IN THE UNITED STATES COURT OF FEDERAL CLAIMS

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KLAMATH IRRIGATION DISTRICT et al.,              )

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Plaintiffs,                                                        )

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v.                                                                     )           No. 01-591 L

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UNITED STATES OF AMERICA ,                       )           Judge Diane Gilbert Sypolt       

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            Defendant.                                                     )

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PLAINTIFFS’ REPLY TO DEFENDANT’S OPPOSITION

TO PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT

This Court ordered the parties to brief this question: do plaintiffs have a property right in the absence of an award of title to the water right in the Klamath Basin Adjudication?  In response, plaintiffs have identified three property rights appurtenant to land within the Klamath Project, all of which do not depend on title to the water right:

·        The right to beneficial use of the irrigation water. Defendant admits that this right exists.

·        Contracts for the delivery of water to the plaintiff districts.  Contracts, too, are property.

·        Vested water rights of plaintiffs Klamath Drainage District  (KDD), Klamath Hills District Improvement Company (KHDIC), and Murel and Barbara Long (within the boundaries of and a part of KHDIC). 

            Since none of these rights depend upon the outcome of the Klamath Basin Adjudication, the Court should grant plaintiffs’ motion for partial summary judgment, holding that plaintiffs have property rights protected by the Just Compensation Clause.

To defeat plaintiffs’ motion, defendant offers up red herrings – that the Indian tribes also have rights in the Klamath Project water; that plaintiffs’ beneficial interest is only a contract right, citing to contract interpretation cases that have nothing to do with this case; and that there are competing demands for the Klamath Project water such as endangered species – and fails entirely to respond to all of the precedent from the Supreme Court, the Federal Circuit, this Court, Oregon law, the Reclamation Act, and Department of Interior regulations and opinions stating that plaintiffs’ beneficial right to receive Klamath Project water is a property right. See Nevada v. United States, 463 U.S. 110, 121, 124 (1983) (“We are bound to say that the Government’s position, if accepted, would do away with half a century of decided case law relating to the Reclamation Act of 1902 and water rights in the public domain of the West . . . . [I]t long has been established law that the right to the use of water can be acquired only by prior appropriation for a beneficial use; and that such right when thus obtained is a property right, which, when acquired for irrigation, becomes, by state law and here by express provision of the Reclamation Act as well, part and parcel of the land upon which it is applied.”)   

        Defendant further attempts to side-step the issue raised in plaintiffs’ motion by arguing that plaintiffs’ “inherently limited” contract rights do not obligate the Bureau of Reclamation (Reclamation) to deliver any water at all to plaintiffs, which is a takings issue and beyond the scope of plaintiffs’ motion for partial summary judgment.  In so doing, defendant urges us to believe that the Indian tribes’ rights and the federal government’s rights are superior to those of the plaintiffs.  At the same time, defendant inexplicably argues that the Court cannot determine plaintiffs’ property rights until after the Klamath Basin Adjudication has concluded. 

        Taken at face value, what defendant asks this Court ultimately to believe is that Reclamation, which has consistently delivered water from the Klamath Project to plaintiffs for almost a century, did so for reasons that are merely happenstance. Plaintiffs have never contended that their right to receive Klamath Project water is free from all constraints; what they do contend, however, is that their rights are property and cannot be taken, regardless of the importance of a competing demand, without payment of just compensation. 

        Defendant’s position in this case is reminiscent of Justice Holmes’s conclusion in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922):

The protection of private property in the Fifth Amendment presupposes that it is wanted for public use, but provides that it shall not be taken for such use without compensation . . . . When this seemingly absolute protection is found to be qualified by the police power, the natural tendency of human nature is to extend the qualification more and more until at last private property disappears.  But that cannot be accomplished in this way under the Constitution of the United States . . . . We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.

Id. at 415-16.

I.          PLAINTIFFS HAVE PROPERTY RIGHTS PROTECTED BY THE FIFTH AMENDMENT.  

A.        Plaintiffs’ Appurtenant Water Rights (the Beneficial Interest in Klamath Project Water) Are Property Rights.    

1.  Although Defendant Discusses at Length Its Appropriation of Water for the Klamath Project, It Fails to Even Mention That It Confirmed the Property Interests in the Use of That Water to Plaintiffs by Patent Deed.  

