Malone v. Franklin Electric Cooperative
MEMORANDUM OPINION AND ORDER - Consistent with the Courts previous text orders denying the plaintiffs motions to remand in Sparks and Bates (see Doc. 25 in Case No. 15-cv-322; Doc. 30 in Case No. 15-cv-334), the Court finds that the actions in those cases were properly removed under the federal officer removal statute. Additionally, pursuant to Rule 24(a)(2), the Court GRANTS the TVAs motions to intervene in Sparks and Bates. (Doc. 10 in Case No. 15-cv-322; Doc. 15 in Case No. 15-cv-334). Signed by Judge Madeline Hughes Haikala on 11/23/2015. Associated Cases: 5:15-cv-00322-MHH, 3:15-cv-00387-MHH, 4:15-cv-00339-MHH, 4:15-cv-00341-MHH, 4:15-cv-00586-MHH, 5:15-cv-00334-MHH (KEK)
2015 Nov-23 AM 10:33
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
STEWART P. SPARKS, III, on behalf of )
himself and others similarly situated,
TAMMY BATES on behalf of herself
and others similarly situated,
JOE WHEELER ELECTRIC
JOHN LAKE on behalf of himself and
others similarly situated,
Case No. 5:15-cv-322-MHH
Case No. 5:15-cv-334-MHH
Case No. 4:15-cv-339-MHH
HERMAN KRITNER, JR., on behalf of
himself and others similarly situated,
ARAB ELECTRIC COOPERATIVE,
THOMAS MALONE, on behalf of
himself and others similarly situated,
JOHN HOLLIS NEYMAN, on behalf of
himself and others similarly situated,
Case No. 4:15-cv-341-MHH
Case No. 3:15-cv-387-MHH
Case No. 4:15-cv-586-MHH
MEMORANDUM OPINION AND ORDER
The plaintiffs in these consolidated putative class actions allege that the
defendant electric cooperatives have failed to reduce electric resale rates or
distribute excess revenues as patronage capital in violation of Alabama Code § 376-20. After all of the defendant electric cooperatives removed their cases to
federal court, each plaintiff moved to remand, and the Tennessee Valley Authority
moved to intervene in each case.1 This memorandum opinion and order addresses
the plaintiffs’ motions to remand and the TVA’s pending motions to intervene in
Sparks v. Cullman Electric Cooperative, Case No. 15-cv-322 and Bates v. Joe
Wheeler Electric Membership Corporation, Case No. 15-cv-334.
FACTUAL AND PROCEDURAL BACKGROUND
The Tennessee Valley Authority (“TVA”) is a federal agency established by
the TVA Act. See 16 U.S.C. § 831 et seq. The TVA Act provides the TVA’s
Board of Directors with the authority to sell surplus power to “States, counties,
municipalities, corporations, partnerships, or individuals.”
16 U.S.C. § 831i.
“[T]o carry out said authority, the Board is authorized to enter into contracts for
such sale . . . .” Id. “[T]he Board is authorized to include in any contract for the
Before the actions were consolidated for pretrial purposes, Judge Virginia Hopkins denied
motions to remand and granted the TVA’s motions to intervene in the cases over which she
originally presided. See Docs. 22 and 23 in Lake v. Marshall-DeKalb Electric Cooperative, Case
No. 4:15-CV-339; Docs. 21 and 22 in Kritner v. Arab Electric Cooperative, Case No. 4:15-cv341; and Docs. 20 and 21 in Neyman v. Cherokee Electric Cooperative, Case No. 4:15-cv-586.
After the plaintiffs filed notices of voluntary dismissal in Malone v. Franklin Electric
Cooperative, Case No. 3:15-cv-387 (see Doc. 33) and Neyman v. Cherokee Electric Cooperative,
Case No. 4:15-cv-586 (see Doc. 29), the Court dismissed those cases without prejudice. See
Doc. 34 in Malone; Doc. 30 in Neyman. In separate text orders, the undersigned denied the
plaintiffs’ motions to remand in Sparks v. Cullman Electric Cooperative, Case No. 5:15-cv-322
(see Doc. 25) and Bates v. Joe Wheeler Electric Membership Corporation, Case No. 5:15-cv-334
(see Doc. 30). The undersigned informed the parties in those cases that the Court would explain
in a separate opinion the reasons for denying the plaintiffs’ motions to remand. The TVA’s
motions to intervene in Sparks (see Doc. 10) and Bates (see Doc. 15) are pending.
sale of power such terms and conditions, including resale rate schedules, and to
provide for such rules and regulations as in its judgment may be necessary or
desirable for carrying out the purposes of this [Act].” Id.
