CITY OF COOKEVILLE, TENNESSEE, Plaintiff-Appellant, v. UPPER CUMBERLAND ELECTRIC MEMBERSHIP CORPORATION; Hilda G. Legg; Rural Utilities Services, an Agency of the Department of Agriculture; Department of Agriculture; Sheldon Peterson, Governor; National Bank for Cooperatives; National Rural Utilities Cooperative, Defendants-Appellees.
Nos. 05-5886, 06-5363
United States Court of Appeals, Sixth Circuit
April 19, 2007
484 F.3d 380
Argued: March 5, 2007.
For the reasons set out above, we reject the plaintiff‘s challenge to the “check-the-box” regulations and AFFIRM the district court‘s grant of summary judgment to the defendant.
Before ROGERS and GRIFFIN, Circuit Judges; RUSSELL, District Judge.*
OPINION
ROGERS, Circuit Judge.
In this case, we affirm the federal district court‘s resolution of a dispute over one element of the compensation that Tennessee law requires when a city annexes territory and exercises its right to purchase electric utility property within the annexed territory. The federal court had jurisdiction because a federal agency, the Rural Utilities Service (“RUS“), was a party defendant. We reverse, however, a post-judgment order enjoining the city from providing electric service in this annexed area pending resolution of the compensation dispute.
When a Tennessee municipality that owns and operates its own electric system annexes territory in which an electric cooperative is providing eleсtric services to customers, the municipality has two choices of how to provide electric services to those customers under Tennessee law. See City of South Fulton v. Hickman-Fulton Counties Rural Elec. Coop. Corp., 976 S.W.2d 86, 90 (Tenn.1998). The municipality can either “grant such cooperative a franchise to serve the annexed area” or, as the City of Cookeville chose to do here, “offer to purchase any electric distribution properties and service rights within the annexed area owned by any electric cooperative.”
Cookeville annexed nine areas in which the Upper Cumberland Electric Membership Corporation (“UCEMC“) provided electric services. Cookeville sued UCEMC, originally in state court, to condemn UCEMC‘s facilities and electric service rights in the annexed areas. RUS was later added as a defendant. Cookeville and UCEMC disagreed on the cost of reintegration—Cookeville argued that the cost was approximately $127,000 whereas UCEMC argued that the cost was $5.825 million. The district court agreed with UCEMC and ordered Cookeville to pay the higher amount so that UCEMC could build a new substation and distribution loop. Cookeville appealed. While that appeal was pending, Cookeville began building electric facilities in the annexed areas and providing electric services to customers in those areas. UCEMC sought and obtained an injunction from the district court enjoining Cookeville from building facilities or providing service until it paid UCEMC the damages owed for the condemnation. Cookeville appealed, and now the propriety of both the damage award and the injunction are before this court. Cookeville also challenges the district court‘s jurisdiction over the entire case and the district court‘s jurisdiction to enter the injunction while the first appeal was pending.
The district court properly exercised jurisdiction because a federal agency was a party. The district court order requiring Cookeville tо pay reintegration costs of $5.825 million was legally proper and not clearly erroneous. The district court‘s injunction, entered during the pendency of the appeal from the district court‘s compensation order, however, improperly expanded the scope of the previous order. We therefore affirm in part and reverse in part.
I.
In 2000, Cookeville annexed five areas surrounding the city. In 2002, Cookeville annexed four additional areas. With respect to each annexed area, Cookeville gave notice to UCEMC, an electric cooperative serving customers in the annexed areas, as required by Tennessee law, but UCEMC refused to sell voluntarily any of its electric distribution properties or service rights in those areas. See
Removal and Denial of Motion to Remand
On July 31, 2001, Cookeville brought a civil action against UCEMC in Tennessee state court in order to condemn UCEMC‘s facilities and service rights. On August 14, 2002, Cookeville amended its complaint and added RUS and National Rural Utilities Cooperative Finance Corporation (“CFC“) as defendants. RUS is a federal agency. See
The district court denied Cookeville‘s motion to remand. Tennessee ex rel. City of Cookeville v. Upper Cumberland Elec. Membership Corp., 256 F.Supp.2d 754, 758 (M.D.Tenn.2003).
