SCRANTON, Pa.-NCUA is seeking a dismissal of the lawsuitchallenging its approval of a six county community charter forthree Pennsylvania credit unions as the credit unions involved andtheir trade associations were approved to intervene in the case. OnFeb. 6, NCUA filed papers with the U.S. District Court for theMiddle District of Pennsylvania requesting dismissal with prejudicein the American Bankers Association lawsuit seeking to stripMembers 1st FCU, AmeriChoice FCU, and New Cumberland FCU of theircommunity charters. NCUA approved Members 1st to serve Adams,Dauphin, Lebanon, Perry, York, and Cumberland counties inPennsylvania, and the entire Borough of Shippensburg (which is inCumberland and Franklin Counties) on April 24, 2003. AmeriChoiceand New Cumberland were subsequently approved for the samecommunity charter. The ABA and others filed a lawsuit Nov. 1, 2005stating that the area is not a well-defined community as requiredby regulation and statute. The bankers were successful just over ayear ago in forcing NCUA to repeal a community charter approved forTooele Federal Credit Union and three others in Utah. In NCUA'sfiling, the Department of Justice on behalf of the agency wrote,“Defendant denies that plaintiffs are entitled to the reliefrequested, or to any relief whatsoever. “Defendant hereby deniesall allegations not expressly admitted or denied. THEREFORE, havingfully answered, defendant asserts that plaintiffs are not entitledto the relief requested, or to any relief whatsoever, and requeststhat this action be dismissed with prejudice and that defendant begiven such other relief as the Court deems just and proper.” At thesame time, CUNA, NAFCU, the Pennsylvania Credit Union Associationand the three affected credit unions also petitioned the court tobecome intervenors in the case, which the trades have declined todo thus far in another field of membership challenge in Utah (Seerelated story, p. 1). According to the motion to intervene,“Federal Rule of Civil Procedure 24(a) provides that [U]pon timelyapplication anyone shall be permitted to intervene in an action:. .. (2) when the applicant claims an interest relating to theproperty or transaction which is the subject of the action and theapplicant is so situated that the disposition of the action may asa practical matter impair or impede the applicant's ability toprotect that interest, unless the applicant's interest isadequately represented by existing parties. “An applicant seekingto intervene in an action must meet four requirements: (1)timeliness; (2) sufficient interest; (3) potential impairment ofthe interest; and (4) lack of adequate representation by existingparties.” The brief outlined how each of the organizations seekingto intervene met each of the criteria. “This relief, if granted,would have a severely adverse effect on these financialinstitutions, effectively blocking their ability to add new membersfrom the field of membership approved by NCUA,” it read regardingthe federal credit unions. “This will disadvantage the CreditUnions in competing with other financial institutions, includingthe plaintiff Legacy Bank, and other Pennsylvania banks that aremembers of the plaintiff bank trade associations.” As far as thecredit unions and trades are concerned, “They seek to limit thescope of credit union membership for community-based credit unionsas much as possible. If the Court were to grant the relief soughtby the plaintiffs, the precedent would have adverse competitivesignificance to many federal community-based credit unions,including those that are members of the Credit Union Associations.”Upon hearing of the approval of the joint motion to intervene, CUNAGeneral Counsel Eric Richard said, “We appreciate the courtgranting our request and look forward to representing the interestsof credit unions in this case, the adjudication of which we believecould have a strong impact on other credit unions nationwide.” Thetrades and credit unions had argued that their interests would notbe sufficiently represented by NCUA. Though the interests of thoseseeking to intervene are similar to the existing defendants in someaspects, that representation is inadequate when interests are“sufficiently different that the representative cannot give theapplicant's interest proper attention.” The intervenors added, “TheD.C. Circuit has noted that there is a `relatively large class ofcases in this circuit recognizing the inadequacy of governmentalrepresentation of the interests of private parties in certaincircumstances.' ” Additionally, in the more than two years betweenNCUA's approval for Members 1st and ABA's filing, the credit unionhad added new branches, installed new office systems, addedmanpower, incurred various related expenses, and began serving thenew members, “ all in reliance on NCUA's order allowing Members 1stto expand its field of membership.” Though NCUA may raise thelaches argument as well due to the ABA's slow response, theprejudice it would suffer is very different from that of theinstitutions, the brief argued. CUNA declined to speculate onwhether Judge Yvette Kane would dismiss the case at this point.NAFCU Director of Regulatory Affairs Carrie Hunt commented, “Weintervened on the side of NCUA. We obviously do not agree NCUAacted arbitrarily and capriciously in making its decision.” A Feb.16 scheduling conference is slated for the case but both sides hadrequested a two-week extension on that conference at press time.-

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