Pursuant to its statutory authority, the TVA sells power to electric
cooperatives in northern Alabama.2 The electric cooperatives resell the electricity
to consumers pursuant to separate “power contracts” between each electric
cooperative and the TVA. (See Doc. 22-2 in Case No. 15-cv-322; Doc. 26-2 in
Case No. 15-cv-334).3 Plaintiffs Stewart P. Sparks, III and Tammy Bates are
consumers who are members of the Cullman Electric Cooperative and the Joe
Wheeler Electric Membership Corporation, respectively.
Among other things, the TVA’s power contracts place restrictions on the
electric cooperatives’ “resale rates”—the rates that the electric cooperatives charge
when distributing power throughout the cooperatives’ respective regions. (See
Doc. 22-2, § 5(b)). The contracts provide that the resale rates must conform to the
TVA’s “Schedule of Rates and Charges” and that the electric cooperatives cannot
make any changes to their rates without the consultation and agreement of the
(See Doc. 22-2, §§ 5-6). Additionally, the power contracts incorporate a
The TVA supplies electric power throughout the 80,000 square miles comprising the Tennessee
Valley, which includes 155 municipal and cooperative distributors. (Doc. 22-1 in Case No. 15cv-322 at ¶¶ 2-3).
Because the pertinent portions of each electric cooperative’s power contract with the TVA are
identical, the Court will cite only to the power contract between the Cullman Electric
Cooperative and the TVA for the remainder of this opinion.
“Schedule of Terms and Conditions,” which controls how and when the parties
may adjust resale rates. (Doc. 22-2, pp. 12-13). According to the TVA’s vice
president of operations and regulatory assurance, Dwain Lanier, the “[s]tandard
terms and conditions in TVA’s contracts with its cooperative distributors preclude
patronage refunds to members of the cooperatives,” and any reduction in resale
rates “requires the express approval of TVA.” (Doc. 22-1 at ¶¶ 5, 8).
In January 2015, Mr. Sparks and Ms. Bates each filed class action
complaints in Alabama state court against their respective electric cooperatives.
(See Doc. 1-1 in Case No. 15-cv-322; Doc. 1-1 in Case No. 15-cv-334). Each
action seeks a declaration that the putative class is entitled to rate reductions or
refunds of excess revenue in the form of patronage capital pursuant to Ala. Code §
In late February 2015, the electric cooperatives removed each action to
federal court, premising subject matter jurisdiction on 28 U.S.C. § 1442(a), the
“officer removal” statute. (See Doc. 1 in Case No. 15-cv-322; Doc. 1 in Case No.
15-cv-334). In March 2015, the TVA filed motions to intervene in both cases, and
the plaintiffs each filed a motion to remand. (See Docs. 10 and 18 in Case No. 15cv-322; Docs. 15 and 21 in Case No. 15-cv-334). The parties have briefed these
motions and have participated in oral argument.
A. The Court Has Subject Matter Jurisdiction over the Plaintiffs’ Actions
Against the Electric Cooperatives.
As stated, the electric cooperatives removed the Sparks and Bates actions to
federal court via the federal officer removal statute. 28 U.S.C. § 1442(a). “Federal
courts are courts of limited jurisdiction. They possess only that power authorized
by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994). A removing defendant bears the burden of proving proper federal
subject matter jurisdiction by a preponderance of the evidence. Hobbs v. Blue
Cross Blue Shield of Ala., 276 F.3d 1236, 1242 (11th Cir. 2001).
Generally, courts construe removal statutes strictly and resolve uncertainties
in favor of remand. See, e.g., Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th
Cir. 1994). The federal officer removal statute is an exception to the general rule.
Courts must construe that removal statute liberally “enough to cover all cases
where federal officers can raise a colorable defense arising out of their duty to
enforce federal law.” Willingham v. Morgan, 395 U.S. 402, 406-07 (1969). “The
right of removal is made absolute whenever a suit in a state court is for any act
‘under color’ of federal office, regardless of whether the suit could originally have
been brought in a federal court.” Magnin v. Teledyne Continental Motors, 91 F.3d
1424, 1427 (11th Cir. 1996) (internal quotation marks omitted). “If the statutory
prerequisites are satisfied, section 1442(a)(1) provides an independent federal
jurisdictional basis.” Id.
The federal officer removal statute authorizes removal of a civil or criminal
action against or directed to “any officer (or any person acting under that officer)
of the United States or any agency thereof . . . for or relating to any act under
color of such office.” 28 U.S.C. § 1442(a). A private actor may qualify as a
“person” under the federal officer removal statute. See, e.g., Isaacson v. Dow
Chem. Co., 517 F.3d 129, 137 (2d Cir. 2008); Alsup v. 3-Day Blinds, Inc., 435 F.
Supp. 2d 838, 845 n.3 (S.D. Ill. 2006) (listing cases holding that a corporation is a
“person” under this statute).
