Two years after a suit was filed against the defunct EasternFinancial Florida Credit Union to recoup millions in participationloan losses, a federal court has dismissed the claim against one ofthe plaintiffs.

The $3 billion Space Coast Credit Union in Melbourne, Fla.,which, acquired the troubled EFFCU in June 2009, taking on the cooperative's financial woes,is no longer a defendant in the suit, Meredith Gibson, a SCCUcredit union spokeswoman, confirmed with Credit UnionTimes.

In the July 3 ruling, the court said that the case against SCCUdid not have enough merit to proceed, Gibson said.

The $302 million Sperry Associates Federal Credit Union in Garden Park, N.Y.,filed the suit against EFFCU in August 2010 to recover failedparticipation loans in deals that included at least $9 million ofthe loans that were bought and sold by Sperry.

Also named in the suit were CU Business Capital LLC, whichunderwrote the participation loans, and CUBC's successor, SmallBusiness America in Linthicum, Md. CU Business Capital was foundedby EFFCU.

Meanwhile, Space Coast is moving forward with its $100 million suit filedin February against Merrill Lynch, Wachovia Capital, BarclaysCapital, Lehman Brothers' former CEO Richard Fuld and major U.S.credit rating agencies, Standard & Poor's and Moody's, allegingthat they conspired to inflate allegedly toxic bonds intoinvestment-grade securities using fraudulent credit ratings andthat the investment banks dumped those inflated securities ontounsuspecting investors.

The investments were initially sold to EFFCU. The plaintiffs claimed that the credit union knew the risks ofengaging in the collateralized debt obligations before buyingthem.