# Opposition Brief — City of McAlester v. Pittsburg County Rural Water District No. 7

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2000
- **Citation:** 531 U.S. 1011

## Text

Supreme Court, U.S.

@) FILED
: 40 OCT 3 0 onnn

No.00-4

WN THE___CLERK
SUPREME COURT OF THE UNITED STATES

PITTSBURG COUNTY RURAL WATER -
DISTRICT NO.7,
Petitioner,

V.

CITY OF MCALESTER, et al.,
Respondents. ~

On Petition For Writ Or CERTIORARI
To Tae Unitep STATES CourT OF APPEALS
= For Tae Tents Circuit

RESPONSE TO CROSS PETITION

WESLEY BROWN LInDA C. MARTIN *

Brown & BROWN JAMES C. MILTON

417 E. CHEROKEE DOERNER, SAUNDERS, DANIEL

McA Ester, OK 74501 & ANDERSON, L.L.P.

(918) 423-4606 320 SoutH Boston AVENUE
Surre 500

Tutsa, OK 74103-3725
(918) 582-1211

Counsel for Respondents

* Counsel of Record

BECKER GALLAGHER LEGAL PUBLISHING, INC.,
CINCINNATI, OHIO 800-890-5001

TABLE OF CONTENTS

SMMEGD AMT GAMUEUINEE 85 bins OC sre be be ea bes i
TASLE OF AUTIRMneee 3 PEELS il
STATEMENT OF THE CASE 2... esa eceus 1

ARGUMENT AGAINST GRANTING PITTSBURG’S
CONDITIONAL CROSS-PETITION FOR
WHae Ge CREO i ee bw l

ARGUMENT 1
Every federal court to consider the issue has
rejected the argument advanced by Pittsburg in
its Cross Petition that it should receive
continued Section 1926(b) protection based on
federal loans that were satisfied in full. ...... 3

ARGUMENT 2
Pittsburg has misinterpreted and overstated the
test adopted by a handful of federal courts,
offered here by Pittsburg as a “bright line
NN rh ees ee a aes 10

TABLE OF AUTHORITIES
Federal Cases

Bell Arthur Water Corp. v. Greenville Util. Comm n,
173 F.3d 517 (4th Cir. 1999) ......------> 6

Bell Arthur Water Corp. v. Greenville Utils. Comm ‘Nn,
972 F. Supp. 951 (E.D.N.C. 1997), aff'd,
173 F.3d 517 (4th Cir. 1999) ......-----> 4,6

Lexington-South Elkhorn Water Dist. v. Wilmore,
93 F.3d 230 (6th Cir. 1996) .....-.-- 10, 14, 15

North Alamo Water Supply Corp. v. San Juan,
90 F.3d 910 (Sth Cir.), cert. denied,
519 U.S. 1029 (1996) ......----- 10, 11, 14

Rural Water System #1 v. Sioux Center,
967 F. Supp. 1483 (N.D. lowa 1997),
aff'd in part & rev'd in part, 202 F.3d 1035
(8th Cir.), cert. denied,
68 U.S.L.W. 3774 (2000) .....------- passim

Rural Water System #1 v. Sioux Center,
202 F.3d 1035 (8th Cir. 2000),
cert. denied, 68 U.S.L.W. 3774 (2000) ....-- 5

Scioto County Regional Water Dist. No. I v.
Scioto Water, Inc., 103 F.3d 38
(6th Cir. 1996), cert. denied,
$90 U.S. 1411 GESGT) 5 vc cee oes ties passim

ii

Sequoyah County Rural Water Dist. No. 7 v. Muldrow, 191
F.3d 1192 (10th Cir. 1999),

cert. denied, 120 S. Ct. 1532,

120 S. Ct. 1548 (2000) ............ a, shy Se

State Cases

Grand Junction v. UTE Water Conservatory Dist.,

Pee Fae Ol CMe, BPN) 6 ks oe ke ves 7,8
Mariposa County v. Merced Irrigation Dist.,

