Dona Ana Mut. v. City of Las Cruces, Nm

• Decision Date: 20 February 2008
• Docket Number: No. 06-2347.,No. 06-2266.,06-2266.,06-2347.
• Citation: 516 F.3d 900
• Parties: DOÑA ANA MUTUAL DOMESTIC WATER CONSUMERS ASSOCIATION, Plaintiff, v. The CITY OF LAS CRUCES, NEW MEXICO, Defendant-Appellant, Moongate Water Company, Inc., Intervenor-Appellee. Doña Ana Mutual Domestic Water Consumers Association, Plaintiff-Appellant, v. The City of Las Cruces, New Mexico, Defendant-Appellee, Moongate Water Company, Inc., Intervenor-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

516 F.3d 900

DOÑA ANA MUTUAL DOMESTIC WATER CONSUMERS ASSOCIATION, Plaintiff, v. The CITY OF LAS CRUCES, NEW MEXICO, Defendant-Appellant, Moongate Water Company, Inc., Intervenor-Appellee.

Doña Ana Mutual Domestic Water Consumers Association, Plaintiff-Appellant, v. The City of Las Cruces, New Mexico, Defendant-Appellee, Moongate Water Company, Inc., Intervenor-Appellee.

No. 06-2266.

No. 06-2347.

United States Court of Appeals, Tenth Circuit.

February 20, 2008.

Lee E. Peters, Hubert & Hernandez, PA., Las Cruces, New Mexico, for Plaintiff-Appellant, Doña Ana Mutual Domestic Water Consumers Association, in Case No. 06-2347.

Edward Ricca, Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, New Mexico (Harry S. "Pete" Connelly, Office of the City Attorney, Las Cruces, New Mexico, with him on the briefs), for Defendant, City of Las Cruces, New Mexico, Appellant in Case No. 06-2266; Appellee in Case No. 06-2347.

William H. Lazar, Tesuque, New Mexico (Kyle W. Gesswein, Las Cruces, New Mexico, and William A. Walker, Jr., Las Cruces, New Mexico, with him on the brief), for Intervenor-Appellee, Moongate Water Company, Inc.

Before BRISCOE, GORSUCH, and HOLMES, Circuit Judges.

BRISCOE, Circuit Judge.

Doña, Ana Mutual Domestic Water Consumers Association ("Doña Ana") — the appellant in Case No. 06-2347 — previously entered into a settlement agreement (the "Settlement") with City of Las Cruces, New Mexico (the "City") — the appellant in Case No. 06-2266 and an appellee in Case No. 06-2347. In the Settlement, the City agreed to recognize Doña Ana's exclusive rights, under 7 U.S.C. § 1926(b), to provide water to customers in an area northeast of Las Cruces, New Mexico (the "Disputed Area"). The United States District Court for the District of New Mexico entered the Settlement as a stipulated judgment and retained jurisdiction over it. Subsequently, another water service provider, Moongate Water Company, Inc. ("Moongate"), which is an appellee in Case No. 06-2266 and in Case No. 06-2347, contested Doña Ana's rights to provide water in the Disputed Area. In Moongate Water Co. v. Doña Ana Mutual Domestic Water Consumers Association, 420 F.3d 1082 (10th Cir.2005), we determined that Doña Ana did not have 1926(b) exclusivity as against Moongate, and in Doña Ana Mutual Domestic Water Consumers Association v. New Mexico Public Regulation Commission, 140 N.M. 6, 139 P.3d 166 (2006), the New Mexico Supreme Court affirmed a state regulatory determination that, as against Doña Ana, Moongate had the exclusive right to serve the Disputed Area. Doña Ana and the City then attempted to amend their previous Settlement via a "Second Addendum," in which Doña Ana consented to the City providing water in the Disputed Area. Moongate intervened and moved for summary judgment, claiming that it was a third-party beneficiary to the original Settlement and that the Second Addendum prejudiced its rights to exclusivity in the Disputed Area. The district court, agreed with Moongate and refused to approve the Second Addendum. Doña Ana and the City appeal, arguing that the district court erred in holding that Moongate was a third-party beneficiary. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and, in Case No. 06-2266, we reverse and remand. We dismiss the related appeal, Case No. 06-2347, as moot.

I.

Moongate is a public utility organized under the New Mexico Public Utilities Act, N.M. Stat. Ann. § 62-1-1 et seq. As a public utility, Moongate falls under the jurisdiction of the New Mexico Public Regulatory Commission ("PRC"). See N.M. Stat. Ann. § 62-6-4. The PRC comprehensively regulates many aspects of a public utility's business, including rate-setting, service standards, accodinting methods, and the building or expansion of facilities. See N.M. Stat. Ann. § § 62-6-4, -16, 19, -23; id. § 62-9-1. In return for this regulation, New Mexico law grants a public utility a limited monopoly within its service area. See N.M. Stat. Ann. §§ 62-9-1, -1.1; see also Morningstar Water Users Ass'n v. N.M. Pub. Util. Comm'n, 120 N.M. 579, 904 P.2d 28, 39 (1995).

