Rural Water Dist. No. 4 v. City of Eudora, Kan.
2011 U.S. App. LEXIS 19576
| 10th Cir. | 2011Background
- Douglas-4, a rural water district, and the City of Eudora clashed over water service in annexed Douglas County areas after Eudora annexed the Fairfield (Garber), Meadow Lark, Grinnell, and Kurtz properties.
- Douglas-4 claimed protection under 7 U.S.C. § 1926(b) to prevent competition from Eudora for current and prospective customers in the annexed areas.
- Douglas-4 financed a new water project partly with a USDA-guaranteed loan, seeking the guarantee to gain § 1926(b) protection, though the loan also involved higher costs.
- During negotiations, communications occurred between the parties about service, timing, and potential repurchase or asset transfer as annexations occurred.
- A ten-day trial produced a jury verdict that Douglas-4 had § 1926(b) protection and that Eudora had curtailed Douglas-4’s service in the disputed areas, leading to a district-court injunction.
- The district court later denied some challenges and entered partial judgments, while the court of appeals reversed on some issues and remanded for a new trial focused on necessity of cooperation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Douglas-4's USDA guarantee cooperation was 'necessary' to carry out its purposes. | Douglas-4 argues the guarantee was necessary to fulfill its purposes. | Eudora contends cooperation/guarantee may not be necessary to carry out district purposes. | Reversed for new trial on necessity of cooperation. |
| Whether the cooperation must relate to an enumerated purpose under Douglas-4's charter/bylaws to be necessary. | Douglas-4 asserts deference to its discretion to determine necessity under its purposes. | Eudora asserts no statutory basis to deem protection necessary for monopoly-creating goals. | Remand for limited retrial to assess necessity tied to organizational purposes. |
| Whether Douglas-4 made services available to the disputed properties under § 1926(b) and who bears the cost reasonableness burden. | Douglas-4 made pipes in the ground; costs are to be analyzed under reasonableness. | Eudora should prove costs unreasonable/excessive to show lack of availability. | Affirmed rulings on burden-shifting and fire-protection cost relevance; remanded on necessity only. |
| Whether Douglas-4 could legally serve the church property outside its boundaries for § 1926(b) protection. | Douglas-4 relied on statutory authority to serve adjacent areas. | Kansas law does not authorize serving outside district boundaries. | Affirmed dismissal; no power to serve outside boundaries established. |
| Whether annexation and threats by Eudora could constitute curtailment/limitation under § 1926(b). | Annexation coupled with threats to de-annex/appraise could curtail service. | Annexation alone does not curtail; threats require actual impact on service. | Annexation alone not curtailment; threats analyzed under encroachment framework; remanded for necessity determination. |
Key Cases Cited
- City of Wichita, Kan. v. U.S. Gypsum Co., 72 F.3d 1491 (10th Cir. 1996) (reverse if jury instruction misframes issues; de novo review of jury instructions)
- United States v. Platte, 401 F.3d 1176 (10th Cir. 2005) (de novo review of jury instructions; evidentiary rulings; standard)
- Cann v. Ford Motor Co., 658 F.2d 54 (2d Cir. 1981) (verdict questions framed by incorrect issues )
- Sequoyah Cnty. Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192 (10th Cir. 1999) (§ 1926(b) protection liberal interpretation; necessity inquiry)
- Pittsburg Cnty. Rural Water Dist. No. 7 v. City of McAlester, 358 F.3d 694 (10th Cir. 2004) (binding test for eligibility and curtailment under § 1926(b))
- Glenpool Util. Servs. Auth. v. Creek Cnty. Rural Water Dist. No. 2, 861 F.2d 1211 (10th Cir. 1988) (annexation and curtailment framework under § 1926(b))
- Dedeke v. Rural Water Dist. No. 5, 229 Kan. 242, 623 P.2d 1324 (Kan. 1981) (state-law powers of rural water districts)
- General Communications System, Inc. v. State Corp. Comm'n, 216 Kan. 410, 532 P.2d 1341 (Kan. 1975) (necessity/public need framing in utilities context)
- Schuck v. Rural Tel. Serv. Co., 180 P.3d 571 (Kan. 2008) (public utility necessity and corporate purpose standards)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading plausibility standard)