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invoking the court's "broad discretion to defer ruling on a motion for summary judgment as to affirmative defenses" where the outcome of a pending motion may have affected the court's ruling
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No. 4:18-cv-00431–JEG-CFB
03-19-2020
XENIA RURAL WATER DISTRICT, Plaintiff, v. CITY OF JOHNSTON, IOWA, Defendant.
Frank Murray Smith, Frank Smith Law Office, Des Moines, IA, Michael Dwight Davis, Pro Hac Vice, Steven Massey Harris, Pro Hac Vice, Doyle Harris Davis & Haughey, Tulsa, OK, for Plaintiff. William J. Miller, Manuel Adolfo Cornell, Dorsey & Whitney LLP, Des Moines, IA, for Defendant City of Johnston, Iowa. Frank Murray Smith, Frank Smith Law Office, Des Moines, IA, Michael Dwight Davis, Steven Massey Harris, Pro Hac Vice, Doyle Harris Davis & Haughey, Tulsa, OK, for Defendant Xenia Rural Water District.
Frank Murray Smith, Frank Smith Law Office, Des Moines, IA, Michael Dwight Davis, Pro Hac Vice, Steven Massey Harris, Pro Hac Vice, Doyle Harris Davis & Haughey, Tulsa, OK, for Plaintiff.
William J. Miller, Manuel Adolfo Cornell, Dorsey & Whitney LLP, Des Moines, IA, for Defendant City of Johnston, Iowa.
Frank Murray Smith, Frank Smith Law Office, Des Moines, IA, Michael Dwight Davis, Steven Massey Harris, Pro Hac Vice, Doyle Harris Davis & Haughey, Tulsa, OK, for Defendant Xenia Rural Water District.
ORDER
JAMES E. GRITZNER, Senior Judge
This matter comes before the Court on Motions for Partial Summary Judgment, ECF Nos. 33 and 44, from Xenia Rural Water District (Xenia) and the City of Johnston, Iowa (Johnston), respectively. A hearing on the motions was held on February 11, 2020. Plaintiff was represented by attorneys Steven Harris and Frank Smith. Defendant was represented by attorneys William Miller and Manuel Cornell. The matter is fully submitted and ready for decision.
I. BACKGROUND
A. Factual Background
Johnston is a municipality that operates its own water supply system. Xenia is a rural water provider operating in Polk County, Iowa, among other locations in Iowa. On May 18, 1982, Xenia borrowed $3,200,000 from the United States Department of Agriculture (USDA) and has borrowed additional funds many times since then. Xenia first incorporated in 1977 under Iowa Code Chapter 504A as a nonprofit corporation titled Xenia Rural Water Association. On October 30, 1990, Xenia petitioned the Polk County Board of Supervisors (PCBOS) for conversion to a rural water district under Iowa Code Chapter 357A, and the PCBOS granted the petition in a November 27, 1990 resolution. The resolution stated, in relevant part:
BE IT FURTHER RESOLVED that it is the order of the Polk County Board of Supervisors that the district whose boundary includes the area in Polk County described as follows be and hereby is established as the Xenia Rural Water District with all of the rights, powers and duties specified in Chapter 357A of the code of Iowa, as amended:
All of the following sections in Polk County except that portion lying within the boundary of any incorporated city on the date hereof:
(1) The North ½ of Sections 1, 2, and 3, all of Sections 4 through 9, Sections 16 through 20, and Sections 29, 30, 31, 32, and that part of Section 33 west of Saylorville Lake all in Township 81 North Range 25 West.
(2) All of that part of all Sections in Township 80 North Range 25 West lying westerly of Saylorville Lake.
Pl.’s App. 13, ECF No. 34-1.
There are two sets of service areas subject to the present suit, which Xenia refers to as "Encroachment Areas" and a "Disputed Area." The Encroachment Areas and Disputed Area together comprise what Xenia calls the "areas in dispute." The parties agree that the areas in dispute are within the boundaries described in the PCBOS resolution. Johnston has provided water service to portions of the Encroachment Areas since at least 1995 and continues to do so. The Disputed Area contains approximately 1900 acres, including approximately 550 acres annexed by Johnston in 2018 and approximately 1350 acres over which Johnston intends to annex.
In early 2018, Xenia and Johnston began negotiations relating to a request for water services from the United States Navy for a facility it was building in the Disputed Area. The negotiations led to an April 4, 2018 Interim Agreement, which stated, in relevant part, "Section 357A.2 of the [Iowa] Code provides that Xenia may not provide services within two miles of the limits of Johnston unless Johnston has approved a new water system plan." Def.’s App. 21, ECF No. 40-3. The agreement was signed by the Mayor and City Clerk of Johnston and the Chair and Secretary of Xenia. The area Johnston intended to annex included sections both within and over two miles from Johnston, although the parties dispute the exact portions. Negotiations broke down around September 2018 after Johnston offered to pay Xenia approximately $1.58 million for its rights to the area over two miles from Johnston's city limits.
Xenia filed a three-count Complaint against Johnston on November 3, 2018, and filed a five-count First Amended Complaint on January 4, 2019. Count One alleges that Johnston violated 42 U.S.C. § 1983 by depriving Xenia of its rights under 7 U.S.C. § 1926(b), which protects certain entities indebted to the USDA from municipal encroachment. Count Two requests a Declaratory Judgment under 28 U.S.C. §§ 2201 and 2202 on Xenia's legal rights to serve the areas in dispute. Count Three requests the Court enjoin Johnston from violating § 1926(b), Count Four requests the Court create a constructive trust conveyed to Xenia for Johnston's water infrastructure in the areas in dispute, and Count Five requests damages. In its January 18, 2019 Answer to the Amended Complaint, Johnston asserted nine affirmative defenses and a two-count counterclaim. Counterclaim Count I requests a Declaratory Judgment as to the legal rights between Xenia and Johnston, and Counterclaim Count II requests an injunction against Xenia regarding the same.
On June 12, 2019, Xenia moved for partial summary judgment as to several elements of its claims and against all of Johnston's affirmative defenses and counterclaims. On July 18, 2019, Johnston moved for partial summary judgment only as to Xenia's request for a ruling declaring that federal law preempts Iowa Code § 357A.2. On January 8, 2020, Xenia filed a Second Motion for Partial Summary Judgment, which requested summary judgment as to an additional aspect of an element of Xenia's claims and as to past damages. Xenia has not moved for summary judgment as to future damages or its requests for equitable relief. The February 11, 2020 hearing concerned Johnston's Motion and Xenia's first Motion. Neither the hearing nor this Order addresses Xenia's second Motion.
B. Legal Background
Federal law permits the USDA to issue loans to certain entities for financing, among other things, rural water service. 7 U.S.C. § 1926(a)(1). Section 1926(b) provides that the "service provided or made available" by a loan recipient "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." 7 U.S.C. § 1926(b). "Congress enacted section 1926(b) to encourage rural water development and to provide greater security for [USDA] loans." Rural Water Sys. No. 1 v. City of Sioux Ctr., 202 F.3d 1035, 1039 (8th Cir. 2000) (citing Sequoyah Cty. Rural Water Dist. No. 7 v. Town of Muldrow, 191 F.3d 1192, 1196 (10th Cir. 1999) ). "To qualify for protection, an entity must: (1) be an ‘association’ under the statute, (2) have a qualifying federal loan, and (3) have provided or made service available to the disputed area." Pub. Water Supply Dist. No. 3 of Laclede Cty. v. City of Lebanon, 605 F.3d 511, 521 (8th Cir. 2010) (citing Sequoyah Cty. Rural Water Dist. No. 7, 191 F.3d at 1197 ).
