Washington County Water Company, Inc. v. City of Sparta ( 2023 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-2942
WASHINGTON COUNTY WATER COMPANY, INC.,
Plaintiff-Appellant,
v.
CITY OF SPARTA, ILLINOIS,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Illinois.
No. 20-cv-1052 — Nancy J. Rosenstengel, Chief Judge.
____________________
ARGUED JUNE 2, 2023 — DECIDED AUGUST 8, 2023
____________________
Before FLAUM, BRENNAN, and ST. EVE, Circuit Judges.
ST. EVE, Circuit Judge. The Agriculture Act of 1961 author-
ized the United States Department of Agriculture (“USDA”)
to provide loans to rural water associations to decrease the
cost and ensure an adequate supply of safe water for farmers
and other rural residents. To ensure that these associations
could repay their loans, Congress enacted 7 U.S.C. § 1926(b),
which prohibits municipalities and others from selling water
in an area that a USDA-indebted rural water association has
2 No. 22-2942
“provided or made available” its service. In order to be enti-
tled to protection under § 1926(b), the rural water association
must have the physical capability to provide service to the
disputed area and a legal right to do so under state law.
Washington County Water Company (“WCWC”) is a rural
water association that sells potable water to several counties
in southern Illinois. The Village of Coulterville is adjacent to
these counties. In 2019, due to the deteriorating state of its wa-
ter treatment facility, Coulterville explored the possibility of
buying water from either WCWC or the City of Sparta. Coul-
terville ultimately decided to buy water from Sparta because
it was not convinced that WCWC could provide enough wa-
ter to satisfy its residents’ demand. When WCWC learned of
this decision, it filed a complaint in federal district court alleg-
ing that § 1926(b) prohibited Sparta from selling water to
Coulterville because WCWC had made its service available to
Coulterville. The district court granted summary judgment in
favor of Sparta, holding that WCWC was not entitled to
§ 1926(b) protection because it did not have a legal right to
provide water to Coulterville under Illinois state law.
I. Background
A. Statutory Framework
As part of the Agricultural Act of 1961, Congress passed
the Consolidated Farm and Rural Development Act, which,
among other things, promotes the “conservation, develop-
ment, use, and control of water” to help farmers and other ru-
ral residents obtain access to affordable and adequate quanti-
ties of safe water. 7 U.S.C. §§ 1921, 1926(a)(1). It does this by
No. 22-2942 3
authorizing the USDA 1 to provide loans to rural water asso-
ciations or utilities “to finance specific projects for works for
the development, storage, treatment, purification, or distribu-
tion of water ….” § 1926(a)(2)(A)(i). Congress passed § 1926(b)
of the Act to protect these USDA-indebted associations from
certain forms of competition and ensure that they could repay
their loans.
Under § 1926(b),
[t]he service provided or made available through any
such association shall not be curtailed or limited by in-
clusion of the area served by such association 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
such loan; nor shall the happening of any such event
be the basis of requiring such association to secure any
franchise, license, or permit as a condition to continu-
ing to serve the area served by the association at the
time of the occurrence of such event.
This “statute explicitly prohibits municipal encroachment on
a rural water association’s service area ….” Jennings Water,
Inc., v. City of North Vernon, 895 F.2d 311, 314 (7th Cir. 1989).
“Congress intended a broad reading of section 1926(b).” Id. at
315. “[S]ection 1926(b) does not limit itself strictly to the rural
association territory per se, but rather, extends the
1 “Prior to 1994, the loans relevant to 7 U.S.C. § 1926[] were operated
by the Farmers Home Administration (FmHA). The USDA now operates
the loan and guarantee program through the Rural Utility Services.” Gar-
rett Dev., LLC v. Deer Creek Water Corp., No. 21-6105, 2022 WL 12184048, at
*1 n.1 (10th Cir. Oct. 21, 2022) (citations omitted).
4 No. 22-2942
association’s protection against competition also to those to
whom service is ‘provided or made available’ through a pri-
vate intermediary.” Id. at 318.
Although the Seventh Circuit has not explicitly stated how
to determine when an association has “provided or made
available” service to a certain area, other circuits apply a two-
pronged test. See, e.g., Green Valley Special Util. Dist. v. City of
Shertz, 969 F.3d 460, 476–77 (5th Cir. 2020) (en banc) (“Every
other circuit to consider § 1926(b) has adopted some variation
of the ‘physical capability’ test.”).