Repeatedly and at length, defendant recites how it appropriated water for the Klamath Project. See, e.g., Opposition at 4-7, 16-19, 36-38, 40.  In that lengthy discussion, however, defendant fails to mention that the reason why Oregon authorized the appropriation in the first place was to facilitate a steady supply of irrigation water. As defendant admitted in its Klamath Basin Adjudication filing under the Reclamation Act, use of the project water is limited to “irrigation, reclamation, domestic and other authorized uses.” See Statement and Proof of Claim to Waters of the Klamath River and Its Tributaries, Pls.’ Ex. 29, Supp. App. at 223 (citing Notice of Intention to Utilize All Waters of the Klamath Basin (May 19, 1905)).   

    More significantly, defendant utterly fails to reveal or discuss the next step in the process:  how the United States confirmed the appurtenant property right in the project water to many of the plaintiffs by patent deed.  Neither party disputes that homesteaders in the Klamath Project obtained title to their land by patent deed from the United States , which typically state:  

The United States of America, in consideration of the premises, and in conformity with the several Acts of Congress . . . has given and granted . . . unto the said [name of grantee]  . . . the tract above described, together with the right to the use of water from the Klamath Reclamation Project as an appurtenance to the irrigable lands in said tract . . . . 

See Rev. Pls.’ Finding 10 (quoting United States Patent, Pls.’ Ex. 6, App. at 56-57); see also Def.’s Resp. to Finding 10 (“[D]efendant does not dispute that some of the land that was reclaimed by the United States when it developed the Klamath Project was ceded to the United States by the State of California and then conveyed by the United States to homesteaders by a patent. . . . [D]efendant does not dispute that the language quoted is typical of language found in such patents.”).

            Nor does defendant dispute (or discuss in any way) plaintiff Fred Robison’s declaration, in which he stated:

2.  I obtained title to this land, with its appurtenant water rights, from the United States by patent deed.  The patent states:

[T]he United States of America in consideration of the premises; and in conformity with the several Acts of Congress in such case made and provided, HAS GIVEN AND GRANTED, and by those presents DOES GIVE AND GRANT, unto the said Fred A. Robison and to his heirs, the Tract above described, together with the right to the use of water from the Klamath Reclamation Project as an appurtenance to the irrigable lands in said tract . . . .

Pls.’ Ex. 23 at ¶ 2, App. at 152 (quoting United States Patent 1135040 (May 14, 1952), App. at 159).  Individual plaintiffs Albert Robison, Mark Trotman, and Lonny Baley similarly trace title to patent deeds containing identical language. See Pls.’ Ex. 23, App. at 180; Pls.’ Ex. 24, App. at 189.

                Defendant’s conveyance of the land “together with the right to the use of water from the Klamath Reclamation Project as an appurtenance to the irrigable lands” to plaintiffs implements Section 8 of the Reclamation Act, which reads: “The right to the use of water acquired under the provisions of this Act shall be appurtenant to the land irrigated . . . .” Reclamation Act of 1902, ch. 1093 § 8, 32 Stat. 388 (1902) (amended as codified in 43 U.S.C. § 372 (2003)).  The regulations in effect at the time of those conveyances stated unambiguously that the “patent in each of such cases carries with it the water right to which the lands patented are entitled.” 43 C.F.R. § 230.59 (1993), attached as Pls.’ Ex. 34, Supp. App. at 244.[1] 

            Put simply, if plaintiffs own the land patented to them, they also own the appurtenant right to the use of Klamath Project water.  As the Interior Department has stated:

The right of entry and the right to use water are inseparable.  It is not a privilege or right of the homesteader to take water or not, as he may wish, or in such quantities as he may wish to apply for, but he is chargeable with his equitable proportion of the water apportioned to the land entered.  Every application to enter lands withdrawn for disposal under the reclamation act is an application for the water right appurtenant thereto, which attaches by virtue of the statute . . . .

Reclamation Water Charges-Irrigable Area-Practice, Williston Land Company, 39 I.D. 2, 4 ( June 4, 1910 ).

