Beaman v. Mountain Am. Fed. Credit Union
| Decision Date | 30 April 2020 |
| Docket Number | Case No. 1:19-cv-00053 |
| Citation | 458 F.Supp.3d 1316 |
| Parties | Chas BEAMAN, Plaintiff, v. MOUNTAIN AMERICA FEDERAL CREDIT UNION, Defendant. |
| Court | U.S. District Court — District of Utah |
Jason R. Hull, Trevor C. Lang, Marshall Olson & Hull PC, Salt Lake City, UT, Jeffrey Douglas Kaliel, Sophia Goren Gold, Kaliel PLLC, Washington, DC, Kelly A. Hyman, Michael D. Murphy, Franklin D. Azar & Associates PC, Aurora, CO, Seth W. Schanher, Dyer Garofalo Mann & Schultz, Dayton, OH, for Plaintiff.
Andrew J. Demko, Pro Hac Vice, Stuart M. Richter, Pro Hac Vice, Katten Muchin Rosenman LLP, Los Angeles, CA, Joseph A. Skinner, Scalley Reading Bates Hansen & Rasmussen PC, Salt Lake City, UT, for Defendant.
Plaintiff Mr. Chas Beaman filed a state-law, breach-of-contract claim and proposed class action against Defendant Mountain America Federal Credit Union in this court on May 31, 2019. See Dkt. No. 2 ("Compl."). Defendant is a federally chartered credit union that does business in multiple States. See id. ¶ 8; Dkt. No. 49-2. For the following reasons, the court dismisses this case without prejudice for lack of subject matter jurisdiction.
Plaintiff and the members of the proposed class hold checking accounts with Defendant. See Compl. ¶¶ 28, 50. In his sole claim for relief, Plaintiff alleges that Defendant wrongfully charged him and the members of the proposed class overdraft fees in violation of their contracts and the implied covenant of good faith and fair dealing. See id. ¶¶ 50, 60–72. Plaintiff alleges that he "is an individual and resident of Weber County, Utah," id. ¶ 7, and that Defendant's "principal place of business [is] located in Salt Lake County, Utah," id. ¶ 8. Plaintiff further alleges that "(1) the proposed class [comprises] at least 100 members; (2) proposed class members reside in states outside of Utah; and (3) the aggregate claims of the putative class members exceed $5 million, exclusive of interest and costs." Id. ¶ 9. Plaintiff alleges that this court thus has jurisdiction under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2). See id. Rather than filing an answer, Defendant asked this court to compel arbitration and dismiss the case. See Dkt. No. 11. The court heard argument on this motion on October 15, 2019. See Dkt. No. 42.
The court later requested briefing addressing this court's subject matter jurisdiction. The court first ordered both parties to file briefs addressing whether the court "has subject matter jurisdiction in this case in light of 28 U.S.C. § 1332(d)(4) or, if the court has subject matter jurisdiction, whether it should exercise its jurisdiction in light of § 1332(d)(3)." Dkt. No. 43. Broadly speaking, Sections 1332(d)(3) and 1332(d)(4) place limits on this court's jurisdiction where a significant portion of the class members are citizens of the same State as the defendant and the same State in which the action was originally filed. See 28 U.S.C. §§ 1332(d)(3) & (d)(4). The court next directed Plaintiff to file a brief addressing whether the court has subject matter jurisdiction given Defendant's status as a federal credit union doing business in multiple States. See Dkt. No. 48. Although the caselaw is not uniform, several district courts have dismissed diversity actions against federal credit unions for lack of subject matter jurisdiction, holding that federal credit unions lack the citizenship required to invoke federal jurisdiction under 28 U.S.C. § 1332. Compare Pierson v. Alaska USA Fed. Credit Union , No. 2:19-cv-1685, 2020 WL 747857, at *2 (W.D. Wash. Feb. 14, 2020), and Navy Fed. Credit Union v. LTD Fin. Serv., LP , 368 F. Supp. 3d 889, 898 (E.D. Va. 2019), with Lloyd v. Navy Fed. Credit Union , No. 17-cv-1280, 2019 WL 2269958, at *6 (S.D. Cal. May 28, 2019). The court has carefully considered the parties’ briefs filed in response to these orders.
