March 2, 2017

Rural Electric Cooperatives Receive Dismissals in Class Action Capital Credit Litigation

Holland & Knight Alert
Christina M. Schwing | Laura B. Renstrom

Two recent dismissal orders – filed within days of each other – signal positive news to rural electric cooperatives defending actions brought by former or current members regarding the distribution of patronage capital and excess revenues.

Recently, in Florence N. Brunson v. Gulf Coast Electric Cooperative, Inc., Case No. 2015-CA-000063, a Florida circuit court granted in part a motion to dismiss filed by Gulf Coast Electric Cooperative, dismissing the plaintiff's claims for unjust enrichment and violations of Florida's Deceptive and Unfair Trade Practices Act (FDUTPA). Less than one month after the court's oral ruling on the motion and before the court entered its written order, the plaintiff dismissed the remaining counts and filed a notice of appeal with Florida's First District Court of Appeal. Instead of pursuing the appeal, plaintiff Florence N. Brunson filed a Notice of Voluntary Dismissal with Prejudice on Feb. 22, 2017. The notice provides that each party is to bear its own attorneys' fees and costs. Further, the fact that the dismissal is with prejudice signifies that the plaintiff is barred from bringing any future action on the same claim.

In a related action the next day, in Grice Webb v. Tombigbee Electric Cooperative, Inc., No. 49-CV-2014-900078, the Circuit Court of Marion County, Alabama granted the parties' Joint Motion to Dismiss and issued an Order of Dismissal, dismissing the claims of Grice Webb without prejudice.

These dismissals come on the heels of an appellate court decision upholding the dismissal of a related action brought by Alabama rural electric members and former members. The U.S. Court of Appeals for the Eleventh Circuit on Jan. 1, 2017, upheld the dismissal of plaintiffs' claims in the case of Pamela Caver, et al. v. Central Alabama Electric Cooperative, Case No. 15-15207. The court affirmed the district court's holding that the cooperative's "distribution of excess revenues to its members by making credits to their capital accounts, as opposed to making cash payments, complied with Alabama state law." The court dismissed the plaintiffs' argument that the cooperative must annually distribute patronage refunds in the form of a cash payment to its members and instead held that the Alabama state statute, which is similar to many other states' excess revenue statutes, does not require an annual cash payment to be made to rural electric cooperative members.

Rural electric cooperatives have been the target of actions in many jurisdictions, and the legal landscape facing them is in a state of considerable flux. However, a number of recent rulings and developments have favored cooperatives. For more information about responding to patronage capital class action litigation, contact the authors of this alert. 

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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