The first prong, referred to as the “pipes in the ground”
prong, asks whether the association has “water pipes either
within or adjacent to the disputed area before the allegedly
encroaching association begins providing service to custom-
ers in the disputed area.” Ross Cnty. Water Co. v. City of Chil-
licothe, 666 F.3d 391, 399 (6th Cir. 2011) (citation omitted). “The
association seeking § 1926(b) protection must also be capable
of providing service to the disputed area within a reasonable
time after a request for service occurs.” Id. (citation omitted).
The second prong asks whether the association has the “legal
right under state law to provide water to the disputed area.”
Id. (citation omitted). 2
2 See also Green Valley, 969 F.3d at 477 (“[W]e hold that a utility must
show that it has (1) adequate facilities to provide service to the area within
a reasonable time after a request for service is made and (2) the legal right
to provide service.”); Chesapeake Ranch Water Co. v. Bd. of Comm’rs, 401 F.3d
274, 281 (4th Cir. 2005) (“For purposes of § 1926(b), to prove that it has
provided or made available service, a water association must demonstrate
that (1) it is physically capable of serving the area in dispute, (2) it has the
legal right under state law to do so, and (3) the disputed area is within the
geographic boundaries of the association’s existing franchise area.”).
No. 22-2942 5
B. The Parties
WCWC is a rural non-profit association that provides po-
table water to customers in southern Illinois. It serves approx-
imately 4,765 customers across St. Clair, Washington, Jeffer-
son, Randolph, Jackson, and Franklin counties. Since 1980,
WCWC has been continuously indebted to the USDA for
loans used to build its distribution system. It is licensed by the
Illinois Environmental Protection Agency (“IEPA”) and is in
good standing.
Water associations can obtain safe, potable water in two
ways: They can operate their own treatment plants, or they
can purchase already treated water. WCWC does the latter—
it purchases potable water from several suppliers and delivers
that water to its customers through its distribution system.
Specifically, WCWC has contracts with the Kaskaskia Water
District for 25 million gallons/month; the City of Nashville,
Illinois for 432,000 gallons/day; and the Rend Lake Conserva-
tory for 450,000 gallons/day. WCWC also has a contract with
Kinkaid-Reed’s Creek Conservatory to purchase water, but,
as the district court noted, “[t]he Kinkaid District-WCWC sys-
tem is essentially a ‘closed loop,’ and WCWC has never taken
water sold to it under the Kinkaid contract and distributed it
through its water distribution system.”
Some courts also require “an association to prove that it has provided or
made available service by demonstrating that it has a duty (not merely a
right) under state law to provide service to the disputed area.” Chesapeake
Ranch, 401 F.3d at 279 (citations omitted). But most courts have rejected
that an association must have a legal duty to provide service to be pro-
tected by § 1926(b), id., and neither party here claims that a legal duty is
required for § 1926(b) to apply.
6 No. 22-2942
In addition to the primary contract with Kaskaskia,
WCWC also had a secondary contract to provide water to the
Prairie State Generation Company (the “Prairie State con-
tract”). As part of the agreement between WCWC, Prairie
State, and Kaskaskia, WCWC constructed a direct line from
Kaskaskia to Prairie State. Under the contract, WCWC was
entitled to buy, and Prairie State was entitled to receive, up to
300,000 gallons/day from Kaskaskia. The Prairie State contract
also permitted WCWC to send excess water, not used by Prai-
rie State, to its own distribution system. This contract, how-
ever, expired in 2021 without renewal.
The Village of Coulterville is located in southern Illinois,
adjacent to counties that WCWC serves. Coulterville operates
its own water treatment facility and provides water to its res-
idents, with one exception: Coulterville does not provide ser-
vice to a single resident who lives one meter north of the Coul-
terville village line. The easiest way to provide this customer
with service was to connect them to WCWC’s system. So, pur-
suant to a contract, Coulterville pays WCWC for the water
that it sells to this one customer. WCWC does not provide wa-
ter service to anyone else in Coulterville. But WCWC has pre-
viously communicated to Coulterville that WCWC has ser-
vice available if Coulterville ever needed additional or ex-
panded water service.
Due to the age and condition of Coulterville’s water treat-
ment facility, it is nearing the end of its useful life. So, Coul-
terville hired HMG Engineers in 2019 to look into an alterna-
tive water source. HMG investigated the possibility of obtain-
ing water from either WCWC or the City of Sparta. HMG ul-
timately recommended that Coulterville buy water from
Sparta, finding that WCWC would not be able to commit to
No. 22-2942 7
providing enough water to satisfy Coulterville’s customers’
demand. Coulterville heeded this recommendation and
sought water services from Sparta.