eg LS A | Ee ere 12
Public Water Supply Dist. No. 10 v. Peculiar,

971 S.W.2d 849 (Mo. Ct. App. 1998) ...... 4,6
West Norman Timber, Inc. v. State,

See Be Ges COM. TI) 6 i ee cee 12
Wetumpka v. Central Elmore Water Auth.,

ap oe. ae wet CAM. T997) ek ss 7
Federal Statutes
pe | er ee ae 1, 3, 10, 15
af eS ee ee ee ee ee eee eS
State Statutes
Sou. eee. OR. Be, BESO) oe eS 12, 13

ill

Gitte. Gent. Ot. Gh, BE 5 se 11

Cita, Som. 0 0S, § ISR. cc i ees 12, 13, 14
Federal Regulations

TCPR. BG THD) oc 6 eis 5 ees 15
TC.P.R. & PGR. THD sw vos ce eo ees 14

iV

STATEMENT OF THE CASE

Pittsburg’s Statement of the Case is incomplete in at
least one respect. Pittsburg asserts on page 9 of its Cross-
Petition that it purchased its original federal loans in 1989.
This assertion is inconsistent with the conclusion reached by
the U.S. Court of Appeals for the Tenth Circuit. The Tenth
Circuit concluded that while Pittsburg “repurchased” its
outstanding indebtedness to the FmHA, its promissory notes
to the FmHA were marked “SATISFIED IN FULL -
FmHA.” [Appendix A, at p. 5a.] This distinction between
Pittsburg’s assertion and the Tenth Circuit’s factual
conclusion is important because of existing circuit-made case
law on the impact on Section 1926(b) protection of the
satisfaction of an outstanding loan from the FmHA.

ARGUMENT AGAINST GRANTING
PITTSBURG’S CONDITIONAL CROSS-
PETITION FOR WRIT OF CERTIORARI

McAlester agrees with Pittsburg on one issue: that the
test for application of 7 U.S.C. § 1926(b) should be reviewed
by the U.S. Supreme Court. In its conditional cross petition
for writ of certiorari, Pittsburg argues that the Court should
adopt a “bright line rule” for application of Section 1926(b).
Pittsburg supports its proposed “bright line rule” with
selective quotation from a few decisions from courts that have
taken an extreme approach to Section 1926(b) interpretation.

The complexities of state law cause such a “bright line
rule” to be unworkable. In some states, the established
territory of a rural water association qualifying for federal
loans is determined on a step-by-step basis, with each addition
to the territory approved after a careful analysis of the needs
of the area and the capacity of the rural water association. In

l

other states, such as Oklahoma, the state statutes governing
creation of a rural water association allow a one-time
formation document to include a description of a vast and
typically vaguely described area as the association's territory.
The association’s original territory could include areas that
are located significant distances from the association’s water
distribution facilities. In some cases, an association’s
territory includes land that is separated from the association’s
water distribution facilities by a highway or a body of water.
As aresult, it is nearly impossible for the association to serve
the water needs of its entire territory without substantial
additional capital expenditures.

Pittsburg’s position on the “bright line rule” must be
viewed with skepticism, particularly when it is understood
that Pittsburg would argue against any action by governing
state agencies to remove an area from a rural water
association’s territory. [Appendix D, at p. 50a.] The “bright
line rule” would provide anticompetitive protection for areas
that were included within a rural water association’s territory
long before the association borrowed funds from the federal
government. The anticompetitive protection would apply
even if the association has insufficient capacity or facilities to
serve the area. Under Pittsburg’s proposed scheme,
landowners in the area would be powerless to remove their
land from the rural water association’s territory.

In short, Pittsburg’s proposed “bright line rule”
ignores the clear terms of the statute. The rule proposed by
Pittsburg should be rejected in favor of the standard offered
by McAlester in its Petition for Writ of Certiorari, filed in
Case No. 00-323.

