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ATION: 2003 FED App . 0365P (6th C ir.) File Name: 03a03 65p.06



### UNITED STATES COURT OF APPEALS

FOR THE SIXT H CIR CUIT

_________________
L E -A X W ATER D ISTRICT ,

Plaintiff-Appellee,

v.

C ITY OF A THENS , O HIO , Defenda nt-Appel

lant. X - - - -
> , - - N No. 02-3016

Appeal from the United States District Court for the So uthern D istrict of

Ohio at Col

umbus. No. 00-01328—Algenon L. Ma rbley, District Judge. Argued: June 12, 2003
Decided and Filed: October 10, 2003

Befor e: KEI TH, MOORE , and GI BBONS, Circuit Judg es.

_________________ COUNSEL

ARGUED: Garry

E. Hunter , LAW DI

RECTOR, Athens, Ohio, fo r App ellant. Orla E. Collier II I, BENESCH, FRIE DLAN DER, CO PLAN & ARONOFF , Columbus, Oh io
, for Ap p ellee. ON BRI EF: Garry E. Hunter, LAW DIRE CTOR, Athens, Ohio, for Appellant. Orl a E. Co ll ier III, BENESCH, FRIEDL

ANDER, COP L AN & ARONOFF, Columbus, Ohio, fo r A pp el le e. Ba rr y M. Byr on , W il lo ug hb y, 2 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

Ohi o, Dennis M . O’Toole, Stephen P. Bond
, BAUMGARTNER

& O’TOOLE, Ely

ria, 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 NELSO

N MOORE, Ci

rcuit J udge. The defendant City of At hens, Ohio (“Athens”) appeals the district court’s grant of summary judg

ment and of a declaratory judgmen t to the plaintiff

Le- Ax Water Dis t ric t (“Le-Ax”), as well as the districtcourt’s denial of Athens’s own motion for su mmary judgmen t. Universi

ty E state s owns 825 a

cres of propert y outside of , b ut ne ar by, both A

then s and Le -Ax. Both Athens and Le-Ax wish to supp ly water to U niversity Estates, which seeks to develo

p its prope

rty into a go lf-course commun it y. After Universi ty E states ma

de arra ngemen ts for Athens to supply the necessary

water, L e -Ax, a predominantly rura l water district, brought this lawsuit, claiming that Athens ’ s agree me nt 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 judgme

nt and of a d ecl aratory

judgment to LeAx, and we also R EVE RSE the district court’s denial of summary judgment to Athens. We REMAND this case to the districtcourt so that

it may enter judg

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

ns, Ohio 3

I. OVERVIEW A. Factual History

The Le-Ax Water District is a rural wa ter district that

was created by a judicial order upon

a petition filed in the Athens County Court of Common Pleas in198 0, pursuant to O HIO R EV

. C ODE ANN

. § 6119.01. Joint Appendix (“J.A.”) at 71- 72. As a water district, Le- Ax is an independent political subdivision of the Sta

te of Ohio , g ov er ne d b y O HIO R EV

. C ODE ANN . § 6119. Le-Ax’s te rritory was desc rib ed in the petition a pproved by t hat cour t.

Le -Ax, as a rural wat er d istrict, a ssumed the debt that its predecessor

owe d to the United States Department of Agriculture (“USDA”). As a result, Le-Ax has been indebte d to the U SDA s ince its in ception. Le- Ax subseque ntly incurred another debt to the USDA when it sold reve nu e bonds to the Rural Economic and Community Deve lopment Service (“RECDS” ), whic h was formerly known a s the Farmers Home Admin istratio n (“FmHA”). Bo nd s were issued on Febru a ry 26, 1997, in the principal a mount 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 finan ce the Unive

rsity Estates project a

nd appar ently have no connection in any way to t he University Estates transaction.

Universi ty Estates owns 825 ac

res of pr operty, all of which is outside th e bounda

ries of b oth Le -Ax and Athens. Universi ty Estates p lans to de

velop this propert y in to a golf course and approximately 800 home s. The propert y is close to the boundaries of both Le-Ax and Athens; it borders Athens on Athens’s northern side, and is, atits closes t point, 1400 feet (roughly

one third of a mile) from Le-Ax ’s bo un da ry. J.A. at 230 (Aff. of Steven Mullaney). Le-Ax has taken no formal steps to cha

nge its boundaries to include Universi t y Estat es’s pro

perty, such as by f

iling a p etition in 4 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

statecourt under O HIO R E V

. C ODE ANN . § 6 119 .05 1. In contras t, Athens ha s begun the proc ess of ch anging its b oundaries to include

Universi ty E states. On Octo ber 16
, 20 00, Athens’s City Council authorized a developmen t agreement

with University Estates, pursuant to which A thens would annex University Estates and provide it with water. J.A. at 117-22 (Ordinance and Development Agre ement).