The Farm Home Administration previously administered the program, but it is now run by the Rural Utilities Service, a component of the USDA. See Rural Water Sys. No. 1, 202 F.3d at 1037, n.4.
"Making service available has two components: (1) the physical ability to serve an area; and (2) the legal right to serve an area." Id. (quoting Rural Water Sys. No. 1, 202 F.3d at 1037 ). Courts evaluate the physical ability to serve element using the "pipes in the ground" test, which asks "whether a water association ‘has adequate facilities within or adjacent to the area to provide service to the area within a reasonable amount of time after a request for service is made.’ " Pub. Water Supply Dist. No. 3 of Laclede Cty., 605 F.3d at 523 (quoting Sequoyah Cty. Rural Water Dist. No. 7, 191 F.3d at 1202 ). A water provider's legal rights are determined by state law. See Rural Water Sys. No. 1 v. City of Sioux Ctr., 967 F. Supp. 1483, 1525 (N.D. Iowa 1997) (citing Lexington-S. Elkhorn Water Dist. v. City of Wilmore, 93 F.3d 230, 234 (6th Cir. 1996) ), aff'd, 202 F.3d 1035 (8th Cir. 2000). The party's "protected service area is defined by state law as of the date" when the debt was assumed. Id. at 1530. "[A]ny ‘[d]oubts about whether a water association is entitled to protection from competition under § 1926(b) should be resolved in favor of the [USDA]-indebted party seeking protection for its territory.’ " Rural Water Sys. No. 1, 202 F.3d at 1038 (second alteration in original) (quoting Sequoyah Cty. Rural Water Dist. No. 7, 191 F.3d at 1197 ). At the same time, the Court's "role is to interpret and apply statutes as written, for the power to redraft laws to implement policy changes is reserved to the legislative branch." Pub. Water Supply Dist. No. 3 of Laclede Cty., 605 F.3d at 515 (quoting Doe v. Dep't of Veterans Affairs, 519 F.3d 456, 461 (8th Cir. 2008) ).
The parties dispute whether and how Iowa Code § 357A.2 applies to Xenia's legal rights. The current version states, in relevant part, "Water services, other than water services provided as of April 1, 1987, shall not be provided within two miles of the limits of a city by a rural water district incorporated under this chapter except as provided in this section." Iowa Code § 357A.2(3). The parties refer to this as the "two-mile rule." The statute then sets forth a process by which a rural water district may receive an exception to the two-mile rule, which requires the district to notify the relevant city of its intent to serve an area within two miles of the city's limits by submitting a proposed plan. Iowa Code § 357A.2(4). After the rural water district submits the plan, "the city may affirmatively waive its right to provide water service within the areas designated for water service by the rural water district, or the city may reserve the right to provide water service in some or all of the areas which the district or association intends to serve." Iowa Code § 357A.2(4)(d)(1). If the city reserves its right to provide water service to an area after receiving a proposed plan, but then fails to provide water service to the area within three years, the district may provide service to the area. Iowa Code § 357A.2(4) (d)(2)(c). Conversely, if the city waives its right to provide water service to an area, but the district then fails to provide water service to the area within three years, the city regains the right to provide service to the area. Iowa Code § 357A.2(4)(d)(3).
II. DISCUSSION
A. Summary Judgment Standard
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "The movant ‘bears the initial responsibility of informing the district court of the basis for its motion,’ and must identify ‘those portions of [the record] ... which it believes demonstrate the absence of a genuine issue of material fact.’ " Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (alterations in original) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). If the movant makes such a showing, to avoid summary judgment the nonmovant must "respond by submitting evidentiary materials that set out ‘specific facts showing that there is a genuine issue for trial.’ " Id. (quoting Celotex, 477 U.S. at 324, 106 S.Ct. 2548 ). A genuine issue for trial requires more than "some metaphysical doubt as to the material facts." Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).
"At the summary judgment stage, facts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine’ dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (quoting Fed. R. Civ. P. 56(c) ). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Id. (alteration and emphasis in original) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). "A fact is ‘material’ if it may affect the outcome of the lawsuit." TCF Nat'l Bank v. Mkt. Intelligence, Inc., 812 F.3d 701, 707 (8th Cir. 2016) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505 ). "When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Scott, 550 U.S. at 380, 127 S.Ct. 1769.
"Where the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate." Adams ex rel. Harris v. Boy Scouts of Am.-Chickasaw Council, 271 F.3d 769, 775 (8th Cir. 2001) (citing Crain v. Bd. of Police Comm'rs, 920 F.2d 1402, 1405-06 (8th Cir. 1990) ); Bank of Am. Nat. Tr. & Sav. Ass'n v. Shirley, 96 F.3d 1108, 1111 (8th Cir. 1996) (same). "Summary judgment is an appropriate remedy when questions of statutory interpretation are controlling." Ferezy v. Wells Fargo Bank, N.A., 755 F. Supp. 2d 1010, 1013 (S.D. Iowa 2010) (citing Bob Zimmerman Ford, Inc. v. Midwest Auto. I, L.L.C., 679 N.W.2d 606, 608 (Iowa 2004) ); see also Johnson v. Land O'Lakes, Inc., 18 F. Supp. 2d 985, 993 (N.D. Iowa 1998) ("[S]tatutory interpretation—particularly interpretation of the effect of a statute where facts are undisputed—is primarily a legal question amenable to summary judgment." (citing Prudential Ins. Co. of Am. v. Rand & Reed Powers P'ship, 972 F. Supp. 1194, 1202-03 (N.D. Iowa 1997), aff'd, 141 F.3d 834 (8th Cir. 1998) )). The legal rights element of a § 1926(b) claim may be appropriately decided on summary judgment. See Rural Water Sys. No. 1, 967 F. Supp. at 1534-35 (determining legal rights of § 1926(b) claim on cross-motions for summary judgment while leaving physical ability to serve element for trial).
B. Xenia's Qualifying Loans
To establish its § 1926(b) claim, Xenia must show that it is an association within the meaning of the statute and that it had qualifying federal loans; Xenia moves for summary judgment as to both elements. Xenia contends that it is an association under the meaning of § 1926(b) because it was created to provide water service, and that it has had qualifying loans from the USDA continuously since 1982. Xenia's original 1977 Articles of Incorporation indicates it is meant to "operate a mutual rural water system," Pl.’s App. 6, ECF No. 34-1, and its 1990 reorganization resolution indicates it is a "rural water district" meant to provide rural water services, id. at 13. The record also contains ample evidence of USDA loans to Xenia, including a summary chart showing Xenia's USDA loan history. Id. at 47.
Johnston states that the Court need not address the first two elements because Xenia cannot satisfy the third element. Although Johnston asserts that it does not "concede" the first two elements, Def.’s Resist. 21, ECF No. 43, Johnston's failure to contest the elements for purposes of summary judgment is, in effect, a concession. Xenia more than met its initial summary judgment burden of identifying why it believes there is no genuine dispute of material fact as to these elements, but Johnston has not met its burden to identify through record citations a genuine factual dispute as to these elements. See Torgerson, 643 F.3d at 1042. The record does not appear to contain a genuine dispute of material fact regarding whether Xenia is an association or has qualifying USDA loans. Xenia's Motion as to the association and indebtedness elements of § 1926(b) protection must be granted .
