Court rules in favor of co-op members, transparency
Published 14 072011 by admin
Great news for cooperative member-owners and our rights to increase transparency in how our co-ops run. After all, we do own them, don't we? A New Mexico judge has ruled in favor of the members of the Socorro Electric Cooperative, who passed several resolutions at their annual meeting demanding transparency. Their board didn't like the proposals and tried to throw them out. But the judge sided with the members, who will now have the protection of New Mexico's open meetings and open records laws to help them bring their co-op under local member control. This sets a great precedent for member control and sets a standard that most co-ops can aspire to.
The Socorro Co-op had originally sued it's 10,000 member-owners for bylaws passed at their 2010 annual meeting. The co-op claimed that since New Mexico's open government laws were only written to cover government entities and a cooperative as a private institution should not be covered. Judge Albert J Mitchell disagreed, saying on presenting his findings, "I guess Socorro Electric will be a leading co-op once again. Owners chose to do this. If it’s to their detriment, I suspect the members will make changes.”
This fits with the principles behind co-ops, one of which is democratic member control. Democracy cannot exist without transparency, so making the co-op subject to NM open government laws, while unprecedented, is exactly in line with what we expect from our co-ops. This is just the latest in a string of transparency victories, including the passage of the first in the nation Member Bill of Rights in the Pedernales Electric Cooperative in Texas
What about you? Do you have a problem with transparency in your co-op? Can't get the information you need? Sound off in our comments section, and let's increase our dialogue about making our cooperatives as open and accountable as we expect them to be, rather than the good ol' boys clubs some of them have turned into.
Thanks to staffwriter TS Last at the El Defensor Chieftan, Socorro County's oldest newspaper, for his reporting on this issue, the body of which I have added below for more information.
What members say, goes.
That’s what a New Mexico Supreme Court-appointed judge ruled Wednesday in a landmark case in which Socorro Electric Cooperative sued all of its approximately 10,000 member-owners in an effort to block three bylaws — each aimed at increasing transparency — passed by members at last year’s annual meeting.
The ruling by Judge Albert J. Mitchell Jr. of the 10th Judicial District Court means that the democratically controlled rural electric utility must abide by the New Mexico Open Meetings Act and Inspection of Public Records Act.
The merits hearing drew an audience of about 100 people, who packed a Socorro courtroom.
The co-op’s attorney, Dennis Francish, argued that the bylaws were unmanageable, created confusion and put hardship on the co-op. He said the OMA and IPRA were laws that applied to government entities and not private non-profit corporations such as the co-op. Because of that, he said members overreached their authority when they passed the bylaws.
If put into effect, Francish said Socorro Electric would be the first co-op in the country to be subject to OMA and IPRA.
“Mr. Francish, I guess Socorro Electric will be a leading co-op once again,” Mitchell said when he announced his decision. “Owners chose to do this. If it’s to their detriment, I suspect the members will make changes.”
Mitchell ruled that the bylaws were properly and legally enacted, and there’s no law that says members can’t approve such measures. The co-op’s board might not like what members mandated them to do, but they were going to have to “live with it,” he said.
“It’s going to be a great big change,” he said, “but members said that’s what the deal is. If members don’t like it, they can change it.”
Mitchell said the co-op should have been following the bylaws since they were adopted on April 17, 2010.
“Members put them in place and there was no injunction to suspend anything,” he said.
That means that any action taken by the co-op’s board of trustees at a meeting that didn’t follow open meetings guidelines in the last 13 months is invalid.
“That’s what the (Open Meetings) Act says. You’ve got to get that cleaned up,” Mitchell said.
The bylaws in question were among a bevy of reform-related measures members adopted by overwhelming margins last year.
The movement for reform came about when it came to light that Socorro Electric’s 11-member board of trustees had incurred significantly higher expenses than other co-ops in New Mexico, peaking at $492,000 in 2009.
The co-op’s request for declaratory judgment and injunctive relief was filed against Charlene West, chairwoman of the Socorro Electric Cooperative Reform Committee, and “all unnamed member/owners” of the co-op, who are also its customers.
“It feels good to finally be vindicated,” said West after the hearing. “It’s a win for the people. The judge said that the people said this is what you’re supposed to do and they need to adhere to it.”
West credited trustee Charlie Wagner, who helped lead the reform movement, and his wife, Charlene, for their efforts to “clean up” the co-op, as well as the members who came out to vote and the attorneys who defended the case.
The co-op’s Francish said he had little to say about the outcome.
“The judge has made his statement. Amen,” he said.
That’s not the end of it, though. A countersuit requesting class-action certification was filed in answer to the co-op’s original case. While no date has been set, a status hearing on the cross claim is planned for next month.
The hour-and-a-half hearing was sped along when it was stipulated what witnesses would generally testify to. The co-op planned to call trustees Leroy Anaya, Paul Bustamante and Donald Wolberg. Socorro attorney Lee Deschamps said the defense didn’t plan to call any witnesses, but if it did it would call trustee Charlie Wagner.
All but Bustamante, the co-op’s president, were asked to leave the courtroom for a portion of the hearing, but the others were soon called back when the stipulation to their testimony was invoked.
The plaintiff and defense teams each submitted two documents as exhibits.
The co-op turned in a copy of an amended preliminary injunction that bars West from attending board meetings, and the minutes of the June 23, 2010, board meeting, which was called off soon after it started when about 18 members refused to leave the board room for executive session. Both documents were meant to illustrate the board’s inability to conduct business with members present.
The defense submitted copies of policies dating back to 1998 that allow members to attend meetings and address the board, and a policy approved in 2005 that outlines the procedure for hiring a manager. The exhibits were intended to show that the co-op’s board of directors has a history of not following company policy.
