City of Falls Church v. Fairfax County Water Authority , 272 F. App'x 252 ( 2008 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-1527
CITY OF FALLS CHURCH, VIRGINIA,
Plaintiff - Appellant,
versus
FAIRFAX COUNTY WATER AUTHORITY,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Claude M. Hilton, Senior
District Judge. (1:07-cv-00174-CMH)
Argued: January 31, 2008 Decided: April 4, 2008
Before MICHAEL, GREGORY, and DUNCAN, Circuit Judges.
Affirmed by unpublished opinion. Judge Duncan wrote the opinion,
in which Judge Michael and Judge Gregory joined.
ARGUED: Philip Louis Chabot, Jr., MCCARTHY, SWEENEY & HARKAWAY,
Washington, D.C., for Appellant. Stuart A. Raphael, HUNTON &
WILLIAMS, L.L.P., McLean, Virginia, for Appellee. ON BRIEF: Jill
Marie Dennis, HUNTON & WILLIAMS, L.L.P., McLean, Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
DUNCAN, Circuit Judge:
The City of Falls Church (“Falls Church”), appellant in this
action, contends that the federal government effectively granted it
the exclusive right to provide water service to customers in
certain portions of Fairfax County, Virginia, through the passage
of four Acts of Congress in 1859, 1926, 1947, and 1996. The issue
presented in this case is whether the provision of water service in
the affected areas by appellee Fairfax County Water Authority
(“Fairfax Water”), though consistent with Virginia law, was
preempted by these four Acts. The district court held that it was
not and granted Fairfax Water’s motion to dismiss. For the
following reasons, we affirm.
I.
In 1957, the Board of Supervisors of Fairfax County created
Fairfax Water. Under Virginia law, Fairfax Water has the power to
operate a water system “within, outside, or partly within and
partly outside one or more of the localities which created the
authority . . . .” Va. Code Ann. § 15.2-5114(6). However, under
Virginia law, Falls Church, a political subdivision of the
Commonwealth of Virginia, also maintains a right to provide water
service both within and outside its own territorial limits. Va.
Const. art. VII, § 8 (1971); Va. Code Ann. § 15.2-2143; Charter,
City of Falls Church § 2.03 (1998 & Supp. 2003). The combined
2
effect of these provisions creates areas of overlapping authority,
or “interface areas,” where water service might legitimately be
provided by either Fairfax Water or Falls Church.
For thirty years, from 1959 to 1989, Fairfax Water and Falls
Church operated under a contractual agreement in which the two
entities delineated portions of interface areas to be served by
Fairfax Water or Falls Church, but not both. When the agreement
expired in 1989, these areas were ostensibly opened up for
competition between the parties. In 2005, Fairfax Water informed
Falls Church that it intended to serve new developments in the
interface areas.
In February 2007, shortly after learning that Fairfax Water
had moved ahead with its plan by offering to provide water service
to a planned office complex within one of the interface areas,
Falls Church initiated this action. Falls Church asserted that the
extension of Fairfax Water’s service into these areas would
frustrate the purposes embodied in a series of four federal Acts
related to the provision of water service from the federally-owned
and operated Washington Aqueduct to Falls Church and other Aqueduct
customers.1
1
The Washington Aqueduct includes various federally-owned
facilities, including “the dams, intake works, conduits, and pump
stations that capture and transport raw water from the Potomac
River to the Dalecarlia Reservoir; . . . the infrastructure and
appurtenances used to treat water taken from the Potomac River to
potable standards; and . . . related water distribution
facilities.” Safe Drinking Water Act Amendments of 1996, Pub. L.
3
Three of the Acts in issue set forth the basic framework under
which water is provided to Washington Aqueduct customers. The
first Act, passed in 1859, authorized the provision of public
drinking water to the District of Columbia via the Washington
Aqueduct. Act of March 3, 1859, ch. 84, 11 Stat. 435 (the “1859
Act”). The second Act, passed in 1926, authorized the Secretary of
War, “in his discretion and subject to the approval of the Chief of
Engineers, upon the request of the Board of Supervisors of
Arlington County, Virginia, to permit the delivery of water” from
the Washington Aqueduct to Arlington County. Act of April 14,
1926, ch. 140, 44 Stat. 251 (the “1926 Act”). On similar terms,
the third Act, passed in 1947, expanded the permissible service
area of the Washington Aqueduct to include Falls Church. Act of
June 26, 1947, ch. 149, § 1, Pub. L. No. 80-118, 61 Stat. 181 (the
“1947 Act”).2 Falls Church began receiving water from the
No. 104-182, 110 Stat. 1613.
2
“[T]he Secretary of War . . . is hereby authorized in his
discretion, upon request of the town council of the town of Falls
Church, Fairfax County, Virginia, or any other competent State or
local authority in the Washington metropolitan area in Virginia, to
permit the delivery of water” from the Washington Aqueduct to Falls
Church “for the purpose of supplying water for the use of said town
and such adjacent areas as are now or shall hereafter be served by
the water system of said town; or to any other competent State or
local authority in said metropolitan area in Virginia.” Id. The
Act further provided “[t]hat the Secretary of War, directly or upon
the request of the Board of Commissioners, may revoke at any time
any permit for the use of said water that may have been granted.”
