Alaska Supreme Court Opinions made Available by Touch N' Go Systems and Bright Solutions

Touch N' Go, the DeskTop In-and-Out Board makes your office run smoother. Visit Touch N' Go's Website.
  This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Matanuska Electric Assoc., Inc. v. Waterman (03/26/2004) sp-5790

Matanuska Electric Assoc., Inc. v. Waterman (03/26/2004) sp-5790

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA


MATANUSKA ELECTRIC       )
ASSOCIATION, INC.,            )    Supreme Court No. S-10828
                              )
             Appellant,            )    Superior Court No.
                              )    3PA-01-00548 CI
     v.                       )
                              )    O P I N I O N
ROWLAND SCOTT WATERMAN,  )
                              )    [No. 5790 - March 26, 2004]
             Appellee.             )
________________________________)



          Appeal  from the Superior Court of the  State
          of  Alaska,  Third Judicial District, Palmer,
          Beverly W. Cutler, Judge.

          Appearances:   Kyle W. Parker  and  David  J.
          Mayberry,  Patton Boggs LLP,  Anchorage,  for
          Appellant.    Peter  J.  Maassen,   Ingaldson
          Maassen, P.C., Anchorage, for Appellee.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Fabe,  and  Carpeneti, Justices.   [Eastaugh,
          Justice, not participating.]

          FABE, Justice.


I.   INTRODUCTION

          Rowland  Waterman sued Matanuska Electric  Association,

Inc.  (MEA)  after  the  Board of Directors  refused  to  seat  a

successful  candidate  for  the Board  of  Directors  because  of

alleged  campaign  disclosure  violations.   The  superior  court

granted  Watermans motion for summary judgment,  concluding  that

under the MEA bylaws the MEA Board was not permitted to refuse to

seat  a  successful  board candidate.  MEA appeals  the  superior

courts   judgment.    Because   the  superior   court   correctly

interpreted the MEA bylaws, we affirm its ruling.

II.  FACTS AND PROCEEDINGS

     A.   Factual History

          Matanuska Electric Association, Inc. (MEA) is a  public

utility  cooperative that is managed by a seven-person  board  of

directors.  In the spring of 2001 three Board seats came  up  for

election.  Two incumbent directors, Rose Marie DePriest and Linda

Shattuck, sought reelection, while there was no incumbent for the

third  seat.   Michael Janecek and Mae Tischer both ran  for  the

open  seat.  Janecek received 119 votes more than Tischer in  the

election.   DePriest  and Shattuck were  both  reelected  to  the

Board.

          On April 9, 2001, the Board met to certify the election

results and to seat the winning candidates.  At this meeting, one

participant    expressed   concern   about   Janeceks    campaign

disclosures, suggesting that Janeceks advertising cost more  than

his disclosure statements revealed.  At the same meeting, Stephen

Ellis, MEAs counsel, questioned Janecek about the contents of his

disclosure  report as well as his contributions and expenditures.

The  meeting was then continued to April 30 so that the  campaign

disclosures  of all of the winning candidates could be  reviewed.

None  of  the  successful candidates were seated at the  April  9

meeting.

          There  are  four campaign-finance reports described  in

the  Election  2001  Candidates Handbook:  a pre-election  report

which  must be filed ten to twenty days prior to the April annual

meeting; a post-election report which covers the period after the

filing of the pre-election report and must be filed within twenty

days after the April annual meeting; a year-end report for all of

2001;  and  a  correction  report.   The  correction  report   is

described  in  the handbook as an opportunity for a candidate  to

provide any information that is missing:

          If  a  candidate fails to fully disclose  the
          information  required  by  MEA,  he  will  be
          notified  by  the Board of Directors  of  the
          actions  needed to fully comply for  example,
          to  correct  any  erroneous campaign  finance
          report. The candidate will be asked to file a
          Correction  Report.  The Board  will  specify
          the  period  this report should  cover.   The
          Correction  Report must be  filed  within  30
          days  after the candidate receives notice  of
          the Boards request for the report.
          
          On  April 26 Janecek filed two reports:  a timely post-

election report and a correction of his pre-election report.   In

his  correction report, Janecek disclosed a $6,400 invoice for  a

mailing  performed by North Mail.  His post-election report  also

included advertising expenses with the Frontiersman newspaper.

