358 F.3d 694 (10th Cir. 2004), 02-7080, Pittsburg County Rural Water Dist. No. 7 v. City of McAlester

Docket Nº:02-7080.
Citation:358 F.3d 694
Party Name:PITTSBURG COUNTY RURAL WATER DISTRICT No. 7, an agency and legally constituted authority of the State of Oklahoma, Plaintiff-Appellant, v. CITY OF McALESTER, a municipality, and the McAlester Public Works Authority, a public trust, Defendants-Appellees. and Kenneth W. Sherill; Linda F. Sherill; Bar-19; Huntsman Edison Films Corporation, successor t
Case Date:February 06, 2004
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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358 F.3d 694 (10th Cir. 2004)

PITTSBURG COUNTY RURAL WATER DISTRICT No. 7, an agency and legally constituted authority of the State of Oklahoma, Plaintiff-Appellant,


CITY OF McALESTER, a municipality, and the McAlester Public Works Authority, a public trust, Defendants-Appellees.


Kenneth W. Sherill; Linda F. Sherill; Bar-19; Huntsman Edison Films Corporation, successor to Blessing Corp., d/b/a Edison Plastics; Mig, Inc.; Southeast Oklahoma Box Company; Tri-Cat, Inc.; Simmons Poultry Farms, Inc.; Dennis Defrange; Terry Kinyon; Pittsburg County Regional Exposition Authority; The Board of County Commissioners of the County of Pittsburg; H.G. Gilliam; Bill Webber; Oben Weeks; Thundercreek Golf Course Trust Authority, Defendants.

No. 02-7080.

United States Court of Appeals, Tenth Circuit

February 6, 2004

As Amended on Denial of Rehearing and Rehearing En Banc Feb. 6, 2004.

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Michael D. Davis (Steven M. Harris with him on the briefs), Doyle, Harris, Davis & Haughey, Tulsa, OK, for Plaintiff-Appellant.

James C. Milton (Linda C. Martin, Doerner, Saunders, Daniel & Anderson, L.L.P., Tulsa, OK, and Wesley Brown, Brown & Brown, McAlester, OK, with him on the brief), Doerner, Saunders, Daniel & Anderson, L.L.P., Tulsa, OK, for Defendants-Appellees.

Before HENRY, HOLLOWAY, and MURPHY, Circuit Judges.

HENRY, Circuit Judge.

The Pittsburg County Rural Water District Number 7 (Pitt-7) is a rural county water association in Oklahoma. The City of McAlester (McAlester) is a municipality in Oklahoma. Both Pitt-7 and McAlester are subdivisions of the State of Oklahoma, and both are water providers. Pitt-7 sued McAlester and a number of other entities under: (1) 42 U.S.C. § 1983, based on the claim that the defendants violated Pitt-7's exclusive right under 7 U.S.C. § 1926 to provide water to customers within the protected area; (2) federal antitrust law; and (3) state antitrust law. The district court, faced with a difficult set of issues, granted summary judgment for the defendants on certain § 1926 claims, dismissed certain other § 1926 claims, and dismissed Pitt-7's federal and state antitrust claims. For the reasons detailed below, we affirm in part, reverse in part, and remand.

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A. 7 U.S.C. § 1926

In 1961, Congress amended 7 U.S.C. § 1926(a) to authorize the United States Farmer's Home Administration (FMHA) to make loans to nonprofit water service associations for "the conservation, development, use, and control of water." 1 Congress enacted 7 U.S.C. § 1926(b), in turn, to govern the terms of federal loans made to those associations. Section 1926(b) provides that, for an association indebted by a loan to the federal government under the statute, "[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 or other public body, or by the granting of any private franchise for similar service within such area during the term of such loan." 7 U.S.C. § 1926(b).

B. The Board of County Commissioners of Pittsburg County, Pitt-7, the Loan from the FMHA, and McAlester

In 1963, Oklahoma lawmakers responded to Congress's 1961 amendment of 7 U.S.C. § 1926 by enacting a statute that "authorizes rural water districts to borrow money from the federal government to accomplish the purposes for which they are established." Sequoyah County Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192, 1194 (10th Cir. 1999) (citing Okla. Stat. Ann. tit. 82, § 1324.10(A)(4)). In 1966, the Board of County Commissioners of Pittsburg County, Oklahoma (importantly, as will be seen later, an entity distinct from Pitt-7), incorporated Pitt-7 to "develop[] and provid[e] an adequate rural water supply ... to serve and meet the needs of rural residents within the territory of the district." Okla. Stat. Ann tit. 82, § 1324.3.

In 1967, Pitt-7 first took advantage of the availability of the federal loans by borrowing $300,000 from the FMHA. Pitt-7 remained continuously indebted to the FMHA until February 24, 1989, when Pitt-7 repurchased its outstanding debt to the FMHA. On June 15, 1994, Pitt-7 once again entered into a loan agreement with the FMHA, borrowing $162,500. See Aplt's App. at 1005 (Mortgage, dated June 15, 1994).

