Burch v. National Credit Union Administration
2:11-cv-02309
D. Ariz.Mar 6, 2012Background
- In 2004, Burch purchased land in Yuma to develop the Tuscan Ranch subdivision and, in 2006, funded Reflections via funds from Yuma Community Bank and then moved his funds to AEA Federal Credit Union.
- AEA's CLO solicited Burch to move his banking to AEA, promising continued loans, solvent finances, and fair loan management.
- Burch relied on these representations and transferred funds; AEA extended a credit line exceeding $2 million.
- Reflections opened in 2009 with no sales; March 2009 funds were used to convert it into an Assisted Living Facility.
- AE A’s CLO left in December 2009; February 2010, Burch learned a line of credit was mis-stated; AEA denied access in February 2010; Burch filed for bankruptcy.
- NCUA assumed conservatorship of AEA on December 17, 2010; plaintiff filed suit in state court later removed here; lis pendens were recorded in February 2012 and the properties were sold to the NCUA shortly thereafter.
- NCUA moved to dismiss under Rule 12(b)(6); plaintiff asserted three claims: fraudulent misrepresentation, breach of the implied covenant of good faith and fair dealing, and defamation; NCUA counterclaimed for lis pendens relief and treble damages under Arizona law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the fraud and contract claims are barred by the D'Oench doctrine. | Burch asserts unwritten promises induced reliance. | NCUA contends writings and statute bar unwritten promises against the liquidating agent. | Yes; barred by D'Oench and 12 U.S.C. § 1788(a)(3). |
| Whether the defamation claim can proceed against the NCUA. | Defamation by AEA should hold NCUA liable as conservator. | FTCA excludes defamation; NCUA steps into AEA’s shoes but defamation not actionable. | Defamation claim fails; FTCA excludes defamation actions. |
| Whether plaintiff may base claims on a private right of action under 12 U.S.C. § 1757(5)(A)(x). | Loans violated the statute; private right of action should exist. | No private right of action under the Federal Credit Union Act. | No private right of action; claims futile. |
| Whether the court should grant dismissal while allowing counterclaims to proceed. | N/A as to counterclaims. | Dismiss claims, allow counterclaims. | Dismissal granted; only counterclaims remain. |
Key Cases Cited
- Langley v. FDIC, 484 U.S. 86 (U.S. 1987) (D'Oench doctrine and false representations regarding bank assets)
- Brookside Assocs. v. Rifkin, 49 F.3d 490 (9th Cir. 1995) (protects against undisclosed conditions or deceptive documents against the NCUA)
- Jesinger v. Nev. Fed. Credit Union, 24 F.3d 1127 (9th Cir. 1994) (no private action under the Federal Credit Union Act)
- Ridenour v. Andrews Fed. Credit Union, 897 F.2d 715 (4th Cir. 1990) (no private right of action under the FCU Act other than Congress-created exceptions)