To remove a case under section 1442(a)(1), a
defendant “must advance a ‘colorable defense arising out of his duty to enforce
federal law.’” Magnin, 91 F.3d at 1427 (quoting Mesa v. California, 489 U.S. 121,
133 (1989)). The defendant also “must establish that there is a ‘causal connection
between what the officer has done under asserted official authority’ and the action
against him.” Id. (quoting Maryland v. Soper, 270 U.S. 9, 33 (1926)).
To be a colorable defense, the “defense need only be plausible; its ultimate
validity is not to be determined at the time of removal.” Id. (citing Mesa, 489 U.S.
at 129). The Supreme Court has construed the colorable defense requirement
broadly, “recognizing that ‘one of the most important reasons for removal is to
have the validity’ of the [federal defense] tried in a federal court.” See Jefferson
Cnty., Ala. v. Acker, 527 U.S. 423, 431 (1999).
The electric cooperatives have presented a colorable federal defense to the
plaintiffs’ claims. In their removal petitions, the co-ops contend that the TVA Act
preempts the plaintiffs’ claims. (Doc. 1, p. 7 in Case No. 15-cv-322; Doc. 1, p. 7
in Case No. 15-cv-334). In support of this argument, the electric cooperatives
argue that both Congress’s broad grant of power to the TVA under the TVA Act
and the restrictions in the power contracts prevent the cooperatives from
unilaterally reducing rates or issuing refund payments per Alabama Code § 37-620. The plaintiffs argue that federal law does not preempt Alabama Code § 37-620 because the conditions in the power contracts are consistent with § 37-6-20.
“[P]reemption exists where it is impossible for a private party to comply
with both state and federal requirements or where state law stands as an obstacle to
the accomplishment and execution of the full purposes and objectives of
Congress.” Wiersum v. U.S. Bank, N.A., 785 F.3d 483, 486 (11th Cir. 2015)
(internal quotation marks and citation omitted). The power contracts and Mr.
Lanier’s declarations support the electric cooperatives’ contention that they can
neither reduce resale rates nor issue refunds as patronage capital without first
consulting with, and obtaining approval from, the TVA.
limitation on the electric cooperatives’ rate-related discretion falls squarely within
the TVA’s wide range of authority under the TVA Act.
assertion that they cannot comply with Ala. Code § 37-6-20 without running afoul
of their obligations to the TVA under the TVA Act is a plausible defense to this
action. Thus, the Court finds that the electric cooperatives’ federal preemption
defense is “colorable.”
To establish a causal connection between what the cooperatives have done
based on federal authority and the conduct that gives rise to this action, the electric
cooperatives must show that the plaintiffs’ claims arise from the electric
cooperatives’ performance of the cooperatives’ contracts with the TVA.
Marley v. Elliot Turbomachinery Co., Inc., 545 F. Supp. 2d 1266, 1274 (S.D. Fla.
2008) (citing Magnin, 91 F.3d at 1427-28); see also Isaacson, 517 F.3d 129, 137
(2d Cir. 2008) (“[N]on-governmental corporate defendants . . . must demonstrate
that the acts for which they are being sued . . . occurred because of what they
were asked to do by the Government.”) (emphasis omitted).
The agreements between the electric cooperatives and the TVA support the
cooperatives’ argument that the terms of those agreements prohibit the
cooperatives from reducing resale rates or issuing refunds as patronage capital—
the omissions for which the plaintiffs have sued the cooperatives. The contracts
contain various provisions that restrict the electric cooperatives’ authority to
unilaterally change or adjust rates. (Doc. 22-2, pp. 5-6, 12-13). In addition, Mr.
Lanier’s declarations indicate that the TVA prohibited the issuance of patronage
refunds. (Doc. 22-1, ¶¶ 5, 8). Thus, the Court finds a causal connection between
the electric cooperatives’ conduct under asserted official authority and the
plaintiffs’ claims against the cooperatives.
MOTIONS TO INTERVENE
A party seeking to intervene as of right may do so under Federal Rule of
Civil Procedure 24(a)(2) if: (1) the party’s application to intervene is timely; (2)
the party has an interest relating to the property or transaction which is the subject
of the action; (3) the party is so situated that disposition of the action, as a practical
matter, may impede or impair the party’s ability to protect that interest; and (4) the
party’s interest is represented inadequately by the existing parties to the suit.
Chiles v. Thornburgh, 865 F.2d 1197, 1213 (11th Cir. 1989). If a party establishes
each of these four elements, a district court must allow the party to intervene. Id.