C. Procedural History
When WCWC learned that Coulterville was negotiating
with Sparta, it sent letters through legal counsel to both Coul-
terville and Sparta, claiming to have a federally protected
right to service Coulterville under 7 U.S.C. § 1926(b). When
those efforts failed, WCWC filed a complaint alleging that
Sparta was attempting to unlawfully curtail WCWC’s feder-
ally protected service area. It sought a declaratory judgment
and preliminary and permanent injunctions. Both parties re-
tained experts to support their arguments—Harry Harman
for Sparta and Lindsey Bowlin for WCWC. Bowlin opined
that WCWC had the capacity to provide water service to
Coulterville, and Harman said the opposite.
The district court held that WCWC was not entitled to
§ 1926(b) protection because it did not have a legal right un-
der Illinois state law to provide service to Coulterville. Specif-
ically, according to IEPA regulations, WCWC “must be de-
signed to produce at least 20 percent greater than [its] maxi-
mum average daily demand ….” Ill. Admin. Code tit 35,
§ 604.105(a). “When records are not available,” as is the case
here, “maximum demand must be calculated as 1.5 times the
average daily usage.” § 604.115(c). 3
3 Where daily records are available, “‘Maximum Average Daily De-
mand’ or ‘Maximum Demand’ means the highest average daily produc-
tion over seven consecutive days.” Ill. Admin. Code tit 35, § 601.105(a).
8 No. 22-2942
WCWC argued that “designed to produce” in § 604.105(a)
referred to the amount of water it could distribute through its
distribution system (its “pumping capacity”), not the amount
of water it could purchase under its contracts (its “contractual
capacity”). Sparta, in contrast, argued that “designed to pro-
duce” referred to a combination of WCWC’s pumping and
contractual capacities, because, if WCWC had contracts to
purchase more water than it could pump through its systems,
its pumping capacity would limit its contractual capacity (or
vice versa).
The district court found that WCWC was unable to pro-
duce “20 percent greater than the maximum daily average”
no matter which metric was used. Including Coulterville’s de-
mand, the court found that WCWC had a maximum average
daily demand of 1,608,297 gallons/day, so after adding the re-
quired 20 percent reserve, WCWC needed to be “designed to
produce” at least 1,929,956 gallons/day. The court then calcu-
lated WCWC’s contractual capacity as 1,701,672 gallons/day,
and its pumping capacity as 1,593,672 gallons/day. Accord-
ingly, the court held that WCWC did not have the legal right
to provide service to Coulterville—even ignoring other issues
such as customary water loss due to leaks, both WCWC’s
pumping and contractual capacities were insufficient to pro-
duce its maximum average daily demand plus 20 percent. The
district court did not address the “pipes in the ground” prong
of the test because WCWC failed on the legal right prong.
WCWC appealed, and we affirm.
II. Discussion
On summary judgment, “[o]ur review is de novo. We view
the facts and draw reasonable inferences in the light most fa-
vorable to the non-moving party. Summary judgment is
No. 22-2942 9
appropriate if there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Uebelacker v. Rock Energy Coop., 54 F.4th 1008, 1010 (7th
Cir. 2022) (citations and internal quotation marks omitted).
“On summary judgment a court may not make credibility de-
terminations, weigh the evidence, or decide which inferences
to draw from the facts; these are jobs for a factfinder.” Runkel
v. City of Springfield, 51 F.4th 736, 741 (7th Cir. 2022) (citation
omitted).
Under § 1926(b), Sparta is barred from selling water to
Coulterville if: (1) WCWC is a USDA-indebted rural water as-
sociation, and (2) WCWC has “provided or made available”
service to Coulterville. Jennings Water, 895 F.2d at 314 (quoting
§ 1926(b)). There is no dispute that WCWC is an association
within the meaning of the statute and is indebted to the
USDA. Because all of WCWC’s claims rest on it establishing
protection under § 1926(b), we need only address the narrow
question of whether § 1926(b) prohibits Sparta from provid-
ing water services to Coulterville because WCWC has “pro-
vided or made available” those services to Coulterville. Fur-
ther, WCWC does not dispute the district court’s finding that
its current contract with Coulterville—to provide water ser-
vice to a single resident just outside of Coulterville—is not
sufficient to establish that WCWC currently provides services
to Coulterville because “there is no connection between the
customer’s property and Coulterville’s distribution system.”
