Rural Water District No. 5, Wagoner County, Oklahoma v. Coweta, City of et al
Filing
90
OPINION AND ORDER by Judge John E Dowdell Defendants' Motion for Summary Judgment (Doc. 52) is denied. Wagoner-5's Motion for Partial Summary Judgment (Doc. 48) is granted in part and denied in part. ; granting in part and denying in part 48 Motion for Partial Summary Judgment; denying 52 Motion for Summary Judgment (Re: 2 Complaint ) (SAS, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
RURAL WATER DISTRICT NO. 5
WAGONER COUNTY, OKLAHOMA,
Plaintiff,
v.
CITY OF COWETA; COWETA
PUBLIC WORKS AUTHORITY,
Defendants.
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Case No. 08-CV-252-JED-FHM
OPINION AND ORDER
The Court has for its consideration the Motion for Summary Judgment filed by
defendants (Doc. 52). Plaintiff filed a response (Doc. 63), and defendants filed a reply brief
(Doc. 74). Plaintiff also filed a Motion for Partial Summary Judgment (Doc. 48, 49), to which
defendants responded (Doc. 62), and plaintiff filed a reply (Doc. 71). Upon consideration of the
parties’ filings and for the reasons set forth herein, the Court finds that the defendants’ motion
should be denied, and the plaintiff’s motion should be granted in part and denied in part.
I.
Background
Plaintiff, Rural Water District No. 5 of Wagoner County, Oklahoma (“Wagoner-5”), filed
this case claiming that, as a debtor association under 7 U.S.C. § 1926(b), it has the exclusive
right to provide water service to all customers within its service area. Wagoner-5 alleges that it
acquired a loan from the United States Department of Agriculture (“USDA”) on June 15, 2007
and that Wagoner-5 therefore has the exclusive right to serve four customers whose service is at
issue in this action: Koweta Indian Clinic; Timber Ridge Crossing Subdivision; Celebration at
the Woods Subdivision; and Cedar Creek Village (the “disputed customers”). Defendant City of
Coweta (“City”) has provided water service to the disputed customers, and Wagoner-5 alleges
that the City’s service to those customers violates § 1926(b). Wagoner-5 brings claims for
damages and equitable relief under 42 U.S.C. § 1983 and 7 U.S.C. § 1926(b).
II.
General Standards Applicable to Summary Judgment
Summary judgment is appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 250 (1986). “By its terms, [the Rule 56] standard provides that the mere
existence of some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is that there be no genuine
issue of material fact.” Anderson, 477 U.S. at 247-48 (emphasis in original). In considering a
summary judgment motion, the courts determine “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.” Id. at 251-52. The evidence of a non-movant is to be taken as true,
and all justifiable and reasonable inferences are to be drawn in the non-movant’s favor.
Anderson, 477 U.S. at 255; see Ribeau v. Katt, 681 F.3d 1190, 1194 (10th Cir. 2012). The plain
language of Fed. R. Civ. P. 56 mandates entry of summary judgment against a party who fails to
make a showing sufficient to establish the existence of an element essential to the party’s case,
and on which that party will bear the burden of proof at trial. See Celotex, 477 U.S. at 322.
The summary judgment procedure is “not . . . a disfavored procedural shortcut, but rather
[is] an integral part of the Federal Rules as a whole, which are designed ‘to secure the just,
speedy and inexpensive determination of every action.’” Id. at 327. When the moving party has
carried its burden under Rule 56, its “opponent must do more than simply show that there is
some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could
2
not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for
trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). “The
mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient;
there must be evidence on which the [trier of fact] could reasonably find for the plaintiff.”
Anderson, 477 U.S. at 252.
The inquiry is “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.” Id. at 259.
Rule 56 also permits partial summary judgment. See Fed. R. Civ. P. 56(a) (party may
move for summary judgment as to “part of [a] claim or defense”); Fed. R. Civ. P. 56(g) (the
court “may enter an order stating any material fact--including an item of damages or other relief-that is not genuinely in dispute and treating the fact as established in the case.”).
III.
Discussion
A.
General Prohibition of Curtailment or Limitation of Service of an Indebted
Rural Water Service Association
In 1961, Congress amended legislation to allow nonprofit water associations to borrow
federal funds to conserve, develop, use, and control water primarily serving rural residents.
Moongate Water Co. v. Doña Ana Mut. Domestic Water Consumers Ass’n, 420 F.3d 1082, 1084
(10th Cir. 2005); see 7 U.S.C. § 1926(a)(1). Since 1994, the USDA has administered such loans.
