The opinion
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 07a0138p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
Plaintiff-Appellant, -
CITY OF COOKEVILLE, TENNESSEE,
-
-
-
Nos. 05-5886; 06-5363
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. -
-
N
Appeal from the United States District Courts
for the Middle District of Tennessee at Cookeville and Nashville.
No. 02-00093—Thomas A. Wiseman, Jr., District Judge.
Argued: March 5, 2007
Decided and Filed: April 19, 2007
Before: ROGERS and GRIFFIN, Circuit Judges; RUSSELL, District Judge.*
_________________
COUNSEL
ARGUED: Andree Sophia Blumstein, SHERRARD & ROE, Nashville, Tennessee, for Appellant.
W. Brantley Phillips, Jr., BASS, BERRY & SIMS, Nashville, Tennessee, Frances M. Toole,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees. ON BRIEF:
Andree Sophia Blumstein, SHERRARD & ROE, Nashville, Tennessee, T. Michael O’Mara,
Cookeville, Tennessee, for Appellant. W. Brantley Phillips, Jr., John R. Lodge, Jr., Russell S.
Baldwin, BASS, BERRY & SIMS, Nashville, Tennessee, Frances M. Toole, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees.
*
The Honorable Thomas B. Russell, United States District Judge for the Western District of Kentucky, sitting
by designation.
1
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 2
Elec. Membership Corp., et al.
_________________
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 electric 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.” Tenn.
Code Ann. § 6-51-112(a). The same Tennessee statute that requires this choice also provides a
formula for determining the amount of compensation that the municipality must offer the
cooperative. See Tenn. Code Ann. § 6-51-112(a)(2). As part of this compensation, the municipality
must offer “[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.” Tenn.
Code Ann. § 6-51-112(a)(2)(B).
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 to 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
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 3
Elec. Membership Corp., et al.
UCEMC refused to sell voluntarily any of its electric distribution properties or service rights in those
areas. See Tenn. Code Ann. § 6-51-112(a)(1) (requiring notice).
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 7 U.S.C. § 6942. RUS and CFC
each hold a security interest in all of UCEMC’s equipment and service rights within the annexed
areas. UCEMC, RUS, and CFC removed the case under 28 U.S.C. § 1442(a)(1) to the United States
District Court for the Middle District of Tennessee. Cookeville then filed a motion to remand in the
district court arguing that the district court lacked subject matter jurisdiction.
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). Section 1442 states that “[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” can remove a civil action to the district court. Courts have also required
as necessary for removal under this statute that the defendant assert a colorable federal defense.
Here, the district court held that “[c]learly, the RUS is an agency of the United States being sued for
acting under color of its office in this case.” Tennessee ex rel. City of Cookeville, 256 F. Supp. 2d
at 758. The court also held that defendants asserted the colorable federal defense of preemption
because they “adequately pled” such a defense and the defense was an issue the district court needed
to decide. Id.
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
facilities 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
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 4
Elec. Membership Corp., et al.
(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 hundred kilowatts (300kW) within the
annexed area during the last twelve (12) months preceding the date
of the notice provided for in subdivision (a)(1).
Tenn. Code Ann. § 6-51-112(a)(2). Cookeville and UCEMC agreed on the first and third elements
of the statutory formula. Cookeville agreed to pay UCEMC $1,136,325.25 for the present-day
reproduction cost, new, less depreciation of UCEMC’s electric distribution properties located in the
annexed areas. Cookeville also agreed to make ten annual payments to UCEMC of $276,330 to
comply with section 6-51-112(a)(2)(C).
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 of the cooperative outside the
annexed area after detaching the portion to be sold.” See City of Cookeville v. Upper Cumberland
Elec. Membership Corp., 360 F. Supp. 2d 873, 879 (M.D. Tenn. 2005) (quoting Tenn. Code Ann.
§ 6-51-112(a)(2)(B)). At a bench trial in November of 2004, each side presented testimony of an
expert who had produced a “reintegration” plan. Cookeville’s expert, Thomas M. Barnes, testified
about the report that he prepared. In the report, Barnes stated that to reintegrate UCEMC’s system,
UCEMC would only need to construct facilities in one of the annexed areas and would incur “costs
related to coordination of the facility transfer” and “a restocking charge of metering equipment” in
all of the annexed areas. Barnes estimated the total reintegration costs to be $127,282.64. Prior to
the annexations, Cookeville and UCEMC shared a Cookeville-owned substation in West Cookeville
(“West Substation”), and Barnes’ plan anticipated that UCEMC would continue to use that
substation.
