SAN DIEGO— In one of the most public and closely watched credit union merger disputes in years, the courtroom clash between Cal Coast CU and San Diego County Credit Union is no longer just about whether a deal died—it’s about whether one side can force the other to keep acting like the marriage is still on while a judge decides if the breakup was legal.
Recently, a court in California heard arguments from attorneys representing both credit unions in ongoing litigation alleging breach of a merger agreement.
As CUToday.info reported, a planned merger between Cal Coast and San Diego County Credit Union, which would create the fourth-largest credit union in California and the 16th-largest in the U.S., has come to a screeching halt when the credit unions reached an impasse about alleged significant compliance failures that became clear during the integration planning process which SDCCU claims made the merger untenable.
Brandy Bruyere, partner at Honigman, LLP, explained that Cal Coast claims buyers’ remorse on the part of SDCCU and has asked a court for an injunction to enforce key provisions of the merger agreement until the court can determine whether a breach of contract occurred.
“What are the credit unions really arguing about at this stage? Typically, a merger agreement will have various terms and conditions which require both parties to act in the ‘ordinary course of business’ while also taking care to preserve the current financial state of each credit union,” Bruyere explained. “This will generally place limits on the parties’ activities like entering into or renewing contracts above a certain dollar amount or term length, prohibit entertaining other mergers, and similar guardrails. Cal Coast is asking the court to enforce these kinds of key provisions while the litigation progresses. SDCCU asserts this ask is overly burdensome.”
Cal Coast: A Deal Is A Deal
For its part, Bruyere said, Cal Coast has framed the dispute as a matter of honoring commitments boiling down to “a deal is a deal.”
“The credit union highlighted that prior to signing a merger agreement, both organizations’ leadership teams had spent months conducting due diligence, openly recognizing existing operational differences. According to Cal Coast, it was always agreed that SDCCU’s policies would ultimately govern, making alleged compliance issues not material,” she said.
“Furthermore, according to Cal Coast, the merger agreement required ‘prompt’ notification of alleged material breaches, so, even though legal memos from outside counsel highlighted compliance risks with Cal Coast’s operations, SDCCU did not provide such notice of breach prior to its November 14 termination letter,” Bruyere said. “Cal Coast maintained that the compliance memos, mostly dated in the summer of 2025, were intended to support integration, were disclosed, and did not identify violations or any ‘material adverse change’ that would trigger termination rights under the agreement. Cal Coast contends relying on these memos is an ‘after‑the‑fact, litigation‑created excuse’ and an attempt to renegotiate the agreement.
According to Cal Coast, at this stage, the request to preserve the status quo is necessary so the court can provide meaningful relief, including potential specific performance, if the court determines that is the appropriate outcome as the litigation proceeds, Bruyere said.
“Cal Coast maintained that SDCCU cannot demonstrate a breach—let alone a material one—and that losing the merger opportunity would cause ‘irreparable harm’ because the benefits are unique,” Bruyere said. “Cal Coast warned that without an injunction, SDCCU could take actions—such as selling assets or taking on debt—that would undermine the court’s future ability to grant relief. Cal Coast also suggested that SDCCU had been approached by another potential merger partner which added to the need for an injunction.”
SDCCU: Injunction Inappropriate As Ordering Specific Performance Is Not An Option
Brandy Bruyere
In response, SDCCU’s counsel argued that an injunction is inappropriate because specific performance is not available under the agreement. SDCCU asserted that the parties intentionally excluded a specific performance clause in the merger agreement. SDCCU’s counsel asserted that courts have enforced such remedies only when explicitly included. SDCCU emphasized that this merger is structurally different from corporate acquisitions in other jurisdictions where specific performance is more common.
“SDCCU further claimed that forcing the merger to proceed would harm members and create a dysfunctional organization marked by ‘warring factions,’” Bruyere said. “The credit union asserted that the court should not act as a ‘judicial babysitter’ over a complex and disputed merger, and that California law would require specific performance only in straightforward transactions, not in a multifaceted, complicated proposed merger like the one at issue.”
SDCCU maintained that Cal Coast’s request for an injunction would effectively compel progress toward a merger that SDCCU believes is no longer viable. SDCCU cited concerns about compliance leadership and fiduciary obligations to its members, asserting that regulators must approve the merger and that the record reflects unresolved compliance issues.
“Overall, both sides presented sharply contrasting views of the merger’s viability, the nature of the alleged breaches, and the appropriate role of the court in resolving the dispute,” Bruyere explained. “The judge’s ruling is pending, but could signal how the court views the overarching breach of contract claim and potential harm by not allowing the parties to act unbound by the merger agreement’s limitations.”
Reports in this series:
- Inside The Cal Coast SDCCU Merger, Part I: Legal Fight Intensifies Before This Week’s Court Hearing
- Inside Cal Coast/SDCCU Merger Part II: Thousands Of Pages, No Decision As Mega-Deal Case Pushed To March
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