Rural Water Sewer & Solid Waste Mgmt. Dist. No. 1, Logan County, Oklahoma v. City of
Guthrie (“Logan-1”), 654 F.3d 1058, 1061 (10th Cir. 2011) (citations omitted). To provide
greater security for the federal loans and to promote rural water development, the statute
prohibits other water utilities from competing with the borrowing water association in its service
area. Id. (citations omitted). The applicable statute provides:
3
(b) Curtailment or limitation of service prohibited
The service provided or made available through any such [indebted rural
water] association shall not be curtailed or limited by inclusion of the area served
by such association within the boundaries of any municipal corporation or other
public body, or by the granting of any private franchise for similar service within
such area during the term of such loan; nor shall the happening of any such event
be the basis of requiring such association to secure any franchise, license, or
permit as a condition to continuing to serve the area served by the association at
the time of the occurrence of such event.
7 U.S.C. § 1926(b).
The Tenth Circuit “has applied § 1926(b) broadly to protect an indebted rural water
district against competition from municipalities encroaching upon the rural water district . . . .”
Logan-1, 654 F.3d at 1062. “Thus, [the court] ha[s] previously applied § 1926(b) in cases . . .
where an indebted rural water district sought protection against encroachment by a neighboring
municipality allegedly providing water service to the rural water district’s customers or potential
customers.” Id. at 1062 (citing Rural Water District No. 1, Ellsworth County v. City of Wilson,
243 F.3d 1263, 1267-69 (10th Cir. 2001); Sequoyah County Rural Water District No. 7 v. Town
of Muldrow, 191 F.3d 1192, 1197-1201 (10th Cir. 1999)).
Most cases “‘arising under § 1926(b) have involved a municipality’s attempt to encroach
on a rural water association’s area of service. Courts have uniformly understood the section as
forbidding such encroachment, concluding that § 1926(b) should be given a liberal interpretation
that protects rural associations indebted to the [USDA] from municipal encroachment.’” Logan1, 654 F.3d at 1062 (quoting Adams County Reg’l Water Dist. v. Village of Manchester, 226 F.3d
513, 518 (6th Cir. 2000)). To be entitled to protection against competition under § 1926(b), a
rural water association “must establish 1) its continuing indebtedness on loans obtained from the
USDA and 2) that it has provided or at least made water service available.” Logan-1, 654 F.3d
at 1062.
“Any ‘doubts about whether a water association is entitled to protection from
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competition under § 1926(b) should be resolved in favor of the . . . indebted party seeking
protection for its territory.” Id. at 1062-63 (citations omitted).
B.
Defendants’ Motion for Summary Judgment
Defendants move for summary judgment on Wagoner-5’s claims and argue that
Wagoner-5 is not entitled to the protection of § 1926(b) for several reasons, discussed below.
1.
Boundaries of the Water District
The City first argues that Wagoner-5’s boundaries, by definition, exclude “the Town of
Coweta,” and, because the incorporating documents of Wagoner-5 did not specifically exclude
Coweta as it existed at the time of Wagoner-5’s incorporation (May 23, 1966), the City’s
subsequent annexation of lands (between 2002 and 2007) diminished Wagoner-5’s boundaries.
(Doc. 52 at 13). The City asserts that Wagoner-5 should have “described its boundaries to
include all un-annexed land of the City of Coweta as of May 23, 1966.” (Id. at 14). The City
then argues that the district boundaries as described in the Order Incorporating Wagoner-5 must
not have included land that would be annexed in the future. Thus, according to the City, its
annexation (between 2002 and 2007) of the properties on which the City is providing water
services to the disputed customers automatically removed those properties from Wagoner-5, and
the City “has retained the right to serve any customers located within its city limits” as those city
limits may change through annexation. (Id. at 12-14). The City does not cite any authority
directly supporting its argument, although it notes that water districts in other cases defined their
districts to exclude cities as they existed at the time of formation of the districts. (Id. at 14).
In response, Wagoner-5 notes that its boundaries were established under Oklahoma law
on the date of the Order Incorporating Wagoner-5 (Doc. 49-5) and to allow a third party such as
the City to diminish the district’s area by annexation is inconsistent with any law or statutory
5
intent. The Court finds Wagoner-5’s position more persuasive and, at a minimum, the Court
cannot find that the City is entitled to judgment as a matter of law on its argument that
subsequent annexations of land diminish the established boundaries of Wagoner-5.
