Town of Smyrna, Tenn. v. U.S. Army Corps of Eng'Rs
| Decision Date | 26 September 2007 |
| Docket Number | No. 3:06-cv-0675.,3:06-cv-0675. |
| Citation | 517 F.Supp.2d 1026 |
| Parties | TOWN OF SMYRNA, TENNESSEE, Plaintiff, v. UNITED STATES ARMY CORPS OF ENGINEERS, Defendant. |
| Court | U.S. District Court — Middle District of Tennessee |
Jessalyn H. Zeigler, L. Wearen Hughes, Bass, Berry & Sims, Nashville, TN, for Plaintiff.
Michael L. Roden, Office of the United States Attorney, Nashville, TN, for Defendant.
Pending before the court is the Motion to Dismiss (Docket No. 32) filed by the defendant, United States Army Corps of Engineers, and the Motion for Partial Summary Judgment (Docket No. 52) and Motion to Exclude Evidence (Docket No. 65) filed by the plaintiff, Town of Smyrna, Tennessee. For the reasons discussed herein, the defendant's Motion to Dismiss will be denied, the plaintiff's Motion for Partial Summary Judgment will be granted, and the plaintiff's Motion to Exclude Evidence will be denied as moot.
Prior to the construction of the J. Percy Priest Reservoir and Dam (the "Reservoir") in the 1960s, the Town of Smyrna (the "Town" or "plaintiff') relied for its water supply on the Stones River, drawing water from two intakes constructed on the river.1 At that time, the Town drew approximately 6.6 million gallons per day ("mgd") from the river.
In the 1960s, the Army Corps of Engineers (the "Corps" or "defendant") impounded the Stones River to build the Reservoir, which currently is the primary source of water for nearly 50,000 people served by the Town. Prior to beginning construction on the Reservoir, the Corps did not seek, negotiate, or execute an agreement with the Town providing the Town with water supply storage in the Reservoir or requiring the Town's contribution to the cost of constructing the Reservoir. Construction on the Reservoir began in 1963 and was completed in 1967, and the Reservoir was placed into service in 1970. Since the Reservoir was placed into service, the Town has relied for its water supply on water drawn from the Reservoir, primarily through one of its two intakes, and has not entered into a cost-sharing agreement or a water supply storage agreement with the Corps.
According to the Corps, it was unaware that the Town relied on the Reservoir for water supply storage until the Town approached the Corps in 1995 with a proposal to build a new intake and to upgrade its existing primary intake. (See Docket No. 58 at 12-13) On February 12, 1997, the Town and the Corps entered an easement with a term of twenty years beginning on December 15, 1996 (the "Easement") that permitted the Town to install a larger pipe on its primary intake, which provides 98% of the Town's water supply. The Easement further provided that the Corps would complete a "reallocation study" with respect to water supply storage in the Reservoir and required the Town to enter a water supply storage agreement with the Corps "upon completion of the reallocation study ... and the establishment of appropriate rates to be paid by the Town."2 The Easement additionally provided that the Town would limit its water usage to 12 mgd prior to the completion of the reallocation study.
In November 2001, the Corps completed its Reallocation Report for Water Supply Storage on J. Percy Priest Reservoir, Tennessee (the "Reallocation Report"). The Reallocation Report provided, in relevant part, that "5,002 acre-feet of storage be reallocated for the Town of Smyrna, and the Town be charged in full for storage necessary to meet its withdrawal needs."3 The Reallocation Report specified that the Town would be charged a total of $2,912,415, which represented $2,896,158 for "Lump sum cost of Storage" and $16,257 for "Annual O & M Cost." The "Lump sum cost of Storage" amount was derived from the cost of constructing the Reservoir in the 1960s adjusted to present-day dollars, and the "Annual O & M Cost" represented ongoing operation and maintenance costs.
