Generic federal complaint on 1926(b) provided by: Steven M. Harris, OBA #3913 Michael D. Davis, OBA #11282 2431 E. 61st St., Suite 260 Tulsa, OK 74136 (918) 743-1276 SMHarris8@aol.com IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF OKLAHOMA ____________________________________) ____________________________________) ) Plaintiff, ) ) vs. ) Case No. _______________________ ) ____________________________________) ____________________________________) ) JURY TRIAL DEMANDED ) Defendants. ) COMPLAINT COMES NOW the Plaintiff, ____________________________, and for its claims and causes of action against the Defendants, alleges and states as follows: JURISDICTION l. This Court has jurisdiction over the issues raised in this case by virtue of Title 28 USC 1331 (Federal Question) and the rules regarding ancillary and pendent jurisdiction. VENUE 2. Venue is appropriate in this Court pursuant to and in accordance with Title 28 USC 1391(b). FACTUAL ALLEGATIONS 3. ____________________________ is an agency and legally constituted authority of the State of Oklahoma [82 O.S. Section 1324.6; Section 1306 (l970) (replead l972) - predecessor of 1324.6], created for the purpose of developing and providing an adequate water supply to serve and meet the needs of residents within the territory of the District (Title 82 O.S. Section 1324.3). 4. Defendant City of _____________________ (a municipality) and Defendant _____________________ Public Works Authority (an Oklahoma public trust created pursuant to 60 O.S. Section 176, et seq.) are located in Pittsburg County, and in part, within the jurisdictional limits of _____________________'s "Territory". (The Defendants are hereinafter collectively referred to as "_____________________") 5. _____________________ is duly empowered as a rural water district, to borrow funds from the Federal Government [Okla. Stat. Tit. 82, Section 1324.10 (Supp. l988)]. In the process of performing its purpose, _____________________ has in fact borrowed funds from the Federal Government, and continues to be indebted to the Federal Government pursuant to and in accordance with Title 7 USC 1926 for such borrowing. 6. _____________________ enjoys the protection of 7 United States Code, Section 1926(b), by reason of its indebtedness due the Federal Government. [Congress enacted 7 U.S.C. Section 1926(b) as part of a federal statutory scheme to extend loans and grants to certain associations providing soil conservation practices, water service, or management, etc.] The statute states: The 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; nor shall the happening of any such event be the basis of requiring such association to secure any franchise, license, or permit as a condition to continuing to serve the area served by the association at the time of the occurrence of such event. Title 7 U.S.C. Section 1926(b). 7. 7 U.S.C. Section 1926(b) prohibits municipalities' from exercising their powers to sell water, when their exercise would result in competition with a Rural Water District. (Rural Water District No. 3 v. Owasso Utils. Auth., 530 F.Supp. 818.) The statute [7 U.S.C. Section 1926(b)] protects an indebted rural association from curtailment or limitation by impinging municipal corporations. 8. Pursuant to its creating statutes, _____________________ was established to serve a certain geographical area which is hereinafter referenced as the _____________________ Territory. 9. Defendants are and have been selling water within _____________________'s "Territory" to potential customers of _____________________, which _____________________ has the ability to provide such service either currently or within a reasonable time. 10. Defendants have been properly warned, in writing, that they impinge, encroach, and are acting in competition with _____________________ within the above legally described "Territory". Despite such warnings, the Defendants have, knowingly, continued, in violation of law, to impinge, encroach and act in competition for water service within the "Territory". 11. _____________________ has brought this action seeking to enforce its right to exclusive water distribution granted it by virtue of Title 7 USC 1926(b). (See Paragraph 6). 12. The unambiguous wording of this statute and its legislative history disclose that the underlying purpose of 1926(b) is to protect the territory served by such association against competitive facilities which may be developed with the expansion of municipal boundaries: "A new provision [section 1926(b) has been added to assist in protecting the territory served by such an association facility against competitive facilities, which might otherwise be developed with the expansion of the boundaries of municipal and other public bodies into an area served by the rural system. S.Rep. No. 566, 87th Cong., 1st Sess., reprinted in 1961 U.S. Code Cong. & Admin. News 2243, 2309. 