          The  MEA  Board  meeting resumed  on  April  30,  2001.

Apparently Ellis had conducted an investigation of the candidates

in  the interim although the April 9 meeting transcript makes  no

mention  of  any request for such an investigation.  Ellis  asked

that the Board go into executive session to consider the findings

of  his  investigation.  Directors Lester and Cottle objected  to

going  into  executive  session,  but  Ellis  responded  that  he

expected  the  findings  to be made public  after  the  executive

session.   There is no record of what occurred in  the  executive

session.

          When the regular session resumed, the Board adopted the

findings of fact set forth in Elliss investigation report.  Ellis

then orally summarized the contents of his report, describing his

findings  for each candidate.  Ellis found several irregularities

for  DePriest  and Shattuck, but he described each  of  these  as

minor,  in good faith, and correctable.  No objection was  raised

to  seating  these two successful candidates on  the  Board,  and

subsequent to Elliss review, each was sworn in.

          Ellis  then summarized his findings about Janecek.   He

identified a failure to disclose $1,935 in ads placed by  Janecek

in  the Frontiersman and described this as a violation that could

not  be  cured  or  corrected.  Ellis concluded that  there  were

aggravating factors making Janeceks explanation for the  omission

not  credible.  Ellis also identified a mailing expense of $6,400

that  was  not  disclosed when it was accrued.   Ellis  described

Janeceks other violations as minor and correctable.

          After  Ellis  completed  his  report,  Board  President

William  Folsom  opened the floor for discussion.   Although  one

board member asked whether Janecek or his attorney would have  an

opportunity to respond to Elliss findings, Folsom maintained that

Elliss  report  was  based on Janeceks disclosures.   Immediately

thereafter, a motion was made that Janecek be found in  violation

of  the  MEA bylaws and thus not be seated on the Board.   Before

the  vote, Janecek repeatedly requested to be heard, only  to  be

told  by  Folsom that the Board was not hearing anything  further

from  the  public.  The Board then voted 5-2 not to seat Janecek.

By a 5-2 vote, Tischer, Janeceks opponent, was seated in Janeceks

stead.  Before Tischer was seated, Ellis pointed out Tischers own

disclosure irregularity but described it as in good faith.

          During  the  meeting, Directors Lester and Cottle  made

clear  their  dissatisfaction with  the  actions  of  the  Board.

Lester  criticized the Boards action on the basis that all  three

candidates  had violated the bylaws which, according  to  Lester,

should have prevented them all from being seated.

     B.   Procedural History

          In  May  2001 Rowland Waterman, an MEA member  who  had

voted for Janecek, filed suit against MEA alleging violations  of

the  bylaws,  the Open Meetings Act, and the Alaska  Constitution

and  seeking to compel the Board to seat Janecek.  Waterman  also

sought a temporary restraining order (TRO).

          Superior Court Judge Peter A. Michalski was temporarily

assigned the case during Superior Court Judge Beverly W.  Cutlers

absence.   After  a  hearing,  Judge Michalski  denied  Watermans

request for a TRO.

          Following  discovery,  both  sides  filed  motions  for

summary  judgment on Watermans various claims.   On  February  7,

2002,  Judge Cutler heard oral arguments on the summary  judgment

motions.   Judge  Cutler  granted Watermans  motion  for  summary

judgment  on two grounds, concluding that the Board had  violated

section  11  of its bylaws when it refused to seat  Janecek,  and

that  MEA  was  estopped from enforcing its  campaign  disclosure

regulations  against  Janecek  because  Janecek  relied  on  MEAs

disclosure  forms  and fully completed them.  Judge  Cutler  also

found  that  Waterman was a public interest litigant and  awarded

him full reasonable attorneys fees of $100,000.

          Final  judgment was entered on September 10, 2002,  and

the  Board  seated Janecek at its next regularly scheduled  Board

meeting  on  March  11, 2002.  MEA appeals  the  superior  courts

decision to grant summary judgment in Watermans favor.

III. STANDARD OF REVIEW

          We  review a superior courts grant of summary  judgment

de  novo.1  Under that standard, we determine whether any genuine

issue  of material fact exists and whether the movant is entitled

to  judgment on the law applicable to the established facts.2  We

view  the  facts  in the light most favorable to the  non-movant,

drawing all factual inferences in favor of the non-movant.3

IV.  DISCUSSION

     A.   The  Superior Court Correctly Concluded That the  Board
          Had Violated Its Bylaws by Refusing To Seat Janecek.
          
