IN UNITED STATES DISTICT COURT FOR THE

EASTERN DISTRICT OF TENNESSEE

SOUTHERN DIVISION

CITY OF CHATTANOOGA, TENNESSEE, )

)
Plaintiff, )
)
v. )
) CIVIL ACTION NO.:________
WALKER COUNTY GENERAL WATER & )
SEWERAGE AUTHORITY, WALKER )
COUNTY, GEORGIA, )
)
Defendant.
)

COMPLAINT FOR BREACH OF CONTRACT, DECLARATORY JUDGMENT,

EQUITABLE AND INJUNCTIVE RELIEF

Plaintiff City of Chattanooga, Tennessee, by and through its undersigned counsel, files this

Complaint seeking breach of contract damages, a declaratory judgment, equitable and injunctive

relief against Defendant Walker County General Water & Sewerage Authority, Walker County,

Georgia, and respectfully states as follows:

PARTIES

1. Plaintiff City of Chattanooga, Tennessee (“Chattanooga” or the “City”) is a

municipal corporation located in Hamilton County, Tennessee, organized and existing under the

laws of the State of Tennessee.

2. Defendant Walker County General Water & Sewerage Authority, Walker County,

Georgia (“Walker County” or the “County”) is a county organized and existing under the laws of

the State of Georgia.

3. Chattanooga and Walker County are sometimes referred to individually as a “Party”

and collectively as the “Parties.”

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 JURISDICTION AND VENUE

4. This Court has personal jurisdiction over the City because the City is a municipality

organized under the laws of the State of Tennessee and is a Party to the contract that gives rise to

this dispute, which is an agreement relating to the treatment and disposal of wastewater in

Hamilton County.

5. This Court has personal jurisdiction over Walker County because Walker County is

a Party to the contract to which the City is a Party, and which relates to treatment and disposal of

wastewater in Hamilton County, Tennessee.

6. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because

of the complete diversity of citizenship of the parties and because the City seeks damages for

breach of contract in an amount to be determined but in any event greater than $75,000, and further

seeks a declaratory judgment and injunctive relief and other equitable remedies, regarding a

contract with a value of more than $75,000.

7. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(a) because Walker

County is a non-resident and the contract that gives rise to the dispute relates to the treatment and

disposal of wastewater in Hamilton County, Tennessee and a substantial part of the events,

commissions and property giving rise to the City’s claims occurred or are located in Hamilton

County, Tennessee.

8. Paragraph 23(h) of the contract between the Parties includes a forum selection

clause that states that the contract will be “enforced and interpreted according to the laws of the

State of Tennessee” and that “any action brought to enforce this agreement shall be brought in the

State or Federal Courts in the State of Tennessee.”

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 FACTS

Chattanooga’s Treatment and Disposal of Walker County’s Wastewater

9. Pursuant to the Chattanooga Area 208 Waste Treatment Management Plan,

Chattanooga operates the Moccasin Bend Wastewater Treatment Plant (“WWTP”), a treatment

plant of sufficient size and capacity to serve as an area wide wastewater treatment works for

portions of Hamilton County, Tennessee, and portions of Northwest Georgia located in Dade,

Walker, and Catoosa Counties.

10. Pursuant to the Chattanooga Area 208 Waste Treatment Management Plan,

Chattanooga constructed and operated its wastewater treatment works as a party of the 201 Area

Wide Facilities Plan.

11. Walker County is located in the drainage redefined by the 201 Area Wide Facilities

Plan and served by Chattanooga’s treatment works.

12. Pursuant to the National Pollutant Discharge Elimination System (“NPDES”)

permit for the treatment works all wastewater and extraneous waters from all sources entering the

wastewater collection and transmission system (“WCTS”) from inside or outside its boundaries

are required to be treated and discharged through permitted point sources.

13. Chattanooga entered into a consent decree with the United States and the State of

Tennessee, in the case styled United States of America et. al. v. City of Chattanooga, No. 1:12-cv-

00245, which became effective on April 23, 2013 (“Consent Decree”).

The 2014 Interjurisdictional Agreement Between Chattanooga and Walker County

14. Chattanooga and Walker County previously entered into an interjurisdictional

agreement (“IJA”), which governed the treatment and disposal of wastewater by Chattanooga from

Walker County (“the 2014 Agreement”).

