Moongate Water v. Dona Ana Mutual Domestic

• Citation: 420 F.3d 1082
• Decision Date: 28 July 2005
• Docket Number: No. 04-2250.,04-2250.
• Parties: MOONGATE WATER CO., INC., a New Mexico Public Utility, Plaintiff-Counter-Defendant-Appellee, v. DONA ANA MUTUAL DOMESTIC WATER CONSUMERS ASSOCIATION, Defendant-Counter-Claimant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

420 F.3d 1082

MOONGATE WATER CO., INC., a New Mexico Public Utility, Plaintiff-Counter-Defendant-Appellee, v. DONA ANA MUTUAL DOMESTIC WATER CONSUMERS ASSOCIATION, Defendant-Counter-Claimant-Appellant.

No. 04-2250.

United States Court of Appeals, Tenth Circuit.

July 28, 2005.

Michael D. Davis, of Doyle Harris Davis & Haughey, Tulsa, OK, (Steven M. Harris, of Doyle Harris Davis & Haughey, Tulsa, OK, and Rachel Brown, of Hubert & Hernandez, Las Cruces, NM, with him on the briefs), for Defendant-Counter-Claimant-Appellant.

William A. Walker, Jr., Las Cruces, NM, (Kyle W. Gesswein, Las Cruces, NM, with him on the brief), for Plaintiff-Counter-Defendant-Appellee.

Before KELLY, BALDOCK, and HARTZ, Circuit Judges.

HARTZ, Circuit Judge.

This appeal arises out of a dispute between two water-service providers over their rights to serve customers in an area northeast of Las Cruces, New Mexico, referred to by the parties as the Disputed Area. Moongate Water Company, Inc. is a public utility organized under the New Mexico Public Utilities Act, N.M. Stat. Ann.1978, §§ 62-1-1 et seq. Doña Ana Mutual Domestic Water Association, a nonprofit association formed for the purpose of providing water services, is organized under the New Mexico Sanitary Projects Act, N.M. Stat. Ann. § 3-29-1 et seq. Moongate brought this action in the United States District Court for the District of New Mexico to obtain a declaratory judgment that 7 U.S.C. § 1926(b) does not protect Doña Ana from competition in the Disputed Area. Doña Ana now serves one customer in the area, whereas Moongate serves about 1,000 in several developments within the area.

The district court entered summary judgment for Moongate, concluding that because Doña Ana had not made service available to the Disputed Area, it was not entitled to § 1926(b) protection. Doña Ana appealed to this court. Doña Ana's principal argument has been that § 1926(b) protection cannot be decided on a geographic basis but only customer by customer, as customers seek specific service, so the question whether Doña Ana can acquire § 1926(b) protection in the future is not ripe for review.

The issues on appeal have been narrowed by the parties. At oral argument Moongate stated that it does not challenge Doña Ana's § 1926(b) protection with respect to Doña Ana's single present customer in the Disputed Area, and Doña Ana stated that it no longer claims any such protection with respect to Moongate's present customers in the area. The dispute before us thus relates solely to Doña Ana's claim to § 1926(b) protection with respect to future customers in the Disputed Area.

Our jurisdiction over this dispute, however, has been limited by litigation in another forum. As part of its effort to restrict competition from Doña Ana, Moongate not only pursued this action but also filed an action with the New Mexico Public Regulation Commission (PRC)¹ seeking even more extensive relief a declaration that the Disputed Area has been part of Moongate's service area since 1984 and an order prohibiting Doña Ana from extending its facilities into the Disputed Area. (Doña Ana removed the PRC action to federal court, but the district court remanded it back to the PRC.) While this appeal was pending, the PRC ruled that under New Mexico law Doña Ana "does not currently have the legal right to serve the Disputed Area." Moongate Water Co., Inc. v. Doña Ana Mut. Domestic Water Consumers Assoc., No. 03-00247-UT, Final Order at 7 (N.M.P.R.C. May 3, 2005) [hereinafter PRC Order]. The PRC declared that "Moongate has the right and duty to serve ... all land in the Disputed Area... without interference from Doña Ana," id., and it prohibited Doña Ana from further construction of facilities in the area, id. at 5-8. As a result of the PRC Order, we must divide the issue before us into two components: (1) whether Doña Ana presently has § 1926(b) rights with respect to future customers in the Disputed Area and (2) whether it can acquire such rights in the future when potential customers request service. We hold against Doña Ana on the first component. As for the second, the PRC Order renders it moot. We explain below that because of our holding on the first component, the PRC Order is not preempted by § 1926(b). Thus, there is no real and immediate likelihood of Doña Ana's serving future customers in the Disputed Area. Accordingly, there is not a sufficient controversy to support jurisdiction to hear a request for declaratory judgment regarding whether Doña Ana can acquire § 1926(b) protection with respect to future customers in the Disputed Area.

