Seventh Circuit Holds Rural Water Association Cannot Claim USDA Monopoly Rights Over a Customer It Failed to Timely Serve (Dupont Water Co. v. City of Madison, No. 25-3131 (7th Cir. Aug. 5, 2026))
The Seventh Circuit affirmed summary judgment for the City of Madison and Jefferson County, Indiana, holding that Madison did not violate the federal monopoly protections of 7 U.S.C. § 1926(b) by supplying water to a new county jail, because the rural water association claiming those protections, Dupont Water Company, Inc. (“Dupont”), never actually “provided or made available” service to the jail within a reasonable time after being asked to do so.
Section 1926(b) is part of the Consolidated Farmers Home Administration Act of 1961, which authorizes the U.S. Department of Agriculture (“USDA”) to loan money to rural water associations. In exchange for taking on USDA debt, § 1926(b) protects those associations from certain municipal competition: their service “shall not be curtailed or limited” by a municipality’s annexation of the association’s territory or by the grant of a competing franchise. The Seventh Circuit has long read this protection broadly. In Jennings Water, Inc. v. City of North Vernon, 895 F.2d 311 (7th Cir. 1989), the court held that § 1926(b) bars any municipal curtailment of a protected association’s service, not just the two forms of competition the statute’s text actually names. And in Washington County Water Co. v. City of Sparta, 77 F.4th 519 (7th Cir. 2023), the court adopted a two-part “physical capability” test for determining whether an association has “provided or made available” service to a disputed area: (1) the association must have “pipes in the ground”— water lines within or adjacent to the area sufficient to serve it “within a reasonable time after a request for service occurs”—and (2) the association must have the legal right under state law to serve that area. Only the first prong was contested in this case.
Jefferson County built a new jail on undeveloped land just outside Madison in 2020. Two utilities could potentially serve the site: Madison, which had a 12-inch water main across the street, and Dupont, a USDA-indebted rural water association whose nearest main was only three or four inches—too small for the jail’s projected volume. Beginning in July 2020, the County’s construction manager, DLZ Corporation, repeatedly reached out to Dupont about the project’s water needs, and the record shows Dupont knew by October 2020 that it would need a larger main to serve the jail. Over the next two years, DLZ and the County followed up again and again, asking Dupont to confirm its connection plans, requesting a water rate quote, and eventually telling Dupont it would need to hire an engineer to figure out how to proceed. Dupont never provided an infrastructure plan, a cost estimate, a rate quote, or a proposed contract. It did, however, send Jefferson County two letters (in January and June 2021) asserting that the jail site fell within its protected service area under § 1926(b) and that Dupont was “the entity from whom Jefferson County needs to purchase water.” With Dupont still unable to say whether or on what terms it could serve the jail, the County eventually connected the jail to Madison’s main in December 2022.
Dupont sued Madison in March 2023, claiming the sale of water to the jail violated § 1926(b), and sought declaratory relief and damages. Jefferson County intervened, seeking a declaration that its arrangement with Madison was lawful; Dupont counterclaimed against the County. Only once the case was in litigation did Dupont commission an engineering study, which concluded that Dupont could now build the necessary infrastructure to serve the jail in anywhere from about seven days (if allowed to tie into Madison’s main, at roughly $10,000) to 90–180 days (building its own main, at $482,000– $524,160). The district court (S.D. Ind., Judge Sarah Evans Barker) granted summary judgment to Madison and Jefferson County, finding no evidence that Dupont had “provided or made available” water service to the jail, and Dupont appealed.
Dupont’s position on appeal was that Jefferson County had never made a proper “request” for service in the first place pointing to deposition testimony that Dupont customers normally request service by visiting Dupont’s office, filling out an application, and paying a membership fee, none of which the County did. On that theory, Dupont argued its years of inaction were irrelevant, and that the court should instead credit its litigation expert’s after-the-fact estimate that it could physically build the necessary infrastructure in as little as a week. Dupont also argued the County had been improperly “rate shopping” between Dupont and Madison rather than genuinely trying to secure service from Dupont. Madison and Jefferson County argued that two years of correspondence about the jail’s water needs and Dupont’s own letters invoking § 1926(b) and calling itself the exclusive water provider for the site plainly constituted a request for service, and that Dupont’s litigation-driven expert testimony could not retroactively establish a “physical capability” that did not exist when it actually mattered. Madison separately urged the court to overrule Jennings Water and limit § 1926(b) to the two forms of competition its text actually lists (annexation and competing franchises), which would have foreclosed Dupont’s theory entirely.
The Seventh Circuit affirmed on the narrower ground, without reaching Madison’s request to overrule Jennings Water. Applying the “physical capability” test’s first prong, the court held that “we need not hypothesize” about whether Dupont could serve the jail in the abstract, because the historical record already answered the question: Dupont did not provide water to the jail “within a reasonable time after a request for service,” and instead “sat on its hands for years, doing nothing much other than asserting its monopoly rights.” The court rejected Dupont’s argument that no “request” had been made, calling it “Kafkaesque” and finding it “borders on absurd” to say a well-documented, two-year exchange about a large new customer’s water needs was not a request simply because no one filled out Dupont’s standard membership form. The court likewise rejected the rate-shopping argument, noting the County kept working with Dupont for months after learning Madison’s rates were substantially lower. And it gave no weight to Dupont’s litigation-commissioned expert testimony, explaining that such evidence might matter in a case where a water association was caught by surprise, but not where, as here, the association had every opportunity to develop a service plan in real time and simply failed to do so.
Although the panel did not need to revisit Jennings Water to decide the case, it used the opinion to flag concerns with the court’s own precedent. The panel noted that Dupont was not using § 1926(b) defensively, to protect an existing customer base from municipal encroachment, but offensively, as a “sword” to claim a brand-new customer it had never actually served—a use the court worried could let a water association “expand its exclusive franchise area unilaterally and limitlessly” simply by extending pipe toward the edge of its territory (quoting the Fourth Circuit’s “kudzu vine” concern in Chesapeake Ranch Water Co. v. Board of Commissioners, 401 F.3d 274 (4th Cir. 2005)). The court closed by suggesting that “in an appropriate case, we should consider revisiting” its broad, judicially expanded reading of § 1926(b), signaling that the doctrine could narrow in future litigation.
The Seventh Circuit affirmed the district court’s grant of summary judgment to the City of Madison and Jefferson County on all of Dupont’s claims. Madison’s provision of water to the jail did not violate § 1926(b), because Dupont never “provided or made available” service to the jail within a reasonable time after the County’s repeated requests.