Opinion ID: 2334358
Heading Depth: 2
Heading Rank: 3

Heading: SWDC Retains the Right to Select Its Owner-Members

Text: ¶ 27 Third, a cooperative is not subject to regulation as a public utility that serves the general public when it has the right to select those that become members. [23] A cooperative retains the right to select its members even though membership in the cooperative is easy to obtain. [24] Additionally, it matters not that 5 or 1000 people are members or that a few or all the people in a given area are accorded membership. [25] ¶ 28 In Garkane, we held that a cooperative retained the right to select its members even though it had never denied membership to an applicant and it only required members to (1) pay a membership fee of five dollars, (2) agree to purchase a minimum monthly amount of services, and (3) agree to abide by the articles of incorporation and bylaws of the cooperative upon acceptance by a vote of the board of directors. [26] Under the pleadings before the Commission, SWDC retained the right to select cooperative members because it conditioned membership upon ownership of shares and compliance with the articles of incorporation and bylaws of the cooperative. ¶ 29 Bear Hollow alleges that SWDC cannot control to whom an existing shareholder sells his or her land and that subsequent purchasers acquire SWDC shares that are appurtenant to the land. As shareholders of SWDC, subsequent purchasers are members. Bear Hollow asserts that because SWDC has no power to select subsequent purchasers who become members, its membership requirements are largely pretextual. While Bear Hollow dismisses this membership criteria as meaningless, it is sufficient to meet the requirements set forth in Garkane. The right of a cooperative to select its members does not have to be exercised on a case-by-case basis. Here, SWDC employs an objective method of membership selection and requires only that members acquire stock and abide by an internal set of rules to obtain a right to water. As the Commission correctly held, [a]lthough [SWDC] might not have the ability to control to whom a shareholder sells its interest, [SWDC] does retain the power to reject anyone that is not willing to meet the requirements imposed on shareholders. Consequently, the Commission correctly held that even if the requirements are minimal, so long as [SWDC] serves only its shareholders, it is not serving the public generally. In short, it is irrelevant to the public utility analysis how a member acquires his status (here by acquiring shares) so long as a member is bound by rights and duties that are different from those of nonmembers. ¶ 30 Under the alleged facts, SWDC members mutually own their cooperative, SWDC serves only its members, and SWDC has the right to select its members. As a result, the complaint does not allege that SWDC provides water for public service or to the public generally under Utah Code section 54-4-1. Because the pleadings present a scenario in which SWDC does not serve the public and there is no risk of monopolistic coercion of the public that would justify regulation, the Commission correctly dismissed Bear Hollow's complaint for lack of jurisdiction.