SC 2024-opinion-addressing-enforcement-authority-regarding-a-telephone-cooperative-s-failure-to-follow-corporate-formalities September 24, 2024

Who enforces the rules when a South Carolina rural telephone cooperative ignores its own bylaws?

Short answer: The AG concluded that bylaw and corporate-formality problems at a rural telephone cooperative generally fall outside the Public Service Commission and Office of Regulatory Staff, whose authority covers telephone service quality, not internal governance. Because Sandhill Telephone Cooperative is a nonprofit corporation, the Attorney General's office has authority under the S.C. Nonprofit Corporation Act (§ 33-31-171) to investigate, and it referred the constituents' materials to its enforcement division. The AG cannot find facts in an opinion, so it did not say whether violations actually occurred.

Disclaimer: This is an official South Carolina Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed South Carolina attorney for advice on your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official AG opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original AG opinion (PDF)

Official title

Opinion addressing enforcement authority regarding a telephone cooperative's failure to follow corporate formalities.

Requester

Requested by The Honorable Cody T. Mitchell, Richard L. Yow and Patricia Moore Henegan, Members, South Carolina House of Representatives.

Plain-English summary

Three members of the South Carolina House asked the Attorney General who is responsible when a rural telephone cooperative does not follow its own rules. The question came from a constituent serving on the board of Sandhill Telephone Cooperative, who raised concerns about possible governance failures: board business being conducted outside of board meetings, a commissioner not living in the exchange district he represented, and the membership not voting for a commission member by secret ballot at the annual meeting. The legislators asked which entity ensures a cooperative complies with state requirements, and which entity steps in if a majority of the cooperative's commission fails to act.

The AG's answer sorts the problem into the right enforcement channel. The opinion explains that the conduct described does not generally fall under the Public Service Commission (PSC) or the Office of Regulatory Staff (ORS), because their authority concerns whether telephone utility service is provided in a reasonable, adequate, and efficient manner, not internal corporate governance. The complaints here were about corporate formalities and bylaw compliance, not service quality.

Because Sandhill Telephone Cooperative is registered with the Secretary of State as a nonprofit domestic corporation, the relevant authority is the South Carolina Nonprofit Corporation Act. Under § 33-31-171, the Attorney General's office is authorized to investigate the organization, conduct, and management of nonprofit corporations, and such corporations must allow examination of records that tend to show conduct violating their charter or state law. The AG noted it cannot find facts in an opinion, so it did not decide whether any actual violations occurred, but it referred the constituent's materials to the office's division that enforces the Nonprofit Corporation Act for further review.

What this means for you

Legislators and cooperative members

The opinion identifies the AG's office, not the PSC or ORS, as the entity with authority to investigate governance and bylaw-compliance problems at a nonprofit telephone cooperative. The PSC and ORS focus on service quality. For board-conduct concerns like the ones raised, the route runs through the Nonprofit Corporation Act and the Attorney General's enforcement authority.

Telephone cooperative boards

For a cooperative organized as a nonprofit corporation, the opinion explains that the AG's office may investigate its organization, conduct, and management under § 33-31-171, and that the corporation must permit examination of records that tend to show violations of its charter or state law. The opinion does not find that any violation occurred at Sandhill; it describes the office's authority to look.

Telephone-service customers

For customers, the opinion draws a line: complaints about the quality or adequacy of telephone service go to the PSC and ORS, while complaints about how the cooperative governs itself fall under the Nonprofit Corporation Act and the AG's office.

Common questions

Does the Public Service Commission handle a co-op's bylaw problems?
Generally no, per the opinion. The PSC and ORS authority concerns whether telephone service is reasonable, adequate, and efficient. Bylaw and corporate-formality issues are governance matters outside that authority.

Who can investigate a nonprofit telephone cooperative's governance?
The Attorney General's office. Under § 33-31-171 of the Nonprofit Corporation Act, it may investigate the organization, conduct, and management of a nonprofit corporation, and the AG referred this cooperative's materials to its enforcement division.

Did the AG find that Sandhill broke the law?
No. The opinion states the office cannot find facts in an opinion, so it did not decide whether the described conduct amounted to actual violations. It referred the materials for further review.

Is a rural telephone cooperative a government body?
The opinion notes the office's prior formal opinions treat Sandhill Rural Telephone Cooperative as a nonprofit corporation organized under state codes, not a state political subdivision.

Background and statutory framework

The legislators referenced the statutory framework for rural telephone cooperatives, including SC Code § 33-46-10 et seq. (cooperative organization and operations) and S.C. Code § 58-9-10 et seq. (when the PSC may request ORS investigations). The opinion explains that the PSC's powers over telephone, telegraph, and express companies, described in S.C. Code §§ 58-9-710 et seq., relate to the provision of telephone utility service, not to a cooperative's internal corporate conduct.