C. Xenia's Legal Rights
Xenia can only receive § 1926(b) protection for an area if it had a legal right under state law to serve that area at the time it assumed a qualifying loan. See Rural Water Sys. No. 1, 967 F. Supp. at 1525. Xenia contends that the 1990 PCBOS resolution by which Xenia was reorganized as a rural water district provides Xenia an exclusive legal right to serve the areas in dispute. The resolution describes the geographic boundaries of Xenia within Polk County, and Johnston acknowledges the areas in dispute fall within the resolution's description. Johnston argues, however, that Iowa Code § 357A.2 ’s two-mile rule prevents Xenia from having an exclusive legal right to the areas in dispute notwithstanding the areas’ inclusion in the resolution's description of Xenia's boundaries.
The provisions in Iowa law that empower county supervisors to create rural water districts are §§ 357A.2(1)-(2) and 357A.6. Sections 357A.2(1) and (2) allow for petitions requesting county supervisors to create a district "encompassing an area, not then included in any other district, ... for the purpose of providing an adequate supply of water for residents of the area who are not served by the water mains of any city water system." Iowa Code § 357A.2(1). Immediately thereafter is the two-mile rule, which states, "Water services ... shall not be provided within two miles of the limits of a city by a rural water district incorporated under this chapter excepted as provided in this section." Iowa Code § 357A.2(3). The next subsection provides the processes by which a city may grant exceptions to the two-mile rule. Iowa Code § 357A.2(4). Section 357A.6 empowers county supervisors to create a rural water district by approving a § 357A.2 petition. Iowa Code § 357A.6.
The parties cite no authority in which an Iowa court interpreted § 357A.2, and the Court is aware of none, so this Court must interpret the statute in the first instance, attempting to predict how the Iowa Supreme Court would interpret the state law. See In re Bargfrede, 117 F.3d 1078, 1080 (8th Cir. 1997) ("As the Supreme Court of Iowa has not addressed this precise issue, we must attempt to predict what that Court would decide if faced with the issue, considering ‘relevant state precedent, analogous decisions, considered dicta, ... and any other reliable data.’ " (alteration in original) (quoting Ventura v. Titan Sports, Inc., 65 F.3d 725, 729 (8th Cir. 1995) )). This requires following Iowa rules of statutory construction. See In re Dittmaier, 806 F.3d 987, 989 (8th Cir. 2015) ("[W]e apply Missouri's rules of statutory construction when interpreting Missouri statutes." (citing In re Hardy, 787 F.3d 1189, 1192 (8th Cir. 2015) )).
Under Iowa rules of statutory construction, the Court must attempt "to give effect to the general assembly's intent in enacting the law. Generally, this intent is gleaned from the language of the statute." Ferezy, 755 F. Supp. 2d at 1013 (quoting In re Detention of Fowler, 784 N.W.2d 184, 187 (Iowa 2010) ). The Court will not "search for meaning beyond the express terms of a statute when the statute is plain and its meaning is clear." Id. (quoting Fowler, 784 N.W.2d at 187 ). Words are given their "ordinary and common meaning" based on the context in which they are used. Id. (quoting Doe v. Iowa Dep't of Human Servs., 786 N.W.2d 853, 858 (Iowa 2010) ). Further, various provisions of a statute must be read in conjunction. See Bearinger v. Iowa Dep't of Transp., 844 N.W.2d 104, 109 (Iowa 2014) (finding that although one reading of a provision may be persuasive if read "in isolation," the provision must be "read ... together" with subsequent provisions). Statutes should be read to avoid rendering any portion of the statute superfluous. See Thoms v. Iowa Pub. Emps.’ Ret. Sys., 715 N.W.2d 7, 15 (Iowa 2006) ("We will not read a statute so that any provision will be rendered superfluous." (citing Miller v. Marshall Cty., 641 N.W.2d 742, 749 (Iowa 2002) )).
Read together, the provisions of Iowa Code § 357A.2 plainly indicate that a rural water district's permitted service area, as specified by its county supervisors’ resolution, is subject to the two-mile rule. The two-mile rule's placement in the statute immediately after the provisions permitting petitions for the creation of rural water districts shows that the two-mile rule is meant to restrict the potential scope of rural water district service areas. If a rural water district's boundaries specified in a resolution trumped the two-mile rule, then the two-mile rule would be superfluous—its only function is to limit districts’ rights to provide water service within two miles of a city's limits. In addition, the provision immediately after the two-mile rule, § 357A.2(4), sets forth how rural water districts may receive an exception to the two-mile rule with the consent of the relevant municipality, but nowhere creates an exception to the two-mile rule based on a county supervisors’ resolution.
In any event, there is no conflict between the resolution and state law because the resolution explicitly indicates that Xenia is established "with all of the rights, powers and duties specified in Chapter 357A." Pl.’s App. 13, ECF No. 34-1 (emphasis added). One of those duties was the obligation not to provide water service within two miles of a city's limits without receiving the city's permission. Xenia's boundaries within Polk County are not set in stone by the geographic description in the resolution but are instead subject to the caveat of the two-mile rule. Insofar as any of the area described by the resolution falls within two miles of a city's limits, the resolution does not provide Xenia exclusive rights to that area but instead permits it to seek a city's permission to serve the area in accordance with the provisions in § 357A.2(4).
Xenia never meaningfully contests this interpretation of the two-mile rule or its 1990 PCBOS resolution. Indeed, Xenia admits that it obeyed the two-mile rule from 1990 to 2018 (when it sued Johnston), although it says it did so "erroneously." Pl.’s Reply 5, ECF No. 57. Xenia instead argues that the two-mile rule cannot limit its legal rights to the area described in the resolution because: 1) federal law preempts the two-mile rule law, 2) equitable principles bar Johnston from challenging Xenia's service area based on the two-mile rule, 3) a 2014 amendment to § 357A.2 modified the two-mile rule in such a way as that it no longer applies to the areas in dispute, and 4) Xenia retains broad legal rights that it had before it reorganized as a rural water district in 1990.
1. Preemption
Xenia's first argument against the application of the two-mile rule is that the rule is preempted by § 1926(b). Xenia also requested a declaratory judgment on this point. See First Am. Complaint 6, ECF No. 12 ("Xenia also seeks to have this Court declare the rights and legal relations of Xenia and Johnston, with respect to Iowa state laws which are preempted by 7 U.S.C. § 1926(b)."). Johnston moves for summary judgment as to this proposition, contending that § 357A.2(3) is not preempted by § 1926(b).
