NCUA, Community Call on Their Legal Teams, Is it a Fair Fight?
ARLINGTON, Va. - The ongoing struggle between NCUA and the $1.4 billion Community Credit Union over whether the credit union will have to ask its members to vote again on whether or not to become a mutual bank entered a bit of a lull last week. Each side has chosen up its lawyers and the initial dates for the case have been set. NCUA's filings in the matter are due by August 8 and the first arguments before a Magistrate Judge have been set for August 17. Community CU filed suit in U.S. District Court for Eastern Texas on July 15 and asked the court for an injunction which would force NCUA to recognize the ballot voting which concluded on June 21. In this round of voting, over 71% of the credit union members who cast ballots voted in favor of the charter change a sign, the credit union maintained, that the members accepted the change. NCUA has maintained that the credit union violated its regulations in the way it prepared the first two mandated disclosure documents it must send to members (see related voting poll on page 4). The agency has also stated that, when members saw the third packet, which was prepared in the way the agency said it required from the beginning, they voted narrowly against the charter change. To an outsider, the case might appear to be mismatched. On Community's side, the lawyers come from a high profile and high powered D.C.-based law firm, Patton Boggs, led by an experienced litigator, Cass Weiland. By comparison NCUA brings a relatively unknown staff lawyer, Renee Orleans, from the U.S. Justice Department's Civil Division. But where she might be less experienced and have less staff support, she will also bring the weight of the Justice Department with her and the resources the government can bring to keeping up the fight. But Eric Richard, general counsel with CUNA said appearances can deceive. "I would caution anyone from thinking this is necessarily a mismatched fight," observed Richard, a lawyer who is very familiar with agency litigation that involves the U.S. Justice Department. According to Patton Boggs, Weiland has been a lawyer for over 30 years and worked in both civil and criminal law although it is not clear how much of his experience has dealt with administrative law. According to the Justice Department, Orleans has been a lawyer since 1993 and has represented government agencies for almost her entire professional career. Since April of 2001 she has represented the Department of Justice's Civil Division and has spent much of her time detailed to the Office of Intelligence Policy and Review, an assignment that ended just last month. Richard explained that Justice Department lawyers have a reputation for having joined the Department looking for litigation experience and for generally being very bright and very well trained. "If you work for the Justice Department, you are already a pretty good attorney," Richard said, "and Justice Department lawyers sometimes take almost a perverse pleasure in beating a private industry lawyer in a case," he added, though he admitted he was unfamiliar with the work of Weiland or Orleans. He also explained that judges often give Justice Department lawyers something of a break because they know that they generally don't have an army of paralegals or associates to call upon to help them in their cases. "Judges usually understand that it might be just the JD lawyer burning the midnight oil working on their briefs," he said, "and that can mean they hold the private industry lawyers to a higher standard." This is a similar view to that of Robert Liles, the principal shareholder in Martyn Liles, a Washington D.C. law firm which has a lot of experience in litigating before federal agencies. Liles said that he has always been impressed with the caliber of the Justice Department lawyers and said that he expected the judges in the case to "cut through" a lot of the subsidiary issues and get to the core of the matter which is, in his view, that NCUA has the authority to oversee credit union-to-bank charter conversions. He also speculated that the Justice Department may point out immediately that the credit union has not taken full advantage of its existing remedies by appealing the Regional Director's ruling to the NCUA board. Failure to do this, in his opinion, hurts the credit union's case for the injunctive relief it has sought. Slowing The Pace? In the meantime, the ongoing dispute appears to have, at least temporarily, slowed the pace of other credit unions which might consider a charter change move, according to Alan Theriault, a consultant with CU Financial Services, a leading firm which helps credit unions change their charters. "If the NCUA wanted their actions to have a chilling effect on credit unions thinking about converting, they have done so," said Theriault. "But I don't think there has been any overall slowing of interest. I predict there will still be additional credit unions which will convert before the end of the year." Richard Garabedian, a partner with the D.C. law firm of Luse Gorman Pomerenk and Schick who also consults on conversions agreed. He said that none of his clients have specifically cited concerns over the NCUA/Community fight but that it is no surprise that credit unions might find the regulatory environment surrounding the issue to be unsettled, especially since part of Community's suit attacks the NCUA's regulation directly. A Different Tack? Meanwhile, NCUA has written OmniAmerican Credit Union requesting more information before it can make a final decision about whether or not to certify the credit union's charter change vote, which it conducted in mid-July. OmniAmerican received the same letter from the agency earlier this year that declared its charter change disclosure packets violated the agency's regulations and promising that the agency would not certify the disclosure and voting procedures based on those disclosure declarations. Now in a letter dated April 25, NCUA Regional Director Jane Walters has asked the credit union to "reconcile the disparity" between the 251,000 members that the credit union's last call reports lists and the approximately 99,000 ballots that the credit union said it sent out. Walters also asked for information from the credit union about its instructions to Financial Press L.L.P. about the building and mailing of the disclosure packages and ballots. This letter has led some sources to speculate the agency may be looking more closely into how both OmniAmerican and Community conducted its charter change balloting. -firstname.lastname@example.org