In Oklahoma, the Rural Water, Sewer, Gas and Solid Waste Management Districts Act
governs the creation of rural water districts. See Okla. Stat. tit. 82, § 1324.1 et seq. A district is
formed pursuant to a process initiated by landowners who file a petition with a county clerk
requesting the incorporation of a district and giving “a legal description of the lands owned by
the petitioners and other lands which the petitioners propose to be incorporated into the proposed
district.” Id. § 1324.4. Notice of a hearing on the petition is then given to “all persons residing
or owning property and incorporated municipalities within the proposed district.” Id. § 1324.5.
“At the time and place set for the hearing and consideration of the petition, it shall be the duty of
the board of county commissioners to determine . . . [t]he area which should be included in the
district.” Id. § 1324.6. If the board of county commissioners determines that requirements are
met, they shall “immediately declare the land described in the petition or any part thereof to be
incorporated as a district . . . and thereupon the district shall be a body politic and corporate and
an agency and legally constituted authority of the State of Oklahoma for the public purposes set
forth in [the] act.” Id. Every district so created “shall have perpetual existence, subject to
dissolution [under the Act].” Id. § 1324.10(A). Lands may be released from a district upon
petition of affected landowners specifically describing the lands they propose to be released from
the district. See id. § 1324.21.
The provisions of the Oklahoma statutes indicate that the boundaries of a rural water
district are determined at the time the board of county commissioners “declare[s] the land
described in the petition or any part thereof to be incorporated as a district.” See Okla. Stat. tit.
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82, § 1324.6; see also Rural Water Sewer and Solid Waste Mgmt, Distr. No. 1, Logan County,
Oklahoma v. City of Guthrie, 253 P.3d 38, 45-46 (Okla. 2010) (citations omitted) (“Creating a
district in essence requires the County Commissioners to draw boundaries by defining the ‘area
which should be included in the district.’ The County Commissioners must ‘immediately declare
the land described in the petition or any part thereof to be incorporated as a district’ under the
name of the purpose for which it is created.
The existence of this language implies the
Legislature’s intent to convey a service area to the district. If not, the act of identifying the
district’s purpose, area to be served, and recording the legal descriptions with the county clerk
and registrar of deeds would be futile.”).
The Order Incorporating Wagoner-5 was entered on May 23, 1966. On its face it
incorporates Wagoner-5 by defining the area and boundaries to be included in the district. (See
Doc. 52-1).1 This Court is unwilling to determine, as a matter of law, that the boundaries of
Wagoner-5 may constantly and indefinitely be reduced by the actions of third parties such as the
1
The Board of County Commissioners ordered that “the following described lands
contained in the Petition filed herein be and the same are hereby incorporated and organized, said
lands being described with more particularity as follows:”
All of Sections 1 through 34 inclusive, in Township 17 North, Range 15 East lying North
of the Arkansas River, except the Town of Coweta; and all of Sections 1 through 36,
inclusive, Township 17 North, Range 16 East, lying North and East of the Arkansas
River and West of the old channel of the Verdigris River, except the Town of Coweta,
and all of Sections 18, 19, 20, 21, 28, 29, 30, 31, 32 and 33 and that part of Sections 7, 8,
9, 15, 16, 17, 22, 27 and 34 in Township 17 North, Range 17 East lying West and South
of the old channel of the Verdigris River; and the S/2 of Sections 31, 32, 33, 34, 35 and
36, and the E/2 of Sections 12, 13, 24, 25 and 36 in Township 18 North, Range 15 East;
and all of Sections 7 through 36, inclusive, except the NW/4 of Section 8 and N/2 SE/4 of
Section 10, Township 18 North, Range 16 East lying West of the old channel of the
Verdigris River; and all that part of Sections 7, 8, 17, 18, 19 and 30 lying West of the old
channel of the Verdigris River in Township 18 North, Range 17 East, all in Wagoner
County, State of Oklahoma.
(Doc. 52-1; see also 49-2, 49-3, 49-4, 49-5).
