Motions Challenge Kentucky-American's Condemnation Powers

COMMONWEALTH OF KENTUCKY
FRANKLIN CIRCUIT COURT
DIVISION II
CIVIL ACTION NO. 08-CI-2059

KENTUCKY-AMERICAN WATER
COMPANY
PLAINTIFF

vs.

ELIZABETH FELGENDREHER DEFENDANT

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NOTICE-MOTION TO DISMISS AND
MEMORANDUM IN SUPPORT OF MOTION TO DISMISS-
TENDERED ORDER

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NOTICE


Notice is hereby given that this Motion To Dismiss will be brought on for hearing before the Franklin Circuit Court on May 13, 2009 at the hour of 9 a.m. or as soon thereafter as the motion may be heard, in the Franklin Circuit Court, Franklin County Courthouse, St. Clair Street, Frankfort, Kentucky 40601.

MOTION TO DISMISS

Comes the Defendant, Elizabeth Felgendreher, by counsel, and moves this Court pursuant to CR 12.02(f) to dismiss this action on the grounds that the Petition filed by Kentucky-American Water Company fails to state a claim upon which relief can be granted. A supporting memorandum follows.

MEMORANDUM IN SUPPORT OF MOTION TO DISMISS

Comes the Defendant, Elizabeth Felgendreher, by counsel, and in support of her Motion to Dismiss pursuant to Kentucky Civil Rule 12.02(f), states as follows:

INTRODUCTION

This action arises out of a Petition for condemnation filed by Kentucky-American Water Company (?KAWC”) seeking to condemn an easement on the Felgendreher property for the purposes of constructing and maintaining a water transmission and distribution line. This water transmission and distribution line is part of a proposed 30.59 mile, 42-inch ductile iron transmission main that would connect the proposed Kentucky River Station II (“KRS II”), a water treatment plant adjacent to Pool 3 on the Kentucky River, to KAWC’s Central Division distribution system in Fayette county. On April 25, 2008, the Kentucky Public Service Commission (“PSC”) approved KAWC’s application for a Certificate of Convenience and Necessity to construct KRS II and this transmission main. The Commission’s decision is currently under appeal to the Franklin Circuit Court.

As noted by the PSC in the April 25, 2008 Order, KAWC “owns and operates facilities used to distribute water to approximately 116, 978 customers in Bourbon, Clark, Fayette, Gallatin, Grant, Harrison, Jessamine, Owen, Scott and Woodford counties. It provides wholesale water service to Midway, Nicholasville, North Middletown, Georgetown, Versailles, East Clark County Water District, Jessamine-South Elkhorn Water District, and Harrison County Water Association. It directly or indirectly provides potable water service to over 326,000 persons.” Public Service Commission April 25, 2008 Order, pp. 1-2. The Central Division, which consists of facilities and operations other than in Gallatin, Owen and Grant Counties (the Northern Division), contains “the overwhelming majority of Kentucky-American’s facilities and customers” estimated at 97% of the total customers. Id., at. 2.

To construct the proposed transmission main, KAWC expressed a need to obtain easements from 104 private landowners residing in Franklin, Scott, and Fayette counties. Elizabeth Felgendreher was approached by KAWC in an effort to obtain an easement on their property for the purposes of constructing this transmission main. She was uncertain as to whether KAWC had the right to condemn an easement on her property should she deny the request and, along with three other landowners in Franklin County, filed a declaratory judgment action in Franklin Circuit Court seeking a determination as to whether KAWC had the statutory power to condemn their property in Franklin County for the purposes of constructing a transmission main to supply water to KAWC’s Central Division. After denying KAWC’s Motion to Dismiss, the Court held the matter in abeyance for thirty (30) days pending the completion of negotiations between the parties or the filing of a condemnation action by KAWC. She refused to negotiate further with KAWC after the company repeatedly failed to provide them with the specific statutory authority on which it relied for its power of condemnation.

KAWC filed a Petition to condemn on December 19, 2008. Pursuant to KRS 416.580, Commissioners were appointed on January 14, 2009. The Commissioners returned a report, and Summons issued. This Motion follows, and is timely since it is filed within twenty (20) days of service of the summons and Petition.