The appurtenance of Reclamation water rights to Reclamation project lands is critical to application of the original 160-acre ownership restriction on Reclamation lands imposed by Congress.[2]  Early in the program, the Interior Department interpreted the 160-acre provision to apply only to lands where the water right had not been fully paid:

[A] person who holds a farm unit shall not be permitted, before full payment has been made on the appurtenant water right, to acquire other lands with appurtenant water rights unless the water right charges on the latter have been fully paid; similarly that a person may hold private lands with appurtenant water rights up to the limit of single ownership fixed for the project in one or more parcels before full payment of the water right charge, but may not acquire other lands with appurtenant water rights unless the water right charges thereon have been paid in full. Furthermore, that the limit of area of the farm units and of single private land holdings to which water rights are appurtenant (and as to which water right has not been paid in full) shall in no case exceed 160 acres.

Reclamation -- Water Right -- Proviso to Sec. 3, Act of August 9, 1912, 43 I.D. 339, 341, 1914 I.D. LEXIS 135 at *1, 5-6 (July 1, 1914) (opinion by Chief Counsel William R. King, approved July 22, 1914 by First Assistant Secretary A.A. Jones) (commonly referred to as the “King Instructions”).

2.  Plaintiffs’ Patent Deeds Also Confirmed Appurtenant Water Rights Under Oregon State Law.

Applying the concept of “cooperative federalism,” the Reclamation Act requires that in the  “control, appropriation, distribution, and use” of Project water, Reclamation must comply with state law to the extent it is “not inconsistent with Congressional directives.” California v. United States , 438 U.S. 645, 650, 664-79 (1978).  Oregon state law, like Section 8 of the Reclamation Act, provides that “all water used in this state for any purpose shall remain appurtenant to the premises upon which it is used and no change in use or place of use of any water for any purpose may be made . . . .” Or. Rev. Stat. § 540.510 (2001).  “Appurtenances” in the context of water rights have been defined in Oregon as “‘things belonging to another thing as principal, and which pass as incident to the principal thing. It is that which belongs to another thing, but which did not belong to it immemorially.’” Skinner v. Silver, 75 P.2d 21, 28 (Or. 1938) (quoting 2 Kinney on Irrigation and Water Rights 786, § 1005 (2d ed.)).

                Oregon courts have recognized that appurtenant water rights pass with the title to land, even in cases where the deed does not specifically mention an “appurtenant water right,” but only refers to “appurtenances” in general. See Coventon v. Seufert, 32 P. 508, 510 (Or. 1893) (“‘When there is no express grant or sale of a ditch or water right mentioned in the deed of land, other than may be included in the use of the word appurtenances, the question is, whether the interest of the grantor in such ditch and right to the use of the water would be conveyed or pass to the grantee by such deed. The maxim of law is, that whoever grants a thing, is supposed, also, tacitly to grant that without which the grant would be of no avail.’”) (quoting Simmons v. Winters, 27 P. 7, 10  (Or. 1891)); see also Beisell v. Wood, 185 P.2d 570, 573 (Or. 1947) (“Each conveyance included an express grant of the appurtenances, and the authorities hold that a grant of land with its appurtenances is sufficient to pass a water right which is actually appurtenant to and necessary or convenient to the beneficial use of the land conveyed.”); Dill v. Killip, 147 P.2d 896, 898 (Or. 1944) (“‘A water-right is incidental or appurtenant to land when by right used with the land for its benefit.”) (quoting 1 Wiel on Water Rights in the Western States 587, § 550 (3rd ed.)); In Re Water Rights of Deschutes River and Tributaries, 286 P. 563, 574 (Or. 1930) (“Water for irrigation purposes is appurtenant to the land for which it is appropriated and applied.”).

            Likewise in Oregon, as in the other Western states, the right to use water (beneficial interest) is recognized as a water right, Sherred v. City of Baker, 125 P. 826, 830 (Or. 1912) (“According to the modern accepted doctrine, it is the use of water, and not the water itself, in which one acquires property in general.”), and a water right is considered a valuable property right. In Re Willow Creek, 144 P. 505, 514 (Or. 1914) (“The right to the use of water is a valuable property right guaranteed to every citizen. It cannot be arbitrarily nor unreasonably interfered with by the legislative department of the state.”).  

