Baria v. Singing River Electric Cooperative
Filing
55
MEMORANDUM OPINION AND ORDER finding as moot 36 Motion to Stay Proceedings; granting 43 Motion to Dismiss; denying 46 Motion to Amend/Correct. Ordered that this case is dismissed with prejudice. Signed by District Judge Keith Starrett on 7/15/20. (JCH)
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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
BARRETT BARIA, et al.
v.
PLAINTIFFS
CIVIL ACTION NO. 1:19-CV-248-KS-JCG
SINGING RIVER ELECTRIC COOPERATIVE
DEFENDANT
MEMORANDUM OPINION AND ORDER
For the reasons provided below, the Court denies Plaintiffs’ Motion for Leave
to File [46] a Third Amended Complaint, grants Defendant’s Motion to Dismiss [43],
and denies Defendant’s Motion to Stay Pending Appeal [36] as moot. This case is
dismissed with prejudice.
I. BACKGROUND
The Court has previously discussed the background of this case. See Baria v.
Singing River Elec. Coop., 2019 WL 2343841, at *1 (S.D. Miss. June 3, 2019). On June
3, 2019, the Court entered a Memorandum Opinion and Order [17] granting
Defendant’s Motion to Compel Arbitration [3], denying Plaintiffs’ Motion for Limited
Lifting of the Stay on Discovery [9], and administratively closing the case pending
the parties’ completion of arbitration. Id. at *5. The Court held that the parties had
executed a valid arbitration agreement because Plaintiffs’ application for service
incorporated Defendant’s bylaws, and the bylaws include an arbitration provision. Id.
at *3. The Court also noted that the Mississippi legislature specifically granted
Defendant’s board of directors the authority to adopt and amend the bylaws
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regulating the terms and conditions upon which Defendant provides services to its
members “as the board may deem appropriate or desirable.” Id. (quoting MISS. CODE
ANN. § 77-5-223(a)). Finally, the legislature prescribed that Defendant’s members
must “comply with the terms and conditions in respect to membership contained in
the bylaws . . . .” Id. (quoting MISS. CODE ANN. § 77-5-225).
The Court also concluded that the parties to the contract had agreed to
delegate questions of arbitrability to the arbitrator by incorporating the Rules of the
American Arbitration Association (“AAA”). Id. at *4 (citing Arnold v. Homeaway, Inc.,
890 F.3d 546, 551-52 (5th Cir. 2018)). Therefore, the Court concluded that Plaintiffs’
arguments as to the enforceability or validity of the arbitration provision must be
presented to the arbitrator. Id. at *3-*4.
On June 18, 2019, Plaintiffs filed a Motion for Reconsideration [18]. Among
other things, they argued that they did not assent to the inclusion of an arbitration
provision in their contract with Defendant. In response, Defendant argued that all
contracts for service with a power cooperative automatically incorporate the
cooperative’s bylaws by operation of Mississippi law.
The Court held that a party seeking to enforce an arbitration provision must
first demonstrate that the parties agreed to the provision. Baria v. Singing River Elec.
Coop., 2020 WL 1277202, at *2-*3 (S.D. Miss. Mar. 17, 2020). In the context of this
case, a question of bylaw interpretation “begins with reviewing [the power
cooperative’s] application-for-service form” to see if the parties actually incorporated
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the bylaws. Id. at *3 (quoting The Door Shop, Inc. v. Alcorn County Elec. Power Ass’n,
261 So. 3d 1099, 1104 (Miss. 2018)). Although it was undisputed that the parties
executed contracts for services in the form of Plaintiffs’ applications, the record
contained no evidence of the content of those applications. Id. Accordingly, the Court
held that Defendant had failed to demonstrate that Plaintiffs’ contracts incorporated
the cooperative’s bylaws, and the Court declined to create a precedent that all
contracts for service with Mississippi power cooperatives automatically incorporate
the bylaws by operation of statute. Id. Finally, the Court noted that Defendant only
needed to produce copies of the contracts and demonstrate that they incorporated the
terms of the bylaws, as other power cooperatives had done in similar cases. Id.