"[T]he Supremacy Clause, U.S. Const., Art. VI, cl. 2, invalidates state laws that ‘interfere with, or are contrary to,’ federal law." Kinley Corp. v. Iowa Utils. Bd., 999 F.2d 354, 357 (8th Cir. 1993) (alteration in original) (quoting Hillsborough Ct. v. Automated Med. Labs., Inc., 471 U.S. 707, 712, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985) ). "Congressional intent is the critical question in any preemption analysis." Id. (citing La. Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 369, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986) ). "In all preemption cases, and particularly in those in which Congress has ‘legislated ... in a field which the States have traditionally occupied,’ we ‘start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.’ " Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (internal citation omitted) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947) ). There are several types of preemption:
Under the Supremacy Clause, federal law may supersede state law in several different ways. First, when acting within constitutional limits, Congress is empowered to pre-empt state law by so stating in express terms. In the absence of express preemptive language, Congress’ intent to pre-empt all state law in a particular area may be inferred where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress "left no room" for supplementary state regulation. Pre-emption of a whole field also will be inferred where the field is one in which "the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject."
Even where Congress has not completely displaced state regulation in a specific area, state law is nullified to the extent that it actually conflicts with federal law. Such a conflict arises when "compliance with both federal and state regulation is a physical impossibility," or when state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress."
Kinley Corp., 999 F.2d at 357-58 (quoting Hillsborough Cty., 471 U.S. at 713, 105 S.Ct. 2371 ). These types of preemption are often labeled "express," "implied," "conflict," and "field" preemption. See id. at 358, n.3. Xenia contends that both express and conflict preemption cover § 357A.2(3).
The Northern District of Iowa district court previously analyzed at length whether § 1926(b) preempts § 357A.2 ’s two-mile rule. Rural Water Sys. No. 1, 967 F. Supp. at 1528-30. The plaintiff rural water provider in that case had assumed qualifying loans and received § 1926(b) protection starting in 1972, paid off the loans in full in 1988, and took out an additional qualifying loan in 1992. Id. at 1502. In 1989, when the plaintiff did not have any qualifying loans, the City of Sioux Center annexed an area in which the plaintiff had supplied water or had laid pipes and built facilities. Id. After holding on summary judgment that the plaintiff did not have any § 1926(b) protection during the period when it did not have any qualifying loans, the court then analyzed what § 1926(b) protections the plaintiff had when it took out another qualifying loan in 1992. Id. at 1524-28. The court held that if state law, such as the two-mile rule, created a legal impediment to providing service in a given area, a rural water provider could not receive § 1926(b) protection for that area. Id. at 1527-28.
The court then turned to whether § 1926(b) preempts state laws, such as § 357A.2 ’s two-mile rule, that define the service area of a rural water provider. Id. at 1528-30. The court concluded that § 1926(b) would not preempt such a state law. Id. First, the court reasoned that "no federal statute or regulation defines ‘made service available’ within the meaning of 1926(b)," id. at 1528 (citing Lexington-S. Elkhorn Water Dist., 93 F.3d at 235 ), so "there is no federal law to have preemptive effect on any state law defining an indebted association's service area," id. at 1528-29. The court then explained that a state law defining a rural water provider's service area could conflict with (and be preempted by) federal law if the state law sought to retroactively take away a provider's § 1926(b) protected service area, but there is no conflict when a state law merely defines the protected service area at the time the qualifying loan was assumed:
[T]here is no express preemption of state law that defines the service area of an association at the moment the association becomes indebted to the United States, and is thereby entitled to the protection of § 1926(b). Section 1926(b) expressly prohibits only curtailment or limitation of the existing service area of the association by some action of a municipality (presumably under color of state law) to include the association's existing service area within the municipality's boundaries. 7 U.S.C. § 1926(b). It does not expressly prohibit a state-law definition of the existing service area of an association at the moment the association can invoke the protections of § 1926(b) by becoming indebted to the United States. Nor is there conflict preemption, because the federal statute certainly does not prohibit a definition of the service area of an association by state law prior to the association becoming indebted. Rather, state law that defines the service area of an association prior to or at the time it becomes indebted is state law that stands outside the window of § 1926(b) preemption and also is state law that can reasonably coexist with the federal law.
Id. at 1529. In short, the court held that when a rural water provider assumes a qualifying loan, it receives § 1926(b) protection based in part on its legal rights as defined by state law at that time, but any subsequent attempt to shrink that protected service area during the lifetime of the loan is preempted. This Court is fully in agreement with Judge Bennett's analysis.
The court later explained that the two-mile rule did not apply to the plaintiff in that case because the plaintiff was, unlike Xenia after 1990, not a rural water district under Iowa law. Id. at 1532-33.
Complicating the application of § 357A.2 to the facts of the present case is that the law has changed several times during the relevant timeframe, as has Xenia's legal status. Xenia was originally incorporated in 1977 as a nonprofit corporation under Iowa Code Chapter 504A and first became indebted to the USDA (and therefore first received § 1926(b) protection) in 1982. The two-mile rule was first enacted in 1987, although it would not have applied to Xenia at that time. From 1987 until a statutory amendment in 2014, § 357A.2 applied to "a rural water district incorporated under this chapter or chapter 504A." 2014 Iowa Legis. Serv. Ch. 1086 (H.F. 2192) (West). "Under Iowa law, rural water providers can choose to be organized in a variety of ways. A water vendor can be: (1) a cooperative association under chapter 499; (2) a nonprofit corporation under chapter 504A; (3) a benefitted water district under chapter 357; or (4) a rural water district under chapter 357A. Each chapter furnishes both the organizational and governing rules for the entity." Rural Water Sys. No. 1, 202 F.3d at 1037. When the two-mile rule was enacted, Xenia was still a nonprofit corporation under § 504A, not a rural water district. The Eighth Circuit has held that, at that time, despite the statute's language stating it applied to rural water districts incorporated under chapter 504A, § 357A.2 did not apply to non-profit corporations organized under § 504A, such as Xenia before it reorganized 1990, because they were not rural water districts under § 504A. See id. at 1038 ("[A] 504A corporation is clearly not a ‘district’ within the meaning of section 357A.1."). The two-mile rule, then, only began to apply to Xenia in 1990, when Xenia reorganized as a rural water district under § 357A.
After a 2014 amendment, the two-mile rule now applies to "rural water district[s] incorporated under this chapter" and "rural water association[s]," see Iowa Code § 357A.2(3), which includes rural water associations "organized and incorporated ... as a nonprofit corporation under chapter 504," see Iowa Code § 357A.1(7).
In any event, the two-mile would only apply to Xenia's water services first provided after 1987—any water services Xenia provided before 1987 are expressly exempted from the two-mile rule. See Iowa Code § 357A.2(3) ("Water services, other than water services provided as of April 1, 1987 , shall not be provided within two miles of the limits of a city by a rural water district") (emphasis added). If Xenia already provided water services within two miles of Johnston's city limits as of the enactment two-mile rule, then the two-mile rule would not curtail or limit Xenia's continued provision of such services. When Xenia reincorporated as a rural water district pursuant to § 357A.2 in 1990, Xenia would not have given up any pre-1987 service area because § 357A.2 does not curtail or limit water services provided before 1987. That would include the service area protected by § 1926(b) when Xenia took out its first USDA loan in 1982.
