CULLMAN — Both sides in the county’s ongoing water lawsuit added a coda to Monday’s circuit court hearing on the issue, summarizing their positions in arguments filed Wednesday ahead of an anticipated ruling on an emergency appeal the defendants filed last month to stay a temporary injunction order against them.

Defense attorneys contend that Hardeman’s original injunction order, issued in late May, should be stayed to prevent undue hardship on the judicial process—as well as on their clients, including the Governmental Utility Services Corporation of Cullman County (GUSC) and the South Cumberland Cooperative District (SCCD).

The original order, handed down by Circuit Judge Don Hardeman May 28, instructed the SCCD to return all county water department assets deeded to it in late April when the county commission transferred ownership of the department to the newly-created utility cooperative. A series of delays in the case, including an appeal of the order to the Alabama Supreme Court, has so far postponed that transfer from taking place.

To comply with the May injunction’s stipulation that the SCCD return the water department’s assets to Cullman County would, the defense argues, place too great a burden of cost and, possibly, redundant labor on the corporation, should the case ultimately be decided in its favor.

“In the interest of judicial economy,” argue defense attorneys with Birmingham law firm Johnston Barton Proctor and Rose, “the preliminary injunction and all proceedings in this action should be stayed until the Supreme Court of Alabama has ruled on the defendants’ appeal, which raises fundamental issues challenging this Court’s subject matter jurisdiction...It would be a waste of judicial and financial resources to enforce the preliminary injunction and require the GUSC and SCCD to return the water system assets to Cullman County if it is subsequently determined that the Court was without jurisdiction to issue the preliminary injunction in the first place.”

“Judicial economy” is at issue primarily because the defendants appealed the injunction last month to the state Supreme Court, initiating a separate legal process that may result in an outcome that could reverse the temporary limitations placed upon the defendants by the circuit court injunction order.

Plaintiffs’ attorneys argue in their brief that such a scenario should not limit the scope of the circuit court’s ruling in the meantime. Rather, they claim, the court “...has discretion to suspend, modify or stay its preliminary injunction during the pendency [waiting period] of the Defendants’ appeal to the Supreme Court...”

“Subject matter jurisdiction” refers to the authority granted a court to hear cases of a certain type—for instance, the power of a probate court to adjudicate estate cases.

The defendants in this case argue that the circuit court does not have subject matter jurisdiction over any of the five counts alleged in the lawsuit—including the allegation that associate commissioners violated the Alabama Open Meetings Act. Their basis for the claim, as it pertains to the Open Meetings Act, centers around the initial suit filing, which listed county commission chairman James Graves as one of the original seven plaintiffs, and the three-member county commission as a corporate defendant.

While the suit initially named associate commissioners Doug Williams and Wayne Willingham as party defendants in the case, it did not name Graves, who was among those sufficiently incensed by the April formation of the GUSC and SCCD to bring the lawsuit in the first place. On May 28—the day Judge Hardeman issued the original injunction order—the court realigned Graves as a party defendant in the case in order to procedurally include him as a member of the county commission, thereby naming him, technically, among the other defendants. That move, though, “...did not cure this procedural defect,” the defense now claims. It instead placed Graves in “...a paradoxical position of having ‘verified’ an Open Meetings Act complaint against himself.”

With respect to the other four counts in the suit, the defense argues that the circuit court lacks subject matter jurisdiction on the grounds that the six remaining plaintiffs—all residents of Cullman County—lack standing to bring the suit, since they are not authorized by law to seek the “recovery and return of county property, which only the State of Alabama has standing to pursue.” The defense also asserts that the named defendants are in no danger of claiming for themselves any harm they are seeking to remedy by requesting that Hardeman uphold his original injunction order.

Specifically, defense attorneys argue that the plaintiffs, as private citizens, do not have a particular monetary stake in any of the alleged financial endeavors they claim are jeopardized by the formation and empowering of the SCCD and the GUSC. Similarly, the defense claims the plaintiffs have failed to demonstrate that any harm that otherwise could befall them as a result of the SCCD remaining in control of the water department is “...actual or imminent.”

“Instead,” the defense’s brief reads, “the plaintiffs’ claims are based on the fear of future events—bond rating decreases, deprivation of employee benefits, and elimination of water service—without evidence that any of their fears are likely to become reality...The plaintiffs’ speculation about future ‘injuries’ to third parties is not sufficient to confer standing to seek their requested injunctive relief.”

Attorneys for the plaintiffs made an extensive answer of that assertion in their argument, noting that “taxpayers have standing to challenge ultra vires acts [actions conducted beyond the scope of intended powers granted to a body] of public boards and to sue to prevent a misappropriation of county funds.”

The plaintiffs’ brief essentially argues that—by virtue of the allegedly secret manner in which the entities were created—nearly every step in the process leading up to the creation of the GUSC and the SCCD constitutes a demonstrable misappropriation of funds. In particular, they cite the potential jeopardy in which county finances could be placed as it begins payment on a series of revenue-based bonds issued only two weeks before the water department, along with its revenue, was turned over to the SCCD.

Those bonds, totaling more than $7 million, were issued to finance countywide improvements to the water system’s pipe infrastructure. In its preliminary official statement (POS)—a federally-mandated disclosure statement given to potential investors to help them make an informed decision about a bond issuing entity’s stability and creditworthiness—the county did not include any mention of the possibility that its revenue-generating power as a water wholesaler could be transferred to an independent and newly-formed corporation within days of the bonds’ issuance.

A Birmingham-area investment banker testified on the plaintiffs’ behalf Monday that the omission was a crucial one. It “...certainly has an effect on the 2010 bonds, and, from what I was able to discern, it would have an effect on...[bonds issued as early as 2005] as well,” said expert witness David Hooks. Investors’ confidence could be shaken in revenue-backed bonds when the “...revenue stream that’s actually pledged to those four bond issues is now in someone else’s hands other than the issuer who issued those bonds,” he added.  

For plaintiffs’ attorneys, the injunction, “in fact...is the only safeguard now in place to ensure that the water revenue remains under the control of the County as issuer of the bonds, [and] to prevent other potential violations of the bond covenants...”

The plaintiffs also question the defendants’ grounds for requesting the state Supreme Court for an “emergency” stay of the injunction, noting that the defense had agreed to a two-week extension of the deadline for a final circuit court hearing after making the request.

“If a true emergency existed,” the plaintiffs argue, “how could the defendants agree to an extension? Moreover, after having asked both Courts for ‘emergency’ relief, no attorneys from this firm [Johnston Barton, et. al.] appeared at the hearing of their motion held on July 26...Their abdication of their role as advocates to an attorney from another firm [independent attorney Barry Mullins of Tuscaloosa] alone should be sufficient grounds to deny the motion and in fact to strengthen the preliminary injunction based upon the additional evidence presented since May 28th [the date of the preliminary injunction order].”

Whether these or other arguments filed Wednesday will sway the court in favor of either side could be settled quickly if—as some close to the case are speculating—Judge Hardeman issues a ruling today. If not, both sides will have the weekend to anticipate an outcome, since a ruling must come no later than Monday.



* Benjamin Bullard can be reached by e-mail at bbullard@cullmantimes.com or by telephone at 734-2131 ext. 270.