A loan participation suit filed two years ago against the defunct Eastern Financial Florida Credit Union to recoup millions in losses will not include Space Coast Credit Union, a federal court recently ruled.
The $3 billion Space Coast in Melbourne, Fla., which acquired the troubled EFFCU in June 2009, taking on the cooperative's financial woes, is no longer a defendant in the suit, Meredith Gibson, a SCCU credit union spokeswoman, confirmed with Credit Union Times.
In the July 3 ruling, the court said that the case against SCCU did not have enough merit to proceed, Gibson said.
The $302 million Sperry Associates Federal Credit Union in Garden Park, N.Y., filed the suit against EFFCU in August 2010 to recover failed participation loans in deals that included at least $9 million of the loans that were bought and sold by Sperry.
Also named in the suit were CU Business Capital LLC, which underwrote the participation loans, and CUBC's successor, Small Business America in Linthicum, Md. CU Business Capital was founded by EFFCU.
Meanwhile, Space Coast is moving forward with its $100 million suit filed in February against Merrill Lynch, Wachovia Capital, Barclays Capital, Lehman Brothers' former CEO Richard Fuld and major U.S. credit rating agencies, Standard & Poor's and Moody's, alleging that they conspired to inflate allegedly toxic bonds into investment-grade securities using fraudulent credit ratings and that the investment banks dumped those inflated securities onto unsuspecting investors.
The investments were initially sold to EEFCU. The plaintiffs claimed that the credit union knew the risks of engaging in the collateralized debt obligations before buying them.
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