SIMMONS et al v. WEST FLORIDA ELECTRIC COOPERATIVE ASSOCIATION INC

Filing 33

ORDER OF DISMISSAL re granting 15 Motion to Dismiss. The clerk must enter judgment stating, "This action was resolved on a motion to dismiss. It is adjudged that the plaintiffs Robert Simmons and Jan Simmons recover nothing on their claims against the defendant West Florida Electric Cooperative Association, Inc. The claims are dismissed on the merits." Signed by JUDGE ROBERT L HINKLE on 3/7/2017. (jcw)

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IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF FLORIDA
PANAMA CITY DIVISION

ROBERT SIMMONS and
JAN SIMMONS,
Plaintiffs,
v.

CASE NO. 5:15cv321-RH/GRJ

WEST FLORIDA ELECTRIC
COOPERATIVE ASSOCIATION, INC.,
Defendant.
_____________________________________/
ORDER OF DISMISSAL
The plaintiffs are members of a rural electric cooperative. Their complaint
seeks to compel the cooperative to refund excess revenues as allegedly required by
Florida Statutes § 425.21. The cooperative has moved to dismiss. After oral
argument, a ruling was announced on the record granting the motion. This order
confirms and briefly summarizes the ruling.
I
In 1936, at the depth of the Great Depression, many homes in rural America
had no electricity. Congress adopted the Rural Electrification Act in that year to

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serve an important national goal: to “bring electric power to parts of the country
not adequately served by commercial companies.” Arkansas Elec. Co-op. v. Ark.
Pub. Serv. Comm’n, 461 U.S. 375, 380-81 (2006). Toward that end, the Act
included provisions designed to encourage the formation of rural electric
cooperatives. In 1939, the State of Florida adopted its Rural Electric Cooperative
Law, which is codified as chapter 425 of the Florida Statutes. The relevant
provisions have not been changed since that time.
The defendant West Florida Electric Cooperative Association, Inc. (“the
Association”) was created soon after adoption of the federal statute. As is
uncontested, the Association is a cooperative governed by chapter 425. The
Association provides electricity to members in parts of northwest Florida—parts
that were in the 1930s and to a large extent still are rural.
The plaintiffs are members of the Association. They assert the Association
has failed to refund to members excess revenues as allegedly required by Florida
Statutes § 425.21. The plaintiffs assert claims directly under the statute, for breach
of contract, for unjust enrichment, and under the Florida Deceptive and Unfair
Practices Act, Fla. Stat. §§ 501.201–.208. The Association has moved to dismiss
the complaint for failure to state a claim on which relief can be granted.

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II
To survive a motion to dismiss for failure to state a claim, a plaintiff must
plead “factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). For purposes of a motion to dismiss, the complaint’s factual
allegations, though not its legal conclusions, must be accepted as true. Id.; see also
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). As both sides agree, the
Association’s bylaws, which are specifically referred to in the complaint and are
included in this record, may properly be considered on the motion to dismiss.
III
The case turns on a single, straightforward question: does the complaint
allege facts that, if proven, would constitute a violation of § 425.21? The statute
provides that, “unless otherwise determined by a vote of the members,” excess
revenues—determined under a formula set out in the statute—must be
“distributed” to a cooperative’s members “as patronage refunds.” The full text of
the statute is included in the appendix to this order.
The complaint alleges that the Association allocates accumulated earnings to
members by crediting their individual capital accounts but that the Association
does not pay the members in cash. A capital account is of course much less

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valuable to a member than the same amount of cash. A member cannot buy
groceries or pay bills with a capital account.
The amount of earnings the Association allocates to members’ capital
accounts is not the same as the amount of excess revenues calculated under the
statutory formula. But for present purposes this does not matter. The complaint
adequately alleges that the Association has received excess revenues each year.
The allegation may or may not be true, but that is not an issue that can be
determined on the motion to dismiss.
Reasonable arguments can be made on both sides of the question whether
the statutory requirement to “distribute” the properly calculated amount as a
“patronage refund” means the amount must be paid out in cash rather than credited
to a capital account. On the one hand, to “distribute” could easily be read to mean
simply to allocate, including by allocating the proper amount to a capital account.
See, e.g., Distribute, WEBSTER’S SEVENTH NEW COLLEGIATE DICTIONARY (1970)
(listing as the first definition “to divide among several or many: apportion”). On
the other hand, to “refund,” standing alone, could well be read to mean to pay back
in kind—to pay back in cash the excessive portion of the cash paid in by members
to purchase electricity. See, e.g., Refund, WEBSTER’S SEVENTH NEW COLLEGIATE
DICTIONARY (1970) (listing as definitions “to give or put back” and “to return
(money) in restitution, repayment, or balancing of accounts”). Still, the statute uses

