Le-Ax Water District v. City of Athens, Ohio

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0365P (6th Cir.)
File Name: 03a0365p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
LE-AX WATER DISTRICT,
Plaintiff-Appellee,
v.
CITY OF ATHENS, OHIO,
Defendant-Appellant.
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No. 02-3016
Appeal from the United States District Court
for the Southern District of Ohio at Columbus.
No. 00-01328—Algenon L. Marbley, District Judge.
Argued: June 12, 2003
Decided and Filed: October 10, 2003
Before: KEITH, MOORE, and GIBBONS, Circuit Judges.
_________________
COUNSEL
ARGUED: Garry E. Hunter, LAW DIRECTOR, Athens,
Ohio, for Appellant. Orla E. Collier III, BENESCH,
FRIEDLANDER, COPLAN & ARONOFF, Columbus, Ohio,
for Appellee. ON BRIEF: Garry E. Hunter, LAW
DIRECTOR, Athens, Ohio, for Appellant. Orla E. Collier III,
BENESCH, FRIEDLANDER, COPLAN & ARONOFF,
Columbus, Ohio, for Appellee. Barry M. Byron, Willoughby,
2 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
Ohio, Dennis M. O’Toole, Stephen P. Bond,
BAUMGARTNER & O’TOOLE, Elyria, Ohio, for Amici
Curiae.
MOORE, J., delivered the opinion of the court, in which
KEITH, J., joined. GIBBONS, J. (pp. 17-20), delivered a
separate dissenting opinion.
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. The defendant
City of Athens, Ohio (“Athens”) appeals the district court’s
grant of summary judgment and of a declaratory judgment to
the plaintiff Le-Ax Water District (“Le-Ax”), as well as the
district court’s denial of Athens’s own motion for summary
judgment. University Estates owns 825 acres of property
outside of, but nearby, both Athens and Le-Ax. Both Athens
and Le-Ax wish to supply water to University Estates, which
seeks to develop its property into a golf-course community.
After University Estates made arrangements for Athens to
supply the necessary water, Le-Ax, a predominantly rural
water district, brought this lawsuit, claiming that Athens’s
agreement to provide water service to University Estates
violated Le-Ax’s rights under 7 U.S.C. § 1926(b). For the
reasons that follow, we REVERSE the district court’s grant
of summary judgment and of a declaratory judgment to Le-
Ax, and we also REVERSE the district court’s denial of
summary judgment to Athens. We REMAND this case to the
district court so that it may enter judgment in favor of Athens
and dismiss the case.

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
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I. OVERVIEW
A. Factual History
The Le-Ax Water District is a rural water district that was
created by a judicial order upon a petition filed in the Athens
County Court of Common Pleas in 1980, pursuant to OHIO
REV. CODE ANN. § 6119.01. Joint Appendix (“J.A.”) at 71-
72. As a water district, Le-Ax is an independent political
subdivision of the State of Ohio, governed by OHIO REV.
CODE ANN. § 6119. Le-Ax’s territory was described in the
petition approved by that court.
Le-Ax, as a rural water district, assumed the debt that its
predecessor owed to the United States Department of
Agriculture (“USDA”). As a result, Le-Ax has been indebted
to the USDA since its inception. Le-Ax subsequently
incurred another debt to the USDA when it sold revenue
bonds to the Rural Economic and Community Development
Service (“RECDS”), which was formerly known as the
Farmers Home Administration (“FmHA”). Bonds were
issued on February 26, 1997, in the principal amount of
$6,844,000 (at 4.5% interest), that will expire on February 1,
2037. J.A. at 309. The loans were not made in order to help
Le-Ax finance the University Estates project and apparently
have no connection in any way to the University Estates
transaction.
University Estates owns 825 acres of property, all of which
is outside the boundaries of both Le-Ax and Athens.