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City here, approximately 40 years after Wagoner-5 was incorporated. Otherwise, the purpose of
the creation of rural water districts (or other districts authorized by the Act) would be thwarted,
as cities’ annexation of properties within the boundaries of the districts could eventually reduce
the districts to having little to no property within their boundaries. In addition, the City’s
argument that the boundaries of Wagoner-5 are diminished by each annexation is also
inconsistent with the law construing § 1926(b) to prohibit municipalities from using their
annexation of territory within a rural water district as a springboard for providing water service
to residents within the district or to limit the water district’s services to the annexed area. See,
e.g., Glenpool Util. Serv. Authority v. Creek County Rural Water District No. 2, 861 F.2d 1211,
1214 (10th Cir. 1988) (“The statute prohibits Glenpool from using annexation of Eden South to
curtail or limit the service made available by District No. 2. Glenpool may not legally use
‘inclusion’ of Eden South ‘within the boundaries of any municipal corporation’ as a springboard
for providing water service to the area, and thereby limit the service made available by District
No. 2”); Rural Water District No. 4, Douglas County, Kansas v. City of Eudora, Kansas
(“Eudora”), 659 F.3d 969, 980 (10th Cir. 2011) (“A city may annex land within a water
district’s boundaries so long as it does not use the annexation as a means to provide water service
or limit the water district’s services to the annexed area.”).2
2.
Legal Right to Provide Service to the Disputed Customers
The City argues that, by virtue of permits it received from the Oklahoma Department of
Environmental Quality (“ODEQ”), the City “is the appropriate water service provider” for three
of the disputed customers, Timber Ridge Crossing Subdivision, Celebration at the Woods
2
Because summary judgment is inappropriate on this issue and it is uncontroverted that the
disputed customers’ properties were included within Wagoner-5 territory by the Order
Incorporating Wagoner-5, the Court need not address the subsidiary argument raised by the
parties here – whether Wagoner-5 has the right to provide water service outside of its boundaries.
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Subdivision, and Cedar Creek Village. (Doc. 52 at 16). In support of its argument, it notes that
“it is undisputed in regard to the subdivisions that a permit currently has only been issued to the
City, and none has been issued to [Wagoner-5]” such that “[p]ursuant to state law, [Wagoner-5]
has no right to serve the disputed subdivisions.” (Id. at 18). According to the City, it then
follows that Wagoner-5 has no “vested rights” under 7 U.S.C. § 1926(b) and state law governs to
prohibit Wagoner-5 from providing service to the three subdivisions. (Id. at 17-18). The City
cites Moongate Water Co., Inc. v. Doña Ana Mutual Domestic Water Consumers Ass’n, 420 F.3d
1082 (10th Cir. 2005)3 to support its argument that Wagoner-5 has no vested rights under §
1926(b) for the disputed subdivisions.
The Court finds that summary judgment is not appropriate on this issue, for several
reasons. First, the ODEQ permits (and the ODEQ cover letters enclosing them) refer to permits
for “construction” of water line, and each permit is plainly titled a “PERMIT TO
CONSTRUCT.” (Doc. 52-8, 52-11, and 52-14).4 Even if the permits related to supply of water,
there is no language in the permits that would confer upon the City any exclusive right to provide
water service, nor is there any language stating that the City “is the appropriate water service
provider” to those subdivisions. (See id.).
Second, Wagoner-5 submitted evidence that it had facilities in place to serve the disputed
customers such that no off-site line extensions necessitating an ODEQ construction permit would
be required. (Doc. 63 at 15-16; Doc. 63-1 at ¶ 9).
3
Both the City and Wagoner-5 provided an incorrect cite for Moongate Water. The case is
found at 420 F.3d 1082, rather than 403 F.3d 1082.
4
Permits for two of the three subdivisions were not sought or approved until after
Wagoner-5 became indebted under the USDA loan.
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Third, while the City argued in its reply brief that Okla. Stat. tit. 27A, § 2-6-304 requires
a permit to supply water even when construction of line extensions is required to provide water
to a particular customer, in its opening brief, the City contradicted itself, saying that a permit was
only required for construction and admitting that the City has no permit for one of the disputed
customers here, the Koweta Clinic, which the City has been supplying with water since May 16,
2006. (Doc. 52 at 16) (stating that “because of the lines constructed to provide service, a permit
was required for the subdivisions but not for the Koweta Clinic”).
Fourth, the state statute provides for exceptions to the permitting process, and the City
has not shown that Wagoner-5 could not receive an exception before supplying water to the
disputed customers. See Okla. Stat. tit. 27A, § 2-6-304(B).
