Chase v. First Federal Bank of Kansas City, No. 18-1764 (8th Cir. 2019)
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The Eighth Circuit affirmed the district court's dismissal of plaintiffs' putative class action against First Federal and former directors of Inter-State. Plaintiffs alleged that Inter-State's merger with First Federal was inequitable because Inter-State had $25 million more than First Federal in excess capital. Plaintiffs claimed that the surplus should have been distributed to Inter-State's members instead of becoming part of the merged entity, and that the decision to merge should have been decided by a vote of Intra-State's members.
The court held that the district court correctly concluded, based on long-standing Supreme Court precedent, that Inter-State's members did not have an ownership interest in its surplus. Even assuming a provision in Inter-State's charter was unique and that this was a case of first impression, the court held that Inter-State's members would not have an ownership interest in the $25 million surplus based on the provision's plain language. Therefore, without an ownership interest, plaintiffs have not stated a claim against defendants and the district court properly dismissed their claims expressly premised on an ownership interest in the surplus.
Court Description: Gruender, Author, with Stras and Kobes, Circuit Judges] Civil case. Plaintiffs appeal the dismissal of their putative class action which alleged, among other counts, that the directors of Interstate bank, a federally chartered mutual savings and loan, breached their fiduciary duty by failing to distribute excess capital to the members prior to a merger with defendant First Federal; the district court correctly held that Interstate's members did not have an ownership interest in the surplus, under either long-standing Supreme Court precedent or the terms of Interstate's charter.
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