Megatel v. Mansfield

── Megatel v. Mansfield ── Court: Court of Appeals for the Fifth Circuit Date: May 21, 2026 Category: Private Civil Federal Case: 25-11006 Document: 70-1 Page: 1 Date Filed: 05/21/2026 United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit ____________ FILED May 21, 2026 No. 25-11006 ____________ Lyle W. Cayce Clerk Megatel Homes, L.L.C.; Cipriani Island Laguna Azure, L.L.C., Plaintiffs—Appellants, versus City of Mansfield, Texas, Defendant—Appellee. ______________________________ Appeal from the United States District Court for the Northern District of Texas USDC No. 3:24-CV-2295 ______________________________ Before Haynes, Higginson, and Ho, Circuit Judges. Stephen A. Higginson, Circuit Judge: It is ORDERED that the petition for panel rehearing is GRANTED. The court’s prior panel opinion is WITHDRAWN, and the following opinion is SUBSTITUTED. Megatel Homes, L.L.C., and Cipriani Island Azure, L.L.C. (together, Megatel) sought to develop land outside the City of Mansfield, Texas (Mansfield or the City). To do so, Megatel needed retail water utility services from the Johnson County Special Utility District (JCSUD). But when Megatel requested retail water services, JCSUD conveyed that it was not  Case: 25-11006 Document: 70-1 Page: 2 Date Filed: 05/21/2026 No. 25-11006 permitted to provide any without Mansfield’s permission. Years of unsuccessful negotiations between Megatel and Mansfield ensued, resulting in this litigation. Assessing Megatel’s Sherman Act claims and allegations of state-law violations, the district court concluded that state-action immunity prohibited Megatel’s antitrust claims and declined to exercise supplemental jurisdiction. Because we conclude that the Texas Water Code does not clearly articulate and affirmatively express a state policy permitting Mansfield to act anticompetitively, and thus does not provide Mansfield with immunity, we REVERSE and REMAND. I. Megatel owns approximately 517 acres of land—the Cipriani Property—located to the southwest of Mansfield, in Johnson County, Texas. The land sits outside of the City’s corporate boundaries but within its extraterritorial jurisdiction. Megatel sought to develop the Cipriani Property into a residential, mixed-use, and commercial development. To do so, it needed water—essential not only to the property’s eventual habitability, but also as a prerequisite for additional steps in the development process, such as platting. Concomitantly, JCSUD has a certificate of convenience and necessity (CCN) for the land on which the Cipriani property sits. JCSUD must provide water services for developments in “all of its CCN territory,” including the Cipriani Property. 1 In 2009, JCSUD and Mansfield entered into an agreement focusing on the sale and delivery of water in JCSUD’s CCN. In 2022, they amended the agreement, adding a “Restriction on Area of Utility Service” provision _____________________ 1 Mansfield represented to Megatel that it routinely provides water services to developments within the City and “significant portions of its exterritorial jurisdiction.” However, it “does not currently have a CCN that authorizes it to provide retail water service to the Cipriani Development.” 2 C