Rural Water System # 1 v. City of Sioux Center, C95-4112-MWB.

• Citation: 29 F.Supp.2d 975
• Decision Date: 12 November 1998
• Docket Number: No. C95-4112-MWB.,C95-4112-MWB.
• Parties: RURAL WATER SYSTEM # 1, an Iowa non-profit corporation, Plaintiff, v. CITY OF SIOUX CENTER, IOWA, Defendant.
• Court: U.S. District Court — Northern District of Iowa

29 F.Supp.2d 975

RURAL WATER SYSTEM # 1, an Iowa non-profit corporation, Plaintiff, v. CITY OF SIOUX CENTER, IOWA, Defendant.

No. C95-4112-MWB.

United States District Court, N.D. Iowa, Western Division.

November 12, 1998.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Louis T. Rosenberg, P.C., San Antonio, TX, Randall G. Sease, Sease Law Firm, Harley, IA, for Plaintiff.

Ivan T. Webber of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., Des Moines, IA, for Defendant.

MEMORANDUM OPINION AND JUDGMENT REGARDING TRIAL ON THE MERITS

BENNETT, District Judge.

                TABLE OF CONTENTS
                I.  INTRODUCTION ..................................................................979
                    A.  The Summary Judgment Ruling ...............................................980
                    B.  Findings Of Fact ..........................................................981
                        1.  Stipulated facts ......................................................981
                        2.  Further findings of fact ..............................................982
                            a.  The RWS # 1 system ................................................982
                            b.  Existing customers inside the 1989 city limits ....................984
                            c.  New customers inside the 1989 city limits .........................985
                            d.  Customers outside the 1989 city limits ............................986
                

                II.   LEGAL ANALYSIS ..............................................................986
                    A.  Reconsideration Of The Summary Judgment Ruling ............................987
                        1. Payne and the Bell Arthur briefs .......................................987
                        2. The import of Payne and legislative history ............................988
                    B.  The Scope Of RWS # 1's § 1926(b) Protection ..........................988
                        1.  The import of the court's summary judgment ruling .....................988
                        2.  The Vande Berg Scales trade ...........................................989
                        3.  Service and encroachment outside the 1989 boundary ....................991
                            a.  Matters of geography and timing ...................................991
                            b.  Adequacy of service ...............................................992
                                 i.  Fire protection ..............................................992
                                ii.  Capacity, pressure, and storage ..............................994
                    C.  State Law Claims ..........................................................995
                        1.  Tortious interference .................................................995
                        2.  Conversion ............................................................996
                        3.  Inverse condemnation ..................................................999
                    D.  Remedies .................................................................1000
                III.  CONCLUSION .................................................................1002
                

Trial on the merits is the second major battle in this "turf war" between a non-profit corporation and a municipality over which entity is entitled to distribute water in a disputed territory surrounding the municipality. In the first major battle, on the parties' cross-motions for summary judgment, the court clarified — or thought it clarified — precisely what territory is still in dispute and what issues remained to be tried. See Rural Water Sys. # 1 v. City of Sioux Center, Iowa, 967 F.Supp. 1483 (N.D.Iowa 1997). After pre-trial briefing, a bench trial that lasted several days and involved the presentation of voluminous exhibits — such as maps detailing the location, size, flows, and pressures of pipelines and the location of disputed customers — post-trial briefing, and closing arguments, the court can safely say that, although perhaps no wiser, it is considerably better informed. The court must now try to end this turf war by apportioning territory and ordering reparations, if appropriate.

I. INTRODUCTION

Plaintiff Rural Water System # 1 (RWS # 1), a non-profit corporation, filed the original complaint in this lawsuit on November 2, 1995, and an amended complaint on October 22, 1996, against defendant City of Sioux Center, Iowa (the City), alleging generally violations of 7 U.S.C. § 1926(b), which protects rural water associations indebted to the United States from encroachment on their service areas by adjacent municipalities. In addition, RWS # 1 asserts three state-law claims: tortious interference with prospective business advantage, conversion of property, and inverse condemnation. All of RWS # 1's claims allegedly arise from the City's annexation of portions of RWS # 1's asserted service area, the City's demands that it, not RWS # 1, supply the water needs of customers in the annexed areas and within two miles of the City's new boundaries, and the City's actual service to some of the customers in the disputed area, which RWS # 1 alleges resulted in "curtailment" or "limitation" of RWS # 1's federally-protected service area. As relief, RWS # 1 requests preliminary and permanent injunctions prohibiting the City's curtailment of RWS # 1's service area in violation of 7 U.S.C. § 1926(b); declaratory judgment concerning the rights of the parties to serve the disputed area and alleged violations of state and federal law; equitable relief; damages, both compensatory and punitive; and attorney's fees and costs. The issues for trial were clarified by the court's ruling on cross-motions for summary judgment on May 27, 1997.