Fifth, the authority upon which the City’s argument depends is inapplicable to the facts
here. In Moongate Water, while the litigation was pending, the New Mexico Public Regulation
Commission (“PRC”) issued an order concluding that the rural water association “does not
currently have the legal right to serve the Disputed Area,” and prohibiting it from extending its
facilities into the Disputed Area. 420 F.3d at 1087. As a result, the court concluded that the
dispute over rights to future customers was moot because of the PRC’s order. See id. at 1088-89
(“As a result of the PRC decision, there is no point in deciding whether [the rural water
association] could acquire § 1926(b) protection in the Disputed Area in the future. Under state
law, [the rural water association] is restricted from extending service to the Disputed Area, so it
will have no occasion to invoke any right under the federal statute.”). Unlike Moongate Water,
there has been no similar state ruling or order that prohibits any future or current rights of
Wagoner-5 within its district. Also, in Moongate Water, there was considerable evidence that
the disputed area was just outside of the rural water association’s territory. 420 F.3d at 1085. In
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contrast, there is no dispute in this case that the disputed customers’ properties were included in
Wagoner-5’s service area in the Order Incorporating Wagoner-5.
Finally, assuming an ODEQ permit were required to supply water to the disputed
customers, it is noteworthy that the City itself does not have a permit with respect to the Koweta
Clinic, and the City has not established that Wagoner-5 would be unable to obtain an ODEQ
permit within a reasonable time. The City’s permits for the three subdivisions were granted
approximately one month after applications were made (see Doc. 52-7), and there is no evidence
in the record suggesting that Wagoner-5 could not also promptly obtain any necessary permits
within a reasonable time. In determining whether Wagoner-5 has “made services available” to
the disputed customers as required to be protected by § 1926(b), the focus is “on whether the
association has proximate and adequate ‘pipes in the ground’ with which it . . . can serve the
disputed customers within a reasonable time.” Eudora, 659 F.3d at 980 (citations omitted). To
meet the “pipes in the ground” test, “the water district must demonstrate that ‘it has adequate
facilities within or adjacent to the area to provide service to the area within a reasonable time
after a request for service has been made.’” Id. While this does not reference any permitting, the
test clearly contemplates potential line extensions to supply water service within a reasonable
time, which would include all necessary steps to make such extensions, including obtaining any
necessary permits for such extensions.
As noted, Wagoner-5 provided evidence that it has facilities in place to serve the disputed
customers. In its reply brief, the City argues that Wagoner-5 will have to expend significant
costs to provide service to the disputed customers. (Doc. 74 at 4-5 and 74-2). This argument
and the supporting evidence were provided in the reply brief, rather than the opening brief
supporting its summary judgment motion. Accordingly, those arguments were waived (for
11
purposes of summary judgment) by failing to include them in the opening brief. See Cahill v.
American Family Mut. Ins. Co., 610 F.3d 1235, 1239 (10th Cir. 2010) (citing Hill v. Kemp, 478
F.3d 1236, 1250–51 (10th Cir. 2007)) (arguments first raised in a reply brief come too late);
Ulibarri v. City & County of Denver, 742 F. Supp. 2d 1192, 1218 (D. Colo. 2010) (argument first
raised in reply brief may be disregarded); Lobato v. New Mexico Environ. Dept., 838 F. Supp. 2d
1213, 1221, n.4 (D.N.M. 2011); Moody v. Oklahoma Dept. of Corrections, 879 F. Supp. 2d
1275, 1292, n.102 (N.D. Okla. 2012). To consider arguments raised for the first time in reply
“would be ‘manifestly unfair to [plaintiff] who, under our rules, has no opportunity for a written
response’” and “it would also be unfair to the court itself, which, without the benefit of a
response . . . to [a] late-blooming argument, would run the risk ‘of an improvident or ill-advised
opinion,’ given our dependence as an Article III court on the adversarial process for sharpening
the issues for decision.” Headrick v. Rockwell Int’l Corp., 24 F.3d 1272, 1278 (10th Cir. 1994)
(quoting Herbert v. National Academy of Sciences, 974 F.2d 192, 196 (D.C. Cir. 1992)).
Even were the Court to consider the City’s new argument and evidence absent Wagoner5’s input, the Court would find the City’s evidence and argument to be insufficient to grant
summary judgment on that basis. While the City argues that there will be significant costs, it
does not provide evidence, argument, or legal authorities to establish that Wagoner-5’s costs to
provide services to the disputed customers are unreasonable, excessive and confiscatory. “Even
where a rural water district meets the ‘pipes in the ground’ test, ‘the cost of [its] services may be
so excessive that it has not made those services ‘available’ under § 1926(b). . . . Thus, costs may
not be unreasonable, excessive, and confiscatory.”
