Case 4:21-cv-00148-JMS-DML Document 1 Filed 09/08/21 Page 1 of 16 PageID #: 1
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF INDIANA
`NEW ALBANY DIVISION
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`SCOTT COUNTY REGIONAL SEWER
`DISTRICT
`
`Plaintiff,
`
`vs.
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`Civil Action No. 4:21-cv-148
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`CITY OF SCOTTSBURG, INDIANA, and
`CITY OF AUSTIN, INDIANA
`
`Defendants.
`
`Complaint for Declaratory Judgment, Injunctive Relief, Breach of Contract, and
`Attorneys' Fees
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`Plaintiff, Scott County Regional Sewer District (“District”), by counsel, respectfully files
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`its Complaint for Declaratory Judgment, Injunctive Relief, Breach of Contract, and Attorneys’
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`Fees (“Complaint”), against Defendants, City of Scottsburg, Indiana (“Scottsburg”), and City of
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`Austin, Indiana (“Austin”), and states as follows:
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`PARTIES, JURISDICTION, AND VENUE
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`The District is a regional sewer district that was created in 1973 under Indiana
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`When the District was created, its service area was defined as all of Scott County,
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`law.
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`1.
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`2.
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`Indiana, except the incorporated areas of Scottsburg and Austin. See, Ind. Code §§ 13-26-2-3(4),
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`8(c) (current statutory cites for creation of sewer district and its service area).
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`3.
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`4.
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`Scottsburg and Austin are municipalities located in Scott County, Indiana.
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`Venue is proper in the Southern District of Indiana, 28 U.S.C. § 1391(b), and in
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`the New Albany Division.
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`

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`5.
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`The United States government has lent the District funds under 7 U.S.C. §
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`1926(a)(1).
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`6.
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`As will be detailed, Scottsburg and Austin have violated the District’s rights
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`under 7 U.S.C. § 1926(b).
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`7.
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`8.
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`9.
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`This Court has federal question jurisdiction under 28 U.S.C. § 1331.
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`The Complaint also alleges that Scottsburg and Austin have breached contracts.
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`This Court has supplemental jurisdiction over these claims. 28 U.S.C. § 1367.
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`FACTUAL BACKGROUND
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`Scottsburg wastewater agreement and amendment
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`10.
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`In 1988, Scottsburg and the District entered into a wastewater service agreement
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`(“Scottsburg Agreement”) that provides that Scottsburg will treat .0378 million gallons of
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`sewage per day on average for the District, but Scottsburg reserved up to .075 million gallons per
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`day of capacity for the District. A true and accurate copy of the Scottsburg Agreement is
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`attached as Exhibit 1.
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`11.
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`The United States Department of Agriculture lent the District money under 7
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`U.S.C. § 1926(a) to construct sewage works (“Federal Debt”).
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`12.
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`In 1995, Scottsburg and the District amended the Scottsburg Agreement
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`(“Scottsburg Amendment”) because the District had obtained the Federal Debt. A true and
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`accurate copy of the Scottsburg Amendment is attached as Exhibit 2.
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`13.
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`The Scottsburg Amendment provided the following regarding Scottsburg and the
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`District’s service areas:
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`2
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`(Scottsburg Amendment p.2.)
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`14.
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`Exhibit E to the Scottsburg Agreement limited Scottsburg’s service area to its
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`municipal boundaries:
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`(Exhibit E-1.)
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`15.
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`At the time of the Scottsburg Amendment, Scottsburg’s municipal boundaries
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`were east of Interstate 65, and Scottsburg did not extend west of Interstate 65.
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`3
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`16.
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`The Scottsburg Amendment also extended the term of the Scottsburg Agreement
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`to forty years because that is the term of the District’s Federal Debt, meaning the Scottsburg
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`Agreement is in effect until 2028. (Scottsburg Amendment p.1.)
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`Austin wastewater agreement
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`17.
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`In 1996, Austin and the District entered into a wastewater service agreement
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`(“Austin Agreement”) that provides that Austin will treat .075 million gallons of sewage per day
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`on average from the District. A true and accurate copy of the Austin Agreement is attached as
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`Exhibit 3.
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`18.