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“refund,” standing alone, only in the heading; in the text, the statute refers to
“patronage refunds,” a term that, in this industry, might well include capital
allocations.
In addressing a similar Alabama statute, the Eleventh Circuit said that the
requirement to “distribute” excess revenues through “patronage refunds” or rate
reductions, in a manner provided in the bylaws, could be satisfied by crediting
capital accounts—cash refunds were not required. See Caver v. Cent. Ala. Elec.
Coop., 845 F.3d 1135, 1147-48 (11th Cir. 2017). The Alabama and Florida statutes
are not identical, so Caver is not dispositive here. But the decision cuts strongly in
the Association’s favor.
A definitive ruling on this issue is unnecessary in this case. The Florida
statute requires a cooperative to distribute excess revenues “unless otherwise
determined by a vote of the members.” Fla. Stat. § 425.21. Here it is undisputed
that in 2000 the members voted to adopt a bylaw authorizing the capital-account
procedure that the Association has followed ever since. This was a “vote of the
members” that eliminated any requirement to make a cash distribution, even if the
statute otherwise would have required such a distribution.
To be sure, the plaintiffs say the requirement for a cash distribution may be
overridden only by a stand-alone vote of the members—that adopting a bylaw is
not enough. And the plaintiffs say there must be a vote each year—that a vote

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cannot remain in effect indefinitely or until there is a contrary vote. But nothing in
the statute supports these assertions. The best reading of the statute’s plain terms is
that members may vote to dispense with any requirement to distribute excess
revenues. That is what the members did when they adopted the bylaws.
The plaintiffs also say that accumulating excess revenues for as long as the
Association has done it is a deceptive and unfair trade practice, actionable under
the Florida Deceptive and Unfair Trade Practices Act, even aside from any
violation of § 425.21. But that is not so. So long as it does not deceive, a seller of
goods and services ordinarily may charge whatever price it chooses, subject only to
any statutory restriction. A seller ordinarily has no obligation to refund any portion
of the purchase price, even if it turns out that the seller is making large profits.
Here the plaintiffs have not alleged that the Association made any untrue or
deceptive statement about the Association’s prices or about its refund policy.
Absent a violation of a statute or an untrue or deceptive statement, merely
collecting a high price and refusing to refund any portion of it is not a violation of
the Florida Deceptive and Unfair Trade Practices Act.

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IV
For these reasons and those set out on the record,
IT IS ORDERED:
The motion to dismiss, ECF No. 15, is granted. The clerk must enter
judgment stating, “This action was resolved on a motion to dismiss. It is adjudged
that the plaintiffs Robert Simmons and Jan Simmons recover nothing on their
claims against the defendant West Florida Electric Cooperative Association, Inc.
The claims are dismissed on the merits.”
SO ORDERED on March 7, 2017.
s/Robert L. Hinkle
United States District Judge

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APPENDIX: FLORIDA STATUTES § 425.21
425.21 Refunds to members.—Revenues of a cooperative for any fiscal year
in excess of the amount thereof necessary:
(1) To defray expenses of the cooperative and of the operation and
maintenance of its facilities during such fiscal year;
(2) To pay interest and principal obligations of the cooperative coming due
in such fiscal year;
(3) 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;
(4) To provide a reasonable reserve for working capital;
(5) To provide a reserve for the payment of indebtedness of the cooperative
maturing more than 1 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
(6) 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, unless otherwise determined by a vote of the members, be distributed by the
cooperative to its members as patronage refunds in accordance with the patronage
of the cooperative by the respective members paid for during such fiscal year.
Nothing herein contained 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.

Case No. 5:15cv321-RH/GRJ