Cobb EMC loses in court

By Margaret Newkirk

The Atlanta Journal-Constitution

A Marietta-based electric cooperative violated a settlement with customers shortly after signing it,  the Georgia Court of Appeals ruled Wednesday.

The ruling orders Cobb County Superior Court Judge Stephen Schuster to enforce the settlement as signed, which could allow co-op customers to begin participating in its governance again.

But that depends on what Cobb EMC does next.  Litigation has stalled co-op board elections for more than two years.

"We strongly disagree with the ruling and our attorneys are considering an appeal," said Chip Stewart, a spokesman for the co-op.

Plaintiffs attorney David Cohen said the ruling "will allow going forward with the postponed 2008 and 2009 elections, unless the board engages in further appeals and delay.  The cost to the members of Cobb EMC’s board trying to avoid an in-person election with the members they supposedly serve has no doubt been astronomical."

Asked whether he had a figure for its post-settlement legal expenses, Stewart said "No."

Cobb EMC is a former rural electric cooperative that now serves more than 180,000 customers in suburban Atlanta.

A group of customers sued Cobb EMC  in 2007, alleging gross mismanagement, abuse of control, waste of corporate assets and unjust enrichment. The suit targeted a decade-long relationship between the non-profit, customer-owned cooperative and a for-profit Cobb Energy, owned and controlled by co-op insiders. Cobb Energy operated the co-op for a markup of up to 11 percent.

The settlement ended that arrangement.  It also set terms of board elections. The co-op changed those terms, landing landed both sides back in court.  Plaintiffs said the co-op was trying to entrench management. The co-op said customers were trying to run its business.

Wednesday's ruling sided firmly with the suing customers. It ordered Schuster to "enforce the settlement agreement with an order consistent with this opinion."