The lawsuit between La Plata Electric Association (LPEA) and a group of eight LPEA customers over LPEA’s separation from Tri-State Generation and Transmission Association is now in the hands of 21st Judicial District Chief Judge Brian Flynn.
Flynn was assigned to the case on Feb. 11 after 6th Judicial District Chief Judge Kim Shropshire recused the judicial district’s judges from the case at the end of January.
The case, filed in September 2025 by LPEA members who reside in Durango, Ignacio and Bayfield, alleges LPEA should have taken the separation from Tri-State to a vote of LPEA’s membership.
LPEA is seeking to have the suit dismissed, suggesting the plaintiffs misunderstand the organization’s bylaws.
The complaint against LPEA alleges, “Upon information and belief, as a member of Tri-State, LPEA owns approximately $71 million in Tri-State patronage capital as of year-end 2024; this patronage capital represents LPEA’s ownership interest in Tri-State and is therefore an asset of LPEA.”
The complaint then notes that on or about March 26, 2025, the LPEA Board of Directors adopted a resolution calling for LPEA’s withdrawal from its membership and contract with Tri-State, with a withdrawal date of April 1, 2026.
It adds, “Pursuant to Tri-State’s Rate Schedule No. 281, as a withdrawing member, LPEA had two options: ‘a withdrawing member may either: (i) continue receiving patronage capital payments as Tri-State may from time to time distribute to all of its members; or (ii) take a discounted lump sum payment of its patronage capital balance as of the Designated Withdrawal Date as a credit to the Final Payment Amount.’”
It notes the exit charge is payable by LPEA and its members to Tri-State.
“According to Resolution 2025-04, the Board opted to take a discounted lump-sum payment of its patronage capital, which upon information and belief, amounts to a reduction in LPEA’s patronage capital value from approximately $76 million to approximately $47 million,” the complaint alleges.
The plaintiffs then state in the lawsuit that, per LPEA’s bylaws, “LPEA may not sell or otherwise dispose of LPEA assets, which sale exceeds ten percent (10%) of the value of all assets of the cooperative unless authorized by a vote of LPEA’s Members.”
It alleges that the total value of LPEA’s assets at year-end 2024 was approximately $288 million, and LPEA’s acceptance of a lump-sum payment of its Tri State patronage capital represents a disposition of more than 10% of its total assets.
The plaintiffs, according to the complaint, ask the court’s interpretation of the bylaws and request a “declaration of the rights, status, or legal relationships of the parties under the Bylaws” on the matter.
The suit also alleges breach of contract.
LPEA’s attorneys filed a motion to dismiss in October 2025, with the 18-page motion alleging the plaintiffs’ “incorrect reading” of the bylaws.
“While Plaintiffs claim that LPEA members are entitled to vote on a ‘disposition’ of more than 10% of LPEA’s assets, that interpretation ignores the plain language of Article IX, which only entitles LPEA members to vote on a ‘sale’ of more than 10% of LPEA’s assets,” it states. “Moreover, to read Article IX in the way that Plaintiffs suggest would render the use of the word ‘sale’ wholly superfluous. Thus, because Plaintiffs are only entitled to a vote if LPEA engages in a ‘sale,’ and because Plaintiffs do not allege that LPEA’s election to receive its patronage capital as a single discounted lump sum payment constituted a ‘sale,’ both of Plaintiffs’ claims fail.”
The motion also alleges that the amount of the patronage capital value being more than 10 percent of LPEA’s assets “ignores economic reality and is implausible,” and that LPEA’s choice to receive a discounted lump sum payment did not constitute a sale or disposition of LPEA’s assets.
On the topic of breach of contract, the motion to dismiss states in part, “Plaintiffs’ interpretation of Article IX fails to abide by black letter principles of contract interpretation.”
randi@pagosasun.com
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