University Estates plans to develop this property into a golf
course and approximately 800 homes. The property is close
to the boundaries of both Le-Ax and Athens; it borders
Athens on Athens’s northern side, and is, at its closest point,
1400 feet (roughly one third of a mile) from Le-Ax’s
boundary. J.A. at 230 (Aff. of Steven Mullaney). Le-Ax has
taken no formal steps to change its boundaries to include
University Estates’s property, such as by filing a petition in
4 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
state court under OHIO REV. CODE ANN. § 6119.051. In
contrast, Athens has begun the process of changing its
boundaries to include University Estates. On October 16,
2000, Athens’s City Council authorized a development
agreement with University Estates, pursuant to which Athens
would annex University Estates and provide it with water.
J.A. at 117-22 (Ordinance and Development Agreement).
Standing in Athens’s way, however, is this lawsuit — for
Le-Ax also wishes to supply University Estates with water
and claims that 7 U.S.C. § 1926(b) vests Le-Ax with the right
to serve University Estates. Although Le-Ax does not
currently supply University Estates with water (the property
as of yet has no access to water from any supplier) and does
not currently have lines extending into University Estates’s
territory, Le-Ax claims that it could supply University Estates
with water almost immediately. Le-Ax refers to an eight-inch
water main that it owns, which is immediately adjacent to the
University Estates site. Supplemented by two nearby storage
tanks, the eight-inch transmission line, Le-Ax claims, can
provide water to University Estates at a rate far exceeding the
estimates of University Estates’s expected usage. A pressure-
reducing valve, a tap in, and a pumping station will be
necessary to connect the eight-inch main to University
Estates. However, there was unrebutted testimony that the
valve is an apparently minor and inexpensive addition and the
tap-ins and the pumping station (as part of the water apparatus
internal to the site) are to be provided by the developer of the
property, not the water supplier. J.A. at 553 (Dep. Test. of
John Collins).
B. Procedural History
On November 16, 2000, Le-Ax filed this lawsuit in the
United States District Court for the Southern District of Ohio,
alleging that the proposed water supply arrangement between
Athens and University Estates would violate 7 U.S.C.
§ 1926(b). Upon cross-motions for summary judgment and

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
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an in-court hearing, the district court granted summary
judgment to Le-Ax and issued a declaratory judgment that the
provision of water from Athens to University Estates would
violate 7 U.S.C. § 1926(b). This timely appeal followed.
II. ANALYSIS
A. Standards of Review
This court reviews a grant of summary judgment de novo.
Bukowski v. City of Akron, 326 F.3d 702, 707 (6th Cir. 2003).
Although the district court’s denial of a motion for summary
judgment is usually treated as a nonappealable interlocutory
order, when “an appeal from a denial of summary judgment
is presented in tandem with a grant of summary judgment,
this court has jurisdiction to review the propriety of the
district court’s denial of summary judgment.” Hamad v.
Woodcrest Condo. Ass’n, 328 F.3d 224, 235 (6th Cir. 2003)
(quotation omitted). The district court’s denial of summary
judgment based on purely legal grounds is reviewed de novo.
Id. at 235-36. Summary judgment is appropriate where the
“pleadings, depositions, answers to interrogatories, and
admissions on file together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c).
B. Background to 7 U.S.C. § 1926(b)
Over forty years ago, Congress passed the Agricultural Act
of 1961, Pub. L. No. 87-128, 75 Stat. 294, which sought to
preserve and protect rural farm life in a number of respects.
Title III of the Act (which is known as the Consolidated Farm
and Rural Development Act) was concerned largely with
issues of agricultural credit. Title III contained two sections
that are at issue here, sections 306(a) and 306(b). Section
306(a) of the Act, now codified at 7 U.S.C. § 1926(a), made
federal loans available to water service associations. Section
6 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
306(b), now codified at 7 U.S.C. § 1926(b), protected the
recipients of such loans from competition, to a certain extent.
The text of section 306(b) reads:
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.
7 U.S.C. § 1926(b). This provision prevents local
governments from expanding into a rural water association’s
area and stealing its customers; the legislative history states
that the statutory provision was intended to protect “the
territory served by such an association facility against [other]
competitive facilities” such as local governments, as
otherwise rural water service might be threatened by “the
expansion of the boundaries of municipal and other public
bodies into an area served by the rural system.” S. Rep. No.
87-566, at 67 (1962), reprinted in 1961 U.S.C.C.A.N. 2243,
2309.
