April 19, 2019

Tenth Circuit: No Statutory Authority that Allows Water Districts to Serve Customers Outside Their Boundaries

The Tenth Circuit Court of Appeals issued its opinion in Rural Water Dist. No. 4 v. City of Eudora, Kansas on Monday, September 26, 2011.

The Tenth Circuit affirmed in part and reversed in part the district court’s decision. Respondent District filed suit against the Petitioner city of Eudora under 42 U.S.C. § 1983, alleging that Petitioner violated Respondent’s exclusive right to provide water service to current and prospective customers in violation of 7 U.S.C. § 1926(b). A jury found that Respondent had obtained § 1926(b) protection and Petitioner had violated § 1926(b) in each of the disputed service areas. The district court then enjoined Petitioner from serving or limiting Respondent’s service to these areas. Petitioner’s appeal and Respondent’s cross-appeal followed that decision.

Because the jury instructions incorrectly framed the necessity issue, the Court reversed, vacated the judgment, and remanded “for a new trial for the limited purpose of determining whether [Respondent]’s cooperation to secure the federal guarantee [under § 1926(b)] was necessary for the purposes of its organization.” The Court also found that the burden of proving unreasonable, excessive, and confiscatory costs lies with Petitioner city and that the district court properly informed the jury that the cost of fire protection is relevant to the issue of whether Respondent’s costs of service are unreasonable, excessive and confiscatory. The Court also affirmed the district court finding that Respondent lacked the authority under state law to provide service to certain church property; “there is no indication within the statutory scheme of any authority that suggests water districts may serve customers outside their boundaries.” Lastly, “as a matter of Kansas law, an annexing municipality is not compelled to engage in some post-annexation conduct that would necessarily curtail or limit a water district’s ability to serve the annexed area. . . . “A competing municipality may, however, curtail services through threats if the threats effectively limit the water district’s ability to serve existing customers or acquire potential customers to whom it would otherwise provide service.”

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