S tandin g in Athens’s way, howe ver, is this lawsuit — for Le-Ax also wishes to supply University Estates with water and claims tha

t 7 U.S.C. § 1926(b) vests Le-Ax with the right to serve Uni versit

y Estates. Although L e-Ax does not
curren tly su pp ly Univer sity

Estates w

ith water (the pro perty
as of yet has no a

ccess to water from any

supplier) and does notcurren

tly have line s extending

into Uni versity Estates’s te rr it or y, 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, whichis immediately adjacent to the Universi ty Estat es sit e. Sup pleme nted b y two nearb y storage tanks, the e ight-inch tra

nsmis sion l ine, Le -Ax c l aims, 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, a

nd a pumping station will be necessary to connect the eight-inch main t o Univer sity Estates. However, there was un r ebutted testimony that the valve is an apparently

minor and inexpensive additionand the tap-ins and

the pumping station (as part of the water appar atus internal to the site) are to be provided by the developer of the pr op er ty, n ot t he water supplier. J.A. at 553 (Dep. Test. of John Collins). B. Procedural History

OnNovembe

r 16, 2000 , Le-Ax filed this l awsuit i n the United States District Court for the Southern District of Ohio, alleging that the proposed

water su pply arrangement between Athens and University Es ta tes would v iolate 7 U .S.C. § 1926(b). Upon cross-motions for s ummary judgme nt andNo. 02-3016 Le-Ax Water District v. City of Athe

ns, Ohio 5

anin-court hear ing , the district court granted summary judgment to Le-Ax and issued a

declaratory

judgment that the provision of water from Athens to Universi ty E states wo

uld violate 7 U.S.C. § 1926(b). This timely appeal followe d.

II. ANALY SIS

A. Standards of Review

This court re

views a grant of summary

judgment de novo. Bukowskiv. City of Akron
, 326 F.3d 702, 707 (6th Cir. 2003). Alth ough the district court’s denial of a motion for summary judgment is usually treated as a

nonappealable interlocu

t ory order, when “an appeal from a denial of s ummary judgment is presented in tandem with a gr ant of sum mary judgmen t, this court has jurisdiction to revi ew the p ropriety of the district court’s denial of summary judgment.” Hamad v. Wood crest Condo. Ass’n , 328 F.3d 224, 235 (6th Cir. 2003) (q uot ationomitted). The district court’s denial of summary judgment based onpurely leg al grounds is reviewed de novo. Id. at 235-36 . Summ ary judg ment is appropriate where the “pleading s, d epositions, answers to interrogatories, and admissions on file together with the affidavits, if a ny, show that there is no genuine issue as to any material f act and that the moving party is e

ntitled to a judgment as a

matter of law.” Fed. R. Civ. P. 56(c). B. Backgro und to 7 U.S.C . § 1926(b)

Over forty ye ars ag o, Congr

ess passed the Agricultural Act of 1961, Pub. L. No. 87-128, 7 5 Stat. 294, which sou ght to preserve and prote ct r

ural fa rm life in

a number

of respe cts. Title III of the Act

(which is known as the Consolidated Farm and R ura l Development Act)

was conc erned la

rgely with issues of agricultural credit. Title I II 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 federalloans available to water service associations. Section 6 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

306(b), now codif

ie d at 7 U.S.C. § 1926(b), protected the recipie nts of such loans from comp etition, to a certa inextent. The text of

section 3 06(b) re ads:

The service

provided or made a vailable throu gh any such associationshall not be curtailed or limited by inclusion of the area served by

such association within the boundaries of any municipal cor porationor

other pub lic bo dy, or by

the granting of any

private franchise for similar service within such area during the ter m of such l oa n; nor shall the happening of any such event be the basis of requiring such association to secur e a ny franchise, license, or permit as a cond ition to continuing to serve the area served by the association at

the time of the occu rrence of such e vent.

