Davis v. White
| Decision Date | 14 August 2020 |
| Docket Number | 7:17-cv-01533-LSC,7:17-cv-01534-LSC,7:17-cv-01535-LSC |
| Parties | LINDSAY DAVIS, et al., Plaintiffs, v. J. MICHAEL WHITE, et al., Defendants NICOLE SLONE, et al., Plaintiffs, v. J. MICHAEL WHITE, et al., Defendants MONICA LAWRENCE, et al., Plaintiffs, v. J. MICHAEL WHITE, et al., Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
Plaintiffs, Lindsay Davis and Benjamin Davis (collectively "Davis Plaintiffs"), Nicole Slone and Jonathan Slone (collectively "Slone Plaintiffs"), and Monica Lawrence and John Lawrence, Jr. (collectively "Lawrence Plaintiffs"), each bring separate actions asserting, among other things, procedural due process claims pursuant to 42 U.S.C. § 1983 against the following defendants: J. Michael White ("White"), Eco-Preservation Services, LLC ("Eco"), Serma Holdings, LLC ("Serma"), Aketa Management Group ("Aketa"), and Knobloch, Inc. ("Knobloch") (collectively "White Defendants"); The Town of Lake View, Alabama ("Lake View"); and Government Utility Services Corporation of Lake View ("the GUSC"). (Doc. 33 in No. 7:17-cv-01533-LSC, Doc. 48 in No. 7:17-cv-01534-LSC, and Doc. 44 in No. 7:17-cv-01535-LSC.)1 Slone Plaintiffs and Lawrence Plaintiffs further assert several of the same federal and state-law claims against Defendants Michael Walraven ("Walraven") and EOS Utility Services, LLC ("EOS") (collectively "EOS Defendants"). (Doc. 48 in Slone Case and Doc. 44 in Lawrence Case.)
Before the Court are the GUSC's motions for summary judgment (Doc. 113 in Davis Case, Doc. 139 in Slone Case, and Doc. 141 in Lawrence Case), White Defendants' motions for partial summary judgment (Doc. 114 in Davis Case, Doc. 140 in Slone Case, and Doc. 142 in Lawrence Case), Lake View's motions for summary judgment (Doc. 116 in Davis Case, Doc. 141 in Slone Case, and Doc. 143 in Lawrence Case), and EOS Defendants' motions for summary judgment (Doc. 144 in Slone Case and Doc. 146 in Lawrence Case). For the reasons explained below, Lake View's motions are due to be granted, the GUSC's motions are due to be denied, and the other Defendants' various motions are due to be granted in part and denied in part.
The Town of Lake View, Alabama was incorporated in 1998. (Doc. 119-9 at 5 in Davis Case.) Within a year, Lakeview began taking steps to create a sewer systemthat would serve its residents. First, it authorized the incorporation of the GUSC, pursuant to Alabama Code § 11-97-3. (Doc. 33-1 at 5 in Davis Case.)3 Second, representatives of Lake View approached White about operating the planned sewer system. (Doc. 119-12 at 14-15 in Davis Case.)
White sits at the center of a complicated web of private entities that have come to form the bedrock of Lake View's sewer system. For example, he owns or is at least a member of Serma and Knobloch. (Id. at 10.) Serma is a holding company that owns or is a member of Eco. (Id. at 29.) Eco owns a wastewater treatment plant that serves subdivisions developed by Serma, by chemically treating wastewater through a pipeline into Mud Creek. (Id. at 39.) Eco does business under the name "Tannehill Sewer System." (Doc. 113-12 at 2 in Davis Case.) Knobloch holds the permits necessary for Eco's facility to operate in compliance with federal environmental regulations. (Doc. 119-12 at 39 in Davis Case.) Aketa is an "accounting designation" used by another company, Builder 1. (Id. at 75.) Builder 1 is itself owned by Serma. (Id. at 33.) Together, White and these private entities (excluding Builder 1) constitute White Defendants.
Though not as closely tied to White's web of entities, EOS Defendants also participate in the operation of Lake View's sewer system. EOS operates and maintains Eco's sewer treatment plant and collection system. (Doc. 119-11 at 10 in Davis Case.) Walraven serves as EOS's Operations Manager. (Id. at 9.)
