Rural Water District No. 1 v. City of Wilson , 243 F.3d 1263 ( 2001 )

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAR 22 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
RURAL WATER DISTRICT NO. 1,
ELLSWORTH COUNTY, KANSAS,
commonly known as Post Rock Rural
Water District, also known as
Ellsworth County Rural Water District
No. 1, Nos. 98-3337, 98-3340,
99-3075 & 99-3084
Plaintiff-Appellant and Cross-
Appellee,
v.
CITY OF WILSON, KANSAS,
Defendant-Appellee and Cross-
Appellant.
APPEAL FROM UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. No. CV-96-1297-WEB)
Victor S. Nelson, of Victor S. Nelson, P.A., Wichita, Kansas, for the appellant.
Allen G. Glendenning, of Watkins, Calcara, Rondeau, Friedeman, Bleeker,
Glendenning & McVay, Chtd, Great Bend, Kansas, for the appellee.
Before HENRY, BRISCOE , Circuit Judges, and ALLEY , District Judge. 1
1
The Honorable Wayne E. Alley, United States District Judge for the
(continued...)
HENRY, Circuit Judge.
Plaintiff Rural Water District No. 1, Ellsworth County, Kansas (commonly
known as Post Rock Rural Water District) brought this case alleging that
defendant City of Wilson, Kansas, (the City) violated 7 U.S.C. § 1926(b) by
providing domestic water service to customers in Post Rock’s service area. Post
Rock sought declaratory and injunctive relief under 28 U.S.C. §§ 2201 and 2202.
Post Rock appeals the district court’s refusal to grant a permanent injunction
preventing the City from providing domestic water service in Post Rock’s service
area. Post Rock also appeals the district court’s refusal to award all of its
attorney fees and expenses under 42 U.S.C. § 1988. The City cross-appeals the
district court’s decision to grant a contingent injunction concerning the City’s
provision of water service in the Purma Addition. The City further appeals the
district court’s award of partial attorney fees to Post Rock under § 1988. We
exercise jurisdiction pursuant to 28 U.S.C. § 1291, and affirm in part, reverse in
part, and remand.
I.
The City is a municipal corporation in Ellsworth County, Kansas. Post
(...continued)
1
Western District of Oklahoma, sitting by designation.
2
Rock is a rural water district formed on March 5, 1979. Post Rock has the legal
right pursuant to 7 U.S.C. § 1926(c) to provide water service “to all of Ellsworth
County except the incorporated cities, including the City of Wilson as it existed
on March 5, 1979.” Aplt. App. I at 147. The City owns and operates
groundwater wells, water treatment systems, and water distribution systems
within the Wilson city limits and within areas annexed into the City since January
1995. Pursuant to § 1926(c), customers within Post Rock’s service area must
receive water service from Post Rock or provide their own water; they may not
connect to the City water system unless Post Rock is unable to provide service or
releases them from the water district.
To receive water service, Post Rock requires prospective customers to
submit an application for a benefit unit, accompanied by an $800 application fee. 2
This purchase of a benefit unit makes the prospective customer a part owner of
the district. With a portion of the application fee, Post Rock hires an
independent engineering firm to determine whether the customer can be
adequately served by Post Rock “without curtailing service to existing Post Rock
customers. If the engineer finds that there is sufficient capacity to serve the
potential user and determines what additions will be required to the system, Post
2
Alternatively, the potential customer may pay for an engineering study
without filing an application.
3
Rock then calculates the cost of adding the potential user to the system.” Aplt.
App. I at 151. Under this policy, the customer pays all of the costs of adding his
property to Post Rock’s water system.
This appeal concerns three properties in Post Rock’s service area: the
Purma Addition, the Prairie Estates Addition, and the Branda property. Purma
Addition is located outside the 1979 Wilson city limits. On April 20, 1995, the
City annexed Purma Addition. In December 1995, the City extended its
municipal water system to Purma Addition and in July 1997, it began providing
water service to the two duplexes in Purma Addition. Although Post Rock had
the ability to deliver water to Purma Addition, Post Rock had no water pipes in
Purma Addition at the time of trial. At the time of trial, no one in Purma
Addition had made a formal application to Post Rock for water service. A Post
Rock study showed it would take two to five days to establish service to the
duplexes, at a cost of $32,000.
Prairie Estates Addition is also located outside the 1979 Wilson city limits.