The record unambiguously indicates that Xenia did not assume a USDA loan at any time between May 18, 1982—the date of Xenia's first qualifying loan—and January 13, 1992—the date of Xenia's second qualifying loan. See Pl.’s App. 47, ECF No. 34-1. Although § 1926(b) prevents municipal encroachment on indebted rural water providers’ protected service areas, Xenia's "protected service area [was] defined by state law as of the date " it assumed qualifying debt. Rural Water Sys. No. 1, 967 F. Supp. at 1530 (emphasis added). Before 1992, then, any protected service area was defined as of May 18, 1982, and is therefore exempt from the two-mile rule. Based on the current record, that protected service area does not cover the areas in dispute. Xenia represented at the summary judgment hearing that it did not begin to provide service to the areas in dispute until 1993 and acknowledged the current record is silent as to when Xenia first made service available to the areas in dispute. The two-mile rule's application to Xenia in 1990 could not have conflicted with § 1926(b) as it pertains to this case because, at that time and based on the current record, Xenia's protected service area did not extend to the areas in dispute within two miles of Johnston's city limits.
Then the question is whether the application of the two-mile in 1992 or later in prospectively defining Xenia's protected service area conflicts with § 1926(b) —the same question that confronted the district court in Rural Water System No. 1. It does not. Section 1926(b) only protects areas for which a rural water provider had a legal right to serve, and state law determines whether a rural water provider had a legal right to serve an area. See Rural Water Sys. No. 1, 967 F. Supp. at 1525 ("Recent decisions indicate that courts must ‘look to the law governing the way in which a water district must provide service to potential customers to determine whether [a district] has provided or made service available in the disputed areas.’ Courts have routinely looked to applicable state law to make that determination." (internal citation omitted) (quoting Lexington-S. Elkhorn Water Dist., 93 F.3d at 234, and citing N. Alamo Water Supply Corp. v. City of San Juan, 90 F.3d 910, 913 (5th Cir. 1996) )). When Xenia's protected service area expanded at the time it assumed a qualifying loan in 1992 or thereafter, that expansion could only cover areas to which it had a legal right to serve in accordance with Iowa law, including § 357A.2(3) ’s two-mile rule. Section 1926(b) shields rural water providers from having their protected service area curtailed or limited during the lifetime of a qualifying loan, but it does not provide a sword for providers to expand their legal service area outside the bounds provided by state law. See Pub. Water Supply Dist. No. 3 of Laclede Cty., 605 F.3d at 519 (" Section 1926(b) provides a shield, not a sword.").
In sum, Xenia's protected service area as of 1982 was not defined by the two-mile rule because the two-mile rule explicitly exempts water services provided before 1987 and the two-mile rule did not begin to apply to Xenia until 1990, but that protected service area does not cover the areas in dispute. Any expansion of Xenia's protected service area from loans taken out in 1992 or later is defined by the two-mile rule, but § 1926(b) does not preempt the two-mile rule in such situations because § 1926(b) necessarily looks to state law to prospectively define a rural water provider's service area at the time the provider assumes a qualifying loan. As applied to the facts of this case, § 357A.2 does not conflict with § 1926(b), and federal law therefore does not preempt the two-mile rule. Johnston's Motion for Partial Summary Judgment must be granted .
2. Waiver, Estoppel, and Laches
Xenia also argues that Johnston is barred from asserting the two-mile rule to challenge Xenia's service area "on the grounds of waiver, estoppel, and laches due to Johnston's failure to object to the inclusion of the encroachment areas and the disputed area within Xenia's Territory/Service Area by the Polk County Board of Supervisors (‘PCBOS’) in 1990." Pl.’s Reply 15, ECF No. 57. Xenia argues that Johnston did not object to Xenia's proposed service area during the public PCBOS hearing in 1990. Johnston responds that it could not have intended to waive its ability to assert the two-mile rule by failing to object to a resolution that stated Xenia was subject to duties specified in Chapter 357A, which would include the two-mile rule.
The Court must conclude Johnston is not barred from asserting the two-mile rule by an equitable doctrine. "Waiver requires proof of voluntary and intentional relinquishment of a known right." Benton v. Slater, 605 N.W.2d 3, 5 (Iowa 2000) (citing Folkers v. Britt, 457 N.W.2d 578, 581 (Iowa 1990) ). Even if making all reasonable inferences in favor of Xenia, the current record does not show that Johnston intended to waive the two-mile rule by failing to object to a PCBOS resolution that noted Xenia's territory would be subject to the Iowa statute containing the two-mile rule. Beyond the difficulty of concluding that a municipality's mere failure to object at a public hearing constitutes an intentional relinquishment of a known right, Johnston's failure to object could not be interpreted as relinquishing its right to assert the two-mile rule because Johnston would have had every reason to believe that the PCBOS resolution incorporated the two-mile rule. Likewise, estoppel requires "a clear and definite promise." Schoff v. Combined Ins. Co. of Am., 604 N.W.2d 43, 49 (Iowa 1999). Based on the current record, Johnston never made a clear and definite promise not to assert the two-mile rule.
Similarly, "[l]aches is an equitable doctrine premised on unreasonable delay in asserting a right, which causes disadvantage or prejudice to another." State ex rel. Holleman v. Stafford, 584 N.W.2d 242, 245 (Iowa 1998) (citing First Fed. Sav. & Loan Ass'n v. Blass, 316 N.W.2d 411, 414 (Iowa 1982) ). Even if drawing all reasonable inferences in favor of Xenia, the current record shows that Xenia acted in accordance with the two-mile rule continuously from 1990, when Xenia reincorporated as a rural water district, to late 2018, when negotiations broke down and it sued Johnston. As early as April 2, 1993, a letter represents that Xenia will provide Johnston notice of intent to serve areas within two miles of Johnston's city limits, as required by § 357A.2(4) ’s notice procedures. Def.’s App. 7-8, ECF No. 40-3. The letter said that "the City [of Johnston] will need to decide in what portions of the 2 mile zone Xenia will be excluded and in what portions of the 2 mile zone Xenia will be allowed to provide service." Id. at 8. As recently as April 4, 2018, Xenia's Chair and Secretary signed an interim agreement with Johnston in which Xenia expressly acknowledged that " Section 357A.2 of the Code provides that Xenia may not provide services within two miles of the limits of Johnston unless Johnston has approved a new water system plan." Def.’s App. 21, ECF No. 40-3. Indeed, Xenia admits that it followed the two-mile rule until 2018 but contends that it did so "erroneously." Pl.’s Reply 5, ECF No. 57. Based on the current record, Johnston asserted the two-mile rule as soon as it had a reason to do so—when Xenia sued it claiming the two-mile rule was preempted by federal law. The doctrine of laches does not apply.
The letter was sent by H.R. Veenstra to John Ver Hoef, then-Mayor of Johnston. Although Veenstra was not a Xenia employee and is now retained by Johnston as an expert witness, the letter states he was reporting on a conversation with "Dan Miller of Xenia Rural Water." Def.’s App. 7, ECF No. 40-3. Miller was the General Manager of Xenia. Xenia does not contest Johnston's characterization of this letter as representing the position of Xenia. Additionally, Miller sent a letter on Xenia letterhead to Johnston on December 28, 1995, in which Miller notified Johnston that several customers requested water service, suggested establishing a "two-mile agreement ... for this area," and asked if Johnston "has no objections to this proposed extension." Def.’s App. 12, ECF No. 40-3.
For the same reasons, neither does the doctrine of unclean hands, which Xenia raises based on Johnston's alleged delay in asserting the two-mile rule.
