Cahaba Riverkeeper, Inc. v. Water Works Bd. of City of Birmingham

• Decision Date: 25 February 2022
• Docket Number: 1200645
• Parties: Cahaba Riverkeeper, Inc., Cahaba River Society, David Butler, and Bradford McLane v. Water Works Board of the City of Birmingham and State of Alabama ex rel. Steve Marshall, Attorney General
• Court: Alabama Supreme Court

Cahaba Riverkeeper, Inc., Cahaba River Society, David Butler, and Bradford McLane v. Water Works Board of the City of Birmingham and State of Alabama ex rel. Steve Marshall, Attorney General

No. 1200645

Supreme Court of Alabama

February 25, 2022

Appeal from Jefferson Circuit Court (CV-21-900732)

MENDHEIM, Justice.

Cahaba Riverkeeper, Inc., Cahaba River Society, David Butler, and Bradford McLane ("the conservation parties") appeal from a judgment of the Jefferson Circuit Court dismissing their action seeking declaratory and injunctive relief against the Water Works Board of the City of Birmingham ("the Board") and the State of Alabama, on the relation of Alabama Attorney General Steve Marshall. We reverse and remand.

I. Facts

According to the complaint, Cahaba Riverkeeper, Inc., is a nonprofit corporation that "seeks to improve the ecological integrity of the Cahaba watershed and to protect its use as an important drinking water supply." Similarly, the complaint states that Cahaba River Society is a nonprofit corporation that "seeks to restore and protect the Cahaba River watershed and its rich diversity of life, and to safeguard the supply and quality of the drinking water drawn from it." The complaint alleges that both are organizations that have "hundreds of members in Alabama who are [Board] ratepayers." Additionally, the complaint relates that Bradford McLane is a board member of the Cahaba River Society as well as "a [Board] ratepayer who lives in Jefferson County." Similarly, David Butler is a staff attorney employed by Cahaba Riverkeeper, Inc. and, according to the complaint, is "a [Board] ratepayer who lives in Jefferson County."

At the heart of this case is a settlement agreement executed by the Board and a former attorney general on January 29, 2001 ("the settlement agreement"). The settlement agreement was a byproduct of infighting between the City of Birmingham's mayor and its city council over control of the Board and its assets. The Board is a public corporation^[1] that owns and operates a water system in Blount, Jefferson, St. Clair, Shelby, and Walker Counties ("the system").^[2] In 1998, the City of Birmingham ("the City") and its mayor at the time, Richard Arrington, began exploring ways to increase funding for its school system. They concluded that the most profitable method of doing so would be to sell off the assets of the system including land, reservoirs, and filtration systems, to a private investor to retire debts and to establish an education trust fund. To efficiently execute that plan, on September 2, 1998, the Board transferred all the assets of the system to the City for $1. However, state law required a referendum vote by the citizens of the City approving the sale to the private investor, and a referendum that same year failed. In 2000, the City's newly elected mayor, Bernard Kincaid, sought to establish a new arrangement in which the Board would operate as a City department. Members of the city council opposed that plan, desiring to keep the Board independent and to have the Board buy back the assets of the system from the City. Subsequently, the Board submitted an offer to purchase the assets back from the City for the sum of approximately $471 million (which consisted of $275 million in assumption of debt and the payment of $196 million in cash), which was accepted by the city council. In July 2000, the city council approved an ordinance to transfer the assets back to the Board; Mayor Kincaid vetoed the ordinance, but the city council overrode the veto.

On August 10, 2000, Mayor Kincaid commenced an action against the Board and the city council in the Jefferson Circuit Court, attempting to prevent the Board from reacquiring the assets of the system. On September 8, 2000, then Attorney General Bill Pryor intervened as a defendant in that action, "on behalf of the using and consuming public to protect their interests," and asserted a counterclaim against Mayor Kincaid and a cross-claim against the city council. Attorney General Pryor's primary concern was the possibility of the Board's independently operating the system without public oversight. As already noted, on January 29, 2001, Attorney General Pryor and the Board entered into the settlement agreement, in which Attorney General Pryor agreed to withdraw the cross-claim against the city council in exchange for certain concessions from the Board. In pertinent part, the settlement agreement provided:

