Cullman Elec. Coop. v. City of Cullman

• Decision Date: 17 December 2021
• Docket Number: Civil Action No. 5:21-cv-01421-CLS
• Citation: 576 F.Supp.3d 942
• Parties: CULLMAN ELECTRIC COOPERATIVE, Plaintiff, v. CITY OF CULLMAN, ALABAMA, Defendant.
• Court: U.S. District Court — Northern District of Alabama

576 F.Supp.3d 942

CULLMAN ELECTRIC COOPERATIVE, Plaintiff,

v.CITY OF CULLMAN, ALABAMA, Defendant.

Civil Action No. 5:21-cv-01421-CLS

United States District Court, N.D. Alabama, Northeastern Division.

Signed December 17, 2021

Christopher Lea Lockwood, Richard R. Raleigh, Jr., Wilmer & Lee PA, Huntsville, AL, for Plaintiff.

David J. Canupp, George W. Royer, Jr., Andrew Thomas Toler, Lanier Ford Shaver & Payne, P.C., Huntsville, AL, Roy W. Williams, Jr., Jackson & Williams, Cullman, AL, for Defendant.

MEMORANDUM OF OPINION

C. Lynwood Smith, Senior United States District Judge

The Cullman Electric Cooperative ("Cullman Electric") contends that an ordinance enacted by the City of Cullman, Alabama ("the City"), on October 11, 2021, which will impose a 3% "license fee" (tax) on the gross receipts of Cullman Electric from the sale or distribution of electricity within the City's corporate limits,¹ is unlawful under Section 13 of the Tennessee Valley Authority Act of 1933, 16 U.S.C. § 831l .

The Tennessee Valley Authority ("TVA") is a public corporation created by Congress in 1933 for "the purpose of maintaining and operating the properties now owned by the United States in the vicinity of Muscle Shoals, Alabama, in the interest of the National defense and for agricultural and industrial development, and to improve navigation in the Tennessee River and to control the destructive flood waters in the Tennessee River and Mississippi River Basins ...." 16 U.S.C. § 831. Cullman Electric relies upon the final sentence of the first paragraph of Section 13 of the TVA Act, which provides that: "The payments herein authorized are in lieu of taxation, and [TVA], its property, franchises and income, are expressly exempted from taxation in any manner or form by any State, county, municipality, or any subdivision or district thereof." 16 U.S.C. § 831l (alteration and emphasis supplied).² Cullman Electric contends that it is a TVA "franchise" and, for that reason, exempt from local taxation pursuant to § 831l .

Essentially, however, Cullman Electric's complaint asks this court to reaffirm a judgment entered more than thirty years ago by another judge of this court in a suit between these same parties — i.e., The Cullman Electric Cooperative v. City of Cullman, Alabama , Civil Action No. CV-91-N-665-NE, 1991 WL 639132 (N.D. Ala. Aug. 30, 1991) (Nelson, J.) — and declare that the City's October 11, 2021 ordinance "is prohibited under the 1991 Declaratory Judgment." Doc. no. 1 (Complaint), at 5.

The City moved under Federal Rule of Civil Procedure 12(b)(1) to dismiss Cullman Electric's complaint, arguing that the facts stated in that pleading do not establish subject matter jurisdiction. Doc. no. 6 (Motion to Dismiss).³ Challenges to a court's jurisdiction come in two forms: factual and facial attacks. See, e.g. , Kennedy v. Floridian Hotel, Inc. , 998 F.3d 1221, 1230 (11th Cir. 2021). A factual attack challenges the very facts giving rise to subject matter jurisdiction, whereas a facial challenge contends that the facts stated in the plaintiff's complaint do not establish subject matter jurisdiction. Barnett v. Okeechobee Hospital , 283 F.3d 1232, 1237 (11th Cir. 2002).

When reviewing, as here, a facial challenge to jurisdiction, the court considers the facts alleged in the plaintiff's complaint, as well as any documents attached thereto, see , e.g. , Financial Security Assurance, Inc. v. Stephens, Inc. , 500 F.3d 1276, 1284 (11th Cir. 2007),⁴ and presumes that those facts are true. See, e.g., Carmichael v. Kellogg, Brown & Root Services, Inc. , 572 F.3d 1271, 1279 (11th Cir. 2009). In contrast, when reviewing a factual challenge to the court's subject matter jurisdiction, a court makes no such presumption. Lawrence v. Dunbar , 919 F.2d 1525, 1529 (11th Cir. 1990) (per curiam ).

Accordingly, the following section is a summary of the facts alleged in Cullman Electric's complaint, as well as those recited in the Declaratory Judgment and accompanying Memorandum of Opinion entered by Judge Edwin L. Nelson on August 30, 1991, in the previous action between these same parties, copies of which were attached to and incorporated into Cullman Electric's complaint. ( NOTE WELL : For convenience, citations to Judge Nelson's prior opinion will be referred to as the "1991 Judgment .")

