Court Opinion

ID: 1025342
Source: CourtListenerOpinion
Date Created: 2013-07-05 06:48:30.001498+00
Date Added: 2024-06-11T12:27:49.867841
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 07-1527

CITY OF FALLS CHURCH, VIRGINIA,

                                             Plaintiff - Appellant,

           versus

FAIRFAX COUNTY WATER AUTHORITY,

                                              Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Claude M. Hilton, Senior
District Judge. (1:07-cv-00174-CMH)

Argued:   January 31, 2008                  Decided:   April 4, 2008

Before MICHAEL, GREGORY, and DUNCAN, Circuit Judges.

Affirmed by unpublished opinion. Judge Duncan wrote the opinion,
in which Judge Michael and Judge Gregory joined.

ARGUED: Philip Louis Chabot, Jr., MCCARTHY, SWEENEY & HARKAWAY,
Washington, D.C., for Appellant.    Stuart A. Raphael, HUNTON &
WILLIAMS, L.L.P., McLean, Virginia, for Appellee. ON BRIEF: Jill
Marie Dennis, HUNTON & WILLIAMS, L.L.P., McLean, Virginia, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.
DUNCAN, Circuit Judge:

     The City of Falls Church (“Falls Church”), appellant in this

action, contends that the federal government effectively granted it

the exclusive right to provide water service to customers in

certain portions of Fairfax County, Virginia, through the passage

of four Acts of Congress in 1859, 1926, 1947, and 1996.             The issue

presented in this case is whether the provision of water service in

the affected areas by appellee Fairfax County Water Authority

(“Fairfax   Water”),    though   consistent      with    Virginia   law,   was

preempted by these four Acts.        The district court held that it was

not and granted Fairfax Water’s motion to dismiss.                    For the

following reasons, we affirm.

                                      I.

     In 1957, the Board of Supervisors of Fairfax County created

Fairfax Water.     Under Virginia law, Fairfax Water has the power to

operate a water system “within, outside, or partly within and

partly outside one or more of the localities which created the

authority . . . .”     Va. Code Ann. § 15.2-5114(6).         However, under

Virginia    law,   Falls   Church,    a    political    subdivision   of   the

Commonwealth of Virginia, also maintains a right to provide water

service both within and outside its own territorial limits.                Va.

Const. art. VII, § 8 (1971); Va. Code Ann. § 15.2-2143; Charter,

City of Falls Church § 2.03 (1998 & Supp. 2003).               The combined

                                      2
effect of these provisions creates areas of overlapping authority,

or “interface areas,” where water service might legitimately be

provided by either Fairfax Water or Falls Church.

     For thirty years, from 1959 to 1989, Fairfax Water and Falls

Church operated under a contractual agreement in which the two

entities delineated portions of interface areas to be served by

Fairfax Water or Falls Church, but not both.            When the agreement

expired   in   1989,   these   areas   were    ostensibly   opened   up   for

competition between the parties.           In 2005, Fairfax Water informed

Falls Church that it intended to serve new developments in the

interface areas.

     In February 2007, shortly after learning that Fairfax Water

had moved ahead with its plan by offering to provide water service

to a planned office complex within one of the interface areas,

Falls Church initiated this action. Falls Church asserted that the

extension     of   Fairfax   Water’s   service   into   these   areas   would

frustrate the purposes embodied in a series of four federal Acts

related to the provision of water service from the federally-owned

and operated Washington Aqueduct to Falls Church and other Aqueduct

customers.1

     1
      The Washington Aqueduct includes various federally-owned
facilities, including “the dams, intake works, conduits, and pump
stations that capture and transport raw water from the Potomac
River to the Dalecarlia Reservoir; . . . the infrastructure and
appurtenances used to treat water taken from the Potomac River to
potable standards; and . . . related water distribution
facilities.” Safe Drinking Water Act Amendments of 1996, Pub. L.

