Opinion ID: 783855
Heading Depth: 3
Heading Rank: 4

Heading: Offensive and Defensive Uses of Section 1926

Text: 20 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 Le-Ax 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. 21 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 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. 22 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). 23 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 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.). 24 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. 25 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 state-law boundary). 26 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 in relevant precedent, we are reluctant to take such a broad step. 27 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. 28 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 29 We hasten to point out that we are not leaving Le-Ax in a difficult position. The current users and service area of Le-Ax 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 case precedent, we dismiss Le-Ax's claim.