Eudora, 659 F.3d at 980-81 (citations
omitted). It is the City’s burden “to show that the water district’s rates are unreasonable,
excessive, and confiscatory.” Id. at 981. Given that the City did nothing more than provide an
12
estimate of projected improvements and costs it claims would be necessarily expended by
Wagoner-5, and it did not argue or provide authorities showing that such costs are
“unreasonable, excessive, and confiscatory,” summary judgment is inappropriate with respect to
the estimated costs provided.5
3.
The City’s Service to Two of the Disputed Customers Prior to the Loan
It is undisputed that the City provided water service to two of the disputed customers, the
Koweta Indian Clinic and the Timber Ridge Crossing Subdivision, before Wagoner-5 became
indebted on the federal loan in June 2007. The City began providing water service to the Koweta
Indian Clinic on May 16, 2006 and to residential customers within the Timber Ridge Crossing
Subdivision on November 15, 2005. Thus, the City argues that summary judgment should be
granted in its favor as to those two disputed customers.
The Tenth Circuit has held that a rural water district may maintain claims against a
municipality for curtailment after the district becomes indebted, even where the municipality
began providing service to disputed properties prior to the district’s indebtedness. See Sequoyah
County Rural Water District No. 7 v. Town of Muldrow, 191 F.3d 1192, 1201-06 (10th Cir.
1999); Pittsburg County Rural Water District No. 7 v. McAlester, 358 F.3d 694, 712 (10th Cir.
2004).
In Sequoyah, the court concluded that a rural water district may recover for
encroachments “occurring or continuing” after the date on which the water district obtained a
federal loan, so long as the water district can establish that it made service available to those
customers. Because there were disputed fact issues regarding whether the rural water district’s
5
In Eudora, the court noted that the reasonableness of costs is based on the totality of the
circumstances and identified a number of factors which may help guide a fact finder in its
determination regarding costs. See 659 F.3d at 981. The City provided no analysis of the totality
of the circumstances or any factors supporting any assertion that the projected costs would be
unreasonable, excessive, and confiscatory.
13
facilities were such that it “made service available” to those customers, the Tenth Circuit
reversed the district court’s summary judgment order. 191 F.3d at 1196-1206.
In Pittsburg County Rural Water District No. 7 v. City of McAlester, 358 F.3d 694, 722
(10th Cir. 2004), the Tenth Circuit found that the district court erred in its application of §
1926(b). There, the district court dismissed claims that were based on sales to customers to
whom the municipality began providing service prior to the water district’s indebtedness. The
district court held that “[w]hen a municipality is serving water to a property prior to a water
district’s [loan] date, the rural water district has no right to serve water to that property, and thus,
no [§] 1926(b) protection.” 358 F.3d at 712. On appeal, the Tenth Circuit reversed that holding
because it conflicted with the holding of Sequoyah:
The fact that a municipality had provided service to those properties prior to the
FMHA loan was no bar in Sequoyah to claims arising out of a city’s service
during the period of indebtedness. . . . The district court’s ruling conflicts with
Sequoyah and was therefore error. Contrary to the district court’s ruling, all §
1926 claims based on service by McAlester to customers within the limitations
period were not otherwise barred by the fact that McAlester was serving those
customers prior to the 1994 loan.
Id. at 712-13.
Here, the City recognizes that its argument for summary judgment based upon its
provision of service to two of the disputed customers prior to Wagoner-5’s federal indebtedness
is “contrary to the 10th Circuit decisions in this area.” (See Doc. 52 at 20). The City argues
nonetheless that this Court should follow the reasoning of the Eighth Circuit, which expressly
rejected the Tenth Circuit’s rulings in Pittsburg and Sequoyah. See Public Water Supply District
No. 3 of Laclede County, Missouri v. City of Lebanon, 605 F.3d 511, 518 (8th Cir. 2010) (“We
recognize that the Tenth Circuit has addressed this question twice before and taken a contrary
approach, albeit without much discussion of the issue.”).
