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Federal Home Loan Bank of Chicago v. Banc of America Funding Corp.

January 18, 2011


The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge


This action, brought to this District Court via a massive Notice of Removal ("Notice"),*fn1 poses once again the recurring question whether a federal home loan bank--in this instance the Federal Home Loan Bank of Chicago ("Bank")--is entitled to remand an action to its state court place of origin because of what Bank characterizes as the absence of federal subject matter jurisdiction:

1. Diversity of citizenship is assertedly lacking.

2. Original federal question jurisdiction is said not to be conferred by the "sue and be sued" clause in Bank's charter, which conforms to the power granted by 12 U.S.C. §1432(a)("Section 1432(a)").

3. Jurisdiction "related to" Title 11 bankruptcy cases (see 28 U.S.C. §1334(b)) is also said to be absent.

Here the caselaw dealing with the jurisdictional questions presents the unusual spectacle of a host of District Court opinions and decisions*fn2 (not precedential, of course, as is always true of District Court rulings*fn3 ) that answer in the negative, arrayed against two members of a three-judge panel in a single Court of Appeals opinion from another circuit who state an affirmative view.

As already indicated, Bank originally filed suit in the Circuit Court of Cook County, asserting only state law claims under the Illinois Securities Law and the common law of negligent misrepresentation. Despite the absence from the Complaint of any federally grounded theories of recovery, defendants timely filed the Notice. Since then the parties, ably represented on both sides of the "v." sign, have tendered extensive written submissions advancing their respective positions. And with defense counsel now having provided their final scheduled supplemental submission (cited "D. Mem. --"), the issues are sufficiently well focused so that no further response from Bank's counsel is called for.

Although defendants display some imagination in speaking to the issue of diversity vel non, not much time or space is needed to dispatch that claim. Bankers Trust Co. v. Tex. & Pac. Ry.

Co., 241 U.S. 295, 309-10 (1916), most recently reconfirmed by our Court of Appeals in Hukic v. Aurora Loan Servs., 588 F.3d 420, 428 (7th Cir. 2009), teaches "that a corporation chartered pursuant to an Act of Congress with activities in different states...was not a citizen of any state for diversity jurisdiction purposes" (id.). And Bank's extensive outside-of-Illinois business activities in Wisconsin alone, as well as its other highly material nonlocalized activities set out at pages 6 to 12 of its most recent memorandum (part of Dkt. No. 148), take it well out of the limited exception recognized in some cases for "localized" federally chartered corporations. Nor do the arguments at D. Mem. 9-15, though advanced vociferously, call for this Court to repudiate Hukic's continued adherence to Bankers Trust.

As for the question whether the "sue and be sued" language in Bank's charter brings it within the scope of Am. Nat'l Red Cross v. S.G., 505 U.S. 247, 255-57 (1992), it must be confessed that this Court's initial reaction was that the results uniformly reached in the host of District Court decisions referred to in the first paragraph of this opinion were counterintuitive. Here is the excerpt from Section 1432(a) that is echoed in the corporate charter, which gives Bank the power: to sue and be sued, to complain, and to defend, in any court of competent jurisdiction, State or Federal.

This Court frequently employs the "court of competent jurisdiction" locution: Whenever it dismisses a case for lack of subject matter jurisdiction, it regularly qualifies the dismissal by stating that it is "without prejudice to the possible reassertion of plaintiff's claim in a state court of competent jurisdiction."*fn4 And that customary coupling of "competent jurisdiction" with "state court" doubtless accounts for this Court's initial gestalt reaction discussed in the preceding paragraph of the text here.

But Section 1432(a)'s congressional definition of federal home loan bank powers did not, as it well could have, validate the argument now advanced by defendants by stating in unambiguous fashion: to sue and be sued, to complain, and to defend in any Federal court or in any State court of competent jurisdiction.

And Congress' failure to have conferred federal question jurisdiction, as explained in Red Cross, beyond cavil in that fashion surely validates the numerous District Court efforts to construe the language that was used instead.

This Court's examination of all the cases has found persuasive the many District Court decisions that explain that courts must look beyond the words of Section 1432(a) for a source of federal subject matter jurisdiction. It has become convinced that Bank has the better of the argument and that the single two-judge majority opinion in Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Raines, 534 F.3d 779, 784-88 (D.C. Cir. 2008) does not carry ...

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