1

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2003 FED App. 0365P (6th Cir.)

File Name: 03a0365p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

LE-AX WATER DISTRICT,

Plaintiff-Appellee,

v.

CITY OF ATHENS, OHIO,

Defendant-Appellant.

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No. 02-3016

Appeal from the United States District Court

for the Southern District of Ohio at Columbus.

No. 00-01328—Algenon L. Marbley, District Judge.

Argued: June 12, 2003

Decided and Filed: October 10, 2003 

Before: KEITH, MOORE, and GIBBONS, Circuit Judges.

_________________

COUNSEL

ARGUED: Garry E. Hunter, LAW DIRECTOR, Athens,

Ohio, for Appellant. Orla E. Collier III, BENESCH,

FRIEDLANDER,COPLAN & ARONOFF, Columbus, Ohio,

for Appellee. ON BRIEF: Garry E. Hunter, LAW

DIRECTOR, Athens, Ohio, for Appellant. Orla E. Collier III,

BENESCH, FRIEDLANDER, COPLAN & ARONOFF,

Columbus, Ohio, for Appellee. Barry M. Byron, Willoughby,

2 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

Ohio, Dennis M. O’Toole, Stephen P. Bond,

BAUMGARTNER & O’TOOLE, Elyria, Ohio, for Amici

Curiae.

MOORE, J., delivered the opinion of the court, in which

KEITH, J., joined. GIBBONS, J. (pp. 17-20), delivered a

separate dissenting opinion.

_________________

OPINION

_________________

KAREN NELSON MOORE, Circuit Judge. The defendant

City of Athens, Ohio (“Athens”) appeals the district court’s

grant of summary judgment and of a declaratory judgment to

the plaintiff Le-Ax Water District (“Le-Ax”), as well as the

district court’s denial of Athens’s own motion for summary

judgment. University Estates owns 825 acres of property

outside of, but nearby, both Athens and Le-Ax. Both Athens

and Le-Ax wish to supply water to University Estates, which

seeks to develop its property into a golf-course community.

After University Estates made arrangements for Athens to

supply the necessary water, Le-Ax, a predominantly rural

water district, brought this lawsuit, claiming that Athens’s

agreement to provide water service to University Estates

violated Le-Ax’s rights under 7 U.S.C. § 1926(b). For the

reasons that follow, we REVERSE the district court’s grant

of summary judgment and of a declaratory judgment to LeAx, and we also REVERSE the district court’s denial of

summary judgment to Athens. We REMAND this case to the

district court so that it may enter judgment in favor of Athens

and dismiss the case.
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

3

I. OVERVIEW

A. Factual History

The Le-Ax Water District is a rural water district that was

created by a judicial order upon a petition filed in the Athens

County Court of Common Pleas in 1980, pursuant to OHIO

REV. CODE ANN. § 6119.01. Joint Appendix (“J.A.”) at 71-

72. As a water district, Le-Ax is an independent political

subdivision of the State of Ohio, governed by OHIO REV.

CODE ANN. § 6119. Le-Ax’s territory was described in the

petition approved by that court.

Le-Ax, as a rural water district, assumed the debt that its

predecessor owed to the United States Department of

Agriculture (“USDA”). As a result, Le-Ax has been indebted

to the USDA since its inception. Le-Ax subsequently

incurred another debt to the USDA when it sold revenue

bonds to the Rural Economic and Community Development

Service (“RECDS”), which was formerly known as the

Farmers Home Administration (“FmHA”). Bonds were

issued on February 26, 1997, in the principal amount of

$6,844,000 (at 4.5% interest), that will expire on February 1,

2037. J.A. at 309. The loans were not made in order to help

Le-Ax finance the University Estates project and apparently

have no connection in any way to the University Estates

transaction.

University Estates owns 825 acres of property, all of which

is outside the boundaries of both Le-Ax and Athens.