Accordingly, we assume that WCWC has not “provided” ser-
vices to Coulterville; the only issue here is whether WCWC
has “made available” its services to Coulterville.
10 No. 22-2942
A. Legal Right
To receive protection under § 1926(b), WCWC must show
that it “has a legal right under state law” to serve Coulterville.
Ross Cnty., 666 F.3d at 401. Courts have generally looked to
state agency regulations to determine whether an association
has a legal right to serve a disputed area. See id. (“RCWC’s
legal right to serve the disputed area stems from its regula-
tions by entities within the State of Ohio ….”). The relevant
regulating agency under Illinois state law is the IEPA. Accord-
ingly, WCWC can only survive summary judgment if it can
establish a genuine factual dispute as to whether it is “de-
signed to produce” at least 20 percent more than its maximum
average daily demand (including Coulterville’s demand), as
required by IEPA regulations.
IEPA regulations provide no guidance on how to calculate
WCWC’s average daily demand, and the parties dispute the
correct calculation. Although WCWC does not have records
of its daily water usage, it does have records of monthly and
yearly water usage, which the parties and the district court
used in different ways to calculate WCWC’s average daily de-
mand. The district court calculated WCWC’s average daily
demand based on the records from 2018 alone; Bowlin,
WCWC’s expert, calculated an average daily demand for each
year between 2018 and 2020; Sparta and its expert, Harman,
calculated a single figure based on WCWC’s average daily de-
mand from 2016–2020; and WCWC did the same using its av-
erage daily demand from 2018–2020. The same was true for
Coulterville; the parties disputed which years to use to calcu-
late Coulterville’s average daily demand. The parties then
multiplied the average daily demand by 1.5 to determine the
maximum average daily demand. See Ill. Admin. Code tit 35,
No. 22-2942 11
§ 604.115(c). After adding WCWC’s and Coulterville’s maxi-
mum average daily demands together, the parties’ differing
methods resulted in maximum average daily demands rang-
ing from 1,556,645 gallons/day to 1,638,566 gallons/day.
We agree with WCWC that, for purposes of summary
judgment, we must assume WCWC’s calculation is correct
based on the record before us. Viewing the evidence in the
light most favorable to WCWC, the maximum average daily
demand is the lowest number, which is WCWC’s calculation
of 1,556,645 gallons/day. Accordingly, we proceed under the
assumption that WCWC must be “designed to produce” 20
percent more than this number, or 1,867,974 gallons/day, to
comply with Illinois law and have a legal right to serve Coul-
terville.
B. “Designed To Produce”
The next question is whether “designed to produce” refers
to WCWC’s pumping capacity or to its contractual capacity.
The district court did not decide this issue because it found
that both were insufficient under Illinois law. As far as we can
tell, no circuit court has addressed this specific issue.
According to WCWC, “designed to produce” “applies to
a system’s design capacity, not its existing capacity.” Because
it does not have a treatment facility and instead purchases its
water from others, WCWC argues that “designed to produce”
means its pumping capacity, not its contractual capacity, and
the district court erred by conflating these two metrics.
Sparta conceded at oral argument that if pumping capac-
ity alone was the correct metric, then there is a material dis-
pute sufficient to survive summary judgment. But Sparta ar-
gues that the correct metric is a combination of WCWC’s
12 No. 22-2942
pumping and contractual capacities because, “[i]f a combina-
tion of pumps produces fewer gallons per day than the indi-
vidual supplier can provide, the booster pumping stations be-
come choke points limiting the supply to less than what the
individual supplier could possibly provide.” According to
Bowlin, for example, the pump station connecting Nashville
to WCWC can pump 284 gallons/minute, or 408,960 gal-
lons/day. Under the contract with Nashville, however,
WCWC is entitled to purchase 432,000 gallons/day. In other
words, WCWC can buy more water from Nashville than it can
pump. Thus, according to Sparta, WCWC’s pumping capacity
limits how much water it can “produce,” no matter how much
water WCWC is entitled to purchase. We agree with Sparta.
Ill. Admin. Code tit 15, § 604.105(a) provides that a “com-
munity water supply must be designed to produce at least 20
percent greater than the maximum average daily demand.”
“Community water supply” is defined as “a public water sup-
ply which serves or is intended to serve at least 15 service con-
nections used by residents or regularly serves at least 25 resi-
dents.” § 601.105(a). And, as the dissent notes, the definition
“public water supply,” in turn, is focused on the infrastruc-
ture “actually used or intended for use for the purpose of fur-
nishing water for drinking or general domestic use.” Id.