"NOW, THEREFORE, in consideration of the mutual covenants set forth below, the Water Works Board, and the Attorney General hereby agree as follows:

"1. Public Service Commission Jurisdiction. The parties agree that regulation of the Water Works Board by the [Alabama Public Service Commission ('the APSC')] is in the public interest because it will ensure, among other things, that ratepayer revenues are used solely for purposes related to the provisioning of water. The service territory of the Water Works Board has always exceeded the boundaries of its authorizing municipality and the Water Works Board currently provides water to approximately one-quarter of the population of the State of Alabama. Pursuant to Ordinance No. 00-123, the City has agreed to return the assets of the Systems to the Water Works Board that will allow for regulation of the Water Works Board pursuant to the terms of this Agreement, applicable law, and the rules and regulations of the APSC, as amended from time to time. Upon the closing of the transaction as contemplated in Ordinance No. 00-123, the Water Works Board hereby agrees to adopt a Resolution ... waiving its exemption from the jurisdiction of and regulation by the APSC set out in Ala. Code § 11-50-241(b)(1992) and § 11-50-174(b)(1992), if applicable. ...

"2. Independence of the Water Works Board. A public corporation, such as the Water Works Board, is an entity separate and independent from the city it serves. The Board of Directors legally may direct the business and affairs of the Water Works Board without direction or supervision by City officials. In the event of a conflict on any issue between the APSC and the City during the term of this Agreement, the decision of the APSC will prevail and take precedence over a decision by the City.

"3. Schedule of Payments. (a) The Acquisition Agreement that will be entered into by the Water Works Board and the City pursuant to Ordinance No. 00-123 requires that the Water Works Board assume or become responsible for the payment of certain indebtedness secured by the assets and revenues of the Systems owed by the City. The Water Works Board, in the Acquisition Agreement, will also pay the City One Hundred Ninety Six Million Dollars ($196, 000, 000.00) as additional consideration for the City to return the assets of the Systems to the Water Works Board.

"....

"5. Re-conveyance of System Assets. The Attorney General hereby acknowledges that the re-conveyance of the Systems' assets to the Water Works Board as set out in this Agreement, Resolution No. 3995 and Ordinance [No.] 00-123 is in the public interest because (a) the assets of the Systems will be owned by an independent public corporation that will be regulated and supervised by the APSC for the next 50 years; (b) the Systems' revenues will be used solely for purposes related to the provisioning of water rather than funding general municipal needs; and (c) development of certain real property that will be acquired by the Water Works Board in the Transaction will be restricted by a conservation easement to protect the environment associated with the watershed.

"6. Third Party Beneficiaries. The ratepayers of the Water Works Board are intended to be third party beneficiaries of this Agreement and shall have full power and authority to enforce the provisions of the Agreement. Any ratepayer desiring to enforce any provisions of this Agreement must first exhaust all administrative remedies prior to instituting legal action under this provision.

"7. Conservation Easement. In order to ensure that the assets of the Systems are properly utilized to operate the Systems and to ensure that the assets of the Systems are permanently protected from any and all land development activities which could be harmful to the Systems, the Water Works Board hereby agrees to place a conservation easement on the Systems' real estate described in paragraph 7 of the Acquisition Agreement that will be entered into by the Water Works Board and the City, pursuant to Ordinance No. 00-123, under which the Water Works Board shall be the holder of said easement. The parties will agree on the final form of the easement and the terms and conditions of the easement must be satisfactory to the Attorney General. The State of Alabama through the Office of the Attorney General, shall have a third party right of enforcement of said conservation easement for the benefit of the Systems' ratepayers. The Water Works Board agrees to record the easement in the offices of the Judges of Probate of Jefferson and Shelby Counties within 30 days of the closing of the transaction approved in Ordinance No. 00-123. The Water Works Board hereby agrees that the Attorney General shall be a 'key stakeholder' in the land use study described in paragraph 7 of the Acquisition Agreement.

"8. Term. This Agreement shall be in full force and effect for a term of 50 years and shall terminate without notice on February 1, 2051.

"9. Representation of Ratepayers. The Attorney General specifically reserves the right to take whatever action he deems necessary or advisable to protect the interests of the ratepayers during the term of this Agreement, including, but not limited to, matters involving rate, service, facilities or equipment issues. This reservation specifically

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