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Tidelands Bancshares, Inc. v. Coffee

United States District Court, D. South Carolina, Charleston Division

October 3, 2014

ROBERT E. COFFEE, Defendant.


DAVID C. NORTON, District Judge.

This matter is before the court on defendant Robert Coffee's ("Coffee") motion to dismiss or, in the alternative, to stay the proceedings. For the reasons set forth below, the court grants Coffee's motion to stay.[1]


Tidelands Bank is a South Carolina chartered bank and a wholly owned subsidiary of Tidelands Bancshares. Compl. ¶¶ 1, 2. Coffee was the president and chief executive officer of Tidelands from 2003 until his termination on April 4, 2011. Pls.' Resp. 1. Coffee filed a complaint against Tidelands in the Charleston County Court of Common Pleas on or around December 29, 2011, and amended his complaint on March 21, 2014. Coffee's amended complaint alleges claims of breach of contract as well as various fraud claims. Pls.' Resp. 3-4.

Coffee's underlying amended state court complaint alleges that on May 1, 2008, he entered into an employment agreement with Tidelands. Am. State Ct. Compl. ¶ 38. The employment agreement provided that:

none of the conditions or events included in the definition of the term "golden parachute payment" that is set forth in Section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 C.F.R. 359.1(f)(1)(ii)] exists or, to the best knowledge of the Employer, is contemplated insofar as the Employer or any affiliates are concerned.

Id. ¶ 64.[2] On or around December 19, 2008, Tidelands Bancshares became a participant in the Department of Treasury's Troubled Assets Relief Program ("TARP") Capital Purchase Program and received funds, pursuant to this program. Compl. ¶ 11. On June 1, 2010, FDIC and the South Carolina Board of Financial Institutions conducted a joint examination of Tidelands. Id . ¶ 42. As a result of that examination, on or around October 10, 2010, "Tidelands was officially designated as being in a troubled condition' as defined by 12 C.F.R. § 303.10(c), Tideland's safety and soundness composite rating was lowered and Tidelands was obligated to enter into a formal supervisory enforcement action." Id . ¶ 15. On April 4, 2011, Tidelands terminated Coffee without cause. Am. State Ct. Compl. ¶ 61. Coffee did not receive ninety days written notice of his termination as required in the employment agreement. Id . ¶ 63. Additionally, Tidelands did not pay Coffee his severance benefits as provided in the employment agreement. Id . ¶¶ 79, 80.

Tidelands asserts payment of severance benefits would constitute a golden parachutes payment and is therefore prohibited. Id . ¶ 92. Coffee claims, among other things, that Tidelands knew or should have known the employment agreement included provisions "that the Federal Deposit Insurance Corporation ("FDIC") would interpret to be within the definition of the term golden parachute payment, ' and failed to disclose such knowledge to [him]." Id . ¶ 65. Had Coffee known of the possibility that the severance provisions did or could constitute golden parachute payments, he contends "he would not have entered into the Employment Agreement as written." Id . ¶ 67.

Tidelands filed a declaratory judgment action in this court on July 3, 2014 to determine whether it correctly interpreted certain provisions of the Federal Deposit Insurance Act in denying Coffee severance under his employment agreement. Compl. ¶ 46. Tidelands asserts that 12 U.S.C. 1828(k), 12 C.F.R. § 359.1(f)(ii), and 12 C.F.R. § 303.10(c) have been "the applicable statute and regulatory provisions governing the definition, regulation and prohibition of "golden parachute payments" since about May 1, 2008. Id . Tidelands argues none of the conditions or events defining golden parachute payments were present at the time Coffee entered into the employment agreement. Id . Rather, it argues such conditions only arose on or after October of 2010, when Tidelands received a "troubled condition" designation, received a low safety and soundness rating, and was subject to a formal supervisory enforcement action. Id . Therefore, Tidelands argues, it did not make any misrepresentations as to whether the severance provisions did or could constitute golden parachute payments in the golden payment clause and was correct in denying Coffee severance upon his termination. Id.

On July 25, 2014, Coffee filed a motion to dismiss Tidelands' federal action or, in the alternative, to stay this case pending resolution of the underlying state court action. Tidelands responded on August 11, 2014. The motion has been fully briefed and a hearing was held on September 15, 2014. The matter is ripe for the court's review.


"A court has the power to stay proceedings, which is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.'" Doe v. Bayer Corp. , 367 F.Supp.2d 904, 914 (M.D. N.C. 2005) (quoting Landis v. N. Am. Co. , 299 U.S. 248, 254 (1936)). In exercising its authority to grant a discretionary stay, the court "must weigh competing interests and maintain an even balance." Landis , 299 U.S. at 254, 255 (citing Kansas City S. Ry. Co. v. United States , 282 U.S. 760, 763 (1931). Furthermore, "[t]he party seeking a stay must justify it by clear and convincing circumstances outweighing potential harm to the party against whom it is operative." Williford v. Armstrong World Indus., Inc. , 715 F.2d 124, 127 (4th Cir. 1983).

"[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Wilton v. Seven Falls Co. , 515 U.S. 277, 282 (1995). When another suit is pending in a state court involving the same parties and providing the same opportunity for relief, a district court has "wide discretion" in deciding whether to stay or dismiss the declaratory ...

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