Defendant filed a Notice of Appeal [35] of the Court’s ruling on April 16, 2020,
and a week later it filed a Motion to Stay [36] the case pending resolution of the
appeal. 1 After the Motion to Stay [36] was briefed, Defendant also filed a Motion to
Dismiss [43], citing the Court’s ruling in a virtually identical case brought by
Plaintiffs’ counsel against a different power cooperative. See Harper v. S. Pine Elec.
Coop., 2020 WL 2120413 (S.D. Miss. Feb. 12, 2020); Harper v. S. Pine Elec. Coop.,
2020 WL 2114366 (S.D. Miss. May 4, 2020). Plaintiffs then filed a Motion for Leave
to File an Amended Complaint [46]. All three motions are ripe for review.
An interlocutory appeal from denial of a motion to compel arbitration does not divest the district
court of jurisdiction to proceed to the merits. Weingarten Realty Investors v. Miller, 661 F.3d 904,
908-09 (5th Cir. 2011).
1
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II. MOTION TO AMEND [46]
Plaintiffs seek leave to file an amended complaint to “clarify” their allegations.
They have already amended twice and can now do so “only with the opposing party’s
written consent or the court’s leave,” but “[t]he court should freely give leave when
justice so requires.” FED. R. CIV. P. 15(a)(2). Indeed, Rule 15 “evinces a bias in favor
of granting leave to amend,” Thomas v. Chevron USA, Inc., 832 F.3d 586, 590 (5th
Cir. 2016), and a “district court must possess a substantial reason to deny a request
for leave to amend.” Smith v. EMC Corp., 393 F.3d 590, 595 (5th Cir. 2004). “[L]eave
to amend . . . is by no means automatic,” however. Little v. Liquid Air Corp., 952 F.2d
841, 845-46 (5th Cir. 1992). “[P]ermissible reasons for denying a motion for leave to
amend include undue delay, bad faith or dilatory motive on the part of the movant,
repeated failure to cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of allowance of the amendment, futility of
amendment, etc.” Id. The “[p]laintiff bears the burden of showing that delay was due
to oversight, inadvertence or excusable neglect . . . .” Parish v. Frazier, 195 F.3d 761,
763 (5th Cir. 1999).
In the proposed Third Amended Complaint, Plaintiffs allege: “Rather than
returning excess revenues from rate payments not devoted to operating and
maintenance expenses, related debt obligations, and/or reserves for improvements,
new construction, depreciation or contingencies, Defendant has accumulated and
retained, converted, and/or misappropriated them.” Exhibit A to Motion for Leave to
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Amend at 6, Baria v. Singing River Elec. Coop., No. 1:19-CV-248-LG-JCG (S.D. Miss.
June 4, 2020), ECF No. 46-1. Plaintiffs contend that they are entitled to the return of
such revenues, as required by MISS. CODE ANN. § 77-5-235. Id. Although Plaintiffs
asserted a variety of claims, this alleged statutory violation forms the factual
predicate underlying each one.
However, Plaintiffs made it clear in their reply brief that they are challenging
the reasonableness and necessity of the decisions made by Defendant’s board, rather
than claiming that the Board retained funds that the Board itself did not believe were
necessary for reserves, improvements, and other contingencies. See Reply at 2, Baria
v. Singing River Elec. Coop., No. 1:19-CV-248-KS-JCG (S.D. Miss. June 25, 2020),
ECF No. 54. As the Court notes below, the statute grants Defendant’s board complete
discretion to determine how much reserve funds it should retain for improvements,
new construction, and other contingencies. MISS. CODE ANN. § 77-5-235(5). Plaintiffs
know this. They admitted as much in briefing, and argued that the Court must
intervene nonetheless because the Mississippi legislature granted power cooperatives
a monopoly on electric power services and complete discretion in setting their rates
and use of their revenues. Id. at 1-2. In other words, Plaintiffs’ latest proposed
amendment is nothing more than an attempt to use artful pleading to avoid dismissal
for the reasons the Court has already articulated in related cases, while Plaintiffs’
actual goals have not changed.
Nothing alleged in the proposed Third Amended Complaint would change the
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Court’s analysis regarding the broad – indeed, unfettered – discretion granted to the
boards of electric power cooperatives by the relevant statutes. Therefore, the Court
finds that the amendment would be futile, and that leave to amend should be denied.