The concept of economies of scale is an integral part of
§ 306(b)’s rationale; by protecting a rural water association’s
customer base, the provision allows such associations to
spread their fixed costs over a large group of users. In so
doing, the statute aims to prevent rural water costs from
becoming prohibitively expensive to any particular user, to
develop a system providing fresh and clean water to rural
households, and to protect the federal government as insurer
of the loan. Id. (“By including service to other rural residents,
the cost per user is reduced and the loans are more secure in

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
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addition to the community benefits of a safe and adequate
supply of running household water.”); see also Lexington–S.
Elkhorn Water Dist. v. City of Wilmore, 93 F.3d 230, 233 (6th
Cir. 1996) (stating that the Act “safeguard[s] the financial
viability of rural associations and Farmers Home
Administration loans” and “encourage[s] rural water
development by expanding the number of potential users”).
We have stated that this “provision ‘should be given a liberal
interpretation that protects rural water associations indebted
to the FmHA from municipal encroachment.’” Lexington–S.
Elkhorn, 93 F.3d at 235 (citation omitted).
In order to state a claim under § 1926(b), a plaintiff must
establish “that 1) it is an ‘association’ within the meaning of
the Act; 2) it has a qualifying outstanding FmHA loan
obligation; and 3) it has provided or made service available in
the disputed area.” Adams County Reg’l Water Dist. v. Vill.
of Manchester, 226 F.3d 513, 517 (6th Cir. 2000). The first
two elements are not in dispute here; the parties agree that Le-
Ax is an “association” within the meaning of the Act and that
Le-Ax has a qualifying outstanding FmHA loan obligation.
The only element in controversy here is whether Le-Ax
satisfies the third element of the test.
C. The “Has Provided or Made Service Available”
Requirement
The key question is whether Le-Ax satisfies the
requirement that the association “has provided or made
service available in the disputed area.” Id. at 517.
Unfortunately, the statute and the legislative history provide
no help in explaining this phrase, which is derived from the
statute itself. See Scott Hounsel, Note: Water Associations
and Federal Protection Under 7 U.S.C. § 1926(b): A
Proposal to Repeal Monopoly Status, 80 TEX. L. REV. 155,
159 (2001) (noting that the statute does not define “provided
or made available”). Without any guidance from Congress or
the Supreme Court, federal appellate courts have interpreted
8 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
1The Fourth Circuit in Bell Arthu r reports that we also have adopted
this approach. See Bell Arthur Water Corp. v. Greenville Utils. Comm’n,
173 F.3d 517 , 526 (4th Cir. 1999). As we explain below, however, the
Bell Arthur court was apparently misreading our decision in Lexington–S.
this language in a variety of ways. Different circuits use
different factors to determine whether a water association can
invoke the protections of § 1926, including whether the water
association has the physical ability to serve the area in
question, and whether it has a legal duty or legal right to do
so.
To determine whether service was made available, many
courts begin with a “pipes in the ground” or “physical ability”
approach that examines whether the water association has the
physical means presently to serve the area. This inquiry asks
whether the association can demonstrate “‘that it has adequate
facilities within or adjacent to the area to provide service to
the area within a reasonable time after a request for service is
made.’” Sequoyah County Rural Water Dist. No. 7 v. Town
of Muldrow, 191 F.3d 1192, 1203 (10th Cir. 1999) (citation
omitted). The Tenth Circuit has adopted this approach but
has also required that the water association have the right
under state law to serve the area in question. Id. at 1202 n.8.
The Eighth Circuit applies this same test, requiring that a
water association show both that it has the physical means to
serve the area and that it has a legal right to do so. Rural
Water System #1 v. City of Sioux Center, 202 F.3d 1035, 1037
(8th Cir.), cert. denied, 531 U.S. 820 (2000).
Neither of those circuits requires that a water association
have a legal duty to serve in order to receive protection under
§ 1926. That is, however, the approach of the Fourth Circuit,
which apparently requires both a state-law duty to serve and
a physical ability to serve. Bell Arthur Water Corp. v.
Greenville Utils. Comm’n, 173 F.3d 517, 525-26 (4th Cir.
