North Alamo Water v. City of San Juan, TX ( 1998 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 95-40048
NORTH ALAMO WATER
SUPPLY CORPORATION,
Plaintiff-Appellee;
versus
CITY OF SAN JUAN,
Defendant-Appellant.
-------------------------
TEXAS RURAL WATER ASSOCIATION,
Amicus Curiae
Appeals from the United States District Court
For The Southern District of Texas
(93-CV-265)
April 15, 1996
Before KING, WIENER, and BENAVIDES, Circuit Judges:
PER CURIAM:
This appeal involves a battle between Plaintiff-Appellee North
Alamo Water Supply Company (Utility) and the Defendant-Appellant
city of San Juan, Texas (City) over which one has the right to
provide water service to five residential subdivisions (disputed
areas) in or near the City. After the City began providing water
service to the disputed areas, the Utility filed this suit,
claiming that it had the exclusive right to provide water service
to the disputed areas. The district court held in favor of the
Utility and enjoined the City. The City appealed complaining,
inter alia, that the district court’s injunction is improper,
vague, and offends both the Constitution and principles of
federalism. We affirm in part and remand in part for modification
of the injunction consistent with this opinion.
I
FACTS AND PROCEEDINGS
A. BACKGROUND
The Utility is a Texas nonprofit rural water supply company.
Approximately 20 years ago, the Texas Water Commission, which has
since been succeeded by the Texas Natural Resources Conservation
Commission (Commission),1 granted Certificate of Convenience and
Necessity Number 10553 (Certificate) to the Utility. The
Certificate obligates the Utility to provide water services for a
1
The Commission has rule making authority to regulate and
supervise retail public utilities’ rates, fees, operations, and
services.
2
large rural area spanning Hidalgo and Willacy counties in South
Texas (Certificated Area).2 To finance construction, operation,
and improvement of its water system, the Utility obtained loans and
grants from the Farmer’s Home Association (FmHA). At the end of
1993, the Utility owed the FmHA approximately $12,000,000.
The City is a home rule municipality located in Hidalgo
County, Texas. It owns and operates a municipal water supply
system and provides water service in several subdivisions north of
the City, some of which lie within the Utility’s Certificated Area.
As the City developed, the Utility would determine from time to
time that various subdivisions of the City that are within the
Certificated Area would be better served by the City. In such
instances, the Utility would either execute a written release to
the City or acquiesce in the City’s furnishing water service to
those subdivisions. The five other subdivisions3 which
collectively constitute the disputed areas are within the
Certificated Area and are currently receiving water service from
the City, but the City had never obtained a release from the
Utility to service these subdivisions. The Utility objected to the
City’s providing service to the disputed areas, explaining that
these subdivisions are within the Certificated Area and are
2
See Tex. Water Code Ann. 13.250(a) (Vernon 1988 & Supp.
1995)(“[A]ny retail public utility that possesses a . . .
certificate of public convenience and necessity shall serve every
consumer within its certificated area and shall render continuous
and adequate service within the area or areas.”)(emphasis added).
3
The names of these subdivisions are Loma Linda 1, Loma Linda
2, Los Arboles, B&H Mobile Home Park, and Chaparreles.
3
adjacent to the Utility’s water service lines. Despite these
objections, the City refused to allow the Utility to provide water
service to the disputed areas.
B. THE LITIGATION
In December 1993, the Utility brought this action under 7
U.S.C. § 1926(b) to enjoin the City from providing water service
within the Certificated Area. In July 1994, the City filed
applications (Applications) under §§ 13.2544 and 13.255,5 seeking
to decertify portions of the Certificated Area and to recertify
them in the City’s name. On August 18, 1994, before the Commission
reached a decision on the Applications, the district court entered
an Agreed Preliminary Injunction, enjoining the City from servicing
any additional customers within the Certificated Area and ordering
the City to contact the Commission and request that it take no
further action on the Applications until the expiration of the
Agreed Preliminary Injunction.6
1. Original Judgment
On December 15, 1994, the district court entered final
judgment (Original Judgment) in favor of the Utility and against
4
Tex. Water Code Ann. § 13.254 (“The commissioner at any time
after notice and hearing may revoke or amend any certification of
public convenience and necessity . . . if it finds that the
certificate holder has never provided, is no longer providing, or
has failed to provide continuous and adequate service in the area,
or part of the area, covered by the certificate.”).
5
Id. § 13.255 (addressing single certification in an annexed
or incorporated area).
6
This preliminary injunction has not been challenged in this
appeal.
