24 F.3d 1127 (9th Cir. 1994), 92-15807, Jesinger v. Nevada Federal Credit Union

Docket Nº:92-15807.
Citation:24 F.3d 1127
Party Name:Jeanette JESINGER, et al., Plaintiffs-Appellants, v. NEVADA FEDERAL CREDIT UNION, a federally-chartered credit union; Robert W. Fleischman, et al., Defendants-Appellees.
Case Date:May 18, 1994
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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24 F.3d 1127 (9th Cir. 1994)

Jeanette JESINGER, et al., Plaintiffs-Appellants,


NEVADA FEDERAL CREDIT UNION, a federally-chartered credit

union; Robert W. Fleischman, et al., Defendants-Appellees.

No. 92-15807.

United States Court of Appeals, Ninth Circuit

May 18, 1994

Argued and Submitted Oct. 7, 1993.

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[Copyrighted Material Omitted]

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Gerald Gillock, Barker, Gillock & Perry, Las Vegas, NV, for plaintiffs-appellants.

Samuel B. Benham, Hunterton & Naylor, Las Vegas, NV, and James P.C. Silvestri, Bongiovi & Silvestri, Las Vegas, NV, for defendants-appellees.

Appeal from the United States District Court for the District of Nevada.

Before: TANG, TROTT, and FERNANDEZ, Circuit Judges.

Opinion by Judge TANG.

TANG, Circuit Judge:

Appellants are former members of the Board of Directors (collectively, the "Board" or "Board members") of Nevada Federal Credit Union ("NFCU"). On February 13, 1990, the Supervisory Committee of NFCU unanimously voted to suspend five of the Board members. 1 Two weeks later, the NFCU membership voted to sustain the Supervisory Committee's action, pursuant to the rules and regulations of the Federal Credit Union Act ("FCUA"), 12 U.S.C. Sec. 1751 et seq.

The Board members filed the instant action for wrongful removal and defamation against NFCU and each of the members of the Supervisory Committee (collectively, the "Supervisory Committee" or "Committee"). The district court granted summary judgment in favor of the Committee, concluding that the Board members did not have a cause of action under either federal statute or common law. The court further found that there was insufficient evidence upon which any trier of fact could find that there was defamation. The Board members appeal both conclusions. We have jurisdiction under 28 U.S.C. Sec. 1291, and affirm.


On January 31, 1990, the Board met at a regular meeting and voted 5-2 not to renew the employment contract of Robert Street, the President and CEO of NFCU for the previous seven years. 2 Because this action had not been previously discussed by the members, the Board decided to reconvene to reconsider their decision in light of legal advice.

The Board held a second meeting on February 2, 1990. Again, the Board voted 5-2 not to renew Mr. Street's employment contract. The Board notified Mr. Street immediately thereafter, and advised him that it no longer had any trust or confidence in him.

The next morning, Ms. Jesinger, the Chairman of the Board, contacted the Chairman of the Supervisory Committee, 3 Robert

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Fleischman, and informed him that the Board decided not to renew Mr. Street's employment contract because he had lost the Board's trust and confidence.

On February 8, 1990, the Supervisory Committee directed a letter to Ms. Jesinger, containing specific questions as to whether Mr. Street's termination was the result of any misconduct that threatened the safety or soundness of NFCU. A response was requested by February 12, 1990, four days later, because of the serious implications of the Board's action.

On February 9, 1990, an examiner for the National Credit Union Association ("NCUA"), Louis S. McCalla, contacted both Mr. Fleischman and Ms. Jesinger regarding the above letter. After speaking to Mr. Fleischman, Mr. McCalla contacted Ms. Jesinger and advised her that if she failed to respond to the Committee's letter by February 12, 1990, Mr. Fleischman intended to take the matter up with NFCU's membership. Ms. Jesinger failed to respond by the deadline, and Mr. Fleischman concluded the Board was ignoring the Supervisory Committee's urgent request for information regarding the Street decision.

Consequently, on February 12, 1990, the Supervisory Committee met to discuss what action, if any, should be taken against the Board for Mr. Street's termination. The Committee also considered previous problems relating to Board decisions. Prior investigation discovered abuses of credit card usage, travel, and compensation policies by the Board members. Indeed, in 1985, the NCUA characterized the rise in operating expenses by the Board as "lavish." The NCUA also called for the immediate return of personal computers purchased by NFCU for members of the Board. One year later, the NCUA again emphasized a reduction in "frill" operating expenses by the Board.

