The Grand Water and Sewer Service Agency has successfully blocked a change to the bylaws of Moab Irrigation Company that would have required disputes between the company and it shareholders to be resolved outside of a courtroom.
At an annual meeting of the irrigation company on Monday, Feb. 5, the agency used its weight as a large shareholder to vote against the change, which failed by a thin eight-vote margin.
“My biggest issue with this,” said GWSSA Manager Dana Van Horn, “[is] if someone was going to sue the irrigation company, do we absorb some of that cost?”
The implicit answer to the question is “yes,” as the GWSSA holds about 29 percent of the irrigation company’s 1,081 total shares.
Van Horn discussed the proposed change, and how the GWSSA should cast its vote, at a meeting of the agency’s board of directors on Feb. 1. The agency agreed to vote “no” on the bylaw change, which set out a three-step process for settling disputes between the irrigation company and any of its shareholders.
First, an attempt would be made to try to handle the dispute between the company and the shareholder alone, without any outside party getting involved. Then, if that could not be done, the matter would be moved to mediation, where a go-between would try to help arrange a satisfactory solution.
Finally, if mediation failed, the dispute would move to binding arbitration.
The change left no room for either company or shareholder to take a dispute to court through a lawsuit, and that’s where GWSSA board members felt the bylaw proposal fell short.
GWSSA Board Vice-President Gary Wilson said the bylaw would “tie the hands” of the irrigation company, leaving it without an important avenue of recourse.
“That’s a pretty big item to vote on, and we do own a lot shares in the company,” he said.
Dan Pyatt, the GWSSA’s board president, said, “We just feel that the language needs to be tightened up,” implying that language should be added that would still leave room for the option to bring disputes before a judge.
On Monday, the change failed on a 332-324 vote. With each share qualifying the shareholder to cast a corresponding vote, it was clear that the GWSSA’s 315 shares (in other words, votes) drove the measure to defeat.
While shareholders at the meeting were given an opportunity to discuss or debate the change, no one from the GWSSA did so.
But at both the GWSSA’s meeting last week and the MIC’s meeting Monday, MIC board member Mike Duncan explained the MIC’s reasoning for proposing the change (Duncan, also a Moab City Council member, sits on the GWSSA board in his role as City Council liaison).
Duncan described a recent dispute between the irrigation company and one of its smaller shareholders.
“This party was threatening and had already spoken with an attorney … over a very small matter,” Duncan said.
The change would avert the long, and probably expensive, process of litigation in such disputes, said both Duncan and MIC board member Dave Engelman.
While GWSSA board members, at their meeting last week, suggested looking closer at the proposed change and perhaps tweaking it for reconsideration in a year, that suggestion was not expressed at the irrigation company’s meeting.