Trades Pull Together for Good of CUs in Legal Challenges

WASHINGTON and HARRISBURG, Pa. - A number of factors play into why the credit union trade associations get involved in litigation, but the top priority is their membership.

"Number one is `What action will most likely get a better result for credit unions?'" CUNA General Counsel Eric Richard explained. CUNA tends to get involved in federal courts where there can be a larger impact to head off precedent. In the state courts, it may not help to have a Washington-based organization involved, but the trade is typically happy to provide behind the scenes assistance.

He added, "Number two is cost." Richard would not disclose the amount CUNA has expended on the current case percolating in Pennsylvania right now over the six-plus county field of membership approved as a community charter for Members 1st Federal Credit Union.

While CUNA, NAFCU, the Pennsylvania Credit Union Association, Members 1st, AmeriChoice, and New Cumberland are all named as intervenors in the suit, Members 1st has its own attorney working on the case. "We have been agreeing very well. We've been working very, very well together," CEO Bob Marquette said. He explained that his credit union felt the need to hire its own attorney because, in the event the suit was lost, Members 1st has nearly three years invested in the community and will launch the laches defense based on that history of relying on NCUA's original decision.

He added that he has been pleased with NCUA's approach in the case. "I think we have a good shot here," Marquette stated.

"Members 1st has its own counsel, but so far we've been able to stick together on the issues.Since I've been here, CUNA and NAFCU have always worked well together," Richard added.

Involvement begins with approval from the board of directors the intervenors explained. "Ultimately our board of directors decided to commit our association with technical support as well as financial support," PCUA Senior Vice President of Communications and Marketing Mike Wishnow said.

"As the advocate for credit unions in Pennsylvania we support first of all charter options for credit unions and choices for credit unions in general," he said of the league's involvement.

Richard said they also like to get the impacted credit unions directly involved in the case. AmeriChoice CEO Kip Stecher said that while he is not involved in the day-to-day matters of the legal defense, he is kept apprised of the major goings on.

Richard explained how the intervenors have met and the attorneys have given them the procedural background to Administrative Procedures Act challenges, as the Pennsylvania case is. Few other than attorneys are interested in this part, he quipped, but whether the agency receives deference impacts the entire rest of the case. "If we convince the judge this is a normal APA case and NCUA complied, there is a very good chance we will win the case," Richard stated.

He added that it helps to coordinate some with NCUA and the Department of Justice since the briefs permitted are limited and the agency and the intervenors can make different arguments as necessary. Additionally, it is good for the credit unions to represent the practical side of the lawsuit while the agency is representing its regulatory prerogative.

"We obviously talk to the agency, but we're not working with them.but we're certainly keeping them informed of what we're up to," NAFCU Senior Counsel Carrie Hunt explained.

Paul Lambert, a partner with Bingham McCutchen LLP, has been representing the credit unions for a long time, including in the AT&T case. Richard explained, "He understands credit unions, understands administrative law very well."

He added, "I don't believe you save money or time or efficiency or anything else by using cut-rate counsel."

Level of involvement is another consideration. As intervenors, the trade associations and credit unions receive equal treatment with NCUA, the original defendant. Other times, the groups can choose to simply file an amicus brief providing another voice in a case, but not all judges accept these as was the case when the National Community Reinvestment Coalition sued NCUA for repealing the Community Action Plan.

Still, in other cases, the parties choose to wait and see what is going to happen before leaping in as in the current case pending in Utah where the ABA is challenging the authority of non-multiple common bond credit unions to adopt underserved areas.

In Utah, Richard explained, "The spending of money may not have any impact on the outcome.Right now, it's just a bunch of motions pending and it doesn't feel like the right timing for us." He said he expects the new field of membership policy dealing with this to come out at the June NCUA Board meeting.

Hunt said NAFCU is monitoring the case in Utah, which the judge could still dismiss. "If they add more credit unions and expand the scope of the case, [greater involvement] is certainly an option, but we'll cross that bridge when we get there."

The case for mootness is "particularly strong" in Utah, according to Richard, since NCUA set the precedent by repealing America First Federal Credit Union's approved underserved area. "One of the wonderful things about this job is that credit unions work together so wonderfully and cooperatively," Richard said. America First gave up its underserved area for the good of the credit unions as a whole, he noted.

Credit unions also have another advantage in that the bankers have been forced to file "as applied" suits after losing a series of cases challenging NCUA's implementation of H.R. 1151. "Since then they have been required to bring `as applied' cases, which is much more inefficient and costly because it depends on the facts of each individual case," Richard explained.

He admitted that the bankers were partly successful in the original Utah suit over America First's community charter because it was remanded back to NCUA, but the court did not deny it could be a community. However, there is a different history to the Members 1st suit because NCUA turned down an earlier package and the six-plus counties represent a smaller percentage of the state's population.

NCUA and the credit unions do not have a harassment claim just yet, but if they win it could set the stage for one, Richard said. If the credit unions lose, it will not be fatal because it will only apply to that one particular set of facts.

However, cumulatively, the lawyer said, "Clearly it's negative politically when we lose a case because it's not just the bankers saying we're doing something wrong. It's also somebody with some credibility." NCUA last year lost suits in Texas where its treatment of credit union conversions to mutual savings banks was challenged.

"Lawyering in this field has to be three-dimensional," Richard said between the law, public relations, and politics. -scooke@cutimes.com