ALEXANDRIA, Va.—NAFCU and CUNA have each submitted an amicus brief to U.S. Court of Appeals for the Fourth District in support of Navy Federal Credit Union’s appeal of a lower-court decision that determined it did not have diversity jurisdiction to file a federal lawsuit.
The briefs were filed in the case of Navy FCU v. LTD Financial Services et al.
In order to sue in federal court, certain criteria must be met: the plaintiff and defendant either have to have a federal case or controversy, or be citizens of different states. If this criteria is not met, then the lawsuit must be filed in state court.
“The U.S. District Court for the Eastern District of Virginia determined that Navy Federal is not a citizen of Virginia – where it is headquartered – or any other state based on statutory language that says federal credit unions are corporations. This is contrary to how courts have long looked at this issue,” NAFCU said, adding that if this precedent were to stand it could have wide-ranging impact.
CUNA’s View
In CUNA’s brief, the trade group said it supports federal credit unions’ access to federal courts via diversity jurisdiction.
CUNA argued that by foreclosing the ability for federal credit unions to invoke diversity jurisdiction, the court has failed to give effect to congressional intent to treat federal and state credit unions alike in all material respects.
‘Closes the Door’
“The District Court’s decision below closes the federal courthouse door for a significant number of CUNA’s members. It wholly deprives federal credit unions of the ability to bring a diversity action in the first instance, or to remove a case to federal court based on diversity,” the brief reads. “The ruling creates an unwarranted discrepancy between CUNA’s state and federal credit union members… There is no basis in the text or legislative history of the FCUA to believe that Congress intended such disparate treatment of institutions otherwise treated equally in all material respects.”
CUNA’s further argued Congress intended to treat state and federal credit unions equally in all material respects, which is exemplified throughout the Federal Credit Union Act, most notably in provisions that permit and facilitate the ready conversion between federal and state charters after which they can continue to operate in the same manner.
‘Myriad Other Problems’
“Precluding federal credit unions from litigating in federal court under diversity jurisdiction creates myriad other problems. For instance, credit unions, particularly those with limited resources, face the burden of being forced to litigate in different states,” the brief reads. “This results in the need to continually engage local counsel and familiarize themselves with the local rules, practices, and procedures in that particular jurisdiction, which is no small task. By contrast, the federal courts largely have uniform rules of evidence and procedure.”