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 15. Under the 2014 Agreement, Chattanooga billed Walker County for wastewater

based on “billable flow,” which is the quantity of water that Walker County actually sold to its

residents.

16. The 2014 Agreement expired on January 1, 2014.

17. The Consent Decree, the expiration of the 2014 Agreement, and changes in state

and federal law required Chattanooga and Walker County to negotiate a new IJA.

The Negotiation of the New Interjurisdictional Agreement

18. The parties proceeded to negotiate a new IJA governing the treatment and disposal

of Walker County’s wastewater in Chattanooga.

19. During the negotiations over the new IJA, Chattanooga continued to bill Walker

County under the requirements of the 2014 Agreement, using the Billable Flow method to

determine the amount of billing.

20. On November 19, 2015, David Ashburn, General Manager for the Walker County

Sewage Authority, signed the new IJA on behalf of Walker County.

21. On April 4, 2016, Justin Holland, Administrator of the Department of Public Works,

signed and executed the new IJA on behalf of Chattanooga.

22. The new IJA became effective on April 4, 2016 and remains in effect for fifteen

(15) calendar years (the “2016 Agreement”).

23. On November 28, 2016, the parties amended the 2016 Agreement to remove a

reference to a Chattanooga City Council resolution; otherwise, the 2016 Agreement remained

unchanged. A true and correct copy of the 2016 Agreement, as amended, is attached as Exhibit A

to this Complaint and is incorporated herein by reference.

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Walker County’s Payment Obligations Under the 2016 Agreement

24. Chattanooga’s claims in this action against Walker County relate to the provisions

of the 2016 Agreement governing the billing rate for treatment and disposal of Walker County’s

wastewater.

25. Paragraph 14 of the 2016 Agreement provides that “[f]or all wastewater treated by

the WWTP, or through such other applicable regional WCTS and wastewater treatment plants as

may hereafter be constructed by Chattanooga, Walker County shall pay Chattanooga in the manner

hereafter set forth the lower of the applicable following rates (City Code Chapter 31, Article II,

Section 31-36, § (c) an[d] (d)).”

26. In particular, Paragraph 14(c) provides that the amount due from Walker County

“shall be the dollar amount derived by applying the total flow charge to the quantity of water

measured by a flow meter installed and maintained at or near the point of inter-connection between

the system of the regional user and the Chattanooga system (City Code Chapter 31, Article II,

Section 31-36, § (d)).”

27. The 2016 Agreement requires Walker County to install the flow meters to measure

the wastewater flow at specific points of entry into the Chattanooga WCTS, known as “inter-

connection points,” subject to Chattanooga’s approval.

28. Paragraph 14(e) provides that “[p]ayment from Walker County to Chattanooga shall

be made monthly, with payment due within thirty (30) days following the billing date for the

preceding month.”

29. Under Paragraph 14(f), Walker County covenants “at all times to establish,

maintain, prescribe, and collect fees, tolls, and charges for wastewater facilities furnished its

customers, sufficient to provide funds for the payment of all obligations of Walker County under

[the] Agreement.”

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 30. Paragraph 20 of the 2016 Agreement provides that “Walker County shall be liable

for stipulated penalties to Chattanooga for violations of this Agreement as specified herein. A

violation includes failing to perform any obligation required by this Agreement . . .”

31. Paragraph 20 includes a schedule of stipulated penalties that accrue “per violation

or failure to perform per day for each violation of failure to perform.”

32. Paragraph 20 provides that Walker County “shall be liable for interest on such

penalties, accruing as of the date payment becomes due.”

Pursuant to the 2016 Agreement, Chattanooga Begins Billing Walker County Based on the
Total Flow Rate

33. To date, Walker County bills its residential customers $3.50/1,000 gallons, which

has been in place for sixteen (16) years.

34. At the time Chattanooga and Walker County executed the 2016 Agreement,

Chattanooga City Code 31-36 set forth a Wheelage and Treatment total charge of $1.5169/1000

gallons for the total flow-regional user.

35. Under Paragraph 16(b) of the 2016 Agreement, Chattanooga agreed “to review

[the] rates annually, and make appropriate revisions thereto.”