4
the City. After noting that under Texas law the Utility had a
legal duty to provide continuous and adequate service to residents
in the Certificated Area, the district court held that the Utility
had, as a matter of law, “made service available” as required by §
1926(b). In the alternative, the district court held that because
the Utility had water service lines adjacent to the disputed areas,
it had, as a factual matter, “made service available” as required
by § 1926(b). The district court concluded that the City had
encroached on the service area of a federally indebted water
association and thus violated § 1926(b).
The district court found that the Utility’s annual net revenue
attributable to the disputed areas was approximately $365,000.
Accordingly, it permanently enjoined the City from (1) pursuing the
Applications; (2) offering to provide or providing service to the
disputed areas; and (3) offering to provide or providing water
service to areas that lie within the Certified Area but are not
currently served by the City, except as agreed to by the Utility.
Finally, the court also instructed that the transition of service
from the City to the Utility within the disputed areas be
accomplished so as to minimize interruption in water service.
2. Amended Judgment
On December 27, 1994, the City filed a motion for a new trial
and a motion to alter or amend the judgment (City’s Motions). On
December 28, 1994, the Utility filed what it “captioned” as a
motion for leave to amend its complaint (Utility’s Motion). On
January 27, 1995, the court overruled the City’s Motions, but took
5
the Utility’s Motion under advisement. In May 1995, the district
court issued an order which construed the Utility’s Motion as a
Rule 59(e) motion to amend or alter the judgment and granted it
(Amended Judgment).
The Amended Judgement granted the same relief as the Original
Judgment. In addition, it clarified that the City must relinquish
to the Utility control of the water distribution infrastructures in
the disputed areas. On May 5, 1995, the City filed its amended
notice of appeal, challenging, inter alia, the district court’s
findings of fact, its legal conclusions, and the remedy it
fashioned.
C. THE COMMISSION AGREES WITH THE DISTRICT COURT
On May 30, 1995, the Commission issued a Cease and Desist
Order (Commission’s Order) at the request of the Utility. The
Texas Commission ruled that, as the disputed areas are within the
Certificated Area, the Utility had the exclusive right to provide
water in the disputed areas. As a result, the Commission’s Order
directed (1) the Utility to provide “continuous and adequate”
service to the disputed areas; (2) the City to continue providing
water service to the disputed areas until the Utility initiates
service; and (3) the City to cease providing water service to the
disputed areas upon initiation of service by the Utility. The
Commission declined to order the City to relinquish control of the
water distribution infrastructures to the Utility, explaining that
it did not have the power to do so. As a final instruction, the
Commission ordered the City and the Utility to “mend their fences,”
6
by filing applications to reflect the official boundaries of their
respective certificated areas.
II
DISCUSSION
A. THE VIOLATION ISSUES:
1. Standard of Review
We review a judgment on the merits of a nonjury civil case
applying the usual standards of review.7 Thus, we review
conclusions of law de novo and findings of fact for clear error.8
If the district court's account of the evidence is plausible in
light of the record viewed in its entirety, we may not reverse even
if we are convinced that, had we been sitting as the trier of fact,
we would have weighed the evidence differently.9
2. The Statute: 7 U.S.C. § 1926(b)
The initial issue in this appeal centers around Section
1926(b).10 That section provides in pertinent part:
The service provided or made available through any such
[indebted water] association shall not be curtailed or
limited by the inclusion of the area within the
boundaries of any municipal corporation or other public
body, or by the granting of any private franchise for
similar service within such area during the term of said
7
See Crisis Transp. Co. v. M/V Erlangen Express, 794 F.2d
185, 187 n.5 (5th Cir. 1986).
8
See id.
9
See First United Fin. Corp. v. Specialty Oil Co., Inc., 5
F.3d 944, 947 (5th Cir. 1993) (citing Anderson v. City of Bessemer
City, N.C., 470 U.S. 564, 574 (1985)).
10
7 U.S.C. § 1926(b).
7
loan . . . .11
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
encroachment.12
In City of Madison, Miss. v. Bear Creek Water Ass’n Inc.,13 we
held that § 1926(b) “indicates a congressional mandate that local
governments not encroach upon the services provided by such [water]
associations, be that encroachment in the form of competing
franchises, new or additional permit requirements, or similar
means.” We explained that the history behind this section
indicates two congressional purposes: (1) to encourage rural water
development by expanding the number of potential users of such
systems, thereby decreasing the per-user cost, and (2) to safeguard
the viability and financial security of such associations (and
FmHA's loans) by protecting them from the expansion of nearby
11
Id. (emphasis added).