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`The Austin Agreement provides the following regarding service areas:
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`SERVICE AREAS. The parties agree that the planning and service areas for each
`party are reflected upon the map attached hereto as Exhibit “C” and may be
`changed by agreement of the parties. Unless a planning and service area is
`changed by agreement of the parties, neither party shall infringe on the other
`party’s planning and service area.
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`(Austin Agreement p.13.)
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`19.
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`Exhibit C to the Austin Agreement reflects that Austin’s service area is limited to
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`its corporate boundaries.
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`Scottsburg annexes west of Interstate 65
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`19.
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`Since Scottsburg and the District entered the Scottsburg Agreement, Scottsburg
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`has annexed territory west of Interstate 65:
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`4
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`Scottsburg has annexed areas west
`of Interstate 65.
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`20.
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`The areas Scottsburg has annexed are immediately adjacent to the District’s sewer
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`main along State Road 56, and the annexed area is in the District’s service area:
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`5
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`The disputed property
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`21.
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`CR Howser Contracting LLC (“Howser”) owns property within the annexed
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`portion of Scottsburg south of State Road 56 (“Disputed Property”):
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`Disputed Property
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`22.
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`Upon information and belief, the owner of the Disputed Property and/or a
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`developer has met with Scottsburg regarding developing the Disputed Property into a residential
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`subdivision.
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`6
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`23.
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`Upon information and belief, Scottsburg has approached the developer or owner
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`of the Disputed Property and offered to provide sewer service.
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`24.
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`In April 2021, Scottsburg wrote the District that the “developer will not proceed if
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`the proposed subdivision is not on the City system.” A true and accurate copy of this
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`correspondence is attached as Exhibit 4; Ex. 4 at p.3.
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`25.
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`Scottsburg proposed that it would “begin serving all areas within the present City
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`boundaries,” which would include the Disputed Property. (Id. p.2.)
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`26.
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`Scottsburg also proposed that it would “take ownership” of the District’s sewer
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`line along State Road 56, among other infrastructure. (Id.)
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`27.
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`The District did not accept Scottsburg’s proposal.
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`Scottsburg serving the Disputed Property would violate 7 U.S.C. § 1926(b)
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`28.
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`7 U.S.C. § 1926(b) provides the following:
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`The service provided or made available through any such association shall not be
`curtailed or limited by inclusion of the area served by such association within the
`boundaries of any municipal corporation or other public body, or by the granting
`of any private franchise for similar service within such area during the term of
`such loan; nor shall the happening of any such event be the basis of requiring such
`association to secure any franchise, license, or permit as a condition to continuing
`to serve the area served by the association at the time of the occurrence of such
`event.
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`29.
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`The District has made service available, within the meaning of § 1926(b), to the
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`Disputed Property for many years because the Disputed Property is in an area the District could
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`serve within a reasonable amount of time from its sewer main along State Road 56 and the
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`Disputed Property is within the District’s state law service area.
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`30.
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`Scottsburg cannot curtail or limit the area served by the District by annexing the
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`Disputed Property into Scottsburg and then claiming it has a right to serve it. 7 U.S.C. § 1926(b).
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`7
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`Scottsburg adopts an ordinance that violates of 7 U.S.C. § 1926(b)
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`31.
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`On July 26th, 2021, Scottsburg adopted Ordinance No. 2021-14 (“Scottsburg
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`Ordinance”). A true and accurate copy of a Joint Petition filed by Scottsburg and Austin is
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`attached as Exhibit 5; the Scottsburg Ordinance is Exhibit A to the Joint Petition.
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`32.
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`The Scottsburg Ordinance applies to “all territory within the corporate boundaries
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`of the City,” which would include the Disputed Property. (Ex. A to Ex. 5 p.1.)
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`33.
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`The Scottsburg Ordinance was adopted under Ind. Code § 36-9-2-16, that statute
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`permits a municipality to regulate sewer service, and the term regulate “includes license, inspect,
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`or prohibit.” Ind. Code § 36-1-2-15.
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`34.
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`The District has current customers within the corporate boundaries of Scottsburg
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`due to annexations by Scottsburg, and areas served by the District, including the Disputed
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`Property, are within Scottsburg’s corporate boundaries.
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`35.
