Seemingly conflicting NCUA opinions regarding the basis of amember's lawsuit against the $161 million St. Helens Community FCUof St. Helen, Ore., are working their way into court, despite theregulator's attempts to stay out of the conflict.

NCUA Public Affairs Specialist John Fairbanks said the agency isnot taking any sides on the case, saying, “This is a matter beforethe court and we will wait to see what the judge decides.”

But that hasn't stopped both sides from using the NCUA's wordsin the case, in which plaintiff Steve Knebel is suing the creditunion over the results of a Sept. 4, 2012 special meeting to recallfive board members.

Knebel alleges the credit union violated Federal Credit UnionBylaws when it counted absentee ballots in the failedrecall attempt.

Knebel sourced a March 29 legal opinion from NCUA General Counsel Mike McKenna in anApril 1 reply to the credit union's March 1 motionto dismiss the case. McKenna also addressed the question ofwhether the case should be heard in state or federal court – one ofthe credit union's legal defenses – saying that “state law has norole.”

Further, McKenna said a member's rights include right topetition for removal of directors and committee members, and thatthe bylaws “clearly and unambiguously provide that in-person votingis required at a meeting called to consider removal of adirector”.

Knebel said he interprets McKenna's legal opinion to mean thatby counting absentee ballots, St. Helens violated members' rightsto a recall election.

St. Helens, represented by attorney Harold B. Scroggins III,countered April 12 by sourcing a Sept. 7, 2012, email from Region VDirector Elizabeth Whitehead to Knebel informing him the region haddismissed his Aug. 27 complaint.

Whitehead was responding to Knebel's complaint prior to themeeting reporting the credit union had mailed 15,000-plus absenteeballots to members.

The NCUA “has discretion to take administrative action” whenthose violations occur, Whitehead said, and when the agencycontemplates further action, it considers just two things: safetyand soundness, and whether a violation of member rightsoccurred.

“We reviewed your complaint along with the information providedto us by the credit union. Our investigation of this matter did notreveal there is a material safety and soundness issue nor a threatto the fundamental material rights of the members,” Whitehead said.

Knebel said he never received the email, a claim he backed up incourt Wednesday when he filed a motion to respond to the documentand attached an email from Region V Director of SupervisionKimberly Twieg, who said the email was incorrectly addressed.

Also at issue in the case is the matter of jurisdiction.

Scroggins continues to argue that the federal case belongs instate court.

When the NCUA reincorporated Federal Credit Union Bylaws intoits regulations in 2007, it did so to assure the regulator couldtake administrative action to avoid costly litigation between acredit union and member when appropriate, Scroggins said in theMarch 1 motion to dismiss. That incorporation of the bylaws intoNCUA regulations did not, as Scroggins said Knebel claims, affect amember's ability to enforce the bylaws as a contract under statelaw.

“NCUA views its involvement in bylaw disputes as an alternativeto state court action. It does not usurp members' state courtremedies,” Scroggins wrote.

Scroggins also sourced McKenna's letter in his April 12dismissal reply, saying he interprets McKenna's opinion to meanthat “state law does not supplant or alter the provisions of thebylaws. It does not address the question of whether federal courtshave subject matter jurisdiction over breach of bylaw claims.”

The NCUA could have enforced the bylaws, but it declined to doso, Scroggins said. As a result of that decision, the NCUAauthority to enforce and interpret federal credit union bylaws isirrelevant.

The owner of two hydroponic gardening supply stores – with alongstanding member business relationship with the credit union –Knebel is part of a group of members seeking more control over thecredit union after the board proposed a merger with the $152million Wauna FCU and fired former CEO Jeff Schwarz.

Although that merger has since been called off, last year the group successfully elected two of itsown to the credit union's board, and Knebel said the group willattempt to capture two more seats up for grabs at this year'sannual meeting.

St. Helens spokespersons have declined offers to comment on thecase, citing a policy to not comment on pending litigation.