City of Las Cruces v. El Paso Elec. Co.

Decision Date23 October 1995
Docket NumberNo. Civ. 2:95-385 LCS/JHG,Civ. 2:95-485 LCS.,Civ. 2:95-385 LCS/JHG
Citation904 F. Supp. 1238
PartiesCITY OF LAS CRUCES, Plaintiff, v. EL PASO ELECTRIC COMPANY, Defendant.
CourtU.S. District Court — District of New Mexico

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Nann M. Houliston, Las Cruces City Attorney's Office, Las Cruces, NM, William L. Lutz, Martin, Lutz & Brower, Las Cruces, NM, for plaintiff.

Jane C. Cohen, David S. Cohen, Jill Z. Cooper, Cohen & Cohen, Santa Fe, NM, Thomas A. Sandenaw, Jr., Las Cruces, NM, David F. Graham, D. Cameron Findlay, Mark B. Blocker, Sidley & Austin, Chicago, IL, for defendant.

OPINION AND ORDER

SMITH, United States Magistrate Judge.

THIS MATTER comes before the Court on several motions by the parties in these two cases:

(1) Defendant El Paso Electric Company's (EPEC) Motion to Dismiss in 95-CV-385, filed March 24, 1995, in U.S. Bankruptcy Court in Doc. # 1;
(2) EPEC's Motion to Consolidate 95-CV-385 and 95-CV-485, filed May 4, 1995 Doc. # 7 in both cases;
(3) Plaintiff City of Las Cruces' (City) Motion for Abstention or Remand in 95-CV-485, filed May 30, 1995 Doc. # 16;
(4) EPEC's Motion for Summary Judgment in 95-CV-485, filed May 3, 1995 Doc. # 3; and
(5) EPEC's Motion for Certification to the New Mexico Supreme Court in 95-CV-485, filed June 19, 1995 Doc. # 26.

After the motions were fully briefed and after oral argument, the Court ruled on these pending motions in open court at the August 25 and the August 31, 1995 motions hearings, with the exception of EPEC's Motion for Certification. This Opinion and Order sets forth in detail the Court's rulings given in the two hearings. The Court will at this time reserve its ruling on the Certification motion. If there are any discrepancies between the Court's rulings in open court and this Opinion and Order, the rulings set forth herein are controlling.

FACTUAL BACKGROUND OF 95-CV-485

This case arises out of the City's desire to condemn the electric utility system serving the municipality of Las Cruces from EPEC and to introduce a municipally-operated electric utility. EPEC, a privately-owned Texas corporation, has operated the utility system in Las Cruces for over fifty years and currently provides electric service in various parts of southcentral New Mexico, including the communities of Las Cruces, Hatch and Mesilla, and the counties of Doña Ana, Luna, Sierra and Otero. EPEC's New Mexico ratepayers outside of Las Cruces municipal boundaries consume power that is transmitted or distributed over electric lines located within Las Cruces: it is all part of an integrated electric utility system. The City, a municipal corporation organized under the laws of New Mexico, exercises home rule authority pursuant to the New Mexico Constitution, Article X, Section 6, and has implemented a plan to purchase or acquire EPEC's electric utility system located within municipal boundaries. If the City is successful in gaining possession of the utility system, EPEC would still be obligated to provide electricity to county users living outside of the city limits.

On September 3, 1991, the Las Cruces City Council passed Ordinance No. 1247, whereby the City Council pronounced its resolve to create a municipal electric utility. On July 5, 1994, the City Council adopted Resolution No. 95-001, which called for a special election on the following question:

Shall the City of Las Cruces acquire, through negotiated purchase or eminent domain, an electric utility including, but not limited to, distribution, subtransmission facilities for the purpose of providing electricity to the citizens of Las Cruces?

The special election was held on August 30, 1994, with the electorate approving the proposition. On September 6, 1994, the City Council adopted Resolution No. 95-071, accepting the results of the August 30 election. On April 3, 1995, the City Council adopted Resolution No. 95-254, which "determined that condemnation of El Paso Electric's distribution system and related facilities serves the public interest." (Shirley Clark Aff. at 2).

The procedural history of this case begins January 8, 1992, when EPEC filed a petition under Chapter 11 of the federal bankruptcy laws in the United States District Court for the Western District of Texas, Austin Division. On November 24, 1994, an order by the bankruptcy court granted the City's motion to lift the automatic stay so that the City could proceed to take action against EPEC in state or federal court on issues related to the City's quest to acquire the municipal electric utility system.

Thereafter, the City filed an action in the Third Judicial District for the State of New Mexico on April 7, 1995, Case No. CV-95-301. In that action the City sought declaratory judgment as to the City's right of eminent domain with respect to EPEC's electric distribution system within the municipality. On May 3, 1995, EPEC filed a Notice of Removal from state court to the United States District Court for the District of New Mexico, Case No. 95-CV-485, based on diversity of citizenship jurisdiction.