University Estates plans to develop this property into a golf

course and approximately 800 homes. The property is close

to the boundaries of both Le-Ax and Athens; it borders

Athens on Athens’s northern side, and is, at its closest point,

1400 feet (roughly one third of a mile) from Le-Ax’s

boundary. J.A. at 230 (Aff. of Steven Mullaney). Le-Ax has

taken no formal steps to change its boundaries to include

University Estates’s property, such as by filing a petition in

4 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

state court under OHIO REV. CODE ANN. § 6119.051. In

contrast, Athens has begun the process of changing its

boundaries to include University Estates. On October 16,

2000, Athens’s City Council authorized a development

agreement with University Estates, pursuant to which Athens

would annex University Estates and provide it with water.

J.A. at 117-22 (Ordinance and Development Agreement).

Standing in Athens’s way, however, is this lawsuit — for

Le-Ax also wishes to supply University Estates with water

and claims that 7 U.S.C. § 1926(b) vests Le-Ax with the right

to serve University Estates. Although Le-Ax does not

currently supply University Estates with water (the property

as of yet has no access to water from any supplier) and does

not currently have lines extending into University Estates’s

territory, Le-Ax claims that it could supply University Estates

with water almost immediately. Le-Ax refers to an eight-inch

water main that it owns, which is immediately adjacent to the

University Estates site. Supplemented by two nearby storage

tanks, the eight-inch transmission line, Le-Ax claims, can

provide water to University Estates at a rate far exceeding the

estimates of University Estates’s expected usage. A pressurereducing valve, a tap in, and a pumping station will be

necessary to connect the eight-inch main to University

Estates. However, there was unrebutted testimony that the

valve is an apparently minor and inexpensive addition and the

tap-ins and the pumping station (as part of the water apparatus

internal to the site) are to be provided by the developer of the

property, not the water supplier. J.A. at 553 (Dep. Test. of

John Collins).

B. Procedural History

On November 16, 2000, Le-Ax filed this lawsuit in the

United States District Court for the Southern District of Ohio,

alleging that the proposed water supply arrangement between

Athens and University Estates would violate 7 U.S.C.

§ 1926(b). Upon cross-motions for summary judgment and
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

5

an in-court hearing, the district court granted summary

judgment to Le-Ax and issued a declaratory judgment that the

provision of water from Athens to University Estates would

violate 7 U.S.C. § 1926(b). This timely appeal followed.

II. ANALYSIS

A. Standards of Review

This court reviews a grant of summary judgment de novo.

Bukowski v. City of Akron, 326 F.3d 702, 707 (6th Cir. 2003).

Although the district court’s denial of a motion for summary

judgment is usually treated as a nonappealable interlocutory

order, when “an appeal from a denial of summary judgment

is presented in tandem with a grant of summary judgment,

this court has jurisdiction to review the propriety of the

district court’s denial of summary judgment.” Hamad v.

Woodcrest Condo. Ass’n, 328 F.3d 224, 235 (6th Cir. 2003)

(quotation omitted). The district court’s denial of summary

judgment based on purely legal grounds is reviewed de novo.

Id. at 235-36. Summary judgment is appropriate where the

“pleadings, depositions, answers to interrogatories, and

admissions on file together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of law.”

Fed. R. Civ. P. 56(c).

B. Background to 7 U.S.C. § 1926(b)

Over forty years ago, Congress passed the Agricultural Act

of 1961, Pub. L. No. 87-128, 75 Stat. 294, which sought to

preserve and protect rural farm life in a number of respects.

Title III of the Act (which is known as the Consolidated Farm

and Rural Development Act) was concerned largely with

issues of agricultural credit. Title III contained two sections

that are at issue here, sections 306(a) and 306(b). Section

306(a) of the Act, now codified at 7 U.S.C. § 1926(a), made

federal loans available to water service associations. Section

6 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

306(b), now codified at 7 U.S.C. § 1926(b), protected the

recipients of such loans from competition, to a certain extent.

The text of section 306(b) reads:

The service provided or made available through any such

association shall not be curtailed or limited by inclusion

of the area served by such association within the

boundaries of any municipal corporation or other public

body, 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 continuing

to serve the area served by the association at the time of

the occurrence of such event.

7 U.S.C. § 1926(b). This provision prevents local

governments from expanding into a rural water association’s

area and stealing its customers; the legislative history states

that the statutory provision was intended to protect “the

territory served by such an association facility against [other]

competitive facilities” such as local governments, as

otherwise rural water service might be threatened by “the

expansion of the boundaries of municipal and other public

bodies into an area served by the rural system.” S. Rep. No.