Tennessee Statute
The crux of this case is what compensation Cookeville must pay to UCEMC for UCEMC‘s facilities and service rights in the annexed areas. Tennessee law provides the following formula for determining the amount of compensation an annexing municipality must pay an electric cooperative:
The municipality shall offer to purchase the electric distribution properties of the cooperative located within the annexed area, together with all of the cooperative‘s rights to serve within such area, for a cash consideration, which shall consist of:
(A) The present-day reproduction cost, new, of the facilities being acquired, less depreciation computed on a straight-line basis; plus
(B) An amount equal to the cost of constructing any necessary facilitiеs to reintegrate the system of the cooperative outside the annexed area after detaching the portion to be sold; plus
(C) An annual amount, payable each year for a period of ten (10) years, equal to the sum of:
(i) Twenty-five percent (25%) of the revenues received from power sales to consumers of electric power within the annexed area, except consumers with large industrial power loads greater than three hundred kilowatts (300kW), during the last twelve (12) months preceding the date of the notice provided for in subdivision (a)(1); and
(ii) Fifty percent (50%) of the net revenues, which is gross power sales revenues less wholesale cost of power including facilities rental charge, received from power sales to consumers with large industrial power loads greater than three hundrеd kilowatts (300kW) within the annexed area during the last twelve (12) months preceding the date of the notice provided for in subdivision (a)(1).
Trial
Cookeville and UCEMC did not agree on the second element of the statutory formula: “the cost of constructing any necessary facilities to reintegrate the system
UCEMC‘s expert, Robert C. Dew, Jr., testified about the report that he prepared. In his report, Dew concluded that UCEMC needed a new substation and distribution loop built. Dew estimated that this would cost $5.825 million. Dew‘s plan anticipated that UCEMC would no longer use the West Substation after the annexations. At trial, Dew testified that the new substation was needed to “have the same operational flexibility, same capacity, same reliability, and better efficiency” as compared to UCEMC‘s system prior to the annexation. Dew testified that after Cookeville removes UCEMC‘s former customers, UCEMC will be left with extra line that continues through the annexed areas without serving any customers, resulting in increased costs from maintaining the line and losing electricity due to resistance in that line.1
District Court Decision
The district court agreed with UCEMC and found that the disputed second part of the formula equaled $5.825 million. City of Cookeville, 360 F.Supp.2d at 879.2 In coming to that cоnclusion, the court first noted that “[t]here was some argument at trial as to whether [the statutory] definition meant the cost of returning the system to running as well as it had before or whether it meant the cost of making the system adequate for operation.” Id. The court concluded that “reintegration costs are those costs associated with returning the system to running as well as [it] had before the condemnation—no extra inefficiencies and no extra costs related to the system.” Id. The district court found “that reintegration costs equal the cost of a new substation and the cost of restoring UCEMC‘s distribution loop with the new substation.” Id. This was because the condemnations otherwise “would lead to inefficient electric distribution” for UCEMC due to the loss of electricity along lines no longer serving UCEMC customers and due to the maintenance of thosе lines. Id.3
Overall, the district court found that UCEMC‘s condemnation damages totaled “a single payment of $6,961,325.25 and 10 annual payments of $276,330.00 per year.” Id.
Motions to Alter or Amend and Appeal
Cookeville and UCEMC moved to alter or amend the court‘s order. The issues presented in the motions involved how and when Cookeville was to pay UCEMC, whether UCEMC would be allowed to petition the court for additional reintegration costs if the cost of building the substation and distribution loop exceeded $5.825 million, and whether Cookeville was condemning feeder lines associated with Cookeville‘s West Substation. The district court denied the motions of Cookeville and UCEMC as to the means and timing of payment because there was “no good reason that the parties should not be able to come to a resolution of how to execute the judgment.” The court also held that $5.825 million was the maximum amount Cookeville had to pay and that if the “actual costs are less than that amount, the remaining amount shall revert to or remain with” Cookeville. Finally, the court held that Cookeville did not condemn the feeder lines, which remained UCEMC‘s property.
Both parties appealed. UCEMC later voluntarily dismissed its cross-appeal.
Injunction
While the appeal (No. 05-5886) was pending, Cookeville began constructing electric distribution facilities inside some of the annexed areas. Cookeville admits that it installed street lighting and other electric facilities in the annexed areas, but maintains that none of those facilities serviced UCEMC‘s pre-annexation customers. Cookeville explained that it has only “begun to serve new customers, i.e., customers who had moved into the annexed areas (into the City of Cookeville) after the annexation and who had not previously been UCEMC customers.”
On December 2, 2005, defendants filed with the district court a joint motion for injunctive relief and costs. Defendants moved for an order compelling Cookeville to “immediately transfer to UCEMC all electric service currently being provided by [Cookeville] within UCEMC‘s exclusive service territory,” enjoining Cookeville “from constructing electric distribution facilities and/or servicing customers within UCEMC‘s exclusive service territory,” and requiring Cookeville “to pay all reasonable costs and attorneys’ fees incurred by [d]efendants in connection with bringing” the motion. Cookeville responded by arguing that the district court lacked jurisdiction to issue an injunction because the notice of appeal filed in appeal No. 05-5886 transferred jurisdiction to the court of appeals, and that even if the district court had jurisdiction, it should not issue an injunction because post-annexation, a municipality has the right to provide electric service, not an electric cooperative.