ARGUMENT 1

Every federal court to consider the issue has
rejected the argument advanced by
Pittsburg in its Cross Petition that it should
receive continued Section 1926(b) protection
based on federal loans that were satisfied in
full.

The first question presented by Pittsburg’s Cross
Petition rests solely on a legal issue - whether Section
1926(b) protection was extinguished when Pittsburg satisfied
its obligations to the FmHA in 1989. The Agricultural Credit
Act of 1987 contained a provision known as “subsection (g),”
Stating that 7 U.S.C. § 1926(b) “shall be applicable to all
notes or other obligations sold or intended to be sold” under
the Agricultural Credit Act. See 7 U.S.C. § 1929a note
(“Applicability of Prohibition on Curtailment or Limitation of
Service”). Scioto County Regional Water Dist. No. I v.
Scioto Water, Inc., 103 F.3d 38, 40 (6th Cir. 1996), cert.
denied, 521 U.S. 1111 (1997). Pittsburg’s Cross Petition
raises the issue of whether subsection (g)’s provision that
Section 1926(b) applies to “all” obligations “sold or intended
to be sold” means that Section 1926(b)’s protection extends to
a borrower that buys back its own loans from the FmHA,
effectively extinguishing them. /d.

Every federal court that has addressed this issue,
including the District Court and Tenth Circuit in this case, has
decided the issue in McAlester’s favor. Scioto County
Regional Water Dist. No. I v. Scioto Water, Inc., 103 F.3d
38, 43 (6th Cir. 1996), cert. denied, 521 U.S. 1111 (1997);
Sequoyah County Rural Water Dist. No. 7 v. Muldrow, 191
F.3d 1192, 1200 (10th Cir. 1999), cert. denied, 120 S. Ct.
1532, 120 S. Ct. 1548 (2000); Bell Arthur Water Corp. v.

3

Greenville Util. Comm’n, 173 F.3d 517, 523 (4th Cir. 1999),
aff’g 972 F. Supp. 951, 957-59 (E.D.N.C. 1997); Rural
Water System #1 v. Sioux Center, 967 F. Supp. 1483, 1523
(N.D. Iowa 1997), aff'd in pertinent part, 202 F.3d 1035 (8th
Cir.), cert. denied, 68 U.S.L.W. 3774 (2000); see also Public
Water Supply Dist. No. 10 v. Peculiar, 971 S.W.2d 849, 852
(Mo. Ct. App. 1998).

The Scioto County court was the first federal court to
address the argument raised in this case by Pittsburg in its
first question presented on petition for certiorari. The
plaintiff rural water-association in Scioto County argued that
bond issuers (or FmHA borrowers) “that exercised their right
to buy back their bonds are entitled to the same § 1926(b)
curtailment protection that is available to third-party bond
purchasers.” /d. The plaintiff rural water association argued
that viewing subsection (f) and subsection (g) together leads
to the conclusion “that the bond issuer’s right of first refusal
incorporates the right to continued protection against
curtailment.” Jd. “Water 1 insists that it is therefore entitled
to the same § 1926(b) protection that would have been
available to a third-party purchaser of its bonds.” /d.

In Scioto County, the court’s conclusion on this issue
rested on one critical fact. The plaintiff rural water
association’s obligation to FmHA was marked “paid in full.”
Id. at 42. Asa result, its FmHA debt “was thus discharged,
not sold.” Jd. Based on this critical fact, the Scioto County
court concluded that “[w]hen an [FmHA bond] issuer buys
back it own bond and cancels the debt, ... it no longer
qualifies as a debtor for § 1926(b) protection. This statutory
interpretation is also faithful to one of the main legislative
purposes in enacting § 1926(b) - safeguarding Farmers Home
Administration loans. Although the government maintains an
interest in providing affordable rural water service, its interest

4

in protecting against competition diminishes as its loans are
repaid.” Jd.