Id.4
Washington Aqueduct in 1950 and currently obtains its full water
requirements from the Aqueduct.3
The last of the four Acts, passed in 1996, authorized the
transfer of the Washington Aqueduct, within three years, “to a non-
Federal, public or private entity.” Act of Aug. 6, 1996,
§ 306(d)(1), Pub. L. 104-182, 110 Stat. 1686 (the “1996 Act”). The
Act also authorized the Secretary of the Army to borrow such
amounts in fiscal years 1997, 1998, and 1999 as would be necessary
to fund capital improvements to the Washington Aqueduct to ensure
its continued operation until the transfer took place. Id.§ 306(e). This borrowing authority would be effective “only after
the Chief of Engineers [had] entered into contracts with each
customer under which the customer [committed] to repay a pro rata
share (based on water purchase) of the principal and interest.”
Id. § 306(e)(2)(A).4 In 1997, Falls Church entered into a Water
Sales Agreement with the Secretary of the Army under which Falls
3
In 1950, Falls Church entered into a water supply agreement
with Arlington County, which receives water from the Washington
Aqueduct pursuant to the 1926 Act, for the sale and delivery of
water from Arlington County to Falls Church, pursuant to the 1947
Act. That agreement remains in effect to this day. In 1961, Falls
Church built a water line that allowed it to connect to the federal
government’s water filtration plant, and entered into a separate
water supply agreement to receive some of its water directly from
the federal government.
4
The term “customer” in the Act referred to three entities
then receiving water from the Washington Aqueduct: the District of
Columbia; Arlington County, Virginia; and Falls Church. Id.
§ 306(a)(1).
5
Church agreed to pay its pro rata share of the principal and
interest on loans advanced pursuant to § 306 of the 1996 Act. The
Agreement also included terms for offsetting the risk of default by
Falls Church, as required by the Act. J.A. 170; see id.
§ 306(e)(2)(C).5 The Secretary of the Army took out three loans
pursuant to § 306, issuing promissory notes to the U.S. Treasury in
July 1997, October 1997, and October 1998, totaling $75 million.
When the transfer of the Washington Aqueduct was not consummated
within the three-year time frame contemplated in the 1996 Act,
however, § 306 was repealed, leaving the Washington Aqueduct the
property of the United States. Act of Aug. 21, 2002, Pub. L. No.
107-217, § 6, 116 Stat. 1325 (2002) (repealing Pub. L. 104-182,
§ 306).
In the district court, Falls Church argued that Fairfax
Water’s proposed water-service provision within interface areas
would interfere with the federal program and activity authorized by
the above-referenced Acts of Congress, and that such action was
therefore preempted by the Supremacy Clause of the United States
Constitution, U.S. Const. art. VI, cl. 2. Falls Church asked the
court to declare unlawful and enjoin Fairfax Water’s efforts to
5
Under the Agreement, Falls Church committed to pay special
rates designed to take into account “the financial markets’ measure
of the cost of the risk of default[.]” J.A. 170. As explained
infra, this undercuts Falls Church’s argument that competition with
Fairfax Water might jeopardize its ability to meet its obligations
to the United States under the Agreement.
6
provide water and water utility service to customers within
affected interface areas. The district court rejected Falls
Church’s preemption claim and dismissed the case. This appeal
followed.
II.
We review de novo a district court’s dismissal for failure to
state a claim under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, accepting as true all well-pleaded allegations and
reviewing the complaint in the light most favorable to the
plaintiff. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th
Cir. 1993). “Factual allegations must be enough to raise a right
to relief above the speculative level, on the assumption that all
the allegations in the complaint are true (even if doubtful in
fact).” Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1965
(2007) (internal citations omitted).
A.
Federal law may preempt state law through express statutory
language, where Congress evinces an intent to occupy an entire
field of regulation, or where state law actually conflicts with
federal law. Michigan Canners and Freezers Ass’n, Inc. v. Agric.
Marketing & Bargaining Bd., 467 U.S. 461, 469 (1984). Only the
last of these types of preemption--conflict preemption--is at issue
here.
