Municipal Credit Union v. CUMIS Insurance Society, Inc.

Background

Municipal Credit Union and the National Credit Union Administration Board, acting as the credit union’s conservator, sued CUMIS Insurance Society, Inc. in Wisconsin state court. The claims concerned insurance coverage for losses allegedly resulting from wrongdoing by certain former officers and employees. The complaint asserted claims for a declaration of CUMIS’s coverage obligations, anticipatory breach of contract, breach of contract, and breach of the implied covenant of good faith and fair dealing.

CUMIS removed the case to the Western District of Wisconsin. It then moved under 28 U.S.C. § 1404(a) to transfer the case to the Southern District of New York. The plaintiffs moved to remand, meaning they asked the federal court to return the case to state court.

Jurisdiction and Remand

The court held that it had subject-matter jurisdiction under 12 U.S.C. § 1789(a)(2). That statute provides federal jurisdiction over civil suits to which the National Credit Union Administration Board is a party, without regard to the amount in controversy. The court rejected the plaintiffs’ argument that only the Board could remove an action under that statute. It concluded that the statute did not prohibit another defendant from removing a case involving the Board.

The court also noted that the statute contains an exception for suits involving the Board as a liquidating agent of a state-chartered credit union when the suit concerns only rights or obligations under state law. The court found that exception inapplicable because the Board was acting as conservator, not as a liquidating agent. The court therefore denied the plaintiffs’ motion to remand.

Transfer

The court considered whether the Western District of Wisconsin was a proper venue, whether the Southern District of New York was a proper venue, and whether transfer would serve the convenience of the parties and witnesses and the interests of justice. The plaintiffs did not dispute that venue was proper in both districts.

The court gave less weight to the plaintiffs’ choice of Wisconsin because Wisconsin was neither the plaintiffs’ home forum nor the location of the key events. The court identified the alleged dishonest acts by the credit union’s former employees and officers, and an investigation related to the denial of the insurance claims, as central factual issues occurring outside Wisconsin. It also found that the Southern District of New York would be more convenient for many witnesses and could compel the appearances of some material witnesses who were within that court’s subpoena power.

The court recognized that the Wisconsin court could likely provide a faster trial. It nevertheless concluded that most other interests-of-justice factors favored transfer. Those factors included the possibility that additional parties could be joined in New York, the likelihood that New York law would apply to at least some claims, the Southern District of New York’s greater familiarity with New York law, and New York’s stronger connection to the dispute.

Judge William M. Conley granted CUMIS’s motion to transfer and directed the clerk to transfer the case to the Southern District of New York. The order did not decide whether the insurance claims were covered or whether either side would prevail on the underlying contract and bad-faith claims.

Order