(CN) – The 8th Circuit narrowly revived a water district’s lawsuit accusing Lebanon, Mo., of illegally providing water and sewer services to the rural district’s customers.
Public Water Supply District No. 3 of Laclede County “is not entitled to … protection for any of the disputed customers, with the possible exception of customers at one property development,” Judge Raymond Gruender wrote for the three-judge panel.
The U.S. Department of Agriculture had loaned the water district $2 million in 1998 to add sewer services to the water service it has provided since 1967.
“As a federally indebted rural water association, the district became insulated from competition” under federal law, Gruender wrote for the St. Louis-based appeals court.
The law specifically shields rural water associations from competition from nearby cities.
The 8th Circuit said the city could continue providing services to the customers it had before the water district closed on its USDA loan, even though some of those customers live within the district’s boundaries.
However, the court noted a possible exception with the Castle Rock development.
The water district had asked developer Becky Burk to install individual septic systems at each house. Burk had objected, claiming residents of the “upper-end” development would not tolerate individual septic systems.
A federal judge accepted Burk’s testimony and ruled that the water district had not made services available to this area — a requirement for protection from municipal competition.
“The statute protects a rural district’s service wherever it has been ‘made available,’ without restricting the methods of providing that service,” Gruender wrote. But he said the federal judge misapplied this test by “improperly focusing on the preferences of the potential recipient of the service.”
“With respect to Castle Rock, we remand for consideration of whether the district had ‘made service available,’ without considering the recipient’s preferred methods of services,” the panel concluded.
The court affirmed dismissal of all other claims.