United States District Court, W.D. Missouri, Western Division
STEVEN CHASE and SHAWN PENNER, individually and on behalf of others similarly situated, Plaintiffs,
FIRST FEDERAL BANK OF KANSAS CITY, et al., Defendants.
ORDER GRANTING MOTION TO DISMISS
KAYS, CHIEF JUDGE.
Steven Chase and Shawn Penner were two member-depositors of
Inter-State Federal Savings & Loan Association of Kansas
City ("Liter-State"), a mutual savings association
chartered under federal law. In 2015, Inter-State's Board
of Directors approved a merger with another federal mutual
savings association, First Federal Bank of Kansas City
("First Federal"). Plaintiffs have brought a
putative class action suit against First Federal and five of
Liter-State's former directors. The First Amended
Complaint ("the Complaint") (Doc. 6) alleges the
directors breached their fiduciary duties to
Inter-State's member-depositors by not distributing
Inter-State's accumulated capital and earnings, and by
approving the merger. It also claims First Federal unjustly
enriched itself in the merger.
before the Court is Defendants' Motion to Dismiss First
Amended Class Action Complaint (Doc. 21). Holding that the
Complaint rests on a faulty legal premise, namely, that the
member-depositors had fiduciary rights in Inter-State
comparable to those of shareholders in a stock bank,
Defendants' motion is GRANTED.
complaint may be dismissed if it fails "to state a claim
upon which relief can be granted." Fed.R.Civ.P.
12(b)(6). To avoid dismissal, a complaint must include
"enough facts to state a claim to relief that is
plausible on its face." Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007). "A claim has
facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The
Plaintiff need not demonstrate the claim is probable, only
that it is more than just possible. Id.
reviewing the complaint, the court construes it liberally and
draws all reasonable inferences from the facts in the
Plaintiffs favor. Monson v. Drug Enforcement Admin.,
589 F.3d 952, 961 (8th Cir. 2009). The court generally
ignores materials outside the pleadings but may consider
materials that are part of the public record or materials
that are necessarily embraced by the pleadings. Miller v.
Toxicology Lab. Inc., 688 F.3d 928, 931 (8th Cir. 2012).
is a federal mutual savings association which has served the
Kansas City, Missouri, market since 1939. Plaintiffs Steven
Chase and Shawn Penner were member-depositors of Inter-State
at the time it merged with First Federal. Defendants are
First Federal and five former directors of Inter-State:
Richard T. Merker, Helen Skradski, Benjamin J. Fries, William
W. Hutton, and James R Jarrett. With the exception of Mr.
Jarrett, all of the former directors named as defendants are
now directors of First Federal.
April 2015, Inter-State's board approved the merger into
First Federal. Mr. Chase objected to the merger and expressed
his concerns to Inter-State's board in May 2015. He
argued the merger was inequitable because of an alleged $25
million "capital disparity" between the two
institutions. He believed Inter-State was overcapitalized by
$25 million, and he sought a distribution of that
"excess capital" to Inter-State's then-current
depositors. Inter-State's board considered Mr.
Chase's position and rejected it.
receiving merger approval from the primary regulator of both
institutions, the Office of the Comptroller of the Currency
("OCC"), Inter-State and First Federal completed
their merger in March of 2016.
10 of Inter-State's charter ("the Charter")
speaks to two types of potential distributions to members:
(1) periodic "net earnings" and (2) "surplus
funds." In relevant part, Section 10 of the Charter
(titled "Reserves, surplus, and distribution of
As of June 30 and December 31 of each year, after payment or
provision for payment of all expenses, credits to general
reserves and such credits to surplus as the board of
directors may determine, and provision for bonus on
savings accounts as authorized by regulations made by the
Federal Home Loan Bank Board, the board of directors of the
association shall cause the remainder of the net
earnings of the association for the 6 months' period
to be distributed promptly on its savings accounts, ratably,
as declared by the board of directors, to the withdrawal
value thereof; in lieu of or in addition to such net
earnings, any of the association's surplus funds
may be likewise distributed. . . . Notwithstanding any
other provision of its charter, the association may
distribute net earnings on its savings accounts on such
other basis and in accordance with such other terms and
conditions as may from time to time be authorized by
regulations made by the Federal Home Loan Bank Board. All
holders of savings accounts of the association shall be
entitled to equal distribution of assets, pro rata to the
value of their savings accounts, in the event of voluntary or
involuntary liquidation, dissolution, or winding up of the
Doc. 22-2 at 3-4 (emphasis added).
11 states: "No amendment, addition, alteration, change,
or repeal of this charter shall be made" unless made by
the board and approved by the Federal Home Loan Bank Board
and the members. Id. at 4.
Complaint asserts three claims. Count I alleges the former
directors breached their fiduciary duties to the members in
numerous ways, including by:
(a) failing to ratably distribute excess capital and
earnings, as required by the Charter;
(b) failing to call for a member vote on the
Inter-State-First Federal merger;
(c) failing to properly notify Plaintiffs and the Class of
the merger's terms and consequences;
(d) failing to make capital distributions in advance of the
merger and the dilution members would suffer because of the