Attorneys prepare for legal battle
As a member of the Socorro Electric Cooperative Board of Trustees, Charlie Wagner led the fight to reform the manner in which the co-op is run.
As a member-owner of the co-op, Wagner and his wife Charlene are now leading the battle to defend “all unnamed member-owners” of the co-op listed as defendants in a strange case of what is essentially the co-op suing itself.
On July 6, co-op attorney Dennis Francish filed a lawsuit asking for declaratory judgment and injunctive relief from three new bylaws overwhelmingly passed by member-owners at the annual meeting in April. The complaint asks the judge to rule that the bylaws cannot be implemented and that the defendants pay costs and attorney fees for bringing the suit.
Like all rural electric cooperatives, anyone who purchases electricity from Socorro Electric Cooperative is a member and shares in the ownership of the non-profit corporation. Any margins, or profits, earned by the co-op are to be distributed back to member-owners in the form of capital credits.
The co-op’s board of trustees voted to challenge the three bylaws — all of which require the board to operate under more transparency — on the grounds that they are unworkable, unreasonable and illegal.
Wagner has argued against the co-op’s course of action at what are often contemptuous board meetings. He’s also made it known that he’s hired his own set of attorneys to look into bringing a lawsuit against the co-op or the board of trustees.
When the co-op filed the lawsuit last week, the Wagners’ focus shifted from offense to defense. And on Friday, July 16, Charlene Wagner distributed an e-mail to members of the SEC Reform Group informing them the couple is prepared to counter the lawsuit on behalf of the reform group and all member-owners.
The decision to do so, she wrote, came after consulting with Deschamps and Kortemeier law firm in Socorro and an unnamed firm from Texas specializing in class action lawsuits and has experience with cases involving other electric co-ops.
“Based on such consultation, it is our opinion that a class action proceeding offers the best protection for member-owners’ rights without each member having to hire their own separate attorney and that a class action proceeding is also the best way to minimize the necessary legal expenses for the member-owners who unfortunately are having to pay through their electric bills for the privilege of being sued by the cooperative,” she wrote.
The e-mail asks that people contribute to a legal defense fund by mailing contributions to the Deschamps and Kortemeier law firm in Socorro.
Lee Deschamps said he’s worked on retainer for the Wagners for the past few years. Although no timetable has been set, he expects the firm to answer the complaint — and maybe more.
“What the reform group is contemplating is to respond in a timely fashion and possibly file a counterclaim in this action,” he said. “There could be some remaining issues involving the board’s conduct.”
Descahmps said a case could be made that board members may have violated their fiduciary duties administering co-op funds.
Although trustees don’t receive salaries, they are paid for attending meetings and receive generous health benefits. Compensation for the 11-member board last year totaled more than $492,000, an average of almost $45,000 per trustee.
“What the board members have done is absolutely wrong — probably bordering on illegal,” Deschamps said. “The major thing that could come out of this lawsuit, if it gets filed here or in federal court, is to ask the court to order any trustees who have improperly obtained assets of the co-op to give that money back.”
Deschamps confirmed that the unnamed law firm in Charlene Wagner’s e-mail is the Ikard, Wynne law firm of Austin, Texas, which represented member-owners in a class action case against the Pedernales Electric Cooperative.
Settled in 2009, the co-op was ordered to return $23 million in patronage capital to members. Instruments were put in place to assure fiscal responsibility and transparency, the entire board has been replaced and the former general manager and attorney are currently under indictment.
In a phone interview on July 15, Bill Ikard acknowledged his firm was prepared to enter the fray.
Although he doesn’t have an attorney-client relationship with the Wagners, he has discussed the issues with them, and Deschamps and Kortemeier.
“I fully expect to join with Lee and Steve in representing some individual members in the countersuit against the co-op,” Ikard said.
Ikard indicated the lawsuit could come in the form of a counterclaim or a separate lawsuit against board members and management. Ikard said he expected something to be filed within the next 60 days.
Before any counterclaims, the local attorneys are trying to bring the case back to Socorro.
The co-op’s attorney filed the lawsuit not in Socorro, but in the 13th Judicial District Court in Los Lunas. Francish told El Defensor Chieftain that the case was filed there because doing so in Socorro’s 7th Judicial District would create conflicts of interest.
“How do we get this back in Socorro where it belongs? I think we can do it by consolidating it,” Deschamps said.
A key piece in the plan to consolidate is Charlene West, a member-owner from Lemitar, who is individually named as a defendant in the co-op’s lawsuit.
West is chairwoman for the SEC Reform Committee and worked with the Wagners in the movement for reform. She also had a restraining order filed against her by the co-op board last year, and has been banned from board of trustees meetings by 7th Judicial Court Judge Matt Reynolds.
“Because they have a suit against a member already in Socorro, why did they go to another court when the vast majority of the membership is in Socorro County?” Deschamps asked. “Now, they technically have lawsuits against Charlene West in two different counties.”
The other two parties named as defendants in the lawsuit are two Socorro-based newspapers, El Defensor Chieftain and the Mountain Mail.
The Mountain Mail made a convoluted legal matter even more muddled on Thursday, when it announced it would not publish the notice of suit.
District Judge John W. Pope had signed an order allowing the summons serving notice of the lawsuit to member-owners to be published in the two newspapers. According to the notice, defendants had until 20 days after the final date of publication, which was to run three consecutive weeks, to answer the complaint or a judgment by default would be entered against them.
In letter written by attorney Roscoe Woods and addressed to the co-op board of trustees and attorney published in the Mountain Mail, Woods wrote that as a party in the suit the Mountain Mail could not achieve “service of process” against the co-defendants.
El Defensor Chieftain published the notice in its July 10 edition. It is due to run again in the Chieftain July 21 and 28.
No matter how the lawsuit turns out, Deschamps praised Charlie Wagner for taking a bold stance against the board on behalf of the member-owners.
“Charlie Wagner should be commended for doing nothing more than trying to make the other board members to be accountable to the membership,” he said. “One has to wonder why board members are making it so hard to keep him from succeeding in gaining transparency for members.”
Contact T.S. Last