          MEA  argues  that  the  superior court  erred  when  it

substituted its judgment for that of the Board and overturned the

Boards  decision  not  to seat Janecek.   It  contends  that  the

business judgment rule applies and protects the Boards reasonable

decision.  Judge  Cutler  rejected MEAs  claim  that  the  Boards

actions  were reasonable and relied instead on the plain language

of  the bylaws.  The trial court concluded that the board had  no

discretion not to seat [Janecek].

          1.   The relevant bylaws

          Section  11  of  the  MEA bylaws is  entitled  Campaign

Disclosure, with section 11(g) and (i) controlling the  treatment

of  candidates  campaign  disclosure violations.   Section  11(g)

requires  the Board to give candidates an opportunity to  correct

          disclosure violations, while section 11(i) allows the Board to

refuse  to  seat  a  candidate who does not make  the  corrective

disclosure  required  by section 11(g).   The  relevant  sections

provide:

               The  following provisions of this  bylaw
          apply to Board candidates who campaign for  a
          seat  on  the Board of Directors.  The  Board
          shall adopt policies and prescribe such forms
          for the implementation of this section as the
          Board shall deem necessary.
          
               . . . .

               (g)   Any  candidate who fails to  fully
          disclose the information required to be filed
          with  the  Association as stated in  sections
          (a),  (b),  (c), (d) and (e) above  shall  be
          notified  in  writing by  the  Board  of  the
          actions  needed to fully comply and shall  be
          given  thirty (30) days from the  receipt  of
          notice  to  make the disclosure or  file  the
          appropriate report.
          
               . . . .

               (i)   A  candidate who is found  by  the
          Board  to  be  in violation of  this  section
          shall   not  be  seated  by  the   Board   of
          Directors, and if seated shall be immediately
          removed  from the Board by the Board  if  the
          candidate or Board members fails to make  the
          disclosure required in (g) above, as provided
          by Article IV, Section 3.
          
          2.   Bylaw interpretation

          MEA  argues that the Board was simply doing its job  by

addressing  violations  of the campaign  disclosure  regulations.

MEA  relies  on  the managerial power granted  to  the  Board  by

statute4 and its own bylaws,5 as well as the authority granted in

the  bylaws  to  regulate  campaign  disclosures6  and  to  adopt

policies  for  the  implementation of  MEAs  campaign  disclosure

bylaws.7  MEA further argues that Watermans interpretation of the

bylaws would effectively render MEAs campaign disclosure rules  a

nullity.   MEA  contends that there are certain serious  campaign

disclosure violations that cannot be cured with the filing  of  a

post-election correction report8 and that it is the  Boards  duty

          to distinguish such violations from those that are less serious.

          In Afognak Native Corp. v. Olsen, we recognized that  a

boards  interpretation of a corporate bylaw  is  not  necessarily

conclusive.9  The rules of contract interpretation apply  to  the

interpretation  of by-laws10 and include avoiding interpretations

that create conflict among provisions.11

          MEAs position ignores the plain language of the bylaws.

Section 11(i) states that a candidate . . . in violation of [ 11]

shall  not be seated . . . if the candidate . . . fails  to  make

the disclosure required in (g).  (Emphasis added.)  Section 11(g)

provides  that  any  candidate who fails to  fully  disclose  the

information  required  to be filed . . .  shall  be  notified  in

writing  by  the Board of the actions needed to fully comply  and

shall  be  given thirty days from receipt of notice to  make  the

disclosure  or  file the appropriate report.   (Emphasis  added.)

Taken  together,  these  sections  create  a  system  whereby   a

candidate  is  to  be notified of any disclosure  violations  and

given  thirty  days to cure the violation.  If, and  only  if,  a

candidate fails to provide such a cure is the Board permitted  to

refuse  to  seat  that candidate.  This procedure  parallels  the

procedure described in article IV, section 3(e),12 which  permits

the Board to remove a board member when there is a violation that

has not been corrected under section 11(g).  Having been verbally

notified  at the April 9 Board meeting of concerns regarding  his

campaign  disclosures, Janecek filed a correction  report  within

thirty  days.   Janecek  thus  made  a  curative  disclosure  and

satisfied all of the requirements of section 11(g).