I. JURISDICTIONAL FACTS

"Cullman Electric is an Alabama not-for-profit membership cooperative organized and operating under the Alabama Electric Cooperative Act, Ala. Code §§ 37-6-1 to 37-6-29." Doc. no. 1 (Complaint), ¶ 3. It distributes electricity to more than 36,000 members in Cullman, Winston, Morgan, and Lawrence counties. All power distributed by Cullman Electric is acquired from TVA, which sets the rates that Cullman Electric may charge its members for electricity, and

exercises control over, inter alia , the uses that Cullman Electric may make of the revenue derived from power distribution, the rules and regulations applied by Cullman Electric to its members, the method of account[ing] for the finances of Cullman Electric, and the standards as to [the] quality of service provided by Cullman Electric.

Id. , ¶ 7 (alterations supplied).

On August 10, 1970, more than fifty-one years ago, the City of Cullman added two subsections to an existing tax ordinance. The first (Subsection 248 to Ordinance No. 493 ) imposed a 3% tax on Cullman Electric's gross receipts from the distribution of electric power to members within the City's municipal limits, while the second (Subsection 249 to the same Ordinance) imposed a 1½% tax on the gross receipts from Cullman Electric's distribution of power to members residing outside the City limits, but within its "police jurisdiction." 1991 Judgment, at ECF 10; id . at ECF 12, ¶ 8. When Cullman Electric refused to pay the taxes:

12. The City filed a civil action against Cullman Electric in 1974, seeking a declaratory judgment that the police jurisdiction tax was valid and lawful and a valid, lawful exercise of the City's police power pursuant to Alabama Code, Title 37, Section 733 (1940). The state court granted summary judgment for the City, declaring the police jurisdiction tax to be "valid and lawful under the provisions of Title 37, section 733, Code of Alabama, 1940, as amended." [Affidavit of Steve Foshee], Exhibit B. Subsequently, the parties agreed that the City would not collect the police jurisdiction tax for the period October 16, 1970 through October 16, 1985. Id. , Exhibit B.

13. On January 23, 1989, the City filed a civil action in the Circuit Court of Cullman County, Alabama, asking for a declaratory judgment that the city tax is valid and lawful under Ala.Code § 11–15–90 (1975), and a "reaffirmation" that the police jurisdiction tax is valid under Ala.Code § 11–15–91 (1975). Id. ...

Id . at ECF 12-13, ¶¶ 12 & 13 (alteration supplied).

On March 26, 1991, while the 1989 action referenced above still was pending in state court, Cullman Electric filed suit against the City in this court, seeking a judgment declaring that the 3% city and 1½% police-jurisdiction taxes violated Section 13 of the TVA Act, 16 U.S.C. § 831l . Doc. no. 1 (Complaint) ¶ 10. The case was assigned to Judge Edwin L. Nelson.⁵ Cullman Electric subsequently moved for summary judgment.⁶

Significantly, as Judge Nelson observed in the Memorandum of Opinion entered in support of his 1991 Judgment, the City repeatedly failed to submit a meaningful response to Cullman Electric's motion.

Defendant was given an opportunity to respond to the motion, but instead of responding, defendant filed a "motion in opposition" to plaintiff's motion for summary judgment shortly after the date its response was due, stating that it would submit a brief in support of the motion later that week. When the brief was not forthcoming, the court gave the defendant an additional opportunity to submit a response, but the defendant again failed to make any written submission. The defendant's second opportunity to respond passed by over one month ago, and the court has not received any response. The court considers the motion to be ripe and ready for submission.

1991 Judgment, at ECF 13.

In the absence of a meaningful response from the City, Judge Nelson granted Cullman Electric's motion for summary judgment on August 30, 1991, and entered a "Final Judgment" declaring that the City's taxes on Cullman Electric's gross receipts were prohibited by Section 13 of the TVA Act. See id. at ECF 8-9.

Judge Nelson's Memorandum of Opinion did not provide a meaningful discussion of the basis for the court's subject matter jurisdiction. Instead, in a single sentence, and with no substantive analysis, Judge Nelson simply noted: "This is an action for declaratory judgment involving a federal question under the Tennessee Valley Authority Act of 1933, 16 U.S.C. § 831, et seq. ... and the United States Constitution. 28 U.S.C. § 2201(a), 28 U.S.C. § 1331, 16 U.S.C. § 831 et seq. " 1991 Judgment, at ECF 10 (alteration and ellipsis supplied). Judge Nelson then proceeded directly to the merits and concluded that "non-profit distributors of TVA power, such as Cullman Electric, are TVA franchises and, therefore, exempt from local taxation pursuant to Section 831l ." 1991 Judgment, at ECF 14 (citing Courtland v. Town of North Courtland , No. 90–L–1346–NE (N.D. Ala. Dec. 28, 1990) (Lynne, J.); City of Sheffield v. Town of Cherokee , No. 89–AR–5073–NW (N.D. Ala. Oct. 12, 1989) (Acker, J.)); see also doc. no. 1 (Complaint), ¶ 11 ("On August 30, 1991, this Court issued a Declaratory Judgment finding that the City's attempt to tax the gross receipts of Cullman Electric is prohibited under the TVA Act.").

The City did not perfect an appeal from Judge Nelson's judgment.⁷ For that reason, Cullman Electric contends that

the City remains bound by the 1991 Declaratory Judgment. Additionally, the 1991 Declaratory Judgment carries the effect of res judicata and issue preclusion between Cullman Electric and the City of Cullman."

13. On or

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