87-566, at 67 (1962), reprinted in 1961 U.S.C.C.A.N. 2243,

2309.

The concept of economies of scale is an integral part of

§ 306(b)’s rationale; by protecting a rural water association’s

customer base, the provision allows such associations to

spread their fixed costs over a large group of users. In so

doing, the statute aims to prevent rural water costs from

becoming prohibitively expensive to any particular user, to

develop a system providing fresh and clean water to rural

households, and to protect the federal government as insurer

of the loan. Id. (“By including service to other rural residents,

the cost per user is reduced and the loans are more secure in
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

7

addition to the community benefits of a safe and adequate

supply of running household water.”); see also Lexington–S.

Elkhorn Water Dist. v. City of Wilmore, 93 F.3d 230, 233 (6th

Cir. 1996) (stating that the Act “safeguard[s] the financial

viability of rural associations and Farmers Home

Administration loans” and “encourage[s] rural water

development by expanding the number of potential users”).

We have stated that this “provision ‘should be given a liberal

interpretation that protects rural water associations indebted

to the FmHA from municipal encroachment.’” Lexington–S.

Elkhorn, 93 F.3d at 235 (citation omitted).

In order to state a claim under § 1926(b), a plaintiff must

establish “that 1) it is an ‘association’ within the meaning of

the Act; 2) it has a qualifying outstanding FmHA loan

obligation; and 3) it has provided or made service available in

the disputed area.” Adams County Reg’l Water Dist. v. Vill.

of Manchester, 226 F.3d 513, 517 (6th Cir. 2000). The first

two elements are not in dispute here; the parties agree that LeAx is an “association” within the meaning of the Act and that

Le-Ax has a qualifying outstanding FmHA loan obligation.

The only element in controversy here is whether Le-Ax

satisfies the third element of the test.

C. The “Has Provided or Made Service Available”

Requirement

The key question is whether Le-Ax satisfies the

requirement that the association “has provided or made

service available in the disputed area.” Id. at 517.

Unfortunately, the statute and the legislative history provide

no help in explaining this phrase, which is derived from the

statute itself. See Scott Hounsel, Note: Water Associations

and Federal Protection Under 7 U.S.C. § 1926(b): A

Proposal to Repeal Monopoly Status, 80 TEX. L. REV. 155,

159 (2001) (noting that the statute does not define “provided

or made available”). Without any guidance from Congress or

the Supreme Court, federal appellate courts have interpreted

8 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

1

The Fourth Circuit in Bell Arthur reports that we also have adopted

this approach. See Bell Arthur Water Corp. v. Greenville Utils. Comm’n,

173 F.3d 517, 526 (4th Cir. 1999). As we explain below, however, the

Bell Arthur court was apparently misreading our decision in Lexington–S.

this language in a variety of ways. Different circuits use

different factors to determine whether a water association can

invoke the protections of § 1926, including whether the water

association has the physical ability to serve the area in

question, and whether it has a legal duty or legal right to do

so.

To determine whether service was made available, many

courts begin with a “pipes in the ground” or “physical ability”

approach that examines whether the water association has the

physical means presently to serve the area. This inquiry asks

whether the association can demonstrate “‘that it has adequate

facilities within or adjacent to the area to provide service to

the area within a reasonable time after a request for service is

made.’” Sequoyah County Rural Water Dist. No. 7 v. Town

of Muldrow, 191 F.3d 1192, 1203 (10th Cir. 1999) (citation

omitted). The Tenth Circuit has adopted this approach but

has also required that the water association have the right

under state law to serve the area in question. Id. at 1202 n.8.

The Eighth Circuit applies this same test, requiring that a

water association show both that it has the physical means to

serve the area and that it has a legal right to do so. Rural

Water System #1 v. City of Sioux Center, 202 F.3d 1035, 1037

(8th Cir.), cert. denied, 531 U.S. 820 (2000).

Neither of those circuits requires that a water association

have a legal duty to serve in order to receive protection under

§ 1926. That is, however, the approach of the Fourth Circuit,

which apparently requires both a state-law duty to serve and

a physical ability to serve. Bell Arthur Water Corp. v.

