Dixie Elec. Co-op. v. Citizens of State of Ala.

• Decision Date: 01 May 1986
• Docket Number: 85-7368,Nos. 84-7765,s. 84-7765
• Citation: Dixie Elec. Co-op. v. Citizens of State of Ala., 789 F.2d 852 (11th Cir. 1986)
• Parties: DIXIE ELECTRIC COOPERATIVE, et al., Plaintiffs-Appellants, Alabama Power Company, Defendant-Counterclaim Plaintiff, Appellant, v. The CITIZENS OF the STATE OF ALABAMA, et al., Defendants-Counterclaim Plaintiffs, Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 852

789 F.2d 852

DIXIE ELECTRIC COOPERATIVE, et al., Plaintiffs-Appellants Alabama Power Company, Defendant-Counterclaim Plaintiff, Appellant, v. The CITIZENS OF the STATE OF ALABAMA, et al Defendants-Counterclaim Plaintiffs, Appellees.

Nos. 84-7765, 85-7368.

United States Court of Appeals Eleventh Circuit.

May 1, 1986.

Rehearing and Rehearing En Banc Denied June 9, 1986.

Robert A. Huffaker, Rushton, Stakely, Johnston & Garrett, J. Theodore Jackson, Montgomery, Ala., for Dixie Elec.

T.W. Thagard, Montgomery, Ala., for Alabama Power Co., in No. 84-7765.

Craig S. Dillard, Talladega, Ala., for Coosa Valley Elec. Co-op.

Herbert S. Sanger, Jr., Gen. Counsel, James E. Fox, Assoc. Gen. Counsel, Justin M. Schwamm Sr., Asst. Gen. Counsel, Robert C. Glinski, T.V.A. Knoxville, Tenn., for T.V.A. in No. 84-7765.

Algert S. Agricola, Asst. Atty. Gen., Montgomery, Ala., for Citizens.

Robert D. Segall, Copeland, Franco, Screws & Gill, Montgomery, Ala., for Cities.

George C. Douglas, Jr., Andalusia, Ala., for AL Elec. Co-op., Inc.

Roger L. Bates, Barnett, Tingle, Noble & Sexton, Birmingham, Ala., for City of Tarrant City.

Robert D. Thorington, W. Stanley Gregory & Wendell Cauley, Montgomery, Ala., for other original defendants counterclaimed against T.V.A. in No. 84-7765.

W. Sidney Fuller, Andalusia, Ala., for Andalusia, Ala.

Jerry Batts, Sherrill & Batts, Athens, Ala., for Athens, Ala.

Arnold Teks, City of Florence, Florence, Ala., for Florence, Ala.

Fred D. Gray, Gray, Langford, Sapp, Davis & McGowan, Tuskegee, Ala., for Utilities Bd. of the City of Tuskegee.

Drayton N. Hamilton, Montgomery, Ala., for League of Municipalities.

Balch & Bingham, Charles M. Crook, Birmingham, Ala., for Alabama Power Co., in No. 85-7368.

Robert D. Thorington, Robert D. Segall, Wendell Cauley, Montgomery, Ala., for Municipal Utilities Bd. of Albertville, et al. and Cities in No. 85-7368.

Herbert S. Sanger, Jr., Gen. Counsel, T.V.A., Justin M. Schwamm, Sr., Asst. Gen. Co., Knoxville, Tenn., for T.V.A. in No. 85-7368.

Appeals from the United States District Court for the Middle District of Alabama.

Before TJOFLAT and KRAVITCH, Circuit Judges, and DUMBAULD ^*, Senior District Judge.

TJOFLAT, Circuit Judge:

These consolidated appeals are from orders of the district court declaring invalid and enjoining the enforcement of a 1984 and a 1985 act of the Alabama legislature, both of which regulated service territories of electric suppliers. We have concluded that the case was improperly removed to the district court. Because the district court would not have had jurisdiction over the case had it originally been filed there, we vacate the district court's orders and remand the case with instructions that it be dismissed.

I.

In 1984, a regular session of the Alabama legislature enacted Act No. 84-206 ¹ which established service territories for electric suppliers within the state. The Act was intended to prevent and eliminate the duplication of electric distribution facilities used to furnish retail electric service. It sought to accomplish these goals in several ways; it allocated essentially exclusive service territories to electric suppliers, gave a primary electric supplier within a municipality the option to purchase the distribution facilities of any secondary electric suppliers within the municipality, ² specified how the terms of such a purchase would be determined, set up a mechanism for resolving disputes over the terms of such purchases, and provided a private right of action to electric suppliers to enforce the Act's provisions.

