Siding with banks in the common bond dispute, the U.S. Court of Appeals for the Sixth Circuit ruled Monday that occupation-based federal credit unions must limit their membership to employees of a single company.

This is the second federal appeals court to rule against the National Credit Union Administration in a common bond case. The other case, involving AT&T Family Federal Credit Union, is pending before the Supreme Court.

"This is a significant victory," said Michael F. Crotty, deputy general counsel for litigation at the American Bankers Association. "This is the second court of appeals that was willing to set aside policy arguments in favor of enforcing the law as written."

NCUA General Counsel Robert M. Fenner downplayed the loss, saying he expects the Supreme Court will overrule both federal appeals courts when it decides the AT&T Family case this winter.

"We look forward to arguing the standing and merits before the Supreme Court," he said. "We remain confident that we will prevail."

The decision by the federal appeals court in Cincinnati was a surprise. Most lawyers following the case expected the court to wait until the Supreme Court decides the AT&T Family case early next year.

Writing for a 2-to-1 majority in First City Bank v. NCUA, Sixth Circuit Judge James L. Ryan said the Federal Credit Union Act requires all members of a credit union to share a single, common bond.

There would be no need for the law if Congress intended to allow multiple common bonds, the judge said. "If NCUA's interpretation is accepted, it would make the common bond requirement meaningless," the judge said.

Senior Circuit Judge Nathaniel R. Jones dissented from the majority opinion, saying the courts should defer to the NCUA's interpretation of the law.

The case began in 1994 when First City in Murfreesboro, Tenn., sued the NCUA for giving AEDC Federal Credit Union in Tullahoma, Tenn., permission to serve employees at 300 different companies. The trial court judge sided with NCUA, setting up the appeal.

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