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Jones v. Board of Directors of Valor Credit Union

Superior Court of Pennsylvania

August 21, 2017

THOMAS T. JONES, JR., Appellant

         Appeal from the Order entered September 15, 2016 in the Court of Common Pleas of Lackawanna County, Civil Division, No(s): 2015-5854



          MUSMANNO, J.:

         Thomas T. Jones, Jr. ("Jones"), an individual member of Valor Credit Union ("the Credit Union"), [1] appeals from the Order granting the Preliminary Objections filed by the Board of Directors of the Credit Union (hereinafter the "Board"), and dismissing Jones's Complaint. We affirm.

         The trial court set forth the relevant factual and procedural history underlying this appeal as follows:

This case initiated [on] October 2, 2015, at which time [Jones] filed a Motion for Allowance of Discovery in Aid of Pleading. He essentially alleged that[, ] according to a press release by the Federal Bureau of Investigation ("FBI"), [the] former president of the Board …, Sean Jelen [("Jelen")], had been engaged in improper financial activity []in his capacity as president of the [B]oard during the tenure of the other named [B]oard members. [Jones], however, could not ascertain the nature and extent of the improper financial activity without the aid of certain documents requested. Specifically, [Jones] requested books and records for inspection, but was denied access by the [B]oard's counsel in [a] letter dated September 17, 2015. [Jones] concurrently filed a Request for Production of documents seeking: 1) books and records of [the] Credit Union detailing any and all expenditures made by [] Jelen since January 2012; 2) audits and recommendations made since January 2012; 3) documents memorializing any Board activity regarding [] Jelen from the date of his hiring to present; 4) [the] Credit Union's Best Practices regarding corporate disbursements and the use of funds by officers and directors; and 5) Errors and Omissions policies of coverage for the [B]oard. By Order dated November 13, 2015, th[e trial c]ourt denied [Jones's] Motion.
On March 21, 2016, [Jones] filed his Complaint against the Board []. He allege[d] improper financial activity on the part of … Jelen …. He further assert[ed] that the [B]oard is liable for [its] failure to fulfill fiduciary obligations in connection with Jelen's inappropriate conduct. He contend[ed] that the Board's action and/or inaction has resulted in [the Credit Union] suffering irreparable harm due to the diversion of its assets.
* * *
[Jones] alleged that he is and has been a member of [the] Credit Union since 2005, … and that his suit "is a derivative action on behalf of the Depository and Loan members of [the Credit Union] arising from the mismanagement, nonfeasance, misfeasance, and potential criminal activities of the [] Board [] and … Jelen[.]" ([] Complaint, [3/21/16, ¶] 12). [Jones] essentially alleges that [the] Credit Union and its members collectively have suffered injury as a result of [the Board's] actions and/or inaction.
[The Board] filed Preliminary Objections to [the] Complaint on April 8, 2016. Among the several objections raised, [the Board] contend[s] that [Jones] lacks standing or capacity to sue pursuant to Pennsylvania Rule of Civil Procedure 1028(a)(5) [(regarding preliminary objections for lack of capacity to sue)]. ([ Preliminary Objections, [4/8/16, ¶] 17). [The Board] aver[s] that "[Jones] does not allege that any money was removed from his account(s) or that he has suffered any direct financial harm to his interest." ([Id. ¶] 18). Moreover, [the Board] posits that[, ] as a member of a federal credit union, [Jones] is a depositor in a financial institution, not a shareholder in a corporation capable of bringing a derivative action on behalf of a corporation.

Trial Court Memorandum and Order, 9/15/16, at 1-3.

         In June 2016, Jones filed an Answer to the Preliminary Objections and a brief in opposition thereto. The trial court conducted a hearing on the matter on June 24, 2016. Following a procedural history that is not relevant to this appeal, on September 15, 2016, the trial court granted the Board's Preliminary Objections and dismissed Jones's Complaint. In so ruling, the court stated in its Memorandum and Order, in relevant part, as follows:

In his Complaint, [Jones] does not allege any injury suffered personally. As such, it is clear that [] Jones, individually, lacks standing to bring suit against [the Board]. However, [Jones], a member of [the] Credit Union, unambiguously seeks to bring suit on behalf of [the] Credit Union, alleging that it has suffered irreparable harm as a result of [Jelen's] actions and [the] Board['s] inaction. He styles his cause of action as a derivative suit[, ] as a corporation's shareholder would file an action on behalf of a respective corporate entity.
Th[e trial c]ourt is unaware of any statutory or common law authority that would confer standing upon [Jones] to sue on behalf of [the] Credit Union, and [Jones] fails to present any. This [c]ourt recognizes that[, ] as a [f]ederal [c]redit [u]nion, [the Credit Union] is subject to the federal regulations set forth within the [FCUA], which does not provide any basis for a member to have standing or capacity to bring a derivative action[, as ...

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