Corporate America Credit Union won round one late Thursday afternoon in its lawsuit against U.S. Central and its accounting firm RubinBrown. U.S. District Judge Inge Prytz Johnson denied RubinBrown's two motions to dismiss the case.
The order does not apply to U.S. Central's former directors and volunteers also named in the suit. That decision, which will also be written by Johnson, will be released separately.
St. Louis based RubinBrown argued a lack of personal jurisdiction, but Judge Brown opined the firm met "minimum contacts" due process in Alabama because it prepared the PIC II valuation report for U.S. Central members.
The defendant's motion to dismiss or stay the lawsuit due to binding arbitration agreements between RubinBrown and U.S. Central was also denied.
Judge Brown's language signaled she is taking Corporate America's securities fraud claim seriously, as she repeatedly referred to U.S. Central's "PIC II securities."
U.S. Central's defendants argued their case should be dismissed as it was a derivative claim because investment losses were suffered by U.S. Central, and not a direct claim by Corporate America. However, Corporate America CEO Thomas Bonds told the Credit Union Times Jan. 27 his corporate was claiming securities fraud against U.S. Central, which is a direct claim. Due to the cooperative structure of credit unions and capital, and limited issuance to members only, corporate PIC doesn't neatly fit into the definition of a "security."