3.  Defendant Simply Ignores the Abundance of Authority Holding That Plaintiffs’ Beneficial Interest in Reclamation Project Water Is a Property Right.

In their opening brief, plaintiffs cited extensive authority from courts and from the Interior Department itself, demonstrating that their beneficial interest in Klamath Project water is a property right. See Pls.’ Mem. at 15-18, 20-27.  Rather than respond to these authorities, defendant has simply chosen to invite the Court to ignore them by raising irrelevant issues. See Addendum, Pls.’ Ex. 33, Supp. App. at 236.  The Court may reasonably take defendant’s raising of irrelevant issues as an admission that plaintiffs’ beneficial interest in Klamath Project water is, as they have set forth, a property right entitled to protection under the Fifth Amendment.

            For example, the Court might have reasonably expected defendant to respond to the extensive analysis of Interior Solicitor Tarr, although defendant did not, which concludes that: “The Supreme Court has determined that for water rights obtained by the Bureau in the name of the United States, the water user who puts the project water to beneficial use obtains a vested property interest in the water right.” Filings of Claims for Water Rights in General Stream Adjudications, Op. Solicitor, Dep’t of Interior, 97 I.D. 21, 25; 1989 I.D. LEXIS 101 at *1, 13 (July 6, 1989).[3]

            Nor has defendant attempted to explain the Supreme Court’s repeated holding that “such right when thus obtained is a property right, which, when acquired for irrigation, becomes, by state law and here by express provision of the Reclamation Act as well, part and parcel of the land upon which it is applied,” Ickes v. Fox, 300 U.S. 82, 95-96 (1937), or that “the Government’s ‘ownership’ of the water rights was at most nominal . . . .” Nevada v. United States , 463 U.S. 110, 126 (1983).

Accordingly, the Court can reasonably conclude that Reclamation’s regulations (in force at the time of plaintiffs’ patent deeds) correctly characterize their beneficial interest in Klamath Project water, confirmed to them by patent deed, as property rights. See 43 C.F.R. § 230.59 (1993) (“Final water-right certificates are not required for and will not be issued for (a) lands entered under the Reclamation Act . . . , but patent in each of such cases carries with it the water right to which the lands patented are entitled.”), attached as Pls.’ Ex. 34, Supp. App. at 244.

            Reclamation’s regulations in effect at the relevant time defined plaintiffs’ beneficial interest in Reclamation water rights as “a vested right . . . allowing the continued flowing of the water covered by the right through the works constructed by the Government under appropriate regulations and charges.” 43 C.F.R. § 230.70 (1993), attached as Pls.’ Ex. 34, Supp. App. at 246.  Upon compliance with the requirements of Reclamation law, the rights to the use of water from a Reclamation project “permanently attach.” 43 C.F.R. § 230.68 (1993), attached as Pls.’ Ex. 34, Supp. App. at 245.  Nothing in those regulations supports defendant’s claim that plaintiffs’ right to the use of Klamath Project water arises exclusively from plaintiff districts’ contracts. 

                Moreover, Reclamation’s regulations governing non-homesteaders who owned land prior to establishment of the Klamath Project (such as plaintiffs Michael and Daniel Byrne, Daniel and Delores Chin, and James and Cheryl Moore) state: “The execution of final water-right certificate has the effect of vesting in the water-right applicant absolute title to the water right involved, subject in case of partial payment to a lien for the payment of all sums still due, and in all cases to payment of the annual charges for operation and maintenance; hence the necessity for extreme care in the preparation and issuance of these instruments.[4] Laws and Regulations Relating to Reclamation of Arid Lands by the United States , 45 I.D. 385, 402, 1916 I.D. LEXIS 101 at *1, 47 ( May 18, 1916 ).[5]

