United States District Court, W.D. Texas, Austin Division
SOUTHWEST MARINE AND GENERAL INSURANCE COMPANY, Plaintiff and Counter Defendant,
NATIONAL CREDIT UNION ADMINISTRATION BOARD, in Its Capacity as Liquidating Agent for Lakeside Federal Credit Union, Defendant and Counter-Plaintiff.
SPARKS SENIOR UNITED STATES DISTRICT JUDGE
REMEMBERED on this day the Court reviewed the file in the
above-styled cause, and specifically Defendant National
Credit Union Administration Board (the Board)'s Motion
for Summary Judgment [#51] and Memorandum of Law in Support
[#52], Plaintiff Southwest Marine and General Insurance
Company (Southwest Marine)'s Response [#55] in
opposition, and the Board's Reply [#58] in support.
Having reviewed the documents, the governing law, and the
file as a whole, the Court now issues the following opinion
case involves a dispute over the purported rescission of a
fidelity bond (the Bond) issued by Southwest Marine. The Bond
was issued in 2014 to Lakeside Federal Credit Union
(Lakeside) and provided Lakeside with coverage for losses
resulting from dishonest acts committed by its employees or
directors. Am. Compl. [#26] at 4. Lakeside paid Southwest
Marine a premium of $10, 248 for this coverage. Id.
April 2015, Lakeside notified Southwest Marine that it had
incurred a loss covered under the Bond in connection with
"suspicious transactions" linked to two of its
employees. Id. Three months later, Lakeside was
placed into liquidation. Id. The Board was appointed
liquidating agent for Lakeside and took over Lakeside's
claim for coverage (the Claim) under the Bond. Id.
In this capacity, the Board submitted a proof of loss in
support of the Claim on September 15, 2015, explaining a
dishonest "check-kiting" scheme by two Lakeside
employees had resulted in losses to Lakeside of $690, 120.88.
attempt to avoid making payment under the bond, Southwest
Marine reviewed the bond application submitted by Lakeside
and concluded Lakeside had made several incorrect statements
of material fact regarding the preventative measures it used
to detect and deter check kiting. Id. at 6-8. On
this basis, Southwest Marine sent a letter to the Board on
October 19, 2015, stating that the Bond had been unilaterally
rescinded due to incorrect statements of material fact in the
application. Id. at 8-9; Southwest Marine also
returned the premium paid by Lakeside and warned that if
Southwest Marine did not receive a response within thirty
days, it would assume that the Board agreed with the decision
to rescind the Bond. Id. The Board deposited the
$10, 248 premium refund check but did not otherwise respond
to the letter until fourteen months later, when the Board
notified Southwest Marine that it did in fact wish
to contest the rescission. Id. at 10-11. The Board
then attempted to return the already-cashed premium refund,
which Southwest Marine declined to accept. Id.
Marine subsequently filed this lawsuit seeking a declaratory
judgment affirming rescission of the Bond, and the Board
counterclaimed for breach of contract based on Southwest
Marine's failure to pay the Claim. Am. Compl. [#26];
Def.'s Am. Answer [#28]. In response to the Board's
counterclaim, Southwest Marine asserted five affirmative
defenses. PL's Am. Answer [#27] at 9-16.
Board now moves for summary judgment on Southwest
Marine's claims and affirmative defenses. Mot. Summ. J.
[#51] at 1-2. First, the Board contends 12 U.S.C. §
1787(b)(13)(D) deprives this Court of jurisdiction over
Southwest Marine's claims and affirmative defenses.
Id. at 1. In the alternative, the Board contends it
is entitled to summary judgment on those claims and
affirmative defense because the Court is statutorily barred
from granting Southwest Marine's requested relief.
Id. at 2. The Court considers each of these
arguments in turn.
Subject Matter Jurisdiction
Board first contends this Court lacks jurisdiction to hear
Southwest Marine's claims or its affirmative defenses.
See Mot. Summ. J. [#51] at 1.
Rule 12(b)(1),  claims may be dismissed for lack of
subject matter jurisdiction when the court lacks the
statutory power to adjudicate the claim. See Fed. R.
Civ. P. 12(b)(1); see also Home Builders Ass'n of
Miss. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir.
1998). Jurisdiction is a threshold issue that must be
resolved before any consideration of the merits of a case.
See Steel Co. v. Citizens for a Better Env't,
523 U.S. 83, 88-89 (1998). The plaintiff bears the burden of
establishing a federal court has jurisdiction to adjudicate
its claims. See, e.g., Family Rehabilitation, Inc. v.
Azar, 886 F.3d 496, 500 (5th Cir. 2018).
12 U.S.C. § 1787(b), one of the Board's primary
powers as liquidating agent is to "collect all
obligations and money due to the credit union" and to
"conserve the assets and property of the credit
union." Id. § 1787(b)(2)(B)(ii), (iv).
Towards this end, § 1787 positions the Board as the
initial arbiter of claims brought against the credit union.
See Id. § 1787(b)(3)(A) (permitting the Board
to "determine claims in accordance with the requirements
of this subsection"). After a party files a claim with
the Board, the Board has 180 days to determine whether to
allow or disallow the claim and to notify the claimant of
this determination; this deadline may be extended by written
agreement between the claimant and the Board. Id.
§ 1787(b)(5)(A)(i)-(ii). A claimant may obtain judicial
review of the Board's determination on a claim if the
claimant files suit within 60 days of either the end of the
180-day period or the date the claimant received notice that
the Board had disallowed its claim, whichever is earlier.
Id. § 1787(b)(6)(A). If a claimant fails to
file suit within this 60-day window, the claim shall be
deemed finally disallowed "and the claimant shall have
no further rights or remedies with respect to such
claim." Id. § 1787(b)(6)(B).
prevent claimants from circumventing the Board and proceeding
directly to the district court, § 1787(b)(13)(D) divests
courts of jurisdiction over: (1)"any claim or action for
payment from ... the assets of any credit union for which the
Board has been appointed liquidating agent"; (2)
"any claim or action seeking a determination of rights
with respect to" such assets; or (3) "any claim
relating to any act or omission of [a] credit union or the
Board as liquidating agent" 12 U.S.C. §
1787(b)(13)(D)(i)-(ii). The only exception to this
jurisdictional bar is where a litigant exhausts her
administrative remedies by submitting the claim or action to
the Board in accordance with the administrative review
process outlined in § 1787(b). See Id. §
1787(b)(13)(D) ("Except as otherwise provided in this
subsection . . . ."); see also FDIC v. Scott,125 F.3d 254, ...