                                       3
     Three of the Acts in issue set forth the basic framework under

which water is provided to Washington Aqueduct customers.                      The

first Act, passed in 1859, authorized the provision of public

drinking water to the District of Columbia via the Washington

Aqueduct.    Act of March 3, 1859, ch. 84, 11 Stat. 435 (the “1859

Act”). The second Act, passed in 1926, authorized the Secretary of

War, “in his discretion and subject to the approval of the Chief of

Engineers,    upon   the     request   of   the    Board   of   Supervisors    of

Arlington County, Virginia, to permit the delivery of water” from

the Washington Aqueduct to Arlington County.                  Act of April 14,

1926, ch. 140, 44 Stat. 251 (the “1926 Act”).                 On similar terms,

the third Act, passed in 1947, expanded the permissible service

area of the Washington Aqueduct to include Falls Church.                  Act of

June 26, 1947, ch. 149, § 1, Pub. L. No. 80-118, 61 Stat. 181 (the

“1947    Act”).2     Falls    Church   began      receiving     water   from   the

No. 104-182, 110 Stat. 1613.
     2
      “[T]he Secretary of War . . . is hereby authorized in his
discretion, upon request of the town council of the town of Falls
Church, Fairfax County, Virginia, or any other competent State or
local authority in the Washington metropolitan area in Virginia, to
permit the delivery of water” from the Washington Aqueduct to Falls
Church “for the purpose of supplying water for the use of said town
and such adjacent areas as are now or shall hereafter be served by
the water system of said town; or to any other competent State or
local authority in said metropolitan area in Virginia.” Id. The
Act further provided “[t]hat the Secretary of War, directly or upon
the request of the Board of Commissioners, may revoke at any time
any permit for the use of said water that may have been granted.”
Id.

                                       4
Washington Aqueduct in 1950 and currently obtains its full water

requirements from the Aqueduct.3

      The last of the four Acts, passed in 1996, authorized the

transfer of the Washington Aqueduct, within three years, “to a non-

Federal,    public   or   private   entity.”    Act    of   Aug.   6,   1996,

§ 306(d)(1), Pub. L. 104-182, 110 Stat. 1686 (the “1996 Act”).           The

Act also authorized the Secretary of the Army to borrow such

amounts in fiscal years 1997, 1998, and 1999 as would be necessary

to fund capital improvements to the Washington Aqueduct to ensure

its   continued   operation   until   the   transfer   took   place.     Id.

§ 306(e).   This borrowing authority would be effective “only after

the Chief of Engineers [had] entered into contracts with each

customer under which the customer [committed] to repay a pro rata

share (based on water purchase) of the principal and interest.”

Id. § 306(e)(2)(A).4      In 1997, Falls Church entered into a Water

Sales Agreement with the Secretary of the Army under which Falls

      3
      In 1950, Falls Church entered into a water supply agreement
with Arlington County, which receives water from the Washington
Aqueduct pursuant to the 1926 Act, for the sale and delivery of
water from Arlington County to Falls Church, pursuant to the 1947
Act. That agreement remains in effect to this day. In 1961, Falls
Church built a water line that allowed it to connect to the federal
government’s water filtration plant, and entered into a separate
water supply agreement to receive some of its water directly from
the federal government.
      4
      The term “customer” in the Act referred to three entities
then receiving water from the Washington Aqueduct: the District of
Columbia; Arlington County, Virginia; and Falls Church.        Id.
§ 306(a)(1).

                                      5
Church agreed to pay its pro rata share of the principal and

interest on loans advanced pursuant to § 306 of the 1996 Act.                   The

Agreement also included terms for offsetting the risk of default by

Falls    Church,   as    required   by       the   Act.     J.A.   170;   see   id.

§ 306(e)(2)(C).5        The Secretary of the Army took out three loans

pursuant to § 306, issuing promissory notes to the U.S. Treasury in

July 1997, October 1997, and October 1998, totaling $75 million.

When the transfer of the Washington Aqueduct was not consummated

within the three-year time frame contemplated in the 1996 Act,

however, § 306 was repealed, leaving the Washington Aqueduct the

property of the United States.           Act of Aug. 21, 2002, Pub. L. No.

