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Town of Sterlington v. Greater Ouachita Water Co.

Court of Appeals of Louisiana, Second Circuit

April 10, 2019

TOWN OF STERLINGTON Plaintiff-Appellant
v.
GREATER OUACHITA WATER COMPANY Defendant-Appellee

          Appealed from the Fourth Judicial District Court for the Parish of Ouachita, Louisiana Trial Court No. 171, 226 Honorable Alvin Rue Sharp, Judge

          ROUNTREE LAW FIRM James A. Rountree Counsel for Appellants Town of Sterlington, Vern A. Breland, Kerry Elee, Caesar Velasquez

          JAY BARDY MITCHELL Assistant District Attorney Counsel for Intervenor Appellee Ouachita Parish Police Jury

          HAMMONDS, SILLS, ADKINS & GUICE Elmer Gray Noah, II Counsel for Intervenor Appellee Ouachita Parish School Board

          HAYES, HARKEY, SMITH & CASCIO, L.L.P. Thomas Moore Hayes, III Philip E. McQueen Counsel for Defendant Appellee Greater Ouachita Water Company

          SHOTWELL, BROWN & SPERRY Clarence Allan Martin, III Counsel for Defendant Appellee Greater Ouachita Water Company

          JOHN ANDREW GALLAGER KAREN DAY WHITE Counsel for Appellee Louisiana Municipal Association

          Before MOORE, PITMAN, and McCALLUM, JJ.

          McCALLUM, J.

         This appeal calls for us to consider two similar yet contrasting issues. First, the trial court has granted a preliminary injunction against a public subdivision. In essence, the trial court has exercised a unique power wherein it ordered and prevented another government entity from taking certain actions. Second, is a complex issue involving the fundamental division of governmental power. Essentially, we are tasked with deciding whether the trial court overstepped its constitutional authority when it granted a writ of mandamus, an extraordinary remedy, ordering a political subdivision to pay a judgment.

         The City of Sterlington appeals the judgment of the trial court, asserting two errors: (1) the trial court erred in granting the Greater Ouachita Water Company a preliminary injunction against the City of Sterlington; and (2) the trial court erred when it granted a writ of mandamus in favor of the Greater Ouachita Water Company against the City of Sterlington. The City of Sterlington argues that the trial court erred in granting the preliminary injunction because the Greater Ouachita Water Company failed to show any possibility of irreparable injury. The City of Sterlington further contends that the trial court had no authority in granting the writ of mandamus where it had yet to appropriate any funds to pay the judgment in question.

         The Greater Ouachita Water Company counters that the trial court did not err. It argues that that it did not need to show the possibility of irreparable injury. It further urges that Louisiana Revised Statute 19:201 authorized the trial court to issue the writ of mandamus at issue. Additionally, the Greater Ouachita Water Company requests that we increase the award of attorney fees and court costs to include this appeal.

         For the following reasons, we affirm the trial court's judgment as to its grant of the preliminary injunction and we reverse the trial court's judgment as to its grant of the writ of mandamus.

         FACTS

         On June 17, 1996, the City of Sterlington ("Sterlington") entered into an agreement with the Greater Ouachita Water Company ("GOWC"). The agreement, titled ORDINANCE NO. 96-02 (UTL) ("Ordinance Agreement"), granted GOWC, for a period of twenty years, "a non-exclusive franchise … for the construction, maintenance and operation of a water system including the production, transmission, distribution and sale of water in, through, across and beyond the Town of Sterlington[.]" Within the agreement, Sterlington further authorized GOWC the right to "construct, maintain and operate a system of pipes, pipelines, water mains, laterals, conduits, feeders, regulators, meters, fixtures, wells, storage facilities, connections and attachments and other instrumentalities and appurtenances[.]"

         Between June of 1996 and November of 1998, Sterlington installed water mains in the Town of Sterlington for fire protection, a 150, 000-gallon elevated storage tank ("water tower") and a pumping station. By agreement ("Water Tower Agreement") executed on November 1, 1998, Sterlington granted GOWC exclusive use of the water mains, water tower and pumping station. Furthermore, as consideration for the agreement, GOWC assumed full responsibility and liability for the maintenance, operation and upkeep of the water mains, water tower and pumping station. GOWC further agreed to hold Sterlington free of any and all liability and responsibility connected to the use of the water mains, water tower and pumping station. The agreement was executed and effective to June 17, 2016, the same date the Ordinance Agreement was set to expire.