1999).1 The Fifth Circuit has adopted a far looser approach,

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
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Elkho rn. W e have only required (like the Tenth Circuit) a state-law right
(not duty) to serve the area to invoke § 1926.
apparently holding that service is made available through
either a state-law duty to serve or a physical ability to serve.
N. Alamo Water Supply Corp. v. City of San Juan, 90 F.3d
910, 916 (5th Cir.), cert. denied, 519 U.S. 1029 (1996).
As the above analysis makes clear, the circuits are in
conflict as to what they require. In Lexington–S. Elkhorn, we
adopted the same two-part approach that the Eighth and Tenth
Circuits have taken. The first requirement under
Lexington–S. Elkhorn is the “pipes in the ground”
requirement. In Lexington–S. Elkhorn, we plainly stated that
“[i]f an association does not already have service in existence,
water lines must either be within or adjacent to the property
claimed to be protected by Section 1926(b) prior to the time
an allegedly encroaching association begins providing service
in order to be eligible for Section 1926(b) protection.”
Lexington–S. Elkhorn, 93 F.3d at 237 (emphasis added). The
second requirement of Lexington–S. Elkhorn is that the water
district must have the legal right under state law to serve the
area in question. Id. at 235-36 (noting that “Lexington-South
Elkhorn admits that it has not obtained . . . from the Kentucky
Public Service Commission [the right] to construct facilities
or to serve customers within portions of the disputed areas,”
which “distinguish[es] this case from other cases in which
courts have upheld water districts’ rights to Section 1926(b)
protection”). Because neither of these requirements was met,
we dismissed the water district’s claim under § 1926(b). Id.
at 238 (stating that because the plaintiff “has not established
its authorization to serve the disputed properties or its ability
to provide the service,” it cannot be said to have “made
service available”).
In this case, Le-Ax has clearly satisfied both of these
requirements. First, under state law, Le-Ax has a legal right
10 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
to serve the area. As even Athens seems to acknowledge,
Ohio law permits water districts “[t]o supply water to users
within and without the district.” OHIO REV. CODE ANN.
§ 6119.01(A) (emphasis added). Under the plain text of this
statute, which Athens has not even attempted to distinguish,
Le-Ax has the right to provide service outside its boundaries.
Second, Le-Ax has the physical ability to serve University
Estates within the meaning of our “pipes in the ground” test.
It is undisputed that Le-Ax has water lines “within or adjacent
to” the relevant property that could meet University Estates’s
needs. Le-Ax currently has an eight-inch line immediately
adjacent to University Estates, and also has water storage
tanks that augment the system. Athens’s only argument is
that some additional work would have to be done before Le-
Ax could supply University Estates with water. Athens points
out that Le-Ax’s own expert testified that Le-Ax would need
a pressure-reducing valve, some tap-ins, and a pumping
station in order to supply University Estates with water. The
pressure-reducing valve is apparently a minimal addition that
costs roughly $2,000, and the tap-ins and pumping station
would be provided by University Estates, regardless of
whether Athens or Le-Ax supplied the water. To argue, as
Athens does, that water service must be available immediately
(evidently in the sense that someone at University Estates
must be able to go over to the faucet and turn on the water),
would be to ignore our statement in Lexington–S. Elkhorn that
the “made available” requirement is satisfied not only when
the pipes are “within,” but also when they are merely
“adjacent to” the property. The evidence here admits of only
one conclusion, that Le-Ax “has adequate facilities within or
adjacent to the area to provide service to the area within a
reasonable time after a request for service is made.”
Sequoyah County, 191 F.3d at 1203 (quotation omitted); cf.
Bell Arthur, 173 F.3d at 526 (holding that service was not
made available when the water district only had a six-inch
pipeline running near the disputed area and a fourteen-inch
pipeline was necessary to serve the area); Glenpool Util.
Servs. Auth. v. Creek Cty. Rural Water Dist., 861 F.2d 1211,

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City of Athens, Ohio
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1213 (10th Cir. 1988) (holding that service was made
available when the water district had a water line that ran
within fifty feet of the property), cert. denied, 490 U.S. 1067
(1989).
