Skull Valley Band of Goshute Indians of Utah v. U.S. Bank National Association

Background

The Skull Valley Band of Goshute Indians of Utah and sixteen limited liability companies owned solely by the Tribe sued U.S. Bank National Association for breach of contract. The Tribe owned residual securities in trusts for which U.S. Bank served as trustee. The Tribe alleged that U.S. Bank improperly terminated several trusts through self-serving “clean up calls” and kept more than $50 million in excess value.

The Tribe filed the case in New York state court. U.S. Bank removed it to federal court under federal-question jurisdiction, arguing that the trust agreements required application of federal law and that the Government National Mortgage Association, known as Ginnie Mae, had a significant federal interest as guarantor and third-party beneficiary. The plaintiffs moved to remand, meaning they asked the federal court to return the case to state court.

Jurisdictional Analysis

The court explained that a removed case must be remanded if the federal court lacks subject-matter jurisdiction. Federal-question jurisdiction generally requires a claim arising under the Constitution or laws of the United States. A state-law claim can qualify in the limited circumstances where it necessarily raises a disputed and substantial federal issue that a federal court can resolve without upsetting the balance between federal and state authority.

The court held that the trust agreements’ choice-of-law provision did not create federal-question jurisdiction. The provision stated that federal law would govern, but that New York law would apply if no applicable federal law existed. Because the Tribe brought an ordinary state-law contract claim, the court concluded that New York contract law would govern and that the dispute involved the type of contractual analysis state courts regularly conduct.

The court also rejected U.S. Bank’s argument based on Ginnie Mae’s role. If U.S. Bank showed that it complied with the contracts, the case could be resolved without addressing the federal interests asserted by U.S. Bank. Ginnie Mae would not be liable for damages if the Tribe prevailed, its guaranty did not extend to the residual securities at issue, and its status as a third-party beneficiary did not establish a federal rule of decision.

U.S. Bank also raised whether the Tribe was a “Disqualified Organization” under federal tax law and therefore could not hold residual securities. The court noted that the cited statutory provisions did not list an “Indian tribal government” among the disqualified organizations covering the Tribe. The court nevertheless focused its jurisdictional ruling on U.S. Bank’s failure to show that the case necessarily depended on a federal rule of decision.

Ruling

Judge J. Paul Oetken granted the plaintiffs’ motion for remand. The court directed the Clerk to close the motion and remanded the case to New York Supreme Court, New York County, under 28 U.S.C. § 1447(c). The opinion resolved only whether the federal court had jurisdiction; it did not decide whether U.S. Bank breached the contracts.