Walker v. Oglethorpe Power Corp., A17A0384

• Citation: 802 S.E.2d 643
• Decision Date: 09 June 2017
• Docket Number: A17A0385,A17A0384
• Parties: WALKER et al. v. OGLETHORPE POWER CORPORATION et al. Shapiro et al. v. Oglethorpe Power Corporation et al.
• Court: United States Court of Appeals (Georgia)

341 Ga.App. 647

802 S.E.2d 643

WALKER et al.

v.OGLETHORPE POWER CORPORATION et al.

Shapiro et al.

v.Oglethorpe Power Corporation et al.

A17A0384

A17A0385

Court of Appeals of Georgia.

June 9, 2017

Kenneth S. Canfield, Atlanta, Charles D. Gabriel, Alpharetta, Samuel Parker Pierce Jr., Atlanta, Keri Patterson Ware, Robert E. Wilson, Decatur, Charles Siegel, William Paul Lawrence II, Kay Reeves, Larry D. Lahman, Roger L. Ediger, Carol Lahman, Forrest DeVaughn, for Appellant in A17A0384.

T. Joshua R. Archer, Thomas M. Byrne, Atlanta, Annalisa Marie Bloodworth, Tucker, Malissa Anne Kaufold–Wiggins, Natalie Marie Christensen Beasman, Benjamin C. Morgan, Hardy Gregory Jr., Cordele, Anne H. Hicks, Hugh Brown McNatt, James A. Orr, Katherine Marie Smallwood, Tashwanda Colleen Pinchback–Dixon, James Lynn Hollis, Atlanta, Charles William Whitney, Tucker, George H. Carley, Decatur, for Appellee in A17A0384.

Rachel Cook Beverly, Thomasville, Robert D. Howell, Moultrie, George R. Lilly II, Raleigh Willis Rollins, Thomasville, Eric H. Gibbs, Michael Schrag, Allison Ehlert, for Appellant in A17A0385.

T. Joshua R. Archer, Thomas M. Byrne, Malissa Anne Kaufold–Wiggins, Benjamin C. Morgan, Atlanta, Hylton B. Dupree Jr., Marietta, Charles D. Gabriel, Alpharetta, Hardy Gregory Jr., Cordele, Hugh Brown McNatt, James A. Orr, Samuel Parker Pierce Jr., Atlanta, Keri Patterson Ware, Robert E. Wilson, Decatur, Tashwanda Colleen Pinchback–Dixon, James Lynn Hollis, Atlanta, George H. Carley, Decatur, Charles Siegel, William Paul Lawrence II, Kay Reeves, Larry D. Lahman, Roger L. Ediger, Carol Lahman, Forrest DeVaughn, for Appellee in A17A0385.

Dillard, Presiding Judge.

This consolidated appeal arises from two class actions brought on behalf of former and current members of various electric-membership corporations ("EMCs"), which are private, nonprofit, electric utilities owned by the members they serve. In Case No. A17A0384, former EMC members sued Oglethorpe Power Company ("Oglethorpe"), Georgia Transmission Corporation ("GTC"), Walton EMC, Jackson EMC, and Sawnee EMC, raising numerous claims, all of which were based, at least in part, on their assertion that they were entitled to refunds from the defendant EMCs of "patronage capital."¹ Similarly, in Case No. A17A0385, current EMC members sued the same parties (except for Sawnee EMC), raising a variety of claims that were also generally based on their assertion that they were entitled to a refunds of patronage capital from the defendant EMCs. Ultimately, in separate orders, the trial court dismissed both complaints for several reasons, including lack of standing and failure to state a claim.

In Case No. A17A0384, former members of the Walton, Jackson, and Sawnee EMCs appeal the trial court's dismissal of their complaint, arguing that the court erred by (1) applying the wrong legal standard applicable to a motion to dismiss; (2) finding that the plaintiffs lacked standing; (3) finding that the plaintiffs' claims were time-barred; (4) concluding that the defendants have no obligation under any circumstances to refund patronage capital to their members; (5) finding that the plaintiffs failed to state claims for breach of contract, unjust enrichment, money had and received, conversion, and equitable relief; and (6) applying the filed-rate doctrine.

Similarly, in Case No. A17A0385, current members of the Walton and Jackson EMCs appeal the trial court's dismissal of their complaint, arguing that the trial court erred by finding that (1) they lacked standing; (2) the EMC defendants have absolute discretion to never retire patronage capital, except upon dissolution; (3) the plaintiffs failed to state claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, money had and received, conversion, and conspiracy; (4) the plaintiffs' request for declaratory and injunctive relief was improper; and (5) the plaintiffs' claims against certain EMCs were derivative instead of direct. For the reasons set forth infra , we affirm the trial court's dismissal orders in both cases.

