Court dismissed a suit brought in this action against a credit union for discharging its President and CEO.

In this case, Nevada Federal Credit Union held a regularly scheduled meeting and voted 5-2 not to renew the employment contract of Robert Street, its then President and CEO.

After obtaining legal advice, a second meeting was convened, at which time the same vote was reiterated. The Board indicated that they had lost trust and confidence in Mr. Street.

Thereafter, the Supervisory Committee sent a letter to Board of Directors inquiring whether the decision to terminate Mr. Street was the result of any misconduct that threatened the safety or soundness of the credit union. An NCUA examiner also followed up on this request by the Supervisory Committee, however, there was no reply from the Board.

The Supervisory Committee then met to consider what action, if any, should be taken against the Board. After considering the failure of the Board to reply as to whether or not there was any threat to the safety and soundness of the credit union, the Committee also considered a previous investigation of Board members’ abuses of credit card usage, travel and compensation policies utilized by the Board members.

The Supervisory Committee voted to suspend five of the Board members. This suit was then commenced by the Board members against the credit union and each of the members of the Supervisory Committee for wrongful removal and defamation.

The Court initially noted that the Board failed to contend that the Federal Credit Union Administration gives them either an express or an implied right of action for their removal. Rather, the Board argued that they had a cause of action under federal common law.

The court ruled that the Board members did not have a viable cause of action and dismissed the suit against both the credit union and the individual members of the Supervisory Committee.  Jeanette Jesinger, et al. v. Nevada Federal Credit Union (U.S. Court of Appeals, 9th Cir., Case No. 92-15807).

Author: Charles R. Harroun, Attorney at Law