B.        Plaintiffs’ Contract Rights Are Also Property, Protected by the Fifth Amendment.

Defendant’s principal argument is that plaintiffs’ “property right – a beneficial interest in the Klamath Project water – is a limited contractual right that does not rise to the level of a compensable property right which is necessary to sustain a claim for a Fifth Amendment taking.” Opposition at 15.  Although defendant contradicts this assertion a few pages later, admitting that plaintiffs have “a beneficial interest in the Project water,”[6] the claim that contract rights are not property rights flies in the face of a plethora of precedent from the Supreme Court and many lower courts, including this Court.  For example, the Federal Circuit recently ruled: 

Turning next to the plaintiffs’ contractual rights, there is also ample precedent for acknowledging a property interest in contract rights under the Fifth Amendment. See, e.g., Lynch v. United States, 292 U.S. 571, 579 (1934) (“The Fifth Amendment commands that property be not taken without making just compensation. Valid contracts are property, whether the obligor be a private individual, a municipality, a State or the United States.”); United States v. Petty Motor Co., 327 U.S. 372, 381 (1946) (holding that plaintiff was entitled to just compensation for government’s taking of option to renew a lease); United States Trust Co. of N.Y. v. New Jersey , 431 U.S. 1, 19 n.16 (1977) (“Contract rights are a form of property and as such may be taken for a public purpose provided that just compensation is paid.”). Here the Owners had unequivocal contractual rights after twenty years to prepay their mortgages; thus they had a property interest in those rights -- both in the subject matter of the contract (the real property rights) and in the contract itself.

Cienega Gardens v. United States , 331 F.3d 1319, 1329-30 (Fed. Cir. 2003).

Nor is defendant’s reliance on Barcellos & Wolfsen, Inc. v. Westlands Water Dist., 849 F. Supp. 717, 731 (E.D. Cal. 1993), aff’d sub nom. O’Neill v. United States, 50 F.3d 677 (9th Cir. 1995),[7] well placed, for that case stands explicitly for the proposition that Reclamation contract rights are property rights.[8]  Citing the same cases on which plaintiffs here rely, Ickes v. Fox, 300 U.S. 82 (1937), and Nevada v. United States, 463 U.S. 110 (1983), the Barcellos court held:

Ickes v. Fox is closest to our case. Ickes stands for the proposition that under federal reclamation law, particularly section 372, a landholder who has entered into a contract for delivery of irrigation water and has applied it to a beneficial use has a statutory property right which cannot be unilaterally altered or taken away by the government. In Ickes, the landowners complied with all terms of the contract, but the federal government impermissibly threatened to cut their allocation. See also Nevada v. United States, 463 U.S. [110,] 126 [(1983)] (“The government is completely mistaken if it believes that the water rights confirmed to it . . . were like so many bushels of wheat, to be bartered, sold, or shifted about as the Government [m]ight see fit.”). 

Barcellos, 849 F. Supp. at 731.

            The Supreme Court has also held that a contractual right to receive water is property. See International Paper Co. v. United States, 282 U.S. 399, 407 (1931) (“We perceive no difficulty arising from the case of Omnia Commercial Co. v. United States, 261 U.S. 502 [(1923)]. There the taking of the whole product of a company went no further than to make it practically impossible for that company to keep a collateral contract to deliver a certain amount of steel to the appellant. But here the Government took the property that the petitioner owned as fully as the Power Company owned the residue of the water power in the canal. Our conclusion upon the whole matter is that the Government intended to take and did take the use of all the water power in the canal; that it relied upon and exercised its power of eminent domain to that end . . . .”). 

This Court, too, has held that contractual rights to receive water are property rights:

While under California law the title to water always remains with the state, the right to the water’s use is transferred first by permit to DWR, and then by contract to end-users, such as the plaintiffs. Those contracts confer on plaintiffs a right to the exclusive use of prescribed quantities of water, consistent with the terms of the permits. That right remains in place until formally changed by administrative process. Thus, we see plaintiffs’ contract rights in the water’s use as superior to all competing interests. It is a property interest sufficiently matured to take it out of the realm of an Omnia analysis.

Tulare Lake Basin Water Storage Dist. v. United States , 49 Fed. Cl. 313, 318 (2001) (footnote citations omitted).

