SDCCU and Cal Coast legal battle over the proposed merger.
A California judge on Thursday denied a preliminary injunction that would have blocked the $9.3 billion San Diego County Credit Union from terminating its agreement to merge with the $3.4 billion California Coast Credit Union, also based in San Diego.
Cal Coast sought a preliminary injunction to prevent SDCCU from terminating a merger agreement based on what it said were manufactured excuses to re-trade its fundamental terms. SDCCU countered that the merger agreement allowed it to cancel the consolidation after finding that Cal Coast allegedly misrepresented its operations and violated multiple regulations, creating unacceptable risks for a multi-billion dollar cooperative that would be closely scrutinized by state and federal regulators.
"Given the current situation – namely, the termination of the Merger on one hand and Cal Coast's continued interest in pursuing the Merger on the other – the request is challenging and arguably impractical, as it would require parties who are now in an adversarial relationship to work together and move forward with the Merger," California Superior Court Judge Carolyn M. Caietti wrote in an 11-page ruling. "These facts do not support the issuance of a preliminary injunction."
One of the key legal issues was whether Cal Coast met the requirements for a preliminary injunction, which under California law requires the likelihood of success on the merits of Cal Coast's case and whether the balance of harms favored Cal Coast.
Judge Caietti found the credit union failed on both requirements.
In a statement to CU Times, Cal Coast spokesperson Robert Schied said, "California Coast Credit Union is disappointed in the Court's decision on the motion. We respect the Court and remain confident in the merits of our case. As we evaluate the ruling, our top priority continues to be serving our members and maintaining full compliance with all applicable laws and regulations."
Because Cal Coast was seeking a mandatory injunction that would have forced SDCCU to move ahead with the merger pending trials, the court said this is not permitted except in extreme cases.
"In balancing the harm, the Court finds the harm to SDCCU is greater if the injunction were granted than the harm to Cal Coast if the injunction is not," the court wrote. "Cal Coast argues it will potentially lose a unique merger opportunity and suffer reputational harm, however, Cal Coast has failed to address how this cannot be compensated monetarily, especially considering the (supplemental merger agreement) specifically contracted for the monetary damages to be awarded in the event of termination and is silent as to specific performance."
What's more, Cal Coast argued that SDCCU improperly terminated the merger agreement, but Judge Caietti disagreed.
"SDCCU's argument that there is an overall lack of compliance and lack of knowledge of the alleged compliance problems by Cal Coast, which is the primary material breach here, is persuasive," the court wrote.
It was during the merger's integration process that SDCCU grew concerned about Cal Coast's alleged lack of controls and non-compliance issues regarding its technology, auto and QCash loans. SDCCU also alleged Cal Coast had deficient policies for unfair, deceptive or abusive acts or practices.
Because of these numerous problems, SDCCU decided to terminate the merger agreement in November 2025, after which Cal Coast filed its lawsuit seeking a preliminary injunction.
"The evidence demonstrates Cal Coast was not reporting hard loan modifications and did not disclose those to SDCCU; did not monitor employees to ensure compliance with proper loan procedures; there was lack of confidence that Spanish-speaking call center staff knew what to do when dealing with Spanish-speaking loan applicants and Spanish loan disclosures," Judge Caietti wrote. "The overall evaluation of this evidence supports the conclusion that there was widespread institutional compliance issues and that Cal Coast failed to implement systems preventing discriminatory practices."
Since Cal Coast's leadership would comprise a majority of the combined credit union's board under the supplemental merger agreement, there is little reassurance that these non-compliant practices would be corrected, Caietti noted.
Peter Strozniak can be reached at peter.strozniak@arc-network.com.
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