7 U.S.C. § 1926(b). This provi s ion prevents local gover nments fromexpanding into a rural water association’s
area and stealing its customers; the legislative history states that the statutory provision was intended t o protect “the territory served by suc

h an association facility a

gainst [other] compe t itive facilities” such as local governments, as ot herwise ru ra l w at er se rv ic e m ig ht be th re at en ed by “ th e expansion of the bou

ndaries of municip al and o ther publ ic 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 integ ral part of § 306(b )’s rat ional e; by prot ectin g a rural water association’s customer base, the prov ision allow s such ass ociation s to sprea d their fixed costs over a large group of users. In s o doin g, the statute aims to prevent rural water costs from becomingprohibitiv ely

expensiv e to a ny p articula r user, t o d evel op a system providing f resh and clean water to rural households, and to protect the federal gover nment as insurer of the loan. Id. (“By

including service to other rural re sidents, the cost per user is reduced and the loansare mor e secur e inNo. 02-3016 Le-Ax Water District v. City of Athe

ns, Ohio 7

addition to the com

munity be nefits of

a safe a nd adequ ate supply of running household

water.” ); see also Lexington–S. Elkhorn Wate

r Dist. v. C

ity of W ilmore , 93 F.3d 230, 233 (6th Cir. 1996) (statingth at the Act “safeguard[s] the financial viability of rural a ssociations and Fa rmers Home Admin is trationloans” and “encourage [s] rural water deve l opment

by expanding the number of potential users”). We have stated that

this “provision ‘should be given a liberal interpretation

that prote cts rura

l w ater associations indebted to the FmHAfrom municipal encroachment.’” Lexington–S. Elkhorn , 93 F.3d at 235 (citation omitted).

In or der to sta

te a cla im under § 1926(b), a plaintif f 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 provi ded or ma

de servi ce avai lable in the disputed

area.” Adams County Reg’l Wate r Dist. v. V

ill. of Manchester , 226 F.3d

513, 517 ( 6th

Cir. 2000) . The first two elements are not

in dispute here; the parties agree that L eAx is an “association” within the meaning of the Act and that Le-Ax has a qualifying

outstanding FmHA l oa n obligation. T he onl y element in controve rsy here is whether Le-Ax satisfie s the third

element o f the test

. C. T he “Has Pr ovided or M ade Servi ce Availa ble ” Requirem ent
The key question i s whethe

r Le -Ax sa

tis fies 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 fro m the statute itself. See S cott Hou nsel, Note : Water Associations and F ederal Protection Under 7 U.S.C. § 1926(b) : A Proposal to Repeal Monopoly Status
, 80 T EX

. L. R EV . 155, 159 (2001) (noting that the statute does not define “provided
or made available”). Without any guidance from Congress or the Supre me Court, federal appellate courts have interpreted 8 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

1 The Fou rth Circ uit in Bell Arthu r reports that we also hav e adopted this app roac h. See Bell Arthur Water Corp. v . Gree nvil le Ut il s. Comm’n, 173 F.3d 517 , 5 2 6 (4th Cir. 1999). As we explain below, however, the Bell Arthur

court was apparently misr eadin g our de cis ion in Lexingt on–S. this la ng ua ge in a v ar ie ty o f w ays . Differ ent circ uits use different factors to determine whether a water association can invoke the protections of § 1926, including whether the water associationha s t he ph ysi ca l a bi li ty to ser ve the ar ea in question, and whet

her 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 th e g ro un d” or “p hys ic al ab il it y” approach that examines whether the water association has the physical means presently to se

rve the area. This inquiry asks whether the assoc iation ca

n demo nst

rate “‘ that it has

adequa te facilities within or adjacent to the area to pro vide ser

vice 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) ( ci tation omitted). The Tenth Circuit has ad opte d this approach but has also required that the wa ter as sociation have the right under state law to serve the area in question. Id. at 1202 n.8. The Eight h Cir cuit a ppli es thi s same test, requi ring t hat a water associa tion show b oth

that it has the ph

ysi cal mea

ns to
serve the area and that it has a leg al right to d o so. Rural Water System #1 v. City of

Sioux Center, 202 F.3d 1035, 1037 (8th Cir.), cert. denied, 531 U.S. 820 (2000).

N either of those circuits requires that a water associa tion have a lega

l duty to serve in order to receive protection under § 1926. Tha

t is, however, the appr

oach of t he Four th Circuit, whichappare

ntly require s both a state-law duty to serve and
a physical ability

to serve. Bell Arthur Water Corp. v. Greenv illeUtils. 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 Athe

ns, Ohio 9

Elkho rn

. W e have only required (li ke the Tenth Circui t) a s tate -law right (not duty ) to serv e th e area to i nvoke § 1926. appare ntly holding t

hat s ervic e is ma de avai lable throu gh either a state-law duty

to serve or

a physical ability

to serve. N. Alamo W

ater Suppl

y Corp . v. City

of San Juan , 90 F.3d 910, 916 (5th Cir.), cert. denied, 519 U.S. 1029 (1996).

