Barany v. Buller

Decision Date10 February 1982
Docket NumberNo. 80-1458,80-1458
Citation670 F.2d 726
PartiesGene F. BARANY and Helen L. Elliott, Plaintiffs-Appellants, v. John BULLER, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Richard G. McCracken, Indianapolis, Ind., for plaintiffs-appellants.

Michael A. Kiefer, Garrison & Kiefer, Indianapolis, Ind., for defendants-appellees.

Before CUDAHY, Circuit Judge, FAIRCHILD, Senior Circuit Judge, and TEMPLAR, Senior District Judge. *

CUDAHY, Circuit Judge.

This is an internecine dispute between removed members of the Credit Committee of a federally chartered credit union and those responsible for their removal. Although the factual setting is uncomplicated, 1 this case presents surprisingly complex legal issues concerning the availability of federal relief. Viewing the plaintiffs' action as being in the nature of a quo warranto proceeding to establish their rights as officers under the Federal Credit Union Act, 12 U.S.C. § 1751 et seq., the district court determined that the plaintiffs' cause of action is relegated traditionally to state law. In the absence of an express private right of action of this kind under the Act, the trial court held "that Congress did not intend to create a private right of action for the enforcement of the provisions which the plaintiffs allege were violated." Consequently, the court dismissed this action for failure to state a claim. For the reasons given below, we reverse.


The plaintiffs-appellants, Gene F. Barany and Helen L. Elliott, are members of the Barbers and Beauticians Federal Credit Union ("Credit Union"), which is chartered by the National Credit Union Administration ("NCUA") under the Federal Credit Union Act, 12 U.S.C. § 1751 et seq. ("Act"). Pursuant to 12 U.S.C. § 1761, they were elected to the Credit Union's three-member Credit Committee. 2 The third member of the Credit Committee is defendant-appellant Richard J. Devine, who is also a loan officer and a member of the Board of Directors as well as the Credit Union's Treasurer and its only full-time paid employee. As a loan officer, Devine is authorized to approve loans and lines of credit without the concurrence of the other two Credit Committee members, or any other officer, member or employee of the Credit Union. 12 U.S.C. § 1761c, supra note 2.

At some time in 1979, without disclosing his actions to Barany and Elliott, Devine began approving loans to former members of the Barbers, Beauticians and Allied Industries International Association who still were engaged in either the barber or beauty trades. Upon discovering this practice, Barany and Elliott wrote to Devine and the other defendants (the remaining members of the Credit Union's Board of Directors), notifying them that the Credit Committee no longer would approve such loans because the loan recipients were not within the Credit Union's field of membership. 3 On September 13, 1979, after a specially called Board meeting from which they were excluded, Barany and Elliott received written notification that the Board had removed them from the Credit Committee. Subsequently, the Board appointed defendant Jerry Cloud and an office employee, whose name is not mentioned in the complaint, to the vacancies on the Credit Committee left by the Board's removal of Barany and Elliott. 4

To redress their removal from the Credit Committee, Barany and Elliott brought this action for monetary, declaratory and injunctive relief, contending that their removal by the Board of Directors was unlawful under the Act, which empowers the Supervisory Committee to take such action. 5 In essence, they argued that the removal provisions contained in § 1761d, supra note 5, are exclusive, divesting the Board of any power to remove Credit committee members. 6 The district court never reached the merits, however, because it found that the Act did not provide Barany and Elliott with a federal cause of action to enforce their rights as members of the Credit Committee. 7


As they did in the district court, the parties utilize the four-factor analysis articulated in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), to discern whether there is an implied private right of action of the kind asserted here under the pertinent provisions of the Act. They urge us to do the same. For the reasons given below, applying the Cort analysis, we find that the plaintiffs do not have an implied private right of action under the Act in this case. However, we also conclude that they may bring this action under the federal common law.