36. Paragraph 18 of the 2016 Agreement requires Chattanooga “to acquire, equip,

operate, and maintain sufficient treatment facilities to comply with the NPDES Permit and in

conformance with applicable statutes and regulations.”

37. Pursuant to the discretion granted in the 2016 Agreement, Chattanooga raised rates

for its regional users for fiscal years 2017 and 2018.

38. On July 1, 2016, Chattanooga raised the fiscal year 2017 Wheelage and Treatment

total charge for total flow-regional users to $1.8114, which included a “regional capital charge” of

$0.19.

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 39. After Chattanooga and Walker County executed the 2016 Agreement, Chattanooga

provided Walker County with a grace period to pay the billable flow rate under the 2016

Agreement.

40. On March 2, 2017, Chattanooga agreed to extend that grace period to July 1, 2017,

at the request of Walker County, because of Walker County’s purported “financial issues.”

41. Up to July 1, 2017, Chattanooga billed Walker County based on billable flow,

because Walker County had not installed the flow meters.

42. After July 1, 2017, Chattanooga began to bill Walker County based on total flow,

which caused Walker County’s bill to increase substantially.

43. On July 1, 2017, Chattanooga also raised the fiscal year 2018 Wheelage and

Treatment total charge for total flow-regional users to $2.188, which included an increased

regional capital charge of $0.9020.

44. From April 2016 to July 2017, Walker County was paying for a small fraction of

the total flow volume it was actually using.

Walker County Breaches the 2016 Agreement by Short-Paying Chattanooga

45. Walker County refused to honor the terms of the 2016 Agreement, which requires

it to pay the total flow rate as specified under Paragraph 14(c).

46. Instead, Walker County has continued to pay the billable flow rate under the 2014

Agreement, and it has paid only the fiscal year 2017 rate.

47. On December 13, 2017, officials from Chattanooga met with Walker County

officials to discuss the underpayment.

48. At that December 13, 2017 meeting, Chattanooga requested a plan from Walker

County to start paying the agreed rate as set forth in the 2016 Agreement.

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 49. Since December 13, 2017, Walker County has failed to come up with a plan and

has continued to short-pay Chattanooga.

50. As of the filing of this Complaint, Walker County is $1,786,769.82 in arrears on its

sewer bill. That figure includes penalties imposed under Paragraph 20 of the 2016 Agreement.

COUNT I: BREACH OF CONTRACT

51. The City realleges and incorporates all of the preceding paragraphs as if fully set

forth herein.

52. Walker County is required to pay the total flow rate as required under Paragraph

14(c) of the 2016 Agreement.

53. Walker County is required to pay the City’s current fiscal year 2018 rates.

54. Walker County’s failure to pay the agreed-upon rates is a material breach of the

2016 Agreement.

55. Walker County’s failure to pay the agreed-upon rates permits the City to charge

penalties against Walker County under Paragraph 20 of the 2016 Agreement.

56. Walker County’s material breach has deprived the City of revenue that it is entitled

to under the 2016 Agreement.

57. As a result, the City has been damaged in an amount of at least $1,786,769.82 which

continues to increase each month as Walker County fails to honor its payment obligations under

the 2016 Agreement. Walker County is liable for those damages, which were caused by Walker

County’s material breaches of the 2016 Agreement.

COUNT II: DECLARATORY JUDGMENT

58. The City realleges and incorporates all of the preceding paragraphs as if fully set

forth herein.

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 59. The City seeks a declaration from the Court under the Tennessee Declaratory

Judgments Act, Tenn. Code § 29-14-101 et seq., declaring that:

a. Walker County is required to pay the total flow rate in accordance with Paragraph

14(c) of the 2016 Agreement;

b. Walker County is required to pay current fiscal year rates, pursuant to the City’s

power to adjust rates under the 2016 Agreement;

c. This action is timely filed under the applicable statute of limitations, Tenn. Code §

28-3-109, because the City filed this complaint within six years of the date Walker County began

violating its obligations under the 2016 Agreement.

COUNT III: QUANTUM MERUIT

60. The City realleges and incorporates all of the preceding paragraphs as if fully set

forth herein and pleads Count III in the alternative in the event the Court finds there is no existing,

enforceable contract between the City and Walker County regarding the subject matter of this

lawsuit.