SUMMARY OF ARGUMENT

KRS 416.600 provides that a landowner against whom a Petition for condemnation has been filed, may file “ on or before the twenty (20) days after date of service,” an answer or other pleading challenging the right of the petitioner to condemn the property in question.

This Motion to Dismiss challenges the power of KAWC to condemn the requested easement on the Felgendreher property, and asks that the Petition be dismissed because the Petition fails to identify a sufficient basis in statute for the exercise of the power of eminent domain in this instance, as is required by KRS 416.570(1).

The Petition fails to cite any statutory law that would authorize KAWC to condemn an easement on Felgendreher property in Franklin County for the purposes of constructing the proposed transmission main. The Eminent Domain Act, which sets out the procedural requirements for the condemnation of property, requires that the petition for condemnation contain “allegations sufficient to show that the petitioner is entitled, under the provisions of applicable law, to exercise the right of eminent domain and to condemn the property . . . sought to be taken in such proceedings.” Instead, KAWC alleges, without citation to any “applicable law” that simply because it is a Kentucky corporation “engaged in the business of constructing, maintaining, and operating waterworks and pipelines for the supply of water to municipalities and their residents” it “is authorized under the laws of the Commonwealth of Kentucky to condemn lands and materials necessary for carrying out those purposes.” Petition, Paragraph 1. Without referencing any “applicable law” supporting this claim, these allegations are insufficient to meet the requirements of KRS 416.570, and thus the Petition should be dismissed.

Even if such a bald, conclusory statement could somehow constitute a “provision of applicable law,” there is no Kentucky statute authorizing a private for-profit water company such as KAWC that is selling to multiple water districts and communities at wholesale, in addition to retail customers within and outside of Fayette County, to condemn land in northern Franklin or Scott Counties in order to serve retail and wholesale customers in counties other than Fayette.

Thus, because KAWC has failed to cite statutory authority in its Petition that authorizes it to condemn the land in question and no statutory authority exists to grant KAWC the power of condemnation in this case, the Petition should be dismissed and costs assessed against the Petitioner for the institution of the action.

Finally, in this instance, even assuming that KAWC possesses the authority to condemn the Felgendreher property, the exercise of that authority should be disallowed in this instance as being unreasonable and arbitrary. The bisecting of the property rather than routing the line to lessen adverse effects during and after construction, on the uses of the property, makes the attempted exercise of that claimed authority violative of Kentucky Constitution Section 2.

ARGUMENT

I. THE PETITION SHOULD BE DISMISSED BECAUSE IT FAILS TO INDENTIFY SPECIFIC STATUTORY BASIS AUTHORIZING THE PETITIONER TO CONDEMN THE PROPERTY IN QUESTION

The Eminent Domain Act sets out the specific procedural requirements that must be followed by those seeking to exercise the power of eminent domain. Commonwealth v. Cooksey, 948 S.W.2d 122, 123 (Ky. App. 1997). Under the Act, a condemnor seeking to condemn property shall file a verified petition that shall contain “allegations sufficient to show that the petitioner is entitled, under the provisions of applicable law, to exercise the right of eminent domain and to condemn the property . . . sought to be taken in such proceedings.” KRS 416.570(1).

In construing a statute, the duty of the court is to give effect to the intent of the General Assembly. Commonwealth v. Plowman, 86 S.W.3d 47, 49 (Ky. 2002). Unless otherwise defined or having a technical meaning, words should be construed according to their common and approved usage. KRS 446.080. In addition, all parts of the statute must be given meaning so that no part of the statute will become ineffectual. Lewis v. Jackson Energy Co-Op Corp., 189 S.W.3d 87, 92 (Ky. 2005). If the statute is clear and unambiguous, it is to be applied as written if it expresses the legislature’s intent. Griffin v. City of Bowling Green, 458 S.W.2d 456, 457 (Ky. 1970).
Here, the statute is unambiguous and requires, like the condemnation statutes of other states , that the petitioner provide a reference to the legal authority authorizing it to condemn the property in question. The General Assembly chose to include the clause “under the provisions of applicable law” to modify the clause requiring the petition to contain “allegations sufficient to show that the petitioner is entitled” to condemn the requested property. By using the word “provisions,” as defined by Black’s Law Dictionary to be a “clause in a statute,” the General Assembly sought to require the condemnor to cite to the specific statute authorizing its power of eminent domain, rather than merely present a broad and unsupported claim that the laws of Kentucky authorize the petitioner to condemn property, as KAWC has done. Bryan A. Garner, BLACK’S LAW DICTIONARY (7th ed. 1999). Any other interpretation of KRS 416.570(1) fails to give effect to the “under the provisions of applicable law” clause in violation of the principles of statutory construction outlined in Lewis. 189 S.W.3d 87, 92 (Ky. 2005).

