How to Submit Your Question

Transcription

1 About Class Action Lawsuits Monday, November 1 How to Submit Your Question Links Box

2 Today s Expert Ty Thompson NRECA Chief Member Counsel , tyrus.thompson@nreca.coop Today s Moderator Tracey Steiner NRECA Deputy Chief Member Counsel ; tracey.steiner@nreca.coop Overview General Information Lawsuits Defendants, Requested Classes, and Primary Causes of Action Primary Capital Credit Allegations Primary Governance Allegations Common Law Firms NRECA 2010 Page 5 GENERAL INFORMATION NRECA 2010 Page 6

3 General Information PowerPoint information Summarized and generalized Not exhaustive Unrelated to merit, or lack of merit, of allegations Does not address defenses Addresses considerations to avoid allegations, regardless of merit of allegations NRECA 2010 Page 7 General Information Difficult to track all pleadings and proceedings Please correct inaccurate information Please provide any updated information Certain pleadings Electric Cooperative Bar Association website es/litigation.aspx NRECA 2010 Page 8 General Information Class action Definition Black s Law Dictionary (9 th ed. 2009) A lawsuit in which the court authorizes a single person or a small group of people to represent the interests of a larger group Prerequisites Federal Rules of Civil Procedure (2009) Class is so numerous that joining all members is impracticable There are questions of law or fact common to class Claims or defenses of representative parties are typical of claims or defenses of class Representative parties will fairly and adequately protect interests of class NRECA 2010 Page 9

4 LAWSUITS NRECA 2010 Page 10 Lawsuits Arkansas (1) June 2009 Georgia (1) January 2010 Missouri (1) September 2009 New Mexico (1) August 2010 South Carolina (3) May 2009 June 2010 August 2010 Texas (2) February 2009 March 2010 NRECA 2010 Page 11 Lawsuits Arkansas (1) Carroll Electric Cooperative Corporation (June 2009) April 2010 Monetary relief and return of funds claims dismissed for lack of subject matter jurisdiction Arkansas Public Service Commission regulates rates and has exclusive jurisdiction to hear refund of money claims NRECA 2010 Page 12

5 Lawsuits Georgia (1) Cobb Electric Membership Corporation (January 2010) NRECA 2010 Page 13 Lawsuits Missouri (1) White River Valley Electric Cooperative (September 2009) May 2010 Voluntary dismissal without prejudice July 2010 Petition in more favorable venue and adding Associated Electric Cooperative, an electric generation and transmission cooperative NRECA 2010 Page 14 Lawsuits New Mexico (1) Socorro Electric Cooperative (August 2010) Filed as cross claim in electric cooperative s lawsuit challenging enforceability of bylaws requiring open meetings and records NRECA 2010 Page 15

6 Lawsuits South Carolina (3) Edisto Electric Cooperative (May 2009) All South Carolina Electric Cooperatives (June 2010) Santee Electric Cooperative (August 2010) NRECA 2010 Page 16 Lawsuits Texas (2) Denton County Electric Cooperative, d/b/a CoServ (February 2009) November 2009 Capital credit class certification denied because of inadequate class representatives, domination of individual issues, and conflicts among class members Current v. former members; methods of retirement; discounting; etc. Nueces Electric Cooperative (March 2010) NRECA 2010 Page 17 DEFENDANTS, REQUESTED CLASSES, AND PRIMARY CAUSES OF ACTION NRECA 2010 Page 18

7 Defendants Defendants include electric cooperative(s) (9) Arkansas, Georgia, Missouri, New Mexico, South Carolina (EEC, All, SEC), Texas (DCEC, NEC) NRECA 2010 Page 19 Defendants Defendants include management (2) New Mexico, Texas (NEC) Defendants include current and/or former directors (3) New Mexico, South Carolina (SEC), Texas (NEC) NRECA 2010 Page 20 Requested Classes Class of former members with unretired capital credits (4) Arkansas, Georgia, Missouri, South Carolina (EEC) Class of former members with unretired or unclaimed capital credits (1) South Carolina (All) NRECA 2010 Page 21

8 Requested Classes Class of current members (4) New Mexico, South Carolina (SEC), Texas (DCEC, NEC) Class of current and former members who received discounted, general capital credit retirements (1) Texas (DCEC) NRECA 2010 Page 22 Primary Causes of Action Violation of statute (6) Arkansas, New Mexico, South Carolina (EEC, All), Texas (DCEC, NEC) Conversion (4) Arkansas, Missouri, South Carolina (SEC), Texas (DCEC) Violation of duty (8) Arkansas, Georgia, Missouri, New Mexico, South Carolina (All, SEC), Texas (DCEC, NEC) NRECA 2010 Page 23 Primary Causes of Action Breach of contract (7) Arkansas, Georgia, Missouri, New Mexico, South Carolina (SEC), Texas (DCEC, NEC) Oppression (4) Arkansas, Missouri, South Carolina (All), Texas (DCEC) Unjust enrichment (3) Arkansas, Georgia, Missouri Unfair trade practice (3) Missouri, South Carolina (EEC, All) NRECA 2010 Page 24

