FCUs Access to Federal Courts Could Be Constrained

An opinion by the U.S. District Court for the District of Maryland stated that federally chartered credit unions cannot gain access to the federal courts by claiming state citizenship.

Pentagon FCU (PenFed) sought to move a civil suit from Maryland state court to federal court in Maryland claiming Virginia citizenship. Federal law states that federal district courts “have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States.” PenFed claimed that a federally chartered credit union should be deemed to be a citizen of the state in which its “principal place of business” is located for diversity purposes.

However, Judge Roger W. Titus disagreed and wrote: “Congress has chosen to confer citizenship status on some federally chartered corporations, but not on federal credit unions. In the absence of congressional action, this Court cannot confer state citizenship on PenFed.” The Judge remanded the case back to the Circuit Court for Montgomery County.

The decision in Northern Virginia Foot & Ankle Associates LLC v. Pentagon Federal Credit Union could have broader implications because it affects federally chartered credit unions as a class of institutions.

Read the decision.