         Prior to the expiration date of the Ordinance Agreement and the Water Tower Agreement, Sterlington and GOWC entered into an Asset Purchase Agreement ("APA").[1] With a desire to own and operate its own water distribution system, Sterlington executed the APA on April 9, 2015, with GOWC. For the consideration of $2, 600, 000.00, Sterlington agreed to purchase all of GOWC's infrastructure within a specified area, detailed within the APA. Furthermore, within the APA, the parties agreed to the following notable terms and conditions, to wit:

Section 7.01 Conditions to Obligations of All Parties.[2] The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:
(e) Buyer shall have completed construction of the water treatment plant to serve the customers within the Area and shall have completed all construction necessary to tie the water treatment plant into Seller's existing water distribution system in the Area.
Section 9.01 Termination. This Agreement may be terminated at any time prior to the Closing:
(c) by Seller by written Notice to Buyer if:
(i) Seller is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure cannot be cured by Buyer by the Drop Dead Date[.][3]
Section 9.02 Effect of Termination. In the event of the termination of this Agreement in accordance with this Article, this Agreement shall forthwith become null and void, except as provided below, and the following shall apply: …
(c) Buyer and Seller shall sign a new franchise agreement for a term of twenty (20) years; and
(d) Buyer and Seller shall sign a new agreement allowing Seller to use the 8" and 6" fire mains and the 150, 000 gallon elevated tank and pumping station owned by Buyer for a term of twenty (20) years.
Section 10.11 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

         By letter dated April 12, 2017, GOWC terminated the APA with Sterlington. Citing Article VII, Section 7.01(e), GOWC notified Sterlington of the termination due to the fact that Sterlington had failed to construct a water treatment plant or any of the infrastructure required to connect the plant to the water distribution system. GOWC further noted that the Drop Dead Date had passed and that Sterlington had failed to perform in accordance with the APA as a whole. Additionally, it notified Sterlington that due to the termination, Sterlington was required to promptly enter into the necessary agreements to renew or extend the franchise and use agreements as provided in Article IX, Section 9.02 of the APA. Thereafter, GOWC provided an agreement for the extension of the franchise and use agreements to Sterlington.

         Refusing to sign GOWC's extension agreements, Sterlington instead filed an expropriation action against GOWC. Alleging significant residential and commercial growth and GOWC's failure to satisfy such needs, Sterlington sought to gain by expropriation the same infrastructure, from GOWC, which it failed to acquire with the APA, for $1, 400, 000.00.

         GOWC countered Sterlington's expropriation cause with an exception of prematurity. GOWC argued that because Sterlington did not own or operate the necessary treatment plant required for a proper and safe water distribution system, then expropriating the infrastructure from GOWC would be premature. The trial court, agreeing with GOWC, granted its exception and dismissed Sterlington's cause of action. Sterlington did not appeal the trial court's decision. Thereafter, GOWC filed a motion to tax fees and costs, requesting $59, 231.98 in attorney fees and costs it incurred while challenging Sterlington's expropriation suit.

         Prior to the trial court hearing on the motion to tax fees and costs, GOWC determined that the water tower had a design flaw. In seven letters from the State of Louisiana Department of Health, dated from September 11, 2014, to August 25, 2015, the State informed GOWC that the water tower chlorine residual level had fallen below the Louisiana State Sanitary Code's acceptable levels. After years of mitigating the problem with temporary remedies, GOWC grew concerned for the safety and drinkability of the water. The temporary remedies further caused GOWC concern because they hampered the ability of GOWC to provide appropriate amounts of water for fire protection. On June 29, 2017, the State authorized and granted a permit for GOWC to make the necessary changes to ensure the safety of the water. On August 19, 2017, GOWC notified Sterlington of its intent to improve the water tower. To prevent stagnation of the water, and to improve the ...


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