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Wolfe v. Flathead Electric Cooperative, Inc.

Supreme Court of Montana

November 20, 2018

KATHLEEN WOLFE, SUE WORTMAN, JOSEPH ZATOROWSKI, and WILLIAM SUBKO, on behalf of themselves and all others similarly situated, Plaintiffs and Appellants,
v.
FLATHEAD ELECTRIC COOPERATIVE, INC., Defendant and Appellee.

          Submitted on Briefs: September 12, 2018

          APPEAL FROM: District Court of the Eleventh Judicial District, In and For the County of Flathead, Cause No. DV-16-755A Honorable Amy Eddy, Presiding Judge

          For Appellants: Gary A. Gotto, Keller Rohrback LLP, Missoula, Montana, Michael D. Woerner, John P. Freeman, Keller Rohrback LLP, Seattle, Washington

          For Appellee: Maxon R. Davis, Davis, Hatley, Haffeman & Tighe, PC, Great Falls, Montana, James H. Goetz, Geotz, Baldwin & Geddes, PC, Bozeman, Montana.

          OPINION

          INGRID GUSTAFSON, JUSTICE

         ¶1 Energy consumer Plaintiffs appeal from various orders granting summary judgment to Flathead Electric Cooperative, Inc. (FEC) in the Eleventh Judicial District Court, Flathead County. We affirm.

         ¶2 While Plaintiffs assert multiple issues, the following issue is dispositive of the appeal:

Whether the District Court erred in determining Plaintiffs' claims are barred by the statute of limitations?

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶3 FEC is a tax-exempt rural electrical cooperative owned by its members and organized under and governed by the Rural Electric and Telephone Cooperative Act (RETCA). Section 35-18-101, et seq., MCA. Plaintiffs are former members who received electrical services from FEC but have since moved out of FEC's service area. Plaintiffs were FEC members at different times: Zatorowski from 1981 to 1986, Zubko from 1998 to 1999, and Wortman in 2002 only. Plaintiff Wolfe was a member of FEC in 1998 and claims service again in 2007 though FEC could not find record of it.

         ¶4 The Plaintiffs' primary assertion[1] is FEC's practice of allocating capital credits to each member's capital account but not actually retiring and refunding the capital credits until sometime in the future violates RECTA. Specifically, Plaintiffs assert FEC violates § 35-18-316, MCA, because the statute provides cooperative revenue for each fiscal year must be distributed to the members-which Plaintiffs construe to mean members should annually be receiving a refund-and because FEC did not timely issue any Plaintiff said refund. In this assertion the District Court held Plaintiffs fail to consider that the statute does not provide for annual distribution but rather only provides for distributions "whenever the revenue exceeds the amount necessary" to fund the operations of the cooperative and provide reasonable reserves. Section 35-18-316, MCA.

         ¶5 FEC's bylaws, adopted by its members in 1947, provide its members "shall furnish and contribute to the Cooperative, and the Cooperative shall receive as capital all operating margins." The bylaws then define operating margins as "all funds and amounts, received from its' members . . . for the provision of a Cooperative service, that exceed the Cooperative's costs and expenses of providing that service." FEC's bylaws also authorize the periodic retirement of patronage capital. FEC's fiscal year closes December 31. The FEC board meets every month and is presented with the prior fiscal year's financials in February. At that time, the Board determines if there are excess operating margins and whether patronage capital should be retired per § 35-18-316(1), MCA.

         ¶6 Plaintiffs argue FEC breached its contract (the terms of which are the articles of incorporation, bylaws, rules, and regulations of the cooperative, and RECTA)[2] with members and former members by not refunding capital annually. FEC filed a motion for summary judgment asserting the statute of limitations on Plaintiffs' claims had expired. Following full briefing, on December 21, 2017, the District Court granted summary judgment to FEC, ruling in part that Plaintiffs' claims were barred by the statute of limitations. Plaintiffs appeal.

         STANDARD ...


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