12
Wayne v. Of Sebring, 36 F.3d 517, 527-28 (6th Cir. 1994),
cert. denied, 115 S. Ct. 2000 (1995); Jennings Water, Inc. v.
City of North Vernon, Ind., 895 F.2d 311, 315 (7th Cir. 1989);
Glenpool Util. Auth. v. Creek County Rural Water Dist. No. 2, 861
F.2d 1211, 1214 (10th Cir. 1988), cert. denied, 490 U.S. 1067
(1989); City of Madison, Miss. v. Bear Creek Water Ass'n., Inc.,
816 F.2d 1057, 1059 (5th Cir. 1987); North Shelby Water Co. v.
Shelbyville Mun. Water & Sewer Comm’n, 803 F. Supp. 15, 21 (E.D.
Ky. 1992); Pinehurst Enter., Inc. v. Town of Southern Pines, 690
F. Supp. 444, 451 (M.D.N.C.1988), aff'd, 887 F.2d 1080 (4th Cir.
1989); Moore Bayou Water Ass'n., Inc. v. Town of Jonestown, Miss.,
628 F. Supp. 1367, 1369 (M.D.Miss. 1986); Rural Dist. No. 3 v.
Owasso Util. Auth., 530 F. Supp. 818, 824 (M.D.Okla. 1979).
13
816 F.2d at 1060-61.
8
cities and towns. With this background, we turn to the violation
issue.14
3. Did the City Violate § 1926(b)?
To secure the protections of § 1926(b) the Utility must
establish that (1) it has a continuing indebtedness to the FmHA,
and (2) the City has encroached on an area to which the Utility
“made service available.”15 As of the end of 1993, the Utility owed
the FmHA approximately $12,000,000. The City does not contest that
the first, “indebtedness” element is satisfied. Instead, it
contends that the Utility failed to establish the second, “made
service available” element. We disagree.
Under Texas law, the Certificate gives the Utility the
exclusive right to serve the area within its CCN and obligates it
“to serve every consumer within its certified area and . . . render
continuous and adequate service within the area or areas.”16 We
hold that the Utility’s state law duty to provide service is the
legal equivalent to the Utility’s “making service available” under
§1926(b).17 When confronted with a similar issue, other courts have
14
Id. at 1060 (citing S.Rep. No. 566, 87th Cong., 1st Sess.,
reprinted in 1961 U.S. Code Cong. & Admin. News 2243, 2309).
15
See 7 U.S.C. § 1926(b); see also City of Madison 816 F.2d
at 1059; Glenpool, 861 F.2d at 1214.
16
See Tex. Water Code Ann. § 13.001(b)(1),(2) & § 13.250(a)
(West 1988 & Supp. 1995); see also Commission’s Order (“[The
Utility] holds the CCN for the five [disputed] subdivisions . . .
and has the legal right to solely serve those subdivisions.”).
17
See Tex. Water Code Ann. 13.250(a) (Vernon 1988 & Supp.
1995)(“[A]ny retail public utility that possesses a . . .
certificate of public convenience and necessity shall serve every
consumer within its certificated area and shall render continuous
9
reached the same result, holding that when state law obligates a
utility to provide water service, that utility has, for the
purposes of § 1926(b), “made service available.”18
In the alternative, the district court found as a factual
matter that the Utility had “made service available.”19
Specifically, the district court made three findings of fact
relevant to this conclusion: (1) The Utility currently provides
water service to subdivisions adjacent to the disputed areas; (2)
the Utility has lines and adequate facilities to provide service to
the disputed areas; (3) the Utility has not refused service to
anyone who has requested service within the Certificated Area.
These findings of fact are not clearly erroneous. Accordingly, on
the strength of these alternative legal and factual determinations,
we affirm the district court’s conclusion that the Utility had
“made services available” to the disputed areas. As a result, we
also agree with the holding of the district court that the City
violated § 1926(b).
4. Does § 1926(b) Violate the Tenth Amendment?
Before turning to the issues of remedy, we pause to address
the City’s constitutional challenge to § 1926(b). For the first
time on appeal, the City insists that § 1926(b) represents an
and adequate service within the area or areas.”)(emphasis added).
18
Glenpool, 861 F.2d at 1214 (“made service available”
requirement satisfied if state law requires utility to provide
service within a certified area).
19
North Shelby,803 F.Supp. at 21 (“made service available”
requirement satisfied when utility has water lines running
throughout disputed areas).
