Ga. Court Backs Co-ops on Capital Credits

The Court of Appeals of Georgia has sided with electric cooperatives in upholding a lower court ruling that dismissed a pair of high-stakes capital credits lawsuits filed against co-ops in the state.

A Georgia court has upheld a lower court ruling that backed co-ops in capital credits cases involving more than $2 billion.

A Georgia court has upheld a lower court ruling that backed co-ops in capital credits cases involving more than $2 billion. (Photo By: Getty Images/iStockphoto)

By a 3-0 opinion, the court affirmed a 2016 trial court ruling that said the plaintiffs lacked standing to sue a cooperative other than the cooperative in which they were members.

It also held neither state law nor co-op bylaws required capital credits to be retired upon termination of service or within a specific time frame.

If successful, the lawsuits could have raised electricity rates and remade how electric membership corporations operate in Georgia, according to Balch & Bingham, a firm that represented some of the co-ops.

"Plaintiffs in both class actions will not pursue further appeals, solidifying the firm's victory on motions to dismiss where plaintiffs' class sought to recover more than $2 billion," it said.

The decision ended a three-year battle in which current and former distribution co-op members claimed, among other things, they were entitled to the retirement of patronage capital from generation and transmission cooperatives on the grounds that their distribution co-ops were G&T members.

The suits named Oglethorpe Power Co., a generation co-op, and Georgia Transmission Corp., a transmission co-op, both based in Tucker. Also named were Walton EMC, Jackson EMC and Sawnee EMC.

The appellate court agreed with a May 2016 decision handed down by the Superior Court of DeKalb County that said the plaintiffs could not sue the G&Ts because they had no legally binding relationship, known as privity, with them.

Additionally, the plaintiffs maintained that they "owned" unretired capital credits allocations and that the co-ops violated a state statute, breached their bylaws and unjustly enriched themselves by failing to retire capital credits upon termination of service or within a specific time.

However, the court cited a 1970 Georgia case that held capital credits allocations "merely reflect a member's ownership interest" in the retained capital, not an indebtedness that is presently due and payable. The court also noted the discretionary retirement language in the relevant statute and bylaws.

As a result, the court dismissed the claims against the cooperatives.

Ty Thompson, NRECA vice president and deputy general counsel for director and member legal services, said the decisions of the trial court and appellate court indicated that the cooperatives acted within their bylaws and the Georgia statute governing EMCs.

"Even if the members had standing, the court held there was no private cause of action for violating a statute governing excess revenue and that neither the statute nor the cooperative's bylaws required the retirement of capital credits upon termination of service or within a specific time," he said.

"Instead, the cooperatives' boards of directors retire capital credits in their discretion," Thompson said.

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