Corley v. Entergy Corp.

• Decision Date: 24 February 2003
• Docket Number: Civil Action No. 1:98CV2006.,Civil Action No. 1.-98CV2054.
• Citation: 246 F.Supp.2d 565
• Parties: Duane CORLEY, et al., Plaintiffs, v. ENTERGY CORPORATION, et al., Defendants. Douglas C. Dishman, et al., Plaintiffs, v. Entergy Corporation, et al., Defendants.
• Court: U.S. District Court — Eastern District of Texas

Page 565

246 F.Supp.2d 565

Duane CORLEY, et al., Plaintiffs, v. ENTERGY CORPORATION, et al., Defendants.

Douglas C. Dishman, et al., Plaintiffs, v. Entergy Corporation, et al., Defendants.

Civil Action No. 1:98CV2006.

Civil Action No. 1.-98CV2054.

United States District Court, E.D. Texas, Beaumont Division.

February 24, 2003.

Richard Lyle Coffman, Raymond Lyn Stevens, of Stevens, Baldo, Freeman, LLP, Beaumont, TX, for Plaintiffs.

Lawrence Louis Germer, Lawrence James, Simmons, Jr., David Lawrence

Merkley of Germer, Bernsen & Gertz, Beaumont, TX, for Defendants, Entergy Technology Holding Co.

Lawrence Louis Germer, Lawrence James, Simmons, Jr, David Lawrence Merkly of Germer, Bernsen & Gertz, Paul Anthony Scheurieh, Entergy Services, Inc., Beaumont, TX, for all other defendants.

MEMORANDUM OPINION AND ODER PARTIALLY ADOPTING RPORT & RECOMMENDATION OF MAGISTRATE JUDGE

SCHELL, District Judge.

Before the court is the Report & Recommendation on Cross Motions for Summary Judgment [Clerk's Docket No. 186]. Having considered Defendants' Motion for Summary Judgment on Construction of Easements [Clerk's Docket No. 105], Representative Plaintiffs' Motion for Summary Judgment on Construction of Easements and Response to the Defendants' Motion for Summary Judgment on Construction of Easements [Clerk's Docket No. 113], Defendants' Reply to Plaintiffs' Response to Defendants' Motion for Summary Judgment and Response to Plaintiffs' Motion for Summary Judgment [Clerk's Docket No. 121], Plaintiffs' Supplemental Evidence in Support of Their Motion for Summary Judgment and Surreply to the Defendants' Motion for Summary Judgment [Clerk's Docket No. 166], Defendants' Reply to Representative Plaintiffs' Supplemental Evidence in Support of Their Motion for Summary Judgment and Surreply to the Defendants' Motion for Summary Judgment [Clerk's Docket No. 171], Defendants' Objections to Magistrate's Report & Recommendation on Cross Motions for Summary Judgment [Clerk's Docket No. 187], Representative Plaintiffs' Response to the Defendants' Objections to Magistrate's Report & Recommendation on Cross-Motions for Summary Judgment [Clerk's Docket No. 188], Defendants' Supplemental Post-Hearing Brief in Support of Defendants' Motion for Summary Judgment [Clerk's Docket No. 192], Representative Plaintiffs' Post-Hearing Brief and Response to the Defendants' Post-Hearing Brief [Clerk's Docket No. 193] and Defendants' Response to Representative Plaintiffs' Post-Hearing Brief [Clerk's Docket No. 197], and following hearing thereon, the court enters this memorandum opinion and order.

I. FACTUAL & PROCEDURAL BACKGROUND

This litigation involves the interpretation of four easements. Following assignment to this court's docket, all pre-trial matters were referred to the magistrate judge for disposition or recommendation. 28 U.S.C. § 636(b)(1)(A),(B); FED.R.CIV.P. 72; LOCAL COURT RULES (Appendix B). On March 27, 2001, the magistrate judge entered a Report & Recommendation on Cross Motions for Summary Judgment [Clerk's Docket No. 186]. This court heard argument on defendant's objections to the recommendation and accepted for consideration post-hearing briefs from both sides.

A. The Parties

On November 25, 1998, Duane T. Corley filed a putative class action lawsuit¹ against Entergy Corporation and several of its subsidiaries. Plaintiffs have rights to real property in Jefferson, Montgomery and Hardin counties. Defs.' Mot. for Summ. J., Exs. A, B, C, D and E [Clerk's Docket No. 105]. Between 1930 and 1969, plaintiffs' predecessors in interest granted certain easements to Gulf States Utilities Company (GSU) in connection with the extension of its electrical power infrastructure. Id. On December 31, 1993, GSU merged with Entergy Corporation and became a wholly owned subsidiary thereof. On April 22, 1996, GSU filed amended articles of incorporation legally changing its name to Entergy Gulf States, Inc. As such, the easements at issue are now held by Entergy Gulf States, Inc.

Plaintiffs brought suit against Entergy Corporation, Entergy Gulf States, Inc., Entergy Arkansas, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy Services, Inc., Entergy Technology Holding Company and Entergy Technology Company. For purposes of clarification, the court briefly considers the character and interrelationships of these corporations.

