Nashville Chancellor Rules in Favor of DUD

February 25, 2014
Dwayne Page
Chancellor Ellen Hobbs Lyle

A ruling handed down today (Tuesday) by a Davidson County Chancellor may have cleared the way for the DeKalb Utility District to build its own water treatment plant.

Chancellor Ellen Hobbs Lyle has dismissed a petition for a judicial review by DUD ratepayers and the City of Smithville who were seeking to overturn a decision by the Utility Management Review Board, who last April ruled against the petitioners in their quest to halt DUD's plans for construction of a water plant. In her ruling Tuesday, Chancellor Lyle affirmed the UMRB decision.


hppscan343.pdf (6.67 MB)

Specifically, the petitioners (DUD ratepayers/City of Smithville) asked the court to review the following issues:

1. "Did the UMRB err by failing to consider, pursuant to state law, the appropriateness of the DUD expanding its "services provided" to include the construction of a separate, duplicative unnecessary water treatment facility and thereby violate a statute and/or follow an unlawful procedure?"

2. "Did the UMRB err because its ruling is not supported by material evidence in the record?"

3. "Did the UMRB follow an unlawful procedure by failing to let the affected ratepayers in attendance at the contested hearing in Smithville be heard in a public hearing?"

"After considering the record, argument of counsel and the law, the court dismisses the Petition for Judicial Review. The Court determines that the UMRB performed its duty correctly and provided the review required by the statute; the UMRB's decision is not unsupported by substantial and material evidence; and the UMRB did not engage in unlawful procedure," wrote Chancellor Lyle.

"Having ruled against the Petitioners on each of the issues presented for judicial review, it is ordered that the Final Order of the Utility Management Review Board is affirmed, and the petition for Judicial Review is dismissed with prejudice with court costs taxed to the petitioners," concluded Chancellor Lyle.

Last April, the Utility Management Review Board held a hearing in Smithville to review the rates to customers charged by the DeKalb Utility District at that time and rates to be charged associated with the construction of a new water treatment plant. Ratepayers and the City of Smithville, referred to as the petitioners, also wanted the UMRB to block the DUD's decision to build a water treatment plant. They contended that the City has plentiful availability of water to supply the DUD's customer base now and into the future. This redundancy, the petitioners asserted, should be halted. DUD officials contend it is in the best interest for DUD to have its own water plant and that the result would be lower rates to DUD customers and millions of dollars in savings to the DUD in the years ahead.

The UMRB, at the April hearing, found DUD's rates at the time to be reasonable and refused to intervene in DUD's business decision to build the water plant. By not reviewing "services provided" as well as "rates charged" as requested, the petitioners contend that the UMRB violated statutory provisions and or followed an illegal procedure in arriving at its decision. Attorneys for the UMRB and DUD said the Utility Management Review Board had no authority to stop the water plant project nor to force the DUD into a contractual relationship with the city to continue purchasing water.

The petitioners later filed an appeal to the Davidson County Chancery Court for a judicial review of the UMRB's decision, hoping to win a reversal. Chancellor Ellen Hobbs Lyle held a hearing last month in Nashville with all the parties involved and said she would issue her decision within thirty days. That ruling came down Tuesday, February 25.

Attorneys for the DUD and the State Attorney General's Office for the UMRB essentially made the same arguments for the UMRB's decision to be upheld.

DUD's attorney Dewey Branstetter, Jr. wrote in his court brief that "The UMRB correctly dismissed the petition created through the efforts of the City of Smithville and filed by the Ratepayers of the DeKalb Utility District. The petitioners have not and cannot meet the burden required for this court to overturn the decision of the UMRB, to remand this case back to the UMRB, or to do anything except affirm the UMRB Order."

"The UMRB correctly decided to limit its review to the rates charged by the DUD and not to examine the business decision of the DUD to construct its own water treatment plant. While there was significant testimony about the water treatment plant, and even though the proof was overwhelming that the decision by the DUD to build its own plant was in the best interest of the customers of the DUD, the UMRB correctly decided that it was not its duty to examine that decision."

The petitioners also contend that the UMRB failed to consider the capital expenditures associated with the new water treatment plant and how that would affect future rates. The UMRB's ruling that DUD rates were reasonable was not supported by the material evidence presented at the hearing, according to the Petitioners.

In his court brief, Branstetter wrote that "the decision of the UMRB was supported by material evidence in the record. The transcript from the hearing and the exhibits introduced at the hearing show that the rates charged by the DUD are reasonable and that the rates proposed to be charged if the water treatment plant is built will also be reasonable. There was no proof introduced by the petitioners that would support a decision that the rates of DUD are not reasonable."

Lastly, the petitioners argue that the UMRB did not conduct an "Open Hearing" to allow anyone an opportunity to speak and that the case should be remanded to the UMRB to hold another hearing to consider testimony and opinions of the ratepayers that desire to give public comment as part of the proceedings. Although the forum was open for the public to attend, it was conducted like a court hearing, with witnesses called to testify and be cross examined.

Branstetter wrote that this argument by the Petitioners is also without merit. "The UMRB proceeding was a contested case hearing under the Uniform Rules of Procedure for Hearing Contested Cases before State Administrative Agencies. It was not an open hearing under the Rules of the Comptroller of the Treasury for the Utility Management Review Board. As such, the Petitioners cannot legitimately argue that because the UMRB didn't have "open microphone night" that the case should be remanded back to the UMRB for unfettered public comment."

In the brief, Branstetter wrote that the ratepayers and the City of Smithville were represented by counsel. If their counsel had chosen to call any additional ratepayers to testify, they certainly had the right to do so. Any of the ratepayers in attendance who desired to give testimony could have been called by the counsel representing their interest, but the Petitioners failed to even attempt to call any ratepayer witnesses other than the two designate representatives, Randy Rhody and Hunter Hendrixson. The Petitioners should not now be allowed to complain that they were not given an opportunity to have an open forum when their counsel had the full ability to call any witnesses they so desired. If counsel for the Petitioners failed to call any witnesses and now assert that they were somehow prejudiced by not doing so, then it is their own fault for not calling other individuals to testify".

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