Town of Smyrna v. Mun. Gas Auth. of Ga.

• Decision Date: 19 July 2013
• Docket Number: No. 12–5476.,12–5476.
• Citation: 723 F.3d 640
• Parties: The TOWN OF SMYRNA, TENNESSEE, Plaintiff–Appellee, v. The MUNICIPAL GAS AUTHORITY OF GEORGIA, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

723 F.3d 640

The TOWN OF SMYRNA, TENNESSEE, Plaintiff–Appellee,

v.The MUNICIPAL GAS AUTHORITY OF GEORGIA, Defendant–Appellant.

No. 12–5476.

United States Court of Appeals, Sixth Circuit.

Argued: Jan. 25, 2013.

Decided and Filed: July 19, 2013.

ARGUED:Jay D. Bennett, Alston & Bird LLP, Atlanta, Georgia, for Appellant. Jessalyn H. Zeigler, Bass Berry Sims PLC, Nashville, Tennessee, for Appellee. ON BRIEF:Jay D. Bennett, Nowell D. Berreth, Alston & Bird LLP, Atlanta, Georgia, Paul S. Davidson, Waller Lansden Dortch & Davis LLP, Nashville, Tennessee, for Appellant. Jessalyn H. Zeigler, Joshua R. Denton, Bass Berry Sims PLC, Nashville, Tennessee, Douglas Berry, Hubbard, Berry & Harris, PLC, Nashville, Tennessee, for Appellee.

Before: NORRIS, MOORE, and DONALD, Circuit Judges.

OPINION

BERNICE B. DONALD, Circuit Judge.

This case is before us on interlocutory appeal of the district court's denial of sovereign immunity to the appellant Municipal Gas Authority of Georgia (the “Gas Authority”). The heart of the dispute is the Gas Authority's proposed interpretation of Kyle v. Georgia Lottery Corporation, 290 Ga. 87, 718 S.E.2d 801, 802–04 (2011): that any entity referred to as a state “instrumentality” in a Georgia statute is entitled to Georgia state-law sovereign immunity. The Gas Authority's suggested interpretation, however, requires quite a stretch of the imagination. For this and the following reasons, we affirm.

I.

The Gas Authority is a natural gas provider formed in 1987 by the Georgia General Assembly. Ga.Code Ann. § 46–4–82(a) (2012). Its purpose is to provide member municipalities with natural gas. To this end, it acquires, constructs, operates, and maintains facilities for the storage, acquisition, and distribution of natural gas. Id. § 46–4–95. The Gas Authority raises its own funds, receiving no funding from the state of Georgia. It operates on a non-profit basis, distributing excess profits, as well as losses, to its member municipalities. Id.§ 46–4–97. It pays for its own operating expenses and must provide funding for any judgments against it. Id.§ 46–4–97. It is exempt from the state-law provisions on financing and investment for state entities, id. §§ 46–4–82, 50–17–21, and it has discretion over the accumulation, investment, and management of its funds, id. § 46–4–96(a)(10), (11). It sets its own rules for governance, id. § 46–4–92, and its members elect its leaders from among the member municipalities, id. §§ 46–4–88, 46–4–89.

The Gas Authority sells natural gas to seventy-eight member municipalities: sixty-four of these are Georgia municipalities; two are Tennessee municipalities, including the plaintiff Town of Smyrna, Tennessee (“Smyrna”); and others are municipalities in Alabama, Florida and Pennsylvania. Smyrna has contracted with the Gas Authority since 2000. The pipeline that delivers gas to Smyrna does not run through the state of Georgia.

The underlying dispute in this case is essentially a disagreement over the price of gas. The Gas Authority committed to a multi-year “hedge” contract for its acquisition of gas, setting a contract price and volume of gas through the year 2014, and then passed these costs on to Smyrna. After this hedge contract was in place, the “spot price,” or market price, of natural gas fell due to the increased use of hydraulic fracturing or “fracking.” So, although gas was less expensive in the market generally, it was not less expensive to Smyrna, who was still paying the Gas Authority according to the higher price and volume set between the Gas Authority and its suppliers. In July 2011, Smyrna sued the Gas Authority for breach of contract, violations of the Tennessee Consumer Protection Act, breach of fiduciary duty, and unjust enrichment for entering into these long-term hedge contracts and passing the allegedly unauthorized charges on to Smyrna.

After seven months of litigation, including discovery, the Gas Authority filed a motion to dismiss, arguing that it was entitled to sovereign immunity under Georgia law and under the Eleventh Amendment. On April 17, 2012, the district court denied the motion. The Gas Authority now appeals the denial of sovereign immunity under Georgia law and the Eleventh Amendment. It has also filed a motion seeking certification of the question of whether it is entitled to sovereign immunity under Georgia law to the Supreme Court of Georgia.

II.

