Wisconsin Attorney General Opinions

Opinion # OAG 32-86

10 September 1986

Citizens Utility Board; Corporations; The
Citizens Utility Board, a body corporate
and politic, legally dissolved and
reorganized as a non-stock,
non-profit corporation.

TOM LOFTUS,
Chairperson Assembly Organization Committee

The Assembly Organization Committee has
requested my opinion regarding the legality
of the action of the Citizens Utility Board
("CUB") "to transform itself into a private,
non-profit entity."

By Chapter 72, Laws of 1979, the Legislature
created Chapter 199, Stats., the Citizens
Utility Board Act ("CUB Act").

The purpose of the CUB Act is to promote
the health, welfare and prosperity of
all the citizens of this state by
insuring effective and democratic
representation of individual farmers and
other individual residential utility
consumers before regulatory agencies,
the Legislature and other public bodies
and by providing for consumer education
on utility service costs and on benefits
and methods of energy conservation.

Such purpose shall be deemed a statewide
interest and not a private or special
concern.

Sec. 199.02, Stats.

CUB was created as a non-profit

"public body, corporate and politic."

Sec. 199.04(1), Stats.

Thus, as observed in an earlier opinion on
the constitutionality of the CUB Act,[1]

CUB was not intended by the
Legislature to be a corporation
in the ordinary sense.

As shorthand, CUB was referred to throughout
the CUB Act as "the corporation."

E.g., Section 199.03(5), Stats.

I do not conclude from this that the
Legislature intended CUB to be a corporation.

Rather, CUB is one of a number of special
"separate entities designed to carry
on a public purpose."

State ex rel. Warren v. Nusbaum,
59 Wis.2d 391, 425,
208 N.W.2d 780 (1973).[2]

As an entity possessing both governmental and
corporate characteristics, CUB in many
respects resembled a corporation.[3]

In only two respects, however, was CUB made
subject to Chapter 181, the nonstock
corporation law.

75 OAG 168 169 170 171 172

CUB was required to conduct its membership
meetings as provided under Sections 181.14 to
181.18 and 199.08 and CUB was subject to
dissolution, under Sections 181.50 to
181.65 and 199.17.

It is CUB's exercise of the authority to
dissolve under Chapter 181, which is
the subject of your request.

At a special meeting held April 26, 1986,
the membership of CUB voted to dissolve.

Articles of Dissolution were issued by the
Secretary of State on April 28, 1986.

On the same date, Articles of Incorporation
were filed by three former CUB directors,
forming a new non-profit, non-stock
corporation known as Citizens Utility Board,
Inc.

Although not entirely free from doubt, I have
concluded, based on my own factual and legal
investigation, that the dissolution of CUB
and the incorporation of CUB, Inc.,
were legally accomplished.

Despite the fact that CUB was created by a
special act of legislation "to promote public
purposes, not private ones," 69 OP. Att'y
Gen. at 156, CUB clearly was given the
power to unilaterally dissolve.

The CUB board of directors acted pursuant to
statute in adopting a dissolution resolution
and calling a special membership meeting
to vote on the dissolution.

Articles of Dissolution were properly filed
with the Secretary of State, who promptly
issued Articles of Dissolution, effecting
the extinguishment of the corporation.

At the same time, Articles of Incorporation
were filed with the Secretary of State.

In accordance with the dissolution statutes,
CUB has transferred its assets and
liabilities to CUB, Inc., and has notified
its creditors accordingly.

The only concern I have over the legality of
CUB's dissolution is whether CUB acted in
good faith in taking this step.

Under the common law, the decision to
dissolve or not must be made in good faith.

Oleck, Non-profit Corporations and
Associations, Section 226 (1956).

I must presume that CUB acted in good faith
because neither the CUB Act nor Chapter 181
contains any limitation on the grounds
for dissolution.

In other words, as far as the statutes are
concerned, CUB could dissolve for any reason.

75 OAG 168 169 170 171 172

In the case of business corporations, a court
of equity will upset a dissolution despite
compliance with the statutes:
 

at the instance of minority stockholders
where the dissolution is in bad faith
and violates the rights of minority
stockholders, or where it has been
induced by undue influence or a result
of fraud, or, it would seem, where the
dissolution is not intended for the
benefit of the corporation or in
furtherance of its interests but merely
to unjustly oppress the minority, or any
of them, and cause a destruction or
sacrifice of their pecuniary interests
or holdings.

16 A, Fletcher Cyclopedia of the Law of Private
Corporations, Section 7966 (1979 rev. vol.).
CUB, of course, had no stockholders.

By analogy, however, members in the minority
on the vote to dissolve might be found to
have standing to challenge the dissolution
on the ground that it was accomplished
in violation of their rights.

Clearly, a dissolution of CUB was prompted,
at least in part, by a desire to avoid
certain restrictions presented in
the CUB Act.

In the Spring 1986 copy of the CUB
newsletter, CUB president Thomas Lonsway
told CUB members that the Legislature was not
likely to amend the CUB Act to increase the
classes of membership and that "only by
reorganizing as a private non-profit
organization could CUB broaden
its membership base."

Members were also told that CUB received none
of the advantages of being a state agency
(except for the right to include an enclosure
in utility bills, which was being questioned
in litigation) and asked "why keep [the tie
to government] if we get no corresponding
advantages."

CUB was seen as having "essentially . . .
many of the responsibilities of a government
agency but none of the advantages."

Obviously, therefore, a CUB dissolution was
at least in part prompted by a desire to
avoid CUB's statutory responsibilities.

One of those responsibilities, arguably,
was to comply with the state's
public records law.

CUB had refused to divulge its
membership list.

In resulting litigation, CUB has taken the
position that it was not generally subject
to the public records law, but rather was
subject to only the special public records
provision of Section 199.125.

One might argue that dissolution was
accomplished to avoid disclosing
its membership list.

Yet, other than the circumstance of the
timing of the CUB dissolution, relative to
the pendency of the membership list
litigation and President Lonsway's statements
in the CUB newsletter, nothing has come to my
attention that would support a challenge to
CUB's dissolution based on a bad faith
motivation to avoid statutory
responsibilities.

75 OAG 168 169 170 171 172

As far as I know no member has come
forward to challenge the dissolution
on these or any other grounds.

I believe that no one else would have
standing to interfere with the dissolution.

Even with respect to members, however,
an action to upset the dissolution,
being in equity, would be affected
by the doctrine of laches.

The CUB board voted to dissolve
and reorganize in March.

No steps were taken to enjoin the dissolution
and it was accomplished in April.

According to President Lonsway's article in
the CUB newsletter, dissolution had been
discussed for "countless hours during
the past two years."

It is now September and
no member has spoken up.

It is likely, therefore, that no court would
interfere with the dissolution and
reorganization of CUB at this time.

BCL: ESM

[1]

69 Op. Att'y Gen. 153 (1980).

[2]

For a summary and discussion of the
characteristics of some or these entities see
OAG 32-85, August 15, 1985.

[3]

The CUB Act itself, of course in providing
for bylaws and a board or directors among
other things, endowed CUB with a number or
familiar corporate characteristics.

75 OAG 168 169 170 171 172