3. 2014 Amendment to § 357A.2
Xenia also argues that a 2014 amendment to § 357A.2 indicates that the two-mile rule does not apply to the areas in dispute. The 2014 amendment states, in relevant part, "This subsection shall not apply in the case of a district or association extending service to new customers or improving existing facilities within existing district or association service areas or existing district or association agreements." Iowa Code § 357A.2(4)(a). According to Xenia, the amendment clarifies that the two-mile rule does "not apply to a rural water district's extension of service within its own existing Territory/Service Area as established by the County Board of Supervisors (‘CBOS’) and such amendment should receive retroactive application." Pl.’s Reply 5-6, ECF No. 57.
Additional portions of § 357A.2 were amended in 2014 that are not relevant to the current dispute.
As with the two-mile rule, it does not appear that an Iowa court has interpreted the relevant language in the 2014 amendment, so this Court must do so in the first instance. Contrary to Xenia's argument, the amended language never references territory as established by county supervisors but rather refers to a rural water district "extending service" or "improving" facilities within "existing ... service areas or ... agreements." Iowa Code § 357A.2(4)(a). The ordinary meaning of extending service and improving existing facilities within existing service areas suggests that the amended language does not contemplate a rural water district expanding its provision of water service to areas which it previously did not serve. See Ferezy, 755 F. Supp. 2d at 1013 (under Iowa rules of statutory interpretation, words in a statute are given their "ordinary and common" meaning (quoting Doe, 786 N.W.2d at 858 )). Although the amended language permits a rural water district to extend service within its existing service area, it does nothing to change the boundaries or definition of its legal rights to serve.
Further, under Iowa rules of statutory interpretation, the Court must "consider the overall structure and context of the statute, Rolfe State Bank [v. Gunderson], 794 N.W.2d [561,] 564 [ (Iowa 2011) ], ‘not just isolated words or phrases,’ Kline v. SouthGate Prop. Mgmt., LLC, 895 N.W.2d 429, 438 (Iowa 2017)." State v. Lopez, 907 N.W.2d 112, 117 (Iowa 2018). The context for the relevant amended language is:
3. Water services, other than water services provided as of April 1, 1987, shall not be provided within two miles of the limits of a city by a rural water district incorporated under this chapter except as provided in this section. Except as otherwise provided in this chapter, a rural water association shall not provide water services within two miles of a city, other than water services provided as of July 1, 2014.
4. a. A rural water district or rural water association may give notice of intent to provide water service to a new area within two miles of a city by submitting a water plan to the city. This subsection shall not apply in the case of a district or association extending service to new customers or improving existing facilities within existing district or association service areas or existing
district or association agreements. If water service is provided by a city utility established under chapter 388, the water plan shall be filed with the governing body of that city utility. The district or association shall provide written notice pursuant to this subsection by certified mail.
Iowa Code § 357A.2 (relevant amended language emphasized). The remainder of subsection 4 sets forth the details of the procedures by which a rural water district or association may receive an exception to the two-mile rule. See Iowa Code § 357A.2(4)(b)-(d).
The relevant amended language is in subsection 4 of § 357A.2, which provides the back-and-forth process for cities to grant exceptions to the two-mile rule, not in subsection 3, which contains the two-mile rule. The amended language states it only applies to "[t]his subsection," Iowa Code § 357A.2(4)(a), indicating that the amended language is not meant to apply to the other subsections of § 357A.2, including subsection 3's two-mile rule. The Iowa legislature did not intend to abrogate subsection 3's two-mile rule by placing the relevant amended language in the middle of the next subsection in the statute. This interpretation is made clear by the sentence immediately preceding the amended language: "A rural water district or rural water association may give notice of intent to provide water service to a new area within two miles of a city by submitting a water plan to the city." Iowa Code § 357A.2(4)(a). The amended language creates an exception to that notice-of-intent requirement, not the two-mile rule.
Xenia's interpretation would also render the two-mile rule superfluous, contrary to Iowa rules of statutory interpretation. See Thoms, 715 N.W.2d at 15. The county supervisors’ resolution establishes the areas in which a rural water district may provide water service. If that area falls within two miles of a city's limits, then § 357A.2(3) ’s two-mile rule states that the rural water district may not provide water service unless it complies with the procedures set forth in § 357A.2(4), including receiving permission from the city. Under Xenia's reading of the amended language, the two-mile rule would not apply within a rural water district's boundaries as established by its county supervisors’ resolution. If so, it is unclear when the two-mile rule would ever apply. The Court will not read the amended language to render the two-mile rule superfluous because it is implausible that the Iowa legislature intended the amendment to have such an effect.
Even if the 2014 amendment said what Xenia claims it does, it would only exempt Xenia from the two-mile rule if it applied retroactively to when Xenia's § 1926(b) protections attached to its service area. Xenia contends that the amendment should apply retroactively as a change in procedural law. Under Iowa law, "[a] statute is presumed to be prospective in its operation unless expressly made retrospective." Iowa Code § 4.5.
It is well established that a statute is presumed to be prospective only unless expressly made retrospective. Statutes which specifically affect substantive rights are construed to operate prospectively unless legislative intent to the contrary clearly appears from the express language or by necessary and unavoidable implication. Conversely, if the statute relates solely to a remedy or procedure, it is ordinarily applied both prospectively and retrospectively....
Substantive law creates, defines and regulates rights. Procedural law, on the other hand, "is the practice, method, procedure, or legal machinery by which the substantive law is enforced or made effective."
Anderson Fin. Servs., LLC v. Miller, 769 N.W.2d 575, 578 (Iowa 2009) (quoting Baldwin v. City of Waterloo, 372 N.W.2d 486, 491 (Iowa 1985) ).
Xenia argues that the 2014 amendment should apply retroactively because it "modified the ‘procedure’ " by which rural water districts can receive exceptions to the two-mile rule. Pl.’s Reply 9-10, ECF No. 57. This argument, of course, implicitly acknowledges that the 2014 amendment did in fact only relate to notice processes under § 357A.2(4), not the two-mile rule prohibition in § 357A.2(3). In any event, it is clear that this is not what Iowa law considers to be procedural because the amendment does not merely relate to the "practice, method, procedure, or legal machinery by which substantive law is enforced or made effective." Anderson Fin. Servs., 769 N.W.2d at 578 (quoting Baldwin, 372 N.W.2d at 491 ). Given the presumption that statutes only have a prospective effect unless expressly made retroactive, the 2014 amendment cannot apply to define Xenia's legal rights to serve an area prior to the date of the amendment.
4. Prior Legal Rights
In its Reply and at the hearing, Xenia raised a series of additional potential sources of legal rights aside from its 1990 PCBOS resolution. Xenia argues that when it reorganized in 1990, it retained prior legal rights that covered the areas in dispute. According to Xenia, when it was a § 504A nonprofit corporation, it "had the legal right to provide water service anywhere in the State." Pl.’s Reply 11-12, ECF No. 57. Xenia reasons that "Iowa state law did not limit where Xenia the non-profit corporation had the power to provide water service, thus Xenia the non-profit corporation held the power to serve water anywhere within the State of Iowa." Pl.’s Reply 5, ECF No. 57. Johnston argues that the absence of a state law that prohibited Xenia from providing water service cannot imply that Xenia had the legal right to provide water service everywhere.
