Newton v. Southeast Alabama Gas Dist.

• Citation: 708 F. Supp. 1254
• Decision Date: 13 March 1989
• Docket Number: Civ. A. No. 88-D-1198-N.
• Parties: Dennis Ray NEWTON, Plaintiff, v. SOUTHEAST ALABAMA GAS DISTRICT, a corporation, and James H. Smith, Defendants.
• Court: U.S. District Court — Middle District of Alabama

708 F. Supp. 1254

Dennis Ray NEWTON, Plaintiff, v. SOUTHEAST ALABAMA GAS DISTRICT, a corporation, and James H. Smith, Defendants.

Civ. A. No. 88-D-1198-N.

United States District Court, M.D. Alabama, N.D.

March 13, 1989.

Frank J. Tipler, Tipler & Tipler, Andalusia, Ala., Frank W. Riggs, Riggs, NeSmith & Halstrom, P.A., Montgomery, Ala., for plaintiff.

Robert D. Segall, J. Fairley McDonald, III, Copeland, Franco, Screws & Gill, Montgomery, Ala., for defendants.

MEMORANDUM OPINION

DUBINA, District Judge.

There is presently pending in this cause a motion to dismiss, filed herein by the defendants on January 5, 1989. In support of their motion, the defendants submitted a memorandum brief. On January 27, 1989, the plaintiff filed a response to the defendants' motion to dismiss and submitted a memorandum brief and other documentary evidence. For the reasons which follow, this court is of the opinion that the defendants' motion is due to be denied.

I. INTRODUCTION

The plaintiff in this case, Dennis Ray Newton ("Newton"), instituted this action under the Civil Rights Act of 1871, as amended, 42 U.S.C. § 1983, to obtain redress for what he characterizes as a deprivation of rights secured to him by the first amendment to the United States Constitution, made applicable to the states through the due process clause of the fourteenth amendment.

According to the allegations of the complaint, Newton had been employed for approximately twelve years as an accountant with the defendant Southeast Alabama Gas District ("the SAGD"), a public corporation providing gas distribution services to a number of Alabama municipalities. On or about July 1, 1988, Newton was discharged from his position by the defendant James H. Smith ("Smith"), the "chief executive officer" of the SAGD. Newton avers that the sole basis for his termination was his expression to officials of the SAGD, including Smith, of his concerns and disapproval regarding such matters as the concealment of refunds purportedly due to certain of the SAGD's industrial customers; the wasting of SAGD's funds on elaborate and expensive travel arrangements for, among others, Board members and their families; and the loss of approximately $40,000.00 in interest as a result of the SAGD's allegedly irregular full advance payment for a pipeline construction project. Given these circumstances, Newton contends that his discharge was wrongful and in willful violation of his right to freedom of speech as guaranteed by the first and fourteenth amendments. Newton seeks an award of damages, equitable relief in the form of reinstatement to his former position, and an award of attorney's fees and costs.

The defendants' motion to dismiss is premised on two grounds. They are as follows: (1) the complaint fails to state a claim against the defendants upon which relief can be granted since neither defendant engaged in "state action" or acted "under color of state law" with reference to Newton; and (2) the court lacks jurisdiction over the subject matter under 28 U.S. C. § 1343(a)(3), the jurisdictional counterpart to 42 U.S.C. § 1983.

II. FACTS

It is undisputed between the parties that the SAGD is a "public corporation" organized under the statutory scheme created by 1951 Alabama Act No. 762, now codified at § 11-50-390 et seq., Code of Alabama (1975), as amended. Section 11-50-391 provides, in pertinent part, that:

any two or more municipalities are hereby empowered and authorized to cause to be organized and incorporated a gas district as a public corporation with all the power and authority provided in this article for the purpose of securing for such municipalities a supply of natural or artificial gas and for the purpose of transporting gas and for the purpose of the local distribution and sale of gas and gas services in any one or more of such municipalities or for any one or more of such purposes.

The procedure for organizing and incorporating such a district appears in the statutory scheme: (1) the governing body of each municipality approves a resolution expressing the desirability of organizing and incorporating a district, identifying the proposed members of the district, briefly describing the gas systems to be owned by the district, and further authorizing the mayor to proceed with organization and incorporation § 11-50-391; (2) when all potential member-municipalities have approved such resolutions, their respective chief executive officers execute a certificate of incorporation containing the information specified by statute §§ 11-50-391, 11-50-392(a); and (3) the certificate of incorporation is filed with, and recorded by, the probate judge of the county in which the district's principal office is to be located, whereupon the corporation assumes its existence § 11-50-392(a). The SAGD was so incorporated in 1953 and has, as its members, fourteen municipalities in southeast Alabama.