With respect to intervention under Rule 24(a)(2), “[a]ny doubt concerning the
propriety of allowing intervention should be resolved in favor of the proposed
intervenors because it allows the court to resolve all related disputes in a single
action.” Fed. Sav. & Loan Ins. Corp. v. Falls Chase Special Taxing Dist., 983
F.2d 211, 216 (11th Cir. 1993).
As to the timeliness element, there is no specific time before which a
nonparty must move to intervene under Rule 24(a)(2). See Chiles, 865 F.2d at
1213 (“Timeliness is not a word of exactitude or of precisely measurable
dimensions. The requirement of timeliness must have accommodating flexibility
toward both the court and the litigants if it is to be successfully employed to
regulate intervention in the interest of justice.”) (quoting McDonald v. E.J. Lavino
Co., 430 F.2d 1065, 1074 (5th Cir. 1970)). The TVA filed its motions to intervene
in both cases on March 6, 2015, less than six weeks after the plaintiffs filed their
underlying complaints in state court and less than two weeks after the defendants
removed the cases to federal court. Thus, the TVA’s motion was timely. See, e.g.,
id. (finding motion timely when submitted seven months after case was filed);
Georgia v. U.S. Army Corps of Engineers, 302 F.3d 1242, 1260 (11th Cir. 2002)
(finding motion timely when filed six months after proposed intervenor became
aware of case); Defenders of Wildlife v. Bureau of Ocean Energy Management,
Civ. Act. No. 10-0254-WS-C, 2010 WL 5139101, at *2 (S.D. Ala. Dec. 9, 2010)
(finding motion timely when filed three months after lawsuit began).
The TVA also has a direct, substantial, legally protectable interest in the
proceeding such that the TVA is at least a real party in interest in the underlying
transaction. See Chiles, 865 F.2d at 1213-14; Huff v. Comm’r of IRS, 743 F.3d
790, 796 (11th Cir. 2014). The TVA produces, owns, and has congressionally
delegated authority and discretion to dispose of the electricity that the electric
cooperatives resell to local consumers. See 16 U.S.C. § 831i. Additionally, the
TVA has an interest in ensuring that the transactions between the local electric
cooperatives and consumers are consistent with the TVA’s broader goal of
allocating the supply of electricity across the Tennessee Valley region.
plaintiffs’ requested relief (i.e., declarations stating that the plaintiffs are entitled to
patronage refunds or rate reductions) would, as a practical matter, impede or
impair the TVA’s ability to protect its interest in distributing power and setting
resale rates in a manner consistent with its overall power supply scheme. Thus, the
TVA has satisfied the second and third elements of the test for intervention.
“The ‘inadequate representation’ requirement ‘should be treated as minimal’
and [it] is satisfied ‘unless it is clear that [the existing parties] will provide
adequate representation.’” Huff, 743 F.3d at 800 (quoting Chiles, 865 F.2d at
1214). Although the electric cooperatives and the TVA take the same position
with respect to this litigation, the electric cooperatives do not adequately represent
the TVA’s interests. The electric cooperatives are concerned with carrying out the
terms of their individual contracts with the TVA. The TVA’s interest, on the other
hand, extends to its overall goal of ensuring that 155 municipal and cooperative
distributors comply with the terms of their respective contracts, thereby furthering
the TVA’s broader policy objective of supplying power throughout the Tennessee
Additionally, the electric cooperatives do not have the same
institutional knowledge as the TVA with respect to the interrelationship between
supply of power, the TVA Act, and the power contracts. See id. at 800-01. The
plaintiffs clearly do not represent the TVA’s interests. Consequently, the Court
finds that none of the existing parties adequately represents the TVA’s interests.
Thus, the TVA may intervene in these actions as a matter of right under Rule
Consistent with the Court’s previous text orders denying the plaintiffs’
motions to remand in Sparks and Bates (see Doc. 25 in Case No. 15-cv-322; Doc.
30 in Case No. 15-cv-334), the Court finds that the actions in those cases were
properly removed under the federal officer removal statute. Additionally, pursuant
to Rule 24(a)(2), the Court GRANTS the TVA’s motions to intervene in Sparks
and Bates. (Doc. 10 in Case No. 15-cv-322; Doc. 15 in Case No. 15-cv-334).
DONE and ORDERED this November 23, 2015.
MADELINE HUGHES HAIKALA
UNITED STATES DISTRICT JUDGE
Alternatively, the Court would find that the TVA qualifies for permissive intervention under
Federal Rule of Civil Procedure 24(b)(2). A party may intervene under Rule 24(b)(2) if the party
can show that: (1) its application to intervene is timely; and (2) its claim or defense and the main
action have a common question of law or fact. It is “wholly discretionary with the court whether
to allow intervention under Rule 24(b) . . . .” In re Bayshore Ford Trucks Sales, Inc., 471 F.3d
1233, 1246 (11th Cir. 2006).
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