CLEVELAND, Ohio (9/7/10)--The National Credit Union Administration (NCUA) filed suit in a U.S. District Court in Ohio Thursday, seeking an injunction to stop arbitration of a participation loan agreement that involved a credit union it placed into liquidation in May. NCUA is contesting the ownership of the participation loan, which was sold by the now defunct St. Paul's Croatian FCU of Cleveland, to Lormet Community FCU, Amherst, Ohio. Lormet had filed a suit before the American Arbitration Association (AAA) for emergency relief over the portfolio against NCUA and its Asset Management and Assistance Center, the liquidating agent. According to the court documents, Lormet claims it owns 90% of a portfolio of more than $8 million in outstanding loans that St. Paul Croatian held and serviced. "LorMet has been shut out both from information concerning and control of the loans that it principally owns, and has reason to fear that the asset is deteriorating or has been improperly combined with other assets in St. Paul's estate," said the credit union's complaint. It cites a provision of the May 7, 2007 loan-participation agreement that gives it the right to the entire loan upon "insolvency, liquidation or appointment by any public or supervisory authority of any person or firm in charge of St. Paul's assets." NCUA filed its request for an injunction in the U.S. District Court for the Northern District of Ohio--Eastern Division in Cleveland to stop AAA from proceeding with Lormet's claim. The agency said it is not bound by the arbitration provision in the agreement because it is not party to the agreement and the agreement provides that federal law controls on the issues. The injunction request also said that Lormet's sole remedy is to pursue its claims with the liquidating agent, and that LorMet had waived any rights to pursue its claims through arbitration because it filed its claim first with NCUA's liquidating agent. Participation loans have prompted several lawsuits related to defunct credit unions recently. The latest occurred in August, when a suit was filed related to the loans from Eastern Financial Florida CU.