As conceded by the current and former EMC members, the facts necessary to resolve these consolidated appeals are essentially undisputed.² The Jackson, Walton, and Sawnee EMCs (collectively, the "distribution" or "retail" EMCs) are private, nonprofit electric cooperatives that are owned by the individuals, businesses, and other entities who purchase and receive electricity from them. Including the three EMCs that are named defendants in this case, there are 38 total distribution EMCs in Georgia, all of which are members of two larger electric cooperatives, Oglethorpe and GTC (collectively, the "wholesale EMCs"). All of the EMCs were formed under and are subject to the Georgia Electric Membership Corporation Act (the "EMC Act"), OCGA § 46-3-170 et seq.

Oglethorpe, one of the wholesale EMC defendants, was formed by and is owned by the 38 distribution EMCs. And since its formation, Oglethorpe has provided and sold power to those EMCs. In 1997, Oglethorpe created GTC as a separate wholesale EMC to operate its transmission unit, and to that end, GTC now constructs and maintains underground and above-ground power transmission lines, which transmit power to the retail EMCs' customers. But like Oglethorpe, GTC's members and owners are the 38 distribution EMCs, not any of the individual consumers. To summarize, individual consumers purchase electricity from and pay their power bills directly to the distribution

EMC (of which they are members), and those EMCs purchase power wholesale from Oglethorpe and GTC.

Under the EMC Act, all electric cooperatives, including each of the named defendants in these consolidated cases, must operate on a nonprofit basis, which means that they must account for each member's patronage capital—i.e. , the member's pro rata share of the EMC's earnings in excess of its operating costs and expenses.³ This means that when the wholesale EMCs generate extra profit above their operating costs and expenses, they must annually allocate that patronage capital on their books on a pro rata basis to the accounts of their members, which are the 38 distribution EMCs. Similarly, the distribution EMCs must also allocate any patronage capital they accumulate on their books to the accounts of their members—i.e. , the individuals and businesses who purchase electricity from the distribution EMCs. Each EMC maintains an account on its books reflecting the cumulative amount of patronage capital that has been allocated to each of its members over the years. And although members of the distribution EMCs no longer accrue patronage capital when they terminate service, the EMCs still maintain accounts on their books for their former members reflecting the amount of patronage capital allocated to them when they were members.

Until 1992, Oglethorpe refunded the patronage capital allocated to the distribution EMCs "on a 13 year revolving cycle." For example, if Oglethorpe still adhered to that practice, patronage capital that allocated to members of an EMC in 2001 would be refunded to those members 13 years later in 2014 and so on. Then, in 1993, however,

Oglethorpe increased the length of this refund cycle from 13 years to 30 years. But just four years later, in 1997, Oglethorpe revoked its 30-year revolving cycle. And while it still must allocate patronage capital to its members' accounts, Oglethorpe has not refunded any patronage capital since that time. Moreover, although Oglethorpe refunded some patronage capital to the distribution EMCs prior to 1997, those EMCs never redistributed those refunds to their members. Also in 1997, Oglethorpe refunded $49,000,000 in patronage capital to the distribution EMCs to establish equity in and provide working capital to form GTC, but the members of the distribution EMCs did not receive any of that money.

Following Oglethorpe's 1997 distribution of patronage capital, it has continued to "accumulate tremendous amounts of capital credits," but it has not refunded those credits to the distribution EMCs. As of 2011, the former and current members of Walton EMC have allegedly been allocated (but not refunded) more than $46,000,000 in Oglethorpe patronage capital. And as of 2013, Jackson EMC's former and current members have allegedly been allocated (but not refunded) more than $78,000,000 in Oglethorpe patronage capital.⁴ Although the plaintiffs who are former members of an EMC lack access to those EMCs' books,⁵ they estimate that the amount of patronage capital owned by former and current members of the 38 distribution EMCs is nearly $2,000,000,000.

On March 13, 2014, Edgar "Ed" Walker, a former member of Walton EMC; Phillip Caltabiano, a former member of Cobb EMC; Grant Meade, a former member of Sawnee EMC; and Samer Khashan, a former member of Jackson EMC,⁶ filed a class-action complaint against Oglethorpe, GTC, Walton EMC, Sawnee EMC, and Jackson

EMC, primarily seeking payment of allocated, but not refunded, patronage capital. The lawsuit was brought on behalf of "[a]ll Georgia residents who are former members of the 38 retail distribution cooperatives comprising the membership of Oglethorpe ... and [GTC] and who have unredeemed patronage[-]capital accounts on the books of any of those retail distribution cooperatives." Then, on July 28, 2014, the former-member plaintiffs filed their first-amended complaint, which appears to be a complete replacement of their initial complaint, rather than a supplement.

In the complaint, the former-member plaintiffs asserted the following claims against the wholesale and distribution EMCs: (1) declaratory, injunctive, and mandamus relief to remedy the EMCs' violation of OCGA § 46-3-340 ; (2) unjust enrichment; (3) breach of fiduciary duty (only as to the distribution EMCs); (4) breach of contract; (5) conspiracy; (6) money had and received; (7) conversion; and (8) attorney fees. Approximately one year later, on July 9, 2015, the...