D. Offensive and Defensive Uses of Section 1926
Having established the physical ability to serve University
Estates and a legal right to do so under state law, Le-Ax
argues that it is therefore entitled to summary judgment. We,
however, believe that Le-Ax cannot properly invoke the
protections of 7 U.S.C. § 1926(b). Central to our conclusion
is the fact that Le-Ax is not seeking to use the statute to
protect its users or territory from municipal incursion in this
case. It instead is seeking to use the statute to foist an
incursion of its own on users outside of its boundary that it
has never served or made agreements to serve. To grant Le-
Ax what is essentially monopoly status over property that it
has never served (or contracted to serve), and that is outside
of its boundary, we believe, would be wholly inconsistent
with the statute’s text and legislative history, as well as our
case law. Ultimately, we agree with Athens that § 1926(b)
can be used only as a shield to defend against invasion rather
than as a sword to wage one.
This case presents unique facts. Le-Ax has brought this
lawsuit under 7 U.S.C. § 1926(b), claiming that Athens has
improperly curtailed or limited Le-Ax’s activities by
contracting to provide University Estates with water. Athens,
however, is not attempting to serve users within Le-Ax’s
boundary. Nor is Athens attempting to steal Le-Ax’s
customers that may be outside of Le-Ax’s boundary. Instead,
Athens is merely seeking to persuade unserved users to sign
up with Athens (rather than Le-Ax) for water service.
Believing Athens’s action to be outside of the statute’s
intended prohibition, we hold today that a claim under
§ 1926(b) has not been established under these circumstances.
When a rural water district’s boundaries are geographically
12 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
determined by the state, we hold that a rural water district
cannot use § 1926(b) as a sword to force new customers who
are outside that geographic area to receive water service
through the rural water district.
We begin with the text and legislative history of 7 U.S.C.
§ 1926(b). The text of the statute states that “[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.” 7 U.S.C. § 1926(b). The statute’s use of
phrases like “curtailed” and “limited” to describe the
municipality’s interference with the rural water association
suggests that a rural water association must already be
providing service to an area before the protections of
§ 1926(b) apply. The statute’s language provides no support
for Le-Ax’s claim that it has a right to curtail or limit
Athens’s own service to University Estates. See Hounsel,
supra, 80 TEX. L. REV. at 159 (arguing that the statutory text
suggests “that it is the existing customers of the association
that are off-limits to competing municipalities”).
The legislative history also makes it clear that the statute
was only meant to protect rural water associations from the
outside threat of local governments taking their customers —
not as a weapon for water associations to use to recruit new
users outside of their boundaries. The legislative history
states that the section was “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. 87-566, at 67 (1962), reprinted in 1961
U.S.C.C.A.N. 2243, 2309. The legislative history casts the
statute’s purpose in a defensive light. It plainly suggests that
the goal of the statute is only to protect territory already
served by a rural water association from municipal expansion
into the rural water association’s area; it does not give

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
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credence to Le-Ax’s hypothesis that the statute can be used to
recruit unwilling new users outside of the rural water
association’s boundary. Cf. Hounsel, 80 TEX. L. REV. at 159-
60 (“[T]he claim that an indebted association could extend its
federal protection beyond its actual or operative service area
has no support in the legislative history.”).
The distinction between “offensive” and “defensive” uses
of the statute is also embedded, although somewhat
implicitly, in our cases. Even our broad statements about
§ 1926(b)’s applicability have always involved an element of
actual encroachment on a water association’s existing area or
users. See Lexington–S. Elkhorn, 93 F.3d at 235 (stating the
section “‘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’”) (citation omitted) (emphasis added);
Adams County, 226 F.3d at 519 (stating “‘that the statute
should not be construed narrowly to prohibit municipal
encroachment only if technically by annexation or grant of
franchise, but should be applied broadly to protect rural water
associations indebted to FmHA from competition from
expanding municipal systems’”) (citation omitted) (emphasis
changed). We, in fact, presumed the element of
encroachment in our version of the “pipes in the ground” test,
where we stated that “water lines must either be within or
adjacent to the property claimed to be protected by Section
1926(b) prior to the time an allegedly encroaching
association begins providing service in order to be eligible for
Section 1926(b) protection.” Lexington–S. Elkhorn, 93 F.3d
at 237 (emphasis added). The repeated use of the term
“encroachment” suggests that the statute is only invoked
properly when the municipality is attempting to provide water
service to a rural water association’s users or within its
boundary.
