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Balch & Bingham Secures Georgia Court of Appeals Victory in 2 Class Action Patronage Capital Lawsuits

On June 9, 2017, the Georgia Court of Appeals affirmed a trial court’s dismissal of two class action patronage capital lawsuits filed against distribution electric membership corporations (EMCs). Balch & Bingham successfully represented Walton EMC, Jackson EMC and Sawnee EMC in Walker v. Oglethorpe Power Corp., et al., Civ. Action No. 14CV2932-8 and Shapiro v. Oglethorpe Power Corp., et al., Civ. Action No. 14CV8323-8. 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 dollars.

Specifically, the Georgia Court of Appeals affirmed a May 2, 2016, decision by the Superior Court of DeKalb County, Georgia, to dismiss the class actions, including the unusual request to certify a defendants’ class. In both cases, plaintiffs challenged the EMCs’ patronage capital distribution practices, alleging violations of the EMC enabling act, breach of contract, unjust enrichment, breach of fiduciary duty, money had and received, conspiracy, conversion, and breach of the implied obligation of good faith. Plaintiffs sought to increase electricity rates and remake how EMCs operate in Georgia.

The Court of Appeals held that the EMC enabling act and the EMCs’ bylaws do not require EMCs to distribute patronage capital to current or former members prior to dissolution unless the EMCs’ board of directors decides to do so. The act only requires EMCs have bylaws that address the allocation and disposition of revenues, which all the EMCs did. The court also held plaintiffs do not have a private right of action against an EMC for return of patronage capital. All plaintiffs’ other claims were separately addressed and dismissed.

Balch’s Atlanta Litigation Practice members Josh Archer, Jim Hollis, Anne Kaufold-Wiggins, and Hugh McNatt served as counsel to Walton EMC, Jackson EMC and Sawnee EMC.  Mr. Archer argued the cases before the Georgia Court of Appeals.