Greenville Utils. Comm’n, 173 F.3d 517, 525-26 (4th Cir.

1999).1 The Fifth Circuit has adopted a far looser approach,
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

9

Elkhorn. We have only required (like the Tenth Circuit) a state-law right

(not duty) to serve the area to invoke § 1926.

apparently holding that service is made available through

either a state-law duty to serve or a physical ability to serve.

N. Alamo Water Supply Corp. v. City of San Juan, 90 F.3d

910, 916 (5th Cir.), cert. denied, 519 U.S. 1029 (1996).

As the above analysis makes clear, the circuits are in

conflict as to what they require. In Lexington–S. Elkhorn, we

adopted the same two-part approach that the Eighth and Tenth

Circuits have taken. The first requirement under

Lexington–S. Elkhorn is the “pipes in the ground”

requirement. In Lexington–S. Elkhorn, we plainly stated that

“[i]f an association does not already have service in existence,

water lines must either be within or adjacent to the property

claimed to be protected by Section 1926(b) prior to the time

an allegedly encroaching association begins providing service

in order to be eligible for Section 1926(b) protection.”

Lexington–S. Elkhorn, 93 F.3d at 237 (emphasis added). The

second requirement of Lexington–S. Elkhorn is that the water

district must have the legal right under state law to serve the

area in question. Id. at 235-36 (noting that “Lexington-South

Elkhorn admits that it has not obtained . . . from the Kentucky

Public Service Commission [the right] to construct facilities

or to serve customers within portions of the disputed areas,”

which “distinguish[es] this case from other cases in which

courts have upheld water districts’ rights to Section 1926(b)

protection”). Because neither of these requirements was met,

we dismissed the water district’s claim under § 1926(b). Id.

at 238 (stating that because the plaintiff “has not established

its authorization to serve the disputed properties or its ability

to provide the service,” it cannot be said to have “made

service available”).

In this case, Le-Ax has clearly satisfied both of these

requirements. First, under state law, Le-Ax has a legal right

10 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

to serve the area. As even Athens seems to acknowledge,

Ohio law permits water districts “[t]o supply water to users

within and without the district.” OHIO REV. CODE ANN.

§ 6119.01(A) (emphasis added). Under the plain text of this

statute, which Athens has not even attempted to distinguish,

Le-Ax has the right to provide service outside its boundaries.

Second, Le-Ax has the physical ability to serve University

Estates within the meaning of our “pipes in the ground” test.

It is undisputed that Le-Ax has water lines “within or adjacent

to” the relevant property that could meet University Estates’s

needs. Le-Ax currently has an eight-inch line immediately

adjacent to University Estates, and also has water storage

tanks that augment the system. Athens’s only argument is

that some additional work would have to be done before LeAx could supply University Estates with water. Athens points

out that Le-Ax’s own expert testified that Le-Ax would need

a pressure-reducing valve, some tap-ins, and a pumping

station in order to supply University Estates with water. The

pressure-reducing valve is apparently a minimal addition that

costs roughly $2,000, and the tap-ins and pumping station

would be provided by University Estates, regardless of

whether Athens or Le-Ax supplied the water. To argue, as

Athens does, that water servicemust be available immediately

(evidently in the sense that someone at University Estates

must be able to go over to the faucet and turn on the water),

would be to ignore our statement in Lexington–S. Elkhorn that

the “made available” requirement is satisfied not only when

the pipes are “within,” but also when they are merely

“adjacent to” the property. The evidence here admits of only

one conclusion, that Le-Ax “has adequate facilities within or

adjacent to the area to provide service to the area within a

reasonable time after a request for service is made.”

Sequoyah County, 191 F.3d at 1203 (quotation omitted); cf.

Bell Arthur, 173 F.3d at 526 (holding that service was not

made available when the water district only had a six-inch

pipeline running near the disputed area and a fourteen-inch

pipeline was necessary to serve the area); Glenpool Util.

Servs. Auth. v. Creek Cty. Rural Water Dist., 861 F.2d 1211,
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

11

1213 (10th Cir. 1988) (holding that service was made

available when the water district had a water line that ran

within fifty feet of the property), cert. denied, 490 U.S. 1067

(1989).