Entergy Corporation is a registered public utility holding company. Defs.' Mot. for Summ. J., IT 1 [Clerk's Docket No. 105]. As such, Entergy is subject to the PUBLIC UTILITY HOLDING COMPANIES ACT (PUHCA), codified at 15 U.S.C. § 79 et seq., which regulates the operation and activities of public utility holding companies.

Entergy Gulf States, Entergy Arkansas, Entergy Louisiana and Entergy Mississippi are wholly owned domestic retail electric subsidiaries of Entergy Corporation. Defs.' Mot. for Summ. J., H 2 [Clerk's Docket No. 105]. "Much of the utility industry consists of holding company arrangements in which the utility operating company is the subsidiary of a parent corporation." See Gen. Tel. Co. of the Southwest v. Pub. Util. Comm'n of Texas, 628 S.W.2d 832, 837 (Tex.App.-Austin 1982, writ refd n.r.e.). It is the operating companies which own the power line infrastructure, generating stations, administrative offices, control centers, and of particular importance to this case, the easements across private property on which the power lines are located. These utility operating companies are subject to regulatory control by the states in which they operate.

As an electric utility operating in the State of Texas, Entergy Gulf States is subject to the PUBLIC UTILITY REGULATORY ACT (PURA), codified at TEX. UTIL.CODE § 11.001 et seq. The Public Utilities Commission (PUC) has exclusive jurisdiction over the rates, operations and services provided by electric utilities operating in the State of Texas. Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 216 (Tex.2002); TEX. UTIL.CODE §§ 32.001(a), 36.001. PURA confers on the PUC the power to ensure that rates charged by electrical utilities operating in this state are "just and reasonable." TEX. UTIL.CODE § 36.003. In making this determination, the PUC considers transactions with affiliates of the regulated entity.

Entergy Services, Inc. is a wholly owned subsidiary of Entergy Corporation. Defs.' Mot. for Summ. J., 111 [Clerk's Docket No. 105]. Incorporated in the State of Delaware, Entergy Services provides general executive, advisory, administrative, accounting, legal, engineering, and other services primarily to the domestic utility subsidiaries of Entergy Corporation.

Entergy Technology Holding Company (ETHC) is a non-regulated, wholly owned subsidiary of Entergy Corporation. Defs.' Mot. for Summ. J., f 1 [Clerk's Docket No. 105]. ETHC was incorporated February 26, 1996 in the State of Delaware. ETHC's stated purpose for transacting business in Texas is as a stock holding company. During 1996, Entergy through ETHC first entered into several non-regulated telecommunication ventures. By 1997, ETHC was engaged in a variety of telecommunication and information-based enterprises that are exempt from regulation under PUHCA and PURA. According to Entergy Corporation's 1997 public filings:

ETHC has acquired security monitoring firms operating primarily in North and South Carolina, Alabama, Florida, Georgia, Mississippi, Louisiana, and Texas. ETHC participates with Hyperion Telecommunications in a joint venture that operates three Competitive Local Exchange Carriers (CLECs) in Little Rock, Arkansas; Jackson, Mississippi; and Baton Rouge, Louisiana. These CLECs provide long distance carrier access and local exchange services. ETHC also currently operates 1,500 miles of fiber optic cable in Arkansas, Louisiana, Mississippi and Texas that provide long haul telecommunications to wholesale telecommunication carriers. ETHC has made a limited investment in a personal communication services company which will be located in the southeastern United States.

* * *

Entergy has begun to commercialize the fiber optic telecommunications network that connects its facilities and supports its internal business needs. Entergy provides long haul fiber optic capacity to major telecommunications carriers, which in turn, market that service to third parties. The Telecommunications Act of 1996 permits a company such as Entergy to market such a service, subject to state and local regulatory approval .... [T]he law requires that such telecommunications subsidiaries file for exemption from regulation with the Federal Communications Commission, and that they not engage in transactions with utility affiliates within their holding company systems or acquire utility affiliates' rate-based property without state or local regulatory approval.

Entergy Technology Company (ETC) is a non-regulated, wholly owned subsidiary of Entergy Technology Holding Company. Defs.' Mot. for Summ. J., If 1 [Clerk's Docket No. 105]. Like ETHC, ETC was also incorporated on February 12, 1996 in the State of Delaware. It is ETC that actually markets the excess fiber optic capacity to third parties; enters into contracts with third party long distance carriers conveying leasehold rights to use Entergy Gulf States' easements across the plaintiffs' property; and to some extent, operates and maintains the fiber optic network. Defs.' Mot. for Summ. J., 115 [Clerk's Docket No. 105]; see also Rep. Pis.' Resp. to Def. `s Objections at 2, n. 2 [Clerk's Docket No. 188]. It is also ETC that accepts payment from long distance carriers for the right to use Entergy Gulf States' easements across plaintiffs' property. ETC then pays Entergy Gulf States a fee, which is apparently some amount less than the leasehold price. Defs.' Mot. Summ. J., 11115, 14 [Clerk's Docket No. 105]. In spite of the importance of the relationship between ETC and Entergy Gulf States, there is no evidence before the court of a contract which defines their...