This case involves a dispute between two water service providers over which one of them is entitled to serve certain customers located in and around Guthrie, Oklahoma. Plaintiff-Appellee Rural Water, Sewer and Solid Waste Management District No. 1 of Logan County ("Logan-1") claims that its right to serve these customers is grounded in state law, but is protected from competition from encroaching water districts by a federal statute, 7 U.S.C. § 1926(b). Section 1926(b) protects rural water providers like Logan-1, which are indebted on loans obtained from the United States Department of Agriculture ("USDA"). Logan-1 contends that Defendants-Appellants City of Guthrie and its Guthrie Public Works Authority (collectively "Guthrie") violated § 1926(b) by extending water service to customers located in Logan-1's designated service area.
In these appeals, Guthrie challenges several district court orders. Having jurisdiction to review some of these orders under 28 U.S.C. § 1292(b), and jurisdiction to review others under Fed.R.Civ.P. 54(b) and 28 U.S.C. § 1291, we AFFIRM in part, REVERSE in part, and REMAND this case to the district court.
"In 1961 Congress amended the Consolidated Farm and Rural Development Act, 7 U.S.C. §§ 1921-2009n, to allow nonprofit water associations to borrow federal funds for `the conservation, development, use, and control of water ... primarily serving... rural residents.'" Moongate Water Co. v. Dona Ana Mut. Domestic Water Consumers Ass'n, 420 F.3d 1082, 1084 (10th Cir.2005) (quoting 7 U.S.C. § 1926(a)(1)). Originally the Farmers Home Administration ("FmHA") administered these loans. See Pittsburg Cnty. Rural Water Dist. No. 7 v. City of McAlester, 358 F.3d 694, 701 & n. 1 (10th Cir.2004). Since 1994, however, the USDA has operated this loan program, see id. at 701 n. 1, through its Rural Utilities Service. See Rural Water Dist. No. 1, Ellsworth Cnty. v. City of Wilson, 243 F.3d 1263, 1269 n. 3 (10th Cir.2001) (citing 7 C.F.R. § 1780.3(a)).
Beginning in January 1976, Logan-1 obtained a series of five forty-year loans from the USDA — two in 1976, and one each in 1978, 1982 and 2003. Logan-1 is a non-profit association created in 1972 by the Logan County Board of Commissioners to provide water service to parts of Logan County, but not within the Guthrie city limits as those limits existed at that time.
In order to provide greater security for the loans the USDA makes, as well as to promote rural water development, see Pittsburg Cnty., 358 F.3d at 715, Congress, as part of the Consolidated Farm and Rural Development Act, through 7 U.S.C. § 1926(b) prohibited "other water utilities from competing with the borrowing entity within the borrowing entity's service area," Dona Ana Mut. Domestic Water Consumers Ass'n v. City of Las Cruces, 516 F.3d 900, 902-03 (10th Cir. 2008). In 2005, Logan-1 sued Guthrie, claiming Guthrie had encroached on Logan-1's service area, in violation of § 1926(b), by providing water to customers located in Logan-1's service area.
The district court granted Logan-1 partial summary judgment on its § 1926(b) claims, making several legal conclusions
In addition to Logan-1's § 1926(b) claims against Guthrie, Guthrie filed counterclaims against Logan-1 and a third-party complaint against the USDA. The district court dismissed Guthrie's counterclaim and third-party claims for procedural reasons. Guthrie also challenges those determinations now on appeal. Although the district court's dismissal of Guthrie's counterclaim and third-party complaint did not dispose of all of the claims at issue in this case, the district court certified its dismissal of those particular claims as final and appealable under Fed.R.Civ.P. 54(b).
