Dover Chem. Corp. v. City of Dover

• Decision Date: 29 June 2022
• Docket Number: 2021 AP 07 0016
• Citation: 192 N.E.3d 559
• Parties: DOVER CHEMICAL CORPORATION, Plaintiff-Appellee v. City of DOVER, Ohio, et al., Defendants-Appellants
• Court: Ohio Court of Appeals

192 N.E.3d 559

DOVER CHEMICAL CORPORATION, Plaintiff-Appellee

v.City of DOVER, Ohio, et al., Defendants-Appellants

No. 2021 AP 07 0016

Court of Appeals of Ohio, Fifth District, Tuscarawas County.

DATE OF JUDGMENT ENTRY: June 29, 2022

SCOTT L. BRAUM, Scott L. Braum & Associates, Ltd., 812 East Franklin St., Suite C, Dayton, OH 45459, For Plaintiff-Appellee.

JOHN T. MCLANDRICH, FRANK H. SCIALDONE, TERENCE L. WILLIAMS, Mazanec, Raskin & Ryder Co., L.P.A., 100 Franklin's Row, 34305 Solon Road, Cleveland, OH 44139, For Defendants-Appellants.

JUDGES: Hon. Earle E. Wise, Jr., P.J., Hon. John W. Wise, J., Hon. Patricia A. Delaney, J.

OPINION

Delaney, J. {¶1} Defendants-Appellants City of Dover, Ohio and Douglas O'Meara appeal the July 9, 2021 judgment entry of the Tuscarawas County Court of Common Pleas.

FACTS AND PROCEDURAL HISTORY

Amended Complaint

{¶2} On March 22, 2021, Plaintiff-Appellee Dover Chemical Corporation ("Dover Chemical") filed an Amended Complaint for Preliminary Injunction, Declaratory Judgment, and Other Relief in the Tuscarawas County Court of Common Pleas, naming Defendant-Appellants City of Dover, Ohio ("the City") and City of Dover Law Director Douglas O'Meara ("the Law Director") as defendants. In its amended complaint, Dover Chemical raised 11 causes of action:

(1) Declaratory Judgment – Dover Chemical is free to leave Dover Light and Power;

(2) Declaratory Judgment – Constitutional Violations;

(3) Declaratory Judgment – Non-Contractual Penalties;

(4) Declaratory Judgment – Alleged Improper Gifts;

(5) Declaratory Judgment – Statute of Limitations;

(6) Defamation;

(7) Unjust Enrichment;

(8) Breach of Contract;

(9) Negligent Misrepresentation;

(10) Fraudulent Misrepresentation; and

(11) Preliminary and Permanent Injunction.

{¶3} In response to the amended complaint, Defendants-Appellants City of Dover, Ohio, and Douglas O'Meara filed a Motion to Dismiss on April 5, 2021. Dover Chemical filed a response on April 26, 2021. The City and Law Director filed a reply on May 10, 2021.

{¶4} The following facts are based on the amended complaint and related attachments.

Relationship between Dover Chemical and Dover Light and Power

{¶5} Dover Chemical is an Ohio corporation with its principal place of business located on Davis Road, Dover Township, Ohio in Tuscarawas County. At issue in this appeal is Dover Chemical's facility located on Davis Road, which is located outside the City of Dover limits.

{¶6} The City of Dover is a political subdivision located in Tuscarawas County. The Law Director is an elected position for the City of Dover. The City operates Dover Light and Power ("Dover Power"), a municipally owned public utility facility. Dover Power operates its own power generation facility, but also purchases and resells electricity to customers inside and outside of the City's territorial limits.

{¶7} In a June 1, 1976 letter to Dover Chemical, the City of Dover Superintendent of the Electric Field Division explained and confirmed a conversation concerning Dover Chemical's additional power supply request. (Appendix A, Amended Complaint, March 22, 2021). The City proposed in the letter that primary metering would be installed "on the first pole north of the corner" and that location would establish the point of service. The City agreed to construct an electrical line and install distribution transformers beyond the metering point and provide electrical services inside the fence line of Dover Chemical's Davis Road facility. The City, not Dover Chemical, would own the line and equipment and it would bill Dover Chemical for all metered power with no allowances for customer ownership or system losses beyond the meter. If Dover Chemical decided in the future to purchase the line and equipment beyond the meter, the selling price would be established at that time based on the appraised value of the line and equipment.

{¶8} From June 1, 1976, to the present, Dover Power charged Dover Chemical at a rate equivalent to the industrial rate set by ordinance for industrial customers of Dover Power located inside the City limits.

