A judge has put on hold a decision in the lawsuit filed by members of DFCU Financial Credit Union after the credit union questioned the validity of the signatures on a petition that seeks a special meeting to recall the board.
Also at issue: two new members who have been named to the DFCU Financial board after the resignation of two of the board members who had been involved in the credit union's plan, since dropped, to convert to a mutual savings bank charter.
Judge Bans Board Changes
Wayne County Circuit Judge Cynthia D. Stephens ordered the $1.8-billion DFCU Financial not to make any more board changes pending the outcome of the lawsuit. The judge has put a hold on making any rulings until after a deposition hearing set for Nov. 17.
At a hearing here last week, attorneys for the credit union questioned the validity of some of the 1,762 signatures on a recall petition organized by its members.
The hearing is part of a lawsuit filed by members and plaintiffs Margaret Blohm, Richard Sly and Ray Ward who are asking that the state court force DFCU Financial to honor its bylaws and hold a special meeting at which a board recall would be put to vote.
On April 18, the plaintiffs were among 1,762 that signed a petition asking for a recall election.
The credit union's bylaws only require 500 signatures. DFCU said it would not honor the request because it would violate provisions of the Federal Credit Union Act and could reduce the number of directors below the federal mandate of five.
During last Thursday's court proceeding in the 3rd Judicial Court of Michigan before about 25 people that included a handful of members, DFCU attorney Daniel Loeb, of Fried, Frank, Harris, Shriver & Jacobson, LLP, Washington, said that "at least 200 of the signatures" did not belong to members, adding that his clients had not had time to validate the remaining signatures.
"Since April to now, you don't know yet whether the names on the petitions in excess of 500 are valid?" Stephens asked.
CU Claims No Access To Document
After relaying that his clients never received the original document - a claim disputed by the plaintiffs-Stephens gave the plaintiffs 48 hours to submit "the most original documents" they have for DFCU's review.
The complaint filed Aug. 18 also calls for DFCU Financial to make all materials related to a proposed conversion to a mutual savings bank available for unfettered inspection.
DFCU has said members can view the documents, but only if they sign confidentiality agreements.
In addition, the suit seeks damages for court courts and attorney fees and wants the defendants to refrain from using member funds to sway voting.
Meanwhile, members of the credit union in attendance at the hearing also said they had just learned recently of the resignations from the board of two members when they were informed of the two new board members via a recent newsletter article that simply introduced the two, both former supervisory committee members.
The plaintiff's attorney, Bryan Walters, of Varnum, Riddering, Schmidt & Howlett, LLP, Grand Rapids, Mich., later confirmed that both Harold Lowman, board chairman, and Susan Smulsky, member and supervisory chair, recently stepped down.
The defendant's attorney Daniel Loeb, of Fried, Frank, Harris, Shriver & Jacobson, LLP, Washington, D.C., said Lowman and Smulsky resigned due to other commitments. DFCU has already ended its attempt to convert to a bank charter, but the ensuing lawsuit continues to play out in court.
