Four Rulings Made In Columbia Case

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The ongoing legal battle over Columbia Credit Union's attempted conversion to a mutual savings bank continued last week as the judge presiding over the case issued four key rulings.

Superior Court Judge Roger A. Bennett granted Columbia Credit Union's motion for summary judgment on the board of directors term limits issue. The credit union argued successfully the term limits bylaw amendment adopted Nov. 16, 1999, limiting directors to nine consecutive years of service as a director, was to be applied prospectively. In other words, beginning with the election following the adoption of the bylaw.

A group of dissident members, known as the "Save Columbia CU Committee," had asked the court to order four board members-Connie Jones, Dennis McLachlan, Robert M. Byrd and Mark L. Ail-to vacate their director positions. According to plaintiffs, Jones has been a director for 20 consecutive years, McLachlan and Byrd for 12 years each, and Ail for nine years.

Judge Bennett denied two motions for dismissal filed by Columbia Credit Union. In the first motion, the credit union had asked the court to rule the directors of the CU did not owe a fiduciary duty to individual members. In the second, the CU sought to dismiss a claim for inspection of books and records.

The court dismissed Save Columbia CU Committee's request for declaratory judgment on issues relating to a possible renewal of the CU's conversion plan because no plan or intent to plan has been presented.

After the rulings were issued, both sides expressed satisfaction with the results they agreed with, and vowed to contest the rulings that went against them.

Colleen Boccia, vice president of marketing for Columbia Credit Union, said the term limits ruling was "expected." "Some people have misinterpreted it," she said. "The amended term limits bylaw was intended to apply after November 1999. It was intended to provide an orderly transfer of knowledge, and ensure there was no mass exodus from the board."

Columbia CU "probably" will file a motion to reconsider the fiduciary duty and inspection of books and records rulings because, Boccia said, the judge cited inappropriate law in his decision. "Columbia Credit Union was organized under the Washington Credit Union Act, not the Non-profit Corporate Act."

Douglas Schafer, attorney for the Save Columbia CU Committee, told The Credit Union Journal he intended to file a motion for reconsideration on the term limits issue by May 17.

"I am delighted the judge recognized members have rights to inspect books and records, and I'm pleased that he recognized members can pursue a lawsuit for breach of fiduciary duty," said Schafer. "Certainly, I'm disappointed that he dismissed the term limits claim, because there was nothing in the bylaws about a starting date. A plain reading would seem the next election where a board member has more than nine years in the saddle, it is time to get off the horse."

Steve Straub, former president and CEO of Columbia Credit Union and spokesperson for the Save Columbia CU Committee, said he does not believe the term limits issue is dead.

"We were asking for a summary judgment, and the judge said the intent of the board is relevant," Straub said. "What were not argued in court are the facts of the case. They [Columbia Credit Union] produced sketchy, handwritten notes and a declaration of [president and CEO] David Doss."

'Violated Fudiciary Duty'

Straub added he was "quite pleased" with the court's recognition of the Save Columbia CU Committee's claim board members have a fiduciary duty to members.

"It is our position they violated that fiduciary duty in all the money that was spent, both on the failed conversion and afterwards," he said. "A board member is held to a higher standard of responsibility when in that role. If the board members violated that duty, it will create legal problems for themselves. This ruling will be very useful going forward."

In the wake of the ruling, Schafer said the Save Columbia CU Committee filed an amendment to its original complaint. The updated complaint alleges the board thwarted corporate governance and added a corporate derivative action claiming a duty to the credit union itself.

"This allows us to engage in more thorough discovery," Schafer explained. "We want to find out how much they spent on the plan of conversion, as well as the amount spent on fending off the vote in January [a special meeting of members where several of the board members could have been recalled but survived by narrow margins]. They won by a whisker, but how many thousands of dollars of credit union money did they spend to hold on to their volunteer positions?"

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