7
An actual conflict between state and federal law arises “when
compliance with both state and federal law is impossible, or when
the state law stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress.” Id.(internal quotations and citation omitted). Falls Church does not
argue that compliance with state and federal law would be
impossible on this record. Rather, its contentions appear to be
based on the existence of “obstacle preemption.” Falls Church
asserts that Fairfax Water’s attempts to provide water service to
customers in interface areas would “interfere with the implied, but
nonetheless obvious purposes and objectives of Congress in
establishing the Washington Aqueduct.” Appellant Br. at 19. It
argues that “Congress could not have been indifferent to” Fairfax
Water serving customers that would have otherwise been served by
Falls Church. Id. at 20. By serving these customers, according to
Falls Church, Fairfax Water would stand as an obstacle to the most
effective economic use of the Washington Aqueduct, by consequently
causing an increase in the price paid by the federal government for
water in and near the District of Columbia, and by harming the
ability of the Washington Aqueduct’s customers--the District of
Columbia, Arlington County, and Falls Church--to meet their
financial obligations under contracts entered into pursuant to the
1996 Act. Such outcomes, Falls Church concludes, would frustrate
8
Congress’s intent to have the Washington Aqueduct operate in the
most efficient and financially sound manner.
B.
“The purpose of Congress is the ultimate touchstone in every
preemption case.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485
(1996) (internal quotations and alterations omitted). In
ascertaining that purpose, however, we begin our consideration with
the basic premise that “Congress did not intend to displace state
law.” Maryland v. Louisiana, 451 U.S. 725, 746 (1981). “[A] clear
and manifest purpose of preemption is always required.” Puerto
Rico Dep’t of Consumer Affairs v. Isla Petroleum Corp., 485 U.S.
495, 503 (1988) (internal quotations omitted).
The presumption against preemption has particular force in the
areas of public health and safety that have traditionally been
regulated by the states. See Pinney v. Nokia, Inc., 402 F.3d 430,
457 (4th Cir.), cert. denied 126 S. Ct. 551 (2005). Therefore, to
the customary caution with which we approach preemption challenges,
we add “the assumption that the historic police powers of the
States were not to be superseded by the Federal Act unless that was
the clear and manifest purpose of Congress.” Hillsborough County
v. Automated Med. Labs., Inc., 471 U.S. 707, 715 (1985) (internal
quotations omitted); see also Pinney, 402 F.3d at 454 n.4, 457. Of
particular significance here is the fact that “the provision and
regulation of a healthful public water supply is at the core of
9
Virginia’s police power.” Shrader v. Horton, 471 F.Supp. 1236,
1242 (W.D. Va. 1979), aff’d 626 F.2d 1163 (4th Cir. 1980).
Our jurisprudence teaches that even in obstacle preemption
cases, “[t]here is no federal pre-emption in vacuo, without a
constitutional text or a federal statute to assert it.” Isla
Petroleum Corp., 485 U.S. at 503; see also Gade v. Nat’l Solid
Wastes Mgmt. Ass’n, 505 U.S. 88, 104 n.2 (1992). A reviewing court
must “examine the explicit statutory language and the structure and
purpose of the statute.” Ingersoll-Rand Co. v. McClendon, 498 U.S.
133, 138 (1990).
Turning to the text of the statutes at issue here, we find no
clear and manifest purpose to supersede Virginia’s traditional
authority in the area of water utility regulation. Two of the four
statutes do not refer to or impact Falls Church at all. The third
Act, the 1947 statute upon which Falls Church purports to rely,
merely authorizes the Secretary of War “to permit the delivery of
water” to Falls Church. On its face, the language is conspicuously
and unequivocally permissive. Moreover, it allows for the
termination of water service to Falls Church “at any time.” The
purpose of the 1996 Act was to encourage the sale of the Aqueduct
to a non-federal entity within three years, and to finance the
operation of the Aqueduct until the transfer was complete. When a
transfer did not occur within three years, the statute was
repealed. It cannot reasonably be inferred that Congress intended
10
to grant Falls Church an exclusive, federally-mandated water
service territory in a statute that had as its core objective
facilitating the federal government’s departure from the water
supply business.
As we have noted, the Supreme Court instructs us that “[i]n
areas of traditional state regulation, we assume that a federal
statute has not supplanted state law unless Congress made such an
intention clear and manifest.” Bates v. Dow Agrosciences LLC, 544
U.S. 431, 449 (2005) (internal quotations omitted). We find no
such “clear and manifest” intention in the structure and purposes
of the Acts at issue here.
Unable to find support for its preemption challenge in the
statute, Falls Church argues that interference with a federal
scheme can nevertheless be inferred from the possibility that a
loss of customers to Fairfax Water might impact its ability to meet
its contractual obligations with respect to the loans incurred for
capital improvements to the Aqueduct. In addition to ignoring the
analytical prerequisites of conflict preemption, this argument also
fails to articulate the non-speculative factual basis for relief
required by Twombly. 127 S. Ct. at 1965. We note again, in this
vein, that the Water Sales Agreement between Falls Church and the
Secretary of the Army includes provisions protecting the federal
government against the risk of default. Thus, Falls Church’s
11
ability to meet its obligations was accounted for, at least to some
extent, within the terms of the Agreement itself.6
III.
For the foregoing reasons, the judgment of the district court
is
AFFIRMED.
6
Although not determinative of our analysis, we note as well
that Falls Church maintains the option of raising rates or taxes to
meet its contractual obligations to the federal government.
12