We affirm the district court judgment in part and remand the remainder of the judgment so that the district court can dismiss it as moot.

I. BACKGROUND

In 1961 Congress amended the Consolidated Farm and Rural Development Act, 7 U.S.C. §§ 1921-2009n, to allow nonprofit water associations to borrow federal funds for "the conservation, development, use, and control of water ... primarily serving... rural residents." 7 U.S.C. § 1926(a)(1); Pittsburg County Rural Water Dist. No. 7 v. City of McAlester, 358 F.3d 694, 701 (10th Cir.2004). To protect the investments of an indebted water association, the Act restricts other water utilities from competing with the association. See 7 U.S.C. § 1926(b)². In Sequoyah County Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192 (10th Cir.1999), we held that "to receive the protection against competition provided by § 1926(b) a water association must (1) have a continuing indebtedness to the [federal government], and (2) have provided or made available service to the disputed area." Id. at 1197 (internal quotation marks and citations omitted). Essential to the second element is the indebted association's right under state law to serve the disputed area. Id. at 1201 n. 8. "Without a right to provide service arising from state law, a water association would be unable to assert its entitlement to protection under § 1926(b) in the first instance because the association would not legally have `provided or made available' any service." Id. (quoting 7 U.S.C. § 1926(b)).

The approximately 10-square-mile Disputed Area is northeast of Las Cruces, New Mexico, just east of Interstate 25 (I-25) and north of U.S. Highway 70. Every point in the Disputed Area is within half a mile of Moongate's existing pipes or facilities.

In 1983 some residents living within the Disputed Area desired water service. A Doña Ana County Commissioner approached Doña Ana about providing them service, but Doña Ana refused. After determining that the County Commission lacked legal authority to force Doña Ana to serve the area, the Commissioner asked Moongate, which served a nearby area, to provide water to the residents. Moongate responded by surveying the needs of the residents and then applying for and receiving approval from the PRC for a line extension. In March 1985 Moongate finished construction of the extension and began serving about 130 customers within the Disputed Area. A few years later Moongate acquired the Apollo Estates water system within the Disputed Area. By April 2004 Moongate's service to the Disputed Area had increased to nearly 1000 customers.

Doña Ana has long had facilities near or in the Disputed Area. It has a 10-inch main line on Del Rey Boulevard, which runs along the western edge of the Disputed Area, just east of I-25. It also has two water-storage tanks located within the Disputed Area. But they are designed to serve Doña Ana's customers west of I-25. Most of the Disputed Area is above 4,000 feet, and water pressure for the system, which derives from the level of water in the storage tanks, cannot properly supply water to elevations above 4,000 feet.

Considerable evidence before the district court showed that Doña Ana has traditionally identified the eastern boundary of its service area as I-25. The current president of Doña Ana, however, testified that the association had planned to expand its service east of I-25 since at least 1996. Concrete action occurred in 2002 when Doña Ana reached an agreement with the former owners of Apollo Estates under which Doña Ana was to perfect water rights east of I-25. In November 2002 Doña Ana wrote a letter to Moongate stating, "[Y]ou are advised Doña Ana does intend to serve areas east of I-25, and has had an obligation to provide service to certain areas east of I-25 since its creation." R. Vol. I, Aplt.App. at 20. Doña Ana asserted that Moongate's right to serve the area east of I-25 through its acquisition of the Apollo Estates system was limited to only a fraction of the territory.

Moongate responded by initiating the present litigation on December 23, 2002. It sought a declaration that "the provisions of 7 U.S.C. § 1926(b) do not apply to Doña Ana regarding service by Moongate to persons either on their system or in the area of their system." Aplt.App. at 17. Doña Ana counterclaimed, seeking a declaration that Moongate's sale of water within Doña Ana's service area violated § 1926(b), money damages from Moongate for violating § 1926(b), a permanent injunction restraining Moongate from providing service within Doña Ana's service area, an order compelling Moongate to transfer its customers to Doña Ana, and forfeiture of Moongate's lines to Doña Ana.

On June 20, 2003, Moongate filed a complaint with the PRC asking for a declaration that the Disputed Area is and has been a part of its service area since 1984 a finding that extension of Doña Ana's facilities into the Disputed Area would be unnecessarily duplicative, economically wasteful, and an unreasonable and unnecessary interference with Moongate's service of the area; and an order preventing Doña Ana from extending its lines into the Disputed Area.

Meanwhile, in 2003 Doña Ana began serving a single customer within the Disputed Area, an R.V. storage facility located on Del Rey Boulevard. In addition, it initiated plans to construct a...