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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.
