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City of Eudora v. Rural Water District No. 4

United States District Court, District of Kansas

April 29, 2015




Plaintiff the City of Eudora, Kansas (“Eudora” or “the City”) seeks declaratory relief regarding its right to exercise the right to provide water service within certain disputed areas and whether Defendant Rural Water District No. 4, Douglas County, Kansas (“Douglas-4” or “the District”) lacks protection under 7 U.S.C. § 1926(b), specifically any protection related to the curtailment or limitation of water services by Eudora. This matter is before the Court on Douglas-4’s Motion to Dismiss Due to Failure to Join Necessary Parties (Doc. 14). For the reasons explained in detail below, the Court denies Douglas-4’s motion.

I. Factual Background

The following facts are set out in Eudora’s Complaint.[1] This declaratory judgment action stems from prior litigation between the parties, involving multiple orders of this Court, a trial, and two decisions from the Tenth Circuit Court of Appeals. Highly summarized, the parties disputed whether Douglas-4 is entitled to protection under 7 U.S.C. § 1926(b), which prohibits municipalities from “poaching” a rural water district’s customers while a USDA-guaranteed loan is in repayment. Douglas-4 sued Eudora under 42 U.S.C. § 1983, claiming Eudora violated Douglas-4’s federal statutory rights. The case went to trial resulting in a jury verdict and damages for Douglas-4. The Tenth Circuit vacated the verdict, holding that absent a showing that the USDA-guaranteed loan was “necessary”under K.S.A. § 82a-619(g), Douglas-4 could not claim the protections afforded by federal law.[2] The court held that this Court improperly instructed the jury on the meaning of “necessary” and remanded for a new trial.

Effective July 1, 2012, the Kansas legislature amended the relevant Kansas statute, K.S.A. § 82a-619(g), and removed the “necessary” requirement. On remand, the parties filed cross-motions for summary judgment and this Court ruled that the amendment did not apply retroactively. This Court also denied summary judgment for both parties, and certified the retroactivity question to the Tenth Circuit. On appeal, the Tenth Circuit upheld this Court’s conclusion that the amended § 82a-619(g) does not apply retroactively, and thus the “necessary” requirement still bound Douglas-4.[3] The court also agreed to expand the scope of appeal to consider the propriety of summary judgment, and held Douglas-4 failed the “necessary” requirement as a matter of law, entitling Eudora to summary judgment. The court ordered: “On remand, the district court should enter summary judgment in Eudora’s favor on the question of whether Douglas-4’s USDA guarantee was ‘necessary to carry out the purposes of its organization’ and otherwise proceed in a manner consistent with this opinion.”[4] This Court then entered an Order of Final Judgment on Remand, dismissing with prejudice all claims by Douglas-4 against Eudora, including the holding that “Plaintiff [Douglas-4] is not entitled to any protection under 7 U.S.C. § 1926(b).”[5]

Eudora alleges that following the Tenth Circuit’s opinion in Eudora II on July 1, 2013, Douglas-4 concocted a plan during its July 9, 2013 board meeting, to create new facts by “reaffirming” prior loan or guarantee documents in an attempt to avoid the Tenth Circuit’s rulings and avoid following the procedures required by K.S.A. § 12-527 (2009) to transfer water service from Douglas-4 to Eudora in the disputed area. This series of “reaffirmation” acts were intended to create an excuse to claim § 1926(b) protection in spite of final judgment that ruled otherwise.

Eudora further alleges that Douglas-4 refuses to acknowledge the results of the prior litigation and Kansas statutory process required to complete the transition of water services from Douglas-4 to Eudora for the annexed areas, and has threatened to sue Eudora to enforce its federal protection claims. Douglas-4 claims that it now has federal protection under § 1926(b) because of the reaffirmed loan and guarantee, and that notwithstanding the prior litigation, that federal law precludes any taking of Douglas-4’s infrastructure or territory.

As a result, Eudora filed this declaratory judgment action, seeking a determination establishing that Kansas law permits Eudora to initiate or resume-and requires Douglas-4 to follow and complete-the procedures set forth in K.S.A. § 12-527 (2009) or alternatively, those set forth in K.S.A. § 12-541 (current), such that Eudora can properly exercise its right to begin providing water service in the disputed areas, without fear or accusation by Douglas-4 that Eudora would be violating federal protection claimed by Douglas-4 pursuant to § 1926(b) or some other authority. In Count One, Eudora seeks a declaratory judgment that Douglas-4’s claims are barred by res judicata. Count Two seeks a declaratory judgment that Douglas-4’s “reaffirmation” conduct is not “accepting aid” under K.S.A. § 82a-619(g), and thus Douglas-4 lacks any protection under § 1926(b). Count Three seeks a declaratory judgment that Douglas-4’s “reaffirmation” conduct was not “necessary” to accept aid under K.S.A. § 82a-619(g), and thus Douglas-4 lacks any protection under § 1926(b).

II. Discussion

Douglas-4 seeks to dismiss Eudora’s Complaint under Fed.R.Civ.P. 19(a) for failure to join a necessary party, namely the United States Department of Agriculture (“USDA”) and First State Bank & Trust (“the Bank”).[6] Although Rule 19 governs joinder of parties, a motion to dismiss for failure to join a party under Rule 19 is governed by Fed.R.Civ.P. 12(b)(7), and the Court construes District-4’s motion as such. Under Rule 12(b)(7), the court may dismiss a case for failure to join a necessary and indispensible party under Rule 19. As the party seeking dismissal for failure to join, District-4 bears the burden to produce evidence that shows the nature of the interest possessed by an absent party and that such party’s absence will impair the protection of that interest.[7] Movants can satisfy this burden with affidavits of persons having knowledge of the interest as well as other relevant extra-pleading evidence.[8]

Determining whether a party is indispensible under Rule 19(b) involves a three-step analysis.[9] First, the court determines under Rule 19(a) whether the party is a required or necessary party. A party is required if

(A) in that person’s absence, the court cannot afford complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in ...

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