The $161 million St. Helens Community Federal Credit Union is seeking to dismiss a federal lawsuit filed by a member over a dispute to recall board members because it is not within the jurisdiction of the federal court.

Member Steven S. Knebel in U. S. District Court in Portland, Ore. brought the lawsuit against the credit union last month. He claims he St. Helens, Ore.-based credit union did not comply with its bylaws, permitting the five recalled board directors to continue serving. Knebel's lawsuit is asking the federal court for a declaratory judgment that would recall the five board members.

“The plaintiff (Steve Knebel) has simply alleged that the (St. Helens Community FCU) has failed to comply with its bylaw,” according to a court document the credit union submitted Friday. “Although federal regulations prescribe the form of bylaws that federal credit unions must adopt, disputes regarding adherence to the bylaws are a matter of state corporate law.”

Knebel said Monday he disagrees with the credit union's response to his lawsuit and is confident the case will be heard in federal court.

He was part of a group of members who started a recall petition in June 2012 to remove five of the seven board directors after members became upset with the dismissal of former SHCFCU CEO Jeff Schwarz. They also had concerns and questions about a proposed merger with the $152 million Wauna Federal Credit Union in Clatskanie, Ore.

Merger discussions between the two credit unions were called off last year. VanVleet said there are no plans to resume merger discussions.

The recall petition led to a special meeting of the members in September 2012 to vote on whether to retain or recall the five board directors, Lea Chitwood, Michael Hafeman, Richard Louie, Marty Borrevik and David Graham.

According to SHCFCU, the members voted to retain the board of directors.

Knebel contends in his lawsuit, however, that the SHCFCU “counted votes which were not eligible to be counted” under the credit union's bylaws.

For example, the credit union counted mail-in ballots of members, which were ineligible, according to the lawsuit. Knebel said the bylaws allow mail-in ballots to be counted as a vote but only if members request in writing that a ballot be mailed to them. Instead, ballots were mailed to credit union members without their request.

What's more, the credit union's bylaws also state that any director or committee member may be removed from office in an affirmative vote of a majority of members present at a special meeting but only after an opportunity has been given to be heard.

Knebel said he believes the five board members would have been recalled if the credit union counted only the votes of members who attended the special meeting and the mail-in votes from members who requested the mail-in ballots.

“Since they did not reveal the vote break down, then obviously we prevailed,” he said.

However, VanVleet said the membership voted to retain the five directors by a margin of more than 70% for each director.

Instant Insights /

Credit Union Seeks Dismissal of Lawsuit Over Disputed Recall Vote

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