Federal courts "have limited subject matter jurisdiction and may only hear cases ‘when empowered to do so by the Constitution and by act of Congress.’ " Radil v. Sanborn Western Camps, Inc. , 384 F.3d 1220, 1225 (10th Cir. 2004) (quoting 16 James Wm. Moore, Moore's Federal Practice § 108.04(2) (3d ed. 2003)). It is well settled that "no action of the parties can confer subject-matter jurisdiction upon a federal court": "the consent of the parties is irrelevant, principles of estoppel do not apply, and a party does not waive the requirement by failing to challenge jurisdiction early in the proceedings." Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee , 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982) (internal citations omitted). Nor may subject matter jurisdiction be "expanded by judicial decree." Kokkonen v. Guardian Life Ins. Co. of America , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Regardless of whether the parties contest the issue, a court may "raise lack of subject-matter jurisdiction on its own motion." Ins. Corp. of Ireland , 456 U.S. at 702, 102 S.Ct. 2099 ; see also Fed. R. Civ. P. 12(h)(3). "If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fed. R. Civ. P. 12(h)(3).
Plaintiff alleges that this court has subject matter jurisdiction under 28 U.S.C. § 1332(d)(2) over the state-law claim that he asserts on behalf of himself and the proposed class. See Compl. ¶ 9. This statute confers "original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which (A) any member of a class of plaintiffs is a citizen of a State different from any defendant; (B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or (C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state." While this provision thus requires only minimal diversity, see, e.g. , Standard Fire Ins. Co. v. Knowles , 568 U.S. 588, 592, 133 S.Ct. 1345, 185 L.Ed.2d 439 (2013), it still requires that Defendant be a foreign state or have state or foreign citizenship. After carefully considering the Federal Credit Union Act, see 12 U.S.C. § 1751 et seq. , the relevant caselaw, and Plaintiff's arguments, this court concludes that Defendant, as a federally chartered corporation, is not a citizen of any State, a foreign state, or a citizen or subject of any foreign state. Plaintiff thus may not invoke this court's diversity jurisdiction under Section 1332(d)(2).1
Federally chartered credit unions, like Defendant, are federal corporations. See 12 U.S.C. § 1754 ; Navy Fed. Credit Union , 368 F. Supp. 3d at 893 ; see also Dkt. No. 12 ("Corporate Disclosure"). "Because a federally chartered corporation is incorporated under acts of Congress, rather than under state laws, it generally has national citizenship but no state citizenship." Hayward v. Chase Home Finance, LLC , No. 3:10-cv-2463, 2011 WL 2881298, at *3 (N.D. Tex July 18, 2011) (citing Bankers’ Trust Co. v. Texas & Pacific Ry. Co. , 241 U.S. 295, 309, 36 S.Ct. 569, 60 L.Ed. 1010 (1916) ); see also Navy Federal Credit Union , 368 F. Supp. 3d at 897.
In Bankers’ Trust , for example, the Supreme Court held that a federally chartered interstate railroad was "not a citizen of any state" because "[i]t was incorporated under acts of Congress, not under state laws; and its activities and operations were not to be confined to a single state, but to be carried on, as in fact they are, in different states." Bankers’ Trust , 241 U.S. at 309, 36 S.Ct. 569. The Court further held that the railroad lacked state citizenship because it did not fall "within the clause of the 14th Amendment which declares that native born and naturalized citizens of the United States shall be citizens of the state wherein they reside" and because Congress had not otherwise provided that "it shall be regarded as possessing state citizenship for jurisdictional purposes." Id. at 309–10, 36 S.Ct. 569. There was thus "no ground upon which the company [could] be deemed a citizen of" any State. Id. at 310, 36 S.Ct. 569. And as the Supreme Court more recently reaffirmed, because federally chartered corporations "are not incorporated by ‘any State’ " they do not "fit comfortably within" the statutory framework conferring diversity jurisdiction over claims by or against state or foreign corporations. Wachovia Bank v. Schmidt , 546 U.S. 303, 306, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). As a result, although a federal corporation can of course sue or be sued in federal court on a federal cause of action pursuant to 28 U.S.C. § 1331, it may not sue or be sued in federal court on state-law causes of action pursuant to 28 U.S.C. § 1332 absent additional statutory authorization.
Congress may confer federal jurisdiction over state law claims by or against federal corporations in two ways. First, Congress may expressly assign federally chartered corporations state citizenship for diversity purposes. Congress has, for instance, provided that national banks "shall ... be deemed citizens of the States in which they are respectively located," 28 U.S.C. § 1348, and the Supreme Court has made clear that this statute authorizes diversity jurisdiction over state-law claims by or against national banks. See, e.g. , Wachovia Bank , 546 U.S. at 306, 126 S.Ct. 941 (); Bankers’ Trust , 241 U.S. at 310, 36 S.Ct. 569 (). Congress has enacted similar statutes assigning state citizenship for diversity jurisdiction purposes to farm credit banks, land bank...
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