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, resulting1 in increased costs from
maintaining the line and losing electricity due to resistance in that line.
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
conclusion, the court first noted that “[t]here was some argument at trial as to whether [the statutory]
1
When a current is run through an electrical line with resistance, some of the electrical energy is converted to
heat and lost. The longer the line, the more resistance between the substation and the consumer, and thus the more
electricity lost.
2
The district court first held that the proposed condemnation did not frustrate the purpose of the Rural
Electrification Act (“REAct”). City of Cookeville, 360 F. Supp. 2d at 875-78. Neither party challenges this part of the
court’s ruling.
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 5
Elec. Membership Corp., et al.
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 those
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
3
The district court also made a number of rulings not challenged on appeal. The district court refused to include
as reintegration costs the cost of power lines within the annexed areas because no evidence was presented at trial
regarding those costs. Id. The court also refused to make an upward adjustment sought by UCEMC in the amount of
over $3.1 million for “lost revenue from [supposedly] low cost/high profit customers [in the annexed areas].” Id. & n.5.
Finally, the court declined to make a downward adjustment sought by Cookeville for defendants’ purported “delay in
complying with the Tennessee law related to condemnations.” Id. & n.6.
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 6
Elec. Membership Corp., et al.
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 action is brought against
4
As a preliminary matter, RUS argues that this court cannot entertain the issue of removal jurisdiction because
Cookeville failed to raise this issue in its notice of appeal. This contention lacks merit. Federal subject matter
jurisdiction can of course be challenged at any stage of the litigation, and jurisdiction cannot be created by waiver. See
Ohio v. Doe, 433 F.3d 502, 505-06 (6th Cir. 2006); Alongi v. Ford Motor Co., 386 F.3d 716, 728 (6th Cir. 2004); Fed.
Nat’l Mortgage Ass’n v. LeCrone, 868 F.2d 190, 192 n.3 (6th Cir. 1989). In any event, Cookeville appealed from the
final order of the district court and this court consequently may consider any earlier errors to which Cookeville objected.
Where a party indicates in its notice of appeal that it appeals from the district court’s final order, this court considers any
alleged errors that occurred prior to the final order. United States v. Sandles, 469 F.3d 508, 518 n.6 (6th Cir. 2006).
Here, Cookeville’s notice of appeal stated that it appealed “from the final order of the District Court.” Therefore, we
may consider the removal issue.
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 7
Elec. Membership Corp., et al.
[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.
28 U.S.C. § 1442(a)(1). In the context of federal officer removal, the Supreme Court has held that
the officer “must both raise a colorable federal defense and establish that the suit is ‘for a[n] act
under color of office.’” Jefferson County v. Acker, 527 U.S. 423, 431 (1999) (quoting 28 U.S.C.
§ 1442(a)(1)) (citation omitted; emphasis and alteration in Acker).
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 § 1442(a)(1) demonstrate that
any federal agency sued can always remove under § 1442(a)(1) because the “sued” clause in that
provision applies only to federal officers.5
The text of § 1442(a)(1), is best read to mean that the three entities that can remove are
(1) the United States; (2) any agency thereof; or (3) any 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. A possible
different reading—assumed by the parties in this appeal—is that the three entities that can remove
are (1) the United States; (2) any agency thereof; or (3) any officer of the United States or of any
agency thereof; and that each of these entities must be sued in an official or individual capacity for
an act under color of such office. Although the latter reading is supported by the placement of a
comma 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 § 1442(a)(1) should “be read to permit the United
States to remove only when it is ‘sued in an official or individual capacity for any act under color
of such office’—perhaps a null set and surely a peculiar category.” See Richard H. Fallon, Jr.,
Daniel J. Meltzer & David L. Shapiro, Hart and Wechsler’s The Federal Courts And The Federal
System 910 (5th ed. 2003). Moreover, the Supreme Court rejected an interpretation of an earlier
version of the statute that would have applied a similar “sued” clause to agencies because under that
interpretation, the statute “read[] very awkwardly” because “[a]n agency would not normally be
described as exercising authority ‘under color’ of an ‘office.’” Int’l Primate Prot. League v. Adm’rs
of Tulane Educ. Fund, 500 U.S. 72, 80 (1991). Our independent reading of the text of § 1442(a)(1)
is thus that a federal agency defendant may remove without more.
