Rural Water District No. 4 v. City of Eudora, Kansas
2013 U.S. App. LEXIS 13441
| 10th Cir. | 2013Background
- Douglas Water District No. 4 (Douglas-4) sought financing for the Johnson-6 water project; it obtained a KDHE loan and a $250,000 private loan guaranteed by USDA Rural Development.
- Douglas-4 pursued the USDA guarantee largely to obtain federal anti‑poaching protection (7 U.S.C. § 1926(b)) against the City of Eudora, which had annexed part of Douglas‑4’s territory and threatened to take customers.
- Kansas law (K.S.A. § 82a-619(g)) then contained a clause authorizing cooperation with the USDA only if "necessary" to carry out the district’s purposes; the jury initially found the loan necessary and returned a verdict for Douglas-4, but this court vacated and remanded in Eudora I for proper jury instruction focusing on the necessity of the guarantee rather than the loan.
- After Eudora I, the Kansas Legislature amended § 82a-619(g) to reference 7 U.S.C. § 1921 et seq., which arguably authorizes acceptance of USDA aid (including guarantees) without the “necessary” requirement; the district court held the amendment is not retroactive.
- On interlocutory appeal the Tenth Circuit (this opinion) affirmed nonretroactivity, held the amendment substantive, and—after exercising discretion to review summary judgment issues—concluded Douglas-4 cannot satisfy the statutory "necessary" standard as a matter of law, so Eudora is entitled to summary judgment.
Issues and Key Cases Cited
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2012 amendment to K.S.A. § 82a-619(g) applies retroactively | Douglas-4: amendment merely clarifies prior law and should apply retroactively to eliminate the necessity requirement | Eudora: amendment is substantive and cannot be applied retroactively; prior necessity requirement controls | Amendment is substantive and not retroactive; prior "necessary" requirement remains binding |
| Whether the appeal may include summary‑judgment issues beyond the certified retroactivity question | Douglas-4: court should decide that the guarantee was "absolutely necessary" and grant summary judgment for Douglas-4 | Eudora: court may limit review to certified question or, if expanded, should find no necessity as a matter of law | Court may address issues fairly included in certified order and, on de novo review, finds no genuine dispute that guarantee was not necessary |
| Whether the USDA guarantee was "absolutely necessary" to obtain financing | Douglas-4: bank officer testified the bank would not have made the loan without the guarantee, so guarantee was absolutely necessary | Eudora: regulatory practice (bank must certify it wouldn’t make loan without guarantee) would render every guaranteed loan "absolutely necessary", which cannot be the legal test | Guarantee was not "absolutely necessary"—KDHE financing for the full amount was available; absolute‑necessity test rejected as dispositive rule |
| Whether the USDA guarantee was "necessary" (direct association and qualitative betterment tests) | Douglas-4: guarantee advanced district purposes (preventing cherry‑picking, dead‑end lines, rate effects) and was qualitatively better for financing | Eudora: those benefits depend solely on § 1926(b) protection and do not show a direct association; guaranteed loan was costlier and inferior absent anti‑poaching protection | Guarantee lacked the required direct association to an enumerated district purpose and was not qualitatively better; no reasonable jury could find necessity—summary judgment for Eudora |
Key Cases Cited
- Rural Water Dist. No. 4, Douglas Cnty., Kan. v. City of Eudora, Kan., 659 F.3d 969 (10th Cir. 2011) (prior opinion remanding to assess necessity of USDA guarantee)
- Sequoyah Cnty. Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192 (10th Cir. 1999) (explaining purpose of § 1926(b) anti‑poaching protection)
- Pittsburg Cnty. Rural Water Dist. No. 7 v. City of McAlester, 358 F.3d 694 (10th Cir. 2004) (state authorization required for § 1926(b) protection)
- Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199 (1996) (scope of appellate review under § 1292(b))
- Salve Regina Coll. v. Russell, 499 U.S. 225 (1991) (federal courts construe state law questions de novo)
- Borchardt Rifle Corp. v. Cook, 684 F.3d 1037 (10th Cir. 2012) (standard of review for summary judgment)