10
illegitimate exercise of the Congress’ power under the Spending
Clause.20 We will not consider an issue that a party fails to raise
in the district court, absent extraordinary circumstances.21
Extraordinary circumstances exist when the issue involved is a pure
question of law and a miscarriage of justice would result from our
failure to consider it.22 Such extraordinary circumstances do not
exist here. As this court has previously addressed a similar
constitutional challenge (and resolved it contrary to the City’s
position),23 we follow our general forfeiture rule and decline to
consider the issue.
B. THE INJUNCTION ISSUES:
1. Standard Of Review
The panel reviews the district court’s grant or denial of a
permanent injunction for abuse of discretion.24 The district court
abuses its discretion if it (1) relies on clearly erroneous factual
20
Footnote 8 of the district court’s opinion explicitly
states, “[n]o Tenth Amendment argument has been made in the present
case.”
21
Singleton v. Wulff, 428 U.S. 106, 120 (1976); Thomas v.
Capital Sec. Services, 836 f.2d 866, 884 n.25 (5th Cir. 1988)(en
banc).
22
Verden v. C&B Boat Co., Inc., 860 F.2d 150, 155 (5th Cir.
1988).
23
City of Madison, 816 F.2d at 1060 (“[W]e perceive no
significant limitation on the city’s powers by virtue of a statute
enacted to protect FmHA’s subsidy of rural water authorities.”);
see also Helvering v. Davis, 301 U.S. 619 (1936)(“When money is
spent to promote the general welfare, the concept of welfare or the
opposite is shaped by Congress, not the states. So the concept be
not arbitrary, the locality must yield”).
24
Peaches Entertainment Corp. v. Entertainment Repertoire
Assoc., 62 F.3d 690, 693 (5th Cir. 1995).
11
findings when deciding to grant or deny the permanent injunction
(2) relies on erroneous conclusions of law when deciding to grant
or deny the permanent injunction, or (3) misapplies the factual or
legal conclusions when fashioning its injunctive relief.25
2. Was Injunctive Relief Appropriate?
The City urges that the district court’s conclusions that the
Utility would have suffered irreparable harm and had no adequate
legal remedy were “clearly erroneous.” The City asserts that the
record contains no factual basis for such a conclusions. We
disagree. The record reflects the following facts: (1) the Utility
is indebted to the FmHA; (2) in the disputed areas the City has
encroached on the Utility’s service area; and, (3) as a result, the
Utility would lose revenue exceeding $365,000 a year if the City’s
encroachment went unabated. The district court held (and we have
now affirmed) that, as a legal and factual matter, the Utility had
“made service available” to the disputed areas. In other words,
unless the City is prevented from violating § 1926(b), the Utility
will lose $365,000 in annual revenue.
Section 1926(b) does not create or specify a remedy for the
enforcement of violations, but an injunction has been the principle
tool employed by the courts with which to enforce the statute and
prevent violations.26 Given these circumstances, we hold that the
25
Id.
26
See, e.g., City of Madison, 816 F.2d at 1059 (enjoining a
city from annexing subdivisions within a utility’s certificated
area after finding violation of § 1926(b)); see also Jennings
Water, 895 F.2d at 315 (a violation of §1926(b) provided sufficient
basis for the issuance of an injunction).
12
record contains ample evidence to support the injunction.27
3. Is The Injunction Sufficiently Specific?
Next, the City complains that the district court’s judgment
fails to satisfy the requirements of Rule 65(d).28 In the form of
a laundry list of specious quibbles and rhetorical questions, the
City urges that the injunction is vague, unclear, and imprecise.
We find that none of these flaws to be present. The injunction is
sufficiently and reasonably detailed and specific to permit the
transfer of water service from the City to the Utility.
Transferring water service from the City to the Utility will be a
27
The district court’s injunction has forbidden the City to
provide or offer to provide water service within the entire
Certificated Area. This injunction, albeit broad, does not
constitute an abuse of discretion. The Utility, by virtue of its
indebtedness to the FmHA and state law duty to provide “continuous
and adequate” service to the Certificated Area, Tex. Water Code
Ann. 13.250(a), has satisfied the requirements of § 1926(b) with
respect to the entire Certificated Area. Thus, § 1926(b) protects
the entire Certificated Area from encroachment by the City.