On January 6, 2006, the district court granted defendants’ motion for injunctive relief and costs. The court concluded that Cookeville was
unlawfully constructing new electric distribution facilities and providing electric services to customers within one or more of the nine annexation areas at issue in this case; that such annexation areas [were] within the statutorily-assigned exclusive service territory of
[UCEMC]; and that while [Cookeville had] sued to condemn UCEMC‘s exclusive service rights associated with these annexations areas, it ha[d] not yet paid the condemnation damages awarded and [wa]s not entitled to the use and benefit of such exclusive service rights until UCEMC ha[d] been fully compensated....
Accordingly, the district court held that Cookeville‘s actions constituted “an unlawful interference with UCEMC‘s exclusive service rights to the nine annexation areas.” The district court ordered Cookeville to “transfer to UCEMC within 30 days ... all electric service customers within any of the nine annexation areas that are currently being served by” Cookeville. Furthermore, the court enjoined Cookeville from providing electric service to customers within the annexed areas until appeal No. 05-5886 is resolved and Cookeville pays in full “the ultimate damage award to UCEMC, including reintegration costs, ... or until otherwise ordered” by the district court. Finally, the court ordered Cookeville to pay defendants’ reasonable costs and attorneys’ fees associated with the injunction motion because it found that Cookeville‘s actions were “not undertaken in good faith, and that said interference continued despite reasonable efforts by [d]efendants to avoid needless additional litigation.” Cookeville filed a timely notice of appeal of this order (No. 06-5363).
II.
We affirm the district court‘s order in appeal No. 05-5886. Defendants properly removed the case to the district court and the district court‘s decision on the merits awarding reintegration costs of $5.285 million to UCEMC was not clearly erroneous. However, we vacate the district court‘s injunction in appeal No. 06-5363. The district court did not have jurisdiction to issue the injunction because the injunction sought to expand the district court‘s previous order.
1. Removal Jurisdiction
Defendants properly removed this action to federal court.4 A civil action may be removed to the federal district court if the aсtion is brought against
[t]he United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof, sued in an official or individual capacity for any act under color of such office or on account of any right, title or authority claimed under any Act of Congress for the apprehension or punishment of criminals or the collection of the revenue.
Although the parties assume that the Jefferson County v. Acker officer removal test applies to federal agency removal as well, the text and legislative history of
The text of
directly preceding the word “sued” (suggesting that everything after the comma (i.e., the “sued” clause) applies to each element of the list before the comma: the United States, any agency thereof, or any officer of the United States or any agency thereof), that reading does not make sense because the United States and federal agencies are not “sued in an official or individual capacity” and are not sued for an “act under color of such office.” Indeed, distinguished scholars of federal jurisdiction have questioned whether amended
The legislative history provides compelling confirmation of this reading.6 The addition of “The United States or any agency thereof” was the result of a 1996 amendment that sought to reverse an earlier Supreme Court decision. In International Primate Protection League, 500 U.S. at 79-82, the Supreme Court held that the pre-1996 version of
The Senate Report supports a reading that
“sued” clause from reference to an agency and includes that clause only with reference to officers. For example, the Senate Report notes that the amended statute “allows civil actions ... against Federal agencies as well as those against Federal officers sued in either an individual or official capacity to be removed to Federal district court.” Id. at 30, U.S.Code Cong. & Admin.News 1996, pp. 4202, 4210. The Senate Report goes on to state that the amendment “clarifies that suits against Federal agencies, as well as those against Federal officers sued in either an individual or official capacity, may be removed to Federal district court.” Id. at 31, U.S.Code Cong. & Admin.News 1996, pp. 4202, 4210-11. The Report, therefore, demonstrates that the “sued” clause applies only to federal officers and not to federal agencies. Such a reading is consistent with the “clear command from both Congress and the Supreme Court” that
We recognize that other courts of appeals have suggested that a federal agency may also have to assert a colorable federal defense. See City of Jacksonville v. Dep‘t of the Navy, 348 F.3d 1307, 1313 n. 2 (11th Cir.2003) (“We recognize that it remains to be decided whether the requirement of a federal defense also applies to removal by the United States or one of its agencies.“); Parker v. Della Rocco, 252 F.3d 663, 665 n. 2 (2d Cir.2001) (expressly not deciding whether a colorable federal defense is re-
But even if a colorable federal defense were required, RUS fulfilled this requirement by asserting the defense of preemption. Defеndants argued that federal law preempted Cookeville‘s proposed condemnation of UCEMC‘s facilities because the condemnation frustrated the purposes of the Rural Electrification Act of 1936 (“REAct“),
2. Reintegration Costs
The district court did not clearly err by holding that Cookeville must pay tо build UCEMC a new substation and distribution loop. Tennessee law requires as part of the compensation that an annexing municipality must pay to an electric cooperative “[a]n amount equal to the cost of constructing any necessary facilities to reintegrate the system of the cooperative outside the annexed area after detaching the portion to be sold.”