As the above

analy sis makes c lear, th e circu its are in conflict as to what they requir

e. In Lexington

–S. Elkho rn , we adopted the same two-part

approac h that the Eighth and Tent h Circuitshave taken. The first requirement under Lexington–S. Elkhorn is the “ pi pes in the ground” require ment. In Lexington

–S. Elkho rn , 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 prope

rty claimed to be protected by

Section 19 26(b) pr

ior to the time
a nallege dly encroa ching a ssoci ation begins provi ding s ervic e inorder 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 “L exington- South Elkhornadmits that it has not obtained . . . from the Kentucky Public Service Commission [the righ t] to construct facilities or to serve customers within portions of the disputed areas,” which“disting

uish[es] this c ase from other c ases in wh ich courts have upheld wa

ter distr icts’ rig hts to Section 1926(b) protection”). Becau se neither of these require ments was

met, we dismissed

the water district’s claim under § 1926(b). Id. at 238 (stating that because the plaintiff “has not established its authoriza

tion to ser ve the dis puted pro perties or its abilit

y to provide t

he servi ce,” it c annot be s aid to hav e “ma d e service available”).

Inthis case , Le-Ax has clea rly satis fied b oth of the se requirements. First, under state law, L e-Ax has a legal right 10 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

to serve the area. As even Athens se ems to acknow ledge, Ohio l aw permits water districts “[t]o supply water to us er s within and without

the distri ct. ” O HIO R EV

. C ODE 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

boundar ies. Second, Le-Ax has the phy si cal abili ty to serve U niversity 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 Estate s’s needs. Le-Ax curren

tly ha s an eig

ht-inch li ne immedia

tely adjac ent t o Univ ersit y Estates , and a lso h as wat er sto rage tanks that augment the sy stem. At hens ’s only argume nt is that some additional work would have to be done before LeAx could supp ly

Universi ty E states wi

th water . Athens p oints outthat Le-Ax’s own expert testified that Le-Ax would need
a pressure-reducing valve, some ta p-ins, an d a pumping station inorder to

supply University

Estates with water. The pressure-reducing

valve is a pparent ly a minimal addition that
c osts roughly $2,000, a

nd the tap-ins and pumping station would be provi ded by

University Estates, re gardless of whether Athens or

Le- Ax supplie d the wa ter. To argue, as Athens does, tha

t water s e rvice must b e availa ble immedi ately (evide ntly

in the sen se that so meone at Universi ty E state s must be able to go over to the faucet a nd tur n on the water), would be to ignore our s ta

tement in Lexington–S. Elkhorn that the “ made available” requirement is satisfied not only when t he pipes ar

e “within ,” but als o when the y a re me rel y “adjacent to” the property

. The evidence here admits of only
one conclusi on, that Le-Ax “ha s adequa te facilities within or adjacent to the area to provide service to the area w ith in a
reasona ble time after a reque st f or service is made.” Sequoyah County , 191 F.3d at 1203 (quo tatio n omitted) ; cf. Bell Arthur, 173 F.3d at 526 (holding that service was not made ava ilab le when the water district only had a six-inch pipeline running

near the dis puted area and a fourteen-inch pipelin e was necessa

ry to serve the are a); Glenpool

Util. Servs. Auth. v. Creek

Cty. Rural

Wate r Dist ., 861 F.2d 1211,No. 02-3016 Le-Ax Water District v. City of Athe

ns, Ohio 11

1213 (10th Cir. 1988) (ho lding tha t servic e was made availab le when the wa

ter dis trict had a water line that ran within fifty fee t of the property)
, cert. denied, 490 U.S. 1067 (1989).

D. Offensive and Defensive Uses of Section 1926 Havingestablished the phy sical ab ility

to serve Universi ty Estates and a leg al right to do so under state law, L e-Ax argues that it is therefore entitled t o summary

judgmen t. We, how ever , believe that Le-Ax cannot proper ly 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 st atute to protect its users or terri

tory from munic ipal incu

rsion in thi s case. It ins te ad is s eeking to use the statute to foist an incursionof its own on users o utside of its bounda

ry that it has neve r serve d or made

agree ments to serve. To grant

LeAx wh at is es se nt ia ll y mo no po ly statu s over pr operty that it has never served

