Judge rules against PEC request to dismiss suit

BY TOM BOWER • Special to The Daily Tribune

AUSTIN - A class-action lawsuit against board members of the Pedernales Electric Cooperative is poised to move forward after a state district judge recently ruled against a request by co-op attorneys seeking to have the case dismissed.

But in a surprise development, the law firm that originally filed the suit has agreed to withdraw from the case. Two other firms remain involved.

The announcement comes just one week after state District Judge John K. Dietz denied a motion Oct. 3 in which PEC argued that the case was without merit and should be dismissed.

“We decided to withdraw from the case in the interest of reducing the legal costs of the plaintiffs and the purported class, since there is only one law firm that is representing all of the defendants in the case,” lead plaintiff’s attorney Jan Soifer said Wednesday.

Soifer is a partner in the Austin law firm of Lawrence Soifer Satija, which filed the lawsuit May 16 in Travis County’s state 250th District Court.

In their petition, the plaintiffs are accusing the co-op board of directors and top-level managers of breach of fiduciary duty and breach of contract over the manner in which co-op business is being conducted.

Specifically, the plaintiffs are accusing the defendants of awarding themselves excessive compensation and wasting co-op assets. In addition, they claim the board is violating its contract with members by not returning excess revenues earned from the sales of electricity to those members.

In most member-owned electric cooperatives, such revenues typically are refunded to members as capital credits or dividends.

Since it was established in 1938, the Pedernales Co-op has accrued $226 million in so-called patronage capital, almost all of which has already been invested in co-op facilities, including transmission lines, power transmission substations, buildings and other co-op facilities.

The policy effectively means that it is less expensive for new residents to sign up and become co-op members to buy electricity, while existing members are bearing more of the financial burden for extending power service to new subdivisions, homes and apartments.

After Soifer filed the lawsuit, two other law firms were hired by the plaintiffs to pursue the case. Those firms are Ikard Wynne & Ratliff of Austin and Baker & McKenzie of Chicago. They will remain on the case as co-counsels, Soifer said.

“Ikard Wynne and Baker & McKenzie have told us they appreciate all the work that we did in developing the case,” Soifer said.

Soifer’s decision to withdraw stems from a pleading in the case that was filed Sept. 28 by William Ikard, of Ikard Wynne & Ratliff, and Graham Kerin Blair, of Baker & McKenzie. Both are full partners in their respective firms. Ikard is from Austin and Blair is from Houston.

In the Sept. 28 motion, pending before Dietz, the plaintiffs’ attorneys are seeking a hearing to have some or all of the court records in the case placed under seal and accessible only to the lawyers and court officials handling the case.

According to court records, Soifer contested the motion, and Dietz ordered the plaintiffs’ attorneys to mediation. Soifer said she decided to withdraw from the case after a mediation session Oct. 4, adding that she plans to file her motion to withdraw no later than Friday.

In a related development, according to court records, Dietz is scheduled to consider a request by the Pedernales Co-op to issue a protective order in the case at a hearing set for 2 p.m. on Monday.

Such an order would prevent attorneys on both sides of the case from filing sworn depositions and other evidence they uncover during the case’s discovery process. If it is issued, a protective order would effectively limit public access to the case to the oral arguments and testimony that are given in open court hearings.

Back to main page

Judge rules against PEC request
to dismiss suit