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Lake v. Marshall-Dekalb Electric Cooperative

United States District Court, N.D. Alabama, Middle Division

May 14, 2015

JOHN LAKE, on behalf of himself and others similarly situated, Plaintiff,




On January 26, 2015, plaintiff John Lake ("Mr. Lake") filed a class action complaint against defendant Marshall-DeKalb Electric Cooperative ("Marshall-DeKalb") in the Circuit Court of Marshall County, Alabama. (Doc. 1-1 at 4). Marshall-DeKalb is an electric cooperative that purchases electricity from the Tennessee Valley Authority ("TVA") and sells it to customers. Mr. Lake is a member of Marshall-DeKalb. ( Id. at 5). His action seeks a declaration that the putative class that he represents is entitled to a refund of excess revenues as"patronage capital" from Marshall-DeKalb pursuant to Alabama law. ( Id. at 4-5).

On February 25, 2015, Marshall-DeKalb removed the action to this court. (Doc. 1). The case is presently before the court on Mr. Lake's motion to remand ("the Motion"), filed on March 26, 2015. (Doc. 16). The Motion alleges that this court lacks subject matter jurisdiction over this case. ( Id. ). Marshall-DeKalb has filed a response in opposition to the motion (Doc. 18), to which Mr. Lake has replied (Doc. 20). Therefore, the matter is now under submission. For the following reasons, the court DENIES the Motion.


The TVA is an agency of the United States established by the Tennessee Valley Authority Act ("the Act") for the purpose of, among other things, providing electricity throughout the Tennessee Valley, including parts of Northern Alabama. 16 § U.S.C. 831 et seq. The Act provides that the TVA's Board of Directors is authorized to sell surplus power "to States, counties, municipalities, corporations, partnerships, or individuals... and to carry out said authority, the Board is authorized to enter into contracts for such sale." 16 § U.S.C. 831i. The Act also states that the Board of Directors "is authorized to include in any contract for the 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.

Marshall-DeKalb is a cooperative corporation created under the law of Alabama. ( See Doc. 18-2 at 2). On December 30, 1981, Marshall-DeKalb and the TVA entered into a contract[1] whereby Marshall-DeKalb would sell electricity produced by the TVA. ( Id. ). The contract stipulates that resale rates - the rates by Marshall-DeKalb charges to its customers - must conform to the TVA's "Schedule of Rates and Charges." ( Id. at 5). Furthermore, the contract specifies that any change (including a decrease) to the rates must be agreed upon by both parties. ( Id. at 5-6). A "Schedule of Terms and Conditions" incorporated in the contract gives specific procedures that govern when and how the parties can make adjustments to Marshall-DeKalb's resale rates. ( Id. at 18-20). Additionally, the contract limits the possible uses Marshall-DeKalb can make of revenue earned from the sale of TVA-produced electricity. Any surplus revenue (revenue remaining after electric system operating expenses, debt payments, and reasonable reserves) is to be used for new construction or early debt retirement. ( Id. at 6).


"Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). For removal to be proper, the court must have subject matter jurisdiction in the case. The notice of removal in this case premises jurisdiction on 28 U.S.C. § 1442, which states,

(a) A civil action or criminal prosecution that is commenced in a State court and that is against or directed to any of the following may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending:
(1) The 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, in an official or individual capacity, for or relating to 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.

28 U.S.C. § 1442(a). It is well-established that private parties can qualify as "acting under" a United States agency or officer. See, e.g., Isaacson v. Dow Chem. Co., 517 F.3d 129, 137 (2d Cir. 2008) (applying this section to "non-governmental defendants").

The Supreme Court has explained that the "basic purpose" of the removal jurisdiction in 28 U.S.C. § 1442(a) is

to protect the Federal Government from the interference with its operations that would ensue were a State able, for example, to arrest and bring to trial in a State court for an alleged offense against the law of the State, officers and agents of the Federal Government acting within the scope of their authority. State-court proceedings may reflect local prejudice against unpopular federal laws or federal officials. In addition, States hostile to the Federal Government may impede through delay federal revenue collection or the ...

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