“Community water supply,” however, includes a water asso-
ciation like WCWC that does not operate its own water treat-
ment facility. See 415 Ill. Comp. Stat. 45/5.1 (“‘Class D commu-
nity water supply’ means any community water supply that
has only pumpage, storage, or distribution facilities.”); see also
Ill. Admin. Code tit. 35, § 601.105(a) (defining “satellite sup-
ply” as “any community water supply that[] purchases all fin-
ished water from another community water supply…”).
No. 22-2942 13
By its plain language, the requirements under § 604.105(a)
apply to all community water supplies, including WCWC.
And contrary to the dissent, we see nothing in § 604.105(a) (or
elsewhere) limiting its scope to only pumping capacity, ignor-
ing whether the water association can even obtain enough wa-
ter to equal that capacity. Indeed, under WCWC’s and the dis-
sent’s view, the meaning of “designed to produce” would
change depending on the water association at issue—e.g., for
those water associations with a treatment facility, it would re-
fer to its ability to treat and distribute sufficient water; but for
those associations without a treatment facility, it would refer
only to its ability to distribute water. Nothing in the language
of the regulation supports such an amorphous interpretation.
Accordingly, we read “designed to produce” as referring to
the water association’s ability to furnish sufficient water to
residents, whether it treats its own water or purchases it from
others. For WCWC, this means we must look at both its con-
tractual and pumping capacities.
The purpose behind the IEPA further supports this inter-
pretation. The IEPA was created by Illinois’s Environmental
Protection Act, 415 Ill. Comp. Stat. 5/1, 5/3.105, which pro-
vides that,
[t]he General Assembly finds that state supervision of
public water supplies is necessary in order to protect
the public from disease and to assure an adequate supply
of pure water for all beneficial uses. It is the purpose of this
Title to assure adequate protection of public water sup-
plies.
415 Ill. Comp. Stat. 5/14 (emphasis added). The IEPA imple-
mented the regulations at issue to effectuate this purpose.
14 No. 22-2942
Illinois’s purpose of “assur[ing] an adequate supply of
pure water for all beneficial uses” means we must look at
WCWC’s pumping capacity as limited by its contractual ca-
pacity. After all, WCWC cannot pump what it cannot buy. If
we were to accept WCWC’s argument that pumping capacity
alone is the correct metric, then we would be holding that wa-
ter utilities with systems that can pump enough water are en-
titled to § 1926(b) protection, even if they cannot purchase suf-
ficient water to pump through those systems and meet de-
mand. 4 Accordingly, to be entitled to protection under §
1926(b), WCWC must be able to purchase sufficient water un-
der its contracts and also pump sufficient water through its
system to distribute to its customers.
1. WCWC’s Pumping Capacity 5
Pumping capacity represents how much water WCWC’s
pumping stations can distribute through its system. WCWC
states—and Sparta’s expert, Harman, agrees—that its
4 Conversely, a utility with sufficient contractual capacity but insuffi-
cient pumping capacity would not be “designed to produce” enough wa-
ter to meet the requisite average daily demand.
5 We reject Sparta’s contention that WCWC waived the argument that
“designed to produce” means pumping capacity because it failed to ade-
quately raise this issue below. The district court ruled on this issue and
found that, “even accepting WCWC’s argument that the Court should
look at its system’s pumping capacity … rather than its contractual capac-
ity, WCWC does not have a sufficient water supply to serve Coulterville.”
This ruling supports that WCWC raised this argument below. But even if
it did not, the district court’s ruling on the issue preserved it for appeal.
See Gerhartz v. Richert, 779 F.3d 682, 686 (7th Cir. 2015) (holding that an
untimely argument is preserved for appeal “if the district court exercises
its discretion to consider the issue on the merits” (citation omitted)).
No. 22-2942 15
pumping stations are technically able to pump 1,992,960 gal-
lons/day. This number exceeds WCWC’s maximum average
daily demand plus the required 20 percent reserve.
Sparta, however, argues that WCWC’s actual pumping ca-
pacity is only 1,539,672 gallons/day—less than the requisite
1,867,974 gallons/day—because water under the Prairie State
contract is distributed to Prairie State using one of WCWC’s
pumping stations, decreasing the amount of water that station
can pump through WCWC’s system. The district court agreed
with Sparta and adopted its calculation. 6 But the Prairie State
contract expired in 2021 without being renewed. So, viewing
the evidence in the light most favorable to WCWC, that con-
tract is irrelevant to this analysis.
