Credit Union Group Ent., LLC v. Kansas Dept. of Credit

• Decision Date: 27 September 2006
• Docket Number: No. 06-4069-SAC.,06-4069-SAC.
• Citation: 457 F.Supp.2d 1235
• Parties: CREDIT UNION GROUP ENTERPRISES LLC, Plaintiff, v. KANSAS DEPARTMENT OF CREDIT UNIONS, and National Credit Union Administration, Defendants.
• Court: U.S. District Court — District of Kansas

457 F.Supp.2d 1235

CREDIT UNION GROUP ENTERPRISES LLC, Plaintiff, v. KANSAS DEPARTMENT OF CREDIT UNIONS, and National Credit Union Administration, Defendants.

No. 06-4069-SAC.

United States District Court, D. Kansas.

September 27, 2006.

COPYRIGHT MATERIAL OMITTED

Christopher F. Burger, Jason B. Long, Stevens & Brand, L.L.P., Lawrence, KS, for Plaintiff.

Derenda J. Mitchell, Office of Attorney General, Topeka, KS, Brian T. Goldstein, Michael E. Waldeck, Waldeck, Matteuzzi & Sloan, P.C., Leawood, KS, Leon G. Kusnetzky, Leon G. Kusnetzky, P.C., Kansas City, MO, for Defendants.

MEMORANDUM AND ORDER

CROW, Senior District Judge.

The defendant National Credit Union Administration ("NCUA") timely removed this action by the filing of its notice of removal. The plaintiff Credit Union Group Enterprise LLC ("CUGE") initiated this action in the District Court of Douglas County, Kansas, with the filing of a petition for judicial review of the agency actions taken by the Kansas Department of Credit Unions ("KDCU") and the NCUA. According to the petition, the KDCU placed the Credit Union Group, Inc. ("CUG") into a conservatorship and appointed itself as the conservator for the CUG and appointed the NCUA as its agent for the conservatorship. The petition alleges that the CUGE had three service contracts with the CUG which the NCUA repudiated as the conservator by its authority under 12 U.S.C. § 1787(c)(1). The CUGE claims that the NCUA in the exercise of this authority has failed to pay the CUGE the compensatory damages due under 12 U.S.C. § 1787(c)(3) and under the plain terms of the service contracts. The CUGE claims that the defendants "have erroneously interpreted or applied the law" in not paying the compensatory damages, that the defendants' refusal to pay is not supported by substantial evidence, and that their failure to pay "is also unreasonable, arbitrary and capricious." (Dk.1-2, p. 5).

The NCUA filed its notice of removal asserting federal question jurisdiction in that the plaintiffs claims require the interpretation and application of federal law, 12 U.S.C. § 1787(c). Specifically, the plaintiff is seeking compensatory damages under this federal statute, and the NCUA disputes that the plaintiffs claimed damages are "actual direct compensatory damages" recoverable under 12 U.S.C. § 1787(c)(3)(A)(i). The NCUA's notice of removal further asserts federal question jurisdiction by reason of 12 U.S.C. § 1789(a)(2), which provides that "[a]ll suits of a civil nature at common law or in equity" in which it is a party "shall be deemed to arise under the laws of the United States, and the United States district courts shall have original jurisdiction." (Dks.1-1, pp. 2-3).

MOTION TO REMAND (Dk.4)

Arguments

The plaintiff CUGE has filed a motion to remand (Dk.4) for lack of subject matter jurisdiction. The plaintiff does not challenge the notice of removal as procedurally defective.¹ The plaintiff describes its petition as seeking only judicial review under the Kansas Judicial Review Act ("KJRA"), K.S.A. §§ 77-601 et seq., which limits the state court's jurisdiction to an appellate review of the state agency record, see K.S.A. 77-618. The plaintiff contends this appeal from a state administrative agency is not even a civil action under 28 U.S.C. §§ 1331 or 1332. The plaintiff concedes the interpretation of federal law is an element of the case, but asserts its relief is confined to the KJRA, and disaffirms bringing any claims under federal law. Finally, the plaintiff refutes the application of the jurisdictional provision of 12 U.S.C. § 1789(a)(2), arguing that it covers only the NCUA Board and that the suit here names the NCUA and not the Board which is a separate and distinct body pursuant to 12 U.S.C. § 1752(4).