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This Court must follow the precedent of the Tenth Circuit. United States v. Spedalieri,
910 F.2d 707, 709, n.2 (10th Cir. 1990) (“A district court must follow the precedent of this
circuit, regardless of its views concerning the advantages of the precedent of our sister
circuits.”). In any event, the Court disagrees with the Eighth Circuit’s suggestion that the Tenth
Circuit provided little discussion of the issues in Sequoyah and Pittsburgh. A plain reading of
those decisions reveals a thorough analysis of the facts, applicable law, and policies underlying §
1926(b).6 The reasoning of the Tenth Circuit on the issue is also consistent with the overarching
standard applied in the Tenth Circuit to § 1926(b) claims: “Any ‘doubts about whether a water
association is entitled to protection from competition under § 1926(b) should be resolved in favor
of the . . . indebted party seeking protection for its territory.’” Logan-1, 654 F.3d at 1062-63
(citations omitted).
4.
The City’s Counterclaim for Trespass
The City filed a trespass counterclaim against Wagoner-5, alleging that Wagoner-5 “has
constructed a water line across” city-owned property and that the construction of the waterline
“constitutes a continuing trespass on the property of the City of Coweta, causing damage to the
City.” (Doc. 36 at 1). The City now seeks summary judgment on its counterclaim and asks the
Court to determine that Wagoner-5 is liable on that claim. In its response brief, Wagoner-5
submitted evidence that creates genuine issues of material fact, precluding summary judgment on
6
“Federal courts’ broad construction of § 1926(b) reflects the two key goals underlying its
enactment. The first was ‘to provide greater security for the federal loans made under the
program.’ By ‘protecting the territory served by such an association facility against competitive
facilities, which might otherwise be developed with the expansion of the boundaries of municipal
and other public bodies into an area served by the rural system,’ § 1926 protects the financial
interests of the United States, which is a secured creditor of the water association, from reduction
of the water association’s revenue base. The second interest is the promotion of rural water
development ‘by expanding the number of potential users of such systems, thereby decreasing
the per-user cost.’” Pittsburg, 358 F.3d at 715 (citations omitted).
15
the City’s counterclaim. That evidence includes the following: (1) In the 1960s, the then-owner
of the property subject to the trespass claim requested water service from Wagoner-5 as part of
the development of a subdivision; (2) the water line, along with other utilities, were placed on the
east side of Block 1, lots 1-5 of that subdivision, with the knowledge and approval of that owner
in the 1960s; (3) the water line has been used to provide water service to lots 1-4 of Block 1 and
to make water service available to lot 5, since completion in the 1960s; (4) the City purchased lot
5 in August 1986, almost twenty (20) years after the water line was installed; and (5) the City
first raised the issue on October 29, 2010 after this litigation was underway.
Based on its responsive evidence, Wagoner-5 asserts numerous legal arguments in its
response on the trespass claim, including arguments under the Oklahoma Governmental Tort
Claims Act and trespass law. (Doc. 63 at 16-21). The City did not respond to those arguments
or attempt to refute or distinguish the extensive authorities cited by Wagoner-5. Instead, the City
merely argues in its reply that an affidavit of Arvil Morgan, the manager of Wagoner-5, is a
“sham affidavit.” (Doc. 74 at 9-10). The Court has reviewed the cited testimony of Mr. Morgan
and his affidavit and disagrees with the City’s characterization of the affidavit as “sham.” The
fact that Mr. Morgan testified at deposition that he never met the prior landowners does not
preclude him from obtaining documents (which are attached to Wagoner-5’s response) and
educating himself about the prior owners and the history of the waterline constructed by
Wagoner-5 which is the alleged trespass. In Lantec, Inc. v. Novell, Inc., 306 F.3d 1003, 1016
(10th Cir. 2002), the Tenth Circuit noted that “‘an affidavit may not be disregarded because it
conflicts with the affiant’s prior sworn statements . . . however, courts will disregard a contrary
affidavit when they conclude that it constitutes an attempt to create a sham fact issue.’” (quoting
Franks v. Nimmo, 796 F.2d 1230, 1237 (10th Cir. 1986)).
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“In deciding whether an affidavit is an attempt to create a sham issue of fact, the relevant
factors are ‘whether the affiant was cross-examined during his earlier testimony, whether the
affiant had access to the pertinent evidence at the time of his earlier testimony or whether the
affidavit was based on newly discovered evidence, and whether the earlier testimony reflects
confusion which the affidavit attempts to explain.’” Lantec, 306 F.3d at 1016 (quoting Franks);
see also Law Co., Inc. v. Mohawk Constr. & Supply Co., Inc., 577 F.3d 1164, 1169 (10th Cir.
