Judge signs protective order in PEC lawsuit

BY TOM BOWER • Special to The Daily Tribune

AUSTIN - Some consider it a setback, others argue it was inevitable, but attorneys for both sides in a lawsuit against the Pedernales Electric Co-op board and executives have agreed on a protective order that could keep under wraps some of the co-op documents scrutinized in the litigation.

The protective order was sought by attorneys for the co-op in August and was signed Oct. 10 by 250th District Judge John K. Dietz in Austin, where the case was filed, The Daily Tribune has learned.

In the lawsuit, four members of the Pedernales Electric Cooperative are suing the co-op’s board of directors and top executives, accusing them of breach of fiduciary duty and breach of contract over the manner in which co-op business is being conducted.

“It’s pretty disturbing to me that the lawyers for the class-action plaintiffs have apparently agreed to this protective order,” said John Watson, who is a member of a group of co-op members concerned about secret business practices on the part of co-op board members.

In the suit, PEC board members are accused of awarding themselves excessive compensation and of wasting money on a subsidiary for-profit utility computer software company that has posted $22 million in operating losses over the past three years. The lawsuit also seeks to force the co-op board to refund to members at least a portion of the excess revenues garnered from electric sales.

The order, which stays in effect for two years after the lawsuit is over, means that either side in the litigation may designate as “confidential” any document or deposition testimony produced during the pre-trial phase.

The only people who get to see such evidence are the attorneys involved in the case and court officials. Not even the individually named parties or members of the co-op will be allowed to see such documents, unless they are fact witnesses and are being questioned about a confidential item.

“This will keep even the name plaintiffs from seeing some of those documents. The order seems very broad to me,” Watson said.

Watson added that it appears the protective order could have the effect of denying co-op members access to information that would help them judge for themselves whether the board members elected to run the co-op are doing a good job.

However, a state senator who has been critical of the co-op board and management said Tuesday he has seen the protective order, and it is aimed at protecting co-op trade information and business plans from the eyes of competitors vying for a position in the electric power industry.

“The issues they’re dealing with are trade secrets,” explained state Sen. Troy Fraser, R-Horseshoe Bay. “What they’re talking about in that protective order are trade secrets, power supply contracts and things that they don’t want their competitors for electric power to see.”

LCRA negotiations

For example, Fraser noted PEC is in negotiations with the Lower Colorado River Authority on its next long-range power supply contract, and there are certain business plans and decisions the cooperative has a right and a duty to keep confidential.

Opening up such information to power suppliers and smaller electric cooperatives also purchasing electricity could give those parties a competitive advantage.

Fraser is chairman of the Senate Business and Commerce Committee, which oversees the state’s electric power industry. He has vowed to investigate PEC and is among those pushing to reform the co-op’s board election policies and some other business practices.

Attorneys for the plaintiffs and for the co-op did not return phone calls seeking clarification of the order.

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Judge signs protective order
in PEC lawsuit