At the time of trial, the City had not annexed Prairie Estates, but had studied the
feasibility of running water pipes into the area. At the time of trial, Post Rock
had not received a formal application for water service from anyone in Prairie
Estates. Post Rock had no water pipes in Prairie Estates, but there was testimony
that it would take three to six days to provide water service. At the time of trial,
4
no houses had been built in Prairie Estates and none were planned in the
immediate future. Post Rock could not state whether it would have the capacity
to serve Prairie Estates in the future.
The Branda property was annexed into the City in 1992. Before January
19, 1995, the City provided water service only to a house on the property. After
January 19, 1995, the City also provided service to another building on the
property. At the time of trial, Post Rock had not received an application for
water service and had not done a cost analysis of providing water service to the
property.
On February 6, 1997, Post Rock filed an amended complaint in federal
district court alleging the City violated 7 U.S.C. § 1926(b) by providing water
service in Post Rock’s service area and seeking declaratory and injunctive relief
under 28 U.S.C. §§ 2201 and § 2202. In its trial brief, Post Rock asserted it was
entitled to relief under 42 U.S.C. § 1983 and requested attorney fees pursuant to
42 U.S.C. § 1988.
After a bench trial, the district court entered judgment on October 27,
1998, concluding that Post Rock properly brought its claim for a violation of §
1926(b) under 42 U.S.C. § 1983. The district court determined that the City was
encroaching on Post Rock’s service area, but concluded that Post Rock was not
making service available because it charged customers for building water system
5
infrastructure. The district court entered a contingent injunction as to Purma
Addition, enjoining the City from providing water service if Post Rock agreed to
provide service at a reasonable cost. The district court denied Post Rock relief as
to Prairie Estates because Post Rock had not shown when, if ever, there would be
domestic water users in that area and whether Post Rock would have the capacity
to serve those users. The district court also denied Post Rock relief as to the
Branda property because Post Rock had not shown it could serve the property and
had not made service available. Post Rock filed a motion for attorney fees,
expenses, and expert witness fees under § 1988. The district court concluded
that Post Rock was a prevailing party under § 1988 and awarded Post Rock 25
percent of its claimed fees and expenses because it had prevailed on only a
portion of its claim.
II.
Post Rock appeals the district court’s denial of injunctive relief, which we
review for abuse of discretion. See Roe v. Cheyenne Mountain Conference
Resort, Inc. , 124 F.3d 1221, 1230 (10th Cir. 1997). “The discretionary decision
is ‘not left to a Court’s “inclination,” but to its judgment; and its judgment is to
be guided by sound legal principles.’” Id. (quoting Albemarle Paper Co. v.
Moody , 422 U.S. 405, 416 (1975)). “The court’s discretion is to be exercised in
light of the purposes of the statute on which plaintiff’s suit is based.” Id. To the
6
extent the district court determined questions of law in interpreting a statute, we
exercise de novo review. Ute Indian Tribe v. Utah , 114 F.3d 1513, 1520 (10th
Cir. 1997).
Protection from competition under 7 U.S.C. § 1926(b)
Post Rock is a rural water district incorporated by the Ellsworth County
Board of County Commissioners to develop and provide water service to the rural
residents within its territory, pursuant to Kan. Stat. Ann. § 82a-613 (1997).
Kansas law authorizes rural water districts to borrow money from the federal
government. Kan. Stat. Ann. § 82a-619(b) (1997). “As part of the Consolidated
Farm and Rural Development Act, 7 U.S.C. §§ 1921-2009n, Congress authorized
the Secretary of Agriculture to make or insure loans to nonprofit water service
associations for ‘the conservation, development, use, and control of water.’”
Sequoyah County Rural Water Dist. No. 7 v. Town of Muldrow , 191 F.3d 1192,
1194 (10th Cir. 1999) (quoting 7 U.S.C. § 1926(a)), cert. denied , 120 S. Ct.
1532, 1548 (2000). In accordance with these provisions, Post Rock borrowed
money from the Farmer’s Home Administration (FmHA). 3
Section 1926 applies to rural water districts receiving loans from the
3
The FmHA is now known as the Rural Utilities Service, an agency of the
United States Department of Agriculture. See 7 C.F.R. § 1780.3(a).
7
FmHA. That statute provides that “[t]he service provided or made available
through any such 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.” 7 U.S.C. § 1926(b). By enacting § 1926(b),
Congress intended to protect rural water districts from competition to encourage
rural water development and to provide greater security for and thereby increase
the likelihood of repayment of FmHA loans. See Sequoyah County , 191 F.3d at
1196; Bell Arthur Water Corp. v. Greenville Utils. Comm’n , 173 F.3d 517, 523
(4th Cir. 1999). Section 1926(b) is broadly construed to protect rural water
districts from competition with other water service providers. See Adams County
Reg. Water Dist. v. Village of Manchester, Ohio , 226 F.3d 513, 518 (6th Cir.