(or contracted to serve), and that is outside of its boundary, we be lieve, would be whol l y inconsistent with the statute’s text and legislative history, a s well as our caselaw. Ult

ima tely, we ag

ree 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 un ique facts. Le-Ax has brought t his lawsuit under 7 U.S .C. § 1926( b), cl aimi ng t hat At hens has imp rope rly

curtailed or limited Le-Ax’s activities by contracting

to provide University Estates with water. A thens, however, is not attempting to ser ve users within Le-Ax’s bo un da ry. Nor is Athen s attempting to steal Le-Ax’s customers th at ma y be ou ts id e o f Le -A x’ s b ou nd ar y. Instead, Athens is merely seeking to persuade unserved

users to si gn up with Athens (rather tha n Le-Ax) for water se

rvice. Believing Athens’s action to be ou tside o f the statute’s intended prohibition, we hold tod ay tha t a claim under § 1926(b) has not been established under these circumstanc es

. When a rural

water di stric t ’s bounda

ries are geog raphica lly 12 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

determined

by t h e state, we hold that a rural water district cannot use § 1926 (b) as a

sword toforce new customers who
are outside that geographic are a to receive water servic e through the rura l water d istrict.

We begin with the text and legisl ative hist

ory of 7 U.S.C. § 1926(b). The text of

the sta tute states that “[t]he service provided or made availabl e through any such asso ciation shall notbe curtailed or

limited by inclusion of the area se rved by suchassociation within the boundaries of any municipal corporation.” 7 U.S.C. § 1926(b). The s tatute’s use of phrases like “cu rtailed” and “limited” to describe the municipality’s in terfe rence with the rural water associa tion sugg ests th at a r ur al wa te r a ss oc ia ti on mu st al re ad y b e providing service

to an are a befor

e the pro te ct ions of § 19 26 (b ) a pp ly. The statute’s language provide s no support for Le-Ax’s claim that it ha s a right to curtail or limit Athens’s own se rv ice to University Estates. See Hounsel, supra , 80 T EX

. L. R EV . at 1 59 (a rgu ing t hat the sta

tutor y t ext sugge sts “that it is the ex isti ng c ustomers of the association that are off-limits to competing municipalities”).

The legislative history a

lso makes it clear that the stat ut e was only meant to protect rur al wat er associations from the outside threat o f local governme nts taking their customers — not as a weapon for water associa tions to use to recruit new
users outside of their boundaries. The leg i slative history states that the section wa s “adde d to assist in protecting the territory served by suc

h an association facility a g ai nst comp etit ive facilities, which might otherwise be developed with the expansion of the boundaries of municipal and other public bodies int o an are a serve d by the rura l sy stem.” S. Rep. No. 87-566, at 67 (1 962), reprinted in 1961 U.S.C.C.A.N. 2243, 2309. The legislative histor y casts the statute’s purpose

in a defe nsive lig ht. It plainly sugge sts that the goal of the statute is only to protect territory

already served by a rural water association from municipal expansion into the rura

l water a ssociati on’s ar ea; it does not giveNo. 02-3016 Le-Ax Water District v. City of Athe

ns, Ohio 13

credenceto Le -Ax’s hy

pothesis that the sta

tute can be used

to recrui tunwilling

new users outsi de of the rural water association’s boundary. Cf. Hounsel, 80 T EX

. L. R EV

. at 159- 60 (“[T]he c laim that a

n indebte d associa

tion could extend its federalprotection 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, althou gh somewhat im pl ic it ly, in our cases. Even our broad statements about § 1926(b)’s applicability ha ve alway s involved an element of actual encroachment on a water association’s existing area or users. See Lex ington–S. E lkhorn , 93 F.3d at

235 (stating the section“‘indic ates a c ongre ssional ma ndate th at local gover nments not encroach upon the servi ces provided by suchassociations, be that encro achme nt in the form of competing franch

ises, new or

additiona l permit r equirements,
or similar means’” ) (c itation omitted) (emphasis added); Adams Co un ty , 226 F.3d at 519 (st

ating “ ‘that the

statute should not be construed narrowly to prohibit municipal encroachment only if technically by ann ex ation or grant of franchise, but should be applied broadly to protec t rural water associations indebted

to FmHA fr om competition from expanding municipal systems’”) (c itation omitted) ( emphasis changed). We, in fact, presumed the eleme nt of encroachment

in our version of

the “pipe s in the g

round” te st, where w e stated that “water lines must either be within or adjacent to the property c laimed to be p rotecte d by Section 1926(b) prior to the time an allegedly encroaching association begins providing service in order to be eligible for Section1926(b) protection.” Lexington–S. Elkhorn , 93 F.3d at 237 (emphasis added). Th e re peated use of the term “encro achment