Proposed Reorganization of the Relationship

{¶9} On February 5, 2003, the City Mayor sent a letter to Dover Chemical regarding Dover Power's provision of electrical services to Dover Chemical. (Appendix B, Amended Complaint, March 22, 2021). The Mayor stated in the letter that the continuing practice of the City maintaining and upgrading the lines and equipment inside the Davis Road facility, past the primary metering pole, was not in accordance with the Electric Service Regulations established by the City, nor was it in the best interests for the safety concerns of the City personnel. On May 1, 2003, the City would turn over ownership of all electric facilities and equipment from the primary metering pole at Davis Street to Dover Chemical.

{¶10} Dover Chemical did not object to the terms of the February 5, 2003 letter and the electrical equipment from the primary metering pole became the property of Dover Chemical on May 1, 2003.

2019 Electric Rate Renegotiation

{¶11} In 2019, Dover Chemical approached the City to negotiate a reduction in its electrical rate. Dover Chemical also approached American Electric Power to determine its options for providing power to the facility if Dover Chemical terminated its relationship with Dover Power. The Mayor submitted a proposal to Dover Chemical with three options for an electrical rate change: (1) if Dover Chemical agreed to annex into the City, the electrical rate would be .08 + PCA + KWH tax (stay at 15 KV and served by one meter), (2) .085 + PCA + KWH tax (stay at 15 KV served by one meter), or (3) 69 KV Rate if Dover Chemical builds a substation and pays for the 6 spans of wire from the north sub to their property, with a rate of .07 to .072 + PCA + KWH tax to be given to only Dover Chemical (served by one meter at 69 KV power to substation). (Appendix C, Amended Complaint, March 22, 2021). At the time of the proposal, Dover Chemical was willing to accept the second option.

{¶12} On May 22, 2020, the Law Director sent an email to Dover Chemical with the subject line, "notice for non-destruction of records." (Appendix E, Amended Complaint, March 22, 2021). The Law Director's email stated, "Attached is the notice to restrain and not destroy records."

{¶13} Before Dover Chemical communicated its response to the Mayor's proposal, it received an email from the Law Director on May 24, 2020, which informed Dover Chemical that Ordinance 34-14, enacted by the City Council, governs the electricity rates for Dover Chemical. The Law Director stated in the email that only the City Council had the authority to establish or adjust electricity rates for Dover Power, not the Mayor. The Law Director stated the Mayor had no authority to offer the "gift" of City services, materials, equipment, or personnel and would be considered illegal. (Appendix D, Amended Complaint, March 22, 2021).

May 2020 City Council Meeting

{¶14} On May 26, 2020, the City Council held a special meeting called by the Mayor for the purpose of discussing the rate classes. At the special meeting, the Law Director requested two committee assignments, recorded in the Special Meeting Minutes. (Appendix F, Amended Complaint, March 22, 2021). The minutes state:

Law Director O'Meara requested two assignments: (1) a request for a committee assignment that any outside the city industrial customer that received any services, equipment, manpower, or materials from the Dover Light and Power without paying in full for those services, materials, manpower, and material [sic] have a surcharge assessed and collected on that customer's bill above the rates assessed by ordinance 34-14 in an amount up to 50% of the customer's bill until that customer can demonstrate and prove by clear and convincing evidence that they have been repaid the people in the city of Dover in full for all improper or illegal services, material, equipment, or manpower received from the date first provided until repaid in full, (2) a request for a committee assignment to consider applying an up to 20% surcharge to electric rates for electric consumers (industrial, but perhaps commercial, or residential) of the city of Dover who receive that service at locations outside the corporate limits of the city of Dover, above the rates established in ordinance 34-14.

{¶15} The City discovered that after 2003, it had continued to maintain the lines and equipment inside the Dover Chemical Davis Road facility, past the primary metering pole. The City Council discussed the Mayor's rate proposals to Dover Chemical. The City Council ultimately voted to table the proposal presented to Dover Chemical. The Law Director's request for assignments were assigned to "committee of the whole."

Draft Version of Emergency Ordinance 29-20

{¶16} The Law Director prepared a draft ordinance entitled, "Emergency Ordinance 29-20." (Appendix G, March 22, 2021, Amended Complaint). The draft ordinance stated in pertinent part to this appeal:

* * *

Whereas, as a primary metered customer, [Dover Chemical] is required to maintain all equipment and services beyond the meter; and

Whereas, [Dover Power] has been providing power to the Dover Chemical Corporation ("DCC") since 1976 in accordance with rates established by City ordinance; and

Whereas, [Dover Chemical] has been receiving services that were not invoiced and billed in accordance with the City regulations; and

Whereas, instead, the City of Dover has provided maintenance, service, equipment, and materials beyond the primary meter without cost to [Dover Chemical]; and

Whereas, [Dover Chemical] was informed in or around September, 2019 that no further service would be performed by [Dover Power] or the City of Dover's electric field division beyond the meter or contrary to the regulations mandated by Ordinance 111-75; and

Whereas, partial charges have been assessed to [Dover Chemical] after September 2019 to recoup some but not the full cost of services, materials,

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