Judge tells NCUA and WesCorp plaintiffs they must present a joint complaint.
Although U.S. District Court Judge George Wu granted the NCUA exclusive rights to derivative claims, he also granted the credit union plaintiffs the right to continue investigating their direct claims, according to court documents.
Further, the two sides must work together and present a joint amended complaint in court August 31.
At issue was the question of whether the negligence and breach of fiduciary duty suit merited a derivative claim or a direct claim. Derivative claims concern damages afflicted upon an entire organization; in this case, negligent acts and breach of fiduciary duty committed by the director and employee defendants, which caused all WesCorp members to experience losses. Direct claims seek to recover losses specifically suffered by the seven plaintiff credit unions. The NCUA had argued the suit did not warrant any direct claims.
Wu flatly denied the plaintiff credit unions' argument that for the NCUA to substitute in as plaintiff when it serves as conservator of the institution would be "absurd and impractical." At the very least, he wrote, the NCUA is granted all rights to derivative claims.
However, he was equally critical of the NCUA's legal argument, writing that "NCUA appears to concede that if plaintiffs do have a valid direct claim, the NCUA should only be substituted in as plaintiff on the derivative claim."
Lead credit union plaintiff Stuart Perlitsh, president/CEO of the $282 million Glendale Area Schools FCU, told Credit Union Times Judge George Wu also scheduled an Aug. 5 status conference, in which both sides must appear before the judge to report on the progress of the case and how well they are working together.
"The seven plaintiff credit unions look forward to working cooperatively with the NCUA in complying with the federal court order," Perlitsh said.
NCUA Spokesman John McKechnie declined to comment on the case.