2000) (stating that § 1926(b) “should be given a liberal interpretation that
protects rural water associations indebted to the FmHA from municipal
encroachment”) (internal quotation marks omitted); Bell Arthur , 173 F.3d at 520,
526 (noting Congress intended by enactment of § 1926(b) to protect from
competition the territory served by a rural water district); Lexington-South
Elkhorn Water Dist. v. City of Wilmore , 93 F.3d 230, 235 (6th Cir. 1996) (noting
that § 1926(b) is given a liberal interpretation to protect rural water districts);
Jennings Water, Inc. v. City of North Vernon , 895 F.2d 311, 315 (7th Cir. 1989)
(detailing the legislative history of § 1926(b)). “[S]ection 1926(b) ‘indicates a
8
congressional mandate that local governments not encroach upon the services
provided by [federally indebted water] associations, be that encroachment in the
form of competing franchises, new or additional permit requirements, or similar
means.’” Glenpool Util. Servs. Auth. v. Creek County Rural Water Dist. , 861
F.2d 1211, 1214 (10th Cir. 1988) (quoting City of Madison v. Bear Creek Water
Ass’n , 816 F.2d 1057, 1059 (5th Cir. 1987)).
The City does not dispute that it provided water service in Post Rock’s
service area, but argues that § 1926(b) does not apply in this case. “[T]o receive
the protection against competition provided by § 1926(b) a water association
must (1) have a continuing indebtedness to the FmHA and (2) have provided or
made available service to the disputed area.” Sequoyah County , 191 F.3d at
1197. The parties stipulated that Post Rock was indebted to the FmHA. The
parties also stipulated that Purma Addition, Prairie Estates Addition, and the
Branda property were located in Post Rock’s service area. Accordingly, the
narrow issue remaining is whether Post Rock made service available to those
areas.
Consideration of cost
The district court determined that the City was encroaching on Post Rock’s
service area, but concluded that Post Rock failed to make water service available
9
because of its requirement that the customer pay all costs necessary to establish
water service, including the extension of infrastructure. Post Rock contends the
reasonableness of the cost to be borne by a prospective customer is not a relevant
inquiry in determining whether Post Rock made water service available for
purposes of § 1926(b).
Although the district court determined that Post Rock could physically
provide service to Purma Addition, it concluded that “conditioning service on the
user’s agreement to pay unreasonable fees is not ‘making service available.’”
Aplt. App. I at 160. Post Rock does not dispute that it requires customers to pay
the entire cost of establishing water service. Post Rock does not pay for any
water line extensions necessary to establish new water service. In the case of
Purma Addition, Post Rock’s engineer estimated it would cost $32,000 to connect
water service to the duplexes, which would be paid by the customers. This
estimated cost would be for construction of a service line to the duplexes, not a
main line. Although the duplex owners would pay the cost, Post Rock would be
able to use the line to serve future users. If Post Rock needed to make
improvements to its system to serve a new customer, such as installing a pumping
station, the prospective customer would pay for that improvement. However,
Post Rock indicates that even if it joined additional users, it would not pro rate so
as to reimburse some of the $32,000.00 cost to the initial two duplex owners .
10
In order to determine whether a water association has made service
available, the focus is “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 County , 191 F.3d at 1203(emphasis added). “[A] water association meets the ‘pipes-in-the-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 , 173 F.3d at 526). “This is essentially an
inquiry into whether a water association has the capacity to provide water service
to a given customer.” Id.Nevertheless, in spite of this focus on pipes-in-the-ground, we do not agree
with Post Rock that the costs of water service are completely irrelevant in
determining whether it has made services available under § 1926(b). As the
district court observed, Congress intended § 1926(b) not only to safeguard the
viability of rural water associations but also to encourage rural water
development by expanding the number of potential users, resulting in lower costs
per user. See Scioto County Reg’l Water Dist. No. 1 v. Scioto Water, Inc. , 103
F.3d 38, 40 (6th Cir. 1996) (citing the Fifth Circuit’s explanation of the dual
purposes of § 1926(b)—to “‘[s]afeguard the viability and financial security of
11
such associations’” and to “‘encourage water development by expanding the
number of potential users’”) (quoting City of Madison, Miss. v. Bear Creek
Water Ass’n , 816 F.2d 1057, 1060 (5th Cir. 1987)).