5
The removal statute, § 1442(a)(1), is broad and allows for removal when its elements are met “regardless of
whether the suit could originally have been brought in a federal court.” Willingham v. Morgan, 395 U.S. 402, 406
(1969). But as the Ninth Circuit reasoned in a case involving prior exclusive jurisdiction, State Eng’r of Nev. v. S. Fork
Band of Te-Moak Tribe, 339 F.3d 804, 809 (9th Cir. 2003), “[§] 1442 is not a trump. If there are specific jurisdictional
bars elsewhere that prevent the district court from asserting jurisdiction, the general removal provision cannot overcome
the jurisdictional defect.” See also Nebraska ex rel. Dep’t of Soc. Servs. v. Bentson, 146 F.3d 676, 678-79 (9th Cir.
1998) (express deprivation of subject matter jurisdiction under 26 U.S.C. § 6305). Indeed, the legislative history of the
1996 amendment to § 1442 indicates that one purpose of giving agencies the power to remove was to “fulfill[] Congress’
intent that questions concerning the exercise of Federal authority, the scope of Federal immunity and Federal-State
conflicts be adjudicated in Federal court.” S. Rep. No. 104-366, at 31 (1996), reprinted in 1996 U.S.C.C.A.N. 4202,
4210-11. Cookeville does not identify any preclusive rule that would have divested the district court of jurisdiction after
removal.
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 8
Elec. Membership Corp., et al.
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 § 1442 permitted only federal officers,
not federal agencies, to remove suits to federal courts. The pre-1996 version stated that, “Any
officer of the United States or any agency thereof, or person acting under him, 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” could remove a
civil action to district court. Congress responded by replacing the beginning of the section (up to
the phrase “or on account of”) with the current language at issue. See S. Rep. No. 104-366, at 6-7,
30-31 (1996), reprinted in 1996 U.S.C.C.A.N. 4202, 4202, 4210-11. This effectively added the
United States and “any agency thereof” as parties that could remove cases to district court. Id. at
31 (noting that the amendment “legislatively reverses the Supreme Court’s decision in International
Primate Protection League”).
The Senate Report supports a reading that § 1442(a)(1) as amended permits a federal agency
to remove to federal district court without limitation. The Senate Report in multiple places separates
the “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. 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. 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 § 1442 is to be interpreted “broadly in favor of removal.”
Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006). RUS therefore properly
removed the action to the district court under § 1442(a)(1) because RUS is a federal agency.
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 required for agency removal); United States v. Todd, 245 F.3d 691, 693 (8th Cir.
2001) (finding that the United States had asserted a colorable federal defense for removal under
§ 1442 rather than rejecting the need for one). The requirement of a colorable federal defense,
however, is not only not supported by the statutory language, but also is not necessary to ensure the
constitutionality of § 1442(a) under Article III of the Constitution. Article III, section72 extends the
federal judicial power “to Controversies to which the United States shall be a Party.” This case is
thus different from Mesa v. California, 489 U.S. 121, 136-37 (1989), in which the Supreme Court
rejected the government’s argument that a federal defense is not required for officer removal. The
Mesa Court reasoned that an interpretation of § 1442 requiring such a defense ensures Article III
6
We are mindful of the limited utility and reliability of legislative history. In this regard, “the authoritative
statement is the statutory text, not the legislative history or any other extrinsic material.” Exxon Mobil Corp. v.
Allapattah Servs., Inc., 545 U.S. 546, 568 (2005).
7
This constitutional language of course does not lift the sovereign immunity of the United States. In this case,
however, the federal agency consented to jurisdiction so that, as agreed by RUS counsel at oral argument, there is no
sovereign immunity issue in this case. Cf. Lapides v. Bd. of Regents of Univ. Sys. of Ga., 535 U.S. 613, 616 (2002)
(holding that State waives Eleventh Amendment immunity when it removes to federal court).
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 9
Elec. Membership Corp., et al.
jurisdiction by virtue of the case’s “arising under” federal law. Id. No such interpretation is
required where the United States is a party.