Nevertheless, it would have been more prudent to limit the
injunction to the disputed areas, the particular portion of the
Utility’s service area at the heart of this litigation. As the
Commission was not a party to this litigation, we assume the
district court intended this injunction to apply only to these
parties and not to limit the Commissions’ power to regulate or
redraw the Certificated Area. Such an injunction, purporting to
control the actions of the Commission, a state regulatory body,
would create a considerably more difficult federalism question:
Namely, does § 1926(b) also preclude a state regulatory agency from
modifying the service area of a federally indebted utility. But,
we leave that issue for another day.
28
Rule 65(d) provides in pertinent part as follows:
Every order granting an injunction and every restraining order
shall set forth the reasons for its issuance; shall be
specific in terms; shall describe in reasonable detail, and
not by reference to the complaint or other document, the act
or acts sought to be restrained . . .
13
relatively complicated logistical task, requiring a coordinated
effort by both parties. The burdens of any disruption in service
will fall more heavily on the residents than on the parties. With
an eye on these potential pitfalls, the district court instructed
the City to continue uninterrupted water service until the Utility
is prepared to commence service, then to cease providing water
service immediately upon commencement of service by the Utility.
Although this order does not choreograph every step, leap, turn,
and bow of the transition ballet, it specifies the end results
expected and allows the parties the flexibility to accomplish those
results. Like the district court, we trust that, despite their
differences regarding the right to service the disputed areas, the
parties will work together to achieve a smooth transition with no
interruption in water service and a minimum of inconvenience to the
residents of the disputed areas.
4. Was the Judgment Properly Amended?
The City argues that the district court lacked jurisdiction to
amend the Original Judgment and order the City to give the Utility
control of the water distribution infrastructures in the disputed
areas. First, the City argues that the district court’s decision
to construe the Motion as a Rule 59(e) motion was “clearly
erroneous.” Although the City cites no authority for this
conclusional proposition, it seems to be arguing that, as a matter
of law, a district court cannot construe a motion to amend the
complaint as a Rule 59(e) motion. We have found no support for
this proposition.
14
As a general matter, the caption on a pleading does not
constrain the court’s treatment of a pleading. For example, Rule
8(f) instructs district courts to construe all pleadings so as to
do substantial justice, while Rule 8(c) counsels that when a party
mistakenly designates a defense as a counter-claim or vice-versa
the court shall, if justice so requires, treat the pleading as
though it had the proper designation.29 Thus, the district court
could construe the motion as a Rule 59(e) motion so long as the
requirements of Rule 59(e) are met.
Rule 59(e) requires that a motion call into question the
correctness of the judgment and be served within ten days after the
entry of the judgment.30 The City does not contest the first
element, but attempts to obfuscate the second by arguing that the
Utility failed to serve its motion within the ten day limitation
period.31 According to the district court’s docket sheet, the
Original Judgment was entered on December 15, 1994. The
limitations period under Rule 59(e) is less than 11 days, so under
Rule 6(a) the date on which the judgment was entered, weekends, and
federal holidays are not counted “in computing the period of time
prescribed or allowed by these rules.”32 Under this computation
method, the Utility had from December 15, 1994 until December 30,
29
See Fed.R.Civ.P. 8.
30
See Fed.R.Civ.P. 59(e).
31
See id. (“A motion to alter or amend the judgment shall be
served not later than 10 days after entry of the judgment.“).
32
See Fed.R.Civ.P. 6(a).
15
1994 to serve a Rule 59(e) motion.33 As the City avers that it
received a copy of the motion on December 29, 1994, the motion was
timely under Rule 59(e). Accordingly, we hold that there was no
legal impediment to construing the Utility’s Motion as a Rule 59(e)
motion and that the motion was timely under Rule 59(e).
5. The Water Distribution Infrastructures
The City argues that the district court abused its discretion
when it ordered the City to relinquish the water service
infrastructures to the Utility because the relief was unrequested
and if granted would prejudiced the City. Citing International
Harvester Credit Corp. v. East Coast Truck,34 the City insists that
when the failure to demand the relief granted prejudices the
opposing party, the district court abuses its discretion.
We conclude that in ordering the transfer of the
infrastructures to the Utility, the district court did not abuse
its discretion. Rule 54(c) vests district courts with broad
discretion to fashion a remedy, even if the remedy awarded is not
specifically requested in the prayer for relief.35 Although we
recognize that Harvester places some limits on the district court’s
discretion, those limits are modest indeed and clearly were not
33
Four weekend days and the Christmas holiday account for the
extra five days.