The legislative history of the statute reflects this concern with costs. See
Sen. Rep. No. 566 (1961), reprinted in 1961 U.S.C.C.A.N. 2243, 2309 (stating
that, “[b]y including service to other rural residents, the cost per user is reduced
and the loans are more secure in addition to the community benefits of a safe and
adequate supply of running household water” and that “[t]he committee
understands that there are areas where several rural settlements can more
economically combine their efforts to establish an adequate water source by
developing a common reservoir and pipeline at a cost to the users considerably
below the cost attendant to independent facilities serving each community ”)
(emphasis added).
Moreover, the phrase used by Congress in the statute—“service . . . made
available” does not exclude consideration of costs. The word “available” means
“capable of being employed with advantage of or turned to account, hence
capable of being made use of, at one’s disposal, within one’s reach.” 1 Oxford
English Dictionary at 812 (2d ed. 1989). Thus, with regard to a statute enacted
in part to reduce the cost per user, we cannot agree that providing services at a
grossly excessive cost renders them “available.” Cf. Metz v. Tusico, Inc. , 167 F.
12Supp. 393, 397 (E.D. Va. 1958) (construing the statement in a contract that
“water is available to the property” as indicating that water was “obtainable at a
reasonable cost ”) (emphasis added).
Accordingly, we conclude that even though a rural water district 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,’” Sequoyah County ,
191 F.3d at 1201 (quoting Bell Arthur , 173 F.3d at 526), the cost of those
services may be so excessive that it has not made those services “available” under
§ 1926(b). Although the costs of services need not be competitive with the costs
of services provided by other entities, the protection granted to rural water
districts by § 1926(b) should not be construed so broadly as to authorize the
imposition of any level of costs. There is some point at which costs become so
high that assessing them upon the user constitutes a practical deprivation of
service. Just as there are limits on how long a period of time a water district may
take to provide service (i.e. a “reasonable amount of time”), so there are limits on
how much it can charge for that service and still be considered to have “made [it]
available.”
In articulating a standard for determining whether the costs of a water
district’s services are excessive, the decisions of Kansas courts provide guidance.
Those courts have concluded that water rates may not be “unreasonable,
13
excessive, and confiscatory.” Bodine v. Osage County Rural Water District No.
7, 949 P.2d 1104, 1110 (Kan. 1997); see Shawnee Hills Mobile Homes, Inc. v.
Rural Water Dist. No. 6, 537 P.2d 210, 217 (Kan. 1975). In an unpublished
decision (which is not precedential but which we find persuasive, see 10th Cir.R.
36.3), this circuit has taken a somewhat similar approach. See Pittsburg County
Rural Water Dist. No. 7 v. City of McAlester , No. 98-7148, 2000 WL 525942, at
**4 n.7 (10th Cir. May 2, 2000) (concluding that a water district’s practice of
requiring customers to pay for facility improvements was not “per se
unreasonable” but did raise questions in need of “further factual development”).
We therefore conclude that, if the city can show that Post Rock’s rates or
assessements were unreasonable, excessive, and confiscatory, then the water
district has not made services available under § 1926(b).
The Kansas decisions indicate that several factors are relevant in making
this determination: (1) whether the challenged practice allows the district to
yield more than a fair profit; (2) whether the practice establishes a rate that is
disproportionate to the services rendered; (3) whether other, similarly situated
districts do not follow the practice; (4) whether the practice establishes an
arbitrary classification between various users. See Shawnee Hills , 537 P.2d at
218-21. No one factor is dispositive, and the determination of whether the
practice is excessive, unreasonable, and confiscatory depends on an assessment of
14
the totality of the circumstances. See id. Applying this standard, we examine
each property individually in order to determine whether Post Rock has made
service available under § 1926(b).
Purma Addition. The district court concluded as a matter of law that
requiring the owners of the Purma Addition duplex to pay the $32,000 for
constructing a water line was unreasonable. As a result, the court concluded, Post
Rock had not made service available under § 1926(b). The district court did not
cite any evidence from the record and it did not provide any explanation for its
conclusion. There is no indication that the court considered the factors outlined
by the Kansas courts.
Accordingly, we conclude that the case should be remanded to the district
court for further consideration of Post Rock’s imposition of the $32,000 fee. On
remand the City should be afforded an opportunity to show that Post Rock’s
practice was excessive, unreasonable, and confiscatory. If the City makes such a
showing, then the court should conclude that the water district has not “provided
or made [service] available.” See 7 U.S.C. § 1926(b). Absent such a showing by
the City, the water district will be entitled to relief under § 1926(b).