Sparta also claims WCWC’s pumping capacity is even
lower because it, like all water associations, loses water due to
leaks and other issues. But even if we reduce WCWC’s pump-
ing capacity by 5.6 percent based on the average amount of
6 The district court erred by adopting Sparta’s calculation. Even after
purporting to accept WCWC’s claim that it has a technical pumping ca-
pacity of 1,992,960 gallons/day, the court adopted Sparta’s number be-
cause it agreed with Sparta on the Prairie State contract issue. But Sparta’s
expert, Harman, was initially provided with incorrect information and cal-
culated a technical pumping capacity of 1,812,000 gallons/day, then sub-
tracted from that number because he opined that WCWC had to use some
of its pumping capacity to pump water to Prairie State. After receiving the
correct information, Harman submitted a supplemental expert report
where he agreed with WCWC’s calculation. If the court agreed with
Sparta on the Prairie State contract issue, it should have subtracted that
amount from 1,992,960 gallons/day, not adopted Sparta’s number based
on Harman’s initial calculation of a 1,812,000 gallon/day pumping capac-
ity. WCWC did not raise this issue, but the error is harmless because it
does not change the outcome.
16 No. 22-2942
water WCWC loses, WCWC’s pumping capacity is 1,881,354
gallons/day, which is still more than the requisite 1,867,974
gallons/day. 7 Because there is at least a genuine dispute as to
whether WCWC’s pumping capacity exceeds its maximum
average daily demand plus the 20 percent reserve, we move
on to discuss its contractual capacity.
2. WCWC’s Contractual Capacity
Contractual capacity represents the amount of water
WCWC is entitled to purchase under contract from its suppli-
ers. Here, WCWC has contracts to purchase 25 million gal-
lons/month from Kaskaskia; 432,000 gallons/day from Nash-
ville; and 450,000 gallons/day from Rend Lake. 8
The parties dispute WCWC’s contractual capacity.
Bowlin, WCWC’s expert, divided the amount of water avail-
able monthly from Kaskaskia by thirty to get the daily
amount, then added this to the daily amounts available under
the other two contracts to get a total contractual capacity of
1,715,333 gallons/day. Sparta and Harman challenge this cal-
culation because not every month has thirty days. The district
court agreed with Sparta and found that “WCWC can
7 Harman noted that, although 5.6 percent is the average amount of
water WCWC has lost to leaks and other issues, WCWC has lost as much
as 40 percent of its water in a single month. WCWC claims that the district
court’s reliance on water loss is reversible error because “water loss” is not
mentioned in the statute. But because the water loss issue does not change
the outcome, any error was harmless.
8 The parties agree that the other two contracts—the Kinkaid-Reed
and Prairie State contracts—are irrelevant for calculating contractual ca-
pacity.
No. 22-2942 17
purchase 13,661 gallons per day less than Bowlin calculated—
or 1,701,672 gallons.”
Even accepting WCWC’s calculation of 1,715,333 gal-
lons/day, however, WCWC’s contractual capacity is insuffi-
cient to comply with the IEPA regulations because it is less
than WCWC’s maximum average daily demand plus 20 per-
cent. Accordingly, WCWC does not have the legal right to
serve Coulterville because it is not “designed to produce” suf-
ficient water under Illinois law. 9
WCWC argued before the district court that it can increase
its contractual capacity. In support of this argument,
WCWC’s CEO testified that Kaskaskia, Rend Lake, and Nash-
ville have all told WCWC that they can provide additional
water if required. But the district court rejected that argument
because this testimony is inadmissible hearsay. WCWC does
not renew this argument on appeal, and for good reason—
inadmissible hearsay evidence does not create a factual dis-
pute at summary judgment. See Pyles v. Fahim, 771 F.3d 403,
412 (7th Cir. 2014) (holding that “an unsubstantiated, hearsay
assertion … is insufficient to defeat summary judgment”).
Unlike utilities that have treatment facilities, WCWC requires
contracts to ensure that it can obtain enough water to satisfy
its customers’ demand. We cannot simply take WCWC’s
word that it could buy more water if its demand increases—
there may be reasons its current suppliers could not or would
not sell more water to WCWC. To raise a factual dispute about
9 This is not to say that contractual capacity alone will always be the
correct metric. In some cases, the pumping capacity may be the limiting
factor.