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`The Scottsburg Ordinance provides that “no sewer utility other than the
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`Scottsburg Sewer Utility shall commence or continue the collection, processing, or disposition of
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`waste substances . . . without first obtaining a permit from the City.” (Ex. A to Ex. 5 p.1.)
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`36.
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`The Scottsburg Ordinance also requires Scottsburg to agree that the District’s
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`board is duly appointed. (Id. p.2.)
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`37.
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`The Scottsburg Ordinance violates 7 U.S.C. § 1926(b) because it would require
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`the District to obtain a permit and approval from Scottsburg of the District’s board before the
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`District could continue to serve its existing customers within Scottsburg or serve the Disputed
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`Property, and 7 U.S.C. § 1926(b) prohibits a municipality from “requiring such association to
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`secure any franchise, license, or permit as a condition to continuing to serve the area.”
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`8
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`38.
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`The District does not intend to comply with the permitting or approval
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`requirements of the Scottsburg Ordinance.
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`Extraterritorial application of the Scottsburg Ordinance
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`39.
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`The Scottsburg Ordinance also provides that it applies in the area four miles
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`outside of its corporate boundaries, which does not include the Disputed Property or properties
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`within Scottsburg’s corporate boundaries served by the District. (Ex. A to Ex. 5 p.1.)
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`40.
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`Scottsburg serves users and areas within four miles of Scottsburg’s corporate
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`boundaries, and the District’s state-law service area includes all areas outside of Scottsburg’s
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`corporate boundaries within Scott County.
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`41.
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`Ind. Code § 36-9-2-18 provides that a municipality may exercise the power
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`granted by Ind. Code § 36-9-2-16 “in areas within four (4) miles outside its corporate
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`boundaries.”
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`42.
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`But before the Scottsburg Ordinance can go into effect in areas outside its
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`municipal boundaries, the Indiana Utility Regulatory Commission (“IURC”) must approve the
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`Scottsburg Ordinance.
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`43.
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`Ind. Code § 8-1.5-6-2 provides that “‘regulated territory’ means the areas outside
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`the corporate boundaries of a municipality described in . . . IC 36-9-2-18.” (Emphasis added).
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`That is, “regulated territory” only includes “the areas outside the corporate boundaries.” Areas
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`inside corporate boundaries are not within the regulated territory.
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`44.
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`Ind. Code § 8-1.5-6-3 then provides that a “‘regulatory ordinance’ means an
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`ordinance adopted by a municipality that . . . asserts the exclusive authority of a municipal utility
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`to provide service within a regulated territory.” (Emphasis added.)
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`9
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`45.
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`Ind. Code § 8-1.5-6-9(b) provides that a “municipality may not enforce a
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`regulatory ordinance until the commission issues an order” approving it.
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`46.
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`Summarized, the “regulated territory” is the area “outside the corporate
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`boundaries,” a “regulatory ordinance” asserts exclusive authority to serve in the “regulated
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`territory,” and the IURC only needs to approve a “regulatory ordinance.”
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`47.
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`Therefore, the IURC only needs to approve the provisions of the Scottsburg
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`Ordinance that apply outside Scottsburg’s corporate boundaries.
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`48.
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`Recognizing this, the Scottsburg Ordinance provides it “shall be in full force and
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`effect upon approval by the Indiana Utility Regulatory Commission.” (Scottsburg Ordinance p.3)
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`(emphasis added).
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`49.
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`On August 13, 2021, the District’s counsel wrote Scottsburg that the Scottsburg
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`Ordinance violates 7 U.S.C. § 1926(b). A true and accurate copy of this correspondence is
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`attached as Exhibit 6.
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`50.
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`Scottsburg did not substantively respond.
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`Austin adopts a materially identical ordinance
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`51.
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`On August 10th, 2021, Austin adopted Ordinance No. 2021-10 (“Austin
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`Ordinance”). (Exhibit B to Exhibit 5.)
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`52.
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`53.
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`The Austin Ordinance is materially identical to the Scottsburg Ordinance.
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`The District has current customers within the corporate boundaries of Austin due
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`to annexations by Austin, and areas served by the District are within Austin’s corporate
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`boundaries.
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`10
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`54.
