Jones v. Board of Directors of Valor Credit Union
169 A.3d 632
| Pa. Super. Ct. | 2017Background
- Thomas T. Jones, Jr., a member of Valor Credit Union (a federal credit union), alleged the Credit Union’s former board president, Sean Jelen, engaged in improper financial activity and that the Board failed in fiduciary duties, causing diversion of assets.
- Jones sought books and records and filed a complaint styled as a derivative action on behalf of the Credit Union; he did not allege any personal monetary injury to his own accounts.
- The Board denied access to records and filed preliminary objections asserting Jones lacked capacity/standing to sue because he alleged no personal injury and was a depositor, not a corporate shareholder.
- The trial court sustained the Board’s preliminary objections and dismissed the complaint for lack of standing to bring a derivative action on behalf of a federal credit union.
- On appeal, Jones argued state derivative rules and analogies to shareholders (and federal guidance treating bylaws like contracts) support member standing to bring a derivative suit for a federal credit union.
- The Superior Court reviewed de novo and affirmed: federal law (FCUA) does not confer member derivative standing; Pennsylvania Credit Union Code provisions cited by Jones do not apply to federal credit unions; Jones also conceded he did not pursue prerequisite efforts under Pa.R.C.P. 1506.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a member of a federal credit union has standing to bring a derivative action on behalf of the credit union | Jones: credit union members are analogous to corporate shareholders; state derivative rules and credit-union statutes support member standing | Board: Jones alleges no personal injury; as a member/depositor of a federal credit union he lacks derivative standing; federal law (FCUA) and inapplicability of state Code prohibit such suit | Held: No standing. FCUA does not confer member derivative standing; state Credit Union Code section relied upon is inapplicable to federal credit unions; Jones did not meet Pa.R.C.P. 1506 prerequisites |
| Whether Pa.R.C.P. 1506 permits Jones’s derivative action without prior demand | Jones: (implicitly) rule and derivative practice allow suit | Board: Jones made no effort to compel corporate enforcement or satisfy rule’s demand/refusal requirements | Held: Jones conceded he made no effort; Pa.R.C.P. 1506 not satisfied, so derivative path fails |
Key Cases Cited
- Morrison Informatics, Inc. v. Members 1st Fed. Credit Union, 97 A.3d 1233 (Pa. Super. 2014) (standard for reviewing preliminary objections)
- Hill v. Slippery Rock Univ., 138 A.3d 673 (Pa. Super. 2016) (pleading sufficiency and sustaining preliminary objections standard)
- Pittsburgh Palisades Park, LLC v. Commonwealth, 888 A.2d 655 (Pa. 2005) (standing requires plaintiff be aggrieved with a direct, substantial interest)
- Cuker v. Mikalauskas, 692 A.2d 1042 (Pa. 1997) (Pa.R.C.P. 1506 demand/refusal requirements for derivative suits)
- Fitzpatrick v. Shay, 461 A.2d 243 (Pa. Super. 1983) (application of derivative-action demand rule)
- Pa. Bankers Ass’n v. Pa. Dep’t of Banking, 893 A.2d 864 (Pa. Cmwlth. 2006) (describing credit union members as owners/purchasers of shares; distinction between banks and credit unions)