United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
A. Guzmán United States District Judge.
reasons stated below, this case is dismissed without
prejudice for lack of subject matter jurisdiction. Civil case
Airlines Federal Credit Union (“AAFCU”) is a
federally-chartered credit union seeking to invoke this
Court's diversity jurisdiction in its case against Shaun
Eck and Merrill Lynch, Pierce, Fenner & Smith,
Incorporated, which alleges state-law claims for breach of
contract, misappropriation of trade secrets, unjust
enrichment, tortious interference with business relationships
and existing contracts, and conversion. “For a case to
be within the diversity jurisdiction of the federal courts,
diversity of citizenship must be ‘complete, '
meaning that no plaintiff may be a citizen of the same state
as any defendant.” Snyder v. Wal-Mart Stores,
Inc., No. 18 C 583, 2018 WL 1586246, at *5 (N.D. Ill.
Apr. 2, 2018) (internal quotation marks and citation
omitted). In its complaint, AAFCU alleges that it is a
citizen of Texas, and because Defendants are citizens of
Illinois, New York, and Delaware, complete diversity exists.
(Pl.'s Br. Supp. Jurisdiction, Dkt. # 27, at 5-6.)
Supreme Court held in Bankers' Trust Co. v. Texas
& Pacific Railway, Co., 241 U.S. 295, 309-10 (1916),
that a “corporation chartered pursuant to an Act of
Congress with activities in different states . . . [is] not a
citizen of any state for diversity jurisdiction
purposes.” Fed. Home Loan Bank of Chi. v. Banc of
Am. Funding Corp., 760 F.Supp.2d 807, 808-09 (N.D. Ill.
2011). Applying Bankers' Trust to the instant
case, diversity jurisdiction is lacking as Plaintiff would
not be considered a citizen of any state, and the Court would
therefore be required to dismiss the case without prejudice
for lack of subject matter jurisdiction. Additional analysis,
however, is required for the reasons explained below.
Congress eventually enacted a provision declaring that
federally-chartered savings associations
are considered citizens for diversity jurisdiction purposes
“only of the State in which such savings association
has its home office, ” 12 U.S.C. § 1464(x),
has not spoken on the citizenship of a federally-chartered
credit union. Following in line with the rule articulated in
Bankers' Trust, certain courts have concluded
that “federal credit unions are not considered to be a
citizen of any particular state for the purpose of
establishing diversity of citizenship.” Parks
Heritage Fed. Credit Union v. Fiserv Sols., Inc., No.
16-CV-7734 (KBF), 2017 WL 74280, at *4 (S.D.N.Y. Jan. 4,
2017) (citation and internal quotation marks omitted).
Nevertheless, many courts recognize a limited exception to
the general rule, which has become known as the
“localization doctrine.” Arlington Cmty. Fed.
Credit Union v. Berkley Reg'l Ins. Co., 57 F.Supp.3d
589, 593 (E.D. Va. 2014) (noting that ”[i]n 1956, an
Oregon district court . . . judicially created what is now
generally known as the ‘localization doctrine, '
extending diversity jurisdiction to federally chartered
corporations by deeming such corporations citizens of states
where their business was localized.”). “[T]he
Third Circuit became the first Court of Appeals to endorse
the localization doctrine in Feuchtwanger Corp. v. Lake
Hiawatha Fed. Credit Union, 272 F.2d 453 (3d Cir.
the Seventh Circuit has not spoken on the citizenship of
federally-chartered credit unions, it has acknowledged that
with respect to federally-chartered corporations,
“courts sometimes recognized an exception [to the rule
established in Bankers' Trust] if activities
were localized in one state.” Hukic v. Aurora Loan
Servs., 588 F.3d 420, 428 (7th Cir. 2009); see also
Fed. Home Loan Bank, 760 F.Supp.2d at 808-09 (rejecting
argument that Bankers' Trust rule does not apply
to a federal home loan bank, and with respect to localization
doctrine, concluding that the “Bank's extensive
outside-of-Illinois business activities in Wisconsin alone,
as well as its other highly material nonlocalized activities
. . . take it well out of the limited exception recognized in
some cases for ‘localized' federally chartered
corporations”). In Hukic, the Seventh Circuit
neither adopted nor expressed any opinion on the viability of
the localization doctrine; nevertheless, the Court will, in
the instant case, assess whether AAFCU's activities are
localized in Texas, both because the localization doctrine
appears to be widely accepted and, for the reasons discussed
below, the Court finds that the exception does not apply
based on the current record, so its application does not
alter the result of the citizenship analysis.
filings supplementing its jurisdictional allegations, AAFCU
asserts that its activities are localized in Texas, and thus
it should be found to be a citizen of Texas for diversity
jurisdiction purposes. In support, it cites the following
• It is headquartered in Fort Worth, Texas, and all of
its senior officers work from that office.
• All of its operations are directed from its Texas
• Texas residents constitute its largest membership
percentage, accounting for 30% or 84, 959 out of 285, 919
• Texas residents hold 40% or $2.3 billion of its $5.8
billion deposit balances.
• Texas resident members hold 42.76% or $1.2 billion of
the open loan ...