a. Legal Standard
The district court applied a legal standard that is consistent with Tennessee law.8 The district court interpreted reintegration costs under the Tennessee statute to mean “those costs associated with returning the system to running as well as [it] had before the condemnation—no extra inefficiencies and no extra costs related to the system.” City of Cookeville, 360 F.Supp.2d at 879. The Tennessee statute does not define “reintegrate” but the dictionary definition of “reintegrate” is “to restore to unity after disintegration.” Webster‘s Third New International Dictionary 1915 (3d ed.2002). The structure of
Cookeville argues that this standard was incorrect because it read into the statute “an additional requirement that cost inefficiencies, not just engineering disruptions, be compensated as part of the reintegration element of the statutory formula.” The distinction Cookeville asks this court to draw between engineering and economic еfficiency is largely semantic. It is not clear how an engineering inefficiency would not be costly, or how any increased cost would not be caused by engineering.9
b. Factual Findings
The district court‘s determination of the amount of reintegration costs was largely factual in nature, and the district court did not clearly err in its findings.
First, the district court did not clearly err by rejecting Cookeville‘s proposed reintegration plan. The question under the statute is whаt “necessary facilities” must be built in order to “reintegrate” UCEMC‘s distribution system. The district court agreed with UCEMC that Cookeville‘s reintegration plan, which involved maintaining UCEMC‘s use of the West Substation, created inefficiencies because UCEMC would incur extra costs in maintaining several miles of extra power lines leading to UCEMC‘s first customers and from losing electricity along those extra lines. See City of Cookeville, 360 F.Supp.2d at 879. This finding is not clearly erroneous because there was adequate support in the record, in particular, the report and testimony of UCEMC‘s expert, Dew, for the fact that Cookeville‘s reintegration plan failed to account for inefficiencies added to UCEMC‘s electric distribution network.
The district court also did not clearly err by accepting UCEMC‘s reintegration plan. Arguably, UCEMC‘s reintegration plan results in a distribution system even more efficient than UCEMC previously had. In his report, Dew noted that UCEMC‘s plan “assumes that UCEMC‘s post-annexation Putnam County distribution system should operate at least as efficiently and as reliably as it does in its current configuration” (emphasis added). At trial, Dew stated that in formulating the UCEMC plan, he determined that the plan “had to have the same operational flexibility, the same capacity, the same reliability[, and h]opefully, improved efficiency” (emphasis added). But once the district court concluded that Cookeville‘s plan did not meet the minimum required by
3. Injunction
The district court, however, erred by issuing the injunction in appeal No. 06-5363 because the injunction expanded the district court‘s previous order on appeal in No. 05-5886 instead of merely enforcing it. “As a general rule the filing of a notice of appeal divests the district court of jurisdiction and transfers jurisdiction to the court of appeals.” Cochran v. Birkel, 651 F.2d 1219, 1221 (6th Cir.1981). “Although a district court may not altеr or enlarge the scope of its judgment pending appeal, it does retain jurisdiction to enforce the judgment.” NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 588 (6th Cir.1987). This court draws a “crucial distinction between expansion and enforcement of judgments.” Am. Town Ctr. v. Hall 83 Assocs., 912 F.2d 104, 110 (6th Cir.1990) (emphasis in original). Here, in the injunction order, the district court decided two legal issues that it had not decided previously, and expanded significantly the scope of its previous order on appeal.
First, the district court decided that UCEMC enjoyed exclusive service rights in the annexed areas. In its order appealed in No. 05-5886, the district court merely decided the amount Cookeville was required to pay UCEMC in reintegration costs for annexing areas where UCEMC provided electric service. Whether UCEMC enjoyed exclusive service rights in those areas after Cookeville‘s annexation was not at issue. Thus, when thе district court later enjoined Cookeville from “interfering” with UCEMC‘s exclusive service rights by providing electric service to new customers in the annexed areas, the district court was deciding an issue of law that went beyond the scope of the court‘s initial order that was on appeal at the time of the injunction, and granting relief beyond the scope of the earlier order.
Second, the district court decided that Cookeville was required to compensate UCEMC prior to taking UCEMC‘s property.12 In denying UCEMC‘s motion to alter or amend the earlier order with respect to the timing of the payments, the district court refused to
III.
For the foregoing reasons, we AFFIRM the district court‘s order challenged in appeal No. 05-5886 and REVERSE the district court‘s injunction order challenged in appeal No. 06-5363.
JOHN M. ROGERS
UNITED STATES CIRCUIT JUDGE