Prairie Estates Addition. The district court denied Post Rock any relief for
Prairie Estates. The district court concluded that Post Rock failed to establish
15
when, if ever, there would be water users in Prairie Estates and whether Post
Rock would have the capacity to serve those users. At the time of trial, there was
no development in Prairie Estates and none was planned in the near future. The
district court properly concluded that an injunction concerning Prairie Estates
would be premature. Although the City planned to run water pipes into Prairie
Estates for fire protection, this was a permissible action that did not encroach on
Post Rock’s service rights. See Rural Water Dist. No. 3 v. Owasso Utils. Auth. ,
530 F. Supp. 818, 823 (N.D. Okla. 1979) (noting “[t]here is nothing in the Act
[§ 1926] itself to preclude the Owasso Utilities Authority from maintaining a
water line for the purposes of fire protection only”); Kan. Stat. Ann. § 80-
1513(c) (1997) (requiring city to provide fire protection services to annexed
territory). Post Rock failed to show it had the ability to provide service to Prairie
Estates and that the City encroached on its service area.
Branda property. The district court denied Post Rock’s request for
injunctive relief as to the Branda property. The district court determined that
Post Rock failed to show it could serve the Branda property, had made no effort
to extend service to the property, and had not commissioned an engineering study
to determine if service was feasible. Based on these findings, the district court
concluded that Post Rock had not made service available to the Branda property.
On appeal, Post Rock does not dispute these findings and conclusions. The
16
district court did not err in denying Post Rock relief as regards the Branda
property.
Denial of declaratory judgment
The district court denied Post Rock’s request for a declaratory judgment
that § 1926(b) applied to all property surrounding the City as long as Post Rock
was indebted to the FmHA and had the capacity to serve additional water users.
This court reviews the denial of declaratory relief for abuse of discretion.
Johnson v. Thompson , 971 F.2d 1487, 1498 (10th Cir. 1992). In denying
injunctive relief for Prairie Estates, the district court noted that its “legal ruling
will apply equally to the Prairie Estates addition should that area ever be
developed.” Aplt. App. I at 161. Whether Post Rock is entitled to provide
exclusive water service in Prairie Estates will depend on whether it has the ability
to serve the area; this has not yet been established and cannot be established until
there are water customers in the area. The district court did not abuse its
discretion in denying Post Rock declaratory relief.
Award of attorney fees, expenses, and costs
The district court awarded Post Rock partial attorney fees under 42 U.S.C.
§ 1988. The City appeals the award of attorney fees, arguing that Post Rock’s
claim for an injunction under § 7 U.S.C. § 1926(b) is not cognizable under 42
17
U.S.C. § 1983 and therefore does not support an award of attorneys’ fees under
42 U.S.C. § 1988. 4
As noted above, the record requires further factual development as to
whether Post Rock’s imposition of costs on the owners of the Purma Addition
duplex was “unreasonable, excessive, and confiscatory” such that it did not make
services available under § 1926(b). Accordingly, it is unclear at this point
whether Post Rock will prevail on its claim for injunctive relief as to the Purma
Addition and whether, as a result, it will request an award of attorneys fees as the
prevailing party under 42 U.S.C. § 1988.
However, in the event that Post Rock does prevail on this claim, the
district court will be required to resolve the question of whether Post Rock is
entitled to attorneys fees. Because the issue has been fully briefed, we will
address it here. Although we generally review an award of attorney fees for
abuse of discretion, we consider de novo the district court’s legal conclusions
underlying the award of fees. Brandau v. Kansas , 168 F.3d 1179, 1181 (10th
Cir.), cert. denied , 526 U.S. 1132 (1999).
Section 1988(b) allows for an award of attorney fees in an action to
enforce 42 U.S.C. § 1983. The district court concluded that actions for
4
Post Rock has filed a cross-appeal of the amount of the award.
However, in light of our decision to remand Post Rock’s claim as to the Purma
Addition to the district court for further proceedings, that cross-appeal is moot.
18
violations of § 1926(b) are properly brought under § 1983. Although Post
Rock’s complaint did not mention § 1983, Post Rock may recover attorney fees
under § 1988 if its complaint contained allegations sufficient to support a § 1983
action. See Haley v. Pataki , 106 F.3d 478, 481 (2d Cir. 1997) ; Thorstenn v.
Barnard , 883 F.2d 217, 218 (3d Cir. 1989).
The issue is whether Post Rock’s complaint stated a claim that would be
cognizable under § 1983. Section 1983 provides that
[e]very person who, under color of any statute, [or] ordinance . . . of
any State . . . subjects, or causes to be subjected, any citizen of the
United States or other person within the jurisdiction thereof to the
deprivation of any rights, privileges, or immunities secured by the
Constitution and laws, shall be liable to the party injured in an action
at law, suit in equity, or other proper proceeding for redress.