Section 1926(b) states:
7 U.S.C. § 1926(b). Although this case does not specifically involve the "inclusion of [Logan-1's service] area ... within the boundaries of any municipal corporation or other public body," "the granting of any private franchise for similar service[s] in [Logan-1's service] area," or any "event... requiring [Logan-1] to secure any franchise, license, or permit as a condition to continuing to serve [its] area," id., this court has applied § 1926(b) broadly to protect an indebted rural water district against competition from municipalities encroaching upon the rural water district by other, "similar means." Glenpool Util. Servs. Auth. v. Creek Cnty. Rural Water Dist. No. 2, 861 F.2d 1211, 1214 (10th Cir.1988) (quotation omitted); see also Pittsburg Cnty., 358 F.3d at 714-15; Sequoyah Cnty. Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192, 1197 (10th Cir.1999). Thus, we have previously applied § 1926(b) in cases like this one, where an indebted rural water district sought protection against encroachment by a neighboring municipality allegedly providing water service to the rural water district's customers or potential customers. See Rural Water Dist. No. 1, 243 F.3d at 1267-69; Sequoyah Cnty., 191 F.3d at 1194, 1197-1201. See generally Adams Cnty. Reg'l Water Dist. v. Vill. of Manchester, 226 F.3d 513, 518 (6th Cir.2000) ("Most of the cases arising under § 1926(b) have involved a municipality's attempt to encroach on a rural water association's area of service. Courts have uniformly understood the section as forbidding such encroachment, concluding that § 1926(b) should be given a liberal interpretation that protects rural associations indebted to the [USDA] from municipal encroachment." (quotation omitted; citing cases)).
To be entitled to § 1926(b)'s protection from competition, Logan-1 must establish 1) its continuing indebtedness on loans obtained from the USDA and 2) that it has provided or at least made water service available. See Pittsburg Cnty., 358 F.3d at 713; Sequoyah Cnty., 191 F.3d at 1197. Any "doubts about whether a water association is entitled to protection from competition under § 1926(b) should be resolved in favor of the [USDA]-indebted party seeking protection for its territory."
On appeal, Guthrie does not dispute that Logan-1 has been continually indebted, since 1976, on loans obtained from the USDA.
The Oklahoma Supreme Court accepted our certification of this question, see Rural Water Sewer & Solid Waste Mgmt., Dist. No. 1 v. City of Guthrie, 344 Fed.Appx. 462 (10th Cir.2009) (unpublished), and concluded that a rural water district could agree to § 1926(b)'s protection without violating the Oklahoma Constitution. See Rural Water Sewer & Solid Waste Mgmt., Dist. No. 1 v. City of Guthrie, 253 P.3d 38, 41 (Okla.2010). In reaching that conclusion, the Oklahoma Supreme Court determined the following: The Oklahoma legislature enacted statutes that permit the creation of rural water districts with designated service areas, but the legislature has not provided these districts with an exclusive franchise to provide water service in those areas. See id. at 45-46 & 46 n. 10. The state legislature also authorized these rural water districts to borrow money and enter into contracts. See id. at 46. And in borrowing money, a district may obtain financing from the USDA, even if such an agreement requires § 1926's protection from competition. See id. at 46-47. That protection, however, is granted, not by the state legislature, but instead by Congress. See id. at 44-48, 52 (relying on Glenpool, 861 F.2d at 1216). Therefore, "article 5, section 51 is neither implicated nor violated as no action by the Oklahoma Legislature has been taken that grants an exclusive right to a water district." Id. at 48. Moreover, § 1926(b)'s protection "is a qualified not an exclusive right, limited in time and in scope" by "preclud[ing] competitive water services only while a district remains indebted to the USDA [and] to the extent that a competitor's services would curtail or limit the indebted district's ability to provide water services and repay its loans." Id. at 49. Further, noting that a rural water district can only invoke § 1926(b)'s protection if it has made water service available, the Oklahoma Supreme Court determined that, "[a]t most, section 1926(b) ordains a dual water authority function within a municipal area for a period of time." Id. at 49-50.
In light of the Oklahoma Supreme Court's resolution of our certified question, we affirm the district court's determination that Logan-1's § 1926(b) protection does not violate the Oklahoma Constitution. Logan-1 has thus established that it has been continually and validly indebted, since 1976, on loans obtained from the USDA.
In order to establish that it has adequately made water service available, Logan-1 must first show that it has the legal right to provide water service. See Sequoyah Cnty., 191 F.3d at 1201 n. 8; see also Moongate Water, 420 F.3d at 1084-85. Here, no one disputes that Logan-1 has a right under Oklahoma law to provide water service within its assigned territory.
Logan-1 must also establish that it has in fact "provided or made [water service] available," 7 U.S.C. § 1926(b). See Sequoyah Cnty., 191 F.3d at 1201-03. This inquiry "focus[es] primarily on whether [Logan-1]... has proximate and adequate `pipes in the ground' with which it has served or can serve the disputed customers within a reasonable time." Id. at 1203; see also Butterfield Park, 291 F.3d at 1267-68; Rural Water Dist. No. 1, 243 F.3d at 1270.
