City of Stilwell, Okl. v. Ozarks Rural Elec. Co-op. Corp.

• Decision Date: 28 March 1996
• Docket Number: 95-7011,Nos. 94-7135,s. 94-7135
• Citation: 79 F.3d 1038
• Parties: , Util. L. Rep. P 14,098 CITY OF STILWELL, OKLAHOMA, a municipal corporation, Plaintiff-Appellant, v. OZARKS RURAL ELECTRIC COOPERATIVE CORPORATION; Rural Electrification Administration, United States of America; National Rural Utilities Cooperative Finance Corporation, Defendants-Appellees, KAMO Electric Cooperative, Inc., Movant-Appellant, Tahlequah Public Works Authority; Municipal Electric Systems of Oklahoma, Inc.; American Public Power Association; National Institute of Municipal Law Officers; National League of Cities; United States Conference of Mayors; Colorado Association of Municipal Utilities; The Colorado Rural Electrification Association; National Rural Electric Cooperative Association, Amici Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1038

79 F.3d 1038

34 Fed.R.Serv.3d 954, Util. L. Rep. P 14,098

CITY OF STILWELL, OKLAHOMA, a municipal corporation Plaintiff-Appellant, v. OZARKS RURAL ELECTRIC COOPERATIVE CORPORATION; Rural Electrification Administration, United States of America; National Rural Utilities Cooperative Finance Corporation Defendants-Appellees KAMO Electric Cooperative, Inc., Movant-Appellant Tahlequah Public Works Authority; Municipal Electric Systems of Oklahoma, Inc.; American Public Power Association; National Institute of Municipal Law Officers; National League of Cities; United States Conference of Mayors; Colorado Association of Municipal Utilities; The Colorado Rural Electrification Association; National Rural Electric Cooperative Association, Amici Curiae.

Nos. 94-7135, 95-7011.

United States Court of Appeals, Tenth Circuit.

March 28, 1996.

Appeal From The United States District Court For The Eastern District Of Oklahoma (D.C. No. CV-94-293); Frank H. Seay, Judge.

Lloyd E. Cole, Jr., Stilwell, Oklahoma, for Plaintiff-Appellant.

John R. Eldridge, III of Burke & Eldridge, P.A., Fayetteville, Arkansas (Larry Derryberry, Patrick D. Shore of Derryberry, Quigley, Parrish, Solomon & Blankenship, Oklahoma City, Oklahoma, with him on the brief), for Defendant-Appellee Ozarks Rural Electric Cooperative Corporation.

Mark B. Stern, Thomas M. Bondy, Attorneys, Appellate Staff, Civil Division, Department of Justice, Washington, D.C., for Defendant-Appellee Rural Electrification Administration, United States of America.

Jot Hartley of Hartley & Jones, Vinita, Oklahoma (Joseph M. Gardner of Hartley & Jones, Vinita, Oklahoma, and Clifford K. Cate, Muskogee, Oklahoma, with him on the brief), for Movant-Appellant KAMO Electric Cooperative, Inc.

Harvey L. Chaffin, Karig P. Culver, of Chaffin, Culver & Chapman-Plumb, Tahlequah, Oklahoma, Ronald A. Bloch, Martha A. Hausman, Lisa S. Derman, of McDermott, Will & Emery, Washington, D.C., for Tahlequah Public Works Authority, and Municipal Electric Systems of Oklahoma, Inc., Amici Curiae.

Clifton S. Elgarten, Amy J. Mauser, of Cromwell & Moring, Washington, D.C., for American Public Power Association, National Institute of Municipal Law Officers, National League of Cities, and United States Conference of Mayors, Amici Curiae.

Paula M. Connely of Gorsuch Kirgis L.L.C., Denver, Colorado, Joseph B. Wilson, Colorado Springs, Colorado, for Colorado Association of Municipal Utilities, Amicus Curiae.

John J. Conway, Denver, Colorado, Randolph W. Starr, Loveland, Colorado, Jack P. Wolfe, Longmont, Colorado, for Colorado Rural Electric Association, Amicus Curiae.

Wallace F. Tillman, Jonathan H. Glazier, National Rural Electric Cooperative Association, Washington, D.C., James A. Orr of Sutherland, Asbill & Brennan, Atlanta, Georgia, for National Rural Electric Cooperative Association, Amicus Curiae.

Before BALDOCK, BRORBY and KELLY, Circuit Judges.

PAUL KELLY, Jr., Circuit Judge.

These appeals concern an action by the City of Stilwell, Oklahoma ("Stilwell" or "City") to condemn the electric facilities and service rights of Defendant-Appellee Ozarks Rural Electric Cooperative Corporation ("Ozarks") within an area annexed by the City. The district court granted summary judgment in favor of Ozarks, preventing Stilwell's proposed condemnation on the ground that the state condemnation statute, Okla. Stat. Ann. tit. 18, 437.2(k), was preempted under the Supremacy Clause, U.S. Const. art. 6, cl. 2, because it frustrated the purpose of the Rural Electrification Act, 7 U.S.C. §§ 901 to 950aa-1. ("REAct"). City of Stilwell v. Ozarks Rural Elec. Coop. Corp., 870 F.Supp. 1025, 1030-31 (E.D.Okla.1994). The district court also denied appellant KAMO Electric Cooperative's ("KAMO") motion to intervene. KAMO Br., ex. A. Our jurisdiction arises under 28 U.S.C. § 1291. We reverse the district court's grant of summary judgment and affirm the denial of KAMO's motion to intervene.

