The judge also took a shot at the board of directors, which he said has been dragging “its collective feet” in implementing the deal with the plaintiffs. He even ordered all 10 directors to personally appear in his courtroom at 9 a.m. Aug. 12.
Schuster’s ruling came on a request from the nonprofit electric cooperative’s directors, who sought his permission to re-hire Brown despite a December 2008 settlement agreement that he would retire by February 2011. The judge’s 13-page ruling also covered a motion by the plaintiffs to enforce the settlement agreement and elections of the directors.
“The clear language of the Settlement and the Notice to the members contemplates the successor CEO as someone other than Dwight T. Brown,” Schuster wrote in a timeline on the Brown issue included with his ruling.
Sam Kelly, Cobb EMC’s vice president of public relations, said via e-mail late Friday that “we thought we had made some good points in court.”
“Above all we were seeking clarification on whether Dwight Brown could be rehired, and Judge Schuster is very clear on this point. We are still pleased that we asked Judge Schuster’s permission in the matter and I think now the Cobb EMC Board will move forward on two important fronts — to fill the CEO position and to move ahead with the elections.”
Not surprisingly, plaintiffs and critics of the Cobb EMC directors hailed the ruling.
At a May 18 hearing on the question of Brown’s re-hire, lawyers for the EMC board told the court that the directors had paid an executive-search firm $250,000 to find a replacement for Brown, and ultimately interviewed four external and four internal candidates. A footnote on Schuster’s Friday ruling names the four internal candidates interviewed as Chip Nelson, who is the current interim CEO; David Johnson; Robert Steele; and Kelly, the public relations executive.
“Although the Succession Plan defines retirement as a ‘permanent absence,’” Schuster wrote, “Brown has yet to leave his office at Cobb EMC.” Brown is now a consultant who reports to interim CEO Nelson, he notes.
“Neither the Chairman of the Board, Larry Chadwick, nor the Chairman of the Governance Committee, Sarah C. Brown, know what, if anything, Dwight T. Brown does differently in his role as a consultant as compared to being CEO or whether his compensation has changed at all,” Schuster wrote. … “This court can reach no other conclusion from the timeline, the evidence presented and in the record that the Board has been recalcitrant in implementing the Settlement. The filing of this lawsuit in the nominal name of Cobb EMC appears solely to be for the purpose of insulating the Directors from the Court’s decision today. To, in effect, allow the Board more time to drag its collective feet.”
Schuster also ordered all 10 Cobb EMC directors to appear before him at 9 a.m. Aug. 12 in his courtroom for a compliance hearing on the settlement.
As for the issues of enforcing that settlement and moving forward, Judge Schuster is awaiting paperwork from the Georgia Supreme Court, which in a 6-1 ruling issued June 12 held that EMC directors violated the settlement agreement by amending the cooperative’s bylaws to allow voting by proxy. Once Schuster has that, he wrote, he will schedule the elections that have been delayed since 2008, which “has disenfranchised the membership.”
“The EMC members are entitled to be given the opportunity to shine the bright light of democracy on their EMC through their participation in elections and voicing their opinions on the cooperative’s governance,” Schuster wrote.
Dwight Davis, a partner in Atlanta’s King & Spalding law firm who is the lead attorney for the EMC directors, said Friday afternoon that he had not read Schuster’s order and thus could not comment on it.
Butch Thompson, a member of the electric co-operative and one of the plaintiffs who brought suit against Cobb EMC in 2007, said he was “real pleased” with the decision, which he thinks was influenced by the Supreme Court’s proxy-vote ruling earlier this month.
He also isn’t sure his opponents will appeal.
“The Supreme Court has said the settlement is binding, so let’s get on with life,” Thompson said. “Why don’t we just have the elections, and let the best man win? It doesn’t make sense to keep spending money with the silk-stocking lawyers that are charging them tons of money. The plaintiffs have won. They straight out won. It’s time for them to go on with life and say ‘Hey, we’ve been beat. Let’s have the elections.’”
Thompson also said there has been “no transparency whatsoever” with the leadership of Cobb EMC, which is not subject to open meetings or open records laws, and has no regulatory oversight.
“The things we uncovered in the lawsuit could be minor compared to what’s really going on there,” he said. “It could even be worse. We do not know.”
Tripper Sharp, another of the Cobb EMC member-plaintiffs, said he will definitely be in Schuster’s courtroom on Aug. 12 when the directors are to appear.
“The board has been nowhere to be seen during all of these hearings, so I think it’s interesting he’s ordering all of them to show up,” said Sharp, a mortgage consultant who lives in northeast Cobb.
Schuster “basically called the EMC out for not following the settlement, which has been our contention for quite some time,” Sharp said. “I hate that we had to go to these lengths, and I hate that the board felt they should waste the member’s money to try to keep Brown on and not uphold their end of the bargain, but I think their actions of the last couple years are downright silly. And ultimately, the members have had to pay for all of the board’s silliness.”
Pitts Carr, the lead attorney for the plaintiffs, said he believes Schuster “made a very bold and sound ruling on the issue.”
“Among other things, he pointed out that the clear intent of all the parties was that Brown would be replaced,” Pitts said.
Paul Lapides, director of Kennesaw State University’s Corporate Governance Center, said of Cobb EMC’s directors: “If there were awards for the worst boards in America, they would make the Top 10.”
“This judge is fed up, and this is great,” Lapides said. “The duty of the board is to do what’s in the best interest of the co-op and members, and it’s pretty clear the members don’t think that’s happening. If the only one who could run this place is Dwight Brown, then — it’s no surprise to most members — they probably need a whole new board.”
In a daylong hearing before Judge Schuster on May 18, lawyers for the two sides argued whether Brown could accept an offer to return to the helm, and in particular, went back and forth over language in the 2008 settlement agreement that says Brown would “not seek an extension of his employment.”
Attorney Davis told the court that day that the EMC board wanted to hire Brown back as president and CEO, but without a contract. Brown instead would be an at-will employee, Davis said, and he insisted that the settlement language means only that Brown would not seek to continue his employment.
To that end, business consultant J.W. Rayder, who helped negotiate the 2008 settlement on behalf of the EMC, testified that unlike President Lyndon B. Johnson — who in 1968 famously told the nation he would not seek nor would he accept his party’s nomination for president — the settlement did not preclude the cooperative’s board of directors from rehiring Brown as president and CEO.
Rayder, of Chevy Chase, Md., is CEO of Ashby Consulting and testified that he bills Cobb EMC $40,000 to $50,000 per month in consulting fees, at a rate of $400 per hour. He also is chairman of the management committee of Gas South — a wholly owned subsidiary of Cobb EMC — for which he is paid $30,000 a month, he told the court.
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