Compass Lexecon Client San Diego County Credit Union Prevails in Merger Dispute with California Coast Credit Union
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California Coast Credit Union v. San Diego County Credit Union is a matter in the Superior Court of the State of California, County of San Diego, arising from the proposed merger of two San Diego based credit unions. On March 27, 2025, San Diego County Credit Union (“SDCCU”) and California Coast Credit Union (“Cal Coast”) signed a merger agreement whereby the two companies would combine. During the post signing integration process, SDCCU uncovered what it claimed were Cal Coast’s lack of controls and outright non-compliance with various banking regulations. As a result, SDCCU terminated the merger agreement. Cal Coast sought an injunction from the Court asking it to force the merger to take place.
Compass Lexecon supported bank compliance expert Charles Grice, who was retained by counsel for SDCCU to evaluate Cal Coast’s compliance function as compared to regulator guidance and expectations, to analyze the alleged compliance deficiencies at Cal Coast, and to opine on whether Cal Coast’s compliance function was consistent with industry custom and practice. In a report submitted to the Court and in deposition testimony, Mr. Grice opined that Cal Coast’s compliance function created substantial risk of consequential negative regulatory findings, including enforcement actions, fines, and litigation. Mr. Grice further opined that Cal Coast’s injunction would create excessive hardship on SDCCU.
After hearing oral arguments, Judge Carolyn M. Caietti denied Cal Coast’s injunction motion, thereby denying Cal Coast’s request to stop SDCCU from terminating the proposed merger. Judge Caietti’s opinion was consistent with that of Mr. Grice, and stated that “SDCCU's argument that there is an overall lack of compliance and lack of knowledge of the alleged compliance problems by Cal Coast, which is the primary material breach here, is persuasive,” and that “the evidence suggests Cal Coast leadership was either unaware of or impliedly/constructively approved the alleged issues of noncompliance and discriminatory practices.”
Mr. Grice was supported by a Compass Lexecon team that included Adel Turki and Jonathan Polonsky, and Lisa Murphy at CRI Compliance.
Compass Lexecon worked with SDCCU’s counsel at Quinn Emanuel Urquhart & Sullivan, LLP including Jonathan Feder, and Julia Rodrigues, and co-counsel at Weiner Brodsky Kider PC, including Fed Kamensky, Timothy Ofak, and Mitchel Kider.