Even if Xenia had the legal ability to provide water service everywhere in Iowa when it was a nonprofit, Xenia did not retain that right upon reorganization. Xenia argues that it retained the legal rights it had as a nonprofit corporation after it reorganized as a rural water district because § 357A provides that "all assets and liabilities" of a nonprofit corporation that reorganizes "become the assets and liabilities of the newly organized district." Iowa Code § 357A.20(2)(b). Xenia provides no argument and cites no authority as to why "assets and liabilities" would cover a general legal right—particularly a right such as this one, which is more akin to the absence of a prohibition. Iowa statutes are interpreted according to their ordinary meaning, see Ferezy, 755 F. Supp. 2d at 1013-14, and assets and liabilities plainly refer to those items which might appear on a corporate balance sheet concerning assets and liabilities—for instance, Xenia's water infrastructure assets, and USDA debt liabilities, both of which would have transferred upon reorganization. Some specific legal rights might be considered an asset or a liability, such as a contract providing for the purchase of water at a certain price. But even assuming arguendo that Iowa law permitted Xenia to provide water service anywhere in the state when it was a nonprofit corporation, there is no record support or essential logic that application of Iowa state law to Xenia would be considered an asset of Xenia's, and Xenia would therefore have retained any such right upon reorganizing as a rural water district.
Xenia's contention that it retained a statewide legal right to provide water service even after it reorganized in 1990 would lead to absurd results. The PCBOS resolution's geographic boundaries would be superfluous—Xenia would not need the resolution to grant it the right to serve an area if it had the legal right to serve everywhere. Similarly, Xenia contends that its prior legal right to provide water service everywhere trumps § 357A's two-mile rule. The pre-1990 absence of a state law defining Xenia's legal rights to provide water service cannot imply that no otherwise-valid state law can ever define Xenia's legal rights. See Brakke v. Iowa Dep't of Nat. Res., 897 N.W.2d 522, 534 (Iowa 2017) ("It is universally accepted that where statutory terms are ambiguous, courts should interpret the statute in a reasonable fashion to avoid absurd results." (citing 2A Norman J. Singer & Shambie Singer, Statutes & Statutory Construction § 46:7, at 279 (7th ed. rev. 2014))).
Xenia also points to Iowa Code § 357A.13 as an additional source of statewide legal rights. That provision states, "If the capacity of the district's facilities permits, the district may sell water by contract to any city, other district, or other person, public or private, not within the boundaries of a district." Iowa Code § 357A.13. The parties cite no authority from an Iowa court interpreting this provision, and the Court is aware of none. Johnston contends that this provision only relates to "sell[ing] water by contract," Iowa Code § 357A.13, which is distinct from providing water service, and that it must be read in conjunction with the two-mile rule. Under Johnston's reading, § 357A.13 contemplates districts selling excess water supply to other water providers but does not change districts’ legal rights to provide water service to customers.
Unlike § 357A.13 ’s reference to selling water, § 357A.2 consistently refers to "providing" "water service," Iowa Code § 357A.2, and never refers to selling water, suggesting that the two phrases have different meanings. See Hardin Cty. Drainage Dist. 55 v. Union Pac. R. Co., 826 N.W.2d 507, 513-14 (Iowa 2013) (interpreting different words in the same statute to have different meanings); see also In Interest of G.J.A., 547 N.W.2d 3, 6 (Iowa 1996) ("We will not presume that the legislature intended words in the statute be given a redundant meaning." (citing State v. Sullins, 509 N.W.2d 483, 485 (Iowa 1993) )). In addition, § 357A.13 states that districts may sell excess water to "any city, other district, or other person," Iowa Code § 357A.13, whereas § 357A.2 variously refers to providing water service to "residents" or "customers," Iowa Code § 357A.2, further supporting Johnston's interpretation of the law. Although § 357A.13 refers to "other persons" in addition to cities and districts, under Iowa rules of statutory interpretation, "when general words follow specific words in a statute, the general words are read to embrace only objects similar to those objects of the specific words." Teamsters Local Union No. 421 v. City of Dubuque, 706 N.W.2d 709, 715 (Iowa 2005) (citing Messerschmidt v. City of Sioux City, 654 N.W.2d 879, 884 (Iowa 2002) ).
Even if § 357A.13 allowed districts to provide water service to customers outside their boundaries, that permission must be read in conjunction with § 357A.2 ’s prohibition on providing water service within two miles of a municipality. See State v. Lopez, 907 N.W.2d at 120 ("In interpreting [a] statute, we also consider the overall structure and context of the statute, not just specific words or phrases in a vacuum." (citing Kline v. SouthGate Prop. Mgmt., LLC, 895 N.W.2d 429, 438 (Iowa 2017) )); State v. Dann, 591 N.W.2d 635, 638 (Iowa 1999) (in interpreting a statute, courts must "seek to harmonize the statute, if possible, with other statutes on the same subject matter" (citing Doe v. Ray, 251 N.W.2d 496, 501 (Iowa 1977) )). Section 357A.2(3) ’s two-mile rule is more specific as to the issue of rural water districts providing service within two miles of a city and would thus control over the more general right to sell excess water provided in § 357A.13. See State v. Lutgen, 606 N.W.2d 312, 314 (Iowa 2000) ("[G]eneral and specific statutes should be read together and harmonized, if possible. However, to the extent of an irreconcilable conflict between them, the specific or special statute ordinarily will prevail over the general one." (quoting 82 C.J.S. Statutes § 355, at 474 (1999) )). Johnston's reading of § 357A.13 is more plausible, but even Xenia's reading of the statute does not exempt it from the two-mile rule.
Xenia also argued at the hearing that Xenia retained additional legal rights after the 1990 PCBOS resolution because, although Xenia became a rural water district by that resolution, it also maintained its status as a § 504A nonprofit corporation, including all the rights applicable to a nonprofit corporation. That is, after 1990, Xenia did not change from a nonprofit corporation to a rural water district but rather gained dual status as both. Xenia never made this dual status argument in its briefing, and in fact Xenia's written materials appear to contradict this argument. See, e.g., Pl.’s Br. Supp. 1, ECF No. 34 ("Xenia filed a Petition with the County Board of Supervisors of each county Xenia was operating (including Polk County) seeking to be converted from a Non-Profit Corporation to a Rural Water District ...") (emphasis added); id. at 6 (citing §§ 357A.2 and 357A.6, not § 504A, in arguing that Xenia is an "association" for purposes of § 1926(b) ); Pl.’s Reply 5, ECF No. 57 ("In 1990 when Xenia the non-profit corporation was reorganized as Xenia Rural Water District ...") (emphasis added). Xenia has also cited to no evidence in the record indicating that Xenia continued to operate as a § 504A nonprofit corporation after the 1990 PCBOS resolution. The Court is not "obligated to wade through and search the entire record for some specific facts" in support of an argument on summary judgment. Johnson v. Charps Welding & Fabricating, Inc., 950 F.3d 510, 523 (8th Cir. 2020) (quoting Barge v. Anheuser-Busch, Inc., 87 F.3d 256, 260 (8th Cir. 1996) ).