” sugges ts t hat the statute is only invoked properl y when the municipa

lity is attempting to provide water service to a rura

l water a ssociation’s users or within its bo un da ry. 14 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

Our conception o f § 192 6(b) is also consistent with the results in cases both in this circuit and in other circui ts

. Virtually all of the cases invol ving § 1926(b) involve competitors who att

empt to serve c

ustomers w

ithin the rural water district’s state-law authorized boundaries, wh ich is simply notthe case here. See Lexington –S. Elkho rn , 93 F.3d at 2 32 (holding that although Le xington–S. Elkhorn was “offering to provide water serviceto customers located within the Water District’s boundaries,” it did not violate the statute because the water di strict wa s neither license d to reach t

hose customers nor had the facilities to do so); Sequoya h County
, 191 F.3d at 1201 n.7, 1204 (holding that there was a genuine issue for trial on

whether the water district could ade quately supply the wa ter to the di sput ed terr itori es, bu t “ass um[i ng] that the disputed customers are within Plaintiff’s territory as it i s define d by

state law”); N. Alamo , 90 F.3d at 91 3 (involving u s ers and property that “lie within the Utility’s Certificated

Area”); Rural W

ater Dist. No. 1, Ellsworth County v. City of Wil son , 243 F.3d 1263, 1267 (10th Cir. 2001) (involving properties within the water distr ict’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 ex tendthat 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 feder al law to the exclusive right to pr ov id e s er vi ce to an y u ninc orporat ed area that it cou

ld phy sically

serve. Were we to uph old Le -Ax’s cla im in this
ca se, we would be holding that this federal law, ori ginally meant to protect water

asso ciations from undue intrusion, somehow gives them t

h is sort of r

oving mon

opoly status. Without support in

the statut e’s text, th e l eg is la ti ve hi st or y, orNo. 02-3016 Le-Ax Water District v. City of Athe

ns, Ohio 15

2 A few stat es (including at least one in our o wn circ uit) app arently do not create bound aries for their w ater d istricts. See Sco tt Ho unsel, Note: Water A ssociations a nd F edera l Protection Und er 7 U.S. C. § 1926(b) : A Propos al to Repeal Monopoly Status , 80 T EX

. L. R EV . 155, 163 (2001) (explaining t hat “[t] oday, the abili ty to determine t he servi ce area of any wate r suppli er is f urther complicat ed by st ate st atut es, whi ch may or maynot attach geographical boundaries when authori zing a utility to provide water und er st ate reg ulat ions”) . Kentuck y, f or example, evide ntly does not pres cribe boundari es for its water d istricts; as a re sult, the b ounda ries of a water district or association c annot de fined by st at e la w but on ly by pra ctice. See N. Shelby Water Co. v. Shelbyvi lle Mun

. Water & Sewer Com m’n , 803 F. Supp. 15, 21 -22 (E.D. Ky. 1992 ) (noting th at an ad ministrativ e officer of the state had te stified that “[t] here is n o operative defin iti on under Kentuck y law of the p hrase ‘service area’ to inrelevant prec edent , we are reluctant to take such a broa d step. Considering the statut

e’s text a nd history as well as our
ownprecedents, we must conclude that L e-Ax ha s no t presented a claim under

§ 1926(b). We hold that when a rural water district’s boundaries are geog raphically de

termined by the state, a rural water

district cannot use § 1926(b) t o obtain new customers outside that geographic area.
Becau se the dis t inction between offensive and defensive
uses can be difficult to delineate, we take ca re to limit the
sc ope of our holding. This is not a case where a defendan t has in t ruded on a water association’s actual or ope rative 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

Universi ty Estates was ever within Le-Ax’s state-law se rvice bo un da ry. Moreover, no state law requires University Estates to be served only by L e-Ax or re quires Le-Ax to se rve U niversity Estat es. We also take care to point out that Le- Ax’ s boundaries ar e c le ar ly d ef in ed by s tate law; we do not consider here a

case where the state has not defined the boundar ies of its water dist

ricts or a ssociations. 2 16 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

delin eate No rth She lby’s territo ry” and not ad dress ing the m atter); see also Ho unsel, supra , 80 T EX