D. Offensive and Defensive Uses of Section 1926

Having established the physical ability to serve University

Estates and a legal right to do so under state law, Le-Ax

argues that it is therefore entitled to summary judgment. We,

however, believe that Le-Ax cannot properly invoke the

protections of 7 U.S.C. § 1926(b). Central to our conclusion

is the fact that Le-Ax is not seeking to use the statute to

protect its users or territory from municipal incursion in this

case. It instead is seeking to use the statute to foist an

incursion of its own on users outside of its boundary that it

has never served or made agreements to serve. To grant LeAx what is essentially monopoly status over property that it

has never served (or contracted to serve), and that is outside

of its boundary, we believe, would be wholly inconsistent

with the statute’s text and legislative history, as well as our

case law. Ultimately, we agree with Athens that § 1926(b)

can be used only as a shield to defend against invasion rather

than as a sword to wage one.

This case presents unique facts. Le-Ax has brought this

lawsuit under 7 U.S.C. § 1926(b), claiming that Athens has

improperly curtailed or limited Le-Ax’s activities by

contracting to provide University Estates with water. Athens,

however, is not attempting to serve users within Le-Ax’s

boundary. Nor is Athens attempting to steal Le-Ax’s

customers that may be outside of Le-Ax’s boundary. Instead,

Athens is merely seeking to persuade unserved users to sign

up with Athens (rather than Le-Ax) for water service.

Believing Athens’s action to be outside of the statute’s

intended prohibition, we hold today that a claim under

§ 1926(b) has not been established under these circumstances.

When a rural water district’s boundaries are geographically

12 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

determined by the state, we hold that a rural water district

cannot use § 1926(b) as a sword to force new customers who

are outside that geographic area to receive water service

through the rural water district.

We begin with the text and legislative history of 7 U.S.C.

§ 1926(b). The text of the statute states that “[t]he service

provided or made available through any such association shall

not be curtailed or limited by inclusion of the area served by

such association within the boundaries of any municipal

corporation.” 7 U.S.C. § 1926(b). The statute’s use of

phrases like “curtailed” and “limited” to describe the

municipality’s interference with the rural water association

suggests that a rural water association must already be

providing service to an area before the protections of

§ 1926(b) apply. The statute’s language provides no support

for Le-Ax’s claim that it has a right to curtail or limit

Athens’s own service to University Estates. See Hounsel,

supra, 80 TEX. L. REV. at 159 (arguing that the statutory text

suggests “that it is the existing customers of the association

that are off-limits to competing municipalities”).

The legislative history also makes it clear that the statute

was only meant to protect rural water associations from the

outside threat of local governments taking their customers —

not as a weapon for water associations to use to recruit new

users outside of their boundaries. The legislative history

states that the section was “added to assist in protecting the

territory served by such an association facility against

competitive facilities, which might otherwise be developed

with the expansion of the boundaries of municipal and other

public bodies into an area served by the rural system.” S.

Rep. No. 87-566, at 67 (1962), reprinted in 1961

U.S.C.C.A.N. 2243, 2309. The legislative history casts the

statute’s purpose in a defensive light. It plainly suggests that

the goal of the statute is only to protect territory already

served by a rural water association from municipal expansion

into the rural water association’s area; it does not give
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

13

credence to Le-Ax’s hypothesis that the statute can be used to

recruit unwilling new users outside of the rural water

association’s boundary. Cf. Hounsel, 80 TEX.L.REV. at 159-

60 (“[T]he claim that an indebted association could extend its

federal protection beyond its actual or operative service area

has no support in the legislative history.”).

The distinction between “offensive” and “defensive” uses

of the statute is also embedded, although somewhat

implicitly, in our cases. Even our broad statements about

§ 1926(b)’s applicability have always involved an element of

actual encroachment on a water association’s existing area or

users. See Lexington–S. Elkhorn, 93 F.3d at 235 (stating the

section “‘indicates a congressional mandate that local

governments not encroach upon the services provided by

such associations, be that encroachment in the form of

competing franchises, new or additional permit requirements,

or similar means’”) (citation omitted) (emphasis added);