          The  plain  language of the bylaws prevents  the  Board

from using its discretion to determine whether a candidate should

be  disqualified due to campaign disclosure violations.  And  the

bylaws  are based on solid policy.  As Waterman notes, unfettered

Board  discretion to decide when a campaign disclosure  violation

merits  refusing to seat a successful candidate would permit  the

Board  to refuse to seat a winning slate of reform candidates  or

          to choose not to seat its challengers.  In Grimm v. Wagoner, we

considered  whether  financial disclosure violations  required  a

state senate candidate to forfeit an election.13  We reasoned that

minor  errors  in disclosure did not interfere with  the  publics

ability to judge the candidates;14 we instead emphasized the harm

of   thwart[ing]  voter  intent  by  depriving  voters   of   the

representatives they elect.15  The same concern arises here when a

board  is  authorized  to overcome the will  of  the  members  by

selectively seating candidates.  Rather, pursuant to section 5 of

the  bylaws, entitled Removal of Board Member by Members,  it  is

the  members  who  bring charges for cause and who  vote  on  the

question of the removal of such board member.

          MEAs   reliance  on  the  business  judgment  rule   is

misplaced  because  a plain reading of the bylaws,  and  Janeceks

undisputed compliance with the correction report requirements  of

section 11(g), leave no discretion to the Board to refuse to seat

Janecek.  Therefore,  we  affirm the  superior  courts  grant  of

summary judgment in favor of Waterman.

V.   CONCLUSION

          Because the superior court correctly concluded that the

Board  violated  its own bylaws by refusing to seat  Janecek,  we

AFFIRM the superior courts determinations.

_______________________________
     1    Martinez v. Ha, 12 P.3d 1159, 1161 (Alaska 2000).

     2     Id.;  Geolar,  Inc.  v. Gilbert/Commonwealth  Inc.  of
Michigan, 874 P.2d 937, 941 n.8 (Alaska 1994).

     3    Martinez, 12 P.3d at 1162.

     4     The  business of a cooperative shall be managed  by  a
board  of not less than five directors, each of whom shall  be  a
member  of the cooperative or of another cooperative which  is  a
member of it.  AS 10.25.140.

     5     The  business and affairs of the Association shall  be
managed by a board of seven (7) members which shall exercise  all
of  the  power of the Association except such as are by law,  the
Articles  of  Incorporation or these Bylaws,  conferred  upon  or
reserved to the members.  MEA Bylaws Art. IV,  1.

     6    MEA Bylaws Art. IV,  11(i).

     7    The Board shall adopt policies and prescribe such forms
for  the  implementation of this section as the Board shall  deem
necessary.  MEA Bylaws Art. IV,  11.

     8     MEA describes Janeceks violations as uncurable.  While
it  might make sense to permit only pre-election cures,  the  MEA
bylaws do not contain this requirement.  Judge Cutler found  that
Janecek  fully  filled  out  all  of  the  forms.   The  Campaign
Disclosure Statements provided by MEA only ask for various  types
of contributions.  The court concluded that there was no space on
the  forms  to  indicate advertising that was hired  out  by  the
candidate and not yet billed by the advertiser since it is not  a
contribution.  We need not resolve the question whether the forms
estopped   MEA   from   enforcing   the   additional   disclosure
requirements.

     9    648 P.2d 991, 992 (Alaska 1982).

     10     Storrs  v. Lutheran Hosps. & Homes Socy  of  America,
Inc.,  609  P.2d  24,  30 (Alaska 1980);  see  also  McMillan  v.
Anchorage Community Hosp., 646 P.2d 857, 862 (Alaska 1982).

     11    Storrs, 609 P.2d at 30.

     12    Article IV, section 3(e) of the MEA Bylaws states:

          Upon  establishment of the fact that a  board
          member is holding the office in violation  of
          any   of  the  foregoing  provisions  or   in
          violation  of  Article IV, Sections  11  (a),
          (b),  (c),  (d), (e) and not corrected  under
          Section  11(g), the Board shall  remove  such
          board member from office.
          
     13    77 P.3d 423 (Alaska 2003).

     14    Id. at 432.

     15    Id.