This interpretation is the logical construction of the statute and the obvious intent of the General Assembly. The petitioner has the burden of proving it has the power to condemn the property in question. 27 AM. JUR.2D EMINENT DOMAIN § 574. An essential element to that proof is the specific statute authorizing condemnation because the power of eminent domain, being inherent in the sovereign and belonging exclusively to the legislative branch, can only be delegated to individuals and entities by an act of the legislature. 26 AM. JUR.2D EMINENT DOMAIN § 5. Thus, without a statute giving it the power of condemnation, an entity does not have the power of eminent domain and would fail to meet its burden. As a result, an essential piece of the evidence needed by the petitioner to show its power of condemnation is the statute giving it that power, which is exactly what the plain language of the statute requires through the clause “under the provisions of applicable law.”

In this case, the only statements contained in the Petition alleging that KAWC has the power under Kentucky law to condemn the property in question are contained in Paragraph 1, which reads in full:

That Plaintiff is a corporation duly organized and existing under the laws of the Commonwealth of Kentucky, and is engaged in the business of constructing, maintaining, and operating waterworks and pipelines for the supply of water to municipalities and their residents and, as such, is authorized by the laws of the Commonwealth of Kentucky to condemn lands and materials necessary for carrying out those purposes.

KAWC does not cite any provision of applicable law entitling it to condemn an easement on the Felgendreher property, and instead attempts to rely on all of Kentucky law for its power to condemn. The general reference to the “laws of the Commonwealth of Kentucky” do not fall within the plain meaning of the “provisions of applicable law” clause of KRS 416.570(1), for had the General Assembly intended alleged condemnors to rely on the totality of Kentucky law for their power to condemn, the statute would not ask the petitioner to identify any authority inasmuch as it would be assumed the petitioner was relying on all of Kentucky law. KAWC’s failure to cite specific statutory authority for its power to condemn fails to comply with the requirements of KRS 416.570 as described above and thus the Petition should be dismissed.

Even if the “laws of the Commonwealth of Kentucky” could be construed as a provision of applicable law, it is unclear how the Defendants are expected to challenge KAWC’s right to condemn their property, as they are entitled to do under KRS 416.600, without being put on reasonable notice of what statute KAWC relies upon for the claim of the power of eminent domain. Because the power of eminent domain belongs exclusively to the legislative branch, the General Assembly not only must authorize an entity such as KAWC to exercise the power of eminent domain, but must also prescribe the mode and manner in which that power can be exercised, including the limitations on that power. 26 AM. JUR.2D EMINENT DOMAIN § 5.

As such, the power of eminent domain as granted by the General Assembly can only be used in the specific factual and legal situation set out by the legislature, which necessitates an analysis of the particular statute granting that power in light of the specific circumstances giving rise to the requested condemnation. It is unreasonable and fails to meet the threshold requirement both of the Eminent Domain Act and CR 8.01, which requires a “short and plain statement of the claim showing that the pleader is entitled to relief”, Id., a requirement whose purposes is “to give the opposing party fair notice of the nature and basis for grounds of the claim.” 6 Phillips KENTUCKY PRACTICE, at 135 (1995). KAWC has failed to allege in its complaint the provisions of law that give it the power of condemnation in this instance as required by KRS 416.570(1) and its complaint should thus be dismissed.