This holding by the Scioto County court is conclusive _
in this case. The earlier FmHA loans received by Pittsburg
were repaid in 1989. As the trial court found, “[t]he
promissory notes to the FmHA were marked ‘SATISFIED IN
FULL - FmHA’ and the debt was no longer carried upon
[Pittsburg’s] financial records.” [Appendix D, at p. 38a.] As
a result, the FmHA obligations of Pittsburg were extinguished
in 1989, and any Section 1926(b) protection enjoyed by
Pittsburg ended at that time.

This conclusion is consistent with the decisions of all
subsequent federal courts that have addressed the issue of the
cancellation of FmHA indebtedness. In 1997, the U.S.
District Court for the Northern District of lowa conducted an
in-depth review of legislative history related to the issue of the
impact of extinguishment of FmHA debt on Section 1926(b)
protection. Sioux Center, 967 F. Supp. at 1521-23. Based on
this review, the Sioux Center court determined that it “can
only conclude ... that the protection of § 1926(b) through
subsection (g) does not extend to a party such as RWS #1 who
bought back its notes pursuant to subsection (f), and thereby
extinguished them. Consequently, RWS #1 lost the
protections of § 1926(b) when it bought back its notes in 1988
and did not regain any protection of § 1926(b) until RWS #1
again became indebted to the United States in 1992.” Jd. at
1523. In Sioux Center, the plaintiff rural water association’s
FmHA loans were marked “paid in full” at the time that they
were refinanced. Jd. at 1502. The district court’s decision
was recently affirmed in pertinent part by the U.S. Court of
Appeals for the Eighth Circuit. Rural Water System #1 v.
Sioux Center, 202 F.3d 1035 (8th Cir.), cert. denied, 68
U.S.L.W. 3774 (2000).

Also in 1997, the U.S. District Court for the Eastern
District of North Carolina the issue of the impact of
extinguishment of FmHA debt on Section 1926(b) protection.
Bell Arthur Water Corp. v. Greenville Utils. Comm ’n, 972 F.
Supp. 951, 956-59 (E.D.N.C. 1997). In Bell Arthur, the
plaintiff rural water association conceded that its earlier
FmHA debt “may technically have been ‘satisfied’ or ‘paid in
full.’” Jd. at 956. Nonetheless, the plaintiff rural water
association argued that its participation in a congressionally
authorized “buy-out” program - the same program addressed
by the Scioto County and Sioux Center courts - provided it
with continued Section 1926(b) protection. /d. Relying on
Scioto County and Sioux Center, the Bell Arthur court
concluded that “any protection afforded to BAWC pursuant
to § 1926(b) was extinguished when it paid off its FmHA
loans in 1987.” Bell Arthur, 972 F. Supp. at 959. The
district court decision was affirmed by the U.S. Court of
Appeals for the Sixth Circuit, which specifically affirmed the
district court’s decision on this issue. Bell Arthur Water
Corp. v. Greenville Util. Comm'n, 173 F.3d 517, 523 (4th
Cir. 1999).

On June 16, 1998, the Missouri Court of Appeals
addressed the issue of the impact on Section 1926(b)
protection of the extinguishment of FmHA debt. Public
Water Supply Dist. No. 10 v. Peculiar, 971 S.W.2d 849, 852
(Mo. Ct. App. 1998). The Peculiar court noted that
“(njeither subsection (g) nor any other statutory language
mentions service area protection in the event a water district
takes advantage of its right of first refusal and decides to
refinance its loan through issuance of refund bonds or a
conventional bank loan.” Jd. at 852. In Peculiar, the rural
water association “extinguished its indebtedness to FmHA in
July, 1987 when it repurchased [its] 1983 bonds, and FmHA
returned them, marked ‘Cancelled.’” /d. Based on these

6

facts, the Peculiar court concluded that the rural water
association “did not intend that the debt on the 1983 bonds
remain outstanding. Instead, it issued a new series of bonds

and sold them to various private parties to finance the
repurchase and subsequent cancellation of the\1983 bonds.
When faced with identical fact situations, where a rural water
district refinances its FmHA loan and in the process
completely extinguishes its debt on the bonds purchased by
[sic] the government, other jurisdictions hold that § 1926(b)
protection is lost.” Jd. at 853.

