U.S. District Judge Lynn Adelman dismissed the $1.8 billion Corporate Central CU's case against conserved U.S. Central FCU and the NCUA.
Corporate Central filed the suit nearly one year ago after U.S. Central did not refund $6 million worth of excess membership capital accounts to the Muskegon, Wis.-based corporate and other members in December 2008. The struggling U.S. Central, seized by NCUA just three months later, had placed a moratorium on adjusting membership capital account requirements.
Adelman denied the defense's argument that she did not have supplemental jurisdiction over the case and disagreed with NCUA's argument that Corporate Central did not have standing for an equal protection claim.
However, Corporate Central's equal protection suit, in which it alleged the NCUA violated its constitutional right to equal protection of the law and its property rights, did not state a claim on which relief could be granted, the judge ruled.
"To survive the NCUA's motion, plaintiff must allege facts from which it may be plausibly inferred that the NCUA's action is not rationally related to any conceivable legitimate governmental interest," she wrote.
Corporate Central "fell far short" of overcoming that presumption of rationality, she said. The NCUA had a legitimate interest in preserving U.S. Central's capital, and as conservator, the NCUA is permitted by law to take any action "necessary to put [U.S. Central] in a sound and solvent condition" and "appropriate to carry on the business of [U.S. Central] and preserve and conserve the assets and property," court documents stated.
The NCUA's decision to prevent Corporate Central and other members from withdrawing excess capital clearly furthers its interest in putting U.S. Central in a sound financial condition and thus has a rational basis, Adelman said. Preventing a run on capital accounts was within the NCUA's rights, she said.
Corporate Central had argued that the NCUA could have preserved U.S. Central by other means, but Adelman said even if that were true, it still did not overcome the presumption of rationality.