The City contends that Post Rock, as a quasi-municipality, 5
cannot bring a § 1983
claim against the City, a municipality. The City also asserts that Post Rock is not
a “citizen” or “other person” under § 1983.
A political subdivision of a state may not bring certain constitutional
challenges against another political subdivision. See Branson Sch. Dist. RE-82
5
The Kansas Supreme Court has concluded that a rural water district is
“incorporated as a quasi-municipal corporation by declaration of the board of the
commissioners of the county in which the water district is located.” Dedeke v.
Rural Water Dist. No. 5 , 623 P.2d 1324, 1331 (Kan. 1981) (citing Kan. Stat.
Ann. 82a-616). The powers of a rural water district are prescribed by statute, the
water district enjoys the power of eminent domain, and “[i]n law and in fact, a
rural water district exercises the powers of a public utility,” “subject to state
regulation and control.” Id.19
v. Romer , 161 F.3d 619, 628 (10th Cir. 1998) (noting that “a municipality may
not bring a constitutional challenge against its creating state when the
constitutional provision that supplies the basis for the complaint was written to
protect individual rights, as opposed to collective or structural rights”); Housing
Auth. v. City of Ponca City , 952 F.2d 1183, 1190 (10th Cir. 1991) (noting that “a
political subdivision of a state may not challenge the validity of an act by a
fellow political subdivision under the Fourteenth Amendment unless such an
action is expressly authorized by the creating state”); United States v. Alabama ,
791 F.2d 1450, 1454-55 (11th Cir. 1986) (noting that generally “creatures of the
state have no standing to invoke certain constitutional provisions in opposition to
the will of their creator”); South Macomb Disposal Auth. v. Township of
Washington , 790 F.2d 500, 505 (6th Cir. 1986) (noting that “a political
subdivision of a state cannot challenge the constitutionality of another political
subdivision’s ordinance on due process and equal protection grounds”).
This court in Ponca City reasoned that because “political subdivisions are
creatures of the state, they possess no rights independent of those expressly
provided to them by the state. Hence, unless expressly granted the ability by its
creating state, a political subdivision cannot assert federal constitutional rights in
opposition to state action.” 952 F.2d at 1192. The reasoning of Ponca City is
inapplicable here. Post Rock is asserting a violation of federal statutory law, not
20
a constitutional violation. The State of Kansas has authorized Post Rock to
borrow money from the FmHA, which brings Post Rock under the rubric of
§ 1926.
We next address whether Post Rock, a quasi-municipality, may bring a
§ 1983 action against the City for its alleged violation of § 1926. The Supreme
Court has held that municipalities are “persons” for purposes of being sued under
§ 1983. Board of County Comm’rs of Bryan County v. Brown , 520 U.S. 397,
403 (1997); Monell v. Dep’t of Soc. Servs. , 436 U.S. 658, 689-90 (1978) . Other
circuits have stated, post- Monell , that while a municipality may be sued under
§ 1983, it may not bring an action under the same provision. See Rockford Bd.
of Educ., Sch. Dist. No. 205 v. Illinois State Bd. of Educ. , 150 F.3d 686, 688
(7th Cir. 1998) (noting that “a city or other municipality cannot bring a suit under
42 U.S.C. § 1983”); Randolph County v. Alabama Power Co. , 798 F.2d 425, 425-
26 (11th Cir. 1986) (stating that “we have subsequent to Monell continued to
hold that a municipality has no cause of action under section 1983”) . A review
of those cases, however, shows they involved claims by municipalities of
constitutional violations, which generally cannot be asserted by municipalities
under any statute. See City of East St. Louis v. Circuit Court for Twentieth
Judicial Circuit , 986 F.2d 1142, 1144 (7th Cir. 1993) (stating that
“[m]unicipalities cannot challenge state action on federal constitutional grounds
21
because they are not ‘persons’ [and] . . . cannot invoke the protection of the Fifth
or Fourteenth Amendments”); Appling County v. Municipal Elec. Auth. , 621
F.2d 1301, 1308 (5th Cir. 1980) (stating that “[t]he Monell decision does not call
into question the principle that a city or county cannot challenge a state statute on
federal Constitutional grounds”). In this case, Post Rock is claiming a statutory
violation. Section 1983 provides a private cause of action for violations of
federal statutes, as well as for constitutional violations. Maine v. Thiboutot , 448
U.S. 1, 4 (1980). This court has held that “a political subdivision [may] sue its
parent state when the suit alleges a violation by the state of some controlling
federal law.” Branson , 161 F.3d at 630. It follows that Post Rock can sue the
City under § 1983 for violations of § 1926.
