Judge dismisses bulk of

Published 12:00 am Saturday, September 4, 2004



By Jay Thomas

After months of waiting, Judge H. Edward McFerrin made a ruling on Aug. 31, on the suit against Pioneer Electric Cooperative and its board of trustees. McFerrin dismissed most of the members’ suit, including claims against Pioneer Electric’s management.

Wendell Phelps of Butler County, Hoffman Rhyne of Lowndes County and Kenneth Stallworth of Wilcox County are the plaintiffs in the case, claiming Pioneer’s management and trustees allegedly mismanaged funds.

The suit was filed on Feb. 18.

&uot;It’s important that Pioneer members understand what these three individuals tried to do to their co-op,&uot; said Malloy Chandler, Pioneer Electric’s general manager in a prepared statement.

&uot;First, they tried to silence the voices of co-op members by challenging voting by mail and then by seeking to stop the annual meeting.

Then, they asked the court to dissolve the co-op, taking ownership away from our membership altogether.&uot;

&uot;But, for now, the court has halted this effort by dismissing the most threatening portions of the suit, including claims that management breached its fiduciary duties to the membership, wasted the co-op’s assets, grossly mismanaged the co-op, and acted in an ‘illegal, oppressive and fraudulent manner.’&uot;

Susan Copeland, an attorney with Doyle Fuller & Associates, who is representing the plaintiffs in the lawsuit, confirmed Friday that the judge did dismiss a large portion of the suit.

&uot;He dismissed all of the defendants except Pioneer Electric Cooperative,&uot; she said.

&uot;We still have remaining injunctive claims for conversion, negligence and breach of contract.&uot;

Those dismissed included Pioneer Services, ACME Propane, Chandler and the Board. According to Richard Dukes an attorney with Bradley, Arant, Rose & White, who represents Pioneer Electric, said the court dismissed all of the claims brought by the plaintiffs except for their allegation that Pioneer is not legally permitted to enter the propane business.

So what does this mean for the suit?

According to Duke, it breaks the suit down to one issue.

&uot;The Court dismissed the plaintiffs’ claims for money damages, for a class action, and the claims that Pioneer’s management breached its fiduciary duties to the membership, wasted the co-op’s assets, grossly mismanaged the co-op, and acted in an ‘illegal, oppressive and fraudulent manner,’&uot; he said.

Pioneer’s management and employees were happy with McFerrin’s ruling.

&uot;We are pleased that the court has ruled in favor of the co-op on so many of these claims, and we hope that these rulings will reaffirm the members’ faith in the co-op,&uot; Chandler said in the statement. &uot;For 67 years Pioneer Electric has been dedicated to providing service for its members, assembling a team of experienced and devoted employees. Because it is member-owned, Pioneer Electric welcomes input from all of its members, especially when there are concerns.

That way, members can ensure that Pioneer Electric continues to provide a high level of service.&uot;

Pioneer spokesman Terry Wilhite echoed those sentiments when asked about specifics on members attending the board’s meetings.

&uot;Any Pioneer member can and is encouraged to address the board on any subject, granted the process outlined by the cooperative is followed,&uot; he said.

&uot;Pioneer’s management and board have taken meetings to the members by holding several community meetings over the past year. Our annual meeting attracted 53 registered members out of 11,000. As Mr. Chandler said, we welcome member input. Our membership spoke loudly when they voted by a 3-to-2 margin to elect all nine board members and in April to make bylaw changes.&uot;

Earlier this year, several members of the Rural Electric Members Action Committee attempted to attend a board meeting at Pioneer, but claimed Pioneer’s legal counsel turned them away.

Wilhite said they were informed of the rules of addressing the board and refused to follow them.

According to Chandler, the lawsuit has only harmed the co-op.

&uot;By taking their problems to the court rather than the co-op, three individuals have inflicted legal costs and much higher insurance premiums on the co-op.

These costs will only cause electric rates to go up,&uot; said Chandler, hinting of possible future rate increases to the co-op’s membership, which already pay the highest kilowatt rates among other state electric cooperatives.

&uot;I hope that, in the future, these members, and every member, will come to the co-op first when they have any problems or questions.

Only then can the co-op do what it has always done, provide excellent service to its members.&uot;

Wilhite said insurance will be the highest cost.

&uot;The primary increase in expense will be insurance costs,&uot; he said. &uot;The litigation will drive our insurance costs out-of-sight. It could even put the renewability of the cooperative’s insurance in jeopardy.&uot;

He said it is too early to give a dollar figure to what the total cost will be.

&uot;It’s too early to tell exactly what the increased costs will be,&uot; Wilhite said. &uot;It has already cost the cooperative untold dollars in employee time trying to combat the false information this group has circulated. Until costs are known, we won’t know just how much it will affect rates.&uot;

He added that despite what REMAC President Margaret Pierce told the media, there were no rate increases slated prior to the annual meeting and there are none scheduled at the moment.

He did say there is a possibility of wholesale power adjustments due to natural gas costs for generation, which affects all utilities. Rates are adjusted whenever additional expenses are determined.

In April, co-op members voted to allow all elections and future bylaw amendments to be decided by not only on-site voting, but by mail ballot, as well.

In August, after the court allowed the annual meeting to go forward, members elected all nine board members to additional terms by a three-to-two margin.

Now the case centers on the Co-op’s right to engage in the propane business.

Since more than 70 percent of the co-op’s members use propane, and many buy propane from the co-op’s propane affiliate, Acme Propane Gas, Co., Inc., this issue is of vital important to the co-op’s membership. According to Dukes, the Alabama Supreme Court, in a similar case involving Coosa Valley Electric Cooperative, ruled that cooperatives could invest in and own propane companies.

&uot;Pioneer’s members have a vital interest in assuring that Acme Propane is profitable,&uot; Chandler said.

Wilhite said the propane prices have been competitive and have helped keep prices down locally.

&uot;Acme Propane’s prices have been extremely competitive,&uot; he said. &uot;Customers have benefited from this competitiveness, if they’ve not been an Acme customer, because it’s driven the local market’s prices down. Acme is the only locally owned company. More than $3 million annually leave our area, going to out-of-state propane companies. If Pioneer members and others bought their propane from Acme, those dollars could be used to offset the co-op’s operating expense.&uot;

Now the next phase of the suit is discovery.

&uot;The attorneys representing Pioneer and its management are working with plaintiffs’ attorneys to provide any documents that are relevant to plaintiffs’ claims, and which are not privileged or confidential, in a timely fashion,&uot; Dukes said.

&uot;The rules permit Pioneer and its management to request information from the Plaintiffs and we are considering what information we want to request.&uot;

Likewise, the plaintiffs can request specific records from the defendants.

Copeland said in the discovery phase that information may be found that could help the case overall.

&uot;We believe that the judge left it open for us to reinstate the other claims and the other defendants pending on what we find in discovery,&uot; she said.

No date for trial has been set.

Pierce contacted the Advocate late Friday and said she would offer a statement next week, but was out of state and unable to comment.