13. The Courts, which have addressed 1926(b), have made it clear that the statute should be applied broadly to protect rural water associations indebted to the FmHA from competition from expanding municipal systems, whatever form the competition may take: "The clear message of the three federal cases applying 7 USC 1926(b) and of the Senate Report is that the statute should not be construed narrowly to prohibit municipal encroachment only if technically annexation or grant of a franchise, but should be applied broadly to protect rural water associations indebted to the FmHA from competition from expanding municipal systems." Jennings Water, Inc. v. City of North Vernon, Inc., 682 F.Supp. 421, 425 (S.D. Ind. 1988), affirmed at 895 F.2d 311 (7th Cir. 1989). 14. In an Oklahoma Federal District Court case, the Court enjoined a municipal public utility from expanding its sales of water outside the city limits in an area served by a rural water association indebted to the FmHA, although the encroachment was not by expansion of city boundaries or by grant of a private franchise, finding that 1926(b) places federal limits on the power of municipalities to sell water when such sale would result in competition with a rural water district: Title 7 U.S.C. 1926(b) does not negate the power of municipalities to sell water as provided for in the Oklahoma Statutes, nor does it affect the authorization thereof. It does, however, place federally-imposed limitations upon that power, limitations designed to effectuate the legislative scheme of Congress embodies in the Agricultural Act of 1961 (7 U.S.C. 1921 et seq.). Section 1926(b) prohibits the municipalities' exercise of these powers when their exercise would result in competition with a Rural Water District. Rural Water District No. 3 v. Owasso Utilities Authority, 530 F.Supp. 818, 824 (N.D. Okl., 1979). 15. If the competition is based upon a municipality's annexation of an area already within the territory of a rural water district, the application of 1926(b) is even more simple: The face of the statute makes clear that Congress protected the indebted rural association from curtailment or limitation by impinging municipal corporations. The district court correctly held that District No. 2 came within the purview of section 1926(b) and had met the statute's threshold requirements, having a continuing indebtedness under section 1926 and having "made [service] available" to the area, by virtue of its line adjacent to the property and its responsibilities to applicants within its territory. The statute prohibits Glenpool from using annexation of Eden South to curtail or limit the service made available by District No. 2. Glenpool may not legally use "inclusion" of Eden South "within the boundaries of any municipal corporation" as a springboard for providing water service to the area, and thereby limit the service made available y District No. 2. Glenpool Utility Services v. Water District No. 2, 861 F.2d 1211, 1214 (10th Cir. 1988). "The section (7 USC 1926(b) clearly prohibits any curtailment or limitation of the service provided by a rural water association resulting from the inclusion of all or a party of its territory within a municipality while the association is indebted to the FmHA." Moore Bayou Water Association, Inc. v. Town of Jonestown, 628 F.Supp. 1367 (N.D. Miss. 1986). 16. Nor is a municipality allowed to encroach upon the services provided by a Rural Water District by any other means, including condemnation: The statute unambiguously prohibits any curtailment or limitation of an FmHA-indebted water association's services resulting from municipal annexation or inclusion. This language indicates a congressional mandate that local governments not encroach upon the services provided by such associations, be that encroachment in the form of competing franchises, new or additional permit requirements, or similar means. To read a loophole into this absolute prohibition, as Madison would have us do, and allow a city to do a condemnation what it is forbidden by other means, would render nugatory the clear purpose of 1926(b). City of Madison, Miss. v. Bear Creek Water Ass'n., Inc., 816 F.2d 1057 (5th Cir. l987). 17. Purposes of 7 U.S.C. 1926(b) include protection of the viability and financial security of the Water Association. See Jennings Water v. City of North Vernon, Ind., 895 F.2d 311 (7th Cir. 1989) and City of Madison v. Bear Creek Water Association, 816 F.2d 1057 (5th Cir. 1987). COUNT ONE VIOLATION OF 42 USC 1983 18. In order to state a cause of action under 42 USC 1983, Plaintiff must allege only that some person has deprived it of a federal right and that such person acted under color of state or territorial law. Gomez v. Toledo, 446 US 635, 64 L.Ed.2d 572, 100 S.Ct. 1920 (l980). 