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The Virginia Appellate Lawyer’s Court of Appeals of Virginia Blog

Electric "Un-cooperative" might be a better name for it . . .

Virginia has quite a few electric cooperatives. Electric cooperatives are not-for-profit electric transmission providers which are owned by their customers, who are members of the cooperative. Like most cooperative companies, there can often be disputes between the leadership and the members. That was the case in Seth G. Heald, et al. v. Rappahannock Electric Cooperative (February 13, 2024), an appeal from a granting of summary judgment for the Rappahannock Electric Cooperative which satisfied neither the company nor the members.

The dispute was over the adoption of new bylaws to provide greater access to information by the members about board meetings, compensation to directors and proxy voting. The leadership resisted the effort, asserting that it would interfere with their ability to operate the cooperative effectively. Naturally, the members were not satisfied and sought a declaratory judgment which ultimately lead to the cross motions for summary judgement.

As already mentioned, neither side was particularly happy with the resulting judgment, which mostly went the directors' way. The members appealed and the board assigned cross-error. The result in the Court of Appeals will likely be equally unsatisfying as the members prevail on one issue, but lose on two others under a "right result, wrong reason" theory.

The opinion of the Court, Judge Malveaux joined by Judges O'Brien and Fulton, is 26 pages and deals mostly with the arcane world of the Virginia Utility Consumer Services Cooperatives Act. Frequent readers of this space will know that I loathe administrative law, and this case demonstrates why. So unless you are a glutton for punishment (and my sympathies go to the panel and their staffs who had to slog through the Act), let me try to give you the Court's rulings in plain terms.

First, the members prevail on their challenge to the granting of summary judgment for the directors' use of a super-majority requirement for a member-led attempt to alter the bylaws because the Act does not provide for a super-majority requirement and non-stock corporations, which the cooperative is, require only a simply majority.

The members do not prevail on a challenge to the circuit court's finding that their proposed changes to the bylaws would interfere with the directors' administrative powers. Specifically, the Act gives the directors the power to adopt and amend bylaws, while the members have the power to alter or repeal by laws adopted by the directors. The Court held that the circuit court overlooked this distinction on deciding which of the members proposed by laws could be considered, but the court nonetheless reached the correct decision in finding that some of the proposals were proper for the members to assert while others were not.

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