Texas Failed Conversion Suit Grinds On
A lawsuit filed more than three years ago arising from a dispute over a credit union to bank charter change attempt is still dragging on through the Texas courts and promising depositions of many involved in the charter change business.
The case stems from the now 21,000-member $169 million First Basin Credit Union's attempt to change to a mutual bank charter in 2007.
The attempt failed after some members objected and founded an organization, Save First Basin, to oppose the charter change.
The group had gotten help from National Center for Member Trust in its efforts as well and, in the end, the credit union stopped the balloting, alleging that disruption from the opposing side had prevented it from completing the process.
Specifically, the credit union alleged that someone had called up members and warned them that if they voted for the conversion they would lose money on deposit at the CU. Writing in an undated letter to members about the balloting interruption, First Basin CEO Shem Culpepper explained the CU's concerns.
It “has come to our attention that our members have been receiving calls telling them that if they don't vote against the conversion proposal, they will lose their money on deposit at First Basin and their accounts will be closed," Culpepper wrote.
"This is absolutely false.... If you were contacted by individuals urging you to vote no and making similar types of claims, please contact us immediately so that we may ensure your rights were not violated," he added.
Save First Basin's supporters denied there had been any wrongdoing, but the Odessa, Texas-headquartered First Basin sued in 2008 in the District Court of Ector County, and the litigation has been going on ever since.
“I don't think that I have anything to say about the pace of the case except that the courts in Ector County grind very fine,” said Calvin Hendrick, a lawyer for the defendants and now counter plaintiffs as the defendants have counter sued. “That and the number of lawyers hasn't helped.”
From the beginning, the case has involved a lot of discovery and depositions, and Hendrick added that those kinds of cases tended to drag on a long time since every set of lawyers tended to bring its own schedules for availability to depositions and that just tended to make everything take longer.
“Half the time its getting everybody on the same page,” Hendrick said, but he added that the case has taken a few turns since its first filing.
First, and maybe most important, the credit union dropped the case against all the individual Save First Basin supporters, a move that Hendrick attributed to the credit union not wanting to go before a jury suing its own members.
At the same time, the credit union added the Texas Credit Union League to the suit, alleging that the league had helped the Save First Basin group even though it had been saying that it was not taking a position on the charter change.
After the changes, the remaining defendants are the Texas Credit Union League, the National Center for Member Trust and the 45,000 member, $400 million Self Help Credit Union headquartered in Raleigh-Durham, N.C.
According to court filings, the credit union is arguing, among other things, that the three organizations communicated and cooperated among themselves in an effort to oppose the First Basin charter change, including recruiting others to oppose the conversion, preparing communications and media releases for the Save First Basin group and raising funds to pay for the group's website.
For their part, the defendants are asserting that they had a right to communicate with each other about the charter change and oppose it if they chose.
Hendrick could not predict when the case might go to trial as the depositions and discovery are still going on and it’s unclear what remains at stake.
In a recent filing, the credit union included an analysis from an economist that put First Basin's economic damages from the failed conversion attempt at between $11 million and $24 million, but that analysis presupposes that the measure failed because of the defendant’s opposition and not for another reason, which has yet to be proved.
But the defendants have also just made a motion to have part of the case thrown out on the grounds that the credit union lacked the standing to bring a defamation complaint.