As the issue of sovereign immunity is before us on interlocutory appeal, we must address our jurisdiction.¹ Normally,under 28 U.S.C. § 1291, our jurisdiction is limited to appeals from “final decisions” of the district court. When a decision “finally determine[s] claims of right separable from, and collateral to, rights asserted in the action,” however, we may have jurisdiction under what has come to be known as the collateral order doctrine. Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). It is well-settled that the collateral order doctrine gives us jurisdiction over appeals of the denial of Eleventh Amendment sovereign immunity. P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 142–44, 147, 113 S.Ct. 684, 121 L.Ed.2d 605 (1993); Mingus v. Butler, 591 F.3d 474, 481 (6th Cir.2010). We have also extended the collateral order doctrine to denials of state law immunity, so long as the state immunity alleged would provide immunity from suit, as opposed to mere immunity from liability. Sabo v. City of Mentor, 657 F.3d 332, 336 (6th Cir.2011); Chesher v. Neyer, 477 F.3d 784, 793–94 (6th Cir.2007). Georgia's sovereign immunity laws provide immunity from suit. Ga. Const. art. 1, § 2, para. IX. Therefore, we have jurisdiction over both issues on appeal. See also Root v. New Liberty Hosp. Dist., 209 F.3d 1068, 1069 (8th Cir.2000) (reviewing state-law sovereign immunity claims on interlocutory review); Ferguson v. Texarkana, Tex., No. 98–40403, 1999 WL 152936, at *1 (5th Cir.1999) (same).²

We review the legal question of whether a body is entitled to sovereign immunity de novo, but accept any underlying factual findings made by the district court unless such findings are clearly erroneous. S.J. v. Hamilton Cnty., 374 F.3d 416, 418 (6th Cir.2004).

III.

A. Choice of Law

Before addressing the question of the Gas Authority's sovereign immunity under Georgia law, we have the task of determining whether Georgia law even applies to the defense. The district court merely assumed that Georgia law applies and moved on to the sovereign immunity question. Smyrna asks that we affirm the denial of state-law sovereign immunity on the alternative grounds that Georgia sovereign immunity law does not apply because Tennessee law governs the underlying claims. See Murphy v. Nat'l City Bank, 560 F.3d 530, 535 (6th Cir.2009) (“Appellate courts may affirm on alternative grounds supported by the record.”). Although the district court's method is tempting, when sitting in diversity we must apply the choice of law rules of the forum state to determine which state's laws govern the dispute. Montgomery v. Wyeth, 580 F.3d 455, 459 (6th Cir.2009); Johnson v. Ventra Grp., 191 F.3d 732, 738 (6th Cir.1999). Smyrna filed suit in the Middle District of Tennessee, so we begin with Tennessee's choice of law rules. See Johnson, 191 F.3d at 738–39.

For claims based on a contract, Tennessee follows the rule of lex loci contractus, meaning it presumes that the claims are governed by the jurisdiction in which it was executed absent a contrary intent. Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 650 (Tenn.Ct.App.1999). If the parties contracted to be governed by the law of another jurisdiction, Tennessee will honor that choice so long as the provision was executed in good faith, there is a material connection between the law and the transaction, and the chosen law is not contrary to the fundamental policies of Tennessee. Id.

The Gas Authority contends that the parties contracted to be governed by Georgia law, pointing to the following provision in its 2005 Gas Supply Contract with Smyrna, under the “Severability” section:

In case any one or more of the provisions of this contract shall for any reason be held to be illegal or invalid ... this contract shall be construed and enforced as if such illegal or invalid provision had not been contained herein, and this contract shall be construed to adopt, but not to enlarge upon, all the applicable provisions of said [Gas Authority] Act, and all the applicable provisions of the Constitution and general laws of Georgia, and, if any provisions hereof conflict with any applicable provision of said Constitution or laws, the latter as adopted by the General Assembly of Georgia and as interpreted by the courts of this state shall prevail in lieu of any provision hereof in conflict or not in harmony therewith.

Gas Supply Contract, art. IX (emphasis added). A claim that a particular contract provision operates as a choice of law provision is itself a claim based on a contract, therefore we use the contract interpretation law of the jurisdiction in which the purported choice of law agreement was signed. The 2005 Gas Supply Contract was executed in Tennessee. Thus, we use Tennessee contract law to discern the nature and validity of the term.

Tennessee would interpret this provision to ascertain the intent of the parties, according to the natural meaning of the words, giving effect to every term, and construing any ambiguity against the drafter (here, the Gas Authority). Vantage Tech., 17 S.W.3d at 650. Smyrna would have us conclude that this is merely a severability provision designed to avoid any conflicts with Georgia law. This proposed interpretation makes some sense because the Gas Authority is created and its activities are defined by Georgia statute, but if that were the full meaning, the provision would merely conclude after adopting “all the applicable provisions of the [Gas Authority] Act.” Giving meaning to all the terms, as we ...