,’ the mere possibility of liability does
not.” Amicus Br. 24.

Perhaps. But the FDIC did not decide that Bauer’s and
Clark’s pending legal claims were golden parachute payments.
Rather, it determined that if those pending legal claims were to
give rise to a monetary payment—whether through a settlement
or judgment— any such payment would be a golden parachute.
Nothing in the statute forbids the FDIC from advising regulated
parties whether a contemplated future payment would be a
golden parachute if and when made. See Tennessee Gas
Pipeline Co. v. Federal Power Comm’n, 606 F.2d 1373, 1380
(D.C. Cir. 1979) (“[A]gencies are generally free to act in
advisory * * * capacities.”).

Notably, the statute and regulations define golden
parachutes in terms of “any payment” or “agreement to make
any payment[.]” 12 U.S.C. § 1828(k)(4)(A) (emphasis added);
accord 12 C.F.R. § 359.1(f)(1). The explicit inclusion of mere
agreements to make payments in the definition reinforces the
FDIC’s authority to identify golden parachutes before any
funds have actually changed hands and before the precise
payment amount is known. In fact, employment agreements
frequently peg payments to the executive’s level of
compensation at the time of termination, which may be
unknown when the FDIC’s approval for the agreement is
sought. See, e.g., Wollschlager, 992 F.3d at 578, 580
(separation payment tied to executive’s “base compensation
through the end of the year” and annual salary); McCarron v.
FDIC, 111 F.3d 1089, 1092 (3d Cir. 1997) (agreement to pay
executive “a lump sum severance payment in an amount equal
to three times his annual salary”).
 21
B

The district court also held that the absence of an identified
payment amount stripped the FDIC of authority to render its
Step Two decision denying discretionary consent for the banks
to make otherwise-prohibited golden parachute payments.
Here too, the district court was mistaken.

While the regulatory provision cited by the district court,
12 C.F.R. § 303.244(c)(4), does govern the Step Two process,
it does not constrain the FDIC’s authority. As noted before,
Section 303.244 only “contains the procedures to file for the
FDIC’s consent when such consent is necessary[.]” Id.
§ 303.244(a) (emphasis added). The rule explains that
“[a]pplicants shall submit a letter application to the appropriate
FDIC regional director[,]” and then lists the items that the
“application” “shall contain[.]” Id. § 303.244(b)–(c)
(emphasis added). One of those is the cost of the proposed
payment. Id. § 303.244(c)(4). The burden to provide that
information, like other required components of the application,
falls on the party seeking the FDIC’s consent. See id.
§ 303.244(c)(1), (5) (requiring application to contain “[t]he
reasons why the applicant seeks to make the payment” and
“[t]he reasons why the consent to the payment should be
granted”).

Beyond that, in analyzing the role of a regulation within
the agency process, we distinguish between “procedural rules
benefitting the agency” and “procedural rules benefitting the
party otherwise left unprotected by agency rules[.]” Lopez v.
Federal Aviation Admin., 318 F.3d 242, 247 (D.C. Cir. 2003).

By its plain terms, Section 303.244 falls in the former
category. It is a regulation “intended primarily to facilitate the
development of relevant information for the Commission’s use
in deciding applications[.]” American Farm Lines v. Black
 22
Ball Freight Serv., 397 U.S. 532, 538 (1970). We will not
invalidate agency action that departs from such agency-
benefitting procedures unless the complaining party has shown
“substantial prejudice[.]” Lopez, 318 F.3d at 247 (citing
American Farm Lines, 397 U.S. at 539). Here, Bauer and Clark
do not claim to have been prejudiced at all by the FDIC’s
failure to strictly enforce Section 303.244’s application
requirements, much less substantially prejudiced.

Amicus argues that the FDIC was not free to disregard a
regulation requiring the collection of information that Congress
and the agency itself have deemed to be critical in evaluating a
golden parachute application at Step Two. See 12 C.F.R.
§ 359.6 (“For filing requirements, consult 12 [C.F.R.] [§]
303.244.”) (emphasis added); 12 C.F.R. § 303.244(c) (“The
application shall contain the * * * cost of the proposed
payment[.]”) (emphasis added).

We disagree. The statute and regulations treat the amount
of the proposed payment as a factor the FDIC may consider,
not an essential predicate to the agency’s ability to act. The
statute, for one, simply directs the agency to “prescribe, by
regulation, the factors to be considered” in making golden
parachute determinations, and then offers some suggestions for
what those factors “may” include. 12 U.S.C. § 1828(k)(2).
One of those potential factors is “the degree to which * * * the
payment reasonably reflects compensation earned over the
period of employment[,]” which is the closest the statute comes
to possibly referencing a payment amount. Id.
§ 1828(k)(2)(F)(i).

Likewise, in its implementing regulations, the FDIC set
out both mandatory and permissive factors to be considered in
deciding whether to allow a golden parachute payment to be
made. See 12 C.F.R. § 359.4. In the mandatory camp is the
 23
requirement that the applicant “shall demonstrate that it does
not possess and is not aware of any information * * * which
would indicate that there is a reasonable basis to believe” that
the institution-affiliated party is “substantially responsible” for
the troubled condition of the institution. Id. § 359.4(a)(4).

In the permissive camp is “the degree to which the
proposed payment represents a reasonable payment for
services rendered over the period of employment[.]” 12 C.F.R.
§ 359.4(b)(2). Like its statutory counterpart, that provision at
most implies that the payment amount is a factor that the FDIC
“may consider” in evaluating a golden parachute application.
Id. § 359.4(b) (emphasis added).

Proof in point of the permissive nature of that criteria is
that the payment amount was entirely extraneous to the FDIC’s
reasons for denying consent in this case. The FDIC made its
decision not to authorize the golden parachute payments to
Bauer and Clark based on the banks’ inability to satisfy a
mandatory factor—namely, their inability to certify that Bauer
and Clark were not substantially responsible for Southern
Community’s troubled condition. Because consent would run
afoul of that mandatory criterion, there was no need for the
FDIC even to address the permissive factors, including the
reasonableness of the proposed payment amount. For that
reason, the FDIC was well within its rights to deny the
application despite the banks’ failure to include “[t]he cost of
the proposed payment” in their application. 12 C.F.R.
§ 303.244(c)(4).

IV

Having concluded that the district court erred in holding
that the FDIC lacked authority to render its golden parachute
determination, we decline to reach the merits of Bauer’s and
Clark’s APA claims, and instead remand for the district court
 24
to do so in the first instance. “[W]e are a court of review, not
of first view[,]” Capitol Servs. Mgmt., Inc. v. Vesta Corp., 933
F.3d 784, 789 (D.C. Cir. 2019) (citation omitted), so where the
merits went unaddressed below, it is “our general practice * * *
to remand to the district court,” Mendoza v. Perez, 754 F.3d
1002, 1020 (D.C. Cir. 2014). We see no reason to depart from
that general practice here.

For all of those reasons, we reverse the district court’s
order vacating the FDIC’s final determination and remand for
the district court to consider Bauer’s and Clark’s claims on the
merits.

So ordered.