Court says Cobb EMC board violated settlement agreement

By Bill Rankin and David Markiewicz

The Atlanta Journal-Constitution

Reform-seeking members of Cobb EMC said they are pleased with a Georgia Supreme Court ruling Monday in their case against the electric cooperative's leadership, but the wrangling over electing a new slate of directors may not be over.

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Vino Wong, vwong@ajc.com Chief Justice Carol Hunstein, writing for the majority, said the Cobb EMC board's amendment 'fundamentally alters the circumstances pursuant to which the members conduct business.'

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By a 6-1 vote the court ruled that Cobb EMC's president and directors violated an agreement with co-op members by amending its bylaws.

The board's amendment "violates the spirit, if not the letter, of the agreement," Chief Justice Carol Hunstein wrote for the court's majority.

Cobb EMC is the monopoly power provider for more than 190,000 customers in five metro Atlanta counties -- Cobb, Bartow, Cherokee, Fulton and Paulding.

The court's ruling does not allow for Cobb EMC board elections. Instead, the state Supreme Court sent the case back to lower courts for additional consideration. Cobb EMC has not had a board election since its legal troubles began in 2007.

"We believe [this decision] will pave the way to a resumption of postponed elections," said Tom Barksdale, one of a group seeking reform.

In a statement, Cobb EMC said, "Despite today's ruling, we stand by our opinion that the bylaw change, allowing members to vote by mail, was inclusive and pro-democratic." The company was "gratified that the Supreme Court stated that the board did not violate the written terms of the settlement agreement."

In October 2007, Edgar Pounds and other Cobb EMC members filed suit against the company, including CEO Dwight Brown. A year later, the parties entered into a settlement agreement that transferred back to the EMC $112 million in assets from the for-profit entity. It also set a schedule for 2009 elections that would allow co-op members to elect new board members.

But at a Dec. 12, 2008, meeting, the board amended the EMC's bylaws to allow proxy voting at meetings when the election of directors was not on the agenda. Co-op members went back to court again to challenge that decision, setting in motion rulings by Cobb County Superior Court Judge Stephen Schuster, the Georgia Court of Appeals and, now, the state Supreme Court.

Hunstein, writing for the court, said the board's amendment to allow proxy voting "fundamentally alters the circumstances pursuant to which the members conduct business."

Justice Harold Melton dissented. The amendment, he wrote, "increases the ability of EMC Cobb’s members to take part in special meetings [and] supports the settlement agreement’s goal of increasing the transparency of EMC Cobb’s corporate structure.”

In a statement released Monday, Schuster said he had "reviewed and fully supports" the state Supreme Court's decision. Once the case is returned to him, he said, "the court will do everything in its power to ensure the prompt implementation of director elections. This court believes the members must be given the opportunity to decide the  leadership and direction of their EMC."