Sequoyah Cnty., 191 F.3d at 1203 (quotation, citation omitted); see also Pittsburg Cnty., 358 F.3d at 713; Butterfield Park, 291 F.3d at 1268; Rural Water Dist. No. 1, 243 F.3d at 1270. Further, Logan-1 "must have made service available prior to the time an allegedly encroaching association began providing service in order to be eligible for § 1926(b) protection." Sequoyah Cnty., 191 F.3d at 1202 (quotation, alterations omitted).
The district court determined that, in this case, there were disputed issues of fact remaining as to whether Logan-1 had made services available to the customers at issue before Guthrie began providing those customers with water. The parties do not challenge that determination on appeal. In granting Logan-1 partial summary judgment, however, the district court made several legal determinations as to how it intends to resolve that factual question. Guthrie challenges two of those legal conclusions here.
Guthrie first challenges the district court's determination that it will decide whether Logan-1 made services available on a customer-by-customer basis, rather than on an area-wide basis. We need not set forth a per se rule here but, instead, conclude that the district court was correct in applying a customer-by-customer basis in this case because Logan-1 specifically alleged that Guthrie violated § 1926(b) by providing water to certain customers located in Logan-1's service area. That is a more narrow claim than if Logan-1 had instead alleged that § 1926(b)'s protection from competition applied to protect entire areas within its designated service area. We, therefore, need not decide here whether Logan-1 could make such an area-wide claim.
Moreover, the manner that Logan-1 pled its § 1926(b) claim, on a customer-by-customer basis, is consistent with how prior Tenth Circuit cases have addressed the question of whether an indebted rural water district has "made service available" for purposes of § 1926(b). For example, in Sequoyah County, the plaintiff rural water district alleged that a competing municipal water provider violated § 1926(b) by providing water service to specific customers in the rural water district's assigned territory. See 191 F.3d at 1194-95, 1197. This court, in that case, thus addressed the rural water district's § 1926(b) claim on a customer-by-customer basis. See id. at 1203-06; see also Butterfield Park, 291 F.3d at 1263-64 (addressing a dispute under § 1926(b) about which competing water provider had the right to serve a particular customer); cf. Rural Water Dist. No. 1, 243 F.3d at 1267, 1271-72 (addressing whether a rural water district made service available to three specific properties within its service area). Similarly, this court, in Pittsburg County, remanded a § 1926(b) claim to the district court with instructions to consider whether the rural water district had made service available to each of the specific customers at issue in that case. See 358 F.3d at 713-14; see also id. at 716 (addressing the defendant water district's sales to customers in an area de-annexed from the purportedly protected rural water district); Sequoyah Cnty., 191 F.3d at 1201 n. 6 (noting on remand that the district court would have to consider, among other things, whether the rural water district "demonstrate[d] that it `made service available' to the customers that Defendants allegedly began serving before the repurchase date" of the rural water provider's loans obtained from the USDA). The Eighth Circuit has also applied the "pipes in the ground" test customer by
Guthrie next argues that the district court, in addressing whether Logan-1 made service available to the disputed customers, must consider that Logan-1 is required by state and federal law to provide its customers with fire protection, but cannot do so. The district court, however, held that Logan-1 was not legally obligated to provide fire protection. We agree.
Guthrie asserts that 7 C.F.R. § 1780.57 mandates that Logan-1 provide fire protection. But that regulation provides only that "[w]ater facilities" financed by the USDA "should have sufficient capacity to provide reasonable fire protection to the extent practicable." 7 C.F.R. § 1780.57(d) (emphasis added). See Rural Water Dist. No. 4 v. City of Eudora, 604 F.Supp.2d 1298, 1329 (D.Kan.2009) (rejecting similar argument), clarified on reconsideration, 2009 WL 1360182 (D.Kan.2009).