19. _____________________ has a federal right under Title 7 USC 1926(b) to be protected from any curtailment or limitation of its rights to sell water within its "Territory". 20. The actions of _____________________ have deprived _____________________ of the above-described federal right. 21. The actions of _____________________ were conducted under color of law, by virtue of _____________________'s statutory right to sell water within the State. 22. _____________________ has suffered damages as a result of the wrongful acts of _____________________, in an amount not yet determined, but in any event greater than $10,000. COUNT TWO DECLARATORY JUDGMENT 23. This claim is brought pursuant to and in accordance with Title 28 USC 2201 and 2202, seeking a declaration of the rights and other legal relations of the parties. 24. There exists an actual case or controversy between _____________________ and _____________________ regarding _____________________'s right to sell water within the _____________________ Territory and what compensation (damages) _____________________ should receive for such sales. 25. _____________________ seeks to have the Court declare the rights and other legal relations of the parties concerning the right of _____________________ to sell water within the _____________________ Territory. 26. Furthermore, _____________________ seeks to have the Court declare reasonable damages which _____________________ must pay _____________________ for its past and future sales of water within the _____________________ Territory, until transition can be completed eliminating encroachment. COUNT THREE DECLARATORY JUDGMENT - RATE CLAIM - VIOLATION OF STATUTE 27. This claim is brought pursuant to and in accordance with Title 28 U.S.C. 2201 et. seq. for a declaratory judgment, and pursuant to 79 O.S. 1, 2 & 4. 28. The claim is the result of a case of actual controversy within this jurisdiction. 29. _____________________ (a collective term) refers both to a municipality and a public trust which operates a utility by providing water to consumers both within and outside the city limits of the City of _____________________. 30. _____________________, in operating the utility, and selling water in a proprietary fashion, and being a "public business" is governed by the same restrictions as are placed on utility corporations and other "public business" relative to practices of discrimination in rates and services. (79 O.S. 4) 31. A rate scheme which discriminates between particular classes of customers must be based upon "substantial differences" as grounds for the distinction. By law, Defendants must also conduct their business on reasonable terms and without discrimination. 32. _____________________ utilizes a higher rate for providing water to Rural Water Districts than it does for certain large industrial users which are similarly situated. 33. There are no substantial differences between Plaintiff Rural Water District and a large industrial user, which would warrant substantial differing rates. 34. Said actions unfairly discriminate against Rural Water Districts and place unfair and onerous conditions and are therefore a violation of Title 79, Oklahoma Statutes 1, 2 & 4. COUNT FOUR DECLARATORY JUDGMENT - INJUNCTION 35. _____________________ has no water treatment facilities of its own and thus must purchase water from other sources. 36. For over 10 years _____________________ has acquired the water necessary to meet its needs from _____________________. 37. _____________________ executed and returned to _____________________ a Water Purchase Contract in the form attached hereto as Exhibit 1. 38. The execution of the Water Purchase Contract constituted the acceptance of an offer made by _____________________, and has been partially performed by both parties. 39. _____________________ has threatened to terminate the Water Purchase Contract, and/or to otherwise cease selling water to _____________________. 40. If _____________________ is allowed to terminate water sales to _____________________, _____________________ and the residents within the _____________________ Territory will suffer irreparable injury. 41. _____________________ cannot obtain from other sources a sufficient water supply to meet all the requirements of the residents within the _____________________ Territory, within the near future. _____________________ is pursuing diligently an alternative water source. 