107-217, § 6, 116 Stat. 1325 (2002) (repealing Pub. L. 104-182,

§ 306).

     In the district court, Falls Church argued that Fairfax

Water’s proposed water-service provision within interface areas

would interfere with the federal program and activity authorized by

the above-referenced Acts of Congress, and that such action was

therefore preempted by the Supremacy Clause of the United States

Constitution, U.S. Const. art. VI, cl. 2.                 Falls Church asked the

court to declare unlawful and enjoin Fairfax Water’s efforts to

     5
      Under the Agreement, Falls Church committed to pay special
rates designed to take into account “the financial markets’ measure
of the cost of the risk of default[.]” J.A. 170. As explained
infra, this undercuts Falls Church’s argument that competition with
Fairfax Water might jeopardize its ability to meet its obligations
to the United States under the Agreement.

                                         6
provide    water    and   water   utility     service   to   customers     within

affected interface areas.              The district court rejected Falls

Church’s preemption claim and dismissed the case.                  This appeal

followed.

                                        II.

        We review de novo a district court’s dismissal for failure to

state a claim under Rule 12(b)(6) of the Federal Rules of Civil

Procedure, accepting as true all well-pleaded allegations and

reviewing    the    complaint     in   the    light   most   favorable    to   the

plaintiff.     Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th

Cir. 1993).     “Factual allegations must be enough to raise a right

to relief above the speculative level, on the assumption that all

the allegations in the complaint are true (even if doubtful in

fact).”     Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1965

(2007) (internal citations omitted).

                                        A.

        Federal law may preempt state law through express statutory

language, where Congress evinces an intent to occupy an entire

field of regulation, or where state law actually conflicts with

federal law.       Michigan Canners and Freezers Ass’n, Inc. v. Agric.

Marketing & Bargaining Bd., 467 U.S. 461, 469 (1984).                    Only the

last of these types of preemption--conflict preemption--is at issue

here.

                                         7
     An actual conflict between state and federal law arises “when

compliance with both state and federal law is impossible, or when

the state law stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress.”                     Id.

(internal quotations and citation omitted).             Falls Church does not

argue   that    compliance     with   state   and     federal     law   would   be

impossible on this record.        Rather, its contentions appear to be

based on the existence of “obstacle preemption.”                   Falls Church

asserts that Fairfax Water’s attempts to provide water service to

customers in interface areas would “interfere with the implied, but

nonetheless      obvious   purposes    and    objectives     of    Congress     in

establishing the Washington Aqueduct.”               Appellant Br. at 19.        It

argues that “Congress could not have been indifferent to” Fairfax

Water serving customers that would have otherwise been served by

Falls Church.     Id. at 20.    By serving these customers, according to

Falls Church, Fairfax Water would stand as an obstacle to the most

effective economic use of the Washington Aqueduct, by consequently

causing an increase in the price paid by the federal government for

water in and near the District of Columbia, and by harming the

ability of the Washington Aqueduct’s customers--the District of

Columbia,   Arlington      County,    and    Falls    Church--to    meet   their

financial obligations under contracts entered into pursuant to the

1996 Act.      Such outcomes, Falls Church concludes, would frustrate

                                       8
Congress’s intent to have the Washington Aqueduct operate in the

most efficient and financially sound manner.

                                    B.

     “The purpose of Congress is the ultimate touchstone in every

preemption case.”      Medtronic, Inc. v. Lohr, 518 U.S. 470, 485

(1996)     (internal   quotations   and   alterations   omitted).      In

ascertaining that purpose, however, we begin our consideration with

the basic premise that “Congress did not intend to displace state

law.”    Maryland v. Louisiana, 451 U.S. 725, 746 (1981).    “[A] clear

and manifest purpose of preemption is always required.”             Puerto

Rico Dep’t of Consumer Affairs v. Isla Petroleum Corp., 485 U.S.