14 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
Our conception of § 1926(b) is also consistent with the
results in cases both in this circuit and in other circuits.
Virtually all of the cases involving § 1926(b) involve
competitors who attempt to serve customers within the rural
water district’s state-law authorized boundaries, which is
simply not the case here. See Lexington–S. Elkhorn, 93 F.3d
at 232 (holding that although Lexington–S. Elkhorn was
“offering to provide water service to customers located within
the Water District’s boundaries,” it did not violate the statute
because the water district was neither licensed to reach those
customers nor had the facilities to do so); Sequoyah County,
191 F.3d at 1201 n.7, 1204 (holding that there was a genuine
issue for trial on whether the water district could adequately
supply the water to the disputed territories, but “assum[ing]
that the disputed customers are within Plaintiff’s territory as
it is defined by state law”); N. Alamo, 90 F.3d at 913
(involving users and property that “lie within the Utility’s
Certificated Area”); Rural Water Dist. No. 1, Ellsworth
County v. City of Wilson, 243 F.3d 1263, 1267 (10th Cir.
2001) (involving properties within the water district’s state-
law boundary).
Le-Ax argues that § 1926(b) should apply whenever a rural
water association has the capability of serving users that could
also be served by some other entity. This vision of § 1926(b)
is expansive indeed. It would essentially give Le-Ax
monopoly status not only within its boundaries and among its
current users, but also would extend that status to wherever
Le-Ax could provide service. When questioned by the panel
at oral argument, Le-Ax did not dispute that, under its view of
§ 1926(b), it was entitled by federal law to the exclusive right
to provide service to any unincorporated area that it could
physically serve. Were we to uphold Le-Ax’s claim in this
case, we would be holding that this federal law, originally
meant to protect water associations from undue intrusion,
somehow gives them this sort of roving monopoly status.
Without support in the statute’s text, the legislative history, or

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
15
2A few states (including at least one in our o wn circuit) app arently
do not create boundaries for their water districts. See Scott Hounsel,
Note: Water A ssociations a nd F ederal Protection Und er 7 U.S.C.
§ 1926(b): A Proposal to Repeal Monopoly Status, 80 TEX. L. REV. 155,
163 (2001) (explaining that “[t]oday, the ability to determine the service
area of any water supplier is further complicated by state statutes, which
may or may not attach geographical boundaries when authorizing a utility
to provide water under state regulations”). Kentucky, for example,
evidently does not prescribe boundaries for its water districts; as a result,
the bounda ries of a water district or association cannot defined by state
law but on ly by practice. See N. Shelby Water Co. v. Shelbyville Mun.
Water & Sewer Com m’n, 803 F. Supp. 15, 21 -22 (E.D. Ky. 1992 ) (noting
that an administrative officer of the state had testified that “[t]here is no
operative definition under Kentucky law of the phrase ‘service area’ to
in relevant precedent, we are reluctant to take such a broad
step.
Considering the statute’s text and history as well as our
own precedents, we must conclude that Le-Ax has not
presented a claim under § 1926(b). We hold that when a rural
water district’s boundaries are geographically determined by
the state, a rural water district cannot use § 1926(b) to obtain
new customers outside that geographic area.
Because the distinction between offensive and defensive
uses can be difficult to delineate, we take care to limit the
scope of our holding. This is not a case where a defendant
has intruded on a water association’s actual or operative
service area; the evidence is clear that University Estates was
never a customer of Le-Ax, University Estates never arranged
to have water provided by Le-Ax, and no part of University
Estates was ever within Le-Ax’s state-law service boundary.
