Not Your Monopoly

In Megatel Homes v. City of Mansfield, a developer needed water from a special utility district, that held the exclusive state-issued “certificate of convenience and necessity.” The district, however, had contractually agreed to not provide water within the city’s extraterritorial jurisdiction without the city’s prior written consent.

The developer sued under the Sherman Act. The city claimed state-action immunity. The Fifth Circuit agreed that the Texas Water Code expresses a clear state policy to displace competition with monopoly in the provision of water services, but held that the city was not the intended beneficiary of that policy. In other words, the Water Code’s authorization of monopolistic behavior runs to the holder of a certificate, which is the utility district and not the city. No. 25-11006 (5th Cir. Mar. 26, 2026)