An appellate court ruled against Spencer Savings Bank SLA in its bid to reverse a lower court decision eliminating a 10% member threshold for director nominations in a case that was brought by activist investor Lawrence Seidman.
The Superior Court of New Jersey Appellate Division affirmed the lower court's nullification of the Elmwood Park, N.J.-based mutual's threshold that a nominated candidate should be supported by at least 10% of its members and agreed with the lower court's decision that the threshold "was too onerous and unreasonable" and was based on the board's "disdain" and "fear" that Seidman might force the bank to convert to a stock company.
The appellate court did, however, reverse the trial court's imposition of an alternative 1% or 500-member nomination standard, the same threshold employed by federal credit unions. The appellate court said the decision was premature and should be left to the commissioner of the New Jersey Department of Banking & Insurance. Despite striking down the trial judge's ruling, the appellate court said it appreciated the judge not leaving the bank's
"The Board has already whiffed three times in setting the nomination threshold. It was not unreasonable for the trial judge to expect a fourth attempt by the Board would produce yet another insurmountable barrier," the appellate court said. "The judge did not abuse his broad equitable authority in attempting to devise a new threshold, in light of this unique and repetitive history and his well-supported findings of the Board's entrenching conduct and persisting bad faith."
The appellate court requested the banking commissioner rule on the nomination threshold within 90 days. It also upheld the lower court's decision reversing the closure of Seidman's accounts with the bank.
"I'm very happy with the decision and I'm looking forward to getting to the point where we can nominate directors for Spencer Savings Bank," Seidman told S&P Global Market Intelligence. Spencer did not immediately respond to a request for comment.