This matter proceeded to trial beginning on May 11, 1998, and concluding on May 14, 1998. Closing arguments, however, were not held until October 29, 1998. At closing arguments, as at trial, plaintiff RWS # 1 was represented by lead counsel Louis T. Rosenberg of Louis T. Rosenberg, P.C., in San Antonio, Texas, who argued the case on behalf of RWS # 1, and local counsel Randall G. Sease of the Sease Law Firm in Hartley Iowa. Defendant City of Sioux Center, Iowa, was represented by counsel Ivan T. Webber of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., in Des Moines, Iowa.

A. The Summary Judgment Ruling

Because the court's ruling on the parties' cross-motions for summary judgment, Rural Water Sys. # 1 v. City of Sioux Center, Iowa, 967 F.Supp. 1483 (N.D.Iowa 1997), framed the factual and legal issues for trial, the court will recapitulate the conclusions in that ruling here. In the summary judgment ruling, the court considered, inter alia, the requirement that the entity seeking protection under § 1926(b) be indebted to the United States at the time of the alleged curtailment of its protected service area.¹ After examining the record concerning RWS # 1's "buy out" of its notes to the United States,² and interpretation of the pertinent statutory provisions governing that "buy out,"³ the court concluded that RWS # 1 lost the protections of § 1926(b) when it bought back its notes in 1988 and did not regain such protections until RWS # 1 again became indebted to the United States in 1992. Consequently, the court concluded that RWS # 1 could not state a claim that the City violated § 1926(b) when it annexed portions of the disputed territory in 1989, because RWS # 1 simply had no protection of § 1926(b) to assert against that annexation. The court therefore granted summary judgment in favor of the City on any part of any claim in which RWS # 1 asserted that the City's expansion to its 1989 city limits involved a curtailment or limitation of RWS # 1's service area in violation of § 1926(b), and denied that part of RWS # 1's cross-motion for summary judgment asserting that the City's expansion to its 1989 city limits violated § 1926(b).

The question of whether curtailments or threatened curtailments of RWS # 1's service area occurred in violation of § 1926(b) after July 1, 1992, when RWS # 1 again became indebted to the United States, the court concluded, would have to await resolution upon trial on the merits. The court concluded that RWS # 1's service area, where it "made service available," must be determined by the coincidence of RWS # 1's legal right or authority to serve, a matter of state law, and its physical ability to serve, a matter of fact determined by the "pipe-in-the-ground test" established by federal precedent. The court found that the Iowa statute the City contended established RWS # 1 had no legal right to serve within two miles of the City's 1989 city limits, IOWA CODE § 357A.2, is not applicable to an entity such as RWS # 1, which is not a "special water district," but has instead remained a water service association.

Therefore, the court concluded, the question of the extent of RWS # 1's protected service area turns on RWS # 1's physical ability to serve portions of its service area. Where RWS # 1 was physically able to serve, however, was the subject of genuine issues of material fact. In particular, the court found that the City had generated genuine issues of material fact as to whether RWS # 1 had an agreement with the City that one of its lines would be only a dedicated transmission line, thus excluding that line from defining where RWS # 1 physically made service available. Other fact questions persisted as to RWS # 1's physical ability to serve the entirety of the area outside of the City's 1989 boundaries that RWS # 1 claims is protected by § 1926(b).

Consequently, the court denied the cross-motions for summary judgment to the extent not otherwise resolved, and stated that this matter would proceed to trial on the question of the extent of RWS # 1's physical ability to serve all portions of its asserted service area outside of the City's 1989 city limits and the City's encroachment upon any protected service area. The findings of fact, which follow, are molded to address the remaining questions identified in the summary judgment ruling.

B. Findings Of Fact

These findings of fact are not meant to be exhaustive. They are intended instead to provide the...