Ruling made in East Side Water lawsuit

Randel Brown’s suit against East Side Water System, Inc. finally came to a close this week when a ruling by 13th Judicial District Judge Gary Ortego was made in the civil case that began last March.
Brown, who was represented by attorney Jonathan Vidrine, first decided to bring his suit against the private corporation after the water company’s board of seven, who was represented by attorney Jacob Fusilier, voted at their March 11, 2015 meeting to increase the voter turnout required to validate an election from 10 percent to 50 percent.
While the initial complaint from the plaintiff concerned this matter, when the trial date came the court had two other matters to rule on.
During the June 17th trial, the court heard testimony from board members as well as the water system’s Certified Public Accountant (CPA) so that it could make the most appropriate ruling when dealing with the plaintiff’s three claims and issues, which were: the plaintiff’s request for certain corporate minutes, financial information, and other corporate documents; the alleged improper vote and action of the board of directors as to certain financial and operational expenditures and expenses; and the alleged improper vote and actions of the board of directors to increase the quorum and members from 10 pct. to 50 pct. of the membership required to vote for elections to be valid.
When it comes to the courts decision in the matter concerning the alleged improper vote and action of the board as to certain financial and operational expenditures and expenses, according to the reasons for judgement, the court ruled that the board was “not in any violation of any laws, accounting practices, and/or the Articles of Incorporation and By-laws of the corporation.” This complaint was dismissed by the court.
However, the reasons for judgement also stated that the court finds that the $1,100.00 paid monthly to the board’s president as a “compensation package” is “questionable” and “very substantial,” because this stipend is paid to the president without him being required to submit receipts, time sheets, travel logs or any documentation whatsoever and also because of how small the water system is.
When it came to ruling on the plaintiff’s request for certain corporate minutes, financial information, and other corporate documents, Judge Ortego granted the plaintiff’s request.
The reasons for judgement states, “The court orders that the corporation will allow the membership to view and provide all reasonable copies of the corporate board minutes, corporate financial reports/audits, profit and loss statements and expenses, and other corporate documentation, less and except employee files and records.”
These records are to be made available to all of the membership annually and at least one-half hour prior to the corporation’s annual membership/stockholder’s meeting, which is held on the first Monday of April each year. All members of the corporation will also now be allowed to question the board of directors, staff and CPA about any financial and other corporate activities for the previous year during this meeting.
When it came to ruling in the final and most concerning matter to the plaintiff, which was the increase in voter turnout to validate an election, the judge was attempting to determine whether the board of directors violated their fiduciary duty, or duty to act solely in the best interest of East Side Water Systems and its members.
During the trial, the board’s secretary/treasurer John Vidrine testified that he voted against increasing the voter turnout requirement because he “felt that 50 pct. was undoable” and he “felt like this was only being done to keep our board members from being replaced.”
The court ruled that “the evidence shows, and the court finds, as a finding of fact, that the current board of directors could not provide the court with a valid or even reasonable reason or explanation in their testimony as to any benefit whatsoever that would result or occur pursuant to their action and vote.”
During the trial, it was revealed that the highest number of voters in recent elections was around 200. With more than 1,000 East Side Water members, it would take more than 500 voters to reach the required 50 pct. voter turnout.
Judge Ortego ruled that the board of director’s vote and actions at the March 11, 2015 meeting to change the required voter turnout “to be invalid and improper” because the corporation failed to file the necessary documentation with the Secretary of State’s office.
In the reasons for judgement, the court also found that the “board of directors, and specifically the four directors voting for the said amendment, to have violated their fiduciary duties to the corporation and its membership,” and for that reason the court “cancels and invalidates the actions and vote of the board of directors at the March 11, 2015 meeting.”
Following the courts decision, Brown said, “I am happy that the judge was able to see that we couldn’t change the board when 50 pct. turnout was required.”
An election for three board positions will be held on the first Monday of October this Fall.