GRAND RAPIDS, Mich. New Hampshire’s Bellwether Community CU has vowed to challenge a federal court ruling dismissing its suit over its withdrawal from CUSO Development Co. LLC, saying the Michigan CUSO continues to owe the credit union money reserved for it in its capital account.
The Manchester, N.H., credit union has filed a notice to appeal the court’s May ruling dismissing its suit, which claims an operating agreement it signed upon joining the CUSO in 2008 entitles it to $300,000 in exchange for its 50 Class A units, plus another $355,223 that should be in its capital account with the CUSO, which represents mortgage servicing rights. In court documents the credit union points to similar withdrawals agreed to with Workers CU and American First CU.
CUSO Development, “by failing to pay Bellwether its withdrawal distribution, is in breach of the Operating Agreement between the parties and as a proximate result, Bellwether has been damaged in the amount of $655,233 plus interest, costs and attorney fees,” according to the suit, filed in U.S. District Court for the Western District of Michigan.
Bellwether argues that the $655,223 figure therefore represents the fair value of its shares and should be the amount it is reimbursed for its 2011 withdrawal from the CUSO.
But CUSO Development, which now is owned by six credit unions and is the parent of Member Advantage Mortgage and Member Advantage Title, said the operating agreement signed by partners is silent on any distribution of capital accounts, and so Bellwether’s argument should be rejected. The federal court agreed and dismissed the credit union’s suit.
The court documents indicate that the CUSO paid a capital distribution to Workers CU, but decided against paying a distribution to American First. “The only arguable distribution’ on record to a Class A member was in connection with the isolated, negotiated settlement with WCU which resulted in a buyout of WCU’s interest,” the CUSO said, adding that any argument that prior dealings with Workers CU or American First CU modifies the operating agreement is “untenable.” “Since historically there have been no distributions to CDC’s Class A members, and none are foreseeable, there is no real economic expectation of distributions to Class A members.”
