Bank conversion
Spencer Savings Bank v. Wein
Date: April 8, 2026
Issue: Whether the board of Spencer Savings Bank unlawfully adopted a plan to convert into a mutual savings bank to block an investor from gaining board seats.
Case Summary: In a unanimous decision, a New Jersey Superior Court panel affirmed a ruling that Spencer Savings Bank unlawfully adopted a plan to convert into a mutual savings bank to block an investor from gaining board seats.
In July 2022, Spencer Savings Bank sued Arthur Wein and Lawrence Seidman (the defendants) to prevent them from challenging a new conversion resolution that would convert the savings and loan into a mutual savings bank. In February 2019, the board adopted an earlier conversion plan that would have shifted governance to a structure in which a board of managers would select its own successors, eliminating member voting rights. The defendants, both members and account holders, sued to challenge that plan, alleging the board acted to entrench itself, and a court later agreed and invalidated the 2019 conversion. After that ruling, the board approved a new 2022 conversion plan. In September 2022, the defendants filed counterclaims and a third-party complaint alleging the new plan again sought to entrench the board and that the directors breached their fiduciary duties.
In 2024, the Chancery Division of the Superior Court of New Jersey agreed and found that the primary purpose of the 2022 conversion was to block Seidman and others from obtaining board seats. The court invalidated the conversion plan and dismissed Spencer Savings Bank’s claims. On appeal, Spencer Savings Bank and its directors argued the chancery court erred in invalidating the plan and in concluding the board acted with an improper entrenchment motive.
The panel rejected Spencer Savings Bank’s argument that the chancery court erred in blocking member approval of the 2022 conversion plan, misapplied entrenchment law, and wrongly rejected the advice-of-counsel defense. It found that the trial court’s findings were supported by substantial, credible evidence and that the court properly considered Spencer Savings Bank’s 2022 profitability when assessing whether circumstances had changed. Spencer Savings Bank argued its board acted with “dual motivations,” meaning it had both a legitimate business purpose and an entrenching purpose, and could proceed even if the plan protected its positions. Rejecting this argument, the panel explained New Jersey law bars actions primarily driven by self-interest, and the record supported the finding that the board’s main purpose was to block Seidman and his associates from gaining board seats. The panel also upheld the rejection of the advice-of-counsel defense, finding that the board had decided to pursue the conversion before receiving legal advice and could not rely on that defense to avoid liability.
On cross-appeal, the panel rejected the defendants’ request for attorney’s fees and held that they did not bring a derivative action that would justify an exception to the American Rule, which requires litigants to bear the cost of their own legal representation and generally bars recovery of fees from the opposing party. It explained that defendants’ claims mirrored their earlier challenge to the 2019 conversion, which the court treated as a direct action driven by their own interest in gaining board seats, not one brought on behalf of all members.
Bottom Line: The panel affirmed that Spencer Savings Bank’s board unlawfully adopted a conversion plan mainly to entrench itself and block an investor from gaining board seats, and it properly invalidated the plan.
Document: Opinion
