Recherche, LLC v. Baldwin Cnty. Elec. Membership Corp.

295 So.3d 1041

RECHERCHE, LLC, and Brooks Davis, individually and on behalf of all others similarly situated

v.BALDWIN COUNTY ELECTRIC MEMBERSHIP CORPORATION

1171144

Supreme Court of Alabama.

October 18, 2019

Wilson F. Green and James E. Fleenor, Jr., of Fleenor & Green, LLP, Tuscaloosa; Brian P. Strength and Joel Connally of Strength & Connally, LLC, Montgomery; Stephen D. Heninger of Heninger Garrison Davis LLC, Birmingham; Daniel G. McDowell of McDowell Beason & Hamilton P.C., Russellville; and David M. Cohen of Complex Law Group, LLC, Marietta, Georgia, for appellants.

Daniel G. Blackburn of Blackburn & Conner, P.C., Bay Minette; Robert E. Poundstone IV and George R. Parker of Bradley Arant Boult Cummings LLP, Montgomery; and Marc James Ayers and J. Thomas Richie of Bradley Arant Boult Cummings LLP, Birmingham, for appellee.

Dennis R. Bailey, Christopher S. Simmons, and J. Evans Bailey of Rushton Stakely Johnston & Garrett, P.A., Montgomery, for amicus curiae Alabama Rural Electric Association of Cooperatives, in support of the appellee.

Ashton H. Ott and Edward M. Price, Jr., of Farmer, Price, Hornsby & Weatherford, L.L.P., Dothan, for amici curiae Pea River Electric Cooperative and Wiregrass Electric Cooperative, in support of the appellee.

STEWART, Justice.

This appeal involves the interpretation of the patronage-refund requirements imposed on electric cooperatives by § 37-6-20, Ala. Code 1975. Recherche, LLC, individually and on behalf of all other current and former members of Baldwin County Electric Membership Corporation ("the members"), filed a class-action complaint in the Baldwin Circuit Court ("the trial court") against Baldwin County Electric Membership Corporation ("Baldwin EMC"), seeking a judgment declaring the rights of the members to a return of "Patronage Capital" or "Capital Credits," which the members assert are "excess revenues" due to be distributed to the members under § 37-6-20. Brooks Davis subsequently filed a motion to intervene to represent all former members of Baldwin EMC. Recherche and Davis asserted that Baldwin EMC's method of allocating excess revenues to capital accounts violates § 37-6-20. The trial court dismissed the action, and Recherche and Davis appealed. We affirm.

Facts and Procedural History

The procedural history of the action underlying this appeal is lengthy; accordingly, we will discuss only those facts relevant to the issue of Baldwin EMC's distribution of excess revenues. Recherche, LLC, a domestic limited-liability company located in Baldwin County and a member of Baldwin EMC, initiated the underlying class action against Baldwin EMC in June 2012. In May 2014, Davis filed a motion to intervene, which the trial court initially denied. On September 21, 2015, after Davis had appealed that determination, this Court vacated the trial court's order denying intervention and ordered the trial court to allow Davis to intervene. (Case no. 1140057.) Thereafter, Davis filed a class-action complaint in intervention.¹ Baldwin EMC amended its answer numerous times and filed multiple dispositive motions that were denied throughout the course of the underlying proceedings.

On May 3, 2018, Recherche and Davis filed a joint amended complaint to which they attached the Baldwin EMC bylaws. On June 7, 2018, Baldwin EMC filed a motion to dismiss and a supporting brief in which it argued that its method of allocating capital credits to members' capital accounts as provided in its bylaws complied with § 37-6-20 and that the following federal precedent supported the dismissal of the class action: Davis v. Central Alabama Electric Cooperative, No. 15-0131-WS-C, Sept. 8, 2015 (S.D. Ala. 2015) (not selected for publication in F. Supp.), Caver v. Central Alabama Electric Cooperative, No. 15-0129-WS-C, Sept. 8, 2015 (S.D. Ala. 2015) (not selected for publication in F. Supp.)(" Caver I"), and Caver v. Central Alabama Electric Cooperative, 845 F.3d 1135, 1141 (11th Cir. 2017) (" Caver II"). Baldwin EMC attached to its motion the Baldwin EMC bylaws and copies of the opinions issued in Davis, Caver I, and Caver II. On July 16, 2018, Recherche and Davis filed a response in opposition to Baldwin EMC's motion. On July 24, 2018, the trial court denied Baldwin EMC's motion to dismiss.