7 C.F.R. § 1780.57 also provides more generally that "[f]acilities financed by the [USDA] will be designed and constructed in accordance with sound engineering practices, and must meet the requirements of Federal, State and local agencies." Relying on this regulation, Guthrie further contends that Oklahoma law requires Logan-1 to provide fire protection. But in support of that argument, Guthrie cites to two Oklahoma administrative regulations, one addressing "[w]ater main design for all systems providing fire protection," Okla. Admin. Code 252:626-19-3 (emphasis added), and the other addressing "[w]ater main design for systems providing domestic water only," which "applies only to water systems without full fire protection capabilities," id. 252:626-19-4 (emphasis added). Because these regulations clearly anticipate that some water systems will provide fire protection, while others will not, the district court correctly rejected Guthrie's argument that Oklahoma law, as set forth in these regulations, requires Logan-1 to provide fire protection.
Despite correctly concluding that neither federal nor state law requires Logan-1 to provide fire protection to its customers, the district court nevertheless held that, in light of 7 C.F.R. § 1780.57(d)'s language — "[w]ater facilities" financed by the USDA "should have sufficient capacity to provide reasonable fire protection to the extent practicable" — the court could consider, as one factor in deciding whether Logan-1 has made service available, if it was practicable for Logan-1 to provide "reasonable fire protection." See Sequoyah Cnty., 191 F.3d at 1203-05 (considering evidence regarding rural water district's physical capacity to provide disputed customers with both potable water and with fire protection). We disagree with the district court's conclusion. Logan-1's ability to provide fire protection is simply not relevant to the specific question of whether Logan-1 has adequate pipes in the ground to "make service available" for purposes of the § 1926(b) protection from competition.
To summarize,
Guthrie also challenges the district court's decision to dismiss, for procedural reasons, Guthrie's third-party complaint against the USDA and Guthrie's counterclaims asserted against Logan-1.
In its third-party complaint against the USDA, Guthrie sought declaratory and injunctive relief under the Administrative Procedures Act ("APA"), 5 U.S.C. §§ 701-706. These claims are based generally on two theories: 1) Logan-1 did not have authority, under Oklahoma law, to agree to the § 1926(b) protection from competition because the protection was contrary to Okla. Const. art. 5, § 51. 2) But if Logan-1 did have state-law authority to agree to the § 1926(b) protection, then the USDA is now obligated to invoke the graduation clause in the 2003 loan agreement which, according to Guthrie, requires Logan-1 to repay that loan immediately.
The district court dismissed these claims on sovereign immunity grounds and for lack of standing. This court will review these decisions de novo. See Normandy Apartments, Ltd. v. U.S. Dep't of Housing & Urban Dev., 554 F.3d 1290, 1296 (10th Cir.2009) (sovereign immunity); Day v. Bond, 500 F.3d 1127, 1132 (10th Cir.2007) (standing).
Ordinarily, this court must resolve jurisdictional issues, such as sovereign immunity and standing, "before addressing
Starkey, 569 F.3d at 1260 (citation omitted).
That exception applies here to Guthrie's claims asserted against the USDA based upon the asserted conflict between § 1926(b) and the Oklahoma Constitution. The Oklahoma Supreme Court, in resolving our certified question raised by Logan-1's § 1926(b) claims against Guthrie, over which we clearly have jurisdiction, rejected the merits of that argument. The Oklahoma Supreme Court's decision also resolves the merits of Guthrie's third-party claims based on the same theory. We therefore need not address whether the United States has waived its sovereign immunity as to these claims, nor do we need to decide whether Guthrie has standing to assert them. Instead, we affirm the district court's dismissal of Guthrie's claims against the USDA which are based upon the alleged § 1926(b)/Oklahoma Constitution conflict, but we do so based on these claims' merit, or more precisely on their lack of merit.
We must still address our jurisdiction to consider Guthrie's third-party claims against the USDA seeking to enforce the graduation clause in the 2003 loan agreement. We conclude that the United States has not waived its sovereign immunity as to these claims.
Generally, the United States, through the APA, has waived its sovereign immunity to "[a]n action in a court of the United States seeking relief other than money damages." 5 U.S.C. § 702
In Robbins, this court considered the interaction of the APA with the federal Tucker and Little Tucker Acts.
Robbins, 438 F.3d at 1080-81 (footnote omitted). Reading the APA's waiver of sovereign immunity with the Tucker Acts' waiver, Robbins held "that the Tucker and
In this case, Guthrie's claims seeking the enforcement of the graduation clause in Logan-1's 2003 loan agreement with the USDA are claims seeking equitable relief in the nature of specific performance.
