Navy Federal Credit Union v. LTD Financial Services, LP
972 F.3d 344
| 4th Cir. | 2020Background
- Navy Federal Credit Union is a federally chartered, not-for-profit credit union whose corporate headquarters (nerve center) is in Vienna, Virginia.
- Navy Federal sued several defendants on state-law theories in federal court and invoked diversity jurisdiction; defendants are citizens of Delaware, Florida, New York, and Texas.
- The district court dismissed for lack of subject-matter jurisdiction, reasoning 28 U.S.C. § 1332(c)(1) applies only to entities incorporated under state or foreign law because the conjunctive “and” requires both clauses to be satisfied.
- Navy Federal appealed, arguing (1) it is a “corporation” under the Federal Credit Union Act (FCUA), (2) § 1332(c)(1)’s two clauses are independent and the conjunctive “and” means “in addition to,” so a federally chartered corporation can be a citizen of the state of its principal place of business, and (3) Bankers’ Trust does not foreclose that statutory construction.
- The Fourth Circuit held Navy Federal is a corporation under the FCUA and that § 1332(c)(1) confers citizenship based on principal place of business independently of a state-of-incorporation; the court reversed the dismissal and found Navy Federal a citizen of Virginia.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Navy Federal a “corporation” for § 1332(c)(1)? | FCUA expressly vests an approved federal credit union with corporate status and powers; it is a body corporate. | FCUA also uses “association,” suggesting an unincorporated entity whose citizenship would be that of its members. | Navy Federal is a corporation under the FCUA; the statutory text and context treat approved credit unions as corporations. |
| Does § 1332(c)(1) apply to federally chartered corporations (how to interpret the conjunctive “and”)? | “And” means “in addition to”; the two clauses are independent so principal place of business confers citizenship even if there is no state of incorporation. | “And” is conjunctive such that both clauses must be satisfied; a null state-of-incorporation clause prevents application of the principal-place clause, leaving federal corporations stateless. | The court adopts the additive reading: the clauses are independent and “and” means “in addition to,” so § 1332(c)(1) makes a federal corporation a citizen of its principal place of business. |
| Does Bankers’ Trust (241 U.S. 295) preclude applying § 1332(c)(1) to federal corporations? | Bankers’ Trust asked whether common law, the Constitution, or statutes granted citizenship; Congress later enacted § 1332(c)(1), which supplies a statutory basis. | Bankers’ Trust held a federally chartered corporation was not a citizen, implying § 1332(c)(1) should not reach federal corporations. | Bankers’ Trust is consistent with the analytical framework but does not control because Congress later enacted § 1332(c)(1), which now provides the statutory basis for corporate citizenship. |
| Do canons (surplusage, expressio unius) or specific statutes for other federal entities defeat the reading? | Specific statutes for some federal entities do not displace the general rule; Congress knows how to limit citizenship when intended. | Special statutes and other entity-specific rules imply § 1332(c)(1) was not meant to apply to federally chartered corporations. | Canons do not overcome § 1332(c)(1)’s plain text; specific statutes govern the entities they address but do not render § 1332(c)(1) inapplicable generally. |
Key Cases Cited
- Bankers’ Trust Co. v. Texas & Pacific Ry. Co., 241 U.S. 295 (1916) (held a federally chartered corporation was not a citizen absent constitutional, common-law, or statutory basis)
- Wachovia Bank v. Schmidt, 546 U.S. 303 (2006) (discusses corporate citizenship rules and limits of § 1332(c)(1) analysis)
- Athena Automotive, Inc. v. DiGregorio, 166 F.3d 288 (4th Cir. 1999) (interpreting § 1332(c)(1) to permit citizenship based solely on incorporation when no principal place of business exists)
- Hertz Corp. v. Friend, 559 U.S. 77 (2010) (defines a corporation’s principal place of business as its "nerve center")
- Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (1989) (stateless parties can defeat diversity jurisdiction)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (the specific governs the general; specific statutory provisions control when applicable)
- OneWest Bank, N.A. v. Melina, 827 F.3d 214 (2d Cir. 2016) (illustrates entity-specific citizenship rules can coexist with § 1332(c)(1))