Because Sandhill Telephone Cooperative, Inc. is registered as a nonprofit domestic corporation in good standing, the AG turned to the South Carolina Nonprofit Corporation Act, S.C. Code §§ 33-31-101 et seq. Section 33-31-171 authorizes the office to investigate the organization, conduct, and management of nonprofit corporations and requires them to permit examination of records that show or tend to show conduct in violation of their charter rights or state law. Consistent with its limit on fact-finding in opinions, the AG did not adjudicate the allegations but referred the materials to its enforcement division.

Citations

Statutes:
- SC Code § 33-46-10 et seq. (rural telephone cooperatives)
- S.C. Code § 58-9-10 et seq. (PSC and ORS investigations)
- S.C. Code §§ 58-9-710 et seq. (PSC powers over telephone companies)
- S.C. Code §§ 33-31-101 et seq. (S.C. Nonprofit Corporation Act)
- S.C. Code § 33-31-171 (AG authority to investigate nonprofit corporations)

Source

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ALAN WILSON
ATTORNEY GENERAL

September 24, 2024

The Honorable Cody T. Mitchell
Member

South Carolina House of Representatives
District No. 65

P.O. Drawer 1408

Hartsville, SC 29550

The Honorable Richard L. Yow
Member

South Carolina House of Representatives
District No. 53

The Honorable Patricia Moore Henegan
Member

South Carolina House of Representatives
District No. 54

Dear Representatives Mitchell, Yow, and Henegan:

Attorney General Alan Wilson has referred your letter to the Opinions section. Your letter
states the following:

As elected officials, we are requesting an opinion from your office on a matter of
importance to our constituents, and certainly to all South Carolinians who are
members of rural telephone cooperatives across our state. A constituent who serves
on the cooperative's commission has shared concerns with us that we are enclosing
with our letter.

We are aware that our South Carolina Code, and other provisions, cover rural
telephone cooperatives organization, operations, and oversight. Specifically, SC
Code §33-46-10 ef seq. set these responsibilities out in detail. S.C. Code §58-9-10
et seq. set out instances when the South Carolina Public Service Commission

The Honorable Cody T. Mitchell, Richard L. Yow, & Patricia Moore Henegan
Page 2
September 24, 2024

[SCPSC] may request investigations of Rural Telephone Cooperatives by our
Office of Regulatory Staff [ORS].

Your Office's prior, formal opinions set out that your office considers the Sandhills
Rural Telephone Cooperative not to be a state political subdivision. Rather you
view it as a nonprofit corporation organized under these state codes. ...

[W]e are told that at least one of these Commission members and the Cooperative
operations are causing the other commission members concerns spelled out in the
enclosed materials.

As a result of this situation described to me, these questions come to mind:

What entity ensures that a Rural Telephone Cooperative is complying with all state
requirements?
What entity would have this responsibility in the event a majority of this
Cooperative Commission fails to act or is not successful in obtaining a majority
vote to take corrective action?

The materials enclosed with your letter describe a series of potential failures to follow the
bylaws of Sandhill Telephone Cooperative. Specifically, the materials describe 1) official board
business being conducted outside of a board meeting; 2) a commissioner failing to reside within
the exchange for which he was seated on the board; and 3) a failure of the members to vote for a
commission member by secret ballot at the corporation’s annual meeting.

Law/Analysis

It is this Office’s opinion that the conduct described in your request letter would not
generally fall under the jurisdiction PSC or ORS as it does not relate to providing telephone utility
service in a reasonable, adequate, or efficient manner. See S.C. Code §§ 58-9-710 et seq.
(describing the powers of the PSC in relating to telephone, telegraph, and express companies).
Rather, the enclosed materials contain allegations suggesting a failure to follow corporate
formalities and comply with the Cooperative’s bylaws.

As your letter notes, the Sandhill Telephone Cooperative, Inc. is registered with the S.C.
Secretary of State’s Office as a nonprofit domestic corporation in good standing. Under the S.C.
Nonprofit Corporation Act, $.C. Code §§ 33-31-101 et seq., this Office is authorized to “make
investigations into the organization, conduct, and management” of nonprofit corporations
operating in this state. S.C. Code § 33-31-171. Every such nonprofit corporation is required to
permit examination of “any ... records .., necessary to show or tend to show that the corporation
has been, or is, engaged in acts or conduct in violation of its charter rights and privileges or in

The Honorable Cody T. Mitchell, Richard L. Yow, & Patricia Moore Henegan
Page 3
September 24, 2024

violation of any law of this State.” Id. This Office is not authorized to find facts in an opinion, so
we cannot comment on whether the described conduct amount to actual violations. However, we
have referred your constituent’s materials to this Office’s division overseeing enforcement of the
S.C. Nonprofit Corporation Act for further review.

Sincerely, jf
t 7 a / al
Matthew Houck

Assistant Attorney General
REVIEWED AND APPROVED BY:

Robert D. Cook
Solicitor General