Granite Re, Inc. v. Nat'l Credit Union Adm. Board, No. 18-2674 (8th Cir. 2020)
Annotate this CaseThe National Credit Union Administration Board ("NCUAB"), the self-appointed conservator of Citizens Community Credit Union ("Citizens"), repudiated a letter of credit Citizens issued to Granite Re, Inc. Granite filed a complaint for damages against the NCUAB, claiming wrongful repudiation and wrongful dishonor of a letter of credit. The NCUAB moved to dismiss with prejudice, arguing 12 U.S.C. 1787(c) authorized it to repudiate the letter of credit with no liability for damages, and section 1787(c) preempted conflicting North Dakota Law. The district court agreed and dismissed the complaint. The Eighth Circuit determined that were it to adopt the NCUAB's construction of section 1787(c), the NCUAB could "quietly appoint itself conservator and repudiate letters of credit with no liability to the injured beneficiary. Absent the ability to predict an impending conservatorship, a clean letter-of-credit beneficiary like Granite is subject to repudiation with no recourse." The Court determined NCUAB's construction was inconsistent with the language of the statue, which provided a limited remedy for damages determinable at the point of conservatorship, but did not negate recovery entirely. The Court also determined it was premature to declare section 1787(c) preempted North Dakota law. The Court reversed the trial court's judgment and remanded for further proceedings.
Court Description: [Grasz, Author, with Loken and Stras, Circuit Judges] Civil case. Pursuant to the provisions of 12 U.S.C. Sec. 1787(c), defendant NCUAB, as conservator, took over the bank which had issued Granite a letter of credit and repudiated the letter of credit. Granite sought damages for wrongful repudiation and wrongful dishonor of a letter of credit under the provisions of North Dakota's Uniform Commercial Code. Held, the NCUAB has authority under Section 1787(c) to repudiate a letter of credit issued by the bank it has taken over because a letter of credit is a contact for purposes of Sec. 1787(c)(1); the district court erred, however, in concluding Granite failed to state a claim for damages as a matter of law because it did not present a demand for payment to the bank before the NCUAB appointed itself conservator; the complaint was sufficient to allege a plausible claim for damages; with respect to the question of whether Sec. 1787(c)(3) preempts North Dakota law, until it is clear that Granite's recovery under North Dakota law exceeds the limits set by Section 1787(c)(3), the court need not address whether there is an actual conflict between federal and state law for purposes of determining preemption; reversed and remanded for further proceedings.
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