In City of Los Angeles v. City of Glendale, 142 P. 2d 289 (Cal. 1943), the California Supreme Court explained that water rights are fixed regardless of whether they are acquired by contract, permit or deed:

It is immaterial whether the farmers who use the imported water acquire their rights through a transfer of land that includes a water right or by some other means.  In any event the importer brings the water to the land of the farmer, and the farmer uses it.  Nothing would be gained by requiring plaintiff to change the form of its contracts from a “sale” of the water to a transfer of the right to its use.

Id. at 295 (citations omitted); see also Federal Land Bank of Spokane v. Union Cent. Life Ins. Co., 29 P.2d 1009, 1011 (Id. 1934) (holding a water right is real property that may be bought and sold apart from the land); First Nat’l Bank of Green River v. Ennis, 14 P.2d 201, 205 (Wyo. 1932) (holding a water right contract can be bought and sold as an independently owned asset); United States v. State Water Resources Control Bd., 227 Cal. Rptr. 161, 170 (Cal. Ct. App. 1986) (holding water rights holders are entitled to judicial protection in the form of actions for quiet title, nuisance, wrongful diversion, and inverse condemnation).[9]

             Since Reclamation contract rights are property rights, within the protection of the Fifth Amendment, defendant’s concession that plaintiffs hold such contract rights is also a concession that plaintiffs hold property rights.  Finally, that defendant is participating in the Klamath Basin Adjudication, Case No. 003, rather than removing that case to district court, demonstrates that plaintiffs’ Klamath Project water rights go beyond their Reclamation contracts, for Congress has reserved jurisdiction in the federal district courts to “adjudicate, confirm, validate, or decree the contractual rights of a contracting entity and the United States regarding any contract executed pursuant to Federal reclamation law.” 43 U.S.C. § 390uu (2003); see also Wyoming v. United States, 933 F. Supp. 1030, 1038 (D. Wyo. 1996) (“[43 U.S.C. § 390uu] waives the United States’ sovereign immunity from a declaratory relief action brought by a party to a contract with the United States to establish the party’s rights under that contract. Section 390uu does not waive sovereign immunity from non-contractual claims . . . .”) (citations omitted).

C.        Defendant Concedes That at Least Three Plaintiffs Hold Vested Water Rights, Which Are Property Rights.

                As set forth in plaintiffs’ opening brief (see Pls.’ Mem. at 28), plaintiffs Klamath Drainage District (KDD), Klamath Hills District Improvement Company (KHDIC), and Murel and Barbara Long (water users within the boundaries of and a part of KHDIC) hold vested water rights from the state of Oregon .  Defendant concedes that plaintiffs KDD and KHDIC hold permits to appropriate public waters of the State of Oregon and that they are, therefore, entitled to receive water from the Klamath River . See Def.’s Resp. to Pls.’ Rev. Findings 14 & 15.  Although defendant argues that those rights are “‘subject to existing rights including the appropriate minimum flow policies established by the [State of Oregon] Water Policy Review Board,’” see Def.’s Resp. to Pls.’ Rev. Findings 14 & 15 (citing Pls.’s Ex. 10 at 89), and that these plaintiffs have not been issued a certificate of water right showing that they have perfected their rights under the permit, defendant does concede that these plaintiffs hold such water rights. See Def.’s Resp. to Pls.’ Rev. Findings 14 & 15. 

            Furthermore, defendants incorrectly state that KDD and KHDIC do not have perfected water rights because they have not been issued a water right certificate by the Oregon Water Resources Department.  Once these plaintiffs obtained their permit to appropriate and put the water to beneficial use, as they have done, their water rights were perfected and vested. See Teel Irrigation Dist. v. Oregon Water Resources Dep’t, 919 P.2d 1172, 1174 (Or. 1996) (“The water right is perfected when the water actually is put fully to a beneficial use.”) (citing Janet C. Neuman, Oregon , 6 Waters and Water Rights 704 (2d ed 1994)).  Defendant does not dispute that these plaintiffs have put the water to beneficial use. Although the water right certificate might establish proof that the right has been perfected, absence of such a certificate does not change the status of the water right; if the State of Oregon believed that these plaintiffs had not perfected their water rights, it would have initiated proceedings to cancel the permit for failure to show proof of perfection. See Or. Rev. Stat. § 537.260 (2001).