42. _____________________ has fully performed each of its obligations under the Water Purchase Contract and is not in default of the provisions. _____________________'s efforts to terminate the Contract is an obvious attempt to compel concessions from _____________________ and to violate _____________________'s 1926(b) rights. Breach of Contract 43. If _____________________ follows through on its threat to terminate water sales to _____________________, _____________________ will be in breach of the Water Purchase Contract: a. The Water Purchase Contract requires _____________________ to sell water to _____________________. b. The Water Purchase Contract does not allow _____________________ to terminate water sales to _____________________. Violation of 1926(b) 44. If _____________________ follows through on its threat to terminate water sales to _____________________, _____________________ will be in violation of 1926(b) because it will be curtailing and limiting _____________________'s ability to serve the water needs of the residents within the _____________________ Territory. Breach of Good Faith 45. If _____________________ follows through on its threat to terminate water sales to _____________________, _____________________ will be violation of the covenant of good faith. Hall v. Farmers Ins. Enterprise, 713 P.2d 1027 (Okl. 1955). Violation of 79 O.S. 4 and Public Policy 46. If _____________________ follows through on its threat to terminate water sales to _____________________, such action will be in violation of 79 O.S. 4 as well as the public policy of Oklahoma. (Title 79 O.S. 4 requires a "Public business" to conduct its activities and to provide its services or commodities upon reasonable terms without discrimination). Violation of Federal Antitrust Statutes 47. If _____________________ follows through on its threat to terminate water sales to _____________________, _____________________ will be a violation of the Federal Antitrust Statutes (Title 15 USC 1 et. seq.): a. _____________________ monopolizes and/or attempts to monopolize the water sales within the area within and surrounding the City of _____________________. b. _____________________ (referring to the City of _____________________ and the _____________________ Public Works Authority) have conspired together to restrain trade in that they have worked together to restrict the availability of water to potential sellers of water. c. The actions of _____________________, although local activities, substantially affect interstate commerce. d. Defendants operate an essential facility (_____________________'s water treatment facilities) which _____________________ cannot duplicate practically or reasonably and Defendants are seeking to deny _____________________ use of the facility. e. The actions of _____________________ have an anticompetitive affect in the relevant market (i.e. the sales of water within the area within and surrounding the City of _____________________). PRAYER Based upon the above and foregoing allegations, Plaintiff prays for a judgment against the Defendants as follows: l. A declaration that _____________________'s acts of selling water within the _____________________ Territory are a violation of 1926(b). 2. An award of monetary damages for _____________________'s acts of selling water within the _____________________ Territory in violation of 1926(b). 3. An order enjoining and restraining _____________________ from selling water within the _____________________ Territory. 4. A declaration that the Water Supply Contract is a valid and enforceable Agreement by and between _____________________ and _____________________. 5. A declaration that _____________________ cannot cease water sales to _____________________ because such action would: a. Violate 1926(b) by interfering with _____________________'s ability to serve its Territory; b. Violate the terms of the Water Supply Contract; c. Violate the requirements of good faith; d. Violate public policy; e. Violate _____________________'s obligation to provide service as required by Title 79 O.S. 4; and f. Violate the Federal Antitrust Statutes Title 15 USC 1 et seq. 6. An order enjoining and restraining _____________________ from terminating water sales to _____________________. 7. A declaration that _____________________ has violated its obligations as a public business due to its pricing practices. 8. A monetary judgment for damages sustained by _____________________'s violation of its obligations as a public business in its pricing practices. 9. A judgment directing and compelling _____________________ to transfer to _____________________ any and all water distribution facilities needed to service the residents within the _____________________ Territory. [North Alamo Water Supply Corp. v. City of San Juan, Texas, 90 F.3d 910, (5th Cir. 1996) cert denied 117 S.Ct. 586.] 10. A monetary judgment for all attorneys fees and costs incurred in this action. 11. Such further and other relief as may be appropriate. JURY TRAIL DEMANDED Plaintiff hereby demands a Jury Trial on all issues properly triable by Jury. Respectfully submitted, DOYLE & HARRIS ______________________________ Steven M. Harris, OBA #3913 Michael D. Davis, OBA #11282 2431 E. 61st St., Suite 260 Tulsa, OK 74136 (918) 743-1276 857-2.005:nw