From its inception, Pitt-7's territory included both land within McAlester's territorial limits and land near, but outside of, McAlester's territorial limits. For nearly three decades through June 30, 1999, Pitt-7 serviced these portions of its area with water purchased from McAlester. During the 1980s and 1990s, the relationship between Pitt-7 and McAlester became increasingly strained, apparently due to Pitt-7's demands that McAlester stop selling water in areas over which Pitt-7 held an exclusive service right under § 1926, McAlester's refusal to comply, and McAlester's threats to terminate water sales to Pitt-7.

C. The Complaint, the Petition for Deannexation, and the Termination of Water Sales by McAlester to Pitt-7

On March 25, 1997, Pitt-7 filed this action in federal district court, alleging violations of 7 U.S.C. § 1926(b) as enforced through 42 U.S.C. § 1983, federal antitrust law, and various Oklahoma state laws, including antitrust. McAlester responded in two ways.

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First, on May 12, 1997, more than six weeks after Pitt-7 had filed this action, McAlester, several other local government entities, and landowners within Pitt-7's territory petitioned the defendant-appellee Pittsburg County Board of County Commissioners to deannex a portion of Pitt-7's territory. 2 The deannexed properties included those properties previously designated for service by Pitt-7 that are disputed in this case: Industrial Park, the Pittsburg County Regional Exposition Center, the Thundercreek Golf Course, the Sherrill property, and the Fender residence. The petitions documented complaints by McAlester and by landowners within Pitt-7's territory concerning customer service, capacity, and pricing. Pitt-7 moved before the Board to strike the petitions on the grounds that federal law--specifically § 1926--preempted the requested deannexation.

Second, in June 1998, the McAlester City Council passed a motion instructing that Pitt-7 "be given written notice by the City Manager that effective June 30, 1999, the City Council would no longer enter into a contract for the purpose of selling water to them." Aplt's App. at 437 (Minutes of McAlester City Council Session, dated June 23, 1998). As of June 30, 1999, McAlester terminated water sales to Pitt-7.

D. The Deannexation Order and the Resulting Decisions by the Oklahoma District Court and the Oklahoma Court of Civil Appeals

In June 1997, after a hearing at which counsel for Pitt-7 and for the petitioners each argued its side of the question, the Board voted to enter a Deannexation Order, stating that "it is in the best interests of the landowner, and in the best interest of [Pitt-7], that such lands be released from [Pitt-7]." Aples' Supp.App. at 355 (Certificate Releasing Lands from Rural Water Dist. No. 7, Pittsburg County, Oklahoma, dated Jun. 27, 1997). The Deannexation Order did not address the legality of the deannexation under federal law.

Under Oklahoma law, "an appeal lies from an order of the Board of County Commissioners to the District Court whenever their orders or decisions are of a judicial or quasi judicial nature." Chandler Materials Co. v. Bd. of County Comm'rs of Tulsa County, 208 Okla. 189, 254 P.2d 767, 770 (1953). Pitt-7 appealed the deannexation to the Oklahoma District Court in Pittsburg County, which exercised jurisdiction over the appeal and then dismissed the appeal as not properly perfected on the ground that Pitt-7's service upon the Pittsburg County Board of County Commissioners was "not sufficient" under Oklahoma law. Aples' Supp.App. at 459 (Order of the Oklahoma District Court for Pittsburg County, dated Sept. 15, 1997).

Pitt-7 then appealed the Oklahoma District Court's ruling to the Oklahoma Court of Civil Appeals (OCCA). The OCCA initially stated that "the deannexation decision at issue here ... clearly determines land use and is a legislative function. It therefore follows that the trial court was without jurisdiction to hear Pitt-7's appeal." Aples' Supp.App. at 252 (Memorandum

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Opinion No. 90,114, dated May 19, 1998).

Though the prevailing party, McAlester filed a Petition for Rehearing in the OCCA. The OCCA granted the petition, vacated its initial opinion, and held that the Oklahoma district court did properly exercise jurisdiction over Pitt-7's appeal, reasoning that "[a]s a neutral tribunal whose decision affects the legal relation of particular lands vis-a-vis a corporate body, the board of county commissioners acts in a judicial or quasi-judicial capacity." Id. at 209 (Opinion on Rh'g, dated Sept. 8, 1998). The OCCA further held--with no discussion--that "the decision of the Board of County Commissioners releasing lands from the water district ... is final and binding on [Pitt-7] even if based on an erroneous application of federal law" and that "[i]t is not subject to collateral attack or an equitable challenge, such as declaratory relief." Id. at 210. The OCCA therefore affirmed the trial court's dismissal. Id. Pitt-7's subsequent petition to the Oklahoma Supreme Court for a writ of certiorari was denied.

E. The First Amended Complaint, the Various Motions Filed in the District Court, and the District Court's...

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