In its conditional cross petition for writ of certiorari,
Pittsburg is faced with a difficult challenge on this issue.
Pittsburg cannot avoid the fact that all federal courts that have
addressed the issue have concluded that Section 1926(b)
protection ends when an FmHA loan is paid and marked as
“satisifed” or “paid in full.” Pittsburg cannot avoid the fact
that the most critical factual issue relied upon by the Scioto
County, Sioux Center, and Bell Arthur courts is clearly against
Pittsburg in this case: As the trial court found, “(t]he
promissory notes to the FmHA were marked ‘SATISFIED IN
FULL - FmHA.’” [Appendix D, at p. 38a.] Faced with this
daunting challenge, Pittsburg can turn only to two state-court
decisions that have reached a different conclusion on narrow
and distinguishable facts. [Cross Petition, at pp. 12-13 (citing
Grand Junction v. UTE Water Conservatory Dist. , 900 P.2d
81 (Colo. 1995), and Wetumpka v. Central Elmore Water
Auth. , 703 So. 2d 907 (Ala. 1997).

The decision by the Supreme Court of Colorado in
Grand Junction v. UTE Water Conservatory District was
closely examined by both the Scioto County and Sioux Center
courts. In Scioto County, the U.S. Court of Appeals for the
Sixth Circuit distinguished the Grand Junction decision. “In
that case, the Colorado court found that § 1926(b)’s

7

protection extends to those that buy back bonds only if the
bonds are reacquired ‘with the intent not to discharge the
instrument.’ 900 P.2d at 92. The Ute Water court analyzed
the question of intent and looked to Colorado law to
determine whether the reacquisition of a bond discharged the
debt. Unlike the loan documents in Ute Water, the loan
documents in this case were marked ‘paid in full.’” Scioto
County, 103 F.3d at 42. The point of distinction upon which
the Scioto County court relied was the rural water
association’s treatment of the paid FmHA obligation. In
Scioto County, as in the case before this Court, the FmHA
obligation was marked as paid in full.

Pittsburg’s treatment of this issue in its conditional
cross petition for writ of certiorari, and in particular its
treatment of the Scioto County decision, reveals the weakness
of its position. Pittsburg’s only effort to persuade this Court
to disagree with the Scioto County decision is to argue that the
Scioto County court determined that Section 1926(b)
protection “is only extended when the notes are purchased by
third parties,” and to argue that “such decision ignores the
plain language of [7 U.S.C. § 1929a].” [Cross Petition, at p.
12.]

First, Pittsburg’s characterization of the Scioto County
court’s decision misstates its rationale. The Scioto County
court concluded that “[w]hen an issuer buys back its own
bond and cancels the debt, ... it no longer qualifies as a debtor
for § 1926(b) protection.” Scioto County, 103 F.3d at 42.
Thus, the Scioto County court leaves open the possibility that,
in a Grand Junction circumstance where “a bond issuer ...
reacquire[s] its own bond without extinguishing the debt,” as
allowed by Colorado law. /d. at 41.

