Rural Water Dist. No. 4 v. City of Eudora

• Decision Date: 26 September 2011
• Docket Number: 09–3299.,Nos. 09–3282,s. 09–3282
• Citation: 659 F.3d 969
• Parties: RURAL WATER DISTRICT NO. 4, DOUGLAS COUNTY, KANSAS, Plaintiff–Appellee/Cross–Appellant,v.CITY OF EUDORA, KANSAS, Defendant–Appellant/Cross–Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

659 F.3d 969

RURAL WATER DISTRICT NO. 4, DOUGLAS COUNTY, KANSAS, Plaintiff–Appellee/Cross–Appellant,

v.CITY OF EUDORA, KANSAS, Defendant–Appellant/Cross–Appellee.

Nos. 09–3282

09–3299.

United States Court of Appeals, Tenth Circuit.

Sept. 26, 2011.

Curtis Tideman (David Frye and Jeffrey R. King with him on the briefs), of Lathrop & Gage LLP, Overland Park, KS, for Defendant–Appellant/Cross–Appellee.Steven M. Harris of Doyle Harris Davis & Haughey, Tulsa, OK, (Michael D. Davis of Doyle Harris Davis & Haughey; John W. Nitcher of Riling Burkhead & Nitcher, Lawrence, KS, with him on the briefs) for Plaintiff–Appellee/Cross–Appellant.Before TYMKOVICH, McKAY, and GORSUCH, Circuit Judges.McKAY, Circuit Judge.

This appeal arises out of a dispute between a city and a rural water district over their rights to serve customers in several recently annexed areas of Douglas County, Kansas. Rural Water District No. 4 (“Douglas–4” or “the District”) brought this suit against the city of Eudora under 42 U.S.C. § 1983, alleging the City violated Douglas–4's exclusive right to provide water service to current and prospective customers in violation of 7 U.S.C. § 1926(b). On appeal, this court is asked to resolve a host of federal and state legal issues concerning the competitive relationship between a dueling water district and local municipality. Finding jurisdiction under 28 U.S.C. § 1291, we affirm in part and reverse in part.

BACKGROUND

The parties are well aware of the facts, which we will not repeat in detail. In basic form, Douglas–4 was created to provide water service to areas of Douglas County, Kansas. Its purpose under Kansas law is to provide water to “promote the public health, convenience and welfare” of the community. See K.S.A. § 82a–614. Under its own bylaws, Douglas–4 was developed, inter alia, to “acquire water and water rights and to build and acquire pipelines and other facilities, and to operate the same for the purpose of furnishing water for domestic, garden, livestock and other purposes to owners and occupants of land located within the District, and others as authorized by these By–Laws.” (Appellant's Add. at 7.) To further its purpose, it is also authorized to borrow money, secure loans, and enter into contracts or cooperate with any person or governmental agency. ( Id. at 7–8.)

Beginning in 2000, Douglas–4 developed and then enacted a plan to increase its service area and effectiveness by purchasing water from a nearby water district to meet increasing demand from existing and prospective customers, but it needed to borrow $1.25 million to finance construction of new infrastructure in order to exploit its new water source. It first secured a loan for the full amount from the Kansas Department of Health and Environment (“KDHE”), but upon a recommendation by the District's administrator, it decided to obtain part of its financing from a private bank backed by a federal guarantee from the U.S. Department of Agriculture (“USDA”). Ultimately, Douglas–4 decided to separate its debt into two loans: the first $1 million from the KDHE and the remaining $250,000 from First State Bank & Trust, a private bank. First State in turn entered into a guarantee agreement with Rural Development, a lending branch of the USDA. Douglas–4 does not deny that it pursued the guaranteed loan specifically for the added benefit of § 1926(b) protection, despite the additional costs to the District in the form of higher closing fees and interest rates.

In 2006, the city of Eudora, which also provides water service within its boundaries, annexed several areas around the southern edge of its city limits: Fairfield Addition (also known as the “Garber Property”), Meadow Lark Property, Grinnell Property, and Kurtz Addition. From May to September 2007, both Douglas–4 and Eudora repeatedly contacted the Fairfield Addition's owner, Doug Garber, to discuss his water needs. After the City's annexation, Douglas–4 notified Mr. Garber it possessed the exclusive right to provide water service to his property. It also exchanged correspondence with Mr. Garber regarding cost estimates and a timeline to begin water service. For its part, Eudora informed Mr. Garber it knew he intended to obtain water from Douglas–4 but it was still willing to work with him to provide water service. Eudora also informed Mr. Garber that it might de-annex his property should he refuse its water service.