I.

Plaintiff-appellant City of Stilwell is a municipality located in Adair County, Oklahoma. It owns and operates an electrical system used to provide electric power to its inhabitants. The City uses the revenue it generates from the electrical system to finance a variety of other municipal services, including sewer, water, street, police, fire, and recreational services. Aplt. Br. at 3. In recent years, Stilwell has undergone a period of expansion, and it has annexed certain outlying areas and incorporated them into the City.

Included among the areas recently annexed by Stilwell is a section which includes 154 consumers serviced by Ozarks. These 154 consumers represent 1.55 percent of Ozarks' total consumers in Oklahoma, and 9.32 percent of Ozarks' electric sales revenue in the state. Aplee. App. 11. Ozarks is an Arkansas corporation, which was granted an exclusive right to furnish electric service to customers in its territory under the Oklahoma Rural Electric Supplier Certified Territory Act, Okla. Stat. Ann. tit. 17, 158.25(A). Ozarks receives funding from the Rural Electrification Administration ("REA"), ¹ which was created by the REAct to provide financing to power suppliers as an inducement to provide economical electric power to rural America.

When Stilwell annexed the portion of land within Ozarks' exclusive territory, it sought to have Ozarks transfer its facilities and service rights in the annexed area to the City, under the procedure prescribed by the Oklahoma Rural Electric Cooperative Act, Okla. Stat. Ann. tit. 18, 437 ("OREC Act"). Under 437.2(k):

if such city, town or village in which an area has been or shall be included, as aforesaid, owns and operates a system for the furnishing of electric energy to its inhabitants, the cooperative furnishing electric energy in such area shall transfer to such city, town or village upon its request, the cooperative's electric distribution facilities used in furnishing electric energy in said area....

The state's grant of an exclusive territory to Ozarks foresaw the possibility that the territory could be annexed by Stilwell. Okla. Stat. Ann. tit. 17, 158.28 specifically provides that:

nothing in this act shall prohibit or shall ever be construed to prohibit any municipal corporation ... owning or operating electric lines, from furnishing electric service to any territory thereafter annexed and incorporated into the corporate limits of said municipal corporation, or from acquiring the electric distribution facilities of any association or cooperative corporation as now provided in Title 18, Section 437.2.

Ozarks received its grant of certified territory fully informed that it was subject to a limitation--that if a certified territory "is annexed to and becomes part of an incorporated city or town, the certification of such territory ... shall be null and void." Okla. Stat. tit. 17, 158.29.

When Stilwell approached Ozarks to agree on a "fair price" to compensate Ozarks for the condemnation, Okla. Stat. tit. 18, 437.2(k), Ozarks refused to negotiate. Stilwell then instituted a state court action to force Ozarks to agree to transfer its facilities and service rights for the annexed area to the City for a fair price under the OREC Act. Stilwell joined the United States as an indispensible party defendant on the basis of the United States' interest in Ozarks' property as security against Ozarks' indebtedness to the REA. See 28 U.S.C. § 2410(a)(4). The United States removed the case to federal court. See Aplt.App. tab 2. The REA later announced in an administrative decision that it would not oppose the proposed taking, describing its effects as "minimal." Aplee. App. 14.

Ozarks subsequently filed a motion for summary judgment, urging that Okla. Stat. tit. 18, 473.2(k) is unconstitutional and is preempted because it frustrates the purpose of the REAct. Aplt.App. tabs 6, 7. The trial court granted summary judgment, holding that "[b]ecause the proposed expropriation of Ozarks' facilities and consumers would frustrate the federal purpose underlying the REAct, the City's condemnation proceeding is preempted under the Supremacy Clause of the Constitution." City of Stilwell, 870 F.Supp. at 1030-31. We disagree.

II.

In No. 94-7135, KAMO appeals the district court's denial of its motion to intervene in the action pursuant to Fed.R.Civ.P. 24. KAMO is a non-profit rural generation and transmission cooperative which is owned by its seventeen member distribution cooperatives, including Ozarks. KAMO, like Ozarks, is financed by the REA, and it supplies electric power to its member cooperatives at wholesale rates. KAMO's sales of power to Ozarks represent approximately 4.4% of KAMO's total sales to its member cooperatives, and about 8% of its Oklahoma revenues.

KAMO argues that the district court erred in denying its motion to intervene as of right under Fed.R.Civ.P. 24(a)(2) or, in the alternative, for permissive intervention under Fed.R.Civ.P. 24(b)(2). Our review of rulings on motions to intervene as of right is de novo, Alameda Water & Sanitation Dist. v. Browner, 9 F.3d 88, 90 (10th Cir.1993), and we review a denial of permissive intervention for abuse of discretion, id. at 89-90 (citing Allen Calculators, Inc. v. National Cash Register Co., 322 U.S. 137, 142, 64 S.Ct. 905, 907, 88 L.Ed. 1188 (1944)).

A.

Under Fed.R.Civ.P. 24(a)(2), a party may intervene as a matter of right:

when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

Therefore, to intervene as a matter of right, KAMO must demonstrate that Ozarks cannot represent its interest adequately, and that disposition of the action without KAMO's presence will impair KAMO's ability to protect its interest. Kiamichi R.R. Co....