Vibrant CU Sues Infinity FCU Over Costs of Canceled Merger

The $1 billion Vibrant Credit Union in Moline, Ill., sued the $336 million Infinity Federal Credit Union in Westbrook, Maine for failing to pay its share of the $395,000 in costs of a proposed merger that was called off after months of due diligence and negotiations.

Between December 2018 and September 2019, the credit unions were in discussions of Infinity FCU to consolidate into Vibrant CU.

Elizabeth Hayes, Infinity FCU’s president/CEO, employees, board members and others traveled six times from Maine to Illinois in 2019 for merger negotiations, according to the Vibrant’s civil lawsuit filed in U.S. District Court in in Rock Island, Ill., in March.

When the merger was publicly announced, Infinity said it explored local merger options but determined Vibrant was a good fit because it supported Infinity’s culture. According to Infinity, consolidating with the Illinois financial cooperative would have been beneficial because it would have enabled Infinity to bring out-of-state resources to fuel expansion and growth in Maine.

Vibrant drafted a letter of intent setting the terms, conditions and expectations for Vibrant and Infinity to advance the merger, which Hayes agreed to and signed, according to the lawsuit. Matt McCombs, president/CEO of Vibrant executed that letter of intent in June 2018 to pursue the merger transaction.

But by September 2019, Hayes wrote a letter to McCombs to terminate negotiations for a definitive agreement because of Infinity’s inability to reach agreement with Vibrant on key aspects of the merger.

In its lawsuit, Vibrant said there is a clause in the letter of intent that states Vibrant will cover the merger’s costs and expenses unless the transaction is cancelled. If the transaction did not take place, then the expenses would be split based on the prorated percentage of each credit union’s assets.

Vibrant said it paid the total merger costs of $395,072. Infinity’s share of the pro-rata merger cost is $121,247.

Vibrant alleges Infinity breached its contractual obligations under the letter of intent and is suing Infinity to pay the $121,247, plus interest.

On May 3, Infinity filed court documents that asked a federal court judge to dismiss Vibrant’s lawsuit.

Infinity argued there was no binding contract between the parties because no definitive agreement was ever reached, making the letter of intent unenforceable.

Specifically, the letter of intent is not a binding contract because it specifically provides that it is not a contract, and that a potential definitive agreement would not have been substantially similar to the letter of intent, according to Infinity’s court filing.