Moreover, no state law requires University Estates to be
served only by Le-Ax or requires Le-Ax to serve University
Estates. We also take care to point out that Le-Ax’s
boundaries are clearly defined by state law; we do not
consider here a case where the state has not defined the
boundaries of its water districts or associations.2
16 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
delineate North Shelby’s territory” and not ad dressing the m atter); see
also Ho unsel, supra, 80 TEX. L. REV. at 163 n.39 (contrasting Mississippi,
which does prescribe geographical bo unda ries with K entucky, which does
not). Because Ohio in this case has prescribed the boundaries of the Le-
Ax water d istrict, we do not consid er here the ram ifications of an
unbounded water district for purposes of § 192 6(b).
We hasten to point out that we are not leaving Le-Ax in a
difficult position. The current users and service area of Le-
Ax are still sacrosanct under § 1926(b). Le-Ax still can
attempt to persuade University Estates to become its customer
using normal competitive means. Le-Ax also has the option
of changing its boundaries pursuant to the procedures
specified in OHIO REV. CODE ANN. § 6119.051, which allows
a water district, in some circumstances, to seek to expand its
boundaries by filing a petition in the court of common pleas.
We simply hold that federal law does not compel University
Estates to be served by Le-Ax. Finding this to be the
inexorable conclusion of our analysis of the statute’s text,
history, and interpretative case precedent, we dismiss Le-Ax’s
claim.
III. CONCLUSION
For the foregoing reasons, we REVERSE the district
court’s grant of summary judgment and of a declaratory
judgment to the plaintiff, and REVERSE the district court’s
denial of summary judgment to the defendant. We
REMAND this case to the district court so that it may enter
judgment in favor of Athens and dismiss the case.

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
17
_______________
DISSENT
_______________
JULIA SMITH GIBBONS, Circuit Judge, dissenting. I
agree with the majority’s well-reasoned analysis contained in
sections II.A. through II.C. of its opinion. Based upon this
analysis, I would affirm the district court’s judgment. While
the arguments contained in section II.D. of the majority’s
opinion may be sound policy, in my view, the result reached
by the majority is inconsistent with the statute’s language as
interpreted by this court’s binding precedent.
The majority is correct when it says in section II.D. that
Ҥ 1926(b) can be used only as a shield to defend against
invasion rather than as a sword to wage one.” (Majority Op.
at 11.) The majority errs, however, in defining the area that
§ 1926(b) protects from invasion.
As the majority correctly explains in section II.B. of its
opinion, § 1926(b) protects the area where the association
“has provided or made service available.” (Majority Op. at 7,
quoting Adams County Reg’l Water Dist. v. Vill. of
Manchester, 226 F.3d 513, 517 (6th Cir. 2000).) It is
relatively easy to determine the area where the association has
provided service, but it is not obvious what the statute means
by “service . . . made available.” 7 U.S.C. § 1926(b). As the
majority correctly explains in section II.C. of its opinion,
however, this difficult issue has already been addressed by
our court.
In Lexington–S. Elkhorn Water District v. City of Wilmore,
Kentucky, we held that:
whether an association has made service available is
determined based on the existence of facilities on, or in
the proximity of, the location to be served. If an
18 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
association does not already have service in existence,
water lines must either be within or adjacent to the
property claimed to be protected by Section 1926(b)
prior to the time an allegedly encroaching association
begins providing service in order to be eligible for
Section 1926(b) protection.
93 F.3d 230, 237 (6th Cir. 1996). In addition to the
requirement that the association have “pipes in the ground”
within or adjacent to the area in question, the association must
also have the legal right under state law to serve the area in
question to benefit from the monopoly power afforded by
§ 1926(b). Id. at 235-36.
Le-Ax, as the majority holds, “has clearly satisfied both of
these requirements” as to the disputed area in this case.
(Majority Op. at 9.) First, Le-Ax has a water line
immediately adjacent to the University Estates development.
(Majority Op. at 10.) The uncontradicted evidence is that this
line has been in place since Le-Ax’s creation over twenty
years ago. (JA at 66-67.) Moreover, the uncontradicted
evidence demonstrates that this line was designed with
surplus capacity to serve future growth throughout the area,
including the area encompassing the University Estates
development. (JA at 69.) As the district court found in its
thorough and well-reasoned opinion, “Plaintiff’s distribution
lines that make service available to the UE development are
already in place, and have been in place since the Plaintiff’s
creation over twenty years ago – long before the City of
Athens was interested in the right to distribute water to the
region in question.” (JA at 21.) Second, as the majority
explains, Ohio law permits Le-Ax to serve the University
Estates development. (Majority Op. at 10.)
