Since 2009, at least 14 cases have been filed against electric cooperatives over patronage capital (or capital credits) in eight states: Alabama, Arkansas, Georgia, Missouri, New Mexico, North Carolina, South Carolina, and Texas. Now the membership of a water utility has joined the fray, in a fight with its former members over what’s fair in distribution of the cooperative’s remaining capital.
When the Southwest Atkins Water Users Association in Arkansas merged with the city of Atkins in May, it had about $350,000 to be distributed to members. The association proposed disbursing the funds based on the age of the customer’s meter, but the co-op’s former president Debbie Duvall and her husband, member Gary Duvall, opposed this plan, demanding that the funds be disbursed based on usage. Doyle Cooke, SAWUA’s former treasurer, stated that the Duvalls’ proposal was impossible to implement, requiring the review of 29 years of data. The Association filed suit against the Duvalls in July, and the Duvalls filed a countersuit shortly thereafter. In a separate action, Mitch Castro, the association’s former board chairman, also filed suit asking for the funds to be distributed based on patronage. District Judge Ken Coker, Jr. merged the two counterclaim lawsuits, and has set a pre-trial hearing for August to begin working towards a declaratory judgment on the proper way to disburse the funds.
All utility co-ops would be well-advised to prepare for these types of cases, as legal action by a member against a co-op is becoming an increasingly common occurrence. The best course of action is a pro-active one, to mitigate any existing prickly relations with the membership before these incidents require extreme (and often expensive) solutions.
- Co-op boards should consider an immediate review of all bylaws and board policies concerning capital credits, and an on-going review periodically.
- All board decisions regarding capital credits should be documented carefully and in detail.
- Careful attention also needs to be paid in documenting the data reviewed and personnel consulted by the board in making those decisions.
Most importantly, co-op boards should consider implementing a member-relations effort to foster goodwill, as well as educate members about board decisions on important topics like capital credits. Building and maintaining positive community relations will go a long way to assuaging or even completely avoiding negative feedback from members.
References
Water case goes back to court (Monday, 6 July 2015, CourierNews.com)
SAWUA seeks declaratory judgment (Sunday, 15 June 2015, Couriernews.com)