Indeed, Xenia's argument in its brief that it retained its assets and liabilities from when it was a nonprofit included a citation to an Iowa law, § 357A.20, providing that a "nonprofit corporation shall cease to exist as a chapter 504 entity" after reorganizing as a rural water district. Iowa Code § 357A.20(2)(b) ; Pl.’s Reply 5, ECF No. 57. Despite Xenia's favorable citation to the law in its briefing, Xenia argued at the hearing that § 357A.20 does not apply to it because the relevant language in § 357A.20(2)(b) was not enacted until 1991, after Xenia had reorganized. Xenia referenced an Eighth Circuit decision that discusses the possibility of an entity having dual status. See Rural Water Sys. No. 1, 202 F.3d at 1038. However, the Eighth Circuit only discussed the possibility of dual status in the context of the pre-1991 statutory history of § 357A.2. In attempting to explain why a prior version of § 357A.2(3) stated the two-mile rule applied to rural water districts organized under § 504A, when in fact there was no such thing under Iowa law as a rural water district organized under § 504A (only nonprofit corporations), the Eighth Circuit explained that before the 1991 amendment that specified a § 504A nonprofit ceased to exist when it reorganized as a rural water district, such an entity had dual status as both a § 504A nonprofit corporation and a rural water district, which would account for the seemingly inapt language in the two-mile rule. Id. The Eighth Circuit suggested that "the Iowa legislature failed to strike the surplus words" from the two-mile rule when it passed the 1991 amendment. Id. The Eighth Circuit further explained that after the 1991 amendment, "when a 504A corporation reincorporates as a 357A district, the 504A corporation ceases to exist upon filing the notice of reincorporation" and "is only a 357A district." Id. The court never held that nonprofit corporations reorganized as rural water districts before 1991 continued to hold dual status after the 1991 amendment, and Xenia cites no other authority supporting that proposition. Even if Xenia did have dual status, Xenia has not elaborated on what additional legal rights it would retain as a result. The Eighth Circuit noted that § 357A.2 "likely applied to these corporations having a dual status," suggesting that the two-mile rule would apply to Xenia in any event. Id. Xenia has not demonstrated that it holds dual status as a nonprofit corporation and rural water district, nor that it retains additional legal rights to the areas in dispute.
This language was amended in 2014.
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* * *
In sum, the two-mile rule may validly apply to Xenia, and any § 1926(b) -protected service area Xenia gained after 1982 would be subject to the two-mile rule. However, some portions of the areas in dispute fall over two miles from Johnston's city limits. The parties agree that such areas are within the geographic boundaries set forth in the 1990 PCBOS resolution. See Def.’s Reply – Pl.’s Statement of Undisputed Material Facts, Statement 8, ECF No. 60-1 ("Johnston admits that the areas as defined by Xenia as the ‘Encroachment Areas,’ the ‘Disputed Areas,’ and the ‘Xenia Territory’ are located within the geographic area described in the PCBOS Resolution and Order."). Johnston stated at the hearing that Xenia has rights to the areas in dispute over two miles from Johnston and that Johnston has not asserted a legal claim to that portion of the areas in dispute. Indeed, Johnston previously acknowledged that it would have to "buy out" Xenia's rights to those portions of the areas in dispute over two miles from Johnston. Def.’s App. 4 (Affidavit of James Sanders – Johnston City Administrator, ¶¶ 15-16), ECF No. 40-3 ("Johnston identified a relatively small portion of the area it intended to annex was outside of Johnston's two-mile boundary. Johnston acknowledged that ... Johnston may need to provide consideration to Xenia to ‘buy out’ its interest in the portion."). Based on the current record, Xenia has a legal right to provide water service to those portions of the areas in dispute falling outside the two-mile rule.
The next issue is identifying which portions of the areas in dispute fall outside the two-mile rule. Xenia provides a map purporting to show the areas in dispute in relation to the two-mile boundary. See Pl.’s Supp. App. 326, ECF No. 55-1. Johnston contends Xenia's map "obscures the entirety of the geographic area in issue and its size prevents confirming its accuracy." Def.’s Reply – Def.’s Statement of Uncontroverted Material Facts, Statement 9, ECF No. 60-2. Johnston provides an alternative map, but it is indecipherable in its current form. See Def.’s App. 6, ECF No. 44. According to Johnston, "the parties’ disagreement on the proper map to be used may be resolved by conferral between the parties." Def.’s Reply – Def.’s Statement of Uncontroverted Material Facts, Statement 9, ECF No. 60-2. As such, given the current record, the Court grants Xenia's motion for partial summary judgment as to Xenia's legal right to serve those portions of the areas in dispute that are over two miles from Johnston's city limits without delineating at this juncture which portions of the areas in dispute are over two miles from Johnston. For the reasons provided, Xenia's Motion as to its legal rights to the portions of the areas in dispute covered by the two-mile rule must be denied .
D. Johnston's Affirmative Defenses
Xenia moves for summary judgment as to each of Johnston's nine affirmative defenses. Xenia filed its Motion as to Johnston's affirmative defenses on June 12, 2019. Discovery closed on December 20, 2019, and the dispositive motion deadline was January 15, 2020. See Feb. 25, 2019 Scheduling Order, ECF No. 18. Xenia filed its Second Motion for Partial Summary Judgment on January 8, 2020, expanding the issues for which Xenia sought summary judgment. At the motions hearing, Johnston's counsel argued that resolving Xenia's motion as to Johnston's affirmative defenses would be premature because the briefing on the defenses occurred well before the close of discovery. Johnston's counsel further represented that Johnston would reevaluate its affirmative defenses before trial. Xenia's counsel argued that its Motion as to Johnston's affirmative defenses should be resolved now because discovery has closed and the Court should narrow the issues before trial.
The Court has broad discretion to defer ruling on a motion for summary judgment as to affirmative defenses. See, e.g., LL B Sheet 1, LLC v. Loskutoff, 362 F. Supp. 3d 804, 821 (N.D. Cal. 2019) ("Because the arguments on this affirmative defense would be more appropriately presented in a motion in limine, the Court DEFERS RULING ON Defendant's fourth affirmative defense."); Copper River Seafoods, Inc. v. Chubb Custom Ins., No. 3:16-CV-00039-TMB, 2018 WL 6220064, at *10 (D. Alaska Sept. 19, 2018) (deferring ruling on motion for summary judgment as to an affirmative defense until resolution of a separate pending motion); Sansom v. Milyard, No. 10-CV-02391-WYD-MJW, 2012 WL 1015200, at *9 (D. Colo. Mar. 23, 2012) (stating "any ruling is premature at this time" before trial as to motion for summary judgment against affirmative defense and therefore "defer[ing] any ruling on these issues until trial" by denying the motion without prejudice); Prince v. U.S. Monolithics, LLC, No. 05CV1222 JM( ), 2006 WL 8455455, at *6 (S.D. Cal. July 18, 2006) (deferring ruling on motion for summary judgment as to four affirmative defenses until raised at trial). Here, where Xenia's Second Motion for Partial Summary Judgment remains pending and may impact the Court's resolution of Xenia's current Motion as to Johnston's affirmative defenses, and Johnston may reevaluate its affirmative defenses after the present Order, a ruling on Johnston's affirmative defenses would be premature. The Court therefore defers ruling on Xenia's Motion for Partial Summary Judgment as to Johnston's affirmative defenses at this time.
III. CONCLUSION
Xenia's first Motion for Partial Summary Judgment, ECF No. 33, must be granted in part as to Xenia's legal rights to those portions of the areas in dispute over two miles from Johnston's city limits, and denied in part as to those portions of the areas in dispute within two miles of Johnston's city limits. The Court defers ruling on Xenia's Motion as to Johnston's affirmative defenses.
Johnston's Motion for Partial Summary Judgment, ECF No. 44, must be granted .