Penn. Court Rules For CUs In FOM Lawsuit

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Credit unions won a lawsuit on field of membership here last week when the Pennsylvania Commonwealth Court ruled unanimously to dismiss a lawsuit filed by bankers over the community charters granted to TruMark Financial CU and Freedom CU.

In addition, a separate challenge filed by the bankers against Corry Jamestown Credit Union, also over FOM, was withdrawn by the banks and approved by the court.

"The unanimous decision today by the appeals court in Pennsylvania...should be welcome news to the credit union movement," said CUNA General Counsel Eric Richard in a statement. "Since Pennsylvania law incorporates federal standards on what constitutes a well-defined local community, this decision is good news for credit unions throughout the country."

In its ruling, the court voted 9-0 that a December 2004 decision by the Pennsylvania Secretary of Banking was proper. As part of the decision, it also dismissed the bankers' claims over the growth of FOM and challenges to the tax-exempt status of state-chartered CUs in the Keystone State.

The Pennsylvania CU Association, however, noted that the court did ask for more information on distinctions between banks and credit unions, and it is now working to respond.

"Although we have some additional work to do, the court's affirmation of the community charter approvals is a significant victory for credit unions," said Rick Wargo, PCUA's senior vice president/general counsel, and Laurie Kennedy, associate counsel.

In his statement, CUNA's Richard said the case could still be appealed. "Of course, it remains to be seen if the other side chooses to appeal this ruling, in which case the state Supreme Court will review the decision, he said. "However, given that all of the complaints dealing with field of membership were dismissed, we believe we have a strong position should an appeal be carried out."

Meanwhile, the PCUA is appealing to affiliated credit unions for funds to replenish the Pennsylvania Defense Fund. The fund helps underwrite many of the legal costs involved in fighting field of membership challenges in the state.

"All of the funds raised will be for going forward and will purely be for new litigation," said PCUA Spokesperson Mike Wishnow. "We also hope it will pay for any legislative battle at the state level."

The PCUA is asking for seven cents per member in contributions, while asking smaller CUs to simply do whatever they can. (c) 2006 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.

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