In response, the defendant NCUA asserts federal question jurisdiction and federal statutory jurisdiction. First, the plaintiffs claim is based upon the NCUA's exercise of statutory authority as a conservator of a federally-insured credit union to "repudiate any contract" to which the credit union is a party upon the conservator's determination that the performance of the contract would be "burdensome" and its repudiation would "promote the orderly administration of the credit union's affairs." 12 U.S.C. § 1787(c)(1). Second, the plaintiff claims as damages those allowed by federal statute which limits the conservator's liability for the repudiation of a contract "to actual direct compensatory damages." 12 U.S.C. § 1787(c)(3). Finally, the NCUA claims direct federal court jurisdiction based on the terms of 12 U.S.C. § 1789(a)(2) and argues the statute empowers the NCUA as a federal agency to remove state court cases whether or not the Board itself is a named party.

Removal Jurisdiction

"It is well-established that statutes conferring jurisdiction upon the federal courts, and particularly removal statutes, are to be narrowly construed in light of our constitutional role as limited tribunals." Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1094-95 (10th Cir.2005) (citations omitted). The removing defendant carries the burden of demonstrating that removal was proper and that the federal court has original jurisdiction. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936). It is well-settled that the presumption is "against removal jurisdiction." Martin v. Franklin Capital Corp., 251 F.3d 1284, 1289 (10th Cir.2001) (citation omitted). Doubtful cases must be resolved in favor of remand. Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.), cert. denied, 516 U.S. 863, 116 S.Ct. 174, 133 L.Ed.2d 114 (1995).

A defendant may remove to federal court "any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties, or laws of the United States." 28 U.S.C. § 1441(b). Federal district courts have "original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States." 28 U.S.C. § 1331. "`A case arises under federal law if its "well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of law."'" Nicodemus v. Union Pacific Corp., 440 F.3d 1227, 1232 (10th Cir. 2006) (quoting Morris v. City of Hobart, 39 F.3d 1105, 1111 (10th Cir.1994) (quoting in turn Franchise Tax Board v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)), cert. denied, 514 U.S. 1109, 115 S.Ct. 1960, 131 L.Ed.2d 852 (1995)). To insure that the plaintiff remains the master of its claim, the well-pleaded complaint requires the federal question to appear on the face of the complaint. Nicodemus, 440 F.3d at 1232. And even when apparent, the federal question must be substantial as to deserve a resolution in federal court, and the exercise of federal jurisdiction must be "consistent with congressional judgment about the sound division of labor between state and federal courts." Id.

Analysis

The plaintiff claims the NCUA as the conservator and the KDCU as the agency violated federal law, 12 U.S.C. § 1787(c), in repudiating the CUG's contracts with the plaintiff without acknowledging and paying the plaintiffs actual direct compensatory damages. There is no question that the plaintiff bases its claim for relief exclusively on the rights and remedies created under this federal statute. The plaintiff, however, has framed its suit not as a claim of relief independent of the state administrative agency proceedings but as a suit seeking only judicial review of what it describes as a state agency's determination that the plaintiff suffered no compensatory damages from the conservator's repudiation of the contracts. The plaintiff attributes this determination to the KDUC as a state agency who appointed itself as the conservator of the CUG and who also appointed as its agent in this role, the NCUA, who exercised its federal statutory authority as conservator. The plaintiff correctly observes that federal courts are generally without jurisdiction to review administrative decisions of state agencies. See Wilder v. Oklahoma Dept. of Human Services, 149 F.3d 1192, 1998 WL 255048, *1 (10th Cir.1998) (Table).

With the burden of proving removal jurisdiction on its shoulders, the NCUA does not challenge the plaintiffs self-characterization of its suit as exclusively seeking judicial review or the general rule foreclosing federal judicial review of state administrative agency action. The NCUA, however, does contend these circumstances are not relevant, for when the NCUA is a party to any civil suit then a federal district court has original jurisdiction pursuant to 12 U.S.C. § 1789(a)(2).² The plaintiff unpersuasively argues that a petition for judicial review does not qualify as either an "action" under § 1331 or an "action, suit or proceeding" under § 1789(a)(2).³ See High Country Citizens Alliance v. Clarke, 454 F.3d 1177, 1198 (10th Cir.2006) ("`Section 1331 confers federal question jurisdiction "on federal courts to review agency action", regardless of whether the APA of its own force may serve as a jurisdictional predicate.' Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977)."). By its express terms, § 1789(a)(2) confers original jurisdiction whenever the NCUA Board is a party to a civil suit and, if applicable here, would provide jurisdiction.

The plaintiff argues that § 1789(a)(2) should be read narrowly as applying only when the "Board" is specifically named as a party and not when just the agency, the "NCUA," is named, as in this case. The plaintiff rests its argument on the simple proposition that the definitions used in the Federal Credit Union Act, distinguish between "Administration" as the National Credit Union Administration and "Board" as the National Credit Union Administration Board. 12 U.S.C....