. L. R EV . at 163 n.39 (contrasting M ississipp i, which does pr escr ibe geog raph ical bo unda ries with K entuck y, which does not). Because Ohio inthi s case h as prescr ibed the boundari es of the LeAx water d istrict, we d o no t consid er her e th e ram ific ations of an unbounded water distr ict f or purposes of § 192 6(b). We hasten to

point out that we are not leaving L e-Ax in a difficul tposition. The curren

t users and service area of LeAx are still

sacrosa nct under § 1926(b) . Le-Ax st ill can at temptto persuade University Estates to become its custom e r using normal competitive means. Le-Ax also hasthe option of ch anging its boundaries pursuant to the procedur es specified in O HIO R EV

. C ODE ANN . § 6119.051, which allows
a water di strict, in

some circumstances, to seek to expand it s boundaries by filin g a

petition in the cou

rt of comm

on pleas. We simply

hold that federal law does not compel Un

iversity Estates to be

serv ed by

Le -Ax. Fin ding this to be the inexorabl e conclusi on of our a naly sis of the statute’s

text, hi st or y, and interpr etative case p recedent, we dismiss Le- Ax’s claim.

III. CONCL USION

For the foregoing reasons, we RE V ERSE the district court’s grant

of summary judg

ment and of a declaratory judgment to the plaintiff, and REVERSE the district court’s denial of s um mary

judg ment t o the defe ndan t. We REMAND thi s c ase to the district court so that it may ente r judgment in favor of Athens and dismiss the case.No. 02-3016 Le-Ax Water District v. City of Athe

ns, Ohio 17

_______________ DISSENT

_______________ JU LIASMITH

GIB BONS, Cir

cuit Judge , disse ntin g. I agreewith the majority’swell-re asoned a naly sis conta

ined in sections II .A. through II .C. o f its op inion. Ba sed upon th is analy sis, I wou ld affirm t he distric t court’s judgmen t. While the arguments contained in section II.D. of th e majority’s opinion may

be sound p olicy , in my

view, the result reached by the maj ority is incon sist ent wi th th e stat ute’s langua ge as interpreted by

this court’s binding precedent.

The majority is correc

t when it says in section I I.D. that “§ 1926(b) can be used only as a shield to defe nd agai nst invasionrather

than as a sword to wage one.” (Majority Op. at 1 1.) The majority err

s, however, in defining the area tha t § 1926(b) protects from invasion.

As the ma

jorit y c orre ctly

exp lains in section

II .B. of its opinion, § 192 6(b ) protects the area where the association “has provided or made service availab le.” (Ma

jority Op. at 7, quoting Adams Coun ty Reg’l Wate r Dist. v. Vil l. of Manchester
, 2 26 F.3d 513, 517 ( 6th Cir. 200 0).) I t is relative ly easy to deter

mine the area wherethe 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 maj or ity correctly explains in section II.C. of its opinion, however, this difficult issue has already been addressed by
our cour t.

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

that:

whether an assoc iation ha s made se rvice a vail ab le is dete rmi ned

based on the existen

ce of fa cilities on, or in the proximity of, the locatio n to be served. If a n 18 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

ass ociationdoes not a

lready have ser vice in existe nce , water lines must either be within or adjacent to the propert y claimed to be protected by S ection 1926(b) prior t o t he time an allegedly encroaching association begins providing service in order to be e ligible for Section 1926(b) protection.

93 F.3d 230, 237 (6th Cir. 1996) . In add ition to the requi r ement

that the association have “pipes in the ground” within or adjac ent to the area in

question, the assoc iation must also have the legal right under state law to serve the area in questionto benefit from the monopoly powe r afforded by § 1926(b). Id. at 235-36.

Le -Ax, as the majority

holds, “ha s clear

ly s atisfied

both of theserequirements” as to the d i sputed area in this case. (Majorit y Op. at 9.) First, Le-Ax has a wate r line immediate ly

adjace nt to the Unive

rsity Estates d evelopme nt. (Majorit y Op. at 10.) The uncontradicted evide nce is tha t this line has been in place since L e-Ax’s crea tion over twenty years ago. (JA at 66-67.) Moreo ver, the uncontradicted evidence demonstrates that this line was d esigne d with surplus capacity

to serve future growth throughout the a rea, including the area encompa ssing the University Estates development. (JA at 69. ) As the dist rict cou rt found i n its thoro ugh and well-reasoned opinion, “Plaintiff’s distribution lines that make

service availab le to the UE development are already in place, and have b een in place since the Plaintiff’s
cre ationover twe

nty ye ars ag o – long b efore t he Ci ty o f Athens was inter

ested in the right

to dis tribute w ater to the region in question.” (JA at 2 1.) Second, as t he majo rity explains, Ohio lawperm its Le -Ax to serv e the University Estates development. (Majority Op. at 10.)