2009) (determining district court erred in excluding affidavit from summary judgment
consideration where there was no specific identification of conflicting testimony or how the
affidavit was a sham). The City does not address the factors in its briefing, and it appears that
the historical documentation provided within Wagoner-5’s response was not made available to
Mr. Morgan at his deposition. And as noted, the City does not attempt to challenge the evidence
submitted with Wagoner-5’s Response, and there is accordingly no indication or evidence that
the information in Mr. Morgan’s affidavit is an attempt to create a sham issue of fact.
C.
Wagoner-5’s Motion for Partial Summary Judgment
Wagoner-5 has moved for partial summary judgment on a number of issues relating to its
claims and to potential defenses that may be asserted by the City.
1.
Entitlement to Protection under 7 U.S.C. § 1926(b)
A rural water association is entitled to protection against competition under § 1926(b) if
it: (1) is an association indebted to the federal government on a loan provided within the meaning
of the statute; and (2) has provided or made available service to the disputed area. See 7 U.S.C.
§ 1926; see also Sequoyah, 191 F.3d at 1197 (citing Glenpool, 861 F.2d at 1214). The City does
not dispute that the first element is satisfied here. In accordance with Fed. R. Civ. P. 56, the
Court finds and concludes that there is no genuine dispute that Wagoner-5 is an “association”
and that, since June 15, 2007, it has been indebted to the USDA on a loan made for the purpose
17
of constructing water facilities to meet the needs of residents within its service area. These facts
are accordingly established in this case. See Fed. R. Civ. P. 56(g).
The parties have submitted conflicting evidence with respect to the second prong under §
1926(b), whether Wagoner-5 has provided or made available service to the disputed area. In
analyzing this element, this Court “should focus primarily on whether the water association has
in fact ‘made service available,’ i.e. on whether the association has proximate and adequate
‘pipes in the ground’ with which it has served or can serve the disputed customers within a
reasonable time.” Sequoyah, 191 F.3d at 1203. A rural “water association meets the ‘pipes-inthe-ground’ test by demonstrating ‘that it has adequate facilities within or adjacent to the area to
provide service to the area within a reasonable time after a request for service is made.’” Id.
(quoting Bell Arthur Water Corp. v. Greenville Utilities Comm’n, 173 F.3d 517, 526 (4th Cir.
1999)). “This is essentially an inquiry into whether a water association has the capacity to
provide water service to a given customer.” Sequoyah, 191 F.3d at 1203.
Wagoner-5 claims (and has submitted evidence) that it “could have immediately provided
sufficient potable water through its facilities located within or adjacent to the properties [of the
disputed customers].” (Doc. 49 at 10 of 26; see Doc. 49-9). On the other hand, the City has
presented evidence in support of its contention that there are a number of factual reasons that
Wagoner-5 is not able to serve the water needs of the disputed customers and that expensive
improvements are necessary to provide service to the disputed customers. (Doc. 62 at 20-21 of
26; see Doc. 62-6, 62-7, 62-8, 62-15). Based upon the conflicting evidence, the Court finds that
there are genuine issues of material fact as to whether Wagoner-5 “made service available” to the
disputed customers, precluding summary judgment on that issue.
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The City argues that Wagoner-5 cannot establish that it “made service available” to the
disputed customers because it did not have the legal right to provide water service. To support
that argument, the City argues, as it did in its summary judgment motion, that (1) the boundaries
of Wagoner-5 are diminished each time the City annexes additional property and (2) the issuance
of ODEQ permits to the City for some (but not all) of the disputed properties deprives Wagoner5 of the right to provide service to the disputed customers. These issues are discussed above in
connection with the Court’s analysis of the defendants’ summary judgment motion.
2.
Certain City Defenses
Wagoner-5 moves for summary judgment on certain of the defendants’ defenses. In
response, the City admits that it is not maintaining any statute of limitations defense, that it does
not rely on any defenses related to laches, estoppel or unclean hands, and that any separate
defense of waiver is not necessary and can be withdrawn. (Doc. 62 at 24). Accordingly, the
Court shall treat those defenses as though they are not at issue in this litigation. To the extent
that Wagoner-5 moves for summary judgment on “all remaining affirmative defenses raised” by
the defendants, Wagoner-5’s arguments are lacking in specificity and are accordingly denied.
IT IS THEREFORE ORDERED that the defendants’ Motion for Summary Judgment
(Doc. 52) is denied.
IT IS FURTHER ORDERED that Wagoner-5’s Motion for Partial Summary Judgment
(Doc. 48) is granted in part and denied in part as set forth herein.
IT IS SO ORDERED this 11th day of June, 2013.
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