Opinion ID: 985211
Heading Depth: 2
Heading Rank: 3

Heading: The Litigation Before the First Appeal

Text: In prior cases involving rural water districts, we have held that such districts do not enjoy § 1926(b) protection unless state law authorizes the water district to incur federal obligations. See, e.g., Pittsburg Cnty. Rural Water Dist. No. 7 v. City of McAlester, 358 F.3d 694, 717–19 (10th Cir. 2004). Much of the litigation between Douglas-4 and Eudora therefore revolved around whether Kansas law permits rural water districts to take out federal loans, or guarantees, or both. -5- The question at trial, as framed by the district court, was whether the USDA-guaranteed private loan was “necessary” as required by a Kansas statute that gives rural water districts power to “cooperate with and enter into agreements with the secretary of the United States department of agriculture or the secretary’s duly authorized representative necessary to carry out the purposes of its organization.” K.S.A. § 82a-619(g) (emphasis added). If the loan was not “necessary to carry out the purposes of its organization,” then Douglas-4 would not merit § 1926(b) protection. Eudora objected, arguing that the necessity of the loan (i.e., to build the Johnson-6 project) was never at issue, just the necessity of the federal guarantee on that loan. The district court overruled the objection, stating that the loan and the guarantee were “one and the same” for purposes of this case. The district court therefore instructed the jury to consider whether the loan guaranteed by the USDA was necessary, not whether the guarantee itself was necessary. The jury found the loan necessary (presumably to fund the Johnson-6 project) and gave a verdict in favor of Douglas-4.