[Watchdogs] pending legislation

Sat Apr 11 15:26:29 CDT 2009

For those of you who don't know me, I am the lawyer who tried to find out how much money Bennie Fuelberg was making as General Manager of the PEC, then asked the Attorney General to take over the investigation and enforce the law.  After the Attorney General exercised his discretion not to investigate or take action, I worked with some other lawyers to continue the investigation, and then filed and pursued the class action lawsuit.

I have read the pending bills and had planned to testify in the House committee last week, but had a conflict in the evening when the bills were finally heard.  I have since called Representative Rose's office to ask if there is anything I can do to assist him.  In a nutshell, it is my opinion that if the Rose/Frasier bills had been in effect, the fraud, waste, abuse and breaches of fiduciary duties that occurred at the PEC likely would not have occurred.  The same can not be said for the Swinford bill, as it unduly limits the members' access to information and meetings, and those intent on taking advantage of the co-op could have used the cover of darkness allowed by that legislation to do so. The Rose/Frasier bills open electric co-ops to sunshine and empower co-op members to make sure their co-op's management acts in their interest; the Swinford bill does not.  Thus, I support the Rose/Frasier bills and oppose the Swinford bill.

If PEC members had the right to attend Board meetings, had a fair chance to elect Board members they chose, and had access to complete information about the operation of their co-op, the management would not have been able to run amok, commit fraud and freely breach its fiduciary duties to the co-op and its members.  Had the rights granted by the Rose/Frasier bills been in effect, no class action lawsuit would have been necessary.  Those who oppose litigation, and class action litigation in particular, should favor the Rose/Frasier bills as a preventative measure to avoid the need for litigation.

Some on this listserv have griped about the attorneys' fees awarded in the class action settlement, and about the PEC's having to pay part of the fees rather than AIG's paying all of them.  Who paid the fees was between the PEC and its insurer; the lawyers for the class and the class representatives had no control over that.  The Court had authority to award between ¼ and 4x the lawyers' hourly fees under Texas' class action rules.  The Court awarded less than double, but slightly more than single the amount of hourly fees.  In fact, the lawyers and law firms representing co-op members worked without compensation or reimbursement of our expenses for more than two years, and without any assurance that we would ever receive compensation or reimbursement of our expenses.  As it turned out, the lawyers have finally been paid for our work during the past few weeks, but not without significant sacrifice while we waited.  The class representatives, who invested significant time and effort into pursuing the lawsuit, and who should be commended for sticking their necks out and putting in the time, have also finally been paid the amounts ordered by the Court to compensate them for their efforts.

The reason for the legal fee award and the award to the class representatives is pretty straight-forward:  the lawsuit was successful in achieving almost all of the remedies that were requested, and thus the lawyers and class representatives deserved to be paid for their successful work.  With the benefit of hindsight, I can say that I do not believe that I would have settled the lawsuit on the terms reached and approved by the Court had I been involved in the settlement negotiations (other firms had taken over the lead counsel role by the time of the settlement negotiations), and I know that the class representatives struggled with the terms as well, but there can be no question but that the lawyers and class representatives earned the fees the Court approved; the PEC's reforms are a direct result of the lawsuit.  The pec4u group's agitation around the problems at the PEC, as important as it was, was not given media attention until after the lawsuit was filed.  

Clearly the lawsuit was assisted greatly by the relentless work of the pec4u group, the media's persistent coverage of the lawsuit and the information discovered in litigation (particularly the outstanding investigative reporting of Claudia Grisales and editorial writing of Bruce Hight of the Austin American Statesman) and the good work that Representative Rose and Senator Frasier did after learning of the lawsuit and the issues in the media.  The lawyers worked for six months to a year or longer, some of us on a full-time basis, paying employees and funding overhead, without being paid for our work or reimbursed for our expenses until more than two years after we started our work.  I commend the pec4u group and watchdogs, the media, Rep. Rose and Sen. Frasier for their help, but what was different this time from other attempts to curb the abuses at the PEC was the lawsuit.  While the effort of all contributed to the result, the filing and pursuit of the lawsuit was the impetus for the revolutionary reforms at the PEC.

If the Texas legislature wants to avoid a repetition of the problems at the PEC, and avoid the need for additional class action litigation, it should pass the Rose/Frasier legislation.  If PEC members are not satisfied with the progress of reform at the PEC, they have the tools to achieve change:  they can and should continue to closely watch the actions of the PEC Board and management and elect new Board members to replace those whose actions are not acceptable.

Jan Soifer 

Baron & Budd, P.C.
701 Brazos St., Suite 650
Austin, Texas 78701
(512) 583-0451 (direct phone)
(512) 657-0556 (mobile phone)
(512) 852-5922 (fax)
jsoifer at baronbudd.com <mailto:jsoifer at baronbudd.com>  
www.baronbudd.com <http://www.baronbudd.com> 

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