II. THE PETITION SHOULD BE DISMISSED BECAUSE THERE IS NO KENTUCKY STATUTE THAT GIVES KAWC THE POWER OF CONDEMNATION IN THIS CASE

It is axiomatic that a grant of the power to eminent domain is “to be strictly construed against the condemning party and in favor of the property owner[.]” 26 Am Jur 2D Eminent Domain, § 24. The power of eminent domain must be exercised in strict accordance with its essential elements to protect the constitutional right of the citizen to own and possess property against an unlawful perversion of such right.” Id., § 30. It is “within the authority of the General Assembly to define the limits of the right of eminent domain and to establish the specific terms under which the condemning authority may exercise such power.” Kelly v. Thompson, Ky., 983 S.W.2d 457, 458 (1998).

The General Assembly has provided water utilities with certain powers relative to condemnation and to use of rights-of-way. For example, the right of a company authorized under the laws of the Commonwealth to conduct the business of producing or supply water or who is engaged in the business of transmission or sale of water, to construct and maintain transmission and distribution lines “under, on, along, and over” any right-of-way used as a state, county or public way, is recognized under KRS 416.140. Nonstock nonprofit water associations (of which KAWC is not one) are authorized to exercise the power of eminent domain under K.R.S. 416.130, and city utilities are granted, with an exception not applicable here, the same rights with respect to condemnation and eminent domain as given corporations and partnerships under KRS 278.502 and 416.130. KRS 96.547.

There is no comparable general grant of power to privately-owned for-profit water utilities such as KAWC to condemn private lands for the purpose of construction or maintenance of such transmission or distribution lines.

KRS 96.080, the only potentially applicable grant of authority for condemnation of lands in order to facilitate maintenance or operation of waterworks or pipelines for the supply of water to a municipality, does not grant a power of condemnation to a private company in order to serve customers and water districts and customers in several counties, as the KRS II Project for which this easement is sought will do.

KRS 96.080, codified in a KRS Chapter entitled “Utilities In Cities,” provides that “[a]ny person constructing, maintaining or operating waterworks or pipelines for the supply of water to a municipality may condemn lands and material necessary to carry out these purposes, in the manner prescribed in the Eminent Domain Act of Kentucky.” This statutory grant of authority has been construed, in a case involving the prior codification of KRS 96.080 at KS 4814d-1, to provide a right of condemnation to the holder of a franchise to provide water to a municipality, of “such land or other property as may be necessary to carry into effect his franchise contract.” Thomas v. City of Horse Cave, 61 S.W.2d 601, 604 (1933). Nothing in the Thomas decision or in the statute itself enables a private for-profit water company selling to multiple water districts and communities at wholesale, in addition to retail customers within and outside of Fayette County, to condemn land in furtherance of those activities.
There is nothing in the KAWC application to the Public Service Commission for a certificate of convenience and necessity, in the hearing testimony regarding that certificate, or in the Commission’s Order, that limits or dedicates the distribution or sale of the water that will be produced and transmitted from the KRS II project to residents of the Lexington-Fayette Urban County Government, or which limits the construction, maintenance or operation of the Pool 3 waterworks or transmission pipeline for the supply of water “to a municipality.” Indeed, it would be reasonable to assume, in the absence of such constraints, that KAWC fully intends to utilize the water to meet the retail and wholesale needs of all customers in the Central Division through the KRS II project (and in fact, has proposed at terms requiring a $60 million public subsidy to make them affordable, to reserve 5 million gallons per day of production and transmission capacity for communities other than Fayette County). Indeed, there is nothing in the Public Service Commission’s Order granting a certificate of convenience and necessity that prevents KAWC from continuing to expand its wholesale water sales territory or retail system acquisitions, as it has during the previous years despite having identified a water capacity and supply deficit.

