The city of Graham has filed an answer and a counterclaim to a lawsuit filed by the city of Mebane late last year over the $18.1 million cost that Graham claims that Mebane is obligated to pay toward the $84.6 million cost to expand Graham’s wastewater treatment plant.
The city of Graham is seeking a court order (i.e., a judgment) that would force Mebane to pay its “proportional share” of the wastewater treatment plant expansion, according to the counterclaims and answer to Mebane’s suit that Graham filed in Alamance County superior court last week. Graham is also requesting dismissal of Mebane’s lawsuit based on what it contends are technical errors.
Mebane filed its suit against Graham in Alamance County superior court in December 2025, alleging that an agreement that the two cities entered into in April 2017 obligated Mebane to pay Graham $2.7 million in yearly installments, over 20 years, to have 750,000 gallons of wastewater treated per day at Graham’s plant. Mebane is disputing Graham’s claim that the agreement obligates Mebane to pay Graham $18.1 million toward an $84.6 million wastewater treatment plant upgrade and expansion that Mebane officials contend they were never asked about and never agreed to.
This intergovernmental agreement also called for the two cities to share a proportional cost of any future “agreed upon improvements or upgrades [and] necessary improvements or repairs” and to meet annually to review and discuss operating budgets for the WWTP, both municipalities acknowledge in their court filings.
Graham began planning several years ago to expand its WWTP to increase the treatment capacity from 3.5 million to five million gallons of wastewater per day, according to the suit that Mebane filed against Graham in Alamance County civil superior court in December 2025.
Mebane insists that it shouldn’t be on the hook for an $18.1 million for a WWTP upgrade and expansion it was never informed of – and for which Mebane officials claim they have struggled to get information about for years. “It was and remains Mebane’s express position that the WWTP Project and state loan could not have been, were not, and are not ‘agreed upon improvements or upgrades’ [as stipulated in the 2017 agreement] for which Mebane would be partially responsible,” Mebane asserts in its suit.
In a response and counterclaim filed last week in Alamance County superior court, Graham contends that it “kept Mebane apprised of the planning and construction of the upgrades needed” and “the upgrade has been knowingly and voluntarily accepted by Mebane.”
Though the 2017 agreement included a stipulation that it could only be terminated by a joint agreement of both municipalities, in September 2025, Jennifer Talley, then-mayor of Graham, sent a letter to Mebane mayor Ed Hooks notifying him that “the city of Graham, by way of this letter, serves as official notice of its desire to terminate” the agreement, according to Mebane’s suit.
Hooks apparently responded to Talley that Mebane had no interest in terminating the agreement, according to a letter which is referenced in Mebane’s lawsuit but isn’t included in the court file.
“After careful consideration by our city council, I must respectfully decline the proposed meeting at this time,” Talley states in a response to Hooks on October 23, 2025, adding that multiple meetings between the two cities hadn’t “yielded a pathway to a reasonable resolution, nor was there sufficient progress made to justify further meetings.”
“We continue to contend that the most appropriate and constructive path forward is for the city of Mebane to honor the existing agreement – specifically, by paying its agreed-upon share of 21.43% of the costs associated with the wastewater treatment plant upgrade and operational expenses,” Talley’s second letter to her Mebane counterpart stated.
In its response and counterclaim, Graham asserts that Mebane is not entitled to any remedy or injunctive relief “due to the doctrine of unclean hands for failing and refusing to satisfy its obligations under the contract,” – i.e., the $18.1 million share that Graham officials insist Mebane is obligated to pay toward the $84.6 million WWTP upgrade and expansion.
Jordan Lake Rules necessitated WWTP expansion and upgrade
When the agreement was approved in 2017, Graham’s WWTP couldn’t comply “with the more stringent limitations imposed by the Jordan Lake Rules,” i.e., statewide wastewater discharge regulations originally enacted in 2009 and subsequently amended in 2014 and 2020, according to Graham’s counterclaim.
Moreover, Graham contends that by entering into the 2017 agreement both parties “mutually assented to all upgrades to the facility” and alleges that Mebane, by its failure to pay the $18.1 million, breached that agreement.
Graham admits in its response that the two municipalities met on multiple occasions to review the costs associated with the 2017 agreement and acknowledges the correspondence between the two cities’ mayors and city managers – and had discussed a potential resolution until Mebane filed its suit in December.
Mebane officials originally agreed to kick in $6.8 million to upgrade Graham’s plant but eventually agreed in December to increase its share to $10.7 million, according to Mebane’s suit, which gives no details about how that figure was calculated.
Graham requesting $18.1M judgment against Mebane
Graham is requesting a judgment of $18.1 million against the city of Mebane – in effect, a court order that would compel Mebane to pay “for its proportionate share” of the WWTP project.
Mebane is seeking a declaratory judgment to determine the city’s legal and financial obligations, as outlined within the 2017 agreement with Graham, i.e. what portion of any agreed-upon improvement or upgrades that Mebane is required to pay toward the WWTP project.
“Mebane never agreed to the WWTP Project as unilaterally conceived of and pursued by Graham, as it was never advised of, provided notice of, or consulted in connection with [the project and Graham’s loan application],” Mebane’s lawsuit asserts.
In its suit, Mebane is also asking a superior court judge to compel the city of Graham to fulfill its legal obligation to approve any application for “Flow Tracing for Sewer Extension” (FTSE), a state-mandated certification ensuring that wastewater treatment facilities have sufficient capacity for any projects that connect new wastewater lines to an existing system, according to the state Department of Environmental Quality.
In this case, Mebane insists that Graham officials have slow-walked FTSE approvals for the Buc-ee’s travel plaza that is underway near I-85/40 and Trollingwood-Hawfields Road, which is within Mebane’s extraterritorial jurisdiction and targeted to open in 2027.
Graham seeking dismissal with prejudice over technical errors
Graham further asserts in its response and counterclaim that Mebane’s suit is “replete with statements” that are inadmissible under the state’s civil rules of evidence. Graham is also asking for Mebane’s lawsuit to be dismissed without prejudice, which allows the complaint to be re-filed once the purported errors are corrected.
“The complaint filed by Mebane is replete with statements of the parties made in compromise negotiations which…are not admissible,” Graham’s attorneys state in their answer, motion to dismiss, and counterclaims.
The city of Graham is also asking for the lawsuit to be dismissed for failure to state a claim on which relief may be granted – a common tactic used to make a civil suit go away, according to a recent analysis by Joseph Laizure, an expert in civil law with the School of Government at the University of North Carolina at Chapel Hill.
Meanwhile, both city councils have recently conducted closed meetings to confer with their attorneys on the lawsuit.
On February 9, Mebane’s council met at the end of their regular monthly meeting behind closed doors with city attorney Lawson Brown as well as Norris to discuss the matter.
After about 25 minutes, they emerged with an announcement that the council had authorized the attorneys to represent former Mebane city employees who might be deposed in the course of the lawsuit.
That was understood to be former city managers David Cheek and Chris Rollins, both of whom were in charge during the early portions of the contract with Graham.
Graham’s city council also met behind closed doors for about 15 minutes on February 10, during their most recent regularly-scheduled meeting, to discuss the lawsuit.
The city of Graham is being represented by attorneys Jay H. Ferguson and Olivia Warren of the Thomas, Ferguson & Beskind law firm in Durham.
Mebane is being represented by R. Bryan Norris, Jr. of the Vernon Law Firm in Burlington.