Leading up to and during this same period, the parties communicated extensively with each other. From 2004 to mid–2007, Douglas–4 and Eudora engaged in a series of discussions regarding changes to both parties' territories as a result of the City's annexations. The parties held what would ultimately result in failed negotiations for a repurchase plan, to ensure that Douglas–4 could remain financially viable as Eudora annexed portions of Douglas–4's service area and began serving water to Douglas–4's customers.

Once the Garber property was annexed and Douglas–4 began speaking to Mr. Garber about water service, Douglas–4 notified Eudora that attempts by the City to provide water to the Garber property would violate the District's right to protection under § 1926(b). However, Eudora sought to continue where the failed negotiations ended. It notified Douglas–4 that, unless Douglas–4 submitted to an appraisal to sell its assets to Eudora by the end of September, the City would file suit to compel the District's compliance. Rather than accept the City's demands, Douglas–4 filed a complaint with the district court.

During the course of litigation, the district court issued several critical orders in which it denied both parties' motions for summary judgment, denied Eudora's motions in limine to exclude certain communications by City officials regarding attempts to provide water service to the affected areas, and rejected proposed jury instructions submitted by both parties. At the conclusion of a ten-day trial, the case was submitted to the jury by way of special interrogatories. The jury found that Douglas–4 had obtained § 1926(b) protection and Eudora had violated § 1926(b) in each of the disputed areas. ¹ The district court then enjoined Eudora from serving or limiting Douglas–4's service to these areas. Eudora's appeal and Douglas–4's cross-appeal followed.

DISCUSSION

“Where a jury instruction is legally erroneous, we must reverse if the jury might have based its verdict on the erroneously given instruction.” City of Wichita, Kan. v. U.S. Gypsum Co., 72 F.3d 1491, 1495 (10th Cir.1996). We therefore review de novo whether the district court's jury instructions correctly stated the governing law. See United States v. Platte, 401 F.3d 1176, 1183 (10th Cir.2005); Cann v. Ford Motor Co., 658 F.2d 54, 58 (2d Cir.1981) (“We will reverse a judgment entered upon answers to questions ... which inaccurately frame the issues to be resolved by the jury.”). We review evidentiary rulings for abuse of discretion and will not reverse unless the challenging party shows that the ruling was “based on a clearly erroneous finding of fact or an erroneous conclusion of law or manifests a clear error of judgment.” Phillips v. Hillcrest Med. Ctr., 244 F.3d 790, 799 (10th Cir.2001).

In addition to appealing the district court's legal conclusions, jury instructions, and admissions of evidence, Eudora challenges the sufficiency of the evidence at each step of the § 1926(b) analysis. It was required to renew these challenges at the close of all the evidence in a motion for judgment as a matter of law under Rule 50(a) and again after the entry of judgment as a renewed motion under Rule 50(b).² Having failed to file a Rule 50(b) motion, Eudora has waived any challenges on appeal to the sufficiency of the evidence, see Unitherm Food Sys., Inc. v. Swift–Eckrich, Inc., 546 U.S. 394, 404, 126 S.Ct. 980, 163 L.Ed.2d 974 (2006), including challenges to any decisions at summary judgment where the facts were in dispute, see Haberman v. Hartford Ins. Gr., 443 F.3d 1257, 1264 (10th Cir.2006). However, it may still challenge the district court's decisions pertaining to issues of law, see Wilson v. Union Pac. R.R., 56 F.3d 1226, 1229 (10th Cir.1995), jury instructions, see Kelley v. City of Albuquerque, 542 F.3d 802, 818–20 (10th Cir.2008), and the admission of evidence, see Fed.R.Evid. 103(a).

This court has thoroughly reviewed the history and purpose of 7 U.S.C. § 1926(b) in several recent opinions, and we need not repeat it again here. See, e.g., Rural Water Sewer & Solid Waste Mgmt. v. City of Guthrie, 654 F.3d 1058 (10th Cir.2011); Pittsburg Cnty. Rural Water Dist. No. 7 v. City of McAlester, 358 F.3d 694 (10th Cir.2004); Rural Water Dist. No. 1 v. City of Wilson, Kan., 243 F.3d 1263 (10th Cir.2001); Sequoyah Cnty. Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192 (10th Cir.1999); Glenpool Util. Servs. Auth. v. Creek Cnty. Rural Water Dist. No. 2, 861 F.2d 1211 (10th Cir.1988). For a water district indebted by a qualifying loan to the federal government,

[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). To receive this protection, a water district must have both a continuing indebtedness to the USDA ³ and have provided or made available service to the disputed area. See Pittsburg Cnty., 358 F.3d at 713. “Doubts about whether a water association is entitled to protection from competition under § 1926(b) should be resolved in favor of the [USDA]-indebted party seeking protection for its territory.” ⁴

Sequoyah Cnty., 191 F.3d at 1197. If the water district is entitled to protection, it then must prove that its services were curtailed or limited by the competing entity. See ...