But even if a colorable federal defense were required, RUS fulfilled this requirement by
asserting the defense of preemption. Defendants 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”), 7 U.S.C. §§ 901-950bb (as amended). City of
Cookeville, 360 F. Supp. 2d at 875. The district court noted that this was an issue of first impression
in the Sixth Circuit, and that other courts had split on the issue. Id. at 875. Compare Pub. Util. Dist.
No. 1 of Pend Oreille City v. United States, 417 F.2d 200 (9th Cir. 1969) (disregard of federal
interest precluded condemnation under state law), Pub. Util. Dist. No. 1 of Franklin County v. Big
Bend Elec. Coop., Inc., 618 F.2d 601 (9th Cir. 1980) (condemnation under state law not permitted
after disapproval by the Rural Electrification Administration), City of Morgan City v. S. La. Elec.
Coop. Ass’n, 31 F.3d 319 (5th Cir. 1994) (state-law condemnation preempted by REAct), with City
of Stilwell v. Ozarks Rural Elec. Coop. Corp., 79 F.3d 1038, 1043-46 (10th Cir. 1996) (REAct does
not preempt Oklahoma condemnation statute), Tlingit-Haida Reg’l Elec. Auth. v. Alaska, 15 P.3d
754, 766-68 (Alaska 2001) (similar). Although the district court ultimately sided with Cookeville
and held that the REAct did not preempt Tennessee law permitting the condemnations (a decision
defendants do not challenge on appeal), this does not mean that the defense was not colorable. For
instance, in Acker, 527 U.S. at 431, the Supreme Court concluded that defendants presented a
colorable federal defense of intergovernmental tax immunity even though the Court ultimately
rejected that defense. See also Magnin v. Teledyne Cont’l Motors, 91 F.3d 1424, 1427 (11th Cir.
1996) (“[A colorable federal defense] need only be plausible; its ultimate validity is not to be
determined at the time of removal.”). Here, where the federal defense was an issue of first
impression in this court and had previously found success in other circuits, one would be hard
pressed to say that the defense was not colorable. Therefore, RUS properly removed the action to
the district court even if assertion of a colorable federal defense were required for agency removal
under § 1442(a)(1).
2. Reintegration Costs
The district court did not clearly err by holding that Cookeville must pay to 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.” Tenn. Code Ann. § 6-51-112(a)(2)(B). Cookeville
argues that the district court erred by awarding reintegration compensation of $5.825 million for two
reasons: (1) the district court applied an incorrect legal standard by requiring financial efficiency
even though the statute requires only engineering efficiency; and (2) even if the district court applied
the correct legal standard, UCEMC’s reintegration plan, which the district court adopted, does not
comply with that standard. This court reviews the district court’s conclusions of law de novo and
findings of fact for clear error. Overton Distribs., Inc. v. Heritage Bank, 340 F.3d 361, 365-66 (6th
Cir. 2003).
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 10
Elec. Membership Corp., et al.
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 section 6-51-112(a)(2) suggests that the reintegration costs are those necessary to place
the system in the same state of integration that it was in prior to the condemnation. Section 6-51-
112(a)(2)(A) provides for replacement costs for any facilities acquired by the municipality whereas
section 6-51-112(a)(2)(B) then provides for the cost of constructing “necessary facilities to
reintegrate the system of the cooperative.” This scheme suggests that the reintegration costs are
those necessary to reconnect the replaced facilities into the cooperative’s existing electrical system.
To bring the system back to “unity” would involve placing the system in as integrated a condition
as existed prior to the annexation.
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 efficiency is largely semantic. It is not clear how an
engineering 9inefficiency would not be costly, or how any increased cost would not be caused by
engineering. Cookeville refers to no authority for such a distinction in the statute, legislative
history, case law, or any other source. There is nothing in the statute that purports to limit
reintegration costs only to “engineering” efficiency. The statute instead seeks to place the electric
cooperative in the same position it was prior to the municipality’s condemnation of its facilities.10
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 what “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,
8
Defendants first argue that Cookeville should either be estopped from making this argument because
Cookeville endorsed the same legal test at trial or should be deemed to have waived this argument because Cookeville
failed to object or suggest another legal standard at trial. Cookeville proposed a reintegration plan that included
inefficiencies and argued that this plan was consistent with the statute. Therefore, Cookeville neither is estopped from
making, nor has forfeited, this argument on appeal.