Doña Ana is a nonprofit water service provider formed under the New Mexico Sanitary Projects Act, N.M. Stat. Ann. § 3-29-1 et seq. As a mutual domestic water consumers association, Doña Ana is not subject to regulation by the PRC, except with regard to disputes between Doña Ana and a public utility, such as Moongate. See N.M. Stat. Ann. § 62-9-1; see also El Vadito de los Cerrillos Water Ass'n v. N.M. Pub. Serv. Comm'n, 115 N.M. 784, 858 P.2d 1263, 1267 (1993).

The City is a municipality providing water service pursuant to N.M. Stat. Ann. § 3-27-1 et seq. As a municipality, the City is not subject to regulation by the PRC. See N.M. Stat. Ann. § 624-4.¹

In addition to the New Mexico regulatory scheme, federal law sometimes limits a provider's ability to provide water to a particular area. Pursuant to 7 U.S.C. 1926(a)(1), nonprofit water associations may borrow federal funds for "the conservation, development, use, and control of water, and the installation or improvement of drainage or waste disposal facilities, recreational developments, and essential community facilities including necessary related equipment, all primarily serving farmers, ranchers, farm tenants, farm laborers, rural businesses, and other rural residents ..." Section 1926(b) prohibits other water utilities from competing with the borrowing entity within the borrowing entity's service area. 7 U.S.C. § 1926(b).² Doña Ana has borrowed money from the federal government under this program.

In August 2002, Doña Ana filed suit against the City in the United States District Court for the District of New Mexico, alleging that the City had violated Doña Ana's rights under 7 U.S.C. § 1926(b) by commencing water service to customers in Doña Ana's service area. Moongate was not a party to this action. In March 2003, Doña Ana and the City entered into the Settlement, in which the City agreed to recognize Doña Ana's right to § 1926(b) protection in the Disputed Area.

The controversy in the instant appeal centers around the language in several paragraphs of the Settlement. First, in the preamble to the Settlement, the parties (Doña Ana and the City) stated:

WHEREAS, it is the intention of the parties hereto to settle and dispose of, fully and completely, any and all claims, demands, and causes of action heretofore or hereafter held by one party against the other, arising out of, connected with or incidental to the dealings between the parties prior to the date hereof regarding the Association's service area.

Settlement, ROA, Vol. I, at 51.³ Next, the Settlement provided:

1. The parties recognize that this is a dispute concerning the service areas to which Doña Ana is entitled to 7 U.S.C. § 1926(b) protection, but as a compromise to settle litigation, and only binding on the City and the Association, and specifically not binding on Moongate Water Company, ("Moongate"), it is agreed the Association is entitled to 7 U.S.C. § 1926(b) protection within the geographical boundaries designated in the document attached hereto as Exhibit "A" (hereinafter the "Association's Service Area"). The City shall not provide water service to any customer within the Association's Service Area either directly or through the grant of a franchise or similar means, without the express written consent of the Association. Notwithstanding this provision, the City intends to renegotiate a new franchise with Moongate, and the effect of such renewal or extension shall be resolved pursuant to Paragraph Number 3 herein. The Association shall not submit this Agreement in litigation between the Association and Moongate for the purpose of arguing that the City's recognition of Doña Ana's § 1926(b) protected service area is binding on Moongate.

Settlement, ¶ 1, ROA, Vol. I, at 51-52. Paragraph 3, which the parties referenced in Paragraph 1, then stated:

3. There is a disagreement between the parties as to whether Moongate Water Company may have a right to sell water within certain portions of the Association's Service Area. The City is currently negotiating with Moongate for a non-exclusive franchise to sell water in a certain area, a portion of which is located within the Association's Service Area. Moongate's present franchise with the City expired on December 31, 2002. The City has previously advised Moongate that Moongate will have a month-to-month franchise upon expiration of the existing franchise on December 31, 2002 pending renegotiation of a new franchise. It is the Association's position that the City's granting of and/or renewal of a franchise with Moongate for it to provide water service within the Association's Service Area may violate the Association's claimed rights pursuant to 7 U.S.C. § 1926(b). This dispute relating to whether the franchise or renewed franchise granted by the City to Moongate is void as a violation of 7 U.S.C. § 1926(b), and/or whether Moongate has the right to sell water within any portion of the Association's Service Area with or without a franchise from the City, is to be resolved between the Association and Moongate, and the determination of such issues by a court of competent jurisdiction or by settlement between Moongate and the Association shall be binding upon the City.

Settlement, ¶ 3, ROA, Vol. I, at 52-53. The Settlement also contained a broad release of claims between the City and Doña Ana, as well as several additional provisions not directly relevant to the instant appeal.

The district court entered a stipulated judgment, incorporating the terms of the settlement and providing:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court retains jurisdiction to resolve any dispute between the parties pertaining to the Agreement of Compromise, Settlement and Release if such disputes cannot be resolved by mediation as provided for in said Agreement.

Judgment, ROA, Vol. I, at 67.

In the meantime, in December...