Lawsuit looms over co-op’s annual meeting

Socorro Electric Cooperative’s member-owners will gather for the annual meeting tonight at Finley Gym to vote on a proposal to realign district boundaries. They are also invited to assemble on May 18 in a Socorro courtroom for a hearing on the lawsuit their co-op filed against them last summer.

Member-owners of the independent, nonprofit corporation, who are also its customers, recently began receiving notice of the hearing in their billing statements. A court directive required the co-op to do so after it was determined that the co-op did not provide proper notice when it filed the lawsuit against its approximately 10,000 member-owners on June 29 of last year.
The co-op filed the lawsuit in an effort to block three new bylaws — each of them calling for increased transparency with regard to how the co-op conducts business — that were adopted at last year’s annual meeting. The bylaws, which were passed by overwhelming margins, require the co-op to:
• Voluntarily abide by the Open Meetings Act (OMA) and Inspection of Public Records Act (IPRA).
• Allow members access to co-op books, records and audits, with the exception of records protected by the Privacy Act or other state law.
• Allow members and the press to attend board of trustees meetings and address the board during a public comment period. In addition, the meetings are to be advertised in local newspapers and on billing statements.
Several members filed responses, which includes one counterclaim aimed at the trustees who brought the lawsuit, four former trustees and the co-op’s former general manager. The counterclaim requests class action certification, so all members will be represented.
The counterclaim alleges that co-op officials breached their fiduciary duty through negligence, fraudulent concealment, wasteful spending, and denying members voting rights, among others. It calls for the cross-claim defendants to pay damages out of their own pockets, so as not to harm the co-op.

Co-op’s Arguments
In advance of the May 18 hearing, attorneys for Socorro Electric recently filed a brief outlining the co-op’s arguments for disputing the bylaws. The March 30 filing by attorney Darin M. Foster of Albuquerque’s Kennedy and Han law firm contends that the OMA does not apply to rural electric cooperatives, the members mandate to allow the inspection of records should be declared void, and allowing members and the press to attend meetings is not in the best interest of the co-op.
The brief states that the co-op is a private corporation, therefore is not subject to the OMA, which applies to government agencies.
“While Plaintiff SEC fully supports the public policy underlying the Open Meetings Act, the simple fact is that the SEC is not a state, county or municipal entity, nor is it a political subdivision,” the brief reads.
It further states that the co-op is governed instead by the Rural Electric Utilities Act and regulated by the New Mexico Public Regulation Commission.
The brief goes on to say that operating under the OMA makes it “essentially impossible” for the board to conduct business and has a “chilling effect” on the board of trustees.
“No corporation can effectively function without the ability to conduct private business, to go into executive session, and formulate business strategy and management decisions without the fear that their business deliberations will be in the newspapers the next day,” it states.
It adds that the exposure has led to threats of defamation lawsuits, which have cost the co-op time and money.
The brief claims that co-op members have been allowed to sit in on board meetings with “disastrous” results. It says that members “have shown themselves to be extremely disruptive,” and cites one incident last year when a board meeting was cancelled and the police were called.
In an act of civil disobedience, about 17 members refused to leave after the board attempted to go into closed executive session at the outset of the meeting. The co-op filed its lawsuit the following week.
The brief states that attempting to comply with the new bylaws “simply create ripe ground for continual dispute and litigation.”
Addressing the disclosure of records and information, the brief uses the same argument that the co-op is a private corporation. Since IPRA applies only to state agencies, the bylaw should be declared void.
The brief cites the New Mexico Non-Profit Corporation Act and the 1997 state Supreme Court case of Schein v. Northern Rio Arriba Electric Cooperative, which permits the inspection of records by members with “proper purpose.”
“Plaintiff has made all efforts to comply with these disclosure obligations. However, Plaintiff cannot reasonably comply with vague bylaws that appear to mandate a standard of behavior far in excess of that required by New Mexico law,” it reads.
Socorro Electric has denied repeated requests for audits and financial information made by El Defensor Chieftain and other co-op members. Letters of denial say that because of the current litigation no records will be released without a court order.
In conclusion, the brief states that “as a private corporation, the amendments related to the New Mexico Open Meetings Act and the Inspection of Public Records Act are not applicable to the Cooperative. Similarly, the amendment requiring the SEC to ‘guarantee’ transparency and open records improperly violates an existing regulatory scheme and goes against well-reasoned public policy.”

Binding on Everybody
The lawsuit is being heard by 10th Judicial District Court Judge Albert J. Mitchell Jr., who was appointed to the case by the New Mexico Supreme Court.
Mitchell has already ruled that the lawsuit applies to all members of the co-op — not just those who filed answers to the complaint when it was published in El Defensor Chieftain last July.
Judge Mitchell rendered a decision regarding “applicability of relief” on March 29. It states that any declaratory relief would be “binding on all interested individuals and entities, including those which are not represented before this Court.”
The decision states that injunctive relief upon the defendants, the co-op’s member-owners, combined with declaratory relief binding on all members would potentially resolve all disputes in the co-op’s complaint.
At the May 18 hearing, the judge is to decide on the merits of the original case and may begin to address the class-action aspect of the counterclaim afterward.
Though the co-op filed the lawsuit in Valencia County, the hearing is being held in Socorro as a matter of convenience. The hearing is scheduled for 9:30 a.m. on Wednesday, May 18, at the Socorro County Courthouse.
Tonight’s annual meeting begins with registration from 5 to 7 p.m. The business meeting is scheduled to start at 7 p.m.