Adams County, 226 F.3d at 519 (stating “‘that the statute

should not be construed narrowly to prohibit municipal

encroachment only if technically by annexation or grant of

franchise, but should be applied broadly to protect rural water

associations indebted to FmHA from competition from

expanding municipal systems’”) (citation omitted) (emphasis

changed). We, in fact, presumed the element of

encroachment in our version of the “pipes in the ground” test,

where we stated that “water lines must either be within or

adjacent to the property claimed to be protected by Section

1926(b) prior to the time an allegedly encroaching

association begins providing service in order to be eligible for

Section 1926(b) protection.” Lexington–S. Elkhorn, 93 F.3d

at 237 (emphasis added). The repeated use of the term

“encroachment” suggests that the statute is only invoked

properly when the municipality is attempting to provide water

service to a rural water association’s users or within its

boundary.

14 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

Our conception of § 1926(b) is also consistent with the

results in cases both in this circuit and in other circuits.

Virtually all of the cases involving § 1926(b) involve

competitors who attempt to serve customers within the rural

water district’s state-law authorized boundaries, which is

simply not the case here. See Lexington–S. Elkhorn, 93 F.3d

at 232 (holding that although Lexington–S. Elkhorn was

“offering to provide water service to customers located within

the Water District’s boundaries,” it did not violate the statute

because the water district was neither licensed to reach those

customers nor had the facilities to do so); Sequoyah County,

191 F.3d at 1201 n.7, 1204 (holding that there was a genuine

issue for trial on whether the water district could adequately

supply the water to the disputed territories, but “assum[ing]

that the disputed customers are within Plaintiff’s territory as

it is defined by state law”); N. Alamo, 90 F.3d at 913

(involving users and property that “lie within the Utility’s

Certificated Area”); Rural Water Dist. No. 1, Ellsworth

County v. City of Wilson, 243 F.3d 1263, 1267 (10th Cir.

2001) (involving properties within the water district’s statelaw boundary).

Le-Ax argues that § 1926(b) should apply whenever a rural

water association has the capability of serving users that could

also be served by some other entity. This vision of § 1926(b)

is expansive indeed. It would essentially give Le-Ax

monopoly status not only within its boundaries and among its

current users, but also would extend that status to wherever

Le-Ax could provide service. When questioned by the panel

at oral argument, Le-Ax did not dispute that, under its view of

§ 1926(b), it was entitled by federal law to the exclusive right

to provide service to any unincorporated area that it could

physically serve. Were we to uphold Le-Ax’s claim in this

case, we would be holding that this federal law, originally

meant to protect water associations from undue intrusion,

somehow gives them this sort of roving monopoly status.

Without support in the statute’s text, the legislative history, or
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

15

2

A few states (including at least one in our own circuit) apparently

do not create boundaries for their water districts. See Scott Hounsel,

Note: Water Associations and Federal Protection Under 7 U.S.C.

§ 1926(b): A Proposal to Repeal Monopoly Status, 80 TEX. L. REV. 155,

163 (2001) (explaining that “[t]oday, the ability to determine the service

area of any water supplier is further complicated by state statutes, which

may or may not attach geographical boundaries when authorizing a utility

to provide water under state regulations”). Kentucky, for example,

evidently does not prescribe boundaries for its water districts; as a result,

the boundaries of a water district or association cannot defined by state

law but only by practice. See N. Shelby Water Co. v. Shelbyville Mun.

Water & Sewer Comm’n, 803 F. Supp. 15, 21-22 (E.D. Ky. 1992) (noting

that an administrative officer of the state had testified that “[t]here is no

operative definition under Kentucky law of the phrase ‘service area’ to

in relevant precedent, we are reluctant to take such a broad

step.

Considering the statute’s text and history as well as our

own precedents, we must conclude that Le-Ax has not

presented a claim under § 1926(b). We hold that when a rural

water district’s boundaries are geographically determined by

the state, a rural water district cannot use § 1926(b) to obtain

new customers outside that geographic area.

Because the distinction between offensive and defensive

uses can be difficult to delineate, we take care to limit the

scope of our holding. This is not a case where a defendant

has intruded on a water association’s actual or operative

service area; the evidence is clear that University Estates was

never a customer of Le-Ax, University Estates never arranged

to have water provided by Le-Ax, and no part of University

Estates was ever within Le-Ax’s state-law service boundary.