18 No. 22-2942
its contractual capacity, WCWC needed to provide admissible
evidence showing it could buy more water.
At oral argument, WCWC argued that its contractual ca-
pacity was sufficient because it need only be able to provide
service “within a reasonable time.” See Ross Cnty., 666 F.3d at
399 (“The association seeking § 1926(b) protection must also
be capable of providing service to the disputed area within a
reasonable time after a request for service occurs.” (citations
omitted)). According to WCWC, this means that it should
have the opportunity to ask its suppliers if it can purchase
more water from them and its argument only fails if its sup-
pliers say they are unable to sell any more water to WCWC.
We have doubts about this argument. The “within a rea-
sonable time” language comes from caselaw, not the statute,
and most courts have held that this requirement applies to the
“pipes in the ground” prong of the test, not the legal right
prong.10 See, e.g., id. at 401 (noting the “pipes in the ground”
prong requires “the association seeking § 1926(b) protection
[to] have ‘adequate facilities within or adjacent to the area to
provide service to the area within a reasonable time after a re-
quest for service is made’” (citation omitted)); Chesapeake Ranch,
401 F.3d at 279 & n.3 (same).
But even if the “within a reasonable time” requirement ap-
plies to the legal right prong, WCWC’s argument fails. While
it would not need to have contracts in place under which it
could purchase additional water immediately, WCWC none-
theless needed to produce admissible evidence showing that
10 Because WCWC does not have a legal right to provide services to
Coulterville, we do not decide whether WCWC satisfies the “pipes in the
ground” prong of the test.
No. 22-2942 19
it could secure additional contractual capacity “within a rea-
sonable time.” Discovery was the time for WCWC to produce
such evidence, but it has failed to do so. Thus, WCWC has not
established a factual dispute about whether it is “designed to
produce” sufficient water under Illinois law—the record
shows that WCWC’s contractual capacity is less than its max-
imum average daily demand plus the required 20 percent re-
serve. As the district court found, “WCWC’s failure to secure
[admissible] evidence of its ability to expand its water supply
capabilities is fatal to its claim.”
III. Conclusion
For the foregoing reasons, the district court’s decision is
AFFIRMED
20 No. 22-2942
BRENNAN, Circuit Judge, dissenting. Here we face a statute,
7 U.S.C. § 1926(b), that has been interpreted rarely, and a state
regulation, 35 Illinois Administrative Code § 604.105(a),
which has not been previously construed except by the dis-
trict court in this case.
I agree with much of the majority opinion’s analysis, in-
cluding that to receive protection under § 1926(b) the Wash-
ington County Water Company (WCWC) must show that it
has a legal right under state law to serve the Village of Coul-
terville. I disagree, however, with the majority opinion’s read-
ing of § 604.105(a), and its reliance on the purpose of the Illi-
nois Environmental Protection Act—“to assure an adequate
supply of pure water for all beneficial uses,” 415 ILL. COMP.
STAT. 5/14. The majority opinion agrees with Sparta that the
Act’s purpose means the court should look at WCWC’s
pumping capacity as limited by its contractual capacity in as-
sessing compliance with § 604.105(a). But to me, the plain text
of that regulation controls.
It is true that “words are given meaning by their context,
and context includes the purpose of the text.” ANTONIN
SCALIA & BRYAN A. GARNER, READING LAW: THE
INTERPRETATION OF LEGAL TEXTS 56 (2012). But there are limits
to considering purpose when interpreting text. Id. at 56–57;
see, e.g., Bd. of Governors of Fed. Rsrv. Sys. v. Dimension Fin.
Corp., 474 U.S. 361, 373–74 (1986) (“Application of ‘broad pur-
poses’ of legislation at the expense of specific provisions ig-
nores the complexity of the problems Congress is called upon
to address and the dynamics of legislative action.”); NLRB v.
HH3 Trucking, Inc., 755 F.3d 468, 471 (7th Cir. 2014) (“[S]tat-
utes have stopping points as well as general objectives, and
how far to go in pursuit of those objectives is integral to the
No. 22-2942 21
legislative choice.” (citing Rodriguez v. United States, 480 U.S.
522, 525–26 (1987))). The purpose that Sparta advances and
that the majority opinion effectuates is abstract and highly
generalized, and should not be used to contradict or supple-
ment the legal text. SCALIA & GARNER, supra, at 57.
