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U.S. v. SOUTHWESTERN ELEC. COOP.

June 12, 1987

UNITED STATES OF AMERICA, NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION AND SOYLAND POWER COOPERATIVE, INC., PLAINTIFFS,
v.
SOUTHWESTERN ELECTRIC COOPERATIVE, INC., DEFENDANT/COUNTER-PLAINTIFF, V. SOYLAND POWER COOPERATIVE, INC., COUNTER-DEFENDANT.



The opinion of the court was delivered by: Stiehl, District Judge:

MEMORANDUM AND ORDER

Before the Court is Southwestern Electric Cooperative, Inc.'s (Southwestern) Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6).

This cause was filed by the United States of America on behalf of the Rural Electrification Administration (REA), the National Rural Utilities Cooperative Finance Corporation (CFC), and Soyland Power Cooperative, Inc. (Soyland), as a declaratory judgment action seeking to have the Wholesale Power Contract between Soyland and Southwestern declared binding. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1337 and 1345.

To sustain dismissal of a complaint under Fed.R.Civ.P. 12(b)(6), the Court must take all well-pleaded allegations as true and construe the complaint in the light most favorable to the plaintiffs to determine whether they are entitled to relief. Conley v. Gibson, 355 U.S. 41, 45-56, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1975). "The issue is not whether plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support his claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

I — FACTS

Southwestern is an Illinois not-for-profit corporation formed in 1939 to distribute electrical power to its members in the rural service area. Soyland is an Illinois not-for-profit corporation which serves as a regional generation and transmission cooperative (G & T) engaged in the wholesale production and supply of electricity to its members. Soyland's members consist of fifteen (15) rural Illinois power cooperatives. The REA is a United States Government lending agency which, pursuant to the Rural Electrification Act of 1936 (Act), 7 U.S.C. § 901 et seq., makes or guarantees loans to rural electrical facilities. CFC is a private, not-for-profit cooperative association which serves as a source of financing for its members to supplement REA loans. CFC's membership consists primarily of rural electrification cooperatives. Southwestern is a member of both Soyland and CFC.

Due to the nature of the rural electrification system, numerous contracts and loan agreements have been entered into among the four parties. REA and Southwestern, pursuant to the Act, entered into a loan agreement for the financing of the rural electrification distribution system. The original loan has been amended numerous times. As of March, 1986, REA had loaned $23,815,000 to Southwestern for the construction of its electrical distribution system. Of that amount, $17,024,097 is outstanding. CFC is also a substantial creditor of Southwestern. As of March, 1986, CFC had loaned $5,838,000 to Southwestern for construction of its electrical distribution system, of which $5,694,959 remains outstanding. To secure these loans, REA and CFC entered into a Supplemental Mortgage and Security Agreement with Southwestern, dated September 13, 1972.

REA and CFC are also substantial creditors of Soyland, of which Southwestern is a member. REA has guaranteed the repayment of loans to Soyland for construction of an electrical generation and transmission system in the amount of $425,580,000 and an additional, unadvanced, amount of $56,802,000 as of March 1986. As of the same date, $425,497,423 remains outstanding. CFC has advanced $63,000,000 to Soyland, of which $58,707,606 was outstanding as of March, 1987. REA and CFC both have mortgages with Soyland to secure the guaranteed loans.

In the mid-1970's, Soyland engaged in a series of negotiations to purchase an ownership interest in the Clinton, Dewitt County, Illinois nuclear power facility which the Illinois Power Company proposed to build.

Southwestern entered into a contract with Soyland on May 26, 1976. This contract is the heart of the litigation before this Court. Pursuant to the contract, Southwestern agreed to purchase all of its electricity requirements from Soyland for a term extending at least until the year 2015 (all-requirements contract).

As stated above, it is this contract which is the subject of the dispute. The plaintiffs have filed for declaratory judgment that the contract is valid and enforceable. The defendant has moved for dismissal and filed a counterclaim against Soyland.

II — THE

ALL-REQUIREMENTS ...


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