DFCU Asks For Dismissal of Suit
DFCU Financial has asked that a lawsuit filed last month against the $1.8 billion CU and two board members be dismissed on the grounds that it lacks any evidence for federal cause of action, according to response papers filed last week.
The documents filed with the U.S. District Court, Eastern District of Michigan Southern Division further stated that any court action in favor of the plaintiff's request for a preliminary injunction requiring a special meeting for the purpose of recalling nine board members would be ''illegal, unsafe and unsound.''
Longtime members Richard Sly and Raymond Ward filed a lawsuit on May 24 against DFCU Financial and board members Harold Lowman and J. Paul Conway, alleging personal damages as a result of the CU's alleged breach of bylaws, misuse of CU funds and employees and failure to provide members access to records related to a proposed conversion attempt.
Attorney Bryan R. Walters, of Varnum, Riddering, Schmidt & Howlett, LLP, of Grand Rapids, told The Credit Union Journal that he had no comment about the pending case, other than to say that his clients had until July 3 to respond to the courts with documents in support of their motion for a preliminary injunction.
A preliminary injunction hearing has been scheduled at 2 p.m., July 6 at the U.S. Courthouse in Port Huron, Mich.
In their briefs in opposition to the plaintiff's motion for preliminary injunction and a separate motion to dismiss the complaint, the defendants attorneys Kenneth J. McIntyre of Courtney Schafer Law, Detroit, and Thomas Vartanian, James Schropp and Daniel Loeb, of Fried, Frank, Harris, Shriver & Jacobson, LLP, of Washington, D.C., said the charges against the CU and board members ''lack merit.'' Specifically, they stated that the claim that the CU misused funds to oppose the recall "is just plain silly.''
"Defendants had an obligation to inform DFCU members of the dire consequences should DFCU's entire board be eliminated in one fell swoop,'' according to documents.
Members have said that their CU spent their money to spread false statements and use fear tactics to sway potential voters.
The documents also stated that paperwork filed by plaintiffs Richard Sly, of Northville Township, and Raymond Ward, Detroit, failed to show that they would suffer any immediate, irreparable harm should their motion for a preliminary injunction be denied.
"Plaintiffs do not allege or otherwise set forth any fact describing what irreparable harm will befall them or when they will suffer that harm should the special meeting not be held immediately,'' the documents stated, adding further that it is the defendants who would suffer such harm should the meeting take place prior to a trial that could determine such a meeting lacks any legal basis.
The documents also asserted that Sly and Ward "hardly are the appropriate plaintiffs'' as neither ever made demands of the board to inspect DFCU's books and records.
Besides, they said, since the conversion application has been pulled, the plaintiffs have not proven any proper purpose for such an inspection at this point.
The defendants' attorneys blame the "influence of outsiders,'' namely a recently formed non-profit, National Center for Member Trust, for the conflict.
"DFCU unfortunately has become a pawn in a larger battle being waged throughout the country and in Congress: How easy (or difficult) should it be for credit unions to convert to other depository institution charters?"
The documents went on to state that the real issue is not in response to the directors withholding documents, but the "audacity of the directors to even consider proposing a conversion from a credit union to a mutual savings bank.''