At this point, a number of motions were filed: (1) on May 3, 1995, EPEC filed its Motion for Summary Judgment; (2) on May 4, 1995, EPEC filed a Motion to Consolidate this case (95-CV-485) with 95-CV-385; (3) the City moved for Abstention or Remand to state district court on May 30, 1995; and (4) EPEC filed a Motion for Certification of the question of the City's eminent domain authority to the New Mexico Supreme Court on June 19, 1995. On July 25, 1995, pursuant to 28 U.S.C. § 636(b), the parties consented to the United States Magistrate Judge presiding over all further proceedings, including final disposition of the case.

FACTUAL BACKGROUND IN 95-CV-385

In March 1983, the City and EPEC entered into a ten-year franchise agreement, whereby the City received franchise payments from EPEC in exchange for EPEC's right to use, occupy and rent the City's streets, alleys, rights-of-way, and other public grounds to provide electricity to City consumers. Just prior to the expiration of the franchise contract, the parties entered into a one-year agreement which essentially continued the terms of the previous franchise contract. Since the expiration of this second agreement on March 18, 1994, EPEC has continued to provide electrical service to municipal users and use the City's thoroughfares without making any franchise payments to the City.

On February 22, 1995, the City filed a complaint in the United States Bankruptcy Court for the Western District of Texas, Austin Division, seeking recovery of the unpaid franchise fees from EPEC since the termination of the second franchise agreement. The City alleged four counts in its complaint: (1) breach of an implied contract; (2) specific performance; (3) unjust enrichment; and (4) trespass. EPEC countered by filing a Motion to Dismiss on March 24, 1995.

On April 4, 1995, the bankruptcy court granted the City's Motion to Withdraw Reference to the bankruptcy court and the case was transferred to this Court. EPEC then filed a Motion to Consolidate the two cases, 95-CV-385 and 95-CV-485, on May 4, 1995. On July 11, 1995, the parties consented to the jurisdiction of the United States Magistrate Judge for all proceedings, including final disposition of both cases.

HEARINGS ON THE MOTIONS IN 95-CV-385 AND 95-CV-485

On August 25, 1995, this Court held a motions hearing for both cases. After review of the submissions of the parties and oral argument, this Court ruled from the bench on several motions. In 95-CV-385, the Court (1) denied EPEC's Motion to Consolidate the two cases and (2) granted EPEC's Motion to Dismiss Count II of the City's Complaint (specific performance), but denied the Motion to Dismiss as to the other three counts. In 95-CV-485, the Court (1) denied the City's Motion for Abstention or Remand and (2) took under advisement EPEC's Motion for Certification and EPEC's Motion for Summary Judgment.

Another hearing was held on August 31, 1995. At that time, the Court denied EPEC's Motion for Summary Judgment in 95-CV-485; EPEC's Motion for Certification to the state Supreme Court was taken under further advisement. This Opinion and Order embodies the Court's rulings on the motions. The Court will reserve its ruling on the one outstanding motion, the Motion for Certification to the New Mexico Supreme Court, pending resolution of the factual determination regarding "destruction" of the existing public use.

DISCUSSION
A. CITY'S CONTRACT CLAIMS (95-CV-385)

Dismissal pursuant to Rule 12(b)(6) is appropriate only if the plaintiff can establish no set of facts in support of her claim that would entitle her to relief. Noland v. McAdoo, 39 F.3d 269, 273 (10th Cir.1994). In making this determination, a court must take all well-pleaded facts as true and construe them in the light most favorable to the plaintiff. Rocky Mountain Helicopters, Inc. v. Bell Helicopter Textron, Inc., 24 F.3d 125, 128 (10th Cir.1994).

1. EPEC's Motion to Dismiss Count I (Breach of an Implied Contract)

In Count I, the City alleges that after expiration of the second franchise agreement, EPEC continued to "occupy, use and rent" the City's rights-of-way. Therefore, the City asserts that EPEC's conduct in continuing to use the City's thoroughfares on the same terms and conditions as the expired agreement gives rise to an implied contract. (Compl. at ¶¶ 39-41).

EPEC primarily seeks dismissal of the breach of implied contract count by arguing that the City's sole remedy at law is inverse condemnation. Inverse condemnation is a statutory action available to a property owner when the taker of the property, an entity with condemnation authority, does not intend to bring eminent domain proceedings. N.M.STAT.ANN. § 42A-1-29 (1994 Repl.Pamp.) (New Mexico Inverse Condemnation Statute). If inverse condemnation applies to a given situation, then it is the plaintiff's exclusive...

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