In this case, the Court addressed whether several employment contracts entered into between the Credit Union and its CUSO were enforceable.

Here, the Credit Union desired to sell disability insurance to its members, but the regulations for federal Credit Unions prohibits any activity of this nature for profit.

Hence, the Credit Union formed a CUSO for the purpose of selling insurance and entered into several employment contracts for this purpose.

The individuals who contracted with the Credit Union and CUSO performed their duties without complaint from the CUSO, however, their contracts were terminated by the Credit Union and CUSO when the budget exceeded that permitted by the federal regulators.

The employees sued both the Credit Union and CUSO for breach of contract and sought, among other things, vacation pay, lost wages, use of automobile, club memberships and insurance benefits.

The Court of Appeals ruled in favor of the employees and held that one of the employees must be compensated for more than $42,000.00, while another must be compensated for more than $44,000.00. James Dunn v. CUSO, Inc., Ft. Campbell Federal Credit Union, et al., (Court of Appeals of Tennessee, Middle Section, No. 01-A-019102CV00050).

Author: Charles R. Harroun, Attorney at Law