Additionally, Plaintiffs have unduly delayed seeking leave to amend. Plaintiff
Baria filed the initial Complaint in state court on March 22, 2019. Three days later,
he filed a First Amended Complaint. Defendant removed the case on April 19, 2019,
and on April 29, 2019, Plaintiffs filed the Second Amended Complaint [7], which is
currently the operative pleading. Over a year later, Plaintiffs filed the instant motion,
seeking leave to amend for a third time, after the parties had fully litigated the issue
of arbitration and Defendant had filed a motion to dismiss. Plaintiffs have not
provided any reason for the delay in seeking yet another amendment, much less
demonstrated that the “delay was due to oversight, inadvertence or excusable neglect
. . . .” Parish, 195 F.3d at 763. Indeed, they implicitly admitted in briefing that the
impetus for the instant motion was the Court’s ruling in a related case.
For all these reasons, the Court denies Plaintiffs’ Motion for Leave to File
Amended Complaint [46].
III. MOTION TO DISMISS [43]
Defendant filed a Motion to Dismiss [43]. To survive a Rule 12(b)(6) motion,
the “complaint must contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Great Lakes Dredge & Dock Co. LLC v.
La. State, 624 F.3d 201, 210 (5th Cir. 2010). “To be plausible, the complaint’s factual
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allegations must be enough to raise a right to relief above the speculative level.” Id.
(punctuation omitted). The Court must “accept all well-pleaded facts as true and
construe the complaint in the light most favorable to the plaintiff.” Id. But the Court
will not accept as true “conclusory allegations, unwarranted factual inferences, or
legal conclusions.” Id. Likewise, “a formulaic recitation of the elements of a cause of
action will not do.” PSKS, Inc. v. Leegin Creative Leather Prods., Inc., 615 F.3d 412,
417 (5th Cir. 2010) (punctuation omitted). “While legal conclusions can provide the
framework of a complaint, they must be supported by factual allegations.” Ashcroft v.
Iqbal, 556 U.S. 662, 679, 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009).
The primary question presented by this case is how much discretion
Mississippi law grants the boards of directors of rural power cooperatives with respect
to the retention of funds. Plaintiffs, members of the Defendant power cooperative,
contend that Defendant has no discretion and must return all “excess revenues” to
its members. Defendant contends that the legislature granted it unfettered discretion
to determine how much it should hold in reserve for improvements and other
contingencies.
In reaching these conclusions, the parties applied different versions of the
same statute, Miss. Code Ann. § 77-5-235. Plaintiffs argue that the Court should
apply the former version of the statute because they are only seeking a refund of
excess revenues retained prior to the statute’s amendment. The former version of the
statute provides:
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A corporation formed under the provisions of this article shall have
power to charge reasonable fees, rents, tolls, prices and other charges
for service rendered which shall be sufficient at all times to pay all
operating and maintenance expenses necessary or desirable for the
prudent conduct and operation of its business and to pay the principal
of and interest on such obligations as the corporation may have issued
and/or assumed in the performance of the purpose for which it was
formed. The revenues and receipts of a corporation shall first be devoted
to such operating and maintenance expenses and to the payment of such
principal and interest and thereafter to such reserves for improvement,
new construction, depreciation and contingencies as the board may from
time to time prescribe. Revenues and receipts not needed for these
purposes shall be returned to the members, by the reimbursement of
membership fees, or by way of general rate reductions, as the board may
decide.
MISS. CODE ANN. § 77-5-235 (1936).
Defendant argues that the Court should apply the current version of the
statute regardless of whether Plaintiffs seek funds retained prior to the amendment.
The current version of the statute provides:
A corporation’s rates for energy furnished or offered by the corporation
shall be sufficient at all times to pay all operating and maintenance
expenses necessary or desirable for the prudent conduct and operation
of its business and to pay the principal of and interest on such
obligations as the corporation may have issued and/or assumed in the
performance of the purpose for which it was formed. The revenues and
receipts of a corporation shall first be devoted to such operating and
maintenance expenses and to the payment of such principal and interest
and thereafter to such reserves for improvement, new construction,
depreciation and contingencies as the board may from time to time
prescribe. Revenues and receipts not needed for these purposes shall be
returned to the members by such means as the board may decide,
including through the reimbursement of membership fees, the
implementation of general rate reductions, the limitation or avoidance
of future rate increases, or such other means as the board may
determine.
