Class action TCT suit tossed out by Supreme Court

by CJ Baker, Powell Tribune Via Wyoming News Exchange

POWELL — The Wyoming Supreme Court says a judge was right to throw out a lawsuit that challenged the 2014 sale of a Big Horn Basin telecommunications company.

A pair of former Tri-County Telephone Association board members alleged that leaders conspired to sell the business for much less than its worth, but District Court Judge Jason Conder tossed the class action suit last year.

“... The undisputed facts demonstrate that no civil conspiracy existed,” Conder concluded.

He said the plaintiffs “loudly” and “feverishly” attacked the sale process but didn’t provide evidence to back up their claims.

The suit was filed in December 2015 by the late Joe Campbell — the lone TCT board member to oppose the deal — and his wife Barbara; former board member Bill Loveland later joined them in representing the class of former co-op members.

The plaintiffs appealed Conder’s ruling, but on Tuesday, the Supreme Court unanimously affirmed his decision, potentially bringing an end to the long-running litigation.

TCT formed to provide telephone service to Burlington, Ten Sleep, Hyattville and Hamilton Dome. But the nonprofit, member-owned cooperative later expanded its services and reach, including through its for-profit subsidiary TCT West.

While that brought TCT services to places like Powell, Cody, Lovell and Basin, only those in the original service area were co-op members.

In 2011, Meeteetse businessman Neil Schlenker tried to buy the association for $11 million, which the TCT board rejected as too low. However, Schlenker later made a revised offer; it culminated in a $51 million deal that was presented to the co-op’s members in 2014.

The Campbells, Loveland and others campaigned against the sale, making many of the same arguments raised in the suit.

However, 652 of the co-op’s 825 members (79%) voted to approve it and the sale closed in December 2014.

A host of claims

Turning the member-owned co-op into a private company owned by Schlenker’s BHT Holdings involved a complicated “reverse triangular merger” that was put together by the Cheyenne-based law firm Hathaway & Kunz.

The suit alleged that taking the association private violated Wyoming’s statutes governing co-ops, but Conder disagreed; the Wyoming Supreme Court said the plaintiffs’ attorneys had failed to properly raise the issue.

The bulk of the issues on appeal related to the allegations that TCT leaders conspired with Schlenker to hide the association’s true value and mislead members.

However, TCT officials vehemently denied the allegations — panning the suit as “a disgruntled board member’s pursuit of vengeance” — and Conder said the plaintiffs didn’t back up their claims with evidence.

“... The plaintiffs must do more than repeat their allegations and opinions,” the judge wrote in dismissing a conspiracy claim. “They must provide, by some measure of proof, evidentiary facts to support their position, which they have failed to do.”

The Supreme Court said Conder was right to dismiss the fraud allegations, though they decided some of the issues on slightly different grounds.

For example, the justices said the fact that Loveland and the Campbells voted against the sale undercut their claims that they were defrauded.

“The class representatives stated they did not believe the alleged misrepresentations, did not rely upon them, and had, in fact, tried to counter them,” Justice Keith Kautz wrote for the court. Kautz said the plaintiffs failed to show that there were members who voted for the sale and would have changed their vote if they knew about the alleged misrepresentations.

Joe Campbell, who died in 2020, said in a prior deposition that he was certain some members would have voted differently, but acknowledged he “[didn’t] know of any for sure.”

As for an allegation that TCT leaders wrongfully converted the members’ profits in the co-op, Kautz said the claim was misplaced.

“It was not the cooperative who sold the capital credits but rather the members,” who approved the deal by a more than two-thirds margin, the justice wrote.

Loose ends

While Tuesday’s decision stands to end the bulk of the case, some issues remain.

For example, the plaintiffs previously secured a $200,000 settlement from Hathaway & Kunz, and those proceeds have yet to be distributed.

Half of the settlement is slated to go to the co-op’s former members while the other $100,000 will go toward the costs of bringing the case.

However, those figures could change, because, as the prevailing party, TCT has asked Conder to order the plaintiffs to cover more than $75,000 of the company’s deposition costs.

The plaintiffs dispute that they should have to pay any of TCT’s costs but said any award should be taken out of the settlement funds.

The $100,000 earmarked for the plaintiffs’ costs is already going to come up well short of the full bill, which had topped $400,000 by late 2021 and which doesn’t include any attorneys fees.

Records included in court documents suggest that, at least in the early goings of the litigation, TCT spent hundreds of thousands of dollars on the case each year.