Summit Water Firm Asks Judge To Delay Shareholder Meeting

Jun 24, 2020

An attorney for the Summit Water Company has filed a motion, asking a Third District Court judge to delay his order, calling for a shareholder meeting of the private water firm.

Judge Richard Mrazik called for the shareholders to meet no later than July 23rd.     But the water company is pleading that it needs time to file an appeal.   It’s the latest development in a nearly-two-year-old legal fight between Summit Water and the original founders of the company.

As we’ve reported, Judge Mrazik’s decision in May was good news for the group of litigants that include the Estate of the company’s founder, the late Hy Saunders; Trilogy Limited, started by another deceased founder, Larry Knowles and now run by his son Stuart; and the McMillian Marital Trust.

The judge granted their request for a shareholder meeting and also ruled, in a Preliminary Injunction, that the Founders group can’t be prevented from voting their Class A and Class B shares.

But Summit Water’s attorney, Robert Mansfield, in his Motion filed June 17th, said the company will be irreparably damaged, given their 2018 lawsuit which has alleged wrongful conduct by Saunders, Knowles and their allies.

He alleged that the Founders have made it known that at the shareholder meeting, they intend to replace the board of directors, fire the current management and officers, and dismiss Summit Water’s lawsuits.  Mansfield said that undermines the rights of over 4000 Class B shareholders.

The attorney argued the Saunders-Knowles shares, which can be voted at the meeting, could later be determined to be invalid, if Summit Water’s litigation is allowed to proceed.

He alleges that when Saunders controlled the company in the 90’s, he issued thousands of shares to himself and the Knowles interests, which were not in compliance with the company’s Articles.     That allegedly gave them control through “an artificial majority of outstanding shares.”

The filing by Summit Water says they are only asking for a delay in the shareholders meeting, which will not diminish the rights held by the Founders group.

Meanwhile, the Saunders and Knowles parties have contended in their own lawsuit, also from 2018, that the company improperly tried to cancel or restrict their water shares.

In their favor, Judge Mrazik ruled that the Founders would be irreparably damaged if they could not vote their shares at a company meeting.    He said the company doesn’t have the legal justification in its by-laws to drop the Saunders and Trilogy shares.     Mrazik has said the company could only do that by getting a Declaratory Judgment, and Summit Water hasn’t pursued that option.

A related dispute, brought out in another court filing, is how many positions on the board of directors can be voted on.    Attorney Mansfied has filed a Motion asking Judge Mrazik to Clarify or Reconsider his previous order.

The attorney says that the Saunders and Knowles group want to vote on five out of the six board members.

But Mansfield argued that, at most, only two board members have had their terms expire.    Jerry Dearinger is serving a term that expires this year.

And Larry White was appointed three years ago, as a representative of the Canyons Resort.    The motion says his term expired in 2019.    Other board members have expiration dates running from 2022 to 2024

Summit Water also proposed an expedited schedule for both sides to submit written arguments.    That should be complete by Monday June 29th.