Steven Chase v. First Fed. Bank of Kansas City, 932 F.3d 1158

Inter-State Federal Savings and Loan (a federal mutual association) merged into First Federal in 2016; plaintiffs Chase and Penner were Inter-State member‑depositors before the merger.
Plaintiffs alleged Inter-State had approximately $25 million in excess surplus at the time of the merger that should have been distributed to members rather than absorbed by First Federal.
Plaintiffs sued Inter‑State’s former directors (breach of fiduciary duty) and First Federal (unjust enrichment and conversion), and sought to represent a class of pre‑merger members.
Plaintiffs also contended the merger should have been submitted to a vote of Inter‑State members under the charter.
The district court dismissed under Rule 12(b)(6), holding members had no ownership interest in mutual association surplus, so no duty to distribute, no damages from lack of a vote, and no viable unjust‑enrichment or conversion claims.
The Eighth Circuit affirmed, interpreting Inter‑State’s charter and relying on Supreme Court and federal precedent that depositor‑members of mutual institutions lack a transferable ownership interest in surplus.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Inter‑State members had an ownership interest in the $25M surplus	Charter language grants members an interest in surplus; surplus should have been distributed	Members of a mutual association do not have an ownership right in surplus; charter language is permissive	Held: No ownership interest; charter’s “may” is permissive and does not create a property right
Whether directors breached fiduciary duties by approving the merger without distributing surplus	Directors failed to evaluate/distribute surplus and bypassed member approval	No duty to distribute because members held no surplus ownership; therefore no breach causing loss	Held: Dismissed — no fiduciary duty breach proven because no cognizable loss from non‑distribution
Whether members had a charter‑based right to vote on the merger	Charter conferred a voting right that was not honored	Charter did not create a compensable voting right because any alleged harm depended on surplus ownership	Held: Dismissed — no right to vote that produced damages independent of surplus theory
Whether First Federal was liable for unjust enrichment/conversion of the surplus	First Federal was unjustly enriched and converted Inter‑State’s surplus by retaining it post‑merger	Cannot be unjustly enriched or liable for conversion because members had no ownership interest in the surplus	Held: Dismissed — unjust enrichment/conversion claims fail absent member ownership interest

Society for Savings v. Bowers, 349 U.S. 143 (1955) (mutual association surplus is primarily a reserve and members’ expectancy in surplus is of negligible value)
Paulsen v. Commissioner, 469 U.S. 131 (1985) (applies Bowers to mutual associations organized under Charter K and recognizes the insubstantial ownership expectancy of depositor‑members)
York v. Federal Home Loan Bank Bd., 624 F.2d 495 (4th Cir. 1980) (describing depositor‑members’ interest in mutual associations as effectively creditor‑like rather than a transferable equity)
Ordower v. Office of Thrift Supervision, 999 F.2d 1183 (7th Cir. 1993) (depositor’s interest in a mutual is a liquidation preference, not a transferable property right)
Reschini v. First Fed. Sav. & Loan Ass’n of Ind., 46 F.3d 246 (3d Cir. 1995) (noting the insubstantial nature of depositor‑members’ ownership interests)