Making An Argument
Francish began his argument making the distinction that co-ops are private, non-profit corporations and are not subject to open meetings laws like government entities.
“We’re asking the court to invalidate bylaws because they are unworkable, unmanageable and create hardship for the co-op,” he said.
Francish said that having the press present at meetings was a hindrance.
“The board can’t effectively discuss matters with the press in attendance,” he said. “A true business discussion on business matters can’t be accomplished.”
Francish pointed out that such businesses as PNM and the Ford Motor Co. don’t have the media sitting in on their board meetings.
Francish said allowing members to attend meetings has caused problems in the past. He alluded to the injunction against West and the meeting last June when police were called because members refused to leave.
The co-op’s attorney also said that transparency was difficult to define and language in one bylaw to “guarantee” transparency and reference to the “Privacy Act” was ambiguous.
Francish said the co-op had no problem adhering to case law established in Schein vs. Northern Rio Arriba County Electric Cooperative that allows members access to records for “proper purpose,” but he argued that the co-op wasn’t bound to anything beyond that.
Summing up, Francish said making the co-op abide by OMA and IPRA would be “highly unusual” and simply unworkable.
“You said ‘unusual,’” Mitchell interrupted. “I didn’t see anything in the briefs that said illegal.”
“It just doesn’t apply to a private company,” Francish responded. “There’s been overreaching by members and the court has the power to deal with that, and that’s what we’re asking.”
Socorro attorney Thomas Fitch, acting pro se, began the defense argument poking holes in the plaintiff’s case.
Fitch said the co-op’s failed to provide any evidence to support its argument that the bylaws were unworkable and unmanageable. He spoke in dismissive tones over the Ford Motor Co. analogy, noting that the big difference is that co-ops are structured democratically.
Fitch ridiculed other aspects of the co-op’s case.
“Their argument is: we shouldn’t do it because it’s highly unusual,” he said.
Fitch also discredited an argument in the co-op’s earlier court filings that cites Fortello vs. Socorro Electric Cooperative, a 1988 lawsuit won by the co-op.
“The key to that case was the procurement code doesn’t apply because (the co-op) is not a government entity. What’s that got to do with members making changes?” he asked. “The outcome might have been different if members had said the co-op needed to follow the procurement code.”
Fitch finished by saying that the co-op hasn’t shown any interest in following the spirit of the new bylaws.
“I’d like to see the court go further and see they are enforced,” he concluded.
Deschamps had little to add to what his colleague had said, other than the suggestion that the co-op had engaged itself in a self-fulfilling prophecy. It didn’t think the new bylaws could be applied, therefore it couldn’t adopt them, he offered.
Deschamps ended the defense’s argument with the famous quote, “Democracy is the worst form of government, except for all the rest.”
Orders and Advice
In making his ruling, Mitchell said the court found that there was no rule or statute that prevented members from requiring the co-op to adopt the OMA or IPRA. He said the state Attorney General’s Office has compliance guides and offers training, and the co-op should familiarize itself with the rules.
The judge noted that school boards, water authorities, cities, municipalities and political subdivisions are subject to open meetings laws.
“We still manage to get it done,” he said.
Mitchell did strike the third amendment the co-op was challenging on the grounds that it was redundant to the others and on its whole was “aspirational.” He also said that he would not reserve jurisdiction for enforcement in the case.
“You’ve got judges here for that,” said Mitchell, who typically holds court in Quay County.
The judge then directed attorney Stephen Kortemeier of the Deschamp & Kortemeier law firm to draft the order on the merits, and for the co-op to submit a “clean” copy of the company’s bylaws to the court.
Mitchell also addressed co-op members in the audience. He told them they may have a right to attend meetings, but do not have the right to be disruptive. He said the co-op could set rules of decorum, but warned that there’s a difference between what’s “prohibiting” and what’s “dominating.”
Out of curiosity, the judge asked if the co-op had already held its annual meeting this year. When told that it had but there was no quorum, Mitchell had some more advice for members.
“Members need to understand if you’re going to get involved, you need to stay involved,” he said. “You can’t expect to have electricity just some of the time.”
Trustee accosted following hearing
Judge Albert J. Mitchell Jr. laid the ground rules at the outset of Wednesday’s hearing on the lawsuit brought by Socorro Electric Cooperative against its member-owners.
He told everyone assembled that they needed to be on their best behavior, and through the hour-and-a-half hearing everyone dutifully complied. But minutes after adjournment things got testy downstairs.
While leaving the courthouse, District 5 trustee Charlie Wagner, a leader in the movement to reform the co-op, said he was verbally assaulted by Xavier Ortiz of San Antonio.
“I walked past and I heard someone call me a name. I continued to walk but he continued to pursue me,” Wagner said.
Wagner said Ortiz was yelling and pointing a finger at him. Wagner stepped into a hallway by the treasurers office and asked someone to call police.
Meanwhile, Wagner’s wife, Charlene, ran to the sheriff’s office, located in the same building as the courthouse, and retrieved Sheriff Phillip Montoya, who saw to it Ortiz was escorted outside. Police arrived soon thereafter, took a statement from Wagner and asked Ortiz to leave.
Wagner said he’d probably file assault charges against Ortiz.
“I think it’s necessary,” he said.
Soon after the incident, Ortiz approached an El Defensor Chieftain reporter and said that he wanted to give Wagner a piece of his mind.
“I told that son of a bitch he hasn’t done a damn thing. All he’s done is cost us money — all of us taxpayers and members,” he said. “Let him press charges. I’ll kick his (expletive) ass right now. He’s here one day and wants to take over the whole country.”
No charges against Ortiz had been filed as of El Defensor Chieftain press time on Friday.