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Court dismisses Corp. Central case v. US Central NCUA
WASHINGTON (8/31/10)--A suit alleging breach of conduct, violation of bylaws, and more, against U.S. Central FCU was dismissed by the U.S. District Court for the Eastern District of Wisconsin earlier this month. Corporate Central CU (CCCU) filed suit in October 2009 seeking a refund of $6 million, which represents a portion of its membership capital shares balance from U.S. Central FCU. In addition to charging breach of conduct and bylaws violations, the complaint sought an injunction against the National Credit Union Administration (NCUA) to stop the agency from “continuing and enforcing a policy that violates Corporate Central’s constitutional right to equal protection,” and a declaration of CCCU’s “rights with respect to Corporate Central’s property.” The NCUA took over U.S. Central in early 2009, but was named in the suit because of its role as regulator, not conservator. The agency sought dismissal of the lawsuit last January. While rejecting portions of the agency’s motion to dismiss, District Judge Lynn Adelman granted the request on Aug. 19, finding that the NCUA’s actions had a “rational basis” and therefore did not violate constitutional equal protection under the Fifth Amendment. The judge wrote that the NCUA can take “any action that is necessary to put [U.S. Central] in a sound and solvent condition; and… (is) appropriate to carry on the business of [U.S. Central] and preserve and conserve the assets and property of [U.S. Central].”) The NCUA’s action to bar members from receiving refunds of excess MCS investments, which is key to CCCU’s suit against the agency and U.S. Central, “clearly furthers its interest in putting U.S. Central in a sound financial condition and thus has a rational basis,” the court decision said. The court declined to rule on CCCU’s breach-of-contract, violation-of-bylaws, and other state-law claims on the basis that those claims belonged in state court. The judge went on to opine that the NCUA’s decision “likely prevented a run on excess investment on members’ capital accounts, surely a desirable outcome.” The decision also noted that even if CCCU’s argument that the NCUA could have handled the situation differently is true, that does not negate the agency’s authority to take the action that it did. An attorney for CCCU, Daniel Kelly of Reinhart Boerner Van Deuren s.c., in Milwaukee, said his client “has no comment about the case at this time.” The NCUA also declined to comment except to endorse the court’s decision.


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