Moreover, no state law requires University Estates to be

served only by Le-Ax or requires Le-Ax to serve University

Estates. We also take care to point out that Le-Ax’s

boundaries are clearly defined by state law; we do not

consider here a case where the state has not defined the

boundaries of its water districts or associations.

2

16 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

delineate North Shelby’s territory” and not addressing the matter); see

also Hounsel, supra, 80 TEX. L.REV. at 163 n.39 (contrasting Mississippi,

which does prescribe geographical boundaries with Kentucky, which does

not). Because Ohio in this case has prescribed the boundaries of the LeAx water district, we do not consider here the ramifications of an

unbounded water district for purposes of § 1926(b).

We hasten to point out that we are not leaving Le-Ax in a

difficult position. The current users and service area of LeAx are still sacrosanct under § 1926(b). Le-Ax still can

attempt to persuade University Estates to become its customer

using normal competitive means. Le-Ax also has the option

of changing its boundaries pursuant to the procedures

specified in OHIO REV.CODE ANN. § 6119.051, which allows

a water district, in some circumstances, to seek to expand its

boundaries by filing a petition in the court of common pleas.

We simply hold that federal law does not compel University

Estates to be served by Le-Ax. Finding this to be the

inexorable conclusion of our analysis of the statute’s text,

history, and interpretative caseprecedent, we dismiss Le-Ax’s

claim.

III. CONCLUSION

For the foregoing reasons, we REVERSE the district

court’s grant of summary judgment and of a declaratory

judgment to the plaintiff, and REVERSE the district court’s

denial of summary judgment to the defendant. We

REMAND this case to the district court so that it may enter

judgment in favor of Athens and dismiss the case.
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

17

_______________

DISSENT

_______________

JULIA SMITH GIBBONS, Circuit Judge, dissenting. I

agree with the majority’s well-reasoned analysis contained in

sections II.A. through II.C. of its opinion. Based upon this

analysis, I would affirm the district court’s judgment. While

the arguments contained in section II.D. of the majority’s

opinion may be sound policy, in my view, the result reached

by the majority is inconsistent with the statute’s language as

interpreted by this court’s binding precedent. 

The majority is correct when it says in section II.D. that

“§ 1926(b) can be used only as a shield to defend against

invasion rather than as a sword to wage one.” (Majority Op.

at 11.) The majority errs, however, in defining the area that

§ 1926(b) protects from invasion.

As the majority correctly explains in section II.B. of its

opinion, § 1926(b) protects the area where the association

“has provided or made service available.” (Majority Op. at 7,

quoting Adams County Reg’l Water Dist. v. Vill. of

Manchester, 226 F.3d 513, 517 (6th Cir. 2000).) It is

relatively easy to determine the area where the association has

provided service, but it is not obvious what the statute means

by “service . . . made available.” 7 U.S.C. § 1926(b). As the

majority correctly explains in section II.C. of its opinion,

however, this difficult issue has already been addressed by

our court.

In Lexington–S. Elkhorn Water District v. City of Wilmore,

Kentucky, we held that:

whether an association has made service available is

determined based on the existence of facilities on, or in

the proximity of, the location to be served. If an

18 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

association does not already have service in existence,

water lines must either be within or adjacent to the

property claimed to be protected by Section 1926(b)

prior to the time an allegedly encroaching association

begins providing service in order to be eligible for

Section 1926(b) protection.

93 F.3d 230, 237 (6th Cir. 1996). In addition to the

requirement that the association have “pipes in the ground”

within or adjacent to the area in question, the association must

also have the legal right under state law to serve the area in

question to benefit from the monopoly power afforded by

§ 1926(b). Id. at 235-36. 

Le-Ax, as the majority holds, “has clearly satisfied both of

these requirements” as to the disputed area in this case.

(Majority Op. at 9.) First, Le-Ax has a water line

immediately adjacent to the University Estates development.

