Court rules FCUs can access federal courts

August 20, 2020

Credit unions saw a victory in court Thursday as the U.S Court of Appeals for the Fourth District ruled in favor of Navy FCU in Navy FCU v. LTD Financial Services. CUNA filed a brief in support of Navy FCU in the case, which involves access to federal courts via diversity jurisdiction.

“The 4th Circuit’s ruling is a great step forward for federal credit unions in their mission to reasonably serve their members, better aligning federal and state-chartered credit unions as Congress intended,” said CUNA President/CEO Jim Nussle. 

Diversity jurisdiction is one of two methods a federal court can have jurisdiction. A previous court decision found that a section of the U.S. Code on diversity jurisdiction does not apply to federally chartered credit unions.

"Today's ruling in the 4th Circuit is a huge victory for Navy Federal and its members, and ensures that federal credit unions will have the same access to federal courts that all state-incorporated companies have enjoyed for decades," said Mary McDuffie, president/CEO of Navy FCU. "Special thanks to our partners at the Credit Union National Association and National Association of Federally-Insured Credit Unions for their support in this case."

Federally chartered credit unions may now bring or defend themselves in federal court where diversity exists based solely on the credit union’s principal place of business.

CUNA’s brief argued that, by foreclosing the ability for federal credit unions to invoke diversity jurisdiction, the court has failed to give effect to Congressional intent to treat federal and state credit unions alike in all material respects.

The court held that the diversity statute applies if a corporation (in this case, a credit union) is federally chartered.