Second, Pittsburg offers no support whatsoever for its
conclusory argument that the Scioto County decision “ignores
the plain meaning” of 7 U.S.C. § 1929a. Without elaboration
by Pittsburg regarding its “plain meaning” argument, it would
be difficult for the Respondents to respond to the argument.
However, Pittsburg may be referring to arguments raised by
the plaintiff rural water association in Sioux Center. In Sioux
Center, the plaintiff argued that the plain meaning of
subsection (g) to 7 U.S.C. § 1929a would include, within the
extended protection offered by subsection (g), those FmHA
bonds that are repurchased by the rural water association that
is obligated on the bonds. Sioux Center, 967 F. Supp. at
1516-20. The Sioux Center court rejected that argument,
holding that “it is irrational to read subsection (g) as including
notes sold under subsection (f) within a strained reading of
notes ‘intended to be sold under this section,’ when a sale
under subsection (f) involves significantly different timing and
terms from a sale under subsections (a)-(e).” Sioux Center,
967 F. Supp. at 1520. 3

The Court should reject Pittsburg’s request for
certiorari review of this issue. Pittsburg has failed to show a
disagreement among the federal courts addressing the issue.
The federal courts that have addressed the issue have properly
applied federal statutory law, and have determined that a rural
water association that satisfies its federal debt, whether
through refinance or repurchase, is no longer entitled to
Section 1926(b) protection based on that debt.

ARGUMENT 2

Pittsburg has misinterpreted and overstated
the test adopted by a handful of federal
courts, offered here by Pittsburg as a
“bright line rule.”

McAlester agrees with Pittsburg that the Court should
review and address the proper standard for application of the
anticompetitive protection found in 7 U.S.C. § 1926(b). The
“bright line rule” offered by Pittsburg in the second question
presented in its conditional cross petition for writ of
certiorari, however, is inconsistent with the terms of the
Statute.

The terms of Section 1926(b) require, as a condition
for any anticompetitive protection, that a rural water
association make water service available to its claimed
customers. The nature of rural water associations formed
under state law requires that the complexities of state law be
considered in determining whether the association has made
service available. The federal courts faced with the issue
have looked to state law to determine the boundaries of the
rural water association, and to determine whether a rural
water association has made service available. Sioux Center,
967 F. Supp. at 1525, 1530; North Alamo Water Supply
Corp. v. San Juan, 90 F.3d 910, 913 (Sth Cir.), cert. denied,
519 U.S. 1029 (1996); Lexington-South Elkhorn Water Dist.
v. Wilmore, 93 F.3d 230 234-35 (6th Cir. 1996).

The Sioux Center court defined the importance of state
law to this determination. “State law, and only state law, ...
defines a municipality’s right to annex portions of the
association’s service area, just as state law, and only state
law, otherwise defines where it is the association can legally

10

initiate or continue to provide service. If the association again
becomes indebted to the FmHA, its protected service area is
defined by state law as of the date of the renewed
indebtedness.” Sioux Center, 967 F. Supp. at 1530.

At least one court has determined that a state law duty
to provide service “is the legal equivalent to” making service
available under Section 1926(b). North Alamo Water Supply
Corp. v. San Juan, 90 F.3d 910, 916 (Sth Cir.), cert. denied,
519 U.S. 1029 (1996). In the case at bar, the Tenth Circuit
was asked to determine whether Oxlahoma law imposed on
rural water associations a duty to serve their customers. The
Tenth Circuit determined that state law imposed no such duty
to serve. Sequoyah County Rural Water Dist. No. 7 v.
Muldrow, 191 F.3d 1192, 1202 (10th Cir. 1999), cert.
denied, 120 S. Ct. 1532, 120 S. Ct. 1548 (2000).

In urging a reversal of the Tenth Circuit on this issue
of state law, Pittsburg references several provisions of the
Oklahoma statutes governing formation of rural water
districts. First, Pittsburg urges that its claimed legal
obligation to serve “residents within its Territory” is found in
Okla. Stat. tit. 82, § 1324.3. Section 1324.3 provides that
“[pJublic nonprofit rural water districts ... may be organized
under this act for the purpose of developing and providing an
adequate rural water supply, gas distribution facilities, sewage
disposal facilities and solid waste management system to serve
and meet the needs of rural residents within the territory of
the district.” Okla. Stat. tit. 82, § 1324.3 (1991). This
statement of purpose falls far short of the creation of a duty
to provide water service, or any other utility, to residents of
the rural water district’s territory.