Section 604.105(a) provides, “The community water sup-
ply must be designed to produce at least 20 percent greater
than the maximum average daily demand, as defined in 35 Ill.
Adm. Code 601.105.” When the regulation is broken down
into its component parts:
• A“community water supply” means “a public
water supply which serves or is intended to
serve at least 15 service connections used by res-
idents or regularly serves at least 25 residents.”
ILL. ADMIN. CODE tit. 35, § 601.105(a).
• “Public water supply,” in turn, is defined as “all
mains, pipes and structures through which wa-
ter is obtained and distributed to the public, in-
cluding wells and well structures, intakes and
cribs, pumping stations, treatment plants, reser-
voirs, storage tanks and appurtenances, collec-
tively or severally, actually used or intended for
use for the purpose of furnishing water for
drinking or general domestic use and which
serve at least 15 service connections or which
regularly serve at least 25 persons at least 60
days per year.” Id.
• “Infrastructure,” which has a nearly identical
definition to “public water supply,” means “all
mains, pipes and structures through which
22 No. 22-2942
water is obtained and distributed to the public,
including wells and well structures, intakes and
cribs, pumping stations, treatment plants, reser-
voirs, storage tanks and appurtenances, collec-
tively or severally, actually used or intended to
be used for the purpose of furnishing water for
drinking or general domestic use.” Id.
Reading these definitions together, “community water
supply” refers to a water association’s infrastructure. The ma-
jority opinion agrees. Maj. Op. at 12 (“And, as the dissent
notes, the definition [of] ‘public water supply,’ in turn, is fo-
cused on the infrastructure ‘actually used or intended for use
for the purpose of furnishing water for drinking or general
domestic use.’” (quoting § 601.105(a))). So, under § 604.105(a),
that infrastructure must be “designed to produce” a certain
quantity of water.
Pumping capacity measures “how much water WCWC’s
pumping stations can distribute through its system.” Maj. Op.
at 14. Because pumping capacity quantifies how much water
WCWC’s infrastructure can distribute, I see it is an appropri-
ate measure for assessing its compliance with § 604.105(a).
Contractual capacity is “the amount of water WCWC is
entitled to purchase under contract from its suppliers.” Maj.
Op. at 16. Contractual capacity is not linked to a water associ-
ation’s infrastructure; rather, it depends on that association’s
ability to obtain water from suppliers. Therefore, to me, con-
tractual capacity is not an appropriate measure for determin-
ing whether that infrastructure is designed to produce a cer-
tain quantity of water. Pumping capacity alone should be
used to assess WCWC’s compliance with § 604.105(a). As the
No. 22-2942 23
majority opinion describes very well, that decision ends up as
dispositive in this case.
The majority opinion reads the regulation “as referring to
the water association’s ability to furnish sufficient water to res-
idents … .” Maj. Op. at 13 (emphasis added). The question is
framed as whether the water association, not its infrastruc-
ture, satisfies § 604.105(a). See Maj. Op. at 10 (“Accordingly,
WCWC can only survive summary judgment if it can estab-
lish a genuine factual dispute as to whether it is ‘designed to
produce’ at least 20 percent more than its maximum average
daily demand (including Coulterville’s demand), as required
by IEPA regulations.” (emphasis added)).
This reading is puzzling given the majority opinion’s
agreement that the subject of the regulation is a water associ-
ation’s infrastructure, not the water association itself. Id. at 12.
Left unexplained is how contractual capacity measures
whether infrastructure meets the water quantity require-
ments of § 604.105(a).
For the majority opinion, the consequence of my reading
is that the meaning of “designed to produce” would change
depending on the water association at issue. Maj. Op. at 13.
The majority opinion sees “[n]othing in the language of the
regulation,” id., supporting that reading. But the definition of
“design to produce” does not change; instead, it is the type of
infrastructure to which the regulation applies which may
change. This interpretation is supported by the definitions of
“public water supply” and “infrastructure,” which inform the
meaning of “community water supply” as used in the regula-
tion. Those definitions encompass several different types of
infrastructure, including pumping stations and treatment
plants. § 601.105(a). That infrastructure, regardless of type,
24 No. 22-2942
must be designed to meet the water quantity requirements of
§ 604.105(a).
Based on my reading of the regulation, I would conclude
that pumping capacity alone should be used to assess
WCWC’s compliance with § 604.105(a). There is a genuine
dispute as to whether that capacity meets or exceeds its max-
imum average daily demand plus the 20 percent reserve, so I
would reverse and remand for further consideration by the
district court.