On June 22, 1999, Lake View adopted an ordinance granting the GUSC and Serma a non-exclusive franchise to use Lake View's public ways and other public places to construct and maintain a wastewater collection system that would be connected to Eco's wastewater treatment plant. (Doc. 33-5 at 2-7 in Davis Case.) On July 13, 1999, Lake View and the GUSC entered into an agreement wherein Lake View transferred its planned sanitary sewer system to the GUSC. (Doc. 119-12 at 128 in Davis Case.) That same day, the GUSC and Serma entered into an agreement in which the GUSC agreed to sell and let its rights in the sewer system to Serma, which agreed to "purchase and lease them." (Id. at 146.) Under the 1999 purchase agreement between Lake View and the GUSC, the GUSC promised to "use all its best efforts to collect from its customers all accounts past due" for the sewer system. (Doc. 119-12 at 140 in Davis Case.) The agreement further declared that once the GUSC "has exhausted all lawful means available . . . to collect any accounts due" to the GUSC, those accounts would become the property of Lake View. (Id.) Lake View then certified that, once it collected those past due accounts, it would "pay over tothe [GUSC] a sum equal to [90%] of the past due accounts within [30] days from such time as such accounts shall be collected." (Id. at 140-41.) The agreement between the GUSC and Serma created a substantially similar obligation for the GUSC to "use its best efforts and whatever means allowed by law" to collect any fees deemed uncollectable by Serma and then to reimburse Serma for 90% of the same. (See doc. 119-13 at 7 in Davis Case.)
Over time, the GUSC has become significantly indebted to White Defendants. The GUSC does not collect sewer service revenues and therefore does not generate its own income. (Doc. 113-9 at 20 in Davis Case.) The GUSC's only creditors are Serma or White. (Id. at 20-21.) As of December 30, 2015, the GUSC was in debt to Serma for $2,303,843.02. (Doc. 123-27 at 10 in Davis Case.) To avoid defaulting on its loans from White Defendants, the GUSC has entered into various forbearance agreements with Serma wherein the GUSC has agreed to take on certain obligations. For example, the GUSC board unanimously adopted the Second Forbearance Agreement on October 24, 2012. (Doc. 123-23 at 4.) Pursuant to that agreement, the GUSC promised to authorize its chairman to execute a "Deed in Lieu of foreclosure" in favor of Serma that would transfer all of the GUSC's assets to Serma. (Doc. 113-11 at 9 in Davis Case.) The GUSC also promised to obtain a resolution from Lake View "to designate such individuals, subject to the approval of Lender, toserve as members of [the GUSC's] Board of Directors for those positions that may expire within Ninety (90) days from the date of this Agreement." (Id.) Notably, the GUSC lacks the authority to do anything more than "ask" that Lake View adopt such a resolution. (Doc. 113-9 at 66 in Davis Case.)
The GUSC's debt situation continued to deteriorate, and on December 30, 2015, the GUSC board unanimously adopted the Fourth Forbearance Agreement between itself and Serma. (Doc. 123-27 at 4 in Davis Case.) Under the agreement, the GUSC promised to adopt a resolution acknowledging that Serma had the "sole and exclusive authority to establish Wastewater Standards, Rules, Regulations, Policies and Procedures for the operation of the sanitary sewer system, as set forth in the Utility Service Agreements" ("Wastewater Standards") with users. (Id. at 12.) The agreement made no mention of the GUSC's adoption of such standards. (See id.) However, at the same meeting on December 30, 2015, the GUSC also unanimously approved a resolution adopting White Defendants' Wastewater Standards "as they exist, and as they may be changed or amended from time to time by the Utility Service Provider." (Id. at 5, 17.) At that time, and through the present, Nancy Ray has served as the chairman of the GUSC's board. (Doc. 113-9 at 14 in Davis Case.)
The operative Wastewater Standards authored by White Defendants and unanimously adopted by the GUSC board became effective on February 1, 2016. (Doc. 113-12 at 2 in Davis Case.) Under these standards, Eco, the service provider, "may terminate sanitary sewer service and/or disconnect a User from the Tannehill Sewer System, and/or cut-off the supply of water to the User when . . . [t]he User has . . . failed to pay monthly billing charges when due [or] failed to pay any fee, surcharge, penalty or assessment when due." (Id. at 82.) The Wastewater Standards create a right of entry onto a user's property for Eco's agents, "upon presentation of his/her credentials to any User . . . within thirty (30) minutes of such presentation," for the purpose of suspending services. (Id. at 84.) The Wastewater Standards also provide that an "unauthorized discharge of waste, wastewater or storm drainage" into the sewer system will result in a penalty of $5,000 per day. (Id. at 99.) They further state that tampering with "a lockout device placed on a water cut-off valve" will result in a penalty as established in the "Sewer Rate Schedule," as well as criminal prosecution under § 13A-8-10 and/or § 13A-8-23 of the Code of Alabama. (Id. at 100.) In general, the Wastewater Standards create a host of potentialfees and penalties, and they do not appear to provide any opportunity for users to challenge said fees or penalties.4
On May 31, 2017, White sent an email with the subject heading "Past Due Sewer Accounts - Lake View Reimbursement" to both Nancy Ray, GUSC chairman and councilwoman for Lake View, and Lake View Mayor Paul Calhoun. (Doc. 123-43 at 2 in Davis Case.) In the email, White noted the obligations of Lake View and the GUSC to reimburse White Defendants for any uncollectable past due amounts from Tannehill Sewer System users. (Id.) He attached a list of past due amounts, which included the property of Slone Plaintiffs, and implied that he would be demanding reimbursement from Lake View and the GUSC. (See id.) Nancy Ray emailed a response that same day, noting...
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