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`Scottsburg serves users and areas within four miles of Austin’s corporate
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`boundaries, and the District’s state-law service area includes all areas outside of Austin’s
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`corporate boundaries within Scott County.
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`55.
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`The District does not intend to comply with the permitting or approval
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`requirements of the Austin Ordinance.
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`56.
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`On August 26, 2021, Scottsburg and Austin jointly petitioned the IURC to
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`approve the Scottsburg and Austin Ordinances, under Ind. Code § 8-1.5-6-9. (Ex. 5.)
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`Count I- Declaratory Judgment Regarding the Disputed Property
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`57.
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`The District alleges and incorporates by reference the allegations in the
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`paragraphs above.
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`58.
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`59.
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`60.
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`Count I seeks a declaratory judgment under 28 U.S.C. § 2201.
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`The District is an association within the meaning of 7 U.S.C. § 1926(b).
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`The District has a qualifying outstanding loan under 7 U.S.C. § 1926(a), and the
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`district is protected by 7 U.S.C. § 1926(b).
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`61.
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`Scottsburg (and Austin) are municipalities, within the meaning of 7 U.S.C. §
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`1926(b).
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`62.
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`The Disputed Property is within the area served by the District under 7 U.S.C. §
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`1926(b).
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`63.
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`Scottsburg violated 7 U.S.C. § 1926(b) by annexing the Disputed Property into
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`Scottsburg and then claiming it could serve it.
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`64.
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`The District seeks a declaratory judgment that 7 U.S.C. § 1926(b) prohibits
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`Scottsburg from serving the Disputed Property.
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`Count II- Declaratory Judgment that the Scottsburg and Austin Ordinances
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`11
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`Violate 7 U.S.C. § 1926(b)
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`65.
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`The District alleges and incorporates by reference the allegations in the
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`paragraphs above.
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`66.
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`67.
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`Count II seeks a declaratory judgment under 28 U.S.C. § 2201.
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`The Scottsburg and Austin Ordinances declare that they have the authority to
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`regulate sewer service within their boundaries and within four miles outside of their municipal
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`boundaries under Ind. Code §§ 36-9-2-16, 18. (Scottsburg Ordinance p.1; Austin Ordinance p.1.)
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`68.
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`The Scottsburg and Austin Ordinances purport to require the District to obtain
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`permits and the approval of Scottsburg and Austin of the District’s board for the District to
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`continue serving its current customers. (Scottsburg Ordinance pp.2-3; Austin Ordinance pp.2-4.)
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`69.
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`The Scottsburg and Austin Ordinances violate Section 1926(b) because it
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`prohibits a municipality from “requiring such association to secure any franchise, license, or
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`permit as a condition to continuing to serve the area served.”
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`70.
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`The Scottsburg and Austin Ordinances also violate section 1926(b) by purporting
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`to limit or curtail the area served by the District to “parcels where the sewer utility has facilities
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`existing as of the effective date of this Ordinance that are located within or adjacent to the
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`parcels to be served,” despite the District’s service area being all of Scott County except the
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`incorporated areas of Scottsburg and Austin. (Scottsburg Ordinance § 9(a); Austin Ordinance §
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`9(a).)
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`71.
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`72.
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`Scottsburg and Austin’s actions have and will continue to harm the District.
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`The District seeks a declaratory judgment that the Scottsburg and Austin
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`Ordinances violate 7 U.S.C. § 1926(b).
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`Count III-Injunctive Relief
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`12
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`73.
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`The District alleges and incorporates by reference the allegations in the
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`paragraphs above.
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`74.
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`75.
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`76.
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`The District is likely to succeed on the merits of its 7 U.S.C. § 1926(b) claims.
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`Scottsburg and Austin’s actions have and will continue to harm the District.
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`Absent an injunction, the District’s remedies at law are inadequate and the
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`District faces irreparable harm.
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`77. Monetary damages will not adequately compensate the District for having comply
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`with illegal permitting and approval requirements in the Scottsburg and Austin Ordinances as a
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`condition for the District to continue operating.
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`78.
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`79.
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`The balance of harms weighs in the District’s favor.
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`An injunction is in the public’s interests, as Scottsburg and Austin’s actions will
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`harm rural sewer users throughout Scott County.
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`80.