            Further, defendant does not contest plaintiffs’ statement that such vested water rights are property rights. See, e.g., In re Hood River, 227 P. 1065, 1093 (Or. 1924) (holding vested and fixed water right is a “valuable property right”); see also Kinross Copper Corp. v. Oregon , 981 P.2d 833, 839 (Or. App. 1999) (holding that appropriation process establishes property rights in the waters within the state).  Defendant’s argument that it did not take water belonging to these plaintiffs in 2001 because of their later priority dates is irrelevant to the determination of the only issue before the Court on these motions, which is whether these plaintiffs have a property right.  Because there is no dispute that they do have a property right in their vested water rights, partial summary judgment on this issue must be granted in their favor.

D.        Defendant’s Assertion That Plaintiffs’ Sole Right to Receive Water Derives from Plaintiff Districts’ Contracts is Incorrect and Unsupported.  

In the face of plaintiffs’ patent deeds and ownership of lands to which state water rights are appurtenant, as well as the vast store of statutory, regulatory and case law establishing that Reclamation project landowners hold a property right, defendant’s argument that plaintiffs’ “beneficial interest in the Klamath Project water – is a limited contractual right that does not rise to the level of a compensable property right” is demonstrably wrong. Opposition at 15.  Defendant cites no case, statute or regulation so stating.  Moreover, defendant itself contradicts this assertion elsewhere in its Opposition. 

In its Opposition, defendant admits that “[i]n this case, the scope and limitations of plaintiffs’ interest in Klamath Project water are defined by state water law [and]  federal reclamation law . . . .” Opposition at 14-15.  Yet defendant cites no provision of state or federal law to the effect that plaintiffs’ beneficial interest in the Klamath Project water is a “limited contractual right,” and not a property right appurtenant to their irrigable lands, nor are plaintiffs are aware of any.  To the contrary, as discussed above in Sections I(A) of this reply brief, and as Reclamation itself stated in its 2002 Biological Assessment for the Klamath Project, “[t]he beneficial interest in the Project water right is in the water users who put the water to beneficial use.” Final Biological Assessment, The Effect of Proposed Actions Related to Klamath Project Operation ( April 1, 2002-March 31, 2012) on Federally Listed Threatened and Endangered Species at 4 ( Feb. 25, 2002 ), available at http://www.usbr.gov/mp/kbao/docs/Final_Biological_Assessment_02-25-02.pdf.  Defendant also admits: “Upon the delivery of water pursuant to these contracts, and the application of that water to a beneficial use in accordance with applicable state and federal law, the landowners served by the Project acquired a beneficial interest in the Project water.” Opposition at 17.  As the Department of Interior Solicitor has opined, “for water rights obtained by the Bureau in the name of the United States, the water user who puts the project water to beneficial use obtains a vested property interest in the water right.” Filings of Claims for Water Rights in General Stream Adjudications, Op. Solicitor, Dep’t of Interior, 97 I.D. 21, 25; 1989 I.D. LEXIS 101 at *1, 13 (July 6, 1989).

The argument defendant makes here was the losing argument in Ickes v. Fox, 300 U.S. 82 (1937), as the decision of the D.C. Circuit on remand (again reversing the district court) confirms:

The court below followed the theory of the Secretary that the applications for water-rights under the Yakima project were contracts with the government.  It interpreted these contracts to mean that the Secretary was entitled to determine the amount of water which he was under obligation to deliver to appellants without extra charge, and that his decision could not be reviewed since it had been fairly arrived at and supported by substantial evidence. 

In holding that appellants’ rights were dependent on the enforcement of contracts with the United States , we think the trial court failed to follow the decision in Ickes v. Fox, decided by the Supreme Court in a previous appeal in these proceedings. . . . [T]he Supreme Court held that the rights of applicants were not limited to the enforcement of any contract with the government. 

                                                            *  *  *

Reading the Reclamation Act in the light of the decision in Ickes v. Fox, we find the situation in this case to be as follows: The water-rights of appellants are not determined by contract but by beneficial use.