495, 503 (1988) (internal quotations omitted).

        The presumption against preemption has particular force in the

areas of public health and safety that have traditionally been

regulated by the states.     See Pinney v. Nokia, Inc., 402 F.3d 430,

457 (4th Cir.), cert. denied 126 S. Ct. 551 (2005).       Therefore, to

the customary caution with which we approach preemption challenges,

we add “the assumption that the historic police powers of the

States were not to be superseded by the Federal Act unless that was

the clear and manifest purpose of Congress.”       Hillsborough County

v. Automated Med. Labs., Inc., 471 U.S. 707, 715 (1985) (internal

quotations omitted); see also Pinney, 402 F.3d at 454 n.4, 457.         Of

particular significance here is the fact that “the provision and

regulation of a healthful public water supply is at the core of

                                    9
Virginia’s police power.”        Shrader v. Horton, 471 F.Supp. 1236,

1242 (W.D. Va. 1979), aff’d 626 F.2d 1163 (4th Cir. 1980).

      Our jurisprudence teaches that even in obstacle preemption

cases, “[t]here is no federal pre-emption in vacuo, without a

constitutional text or a federal statute to assert it.”                     Isla

Petroleum Corp., 485 U.S. at 503; see also Gade v. Nat’l Solid

Wastes Mgmt. Ass’n, 505 U.S. 88, 104 n.2 (1992).            A reviewing court

must “examine the explicit statutory language and the structure and

purpose of the statute.” Ingersoll-Rand Co. v. McClendon, 498 U.S.

133, 138 (1990).

      Turning to the text of the statutes at issue here, we find no

clear and manifest purpose to supersede Virginia’s traditional

authority in the area of water utility regulation.            Two of the four

statutes do not refer to or impact Falls Church at all.              The third

Act, the 1947 statute upon which Falls Church purports to rely,

merely authorizes the Secretary of War “to permit the delivery of

water” to Falls Church. On its face, the language is conspicuously

and   unequivocally     permissive.        Moreover,   it   allows    for    the

termination of water service to Falls Church “at any time.”                  The

purpose of the 1996 Act was to encourage the sale of the Aqueduct

to a non-federal entity within three years, and to finance the

operation of the Aqueduct until the transfer was complete.              When a

transfer    did   not   occur   within     three   years,   the   statute    was

repealed.   It cannot reasonably be inferred that Congress intended

                                      10
to   grant   Falls   Church   an   exclusive,   federally-mandated   water

service territory in a statute that had as its core objective

facilitating the federal government’s departure from the water

supply business.

      As we have noted, the Supreme Court instructs us that “[i]n

areas of traditional state regulation, we assume that a federal

statute has not supplanted state law unless Congress made such an

intention clear and manifest.”       Bates v. Dow Agrosciences LLC, 544

U.S. 431, 449 (2005) (internal quotations omitted).           We find no

such “clear and manifest” intention in the structure and purposes

of the Acts at issue here.

      Unable to find support for its preemption challenge in the

statute, Falls Church argues that interference with a federal

scheme can nevertheless be inferred from the possibility that a

loss of customers to Fairfax Water might impact its ability to meet

its contractual obligations with respect to the loans incurred for

capital improvements to the Aqueduct.       In addition to ignoring the

analytical prerequisites of conflict preemption, this argument also

fails to articulate the non-speculative factual basis for relief

required by Twombly.     127 S. Ct. at 1965.      We note again, in this

vein, that the Water Sales Agreement between Falls Church and the

Secretary of the Army includes provisions protecting the federal

government against the risk of default.            Thus, Falls Church’s

                                     11
ability to meet its obligations was accounted for, at least to some

extent, within the terms of the Agreement itself.6

                               III.

     For the foregoing reasons, the judgment of the district court

is

                                                         AFFIRMED.

     6
      Although not determinative of our analysis, we note as well
that Falls Church maintains the option of raising rates or taxes to
meet its contractual obligations to the federal government.

                                12