To extend the general statements contained in Section
1324.3 to impose an obligation on Oklahoma rural water

11

associations would be contrary to general principles of
statutory construction. Courts generally are not eager to
interpret statutes as imposing obligations or liabilities on a
state agency, unless the obligation is clearly stated in the
statute. See, e.g., Mariposa County v. Merced Irrigation
Dist., 196 P.2d 920, 925 (Cal. 1948); West Norman Timber,
Inc. v. State, 224 P.2d 635, 640 (Wash. 1950). As the
Mariposa County court concluded, “[s}tatutes are ordinarily
designed for the government of citizens and residences rather
than the state, and it is settled that the state is not bound by
general words of a statute or code provision which would
operate to trench upon its sovereign rights, injuriously affect
its capacity to perform its functions, or establish a right of
action against it, unless the intent to bind it thereby otherwise
clearly appears.” Mariposa County, 196 P.2d at 925 (quoting
23 Cal. Jur. 625).

Second, Pittsburg points to the “benefit unit” system
contained in Okla. Stat. tit. 82, § 1324.12 as the source of its
claimed legal obligation to serve “residents within its
Territory.” The “benefit unit” system demonstrates that
water service to residents within Pittsburg’s territory is a
function of Pittsburg’s discretion, rather than a “duty to
serve.” Section 1324.12 provides as follows:

The total benefits of any such
improvement shall be divided into a suitable
number of benefit units. Upon determining a
schedule of benefit units and unit fees, the
board of directors shall cause a declaration of
availability of such units for subscription to be
entered in its minutes and except for residents
of cities and towns as provided in paragraph 5
of Section 1324.2 of this title any individual
who fails to become a participating member

12

within thirty (30) days thereafter shall not be
eligible to hold office as a director, nor shall
any individual, firm, partnership, association,
or corporation which fails to become a
participating member within ninety (90) days
after such declaration be qualified to
participate at any meeting or vote at any
election held thereafter unless such individual,
firm,-partnership, association, or corporation
shall thereafter become a participating
member. Each landowner within the district
Shall subscribe to a number of such units in
proportion to the extent he desires to
participate in the benefits of the improvements.
As long as the capacity of the district’s
facilities permits, participating members of the
district may subscribe to additional units upon
payment of a unit fee for each such unit.
Owners or tenants of land located within the
district who are not participating members may
subscribe to such units as the Board in its
discretion may grant, and upon payment of the
unit fee for each such unit shall be entitled to _
the same rights as original participating
members.

Okla. Stat. tit. 82, § 1324.12 (Supp. 1997) (emphasis added).

As can be seen from the text of the statute, the
“benefit units” referred to by Pittsburg in its conditional cross
petition for writ of certiorari are available only at the rural
water district’s discretion and the occupant’s desire. Okla.
Stat. tit. 82, § 1324.12 (Supp. 1997). While Okla. Stat. tit.
82, § 1324.2(7) may provide “a legal right to one service
connection,” Section 1324.12 limits the availability of

13

additional benefit units to current subscribers, based on the
capacity of the district’s facilities. Jd. Section 1324.12
further limits the availability of benefit units to “[o]wners or
tenants of land located within the district who are not
participating members” of the rural water association.
Benefit units are available to such owners and tenants only
upon the discretion of the rural water association’s board. /d.

Finally, Pittsburg argues that its “legal duty to serve”
can be found in the federal regulations governing FmHA
loans. [Cross Petition, at p. 20 (citing 7 C.F.R. §
1942.17(n)(2)(vii)).] Faced with the absence of supporting
state law, Pittsburg has turned to federal law as providing an
obligation to provide service. In doing so, however, Pittsburg
has overlooked the clear terms of the cases upon which it
relies in making this argument. The legal obligation to
provide water service, urged by Pittsburg, must be provided
by state law, rather than by federal law. See North Alamo
Water Supply Corp. v. San Juan, 90 F.3d 910, 916 (Sth Cir.),
cert. denied, 519 U.S. 1029 (1996). Pittsburg’s claimed
territory is determined by reference to state law, rather than
to federal law. Lexington-South Elkhorn Water Dist. v.
Wilmore, 93 F.3d 230, 234 (6th Cir. 1996); Sioux Center,
967 F. Supp. at 1530.