Becau se Le-Ax maintains a water line with excess ca pacity immediately adjace

nt to the University Estates deve lopment (and has done so for ove

r twenty ye ars, antici pating future growth) and because Le -Ax has the right under s ta te law toNo. 02-3016 Le-Ax Water District v. City of Athe

ns, Ohio 19

1 In th e a bsen ce of a ny autho rity, the ma jority see ms to b ase its analysi s upo n a stud ent law re view no te that ad voc ates the r epe al o f § 192 6(b ). (M ajor it y Op . at 12, c iting Sco tt Ho unsel, N ote: Water Associ ati ons and F ede ral P rotection Under 7 U .S.C. §1926(b): A Proposal

to Repeal

Monopoly Stat

us , 80 Tex. L. Rev. 155 (2 001).) serve the University Estates deve lopment, the Un iv ersity Estates development is within Le-Ax’s service ar ea that is prot ec ted from invasion by § 1926(b), a s interpreted by our holding in Lexington

–S. Elkho rn . Therefore, Le- Ax is using § 19 26(b) in t his case

as a shie ld to prote ct an ar ea wher e it has made service available f or ove r twenty

ye ars. Nevertheless, the majority withholds protection under § 1926(b) because the University Estates development is not wi th in Le- Ax ’s st at e- de fi ne d p ol it ic al bo un da ry.
The ma jo ri ty, h owever, fails to explain why it matters where state law places Le-Ax’s boundaries for purposes other thanproviding service. The flaw in the majority ’s analy

sis is that it conflat es an association’s political boundary with an association’s service boundary

. Becau se state law grants Le

Ax the leg al righ

t to serve

the Unive

rsi ty E st ates development, University Estates is within Le-Ax’s statedefined service bo u ndary. More over, because L e-Ax has made service

availab le to the University Estates deve lopment via a water line with excess capaci

ty im mediatel y a djacent to the development, Le-Ax is entitled to the pro tection of § 1926(b) u

nder our holdin g i n Lexington

–S. Elkho rn . The majority has not cited

any case where a c ourt foun d that a water district’s political boundary, as opposed to i ts serv ice bo un da ry, is relevant to defining the area protec ted by § 1926(b). 1 Congress could have limited the protection offered by § 1926(b) to an a ssociation’s state- d efined political bo un da ry; instead, C ongre ss chose to limit the statute’s protection

to where the associ ation has provided service or made service available. 20 Le-Ax Water District v. City of Athe

ns, Ohio No. 02-3016

In Lexington

–S. Elkho rn , we rejected the argume nt that an association’s state-defined political bo und ary is releva nt to determiningthe ar ea pr ot ec te d b y § 1926(b). In Lexington–S. Elkhorn
, the City of Wilmore, Kentucky, did not dispute that it extend ed its water lines into part of the plaintiff water district’s territorial area. 93 F.3d at 232. The water dist

rict, Lex ington–S

. Elkhorn, claimed t hat § 1926 (b) prot

ects i t s territor ial area from inva sion by

the city ’s water

lines. Id. at 234. The district court ruled in favor of the city, rejec

ting the water district’s argument that its territorial boundary wa s relevant to § 1926(b). Id. We affirmed, holding that § 1926(b) protects only tha t area wherethe water district has provided service or made service a vai lable by maintaining water lines nearby. Id. at 23 7. Wefound the water district’s state-defined

political boundaries to be irrelevant. Id. at 238 (looking to state la

w only to deter mine if the

wate r d istrict had the leg al righ

t to serve the area

and finding it unnecessary to decide w

hether t he dis p uted area was within the water district’s state-defined boundaries).

The majority critici zes L e-Ax’s “expansive” vision of § 1926(d), which, ac cording to the majority , would give an association“monopoly

status” to

serve a ny a rea whe re it could provide service. (Majority Op. at 14.) The majority’s criticis m is more appropriately direct ed toward Congress , b ecause § 1926(d)by i

ts plain te

rms gra nts an elig

ible associationmonopoly

status toserve any

area where service is “made available” by

the association. 7 U.S.C. § 1926(b). This court’s binding preceden t hol ds that service is “made
av aila ble” under § 1926(d) wherever the associa tion has the legal right to serve and the present ability to serve because

it has sufficie

nt p ipes i n the ground within or adjacent to the
area. Lexington

–S. Elkho rn , 93 F.3d a

t 237. Be cause

there is
no basis in the statute or our precedent for the majority ’s addition of an additional element to aplaintiff’s claim under § 1926(b) , I dis sent.