The Supervisory Committee's review of these matters resulted in the Committee's decision to suspend five of the Board members. The Committee then ordered the preparation of formal notices of suspension, which each appellant received a day or two later. On February 13, 1990, Mr. Fleischman announced a special membership meeting to allow the credit union membership to vote on the suspensions.

On February 23, 1990, the Committee formally notified, via hand-delivered letters, the Board members of the specific reasons for their suspensions. 4 These letters were provided to NFCU's membership at the special meeting conducted on February 26, 1990. During that meeting, Mr. Fleischman formally stated the reasons for the suspensions. Each Board member was then given an opportunity to address the membership and challenge the Committee's allegations. The membership voted to remove Ms. Jesinger, Mr. Robb, Mr. Benson, and Mr. Dude. The membership voted to retain Mr. Barton, but he resigned from the Board the following day. The Board members filed the instant action shortly thereafter.


A grant of summary judgment is reviewed de novo. Jones v. Union Pacific R. Co., 968 F.2d 937, 940 (9th Cir.1992). An appellate court's review is governed by the same standard used by trial courts under Federal Rule of Civil Procedure 56(c). Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986). An appellate court must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact, and whether the district court correctly applied the relevant substantive law. F.D.I.C. v. O'Melveny & Meyers, 969 F.2d 744, 747 (9th Cir.1992),

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cert. granted, --- U.S. ----, 114 S.Ct. 543, 126 L.Ed.2d 445 (1993). The court must not weigh the evidence or determine the truth of the matters asserted but only determine whether there is a genuine issue for trial. Id.


I. Do the Board members state a cause of action for their discharge?

The appellants contend that federal common law grants them a cause of action for their discharge and that the Supervisory Committee violated their due process rights "through abuse of the suspension process set forth in the credit union bylaws."


We note at the outset of our inquiry that the Board members fail to contend that the FCUA gives them either an express or an implied right of action for their removal. Rather, they argue that the district court erred in finding no private cause of action under federal common law.

It is well-settled that there is "no federal general common law." Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640, 101 S.Ct. 2061, 2067, 68 L.Ed.2d 500 (1981) (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938)). In some limited areas, however, the Supreme Court has recognized that there is both the need and the authority to formulate "federal common law." See United States v. Standard Oil Co. of California, 332 U.S. 301, 308, 67 S.Ct. 1604, 1608, 91 L.Ed. 2067 (1947). Such instances are both "few and restricted" and fall into essentially two categories: where a federal rule of decision is "necessary to protect uniquely federal interests" and where "Congress has given the courts the power to develop substantive law." Texas Indus., 451 U.S. at 640, 101 S.Ct. at 2067 (citing Wheeldin v. Wheeler, 373 U.S. 647, 651-52, 83 S.Ct. 1441, 1445, 10 L.Ed.2d 605 (1963) and Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 426, 84 S.Ct. 923, 939, 11 L.Ed.2d 804 (1964)); see Mortgages, Inc. v. U.S. Dist. Court for Dist. of Nev., 934 F.2d 209, 213-14 (9th Cir.1991); National Audubon Soc. v. Department of Water, 869 F.2d 1196, 1201 (9th Cir.1988). Because the FCUA does not specifically authorize courts to develop substantive law, see Ridenour v. Andrews Fed. Credit Union, 897 F.2d 715, 722 (4th Cir.1990), we must address whether federal common law is necessary to protect federal interests.

Although this Circuit has yet to rule on this question, in Barany v. Buller, 670 F.2d 726 (7th Cir.1982), the Seventh Circuit held that federal common law remedies could be created under the FCUA. In that case, two former members of the credit union's credit committee were removed from office after reporting improper conduct by another member of the committee. In holding that the remedy of quo warranto was available as a matter of federal common law even though not specifically authorized by statute, the court reasoned that the unique federal interests behind the FCUA necessitated the creation of uniform remedies. 5 Id. at 733.

Barany has, however, been criticized. See Ridenour, 897 F.2d at 721. In Ridenour, the Fourth Circuit held that a member of a federal credit union Board of Directors did not state a cause of action under federal common law for his removal. The court carefully reviewed the statutory structure of the FCUA, as well as recent amendments to the FCUA by the Financial Institutions Reforms, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 1989 U.S.Code Cong. & Admin.News (103 Stat.183). The court observed:

Congress originally provided administrative and judicial remedies for a credit union affiliated party when removed by the national Board, but in no other circumstances. More recently, Congress has amended the statute...

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