61. There is no existing, enforceable contract between the City and Walker County

providing for the payment of the fiscal year 2017 rate by Walker County to the City for receipt of

sewer services from the City.

62. The City has provided valuable goods and services to Walker County in providing

sewer services.

63. Walker County received sewer services and related goods from the City.

64. Based on prior course of conduct and communications between the City and Walker

County for sewer services, Walker County should have reasonably understood that the City

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 expected to be compensated by Walker County of its pro rata share of the costs to operate the sewer

system.

65. It would be unjust for Walker County to benefit from the provision of sewer services

by the City without paying its pro rata share of costs related to sewer system operation.

COUNT IV: UNJUST ENRICHEMENT

66. The City realleges and incorporates all of the preceding paragraphs as if fully set

forth herein and pleads Count IV in the alternative in the event the Court finds there is no existing,

enforceable contract between the City and Walker County regarding the subject matter of this

lawsuit.

67. The City conferred a benefit upon Walker County by providing sewer services to it

and its residents.

68. Walker County was aware of and appreciated the nature of the benefit conferred on

it by the City by providing sewer services to it and its residents.

69. Walker County accepted the benefit of sewer services from the City under

circumstances that would make it unjust and inequitable for Walker County to retain the value of

these services without payment of the value thereof.

COUNT V: INJUNCTIVE RELIEF

70. The City realleges and incorporates all of the preceding paragraphs as if fully set

forth herein.

71. Because Walker County has refused to honor its payment obligations under the

2016 Agreement, and Walker County’s refusal to do so causes the City irreparable injury, the City

seeks an order from this Court requiring Walker County to terminate the inter-connections and

disconnect from the Chattanooga WCTS.

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 PRAYER FOR RELIEF

WHEREFORE, Plaintiff City of Chattanooga respectfully requests that the Court:

a. Enter judgment in favor of the City on Count I and award it breach of contract

damages in an amount to be determined, but no less than $1,786,769.82.

b. Enter judgment in favor of the City on Count II and declare (i) Walker County is

required to pay the total flow rate in accordance with Paragraph 14(c) of the 2016 Agreement; (ii)

Walker County is required to pay current fiscal year rates, pursuant to the City’s power to adjust

the rates under the 2016 Agreement; and (iii) the applicable statute of limitations has not run.

c. In the alternative, award the City damages equal to the reasonable value of the

sewer services and goods it provided Walker County in an amount to be determined.

d. In the alternative, award the City damages equal to the value of the benefits

conferred upon Walker County by the City and unjustly retained by Walker County without due

compensation to the City in an amount to be determined.

e. Enter an order requiring Walker County to disconnect from the Chattanooga

WCTS.

f. Award the City any fees, costs, expenses, and attorney’s fees incurred as a result of

this legal challenge, pursuant to Paragraph 21 of the 2016 Agreement.

g. Award the City pre- and post-judgment interest at the maximum legal rate.

The City respectfully requests any and all further relief both at law and in equity that the

Court may find just and proper.

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 Date: June 14, 2019 Respectfully submitted,

OFFICE OF THE CITY ATTORNEY

CITY OF CHATTANOOGA, TENNESSEE

By: /s/ Phillip A. Noblett______ _

PHILLIP A. NOBLETT - BPR No. 10074
City Attorney
pnoblett@chattanooga.gov
JOSEPH A. KELLY - BPR No. 14921
josephkelly@chattanooga.gov
ROBERT D. ROBINSON- BPR No. 32770
Rdrobinson2@chattanooga.gov
Assistant City Attorneys
100 E. 11th Street, Suite 200
Chattanooga, TN 37402
(423) 643-8250 - Telephone
(423) 643-8255 - Facsimile

KING & SPALDING LLP

By: /s/ Adam G. Sowatzka_______ __

ADAM G. SOWATZKA
asowatzka@kslaw.com
Pro Hac Pending
1180 Peachtree Street N.E.
Atlanta, GA 30309-3521
(404) 572-3508 – Telephone
(404) 572-5100 – Facsimile

ATTORNEYS FOR CITY OF CHATTANOOGA

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