MISS. CODE ANN. § 77-5-235(5) (2016).
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Plaintiffs contend that no statute is given retroactive effect under Mississippi
law “unless it is manifest from the language that the legislature intended it to so
operate.” Mladinich v. Kohn, 186 So. 2d 481, 483 (Miss. 1966). Thus, Plaintiffs argue
that unless the new version of Miss. Code Ann. § 77-5-235 contains an express
declaration that it applies retroactively, it does not do so. This is, at best, an
incomplete statement of the applicable law.
Plaintiffs are correct that generally “statutes will be construed to have a
prospective operation only, unless a contrary intention is manifested by the clearest
and most positive expression.” Cellular South, Inc. v. BellSouth Telecomms., LLC,
214 So. 3d 208, 213 (Miss. 2017) (quoting Boston v. Hartford Acc. & Ind. Co., 822 So.
2d 239, 245 (Miss. 2002)). In other words, “[a] statute will not be given retroactive
effect unless it is manifest from the language that the legislature intended it to so
operate.” Id. (quoting Mladinich v. Kohn¸186 So. 2d 481, 484 (Miss. 1966)). However,
Plaintiffs omitted an exception to the general rule:
[T]he effect of a repealing statute is to abrogate the repealed statute as
completely as if it had never been passed, and . . . a statute modifying a
previous statute has the same effect as though the statute had all the
while previously existed in the same language as that contained in the
modified statute, unless the repealing or modifying statute contains a
saving clause.
Id. at 214 (quoting Stone v. Indep. Linen Serv. Co., 55 So. 2d 165, 168 (Miss. 1951)).
Accordingly, “every right or remedy created solely by [a] repealed or modified statute
disappears or falls with the repealed or modified statute, unless carried to final
judgment before the repeal or modification, save that no such repeal or modification
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shall be permitted to impair the obligation of a contract or to abrogate a vested right.”
Id.; see also Wilson v. William Hall Chevrolet, Inc., 871 F. Supp. 279, 281 (S.D. Miss.
1994); Deposit Guaranty Bank & Trust Co. v. Williams, 9 So. 2d 638, 639 (Miss. 1942).
Plaintiffs contend that this rule is only applicable in cases involving a “public
right” and lawsuits between the state and a private individual, but they cited no
authority establishing or citing such limitations. 2 In Cellular South, the Mississippi
Supreme Court drew a distinction between cases involving “application of a wholly
new statute . . . that modified existing rights that existed independently of and before
the existence of the statute,” and cases involving “an amendment to an existing
statute.” Cellular South, 214 So. 3d at 213. Whether the parties are public entities or
private individuals is irrelevant. The question is whether the rights and remedies at
issue preexisted the statute or were created by it. Id. at 215. Plaintiffs do not deny
that the rights at issue here were created by the statute in question. Therefore,
“absent an applicable saving clause, a final judgment, or a loss to [Plaintiffs] of a
vested right,” the Court must apply the statute “as though it has always read as it
reads today.” Id.
The parties have not identified a savings clause in the statute, and the Court
has not entered a final judgment. Therefore, the Court must determine whether
application of the amended statute would “abrogate a vested right.” Id. at 214. If so,
In fact, subsequent cases have applied Cellular South in the same manner this Court did, without
mentioning the limitations Plaintiffs urge. See Bennett Tax Co. Inc. v. Newton County, --- So. 3d ---,
2020 WL 3248466, at *3-*4 (Miss. Ct. App. June 16, 2020); Miss. Dep’t of Corrections v. Roderick &
Solange Macarthur Justice Ctr., 220 So. 3d 929 (Miss. 2017).
2
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the old version of the statute applies. If not, the amended version applies. Moreover,
this question – whether Plaintiffs have a vested right in the reserve funds held by
Defendant – determines the viability of Plaintiffs’ entire case, as the Court will
explain.