The statute also established a state judicial review process to "validate" the provisions of the Act. Any secondary electric supplier whose facilities were subject to purchase was authorized to file a complaint in the Circuit Court of Montgomery County, Alabama, to "seek judicial determination of the legality and validity of such purchase of facilities ... and all other questions of the legality or validity of the provisions of [the Act]." Ala.Code Sec. 37-14-11 (Supp.1985). Citizens of the state, the attorney general, and all electric suppliers within the state would be given actual or constructive notice of the pending complaint and an opportunity to participate in the proceedings. The Act sought to foreclose future litigation by providing that the failure to participate in the initial "validation" proceeding would be deemed a waiver of any right to challenge the validity of any of the provisions of the Act or any transaction made or proposed pursuant to the Act. Id. Sec. 37-14-12(h). It further provided that no action could be commenced challenging the legality or validity of the provisions of the Act where the legality or validity had been determined in any prior proceeding. Id. Sec. 37-14-14.

On May 1, 1984, a number of electric cooperatives ³ filed a complaint in the Circuit Court for Montgomery County, Alabama, to obtain a judicial determination of the legality and validity of the Act. ⁴ Named as defendants were the citizens of Alabama, the Alabama Power Company, and thirty-six municipalities that own and operate electric distribution facilities. The complaint was subsequently amended to allege that Wiregrass Electric Cooperative, Inc., one of the plaintiff cooperatives, had received notice, pursuant to the Act, that Alabama Power Company intended to exercise its option to purchase Wiregrass' distribution facilities.

The City of Dothan, one of the defendants, in its answer opposed the relief sought by the cooperatives and alleged that the Act violated numerous provisions of the state and federal constitutions. The City of Dothan also filed a counterclaim, asking the court to declare the Act illegal and unconstitutional and enjoin the implementation and enforcement of its provisions. The City named the Tennessee Valley Authority (TVA) as an "additional counterclaim defendant," alleging that TVA was an "electric supplier" within the contemplation of the Act and that the Act violated the United States Constitution in its attempt to regulate TVA, an agency of the federal government. ⁵ Thirty of the municipal defendants ultimately adopted the response and counterclaim filed by the City of Dothan and joined in its request to declare the Act illegal. Alabama Power Company and the remaining municipal defendants, although named defendants in the case, agreed with the plaintiff cooperatives' position and asked the court to grant the relief the cooperatives sought.

TVA, after being joined as a counterclaim defendant, filed a petition in the United States District Court for the Middle District of Alabama, pursuant to 28 U.S.C. Sec. 1441(c) (1982), ⁶ for removal of the action to that court. TVA's petition stated that the counterclaim asserted against it arose under the supremacy and commerce clauses of the Constitution, as well as the statute creating TVA, see 16 U.S.C. Secs. 831-831dd (1982). Allegedly, the district court would therefore have had original jurisdiction over the counterclaim, pursuant to 28 U.S.C. Secs. 1331, 1337 (1982), thus allowing for removal pursuant to 28 U.S.C. Sec. 1441(c) (1982). ⁷

On July 20, 1984, the municipal defendants moved the court for summary judgment, pursuant to Fed.R.Civ.P. 56, alleging that there were no genuine issues of material fact and that they were entitled to judgment as a matter of law on four of the grounds upon which they alleged the Act was illegal. On July 31, TVA moved the court to dismiss the claim against it, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim or, in the alternative, to grant summary judgment in its favor. On August 23, the cooperatives moved the court to grant summary judgment in their favor and declare the Act constitutional. On September 13, the municipal defendants filed a second motion for summary judgment, raising the remaining grounds, not contained in their first motion, upon which they alleged the Act was illegal. The court heard argument from counsel on October 25, on the pending motions for summary judgment.

On November 2, the district court issued an opinion addressing the various motions for summary judgment. The court held that the Act was contrary to law in four respects: (1) the Act purported to regulate the activities of TVA in contravention of the supremacy clause of the Constitution; (2) the Act violated Ala.Const. art. XII, Sec. 220, governing the right of municipalities to consent to the use of their streets; (3) the "validation" proceeding authorized by the Act sought to require courts to adjudicate hypothetical controversies in violation of the Alabama and United States Constitutions; and (4) the Act unlawfully impaired existing contractual obligations in violation of U.S. Const. art. I, Sec. 10, and Ala.Const. art. I, Sec. 22 and art. IV, Sec. 95. ⁸ Accordingly, the court issued an order granting TVA's motion for summary judgment and the municipal defendants' first motion for summary judgment ⁹ and denying the cooperatives' motion for summary judgment. The court permanently enjoined the "implementation and enforcement of the provisions of the Act" and enjoined all parties from "implementing or otherwise enforcing any of the provisions of the Act." The cooperatives and Alabama Power Company appealed from the district court's order. ¹⁰

In May 1985, while this appeal was pending, a regular session of the Alabama legislature enacted Act No. 85-645 (the 1985 Act). ¹¹ The 1985 Act, like the 1984 Act, was intended to eliminate duplication of electric distribution facilities. It sought to achieve that result through many of the same mechanisms employed in the 1984 Act. The legislature, however, responding to the district court's order declaring the 1984 Act unconstitutional, modified the statutory scheme in several respects, hoping to alleviate the four constitutional problems identified in the district court's opinion. ¹²

Immediately following the effective date of the 1985 Act,...