In addition to their continuing control of a district's board of directors, member-municipalities remain directly involved in a district's affairs following its incorporation. For example, their governing bodies must approve amendments to the district's certificate of incorporation, including "any proposed change in the name of such district, the inclusion of other municipalities as members thereof or any matter which might originally have been included in the certificate of incorporation" § 11-50-392(b). In addition, member-municipalities must approve any disposal of a district's property in case of its dissolution § 11-50-392(c).

A gas district incorporated under § 11-50-390 et seq. must have a board of directors. Unless the district's certificate of incorporation provides otherwise, the board shall consist of at least one member for each municipality which is a member of the district; the governing bodies of the participating municipalities shall elect the individuals who are to represent the municipalities on the board of directors; and those board members shall serve a term concurrent with the term of office of each municipality's mayor § 11-50-393, as amended. The Board of the SAGD, for example, consists of fourteen members, representing the fourteen member-municipalities.

A board may, but need not, consist of the mayors of the participating municipalities. Board members serve without compensation, although they are entitled to reimbursement for expenses and may receive a fee for attendance at board meetings. An "appointing authority" may remove its representative on the district's board, apparently for cause and after the member has had the opportunity for hearing; such removal by a municipality's governing body is final and nonreviewable § 11-50-393, as amended.

Pursuant to the statute, a board of directors is authorized "to appoint officers, agents and employees, including attorneys, and to fix their compensation" § 11-50-395(a)(3). However, SAGD employees do not fall within any employee merit system in effect in its member municipalities and are not considered to be employees of either its member-municipalities or the state of Alabama.

The statutory scheme authorizes the districts to exercise the same powers of eminent domain as do municipalities §§ 11-50-396(17), 11-50-397; to acquire, construct, own and operate gas distribution systems outside the respective territories of the member-municipalities § 11-50-398; to acquire competing gas systems § 11-50-399; to use the rights-of-way of public highways § 11-50-400; to promulgate rules and regulations concerning installation and service of gas fixtures, appliances, and equipment §§ 11-50-401, 11-50-402, 11-50-403; and to issue bonds § 11-50-405, with the accompanying power to mortgage their property and pledge their revenues as security for such bonds §§ 11-50-407, 11-50-408.

The obligations of a district are not obligations of its member municipalities or the state of Alabama § 11-50-409, and the SAGD, by way of example, does not receive financial assistance from its members or the state. The statutory scheme contemplates that the districts organized under its provisions may be for-profit ventures, with all profits being distributed to their member-municipalities § 11-50-411, as amended. Districts are exempt from state usury and interest statutes § 11-50-415 and are also for the most part tax-exempt § 11-50-412, though they may be obligated to pay municipal "privilege license taxes" § 11-50-413. As "independent instrumentalities of the state," the districts are exempt from the jurisdiction of and regulation and supervision by the Alabama Public Service Commission § 11-50-416.

Finally, notice to the public is required whenever a district board passes a "resolution of a general or permanent nature" §§ 11-50-395(b), 11-50-402 or establishes or alters rates and charges § 11-50-396(12).

III. DISCUSSION

The law is clear that to state a claim under § 1983, a plaintiff must allege the violation of a right secured by the Constitution or laws of the United States and must show that the alleged deprivation was committed by a person acting under color of state law. See, e.g., West v. Atkins, ___ U.S. ___, 108 S.Ct. 2250, 2255, 101 L.Ed.2d 40 (1988); Motes v. Myers, 810 F.2d 1055, 1058 (11th Cir.1987). As the United States Supreme Court has observed, "The ultimate issue in determining whether a person is subject to suit under § 1983 is the same question posed in cases arising under the fourteenth amendment: is the alleged infringement of federal rights `fairly attributable to the State?'" Rendell-Baker v. Kohn, 457 U.S. 830, 838, 102 S.Ct. 2764, 2769, 73 L.Ed.2d 418 (1982) (quoting Lugar v. Edmondson Oil Co., 457 U.S. 922, 937, 102 S.Ct. 2744, 2753, 73 L.Ed.2d 482 (1982)). See also Frazier v. Board of Trustees of Northwest Miss. Regional Medical Center, 765 F.2d 1278, 1283-1284 (5th Cir.1985), cert. denied, 476 U.S. 1142, 106 S.Ct. 2252, 90 L.Ed.2d 697 (1986). To answer this question, courts must determine whether there has been ...