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Oral arguments made in Kentucky FOM case
FRANKFORT, Ky. (11/19/09)--Oral arguments were presented Wednesday in the Supreme Court of Kentucky regarding a field of membership (FOM) case that affects Kentucky credit unions’ ability to serve members based on geography. The case, Home Fed. Sav. & Loan v. Kentucky, was brought by the Home Federal Savings and Loan Association against the Kentucky Office of Financial Institutions (OFI)--now the Department of Financial Institutions (DFI)--in May 2006. The suit alleges that the DFI has no authority under Kentucky law to approve geographic FOM bylaws for Kentucky credit unions (News Now Feb. 17). In 2007, the Kentucky Circuit Court for Franklin County ruled that the DFI exceeded its statutory authority when it approved geographic FOMs for six state-chartered credit unions between 2000 and 2005. In November 2008, an appeals court upheld the decision. In 1984, Kentucky shortened a lengthy statute about the members that credit unions can serve to “credit union memberships shall be limited to persons having a common bond or similar occupation, association or interest.” The statute does not specifically mention geography, which Home Federal used to argue that DFI can't approve geographic FOMs. During the oral arguments, several justices asked questions regarding whether the Kentucky Legislature's 1984 revisions to the FOM statute had been intended to broaden Kentucky's credit union FOM criteria, as the credit union parties have argued, or whether the legislature had instead intended to restrict credit union FOMs, as Home Federal's attorney argued. DFI had approved these geographic FOMs by interpreting the term “similar . . . interests” to include the similar interests that people living and/or working in the same community share, and the justices asked whether it was reasonable to interpret “interests” in this manner given that the word's meaning is ambiguous in context. In Wednesday’s arguments, attorney David Wilson, who represented the six credit unions, said that the lower courts’ logic was incorrect when it concluded that DFI overstepped its bounds when approving the geographic FOMs. Wilson argued that--if the Kentucky legislature had in fact intended to eliminate geographic FOMs when it revised the Commonwealth's credit union act in 1984, as Home Federal argued--the legislature must also have intended to eliminate credit union membership based on selected employee groups (SEGs). Neither geographic FOMs nor SEGs are specifically mentioned in the 1984 version of the FOM statute, even though many Kentucky credit unions serve SEG memberships and DFI has routinely approved new SEG FOM bylaws since 1984. In his brief, Wilson wrote: "the lower court's logic relative to credit union membership appears at first glance to be sound when applied to membership predicated upon geographic residence. However, if the same logic is applied to the credit union membership statute in its entirety, an absurd result is reached." Jill Endicott, who represented Home Federal, rejected Wilson's argument about the SEGs on Wednesday, saying it was not part of the issue The Supreme Court of Kentucky will issue an opinion on the matter.


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