The familiar Cort criteria are:

First, is the plaintiff "one of the class for whose especial benefit the statute was enacted," Texas & Pacific R. Co. v. Rigsby, 241 U.S. 33, 39, 36 S.Ct. 482, 484, 60 L.Ed. 874 (1916) (emphasis supplied)-that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? See, e.g., National Railroad Passenger Corp. v. National Ass'n of Railroad Passengers, 414 U.S. 453, 458, 460, 94 S.Ct. 690, 693, 694, 38 L.Ed.2d 646 (1974) (Amtrak ). Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? See, e.g., Amtrak, supra; Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 423, 95 S.Ct. 1733, 1740, 44 L.Ed.2d 263 (1975); Calhoon v. Harvey, 379 U.S. 134, 85 S.Ct. 292, 13 L.Ed.2d 190 (1964). And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law? See Wheeldin v. Wheeler, 373 U.S. 647, 652, 83 S.Ct. 1441, 1445, 10 L.Ed.2d 605 (1963); cf. J. I. Case Co. v. Borak, 377 U.S. 426, 434, 84 S.Ct. 1555, 1560, 12 L.Ed.2d 423 (1964); Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388, 394-395, 91 S.Ct. 1999, 2003-2004, 29 L.Ed.2d 619 (1971); id., at 400, 91 S.Ct. at 2006 (Harlan, J., concurring in judgment).

422 U.S. at 78, 95 S.Ct. at 2088.

More recently, the Court has emphasized that the determinative question in cases involving a claimed private right of action is whether Congress intended to create the particular right of action being asserted and has stated that the resolution of this question is strictly a matter of statutory interpretation. The four Cort factors are merely statutory interpretation aids. E.g., Touche Ross & Co. v. Reddington, 442 U.S. 560, 568, 99 S.Ct. 2479, 2485, 61 L.Ed.2d 82 (1979). Moreover, these factors are not equally weighted. The first two are most important. If they militate against implying the asserted right of action, then the remaining two factors need not be considered. California v. Sierra Club, 451 U.S. 287, 101 S.Ct. 1775, 68 L.Ed.2d 101 (1981); Touche Ross, 442 U.S. at 574-76, 99 S.Ct. at 2488-2489. Finally, in virtually every instance in which an implied private right of action has been found, the statute in question either prohibited certain conduct or created federal rights in favor of private parties. Touche Ross, 442 U.S. at 569, 99 S.Ct. at 2485.

Under this latter rubric, we should affirm the district court's holding that under the Act the plaintiffs do not have a private right of action of the kind asserted here. Even accepting the implicit premise upon which the plaintiffs rely (i.e., that § 1761d confers upon the Supervisory Committee the exclusive power to remove members of the Credit Committee), the statutory provision in question neither explicitly prohibits the conduct of which the plaintiffs complain nor creates federal rights in their favor.

Nor under the first Cort test are the plaintiffs members of the "class for whose especial benefit the statute was enacted." 241 U.S. at 39, 36 S.Ct. at 484 (quoted in Cort, 422 U.S. at 78, 95 S.Ct. at 2088). If it was intended to benefit any identifiable class, § 1761d must have been designed to protect credit union members in their capacity as members. Here, the plaintiffs emphatically assert their rights only as Credit Committee members and not as members of the Credit Union generally, supra note 7. On appeal, they argue that their status places them at the core of the class especially benefitted by § 1761d. However, plaintiffs also are in a separate class-Credit Committee members-whose interests in this case, in which their removal from office is at issue, apparently conflict with the interests of the general membership of the Credit Union. In order words, in situations such as this there are two relevant classes: Credit Union members and Credit Committee members. These two classes overlap only because Credit Committee members also must be members of the Credit Union. However, the interests of these two classes are different and probably tend to conflict. Thus, the especial class of which the plaintiffs are members for purposes of this action is the class of Credit Committee members. This is neither the class, nor the core of the class, for whose especial benefit § 1761d was enacted. And applying the second Cort test, as often happens in cases of this kind, the legislative history is silent regarding Congress' intent to create the asserted private right of action. See Cannon v. University of Chicago, 441 U.S. 677, 694, 99 S.Ct. 1946, 1956, 60 L.Ed.2d 560 (1979). Thus, our examination of the two most important of the Cort factors compels the conclusion that Congress did not intend to create the private remedy asserted here. 8 Consequently, we agree that the district court, following a Cort analysis, correctly concluded that the complaint failed to state a cognizable federal claim based upon an implied statutory right of action.


But our conclusion that Congress did not intend to create a private right of action under § 1761d does not end our inquiry. As discussed more fully below, the legislative history...

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