34
547 F.2d 888, 891 (5th Cir. 1977).
35
Fed.R.Civ.P. 54(c) (“[E]very final judgment shall grant the
relief to which the party in whose favor it is rendered is
entitled, even if the party has not demanded such relief in the
party’s pleadings.”); see also International Harvester, 547 F.2d at
891.
16
exceeded here. The law gives the Utility the exclusive right to
provide water service to and within the disputed areas. We are
under the impression that the developers of the subdivisions
installed the infrastructures and ceded them to the City without
charge. The infrastructures are indispensable to providing water
service to the residents of the subdivisions now that the
development is complete. Thus, unless the infrastructures are
transferred, the Utility would not be able to provide efficient and
economical water service, and the rights of the Utility that are
validated here would be useless.
We are, however, concerned that the City may not receive just
and adequate compensation for those items comprising the
infrastructures, if any, that the City may have furnished. We have
been unable to determine precisely how the City obtained the
infrastructures or any portions thereof other than a suggestion
that they received them gratuitously from the developers.36 Thus,
36
We do not know from the record or the briefs of the parties
by what means or for what prices, the City came into possession of
the infrastructures in the disputed areas. In Public Utility
Comm’n of Tx. v. Southwest Water Serv., Inc., 636 S.W.2d 262, 263
n.1 (Tex.Ct.App.--Austin 1982, writ ref’d n.r.e.), the practices of
the Texas water and sewer utility industry were described as
follows:
Water and sewer utilities serving suburban or rural areas
acquire their facilities, particularly the water and
sewer pipe mains and their connections to individual
houses or businesses, from the developer of a
subdivision. The developer will normally incur the
original cost of installing the pipe and setting up the
system. More often than not, the developer will recoup
the cost of installation of the system when he sells
houses in the subdivision. For federal income tax
purposes, the developer is also allowed to deduct the
cost of the system from the income he receives from the
17
we remand only this sub-issue to the district court for it to
determine (1) whether the City paid for the infrastructures or any
portions thereof, and (2) if so, the amount of just and adequate
compensation that should be paid to the City for its reasonable
costs and expenses in that regard.
6. Are The Applications Preempted by § 1926(b)?
The district court enjoined the City from pursuing the
Applications with the Commission. The City argues that this aspect
of the district court’s injunction impermissibly interferes with
the legitimate exercise of the State of Texas’ regulatory powers.
Amicus Texas Rural Water Association urges that the district
court’s injunction would be impermissible only if it functioned as
a limitation or prohibition of the power of the State of Texas to
enforce the minimum requirements for the protection of public
sale of the lots or houses. The developer will then sell
or donate the in-place water and sewer system to a newly
created utility company. Often, this utility company will
be one of several affiliate companies owned by the
developer or the development company. Later, when the
utility company is operating and seeks to increase the
rates it charges its customers, the company will seek to
include this property in its rate base as invested
capital. Of course, inclusion of this property in the
rate base will expand the rate base and increase the
amount of return on the invested capital the utility is
entitled to receive in the form of increased rates.
Customers of the utility often complain that they are
charged twice for the same property-once when they buy
the house or lot (and the developer has computed the cost
of the system into the purchase price) and second when
the utility is allowed an increased return on invested
capital because the property is included in the rate
base.
Be that as it may, we do not know which if any of these
generalizations apply in this case.
18
health and safety. We hold that these issues were rendered moot by
the Commission’s Order.
As discussed above, § 1926(b) grants broad protection to
federally indebted utilities. In this case, we need not probe the
outer limits of that grant. Instead, we decide only the issues
presented in this appeal: (1) whether the City, by providing water
service to the disputed areas, has violated § 1926(b); and (2) if
so, what is the appropriate remedy in response to that particular
violation. The district court held, as both a factual and legal
matter, that the Utility has the exclusive right to provide water
service to the disputed areas. The Commission, in a ruling
congruent with that of the district court, declared that the
Utility had the exclusive right to provide water service to the
disputed areas. With that order, the Applications--which sought a
ruling from the Commission that the Utility did not have the
exclusive right to provide water service to the disputed areas--
became moot. Accordingly, we need not address that issue here.
19
III
CONCLUSION
We affirm the district court’s judgment that the City violated
§ 1926(b). We also affirm that court’s injunction except as to
that part which omits a determination of possible repayment of
costs and expenses, if any, incurred by the City in acquiring or
improving the infrastructures. In that limited respect only, we
remand for the district court to consider and, if necessary, to
modify its injunction consistent with this opinion.
AFFIRMED, in part, and REMANDED, in part.
20