Cobb EMC urges judge to toss lawsuit


The Atlanta Journal-Constitution
Published on: 02/13/08

Lawyers for Cobb County's largest utility want a judge to dismiss a suit by customers, saying it was filed six years too late.

Cobb EMC, a Marietta-based electric cooperative, said the plaintiffs no longer have standing to challenge the co-op's financial ties to a for-profit operating affiliate called Cobb Energy.

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The suit focuses on the tie between the co-op and Cobb Energy, which has operated the co-op for a decade under a 40-year contract.

Co-op attorney Bruce Brown said the co-op had disclosed its operating contract with Cobb Energy repeatedly in annual reports. The legal clock for challenging the decade-long relationship ran out six years ago, Brown said.

The co-op's motion for dismissal called the lawsuit a "shotgun" attack that didn't specify who did what wrong and when.

In a hearing last week, Brown said the complaint was vague for a reason. If the plaintiffs had specified when the alleged grievance occurred, their suit "would be thrown out of court," Brown said.

Attorneys for the suing members have 30 days to respond to Cobb EMC's motion to toss the suit.

The member lawsuit against Cobb EMC and Cobb Energy was filed in October by a group of businessmen suing as members of the co-op claiming they were acting on the co-op's behalf.

The lawsuit alleges the for-profit company illegally transferred cash and assets from the nonprofit co-op.

It accuses co-op leadership of mismanagement, breach of fiduciary duty and unjust enrichment for allowing that to happen.

The co-op denies the allegations. In court filings, it says neither the formation of Cobb Energy nor its transactions with the co-op were illegal and that customers had not been harmed.

The co-op, which once owned all of Cobb Energy, now owns just 30 percent. Cobb Energy has not released a list of its other owners.

The motion to dismiss came in a busy week in the 3-month-old lawsuit.

Judge Michael Stoddard, who is handling disclosure issues, also heard arguments about when and how Cobb EMC and Cobb Energy would provide information to the other side.

Stoddard sided with the suing customers on most of those issues.

Information about Cobb Energy in particular has become a battleground, plaintiffs' attorney Pitts Carr argued last week.

"The whole core of this matter is the relationship between Cobb Energy and Cobb EMC," Carr said. That "Cobb Energy, which was owned by Cobb EMC, and that ownership has filtered out to unknown other people for unknown remuneration."

He said Cobb EMC whited out Cobb Energy discussion in co-op board minutes, for instance.

"You're going round talking about the Christmas party, and then it's 'Now we're going to talk about Cobb Energy' and wham!" he said, miming a slamming door.

He said the withheld information prevented more detailed information from being included in the suit, which Cobb EMC is now using as a reason to ask that the suit be dismissed.

"They have precluded us from Day One on this, and they know it," Carr told the court.

Cobb EMC attorney Brown said the co-op redacted only privileged communications between a lawyer and client.


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