Pittsburg attempts to bootstrap the provisions of 7
C.F.R. § 1942.17(n)(2)(vii) into the Oklahoma statutes
governing rural water associations, by pointing to the
Oklahoma statute authorizing rural water associations to
borrow money from the federal government. [Cross Petition,
at p. 20-21.] The Court should reject this attempted bootstrap
because Pittsburg has put the cart before the horse. Section
1926(b) protection, and its attendant regulations, do not apply
to Pittsburg if Pittsburg has failed to meet the elements of
Section 1926(b) protection. The federal obligation to provide

14

water, therefore, does not apply to Pittsburg until it can
establish that it has “made service available.” This is the
conclusion that was reached by the Tenth Circuit in Sequoyah,
when faced by the same-argument by attorneys for Pittsburg.
Sequoyah, 191 F.3d at 1203 n.9.

Even if this Court determines that an obligation to
serve may be based on federal law, the regulation cited by
Pittsburg does not provide the necessary obligation to serve.
Section 1942.17 does not impose an obligation to serve. A
rural water association may deny water service to a user
within the district’s service area, even if the user desires
service. 7 C.F.R. § 1942.17(e)(1). Section 1942.17(e)(1)
states that installation of water services is dependent upon the
feasibility of such service. /d. Similarly, water service from
a rural water district may be declined by the user. /d.

As these authorities demonstrate, Oklahoma law
imposes no obligation to serve. Pittsburg has failed to
demonstrate any source of an obligation to serve occupants
within its territory. As a result, the “legal-duty-to-serve” test
does not apply in this case. Furthermore, it is not enough in
a Section 1926(b) case for Pittsburg to simply show that it has
“a precisely-drawn service area,” or that it has water lines in
the general vicinity of the disputed area. Lexington-South
Elkhorn, 93 F.3d at 234. A rural water association asserting
anticompetitive protection based on 7 U.S.C. § 1926(b)
should be required to show more. The clear text of Section
1926(b) requires, as a condition for anticompetitive
protection, that the rural water association make service
available. 7 U.S.C. § 1926(b) (protecting “[t]he service
provided or made available through any such association”).
To expand the concept of “made available” to reach areas that
were never served by the claiming rural water association,
that the rural water association could not serve, and that

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simply fall within a geographic territory vaguely described in
a years-old formation document would be to create a legal
fiction that would destroy the purpose of Section 1926(b).

CONCLUSION

For the reasons outlined above, Respondent McAlester
respectfully suggests that the Court deny Pittsburg’s
conditional cross petition for writ of certiorari. The first
question presented by Pittsburg’s cross petition raises an
argument that has been universally rejected by the federal
~ courts confronted with it. The second question presented is
closely aligned with the issues raised by McAlester’s Petition
for Writ of Certiorari in Case No. 00-323. However, the
second question is based upon a strained reading of legal
authorities, and represents an attempt by Pittsburg to impose
an onerous interpretation on Section 1926(b), one that would
be entirely inconsistent with the statute’s plain terms.

/s/
LINDA C. MARTIN, ESQ.
Counsel of Record

James C. Milton, Esq.
Doerner, Saunders, Daniel

& Anderson, L.L.P.
320 South Boston Ave., Ste. 500
Tulsa, Oklahoma 74103-3725
(918) 582-1211

Attorneys for Respondents

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Ses
Mae

HSK. Fist

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386019_1333%3A2. Public record. Not legal advice.