A panel of federal judges has ruled in favor of the world’s largest credit union in a suit that could have long-ranging impacts for federally chartered institutions.
The U.S. Court of Appeals for the Fourth Circuit this week overturned a lower court’s decision and determined FCUs have diversity jurisdiction to file federal lawsuits. Diversity jurisdiction allows companies and private citizens to access federal courts in order to avoid litigants from differing states having a possible advantage in their home states’ courts. Ordinarily to sue in federal court, both parties must have a federal case or be citizens of different states.
Navy Federal Credit Union had challenged a district court’s ruling that, although the credit union is headquartered in Virginia, it is not a citizen there or in any other state, based on statutory language classifying FCUs as corporations. The National Associaiton of Federally-Insured Credit Unions noted that view is in contrast to the attitude courts have traditionally taken.
Both NAFCU and the Credit Union National Association filed amicus briefs in support of Navy.
Mary McDuffie, president and CEO of Navy Federal, called the ruling a “huge victory” in a statement, adding it “ensures that federal credit unions will have the same access to federal courts that all state-incorporated companies have enjoyed for decades.”
The verdict stems from a case in which Navy allegedly sold certain accounts to a debt-buying firm that then re-sold those accounts to a collections company, in violation of the credit union’s contract with the original buyer.