In summary, we affirm the dismissal of Guthrie's claims against the USDA alleging that Logan-1 had no authority under Oklahoma law to agree to 7 U.S.C. § 1926(b)'s protection from competition. But we do so based on the merits of those claims and so we remand them for the district court to dismiss those claims with prejudice. We further conclude that, because the United States has not waived its sovereign immunity, the district court properly dismissed without prejudice Guthrie's claims against the USDA seeking declaratory and injunctive relief based upon the graduation clause in the 2003 loan agreement.
Guthrie asserted counterclaims against Logan-1 based on the same two theories underlying its third-party complaint against the USDA — 1) Logan-1's loan agreements with the USDA were void because Logan-1 lacked authority under state law to agree to the § 1926(b) protection
Based upon the Oklahoma Supreme Court's decision rejecting the merits of Guthrie's state constitutional argument, we affirm the district court's dismissal of Guthrie's first counterclaim, not because Guthrie cannot join the USDA, but because, as previously explained, this argument lacks legal merit. In doing so, however, we again remand that claim so that the district court can clarify that this dismissal on the merits is with prejudice.
In its opening brief on appeal, Guthrie focused exclusively on the district court's decision to dismiss Guthrie's counterclaim premised on the Oklahoma Constitution. Guthrie does not address the dismissal of its counterclaim based on the graduation clause until its reply brief and then only fleetingly. In light of that, we conclude Guthrie has waived any argument challenging the dismissal of its counterclaim based upon the graduation clause in the 2003 loan agreement.
To summarize, based upon the Oklahoma Supreme Court's decision in response to our certified questions, we AFFIRM the district court's determination that Logan-1 established its continued indebtedness under loans obtained from the USDA. Based upon the circumstances presented here, we also AFFIRM the district court's conclusion that the "made service available" determination should be made on a customer-by-customer basis. Further, we AFFIRM the district court's decision that Logan-1 is not legally required to provide fire protection. But we REVERSE the district court's determination that whether it is practicable for Logan-1 to provide fire protection is one factor to be considered in deciding whether Logan-1 has made service available. We REMAND Logan-1's § 1926(b) claims asserted against Guthrie for further proceedings consistent with this opinion.
We also AFFIRM the district court's dismissal of Guthrie's third-party claims for equitable relief asserted against the USDA, based upon the alleged conflict between § 1926(b)'s protection from competition
We similarly AFFIRM the dismissal of Guthrie's counterclaim asserted against Logan-1, based upon the alleged § 1926(b)/Oklahoma Constitution conflict, but we do so again based on that claim's lack of merit. We, therefore, REMAND this counterclaim so the district court can also dismiss it with prejudice.
A. Every district incorporated hereunder... shall have power to:
(Footnote omitted.) See Pittsburg Cnty., 358 F.3d at 701 (noting that the Oklahoma legislature enacted Okla. Stat. tit. 82, § 1324.10(A)(4) in response to Congress' enactment of 7 U.S.C. § 1926(b)).
(Aplt.App. at 745.) Guthrie's graduation-clause theory of recovery is limited to the 2003 loan agreement because the USDA transferred its first four loans with Logan-1 to the Trust. Before doing so, the USDA eliminated any right the Trust might have to invoke the graduation clauses in those agreements and the USDA waived its own right to invoke these clauses:
(Id. at 1121-22 (quotation, alteration omitted).) In its amended third-party complaint, Guthrie originally named both the Trust and the USDA as defendants. Guthrie also challenged the USDA's authority to waive the graduation clauses in these loan agreements. But the district court held that the relevant six-year statute of limitations barred any challenge Guthrie asserted to the USDA's transfer of the first four loans to the Trust, which occurred in 1987. See 28 U.S.C. § 2401(a) (providing generally that "every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues"). And the district court later granted Guthrie's motion to dismiss the Trust from this litigation. On appeal, the parties do not challenge either of these decisions. Therefore, as to Guthrie's theory of recovery based upon the graduation clauses in the loan agreements, the four loans that the USDA sold to the Trust in 1987 are no longer at issue and we address here only Guthrie's third-party claims based upon the graduation clause contained in the USDA's 2003 loan agreement with Logan-1.