The number of patronage capital cases continues to rise. From 2009 to 2011, at least 10 cases have been filed against electric cooperatives over patronage capital (or capital credits). In fact—just this past February—another patronage capital case was filed in North Carolina. This is the first known patronage capital case of this kind to be filed in that state.

This Legal Alert reports on the North Carolina suit and provides an update on the other patronage capital suits filed against cooperatives. Most cases are in active litigation. Of particular note is the Capps suit in Arkansas, in which the Supreme Court of Arkansas recently affirmed a lower court decision that exclusive jurisdiction to adjudicate patronage capital claims rests with the Arkansas Public Service Commission.

Jackson v. South River Electric Membership Corp. (North Carolina) (11-CvS-152)

On February 9, 2011, a new patronage capital class action complaint was filed in Sampson County, North Carolina. The class consists of the estates of deceased members of the coop (approximately 3,000) whose accumulated capital credits were allegedly discounted at retirement and converted to permanent equity by the South River Electric Membership Corp. (SREMC).

According to the complaint, SREMC provides electric service to more than 40,000 members in five North Carolina counties. At issue is more than $1.5 million of the deceased class members’ alleged property. SREMC has not yet filed its answer.

This case reflects the trend to limit plaintiff classes to either current members or former/deceased members—rather than both current and former members—in order to avoid claims of inherent conflicts within the plaintiff class.