DEARBORN, Mich. – Members of DFCU Financial FCU will get yet another day in court next month in their long battle over the now-abandoned attempt by the $1.8 billion credit union to convert to a mutual savings bank.
A state court finally ruled in favor of members, who sought a special meeting 18 months ago to recall the board over its support for the failed conversion, which would have been the biggest ever by a credit union. The Wayne County Circuit Court also ruled the members have a legal right to review the books and records concerning the failed conversion.
An April 17 hearing will determine the timing and scope of the review. The court ordered the special meeting be held within 60 days after review of the records.
It is not clear what effect the ongoing legal battle will have on the credit union directors, some of whom have resigned from the panel. In addition, the credit union has rewarded members in each of the last two years with special dividends of $17 million each year, essentially buying the support of many of the members.
At issue in the court dispute is whether a credit union has the legal obligation to abide by its own bylaws–which in this case allowed members to petition for a recall of the board of directors. A federal court rejected the request, saying the dispute was one that should be adjudicated by state court because the bylaws came under state business law.
More than 1,700 members opposed to the conversion signed a petition asking for a special meeting to vote on the board recall–three times the number required by the credit union’s bylaws.
The credit union issued a statement indicating it may appeal the state court ruling.
“DFCU Financial is disappointed by and disagrees with Judge Stephens’ decision, which fails to take into account events that have occurred since the lawsuit was filed in 2006. In particular, eight of the nine directors named in the recall petition have either resigned or been reelected by the membership since 2006,” it said.