9
Indeed, the district court rejected an adjustment for loss of high paying customers. See supra n.3.
10
As an alternative basis for upholding the district court’s legal standard, defendants argue that Tennessee law
permits the district court to modify the statutory formula for compensation. Because the district court applied a standard
consistent with the statute, we do not need to reach this alternative argument.
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 11
Elec. Membership Corp., et al.
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 Tennessee Code section 6-51-112(a)(2)(B), the district court was left only with
UCEMC’s plan, which did meet the minimum requirements of the statute. Cookeville did not
propose an alternative plan—for example, a cost-shifting arrangement where UCEMC would
continue to use the West Substation but Cookeville would compensate UCEMC for cost
inefficiencies.11 The district court’s finding that UCEMC’s plan was required was therefore not
clearly erroneous. When left with the choice between two plans—one that was below the required
minimum and one that was arguably above that minimum—the district court did not clearly err by
requiring the only option that complied with the statute. Therefore, we affirm the district court’s
order requiring Cookeville to pay UCEMC up to $5.285 million in reintegration costs to construct
a new substation and distribution loop.
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 alter 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 the 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.
11
We do not suggest that such a proposal would itself be consistent with the statute. The statute defines
reintegration costs as “[a]n amount equal to the cost of constructing any necessary facilities,” Tenn. Code Ann. § 6-51-
112(a)(2)(B) (emphasis added), and thus might not include payments that are not for constructing facilities, but are
instead meant to compensate the electric cooperative for cost inefficiencies.
Nos. 05-5886; 06-5363 City of Cookeville v. Upper Cumberland Page 12
Elec. Membership Corp., et al.
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 determine the means and
timing of Cookeville’s payments to UCEMC 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 noted
that the $5.825 million awarded to UCEMC was “a maximum amount for reintegration damages”
and that “[i]n the event that actual costs are less than that amount, the remaining amount shall revert
to or remain with” Cookeville. While that decision was on appeal to this court, the district court
issued its injunction, which determined that Cookeville “is not entitled to the use and benefit of
[UCEMC’s] exclusive service rights until UCEMC has been fully compensated.” This decision
expanded the district court’s earlier judgment, which explicitly declined to determine the timing of
Cookeville’s payments. Nowhere in the earlier order did the district court require Cookeville to
compensate UCEMC prior to condemning UCEMC’s property or building electric distribution
facilities in the annexed areas. Also, the earlier order suggested that Cookeville might pay less than
the $5.825 million owed by indicating that if the costs were lower than estimated, the savings might
“remain” with Cookeville. Thus, the earlier order left open the question of whether Cookeville was
required to compensate UCEMC prior to condemnation. Therefore, by requiring Cookeville to pay
UCEMC prior to providing electric service within the annexed areas, the district court improperly
expanded an order on appeal to this court and thus exceeded its jurisdiction.
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.
12
In addition, it appears that the district court erred on the merits in entering the injunction. Under Tennessee
law, a municipality may condemn private property prior to paying compensation. In Zirkle v. City of Kingston, 396
S.W.2d 356, 360-62 (Tenn. 1965), the Supreme Court of Tennessee held that a municipality could take control of private
water and sewer lines on annexed property notwithstanding the fact that the municipality had not paid just compensation
to the owner of the lines prior to taking control of them. See also White v. Nashville & N.W. R. Co., 54 Tenn. (7 Heisk.)
518 (1872) (“[I]t is the approved opinion that property in this country when taken for public use need not be paid for
before being taken.”); cf. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1016 (1984) (“The Fifth Amendment does not
require that compensation precede the taking.”). UCEMC points to a Tennessee statute that prohibits the taking of
property until damages are paid. See Tenn. Code. Ann. § 29-16-122. However, the Zirkle court referred to similar
language in a prior version of this statute, but nonetheless the court held that the municipality could still condemn the
water and sewer lines prior to paying compensation because an injunction was not an appropriate remedy where the
property owner could later sue for damages. 396 S.W.2d at 360-62. Therefore, it is doubtful that the district court could
have enjoined Cookeville from encroaching on UCEMC’s service rights prior to paying compensation, even if it had
jurisdiction.