In Monell , the Supreme Court relied on legislative history to conclude that
a municipality may be sued under § 1983. The Court explained that before the
Civil Rights Act was passed Congress had stated that “‘in all acts hereafter
passed . . . the word “person” may extend and be applied to bodies politic and
corporate . . . unless the context shows that such words were intended to be used
in a more limited sense.’” Monell , 436 U.S. at 688 (quoting Act of Feb. 25,
1871, § 2, 16 Stat. 431). We agree with the Sixth Circuit that “in light of
Monell , it would be a strained analysis to hold, as a matter of statutory
construction, that a municipal corporation was a ‘person’ within one clause of
22
section 1983, but not a ‘person’ within another clause of that same statute.”
South Macomb , 790 F.2d at 503. Post Rock is not precluded from bringing an
action under § 1983 simply by its status as a quasi-municipality.
Availability of § 1983 for violation of § 1926(b)
While Post Rock is not precluded as a quasi-municipality from bringing a
§ 1983 action for violation of a federal statute, we must next determine whether a
violation of § 1926(b) gives rise to a federal right enforceable through a § 1983
action. Section 1983 protects certain rights conferred by federal statutes.
Blessing v. Freestone , 520 U.S. 329, 340 (1997). “In order to seek redress
through § 1983, however, a plaintiff must assert the violation of a federal right,
not merely a violation of federal law.” Id. The court looks at three factors to
determine whether a particular statutory provision gives rise to a federal right:
(1) “Congress must have intended that the provision in question benefit the
plaintiff,” (2) “the plaintiff must demonstrate that the right assertedly protected
by the statute is not so ‘vague and amorphous’ that its enforcement would strain
judicial competence,” and (3) “the statute must unambiguously impose a binding
obligation on the States.” Id. at 340-41.
All of these factors support the conclusion that § 1926(b) gives rise to a
federal right. Section 1926(b) serves to prohibit competition with rural water
districts; this indicates that Congress intended the provision to benefit rural water
23
districts such as Post Rock. See Bell Arthur , 173 F.3d at 520 (stating § 1926(b)
was enacted to protect nonprofit water service associations and hence, the federal
loans made to them, by “protecting the territory served by such an association
facility against competitive facilities”); but see Wayne , 36 F.3d at 529 (stating
that “[t]he overwhelming weight of authority is that the purpose of the statute is
to protect rural water service users access to clean, safe water”). This right
against competition and the requirements for protection of the right are defined
by the statute and are not so vague and amorphous that its enforcement would
strain judicial competence. The statute unambiguously imposes a binding
obligation on municipal corporations, which are political subdivisions of the
state, to not compete with rural water districts.
Even though § 1926(b) creates an individual right, there is only a
rebuttable presumption that the right is enforceable under § 1983. Blessing , 520
U.S. at 341. A right is not enforceable under § 1983 if Congress “‘specifically
foreclosed a remedy under § 1983.’” Id. (quoting Smith v. Robinson , 468 U.S.
992, 1005, n.9 (1984)). Congress may expressly preclude such a remedy by
forbidding recourse to § 1983 in the statute itself. Id. Congress can also
impliedly preclude a § 1983 remedy by creating a comprehensive enforcement
scheme that is incompatible with individual enforcement under § 1983. Id.
With these principles in mind, we conclude that Congress has not
24
foreclosed a § 1983 remedy for violations of § 1926(b). Section 1926(b) does
not itself forbid recourse to § 1983. Moreover, “Congress provided no
enforcement mechanism for protecting the right that § 1926(b) creates. Thus,
pursuant to § 1983, § 1926(b) gives rise to a private right of action on the part of
rural water service users.” Wayne , 36 F.3d at 529; see North Alamo Water
Supply Corp. v. City of San Juan , 90 F.3d 910, 917 (5th Cir. 1996) (noting that
“[s]ection 1926(b) does not create or specify a remedy for the enforcement of
violations, but an injunction has been the principal tool employed by the courts
with which to enforce the statute and prevent violations”). As a result, the
district court did not err in concluding that Post Rock properly brought its action
for violation of § 1926(b) under §1983. In the event that Post Rock prevails on
remand on its claim for injunctive relief as to the Purma Addition, it will be
entitled to an award of a reasonable amount attorneys fees under 42 U.S.C. §
1988.