Because Le-Ax maintains a water line with excess capacity
immediately adjacent to the University Estates development
(and has done so for over twenty years, anticipating future
growth) and because Le-Ax has the right under state law to

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No. 02-3016 Le-Ax Water District v.
City of Athens, Ohio
19
1In the absence of any autho rity, the majority seems to b ase its
analysis upon a student law re view no te that advocates the repeal of
§ 192 6(b). (Majority Op. at 12, citing Sco tt Hounsel, N ote: Water
Associations and Fede ral P rotection Under 7 U .S.C. §1926(b): A
Proposal to Repeal Monopoly Status, 80 Tex. L. Rev. 155 (2 001).)
serve the University Estates development, the University
Estates development is within Le-Ax’s service area that is
protected from invasion by § 1926(b), as interpreted by our
holding in Lexington–S. Elkhorn. Therefore, Le-Ax is using
§ 1926(b) in this case as a shield to protect an area where it
has made service available for over twenty years.
Nevertheless, the majority withholds protection under
§ 1926(b) because the University Estates development is not
within Le-Ax’s state-defined political boundary.
The majority, however, fails to explain why it matters
where state law places Le-Ax’s boundaries for purposes other
than providing service. The flaw in the majority’s analysis is
that it conflates an association’s political boundary with an
association’s service boundary. Because state law grants Le-
Ax the legal right to serve the University Estates
development, University Estates is within Le-Ax’s state-
defined service boundary. Moreover, because Le-Ax has
made service available to the University Estates development
via a water line with excess capacity immediately adjacent to
the development, Le-Ax is entitled to the protection of
§ 1926(b) under our holding in Lexington–S. Elkhorn. The
majority has not cited any case where a court found that a
water district’s political boundary, as opposed to its service
boundary, is relevant to defining the area protected by
§ 1926(b).1 Congress could have limited the protection
offered by § 1926(b) to an association’s state-defined political
boundary; instead, Congress chose to limit the statute’s
protection to where the association has provided service or
made service available.
20 Le-Ax Water District v.
City of Athens, Ohio
No. 02-3016
In Lexington–S. Elkhorn, we rejected the argument that an
association’s state-defined political boundary is relevant to
determining the area protected by § 1926(b). In Lexington–S.
Elkhorn, the City of Wilmore, Kentucky, did not dispute that
it extended its water lines into part of the plaintiff water
district’s territorial area. 93 F.3d at 232. The water district,
Lexington–S. Elkhorn, claimed that § 1926(b) protects its
territorial area from invasion by the city’s water lines. Id. at
234. The district court ruled in favor of the city, rejecting the
water district’s argument that its territorial boundary was
relevant to § 1926(b). Id. We affirmed, holding that
§ 1926(b) protects only that area where the water district has
provided service or made service available by maintaining
water lines nearby. Id. at 237. We found the water district’s
state-defined political boundaries to be irrelevant. Id. at 238
(looking to state law only to determine if the water district
had the legal right to serve the area and finding it unnecessary
to decide whether the disputed area was within the water
district’s state-defined boundaries).
The majority criticizes Le-Ax’s “expansive” vision of
§ 1926(d), which, according to the majority, would give an
association “monopoly status” to serve any area where it
could provide service. (Majority Op. at 14.) The majority’s
criticism is more appropriately directed toward Congress,
because § 1926(d) by its plain terms grants an eligible
association monopoly status to serve any area where service
is “made available” by the association. 7 U.S.C. § 1926(b).
This court’s binding precedent holds that service is “made
available” under § 1926(d) wherever the association has the
legal right to serve and the present ability to serve because it
has sufficient pipes in the ground within or adjacent to the
area. Lexington–S. Elkhorn, 93 F.3d at 237. Because there is
no basis in the statute or our precedent for the majority’s
addition of an additional element to a plaintiff’s claim under
§ 1926(b), I dissent.

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