(Majority Op. at 10.) The uncontradicted evidence is that this

line has been in place since Le-Ax’s creation over twenty

years ago. (JA at 66-67.) Moreover, the uncontradicted

evidence demonstrates that this line was designed with

surplus capacity to serve future growth throughout the area,

including the area encompassing the University Estates

development. (JA at 69.) As the district court found in its

thorough and well-reasoned opinion, “Plaintiff’s distribution

lines that make service available to the UE development are

already in place, and have been in place since the Plaintiff’s

creation over twenty years ago – long before the City of

Athens was interested in the right to distribute water to the

region in question.” (JA at 21.) Second, as the majority

explains, Ohio law permits Le-Ax to serve the University

Estates development. (Majority Op. at 10.)

Because Le-Ax maintains a water line with excess capacity

immediately adjacent to the University Estates development

(and has done so for over twenty years, anticipating future

growth) and because Le-Ax has the right under state law to
No. 02-3016 Le-Ax Water District v.

City of Athens, Ohio

19

1

In the absence of any authority, the majority seems to base its

analysis upon a student law review note that advocates the repeal of

§ 1926(b). (Majority Op. at 12, citing Scott Hounsel, Note: Water

Associations and Federal Protection Under 7 U.S.C. §1926(b): A

Proposal to Repeal Monopoly Status, 80 Tex. L. Rev. 155 (2001).) 

serve the University Estates development, the University

Estates development is within Le-Ax’s service area that is

protected from invasion by § 1926(b), as interpreted by our

holding in Lexington–S. Elkhorn. Therefore, Le-Ax is using

§ 1926(b) in this case as a shield to protect an area where it

has made service available for over twenty years.

Nevertheless, the majority withholds protection under

§ 1926(b) because the University Estates development is not

within Le-Ax’s state-defined political boundary.

The majority, however, fails to explain why it matters

where state law places Le-Ax’s boundaries for purposes other

than providing service. The flaw in the majority’s analysis is

that it conflates an association’s political boundary with an

association’s service boundary. Because state law grants LeAx the legal right to serve the University Estates

development, University Estates is within Le-Ax’s statedefined service boundary. Moreover, because Le-Ax has

made service available to the University Estates development

via a water line with excess capacity immediately adjacent to

the development, Le-Ax is entitled to the protection of

§ 1926(b) under our holding in Lexington–S. Elkhorn. The

majority has not cited any case where a court found that a

water district’s political boundary, as opposed to its service

boundary, is relevant to defining the area protected by

§ 1926(b).1 Congress could have limited the protection

offered by § 1926(b) to an association’s state-defined political

boundary; instead, Congress chose to limit the statute’s

protection to where the association has provided service or

made service available.

20 Le-Ax Water District v.

City of Athens, Ohio

No. 02-3016

In Lexington–S. Elkhorn, we rejected the argument that an

association’s state-defined political boundary is relevant to

determining the area protected by § 1926(b). In Lexington–S.

Elkhorn, the City of Wilmore, Kentucky, did not dispute that

it extended its water lines into part of the plaintiff water

district’s territorial area. 93 F.3d at 232. The water district,

Lexington–S. Elkhorn, claimed that § 1926(b) protects its

territorial area from invasion by the city’s water lines. Id. at

234. The district court ruled in favor of the city, rejecting the

water district’s argument that its territorial boundary was

relevant to § 1926(b). Id. We affirmed, holding that

§ 1926(b) protects only that area where the water district has

provided service or made service available by maintaining

water lines nearby. Id. at 237. We found the water district’s

state-defined political boundaries to be irrelevant. Id. at 238

(looking to state law only to determine if the water district

had the legal right to serve the area and finding it unnecessary

to decide whether the disputed area was within the water

district’s state-defined boundaries).

The majority criticizes Le-Ax’s “expansive” vision of

§ 1926(d), which, according to the majority, would give an

association “monopoly status” to serve any area where it

could provide service. (Majority Op. at 14.) The majority’s

criticism is more appropriately directed toward Congress,

because § 1926(d) by its plain terms grants an eligible

association monopoly status to serve any area where service

is “made available” by the association. 7 U.S.C. § 1926(b).

This court’s binding precedent holds that service is “made

available” under § 1926(d) wherever the association has the

legal right to serve and the present ability to serve because it

has sufficient pipes in the ground within or adjacent to the

area. Lexington–S. Elkhorn, 93 F.3d at 237. Because there is

no basis in the statute or our precedent for the majority’s

addition of an additional element to a plaintiff’s claim under

§ 1926(b), I dissent.