The May 16, 1995 franchise agreement between Lexington-Fayette Urban County Government and Kentucky-American Water Company, grants Kentucky-American a nonexclusive franchise and incorporates the terms of Resolution 146-95, as adopted by LFUCG on April 27, 1995. That ordinance contains no language empowering KAWC to condemn property (nor would such a grant of the municipality’s power be permissible) and is limited in scope to a twenty-year franchise to

"construct, erect, lay, relay, replace, operate and maintain a waterworks system and plant, embracing mains, pipelines, valve and valve boxes, hydrants, meters and meter boxes, service pipe and appurtenances, and any and all other facilities, appliances, apparatus and equipment necessary, used or useable, in the operation of a waterworks systems for the purposes of supplying and to supply water to the inhabitants of Fayette County for domestic, commercial, industrial and other purposes within the right-of-ways through, upon, over, along and under bridges, viaducts, sidewalks, public places and on the main public roads and highways in Fayette County, and on all streets, avenues and roads, running off from or connected therewith either directly or indirectly, and the privilege of opening and excavating the same without the payment of license or other fee as the business of the purchaser thereof may from time to time require, in constructing, erecting, laying, relaying, replacing, operating, maintaining or removing its pipelines and other works and equipment and together also with the right to transport water through its mains and pipelines to any other mains or pipelines, laid or to be laid, which are or may be connected therewith."

Lexington-Fayette Urban County Government Resolution No. 146-95, Section 1.

The franchise is limited, by its terms and by the jurisdictional limitations of the powers of LFUCG, to lands inside Fayette County.
As a company engaged in delivery and sale of waters to numerous entities other than to customers in Fayette County under the LFUCG ordinance, KAWC does not fall within the ambit of KRS 96.080 as “person constructing, maintaining or operating waterworks or pipelines for the supply of water to a municipality[.]”

Assuming, arguendo, that KAWC did fall within that description, under the Thomas decision, the power to condemn would extend only so far as necessary to enable the company to meet the franchise terms. Thomas v. City of Horse Cave, 61 S.W.2d 601, 604 (1933). Nothing in the Thomas decision nor in the statute itself enables a private for-profit water company selling to multiple water districts and communities at wholesale, in addition to retail customers within and outside of Fayette County, to condemn land in northern Franklin or Scott Counties in order to serve retail and wholesale customers in counties other than Fayette.

There appears to be no statutory authority that would allow KAWC, a private for-profit water company, to condemn an easement on the Felgendreher property in Franklin County in order to construct and maintain a transmission line that would serve KAWC’s entire Central Division, which includes customers outside of Fayette County. Because KAWC does not have the power to condemn in this instance, the petition should be dismissed.

III. ASSUMING ARGUENDO THAT KAWC IS FOUND TO POSSESS THE
POWER OF CONDEMNATION IN THIS INSTANCE, THE FAILURE TO ROUTE THE LINE SO AS TO MINIMIZE THE EFFECTS ON THE PROPERTY OWNER RENDERS THE EXERCISE OF THAT POWER ARBITRARY UNDER KENTUCKY CONSTITUTION SECTION 2

Finally, in this instance, even assuming that KAWC possesses the authority to condemn the Felgendreher property, the exercise of that authority should be disallowed in this instance as being unreasonable and arbitrary. The bisecting of the property rather than routing the line to lessen adverse effects during and after construction, on the uses of the property, makes the attempted exercise of that claimed authority violative of Kentucky Constitution Section 2.

Looking at the placement of the temporary and permanent easements on the Felgendreher property, it is apparent that the Petitioner has failed to exercise reasonable efforts to minimize the adverse effect of the proposed transmission main on the current and future uses of the property.

In determining whether the condemnor has demonstrated reasonable necessity to support an exercise of eminent domain, a reviewing Court considers whether the proposed action combines the greatest benefit to the public with the least inconvenience to the property owners consistent with such benefit. Davidson v. Commonwealth, ex rel. State Highway Commission, 61 S.W.2d 34, 36 (1933). The exercise of the condemning authority is subject not merely to the limitations established by the legislature, but also to the constitutional limitation imposed that the exercise of the authority not be arbitrary. Ky. Const. Section 2.

To the extent that KAWC has authority to condemn the Felgendreher property, Defendant Felgendreher respectfully requests that this Court reject the petition on the basis that the location of the line is on its face, violative of Kentucky Constitution Section 2.

Alternatively Defendant requests an evidentiary hearing be scheduled in order to present proof concerning the availability of less inconvenient locations for routing the transmission main, and the inconvenience that will attend the proposed routing.

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