On July 30, 2018, however, the trial court entered the following order withdrawing its July 24, 2018, order and granting Baldwin EMC's motion to dismiss:

"The MOTION TO DISMISS [RECHERCHE AND DAVIS'S] AMENDED COMPLAINT PURSUANT TO RULE 12(B)[, Ala. R. Civ. P.,] is hereby GRANTED based solely upon the Caver arguments asserted by [Baldwin EMC]. The opinion of the Eleventh Circuit Court of Appeals in Caver v. Central Alabama Electric Cooperative, 845 F.3d 1135 (11th Cir. 2017), upheld Rule 12 orders of dismissal by the United States District Court for the Southern District of Alabama. While that opinion is not binding precedent on this Court, it is the only appellate opinion to interpret the subject statute. The Court is convinced that, given the number of identical cases pending in Alabama state courts, the Alabama Supreme Court's consideration of the statute is necessary to ultimately resolve the issue of how electric cooperatives must distribute excess revenues under the controlling statute. [Recherche and Davis's] appeal of this Order granting [Baldwin EMC's] motion will allow for just that. Accordingly, [RECHERCHE AND DAVIS'S] AMENDED COMPLAINT is hereby DISMISSED WITH PREJUDICE."

(Capitalization in original.) Recherche and Davis timely filed a notice of appeal to this Court.

Standard of Review

The trial court stated that it based its decision "solely upon" Baldwin EMC's reliance on Caver II. Although Baldwin EMC attached its bylaws to its motion to dismiss, Recherche and Davis had already submitted a copy of those bylaws as an exhibit to their amended complaint. "Exhibits attached to a pleading become part of the pleading." Ex parte Price, 244 So. 3d 949, 955 (Ala. 2017) (citing Rule 10(c), Ala. R. Civ. P.). Accordingly, because the trial court did not consider evidentiary matters outside the pleadings so as to convert Baldwin EMC's motion to dismiss to a motion for a summary judgment, we apply the standard of review applicable to Rule 12(b)(6), Ala. R. Civ. P., motions.

" ‘The appropriate standard of review of a trial court's [ruling on] of a motion to dismiss is whether "when the allegations of the complaint are viewed most strongly in the pleader's favor, it appears that the pleader could prove any set of circumstances that would entitle [the pleader] to relief." Nance v. Matthews, 622 So. 2d 297, 299 (Ala. 1993) ; Raley v. Citibanc of Alabama/Andalusia, 474 So. 2d 640, 641 (Ala. 1985)....’ " Lyons v. River Road Constr., Inc., 858 So. 2d 257, 260 (Ala. 2003)."

Liberty Nat'l Life Ins. Co. v. University of Alabama Health Servs. Found., P.C., 881 So. 2d 1013, 1017 (Ala. 2003).

Discussion

The statute at issue -- § 37-6-20 -- is entitled "Disposition of Excess Revenues" and provides:

"Revenues of a cooperative for any fiscal year in excess of the amount thereof necessary to defray expenses of the cooperative and of the operation and maintenance of its facilities during such fiscal year; to pay interest and principal obligations of the cooperative coming due in such fiscal year; to finance or to provide a reserve for the financing of, the construction or acquisition by the cooperative of additional facilities to the extent determined by the board of trustees; to provide a reasonable reserve for working capital; to provide a reserve for the payment of indebtedness of the cooperative maturing more than one year after the date of the incurrence of such indebtedness in an amount not less than the total of the interest and principal payments in respect thereof required to be made during the next following fiscal year; and to provide a fund for education in cooperation and for the dissemination of information concerning the effective use of electric energy and other services made available by the cooperative shall be distributed by the cooperative to its members as, and in the manner, provided in the bylaws, either as patronage refunds prorated in accordance with the patronage of the cooperative by the respective members paid for during such fiscal year or by way of general rate reductions, or by combination of such methods. Nothing contained in this article shall be construed to prohibit the payment by a cooperative of all or any part of its indebtedness prior to the date when the same shall become due."

Recherche and Davis argue that § 37-6-20 requires that Baldwin EMC's "distributions must be in cash or by general rate reductions or a combination of both methods." (Recherche and Davis's brief at 28.) Recherche and Davis argue that the language of § 37-6-20 does not permit Baldwin EMC to allocate excess revenue to capital accounts and later "retire" or pay out those funds, because, they assert, allocation and retirement are not among the exclusive manners of distribution recognized in the statute, which are limited to patronage refunds, rate reductions, or a combination of both methods.

Baldwin EMC first argues that the "patronage capital" it allocates to the members' accounts is different from "excess revenues" under § 37-6-20. Baldwin EMC explains that it calculates the amount distributed to the members' capital accounts by subtracting only the cost of providing power, whereas the "excess revenues" contemplated by § 37-6-20 are the revenues remaining after expending the revenues in the multiple ways envisioned by the statute. Baldwin EMC's method of calculation aside, it is undisputed that Baldwin EMC is allocating to the members' capital accounts credits at least equal to any excess revenues. Accordingly, the only question is whether Baldwin EMC's allocation of capital credits to the members' capital accounts each year satisfies the requirement of distributing "patronage refunds" under § 37-6-20.

Recherche and Davis raise...