“A right is vested when it has become a completed, consummated right for
present or future enjoyment; not contingent; unconditional; absolute.” Estate of Greer
v. Ball, 218 So. 3d 1136, 1140 (Miss. 2017). The Mississippi Supreme Court has
defined a “vested right” as “a contract right, a property right, or a right arising from
a transaction in the nature of a contract which has become perfected to the degree
that it is not dependent on the continued existence of the statute.” State ex rel.
Pittman v. Ladner, 512 So. 2d 1271, 1275-76 (Miss. 1987). “Outside the contract and
property contexts, an example of a right so vested would be a ‘tort’ claim after it had
been reduced to a judgment.” Ladner, 512 So. 2d at 1276.
Plaintiffs asserted in briefing that “the unconditional right of Plaintiffs, and
other member-ratepayers similarly situated, to the return of their proportionate
share of accumulated revenues not devoted to the statutorily prescribed purposes
vested to them well before” the legislature amended the statute. Memorandum of Law
in Opposition to Motion to Dismiss at 6, Baria v. Singing River Elec. Power Coop.,
No. 1:19-CV-248-KS-JCG (S.D. Miss. June 10, 2020), ECF No. 51. In support of this
proposition, Plaintiffs cited United States v. Mississippi Chemical Company, 326 F.2d
569 (5th Cir. 1964). There, the Fifth Circuit held that the amount of patronage
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dividends an agricultural cooperative paid its members should be excluded from the
cooperative’s taxable income because “a legally enforceable obligation exist[ed] to
refund to qualified purchasers (stockholder-patrons) their proportionate share of
gross receipts above costs and operating expenses based upon their respective
purchases . . . .” Id. at 570-71. Accordingly, the Court of Appeals held that “such
receipts [were] the income of the patron and not income of the cooperative . . . .” Id.
at 571.
But whether a payment qualifies as taxable income under federal tax law is a
different question than whether a property right has vested under Mississippi law.
While Mississippi Chemical is not wholly irrelevant, it is limited in its applicability
to the present question. Moreover, the Court of Appeals approvingly cited authorities
providing that “the legally enforceable obligation to pay patronage refunds is
destroyed to the extent that discretion to divert exists,” suggesting that any discretion
on the part of the cooperative with respect to the administration of such funds
destroys the potential property right that its members may have in them. Id. This
harmonizes with the Mississippi Supreme Court’s holding that “[a] right is vested
when” it is “not contingent; unconditional; absolute.” Greer, 218 So. 3d at 1140.
Plaintiffs also argue that Carranza-De Salinas v. Holder, 700 F.3d 768 (5th
Cir. 2012), prohibits the retroactive application of an amended statute. Carranza-De
Salinas is inapplicable here because it addressed a question of federal law, rather
than Mississippi law. The statutory right which Plaintiffs seek to enforce and the
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remedies they demanded are creatures of Mississippi law, and, therefore, Mississippi
law determines the retroactivity of the statute in question. Cf. Johnson v. Sw. Reg’l
Med. Ctr., 878 F.2d 856, 859 (5th Cir. 1989).
Regardless, Carranza-De Salinas provides: “To determine when a law may not
apply retroactively, we look to whether such application would take away or impair
vested rights acquired under existing laws, or create a new obligation, impose a new
duty, or attach a new disability, in respect to transactions or considerations already
past.” Carranza-De Salinas, 700 F.3d at 772. As the Court concludes below,
application of the current version of the statute will not impair any vested right
because the previous version did not grant Plaintiffs a vested right to the funds at
issue.
This brings us to the fundamental legal question at the heart of this case:
whether the statute in question grants Plaintiffs un unconditional right to the return
of funds that Defendant’s board has deemed necessary to reserve for improvements
and other contingencies. The Court concludes that the statute does not create an
unconditional, absolute right to the return of such funds, regardless of which version
the Court applies.
The former version of the statute, which Plaintiffs urge the Court to apply,
provides that power cooperatives’ “revenues and receipts . . . shall first be devoted to
such operating and maintenance expenses and to the payment of such principal and
interest and thereafter to such reserves for improvement, new construction,
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depreciation and contingencies as the board may from time to time prescribe.” MISS.