9 Primary Causes of Action Violation of public policy (2) South Carolina (EEC, All) Negligence and/or gross negligence (4) New Mexico, South Carolina (All, SEC), Texas (NEC) Conspiracy (2) Missouri, South Carolina (SEC) Fraud (2) New Mexico, South Carolina (SEC) NRECA 2010 Page 25 PRIMARY CAPITAL CREDIT ALLEGATIONS NRECA 2010 Page 26 Capital Credit Allegations Unreasonably high equity-to-asset ratio Arkansas, Missouri Capital Credits Task Force Report Recommendation Reasonable Equity 30 to 50 percent NRECA 2010 Page 27

10 Capital Credit Allegations Failure to notify members of annual capital credit allocations Arkansas, Missouri, New Mexico, Texas (NEC) Bylaw requirement Exempt electric cooperative nonrequirement Nonexempt electric cooperative requirement Representative Cooper Allocation formula or stated dollar amount NRECA 2010 Page 28 Capital Credit Allegations Failure to pay interest and/or dividends on allocated capital credits Arkansas, Missouri, South Carolina (EEC, All) Nonprofit state law prohibition Subordination of capital tax law prohibition or limitation NRECA 2010 Page 29 Capital Credit Allegations Insufficient general capital credit retirements Arkansas, Georgia, Missouri, New Mexico, South Carolina (EEC, SEC), Texas (NEC) Nature of capital credits Operation at cost Discretion to retire Potential abuse of discretion Public and legislative policy Annual retirement unless occasional, unusual, or exceptional circumstances NRECA 2010 Page 30

11 Capital Credit Allegations No special capital credit retirements to former members Missouri, South Carolina (EEC, All) In conspiracy, failure of G&T to retire capital credits Missouri Failure to retire G&T retired capital credits Arkansas, Georgia NRECA 2010 Page 31 Capital Credit Allegations Failure to operate at cost Arkansas, Georgia, Missouri No former member service, vote, or retirement Arkansas, Georgia, Missouri, South Carolina (EEC, All) Retention of unclaimed capital credits South Carolina (EEC, All) NRECA 2010 Page 32 Capital Credit Allegations Discounting general capital credit retirements without member disclosure or consent Texas (DCEC) IRS private letter rulings Voluntary NRECA 2010 Page 33

12 PRIMARY GOVERNANCE ALLEGATIONS NRECA 2010 Page 34 Governance Allegations Imprudent and/or unlawful diversification without member disclosure or consent Texas (DCEC) Imprudent and/or unlawful provision of competitive retail electric service Texas (NEC) NRECA 2010 Page 35 Governance Allegations Lack of democratic member control and transparency Closed and/or unavailable director meetings, membership list, minutes, member information, etc. Arkansas, New Mexico, South Carolina (SEC), Texas (DCEC) Nonaccess to meetings Limited access to minutes and list Policies Post schedule/agenda/minutes or summary NRECA 2010 Page 36

13 Governance Allegations Lack of democratic member control and member participation Low member meeting attendance and/or voting Arkansas, Missouri, South Carolina (SEC), Texas (DCEC) Voting by mail NRECA 2010 Page 37 Governance Allegations Lack of democratic member control Unreasonable requirements to sell cooperative Arkansas Unreasonable director districts, nominations, and/or elections Arkansas, New Mexico, South Carolina (SEC) Reasonable districts/nominations/elections NRECA 2010 Page 38 Governance Allegations Unreasonable director and/or management compensation Arkansas, Missouri, New Mexico, South Carolina (SEC), Texas (DCEC, NEC) Electric cooperative act Fiduciary duty No tax law limit IRS Form 990 compensation and hours Justification, process consultant and/or comparable data, record hours NRECA 2010 Page 39

14 COMMON LAW FIRMS NRECA 2010 Page 40 Common Law Firms Cook, Barkett, Maguire, and Ponder, LC Cape Girardeau, Missouri Arkansas, Missouri Kirby McInerney, LLP New York, New York Arkansas, Missouri, Texas (DCEC) Mitchell DeClerck, PLLC Enid, Oklahoma Arkansas, Texas (DCEC) NRECA 2010 Page 41 Common Law Firms The Lawrence Firm, PLLC Austin, Texas Arkansas, Texas (DCEC) Ikard Wynne, LLP Austin, Texas New Mexico, Texas (NEC) Represented plaintiffs in lawsuit against Pedernales Electric Cooperative Daniel W. Williams, John P. Freeman, and C. Bradley Hutto South Carolina (EEC, All) NRECA 2010 Page 42

15 Common Law Firms (Quentin Capital Management, LLC; Kurt Q. Holmes) (?) See also Coop Litigation News at Georgia EMC Litigation at NRECA 2010 Page 43 How to Submit Your Question NRECA 2010 Page 44 Links Box NRECA 2010 Page 45

16 THANK YOU! NRECA 2010 Page 46