Members of DFCU Financial who filed suit against the credit union suffered a big blow when the judge denied their request for access to records related to DFCU's ill-fated conversion attempt.
The judge also did not rule on forcing the credit union to hold a special meeting at which a board recall would be voted upon; more than triple the number of names required by bylaws to hold such a meeting have been gathered.
"This is not good," said the plaintiff's attorney, Bryan Walters, of Varnum, Riddering, Schmidt & Howlett, LLP, Grand Rapids, explaining that his clients need to see the documents so as to inform members of any wrongdoing before a new vote of new officers.
As it stands, the CU is set to go forward with an election of three new board members during its annual meeting on Feb. 15.
"It's now incumbent on us to keep this fresh in her mind," Walters told the handful of members who attended the hearing, explaining that Wayne County 3rd Circuit Court Judge Cynthia D. Stephens could issue a written statement as soon as this week, wait a month or put it aside for a very long time, if she chooses.
Longtime members Margaret Blohm, Ray Ward and Richard Sly sued their CU in an attempt to force the special meeting, gain access to records related to the conversion attempt, and keep the $1.8-billion financial institution from spending corporate funds to solicit members on its own behalf. Earlier this year DFCU Financial announced it was dropping plans to convert to a bank.
With regard to the records, Stephens said the evidence that included an opinion letter from the NCUA and testimony that members suspect misconduct of board members did not convince her that they had the right to view those documents.
She also told the courtroom full of supporters from both sides that she was not ready to rule on whether DFCU must call a special meeting, and whether the CU can spend corporate funds to campaign on behalf of the CU's candidates.
Walters earlier told the judge that the primary intent of the lawsuit was to force the special meeting so members could determine which, if any, board members should be removed from office because of their role during the conversion attempt.
Without argument from the plaintiffs' attorney, Stephens accepted a request by Attorney Daniel Loeb, of Fried, Frank, Harris, Shriver & Jacobson, LLP, Washington, D.C., request that defendants Harold Lowman and J. Paul Conway be removed from the lawsuit after testimony explaining that Lowman was no longer on the DFCU board, and that Conway was singled out because he failed to send out notices regarding a special meeting. Lowman is now on the supervisory committee.
Conway, board vice chairman, is running for re-election. Two other candidates endorsed by DFCU's nominating committee, Jim Cowper and Keith Moss, are former supervisory members who were quietly appointed to the board in recent months to replace Lowman and member Susan Smulsky.
In addition, six others endorsed by DFCU Owners United, the members group that fought to save the CU from becoming a bank, have submitted petitions to run in accordance with CU bylaws. According to a DFCU Owners United spokeswoman, at least four of those candidates received letters verifying that they have enough signatures to qualify for the ballot.
Candidate Bruce Gearns told the CU Journal that many questions remain as to how the CU will treat the candidates not endorsed by the CU's nominating committee. Gearns said a letter sent to DFCU by DFCU Owners United requesting specific information about, among other things, the format for candidate bios and when those bios would be posted on the website alongside the three credit union-endorsed candidates already there has been unanswered.
"They have to send ballots out 30 days before the Feb. 15 election and we still don't know the process," Gearns said.
In the meantime, one member reported hearing that employees were asked to each contact at least 10 members to encourage votes in support of the nominating committee's slate. The credit union declined to comment.