CODE ANN. § 77-5-235 (1936) (emphasis added). Then, “[r]evenues and receipts not
needed for these purposes shall be returned to the members, by the reimbursement
of membership fees, or by way of general rate reductions, as the board may decide.”
Id.
In other words, in the former version of the statute, the legislature granted
power cooperatives the discretion to retain capital reserves for improvements and
other contingencies “as the board may from time to time prescribe,” after it met its
operating expenses and other obligations. Id. Then, the statute directed cooperatives
to return capital not needed for that purpose to the members, by rate reductions or
reimbursement of membership fees. Id. To be clear, the legislature granted the
cooperatives’ boards of directors the power to make these decisions. MISS. CODE ANN.
§ 77-5-223 (1936).
The current version of the statute provides power cooperatives the same
discretion to retain capital reserves for improvements and other contingencies “as the
board may from time to time prescribe,” after it meets its operating expenses and
other obligations. MISS. CODE ANN. § 77-5-235(5) (2016). Then, just like the former
version of the statute, cooperatives are required to return funds to members. Id. But
the new version of the statute grants the cooperatives complete discretion to
determine how the funds are returned to the members. Id. Like the former version,
the current law grants the cooperatives’ boards of directors the power to make these
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decisions. MISS. CODE ANN. § 77-5-223 (2016).
Accordingly, both versions of the statute grant power cooperatives the
discretion to retain capital reserves for improvements and other contingencies, and
neither version grants members an unconditional, absolute right to the return of such
funds. Moreover, both versions of the statute give power cooperative boards complete
discretion to determine how much reserves are necessary.
This reading of the two versions of the statute harmonizes with the Mississippi
Supreme Court’s holding that “equity credits allocated to a patron on the books of [an
agricultural] cooperative do not reflect an indebtedness which is presently due and
payable by the cooperative to the patron.” Clarke County Co-op., (AAL) v. Read, 139
So. 2d 639, 884 (Miss. 1962).
Such equity credits represented patronage dividends which the board of
directors of a cooperative, acting under statutory authority so to do, has
elected to allocate to its patrons, not in cash or other medium of payment
which would immediately take such funds out of the working capital of
the cooperative, but in such manner as to provide or retain capital for
the cooperative and at the same time reflect ownership interest of the
patron in such retained capital.
Id. at 884-85. Also, other courts have found that cooperatives are not required to
return capital credits to their members where the enabling legislation provided the
cooperative discretion in the management and allocation of its funds. See, e.g. Walker
v. Oglethorpe Power Coop., 802 S.E. 2d 643, 668 (Ga. Ct. App. 2017) (where statute
gave cooperative the right to maintain reserves for future needs, it was not required
to return capital credits to members); Cessna v. REA Energy Coop., Inc., 258 F. Supp.
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3d 566, 586 (W.D. Penn. 2017) (where cooperative’s bylaws granted the board
discretion to determine whether retiring capital credits would impair the financial
condition of the cooperative, board was not required to retire capital credits), aff’d
753 F. App’x 124, 1129 (3rd Cir. 2018).
For these reasons, the Court finds that the former version of Miss. Code Ann.
§ 77-5-235 (1936), does not grant members of power cooperatives a vested present,
possessory right in funds that the power cooperative board has reserved for
improvements and other contingencies. Accordingly, the current version of the
statute applies here. Moreover, neither the former version of the statute nor the
current version require Defendant to return such funds to its members in the manner
Plaintiffs contend. Therefore, all Plaintiffs’ claims fail because they are premised
upon an incorrect interpretation of the applicable law.
IV. CONCLUSION
For these reasons, the Court denies Plaintiffs’ Motion for Leave to File [46] a
Third Amended Complaint, grants Defendant’s Motion to Dismiss [43], and denies
Defendant’s Motion to Stay Pending Appeal [36] as moot. This case is dismissed with
prejudice.
SO ORDERED AND ADJUDGED this 15th day of July, 2020.
/s/
Keith Starrett
KEITH STARRETT
UNITED STATES DISTRICT JUDGE
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