Co-op answers countersuit
Attorneys for Socorro Electric Cooperative have filed an answer to a countersuit and request for class action certification that came in response to the co-op’s effort to block three new bylaws passed by member-owners at the annual meeting last April.
Attorney Darin Foster of the Kennedy and Han law firm in Albuquerque electronically filed the answer in the 13th Judicial District Court on Sept. 23. The next day, co-op attorney Dennis Francish made a similar filing on behalf of the cross-claim defendants, excluding former co-op General Manager Polo Pineda Jr., who was fired in August amid an investigation into financial irregularities.
The cross-claim defendants include former trustees Harold Baca, Juan Gonzales, Manuel Marquez and Herman Romero, and current trustees Luis Aguilar, Leroy Anaya, Jack Bruton, Paul Bustamante, Leo Cordova, Prescilla Mauldin, Milton Ulibarri, Dave Wade and Donald Wolberg.
The only current trustee not named as a defendant is Charlie Wagner, who is listed as the representative of the class of member-owners in the countersuit.
The answer to the cross claim denies allegations that co-op officials breached their fiduciary duties, were negligent in their responsibilities to member-owners and committed acts of fraud. It also disputes the validity of a class-action certification in this case.
“The Cross Claim fails to state facts sufficient to allow this action to proceed as a class action under the New Mexico Rules of Civil Procedure,” the answer reads, “and fails to state facts sufficient to allow Cross Claim Plaintiff to maintain this action on behalf of the requested class, as required under the New Mexico Rules of Civil Procedure.”
The answer asks the judge to deny class action certification, dismiss the cross claim with prejudice and order that attorneys fees and costs for defending the cross claim be awarded to the cross-claim defendants.
Paul Kennedy, an attorney hired to handle some of the litigation in which the co-op is currently involved, said in a phone interview on Thursday he felt good about the co-op’s legal standing.
“I feel very comfortable about our position,” he said. “They’re filing these kinds of suits against co-ops across the country. It’s a matter of working through it and getting past it.”
While the co-op has filed a motion to dismiss its original lawsuit against its member-owners — or approximately 13,000 individuals, businesses and public and private entities — there are still more than a handful who answered the complaint that must be resolved.
“We’re trying to get rid all of those. It takes awhile,” Kennedy said.
Asked what would happen if even one of the party holds out, Kennedy said it would be in the hands of a judge to determine.
What judge will ultimately hear the case is still up in the air. All seven judges in the 13th Judicial District have either been excused or recused themselves.
On Oct. 1, the last of the district’s judges, Chief Judge Louis P. McDonald of Sandoval County, was excused from the case by Alvin Hickox of San Antonio, N.M.
According to the online case lookup managed by the New Mexico Administrative Office of the Courts, a clerk’s certificate for out-of-district judge designation will be mailed to the state Supreme Court on Oct. 10.
The Supreme Court will then assign a judge to address the many matters that have been filed since the co-op’s original lawsuit was entered more than three months ago.
Legal Wrangling
The legal wrangling began back in June when the co-op filed a motion asking for declaratory judgment and injunctive relief from three bylaws that were overwhelmingly passed by member-owners at the annual meeting on April 17. All three bylaws call for increased transparency in the manner in which it goes about its business.
The bylaws in question:
• Call for the board to voluntarily follow the Open Meetings Act and Inspection of Public Records Act
• Allow members access to co-op books, records and audits, with the exception of records protected by the Privacy Act
• Allow member-owners and the press to attend co-op board meetings and that a portion of the meeting be set aside for public comment. In addition, announcements of meetings are to be made in billing statements and advertised in local newspapers
The lawsuit drew about a dozen answers to the complaint, including the countersuit.
While attorneys for the Socorro law firm of Deschamps and Kortemeier are listed as attorneys for the cross claim defendants, the lead attorney is Austin, Texas, attorney Bill Ikard, who successfully won a class-action lawsuit against Pedernales Electric Cooperative, the largest co-op in the country.
Among the claims in the countersuit were that co-op officials:
• Breached their fiduciary duties in administrating, managing and accounting for patronage capital, the money returned to member-owners of the public, non-profit corporation
• Maintained a system of grossly unequal election districts and manipulated voting procedures and quorum calls at meetings
• Took compensation in excess of what was due to them and abused per diem payments
• Failed to maintain and report financial information, accounting records and financial reports
• Failed to uphold their contractual obligation with member-owners by engaging in wasteful spending, and failing to assure accountability and transparency
The countersuit asks the court to remove the current trustees from their positions on the board and make them, and the former trustees named as defendants, to pay back money deemed to be in excess of reasonable compensation out of their own pockets and pay attorneys fees and court costs.
Steven Kortemeier, one of the attorneys who filed the lawsuit on behalf of the member-owners, said member-owners shouldn’t have to pay legal fees.
“It’s manifestly unfair to saddle members and ratepayers to be held responsible for what they ultimately don’t have control over, and clearly they don’t have control over the behavior of trustees,” he said.
Some of the defenses included in the answer to the counterclaim state:
• “At all times material to the Cross Claim, Cross Claim Defendants acted reasonably, fairly and in good faith.”
• “Cross Claim Defendants have fully and in good faith performed their obligations to SEC members as required by SEC Bylaws, Articles of Incorporation and applicable state and federal law.”
• “The Cross Claim should be dismissed because Cross Claim Plaintiff has failed to plead with particularity the circumstances of fraud raised in his Complaint, in violation of Rule 1-009(B) NMRA (2010).”
• “To the extent that Cross Claim Plaintiff and members of the requested Class may demonstrate that they have suffered damages based on breach of contract, Cross Claim Plaintiff has failed to mitigate his damages or the damages to the class.”
• “The alleged damages claimed in the Cross Complaint are outweighed by the harm which would be caused to the SEC, its Trustees, officers, employees and members if the Cross Complaint’s request for injunctive relief were granted.”
• “All claims made in the Cross Claim are barred by the business judgment rule.”
Contact T.S. Last