III.
The judgment of the district court as to the Purma Addition is VACATED
and the case is REMANDED for the district court for further proceedings. The
judgment of the district court as to the Prairie Estates Addition and the Branda
property is AFFIRMED.
25
26
Nos. 98-3337, 98-3340, 99-3075, 99-3084
Rural Water Dist. No. 1 v. City of Wilson
BRISCOE , Circuit Judge, concurring and dissenting:
I concur in the majority opinion except for its holding regarding the Purma
Addition that cost to the customer of establishing water service is relevant in
determining whether Post Rock has made services available under § 1926(b).
Rather than reverse and remand for further consideration of whether Post Rock’s
imposition of a $32,000 cost upon the owners of the Purma Addition duplex was
excessive, unreasonable, and confiscatory, I would reverse and remand with
directions to the district court to enjoin the City from providing water service in
the Purma Addition and to reassess the amount of attorney fees awarded to Post
Rock as a prevailing party under 42 U.S.C. § 1988.
The proper test in determining whether Post Rock made service available
under § 1926(b) is the “pipes in the ground” test enunciated in Sequoyah County
Rural Water District No. 7 v. Town of Muldrow , 191 F.3d 1192 (10th Cir. 1999),
cert. denied , 120 S. Ct. 1521 (2000), i.e., whether Post Rock had “adequate
facilities within or adjacent to the area to provide service to the area within a
reasonable time after a request for service [was] made.” Id. at 1203.
This court has held that to receive the protection against competition
provided by § 1926(b) a water association must (1) have a
continuing indebtedness to the FmHA and (2) have provided or made
available service to the disputed area. [Citation omitted.] The
purpose of the second inquiry is to determine whether the disputed
customers are within the water association’s service area . . . .
Doubts about whether a water association is entitled to protection
from competition under § 1926(b) should be resolved in favor of the
FmHA-indebted party seeking protection for its territory. See North
Alamo Water Supply Corp. v. City of San Juan, Tex., 90 F.3d 910,
913 (5th Cir. 1996) (“The service area of a federally indebted water
association is sacrosanct. Every federal court to have interpreted §
1926(b) has concluded that the statute should be liberally interpreted
to protect FmHA-indebted rural water associations from municipal
encroachments.”).
Id. at 1197. The cost of water service provided by Post Rock should not be
compared to the cost of water service provided by the City because this would
impermissibly create competition with the rural water district. See S. Rep. No.
566, 87th Cong., 1st Sess., reprinted in 1961 U.S.C.C.A.N. 2243, 2309 (noting
that § 1926(b) exists to “protect[] the territory served by such an association
against competitive facilities”). Similarly, the cost to the customer of
establishing service cannot be considered in determining whether the rural water
district has made service available for purposes of protecting it against
encroachment by a city water district under § 1926(b).
This conclusion does not leave rural water customers without a remedy.
Cost might be a relevant factor in an action against Post Rock by rural water
customers under state law. Kansas statutes provide for release of lands from the
water district’s service area “[i]f it becomes apparent that certain lands included
within a district cannot be economically or adequately served by the facilities of
the district.” Kan. Stat. Ann. § 82a-630 (1997). Rural water customers can also
bring an action in state court challenging the reasonableness of rates set by rural
2
water districts. As the Kansas Supreme Court has noted, the rural water district
“is not free to exact whatever rate it sees fit to impose” and “rates must be
reasonable in the sense that they are not excessive or confiscatory.” Shawnee
Hills Mobile Homes, Inc. v. Rural Water Dist. No. 6 , 537 P.2d 210, 216-17 (Kan.
1975); see Bodine v. Osage County Rural Water Dist. #7 , 949 P.2d 1104, 1110
(Kan. 1997) (noting that “a water user who is subject to the rates [between a City
and the rural water district] may still challenge the rates as improper if the
litigant can overcome the rates’ presumption of validity and prove that the rates
are unreasonable, excessive, and confiscatory”). However, this cost inquiry is
not relevant in determining whether the City violated § 1926(b).
The district court concluded Post Rock was a prevailing party under 42
U.S.C. § 1988 and awarded partial attorney fees on its limited success. As I
would conclude the district court erred in ruling against Post Rock concerning
the Purma Addition, I would also remand for the district court to reassess the
extent to which Post Rock prevailed and the amount of attorney fees warranted.
I would reverse the district court’s judgment as to the Purma Addition and
remand to the district court with directions to enjoin the City from providing
water service in that area and to reassess the extent to which Post Rock prevailed
and award reasonable attorney fees accordingly.
3