And do you not understand the process? The plaintiff brings a lawsuit arguing that the defendant did a bad thing. They make multiple claims about laws that were broken. The judge may throw out any or all of those claims. Most lawsuits lose at least one. In this case one of the claims was that the municipal water district violated their 14th amendment rights. That one got thrown out. The plaintiffs appealed and the this is their appeal being denied.
I haven’t actually read the original lawsuit, but there’s no way that they were dumb enough to make only that one claim against the water district. They’ll still have their claims about negligence and so on and so forth. It’ll go to trial eventually, or the district will settle. Losing this claim does not let the district escape their responsibility.