United States District Court, E.D. Michigan, Southern Division
James M. Perna, Plaintiff,
Health One Credit Union, et al., Defendants.
Anthony P. Patti U.S. Magistrate Judge
OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR
SUMMARY JUDGMENT  AND GRANTING DEFENDANTS' MOTION FOR
SUMMARY JUDGMENT 
J. TARNOW SENIOR UNITED STATES DISTRICT JUDGE.
James Perna, brings this suit to enforce an arbitration award
against his former employer, Defendant Health One Credit
Union (“HOCU”), and the National Credit Union
Administration Board, the federal agency that liquidated that
credit union. Though state and federal law provides courts
the authority to enforce arbitration agreements, the Federal
Credit Union Act (“FCUA”), which governs this
suit, severely limits that authority. Because the FCUA trumps
conflicting provisions of state and federal arbitration law,
Defendants will be granted summary judgment.
Perna began working for HOCU on January 16, 1971. (Compl.
¶ 7). His employment contract was repeatedly renewed
over the course of the intervening years, and he eventually
became the highest-ranking employee at HOCU. (August 27, 2018
Arbitration Hearing Tr., Dkt. 1-3, pg. 13).
16, 2014, Annette Flood, the Director of the Office of Credit
Unions for Michigan's Department of Insurance and
Financial Services (“DIFS”), appointed the NCUA
Board as the conservator of HOCU, pursuant to M.C.L. 490.241.
(Dkt. 1-4, Ex. C). Director Flood based her decision on a
confidential DIFS staff memorandum, and found that it was
necessary to appoint a conservator “to conserve the
credit union's assets, for the benefit of its members,
depositors and other creditors.” (Id.). That
same day, Mr. Perna was terminated by a letter signed by L.J.
Blankenberger, “Agent for the Conservator, ” and
the Director of Region 1 of the NCUA. The letter explained
that Federal Credit Union Act provided the Conservator the
right to repudiate any contract that is deemed burdensome and
whose repudiation would promote the orderly administration of
the credit union's affairs. (Dkt. 1-5, Ex. D (citing 12
U.S.C. § 1787(c))). Mr. Perna's employment contract
was deemed by the conservator to be one such contract.
his sudden termination, Mr. Perna filed for unpaid wages and
fringe benefits with the Occupational Safety and Health
Administration Wage and Hours Program of the Michigan
Department of Licensing and Regulatory Affairs
(“LARA”). The NCUA Board's counsel, in a
December 5, 2014 letter to Katherine Woods, an investigator
at LARA, asserted that “Mr. Perna's tenure as CEO
was not successful and ultimately led to Health One's
current financial predicament.” (Dkt. 18-6; Ex. 5). The
letter also explained that the Federal Credit Union Act gives
the NCUA, in capacity as conservator, the discretion to
repudiate burdensome contracts is such repudiation
“will promote the orderly administration of the credit
union's affairs.” (Id. citing 12 U.S.C.
§ 1787(c)(1)). Mr. Perna's claims for expenses and
vacation pay, the NCUA reasoned, were barred because the
contracts on which those claims were based were repudiated
(Id.). A January 29, 2015 letter from Ms. Woods
explained that LARA was rejecting Mr. Perna's claim for
fringe benefits because they were not allowed under the plain
language of the employee handbook. (Dkt. 18-7, Ex. 6).
1, 2015, Ms. Woods sent an amended letter finding that since
Mr. Perna's employment agreement with HOCU contained an
arbitration clause, LARA would take no further action in the
case. (Dkt. 18-10, Ex. 9). “Resolution of this claim
has been preempted by the contractual assent to arbitration
by the American Arbitration Association for the issues being
on May 14, 2015, Mr. Perna, through counsel, sent a letter to
Conservator Blankenberger of the NCUA Board making claims for
unpaid wages and fringe benefit pursuant to the severance
agreement in his employment contract. (Dkt. 18-11, Ex. 6).
The letter argued that since Mr. Perna was never apprised of
time limits for filing claims under 12 U.S.C. § 1787, he
was entitled to begin filing for an administrative claim
pursuant to § 1787(b)(5). (Id.). On November
20, 2015, Mike Barton, President of the Asset Management and
Assistance Center of the NCUA, denied Mr. Perna's claim
as untimely. That letter cited NCUA Regulations §
709.6(a)(1) for the proposition that “failure to submit
a written claim [against the liquidated credit union] within
the time provided in the notice to creditors shall be deemed
a waiver of said claim and the claimant shall have no further
rights or remedies with respect to such claim.” (Dkt.
18-12, Ex. 11).
Perna's attorney responded to the November 20, 2015
denial letter with a December 9, 2015 letter where he argued
that the Repudiation of Agreement and Termination of
Employment notice that Mr. Perna was given never included a
notice of the time to bring a claim regarding his employment
contract. (Dkt. 18-13, Ex. 12). Mr. Barton denied the request
for reconsideration, observing that the exception for denial
of late claims outlined in 12 U.S.C. § 1787(b)(5)(C)(ii)
does not apply where the claimant had notice that a
liquidating agent had been appointed. (Dkt. 18-14, Ex. 13).
Perna then scheduled an arbitration with the American
Association of Arbitrators (“AAA”). Neither
representatives from HOCU nor from the NCUA Board made an
appearance in the arbitration, however, even after the
arbitrator sent them letters that the arbitration would be
held in their absence. (Arb. Hr'g Tr. 6). Rob Robine, a
trial attorney with the National Credit Union Administration,
responded with an email to an AAA representative explaining
that “the employment agreement containing the
arbitration clause was repudiated pursuant to federal law, in
connection with the conservatorship of Health One Credit
Union.” (Dkt. 18-22, Def. Ex. 21). The email closed:
“Please do not contact our office further regarding
this arbitration.” (Id.). The arbitration
hearing was held on August 27, 2018, without the presence of
the Defendants or briefing on their behalf. (Arb. Hr'g
Tr. 6). Plaintiff paid Defendants' share of the
arbitration fee. (Id. at 8).
October 12, 2018, Arbitrator Samuel McCargo issued an award
for Mr. Perna and against HOCU in the amount of $315, 645.02.
(Arbitration Award, Dkt. 1-3, Ex. 15). The Arbitrator
observed that since his authority derived from the employment
contract between HOCU and Mr. Perna, he would not decide the
NCUA Board's obligations to Mr. Perna. (Id.).
filed his case on November 7, 2018 in Macomb County Circuit
Court. Defendants removed the case to federal court on
January 2, 2019 on the basis of the FCUA's grant of
jurisdiction to civil suits in which the NCUA is a party. 12
U.S.C. § 1789(a)(2). [Dkt. # 1]. That same day,
Defendants filed their Motion to Substitute Party . After
receiving further briefing from both parties, the Court, on
April 2, 2019, granted in part and denied in part that
motion, adding the NCUA Board as a party, but declining ...