A recent appellate court opinion has upheld a chancery court’s decision invalidating a 2022 resolution by the board of directors of a mutual savings and loan association, finding that the board’s primary motivation was to prevent specific individuals from gaining positions on the board. The ruling addresses longstanding disputes over control and governance at the institution, raising questions about fiduciary duties and member rights.
The complaint was filed by Spencer Savings Bank, S.L.A., in the Superior Court of New Jersey, Chancery Division, Bergen County (Docket No. C-000129-22), with Arthur Wein and Lawrence B. Seidman named as defendants. The appellate opinion was argued on March 18, 2026, and decided on April 8, 2026.
According to the opinion, this appeal is part of an ongoing dispute spanning decades regarding control of Spencer Savings Bank. The current case centers on efforts by the bank’s board to convert from a mutual savings and loan association—where depositors and borrowers elect directors—to a mutual savings bank governed by a self-perpetuating board of managers. This change would remove voting rights from members regarding director elections.
In February 2019, the board first adopted a resolution to convert to a mutual savings bank. Seidman and Wein challenged this move in court, alleging it was intended to entrench existing directors and prevent them from joining the board. After trial, the chancery court found that “Board members were primarily motivated by their desire to stop Seidman from becoming a member of the Board” and that they had “primarily acted to entrench their positions.” As a result, the 2019 conversion resolution was invalidated.
Following this judgment in June 2021, less than six weeks later, the board approved a new strategic plan with an explicit goal: removing federal Qualified Thrift Lender (QTL) requirements through charter conversion. State mutual savings banks are not subject to these requirements, which mainly involve maintaining residential mortgage investments.
On June 9, 2022, during another meeting, outside counsel advised eliminating QTL restrictions via conversion. Retired New Jersey Supreme Court Justice Gary Stein told the board that avoiding QTL rules could be considered legitimate grounds for conversion but also acknowledged that impeding Seidman’s ability to join was “one of the side benefits.”
The board formally adopted its new conversion proposal on July 6, 2022. Days later, Spencer Savings Bank filed suit seeking declarations validating its actions and allowing it to proceed with member voting on conversion plans. Anticipating legal challenges from Seidman and Wein—described as “a certainty”—the bank named them as defendants.
Seidman and Wein responded with counterclaims describing themselves as acting derivatively for all members because they were cast as representatives by being named sole defendants. They sought injunctions against holding votes or communicating about conversion plans and requested damages and counsel fees.
On October 3, 2022, Seidman and Wein filed third-party claims against individual directors—Jose Guerrero, Nicholas Lorusso, Thomas Duch, Ada McGuinness, Peter Hayes (later replaced by his estate), and Barry Minkin—alleging breach of fiduciary duty for pursuing another conversion plan allegedly favoring their own interests over those of members.
After trial in September 2023 featuring testimony from financial officers, legal experts—including Justice Stein—and both sides’ witnesses (including hedge fund managers and attorneys), the chancery court ruled on August 30, 2024: it invalidated the new conversion resolution again due to improper entrenchment motives by directors; dismissed related complaints; denied claims for damages or counsel fees; but did not address one count concerning indemnification for legal expenses advanced by the bank.
The bank’s subsequent motion for partial reconsideration focused on contesting findings about breach of fiduciary duty but was denied in October 2024.
On appeal, Spencer Savings Bank argued that its financial success justified conversion absent improper motives; that dual motivations should permit action even if one motive involved entrenchment; and that reliance on advice-of-counsel should insulate directors from liability. The appellate panel rejected these arguments after reviewing trial evidence: “The chancery court heard testimony… made factual… findings which were supported by substantial credible evidence at trial.” It concluded that under applicable law (citing Scheidt v. DRS Tech.), where primary motivation is entrenchment rather than legitimate business purpose—even if both exist—the action cannot stand.
Defendants’ cross-appeal argued entitlement to counsel fees as derivative representatives benefiting all members—a claim previously rejected in similar litigation because their injuries were unique (seeking personal positions on the board). The appellate division saw no basis for departing from prior reasoning denying such fees here as well.
However, because no findings were made regarding indemnification claims raised in count four of defendants’ third-party complaint—seeking reimbursement for fees advanced—the appellate panel vacated dismissal of this count alone: “We remand the case with instructions [for] chancery court [to] consider… any defenses.” A case management conference must be held within thirty days per instructions; further hearings are left at chancery discretion.
Attorneys listed include Timothy P. Malone (Pashman Stein Walder Hayden PC) representing appellants/cross-respondents with Sean Mack and Darcy Baboulis-Gyscek; Peter R. Bray (Bray & Bray LLC) representing respondents/cross-appellants. The case ID is A-0546-24.
Source: A054624_Spencer_Savings_Bank_SLA_v_Wein_Opinion_New_Jersey_Superior_Court_of_Appeals.pdf