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`The District is entitled to an injunction prohibiting Scottsburg or Austin from
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`enforcing the Scottsburg or Austin Ordinances against the District.
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`Count IV-Civil Rights Violation
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`81.
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`The District alleges and incorporates by reference the allegations in the
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`paragraphs above.
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`82.
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`Scottsburg and Austin are acting under color of state law and are depriving the
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`District of its rights under federal law.
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`83.
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`The District may pursue a violation of 7 U.S.C. § 1926(b) through 42 U.S.C. §
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`1983.
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`84.
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`Under 42 U.S.C. § 1988, the District is, therefore, entitled to an award of its
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`attorneys’ fees.
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`13
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`Count V-Breach of Contract
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`85.
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`The District alleges and incorporates by reference the allegations in the
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`paragraphs above.
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`86.
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`Both the Scottsburg and Austin Agreements provide that “[u]nless a planning and
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`service area is changed by agreement of the parties, neither party shall infringe on the other
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`party’s planning and service area.” (Scottsburg Agreement p.17; Austin Agreement p.14.)
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`87.
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`In April 2021, Scottsburg sent the District a letter proposing that the parties agree
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`that Scottsburg’s service area be expanded to the area within four miles of its boundaries. (Ex. 4
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`p.2.)
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`88.
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`89.
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`The District did not agree to this.
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`Scottsburg and Austin breached the Scottsburg and Austin Agreements by
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`unilaterally seeking to extend their service areas into the District’s service area by adopting the
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`Scottsburg and Austin Ordinances and by petitioning the IURC to approve them, rather through
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`an agreement by the parties, as the Scottsburg and Austin Agreements require.
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`90.
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`The District seeks a declaratory judgment, under 28 U.S.C. § 2201, that
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`Scottsburg and Austin breached the Scottsburg and Austin Agreements by adopting the
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`Scottsburg and Austin Ordinances and by petitioning the IURC to approve them.
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`91.
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`Both the Scottsburg and Austin Agreements provide for attorneys’ fees if they are
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`breached. (Scottsburg Agreement p.18; Austin Agreement p.14.)
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`92.
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`The District seeks to enjoin Scottsburg and Austin from continuing to breach the
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`Scottsburg and Austin Agreements by seeking to have the IURC approve the Scottsburg and
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`Austin Ordinances.
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`93.
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`Scottsburg and Austin’s actions have and will continue to harm the District.
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`14
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`94.
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`Absent an injunction, the District remedies at law are inadequate and the District
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`faces irreparable harm.
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`95.
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`96.
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`The balance of harms weighs in the District’s favor.
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`An injunction is in the public’s interests, as Scottsburg and Austin’s actions will
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`harm rural sewer users throughout Scott County.
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`97.
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`The District is entitled to an injunction prohibiting Scottsburg or Austin from
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`breaching the Scottsburg and Austin Agreements.
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`WHEREFORE, the District respectfully requests the following relief:
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`a) The Court enter a declaratory judgment that Scottsburg serving the Disputed
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`Property would violate 7 U.S.C. § 1926(b);
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`b) The Court enter a declaratory judgment that Scottsburg and Austin have violated
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`7 U.S.C. § 1926(b);
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`c) The Court enjoin Scottsburg and Austin from violating 7 U.S.C. § 1926(b);
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`d) The Court enter a declaratory judgment that Scottsburg and Austin breached the
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`Scottsburg and Austin Agreements;
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`e) The Court enter a declaratory judgment that Scottsburg and Austin breached the
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`Scottsburg and Austin Agreements and enjoin them from continuing to breach the
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`agreements;
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`f) Award the District its attorneys’ fees and costs in this action; and
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`g) Award all other just relief.
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`Respectfully submitted,
`
`/s/ Bradley M. Dick
`J. Christopher Janak, 18499-49
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`15
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`Case 4:21-cv-00148-JMS-DML Document 1 Filed 09/08/21 Page 16 of 16 PageID #: 16
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`Bradley M. Dick, 29647-49
`BOSE McKINNEY & EVANS LLP
`111 Monument Circle, Suite 2700
`Indianapolis, Indiana 46204
`
`Attorneys for Scott County Regional Sewer
`District
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`4194355_1
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`16
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