Chambers Bank v. St Paul Mercury Insurance Company et al

Filing 27

ORDER granting 13 Motion to Remand to State Court. This case is therefore remanded to the Yell County, Arkansas Circuit Court. Signed by Judge Brian S. Miller on 11/14/11. (hph)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
CHAMBERS BANK
v.

PLAINTIFF
CASE NO. 4:11CV00389 BSM

ST. PAUL MERCURY INSURANCE
COMPANY, STEVE STANDRIDGE, individually,
and as an agent of Steve Standridge Insurance, Inc.,
and STEVE STANDRIDGE INSURANCE, INC.

DEFENDANTS

ORDER
Plaintiff Chambers Bank (“Chambers”) moves to remand [Doc. No. 13] and
defendant St. Paul Mercury Insurance Company (“Travelers”) objects [Doc. No. 16]. For
the reasons set forth below, the motion to remand is granted.
I. BACKGROUND
Chambers sued defendants in the Yell County, Arkansas Circuit Court on April 15,
2011, alleging breach of contract on a financial institution bond, and damages pursuant to
Arkansas Code Section 23-79-208. [Doc. No. 2] Travelers removed the case [Doc. No.
1] on the basis of federal question jurisdiction under 28 U.S.C. § 1352. Chambers now
moves to remand for lack of jurisdiction, asserting that the bond at issue is not a bond
executed under a law of the United States as required by 28 U.S.C. § 1352 [Doc. No. 13].
II. DISCUSSION
Federal courts have original jurisdiction, concurrent with state courts, of any action
on a bond executed under any law of the United States. 28 U.S.C. § 1352. If at any time
before a final judgment, it appears that subject matter jurisdiction is lacking, the case shall

be remanded. 28 U.S.C. § 1447(c). As the removing party, Travelers has the burden of
showing by a preponderance of the evidence that removal was proper. Altimore v. Mount
Mercy College, 420 F.3d 763, 768 (8th Cir. 2005). Additionally, as the party invoking
federal question jurisdiction, Travelers bears the burden of showing the existence of subject
matter jurisdiction. Newhard, Cook & Co. v. Inspired Life Centers, Inc., 895 F.2d 1226,
1228 (8th Cir. 1990). Federal courts are to “resolve all doubts about federal jurisdiction in
favor of remand.” Dahl v. R.J. Reynolds Tobacco Co., 478 F.3d 965, 968 (8th Cir. 2007).
The bond at issue is a Financial Institution Bond (“the Bond”) purchased by Chambers
from Travelers. [Doc. No. 2]. The Bond, among other types of coverage, provided coverage
for “forgery, alteration, and fraudulent instructions” and “forgery and alteration of securities
and other instruments.” Id. Chambers alleges that Travelers has breached the contract by
not providing the coverage set forth in the Bond. Id. Travelers removed the case based on
28 U.S.C. § 1352 and 12 U.S.C. § 1828(e), asserting that the Federal Deposit Insurance
Corporation (“FDIC”) required Chambers to acquire the Bond.

In support of this

proposition, Travelers cites the FDIC’s Risk Management Manual of Examination Policies
(“Examination Manual”) and its Statement of Policy on Applications for Depository
Insurance (“Policy Statement”).
While it is true that the FDIC “may require any insured depository institution to
provide protection and indemnity against burglary, defalcation, and other similar insurable
losses,” 12 U.S.C. § 1828(e) (emphasis added), it is also true that nothing in the record

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indicates that Chambers was required to obtain the Bond. Affidavit of Bill Donnell, 1-2.
Further, the Examination Manual supports this proposition but specifically provides that
“such action would only be taken in rare instances[.]” Examination Manual, § 4.4. The
examination manual, however, provides that forgery and alteration coverage, which is at
issue here, is “optional coverage.” Id. Similarly, the Policy Statement merely suggests that
banks obtain fidelity bond coverage by stating that “[a]n insured depository institution should
maintain” such coverage. Policy Statement, 63 Fed. Reg. 44752, 44759 (emphasis added).
Though the FDIC has the authority to require state chartered banks to maintain
financial institution bonds, nothing indicates that it exercised that authority here. See e.g.
Federal Deposit Insurance Corporation v. AETNA Casualty and Surety Company, 903 F.2d
1073, 1078 (6th Cir. 1990) (explaining that 12 U.S.C. § 1828(e) provides that the FDIC may
require an insured bank to purchase fidelity bond coverage but that there was no evidence
showing that the FDIC had chosen to exercise that authority). Indeed, the documents
defendants rely upon do not show that Chambers was required to purchase the Bond.
Accordingly, the Bond was not executed under a law of the United States and this
court therefore lacks jurisdiction under 28 U.S.C. § 1352, and remand is therefore proper.
This case is therefore remanded to the Yell County, Arkansas Circuit Court.
IT IS SO ORDERED this 14th day of November 2011.

________________________________
UNITED STATES DISTRICT JUDGE

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