By Brandy Bruyere
SAN DIEGO—On the whole, the credit union industry is not known for a huge amount of drama as that is not in line with the member-focused mindset of the industry. However, a planned merger between California Coast Credit Union and San Diego County Credit Union, which would create the fourth-largest credit union in California and the 16th-largest in the U.S., abruptly and loudly came to a screeching halt.
The credit unions filed a merger application with the NCUA and state regulators last year. Unfortunately, the credit unions reached an impasse that has led to what seems on track to be quite costly litigation. In various court filings, one side claims significant compliance failures arose that no longer made the merger tenable. The other side claims buyers’ remorse. This week, a judge will consider whether to order performance under the merger agreement – and the outcome may inform lessons for future mergers. So, how did the credit unions get here?
Integration Planning Leads to Disagreements, Litigation
During a merger that either involves or creates a large credit union, the NCUA generally asks the parties to engage in a detailed integration planning process to gain regulatory approval. According to SDCCU court filings, during this process, SDDCU discovered a series of compliance concerns, "bedecked by unchecked risk and glaring violations of federal and state regulations," which it then brought to Cal Coast's attention. However, SDCCU claims that its attempts to address these concerns were all but entirely rebuffed, leading to a November 14, 2025 "Demand for Corrective Action/Termination Notice" in which SDCCU sought to terminate the merger agreement unless Cal Coast agreed to key changes to the contemplated leadership of the continuing credit union.
Shortly after, Cal Coast went to court, filing a Complaint, a request to maintain the confidentiality of certain filings, and a Motion for Preliminary Injunction asking the court to order SDCCU to perform its obligations under the merger agreement. Cal Coast alleged that SDCCU is navigating a case of “buyer’s remorse,” taking particular umbrage to SDCCU's attempts to, in Cal Coast’s words, "oust [Cal Coast CEO Todd Lane], install [SDCCU CEO Teresa Campbell] as CEO, and skew the Combined CU’s board 9-2 in favor of SDCCU."
This is a significant shift from the merger agreement which had each credit union contributing five legacy board members, plus one seat for a new board member. The merger agreement also named Lane as the leader of the continuing credit union, with Campbell retiring and then signing on as an advisor to Lane. On Jan. 27, 2026, Cal Coast filed a declaration from Lane which alleged, among other things, a "liquidity crisis" at SDCCU, while also seeming to critique the executive compensation structure of SDCCU's top leadership. (SDCCU’s 2024 Form 990 shows Campbell earned over $18.8 million in 2024).
For its part, SDCCU disagreed with the move to keep supporting documents sealed, arguing this amounts to Cal Coast "[urging] the Court to compel a merger while hiding from the public the reasons why SDCCU sought to terminate it," and framing such an ask as an "extraordinary intervention" that would harm the public good. SDCCU also filed a declaration from Campbell that the liquidity risk claims are simply unfounded, that "SDCCU remains well-capitalized, well-managed, and financially sound."
Rather, according to Campbell, "the greatest threat to SDCCU’s financial health would be merging with Cal Coast given Cal Coast’s systemic compliance failures, deficient policies across multiple regulatory areas, and a deeply troubling culture of non-compliance…" Campbell goes into detail about a series of confrontations between Coastal Cal and SDCCU officials around the compliance findings stemming from a months-long outside counsel review that culminated in a September meeting during which SDCCU alleges Lane stated he “run[s] a dictatorship.”
The NCUA Weighs In
Despite the dust-up, Campbell noted that integration work continued until the NCUA’s merger examination which occurred in October 2025. During this exam—which Cal Coast alleges it was excluded from—SDCCU informed the NCUA of its compliance concerns, a move which Cal Coast claims "poisoned the well" for the regulatory review without its input. Meanwhile, as the initial litigation proceeded, on Jan. 27, 2026, SDCCU received a letter from NCUA Western Regional Director Julie Cayse which reportedly stated that the merger could not proceed in its current form, citing "multiple weaknesses in governance practices and strategic planning" and requesting an updated merger plan.
Notably, the letter apparently flags "defined risk tolerances" among its requests, possibly a nod to the disputes at the heart of the two credit unions’ disagreements. In her declaration, Campbell indicated that to successfully address the requests from that letter to NCUA's satisfaction would require "intensive collaboration between SDCCU and Cal Coast at all levels of both organizations," and that in her opinion, "I do not believe such collaboration is possible."
Preliminary Injunction Hearing and Potential Outcomes
On Friday, the court will hold a hearing on Cal Coast’s request to order SDCCU to perform under the merger agreement, and to date, the filings have generated whiplash when it comes to the competing allegations in the dispute. A court may be reluctant to require parties to move ahead with a transaction in a manner the regulator does not support. However, even if the court grants Cal Coast’s request, the impact may be limited. When the NCUA initially denies a merger and requests an updated plan, there are often specific, detailed requests which may conflict with the merger agreement. A state court does not have the authority to override the NCUA’s approval authority over mergers. So, even if SDCCU was "forced" by the court to perform under the merger agreement, SDCCU cannot perform in a manner that contradicts the NCUA.
Overall, this degree of public disagreement is rare, if not unprecedented, when it comes to credit union mergers. Successful mergers require significant collaboration from both sides to integrate both operationally and culturally. Litigation can certainly prevent two credit unions from building the kind cooperative environment that leads to positive merger outcomes while also causing negative sentiment among the membership that has to vote for the merger for it to proceed and having an adverse impact on balance sheets. Plenty of potential mergers never get past an initial letter of intent stage. It is also not unheard of for two credit unions to sign a formal merger agreement only to determine, perhaps during a due diligence period, that the transaction is not the best fit.
Generally, these kinds of decisions are made privately between the credit unions rather than leading to litigation. While strong merger agreements and a thorough due diligence process can prevent disputes, this case serves as a reminder that sometimes parties can end up in court. Should the court order the merger to proceed, this may shift how some credit unions consider and vet future mergers. Our team will be monitoring this case, providing updates and insights as things develop.
Brandy Bruyere is a partner at Honigman, LLP. Honigman has a dedicated team of credit union focused lawyers that have spent their careers serving the movement. They work nationally advising on M&A, non-organic growth and compliance matters.