In February 2003, the Corps forwarded a proposed water supply storage agreement to the Town for the Town's signature. After reviewing the proposed water supply storage agreement and the Reallocation Report, the Town concluded that the calculated charges contained in the proposed water supply storage agreement "were not appropriate." Specifically, the Town objected to the Corps' calculation on the grounds that the calculation included the cost of construction, to which the Town had not agreed prior to construction and which already had been paid, that it improperly adjusted the cost of construction to present-day dollars, that it did not constitute a "rate" as provided in the Easement, that it did not credit the Town for the amount of water the Town regularly returns to the Reservoir, that it did not credit the Town for the amount of water the Town had been able to draw from the Stones River prior to the construction of the Reservoir, that it utilized the most expensive method of calculating the cost of water supply storage, and that it did not constitute an appropriate or authorized rate for water supply storage.4 In sum, the Town concluded that the Corps acted outside the scope of its statutory authority in calculating the charges.
Because it objected to the charges calculated by the Corps, the Town refused to enter the proposed water supply storage agreement.5 The parties conducted negotiations with respect to the proposed water supply storage agreement, but were unable to reach an agreement. Additionally, the Town reevaluated its water supply needs and requested an increase in its withdrawal limit of 12 mgd under the Easement. In a letter dated August 30, 2005, the Corps denied this request and informed the Town that it "would not be permitted to increase its withdrawal rate" until the Town entered a water supply storage agreement. The Town currently estimates that it will require 25.5 mgd through the year 2020 to meet its water supply needs.
In a letter dated June 8, 2006 (the "June 8, 2006 Letter"), the Corps provided the Town with written notification that the Town's $3,509,1586 debt to the United States was delinquent, citing the Water Supply Act of 1958 and the Easement as the basis for the debt and stating that 7 The letter provides the Town with information about how to pay the debt, interest rates, and the consequences of delinquency or noncompliance.8 The Corps included with the letter a proposed water supply storage agreement, noting "[o]ur preference remains to enter into a Water Supply Agreement that provides for the legally required payments to the United States, and provides the Town assurance of continue [sic] use of the storage."
On July 7, 2006, the plaintiff brought this action seeking a declaratory judgment that the defendant acted outside of the scope of its, authority under the Water Supply Act of 1965 ("WSA") in calculating the amount of the debt that the defendant claims the plaintiff owes and in refusing to grant additional water supply storage for the plaintiff because of the dispute. The plaintiff asserted jurisdiction under 28 U.S.C. § 2201 (Declaratory Judgment Act), § 1331 (federal question jurisdiction) and § 1346 (Little Tucker Act). The plaintiff additionally sought preliminary and permanent injunctive relief to prevent the defendant from shutting off the plaintiff s main water supply, terminating the Easement, or reallocating water designated in the Reallocation Report for the plaintiff's use. The plaintiff subsequently withdrew its motion for a preliminary injunction because the defendant agreed not to undertake, during the litigation of this matter, the action that the plaintiff hoped to enjoin — shutting down any part of the plaintiff's water supply — without first giving the plaintiff sixty days' notice.9 (Docket No. 9)
The defendant answered the complaint and asserted a counterclaim seeking a declaratory judgment that the plaintiff is using water supply storage in the Reservoir unlawfully and that the plaintiff must either comply with the terms of the WSA or cease using water supply storage in the Reservoir. (Docket No. 18)
Subsequently, the plaintiff was granted leave to amend its complaint to allege that sovereign immunity has been waived under the Administrative Procedure Act ("APA"). (Docket Nos. 29, 31) The defendant then filed a motion to dismiss asserting that sovereign immunity has not been waived, that the dispute is not ripe for adjudication, and that there is no final agency action subject to review under the APA.10 (Docket No. 32) That motion has been briefed fully.
Discovery was stayed by court order and the plaintiff was granted permission to file a motion for partial summary judgment. (Docket No. 49) The specific issue before the court on that motion is whether, under the plain language of the WSA, the defendant is authorized to require the plaintiff to pay costs associated with the construction of the Reservoir in the absence of a pre-construction cost-sharing agreement. (Docket No. 52) That motion also has been fully briefed.
In its response to the plaintiff's motion for partial summary judgment, the defendant advanced arguments that go far beyond the limited issue presented to the court in the plaintiff's motion and relies on evidence that would properly be the subject of discovery, had discovery not been stayed. In light of this, the plaintiff additionally has filed a Motion to Exclude Evidence relied on by the defendant in its response. (Docket No. 65)
The present action presents many thorny questions of administrative law. Before we consider some of those issues in the context of the plaintiff's Motion for Partial Summary Judgment, however, we must address the objections to jurisdiction and to the...
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