Fox v. Ickes, 137 F.2d 30, 33 (D.C. Cir. 1943) (footnote citation omitted).  

None of the cases defendant cites supports its claim that plaintiffs’ sole right to Klamath Project water derives from the plaintiff districts’ contracts, nor that such contracts are not property. The case of Barcellos & Wolfsen, Inc. v. Westlands Water Dist., 849 F. Supp. 717, 731 (E.D. Cal. 1993), aff’d sub nom. O’Neill v. United States, 50 F.3d 677 (9th Cir. 1995), involved a “motion to enforce a stipulated judgment which required the United States to perform a 1963 long-term water service contract with the Westlands Water District.” O’Neill v. United States , 50 F.3d 677, 680 (9th Cir. 1995).  Accordingly, the case dealt only with the contract provisions embraced by that stipulated judgment. Barcellos, 849 F. Supp. at 731 (“The disputed contract grants specified water rights. The government is prohibited from breaching the terms of the contract.”). 

Del Puerto Water District v. United States Bureau of Reclamation, 271 F. Supp.2d 1224 (E.D. Cal. 2003), was an action to compel Reclamation to agree to certain terms in a negotiation to renew its expired water delivery contract.[10]  The case was dismissed for lack of ripeness, and was not decided on the merits.[11]  Kandra v. United States, 145 F. Supp. 2d 1192 (D. Or. 2001), was a suit for breach of contract and review under the Administrative Procedure Act.[12]  The reported decision simply denied a preliminary injunction, and the case was thereafter dismissed without prejudice and without any final judgment. In Klamath Water Users v. Patterson, 204 F.3d 1206 (9th Cir. 2000), the contract at issue was between Reclamation and the California Oregon Power Company, not between Reclamation and irrigation districts.  These cases do not hold that plaintiffs’ beneficial interest is not a property right. 

Finally, in both O’Neill and Del Puerto, the contracts were not repayment contracts (such as those under Section 9(d) of the Reclamation Act), such as plaintiffs in this case hold.  Instead, the water users in those cases held executory “water service” contracts under Section 9(e) of the Reclamation Act, and thus, are not relevant to this case because the plaintiffs in those cases may not have the same vested rights that plaintiffs have in this case.[13] 

II.        MOST OF DEFENDANT’S BRIEF IS DEVOTED TO RED HERRINGS AND IRRELEVANT ISSUES FAR BEYOND THE SCOPE OF THE LIMITED MOTION WHICH THE COURT ORDERED PLAINTIFFS TO FILE.  

As defendant has stated, its cross-motion “is expressly limited to a single, threshold element of plaintiffs’ takings claim: whether plaintiffs’ beneficial interest in the Klamath Project water is a property right protected by the Fifth Amendment.” Def.’s Opposition to Pls.’ Mot. to Strike at 5 ( Oct. 17, 2003 ).  Having conceded that plaintiffs have such a beneficial interest, which the Interior Department and the Supreme Court have consistently identified as a property right, there is little left for defendant to say on the issue before the Court. See Opposition at 17.  Instead, defendant strays far afield, discussing the rights of the Indian tribes and others, the drought, the fish, and whether plaintiffs’ water was, in fact, taken in 2001.  While some of these issues may be relevant to the damages issue, they do not aid the Court in determining if plaintiffs have a property right.

A.        The Interest of Defendant in Klamath Project Water Is “at Most Nominal.”

Defendant argues that it “has retained a significant interest in and control over the Project water.” Opposition at 19.  Even if this statement were true, it does not detract from the fact that plaintiffs, too, hold a much more significant interest in Klamath Project water – the beneficial interest – which, according to defendant, is “a vested property interest in the water right.” Filings of Claims for Water Rights in General Stream Adjudications, Op. Solicitor, Dep’t of Interior, 97 I.D. 21, 25; 1989 I.D. LEXIS 101 at *1, 13 (July 6, 1989).

The Supreme Court has not characterized defendant’s interest as “significant,” but rather, as “at most nominal.” Nevada v. United States , 463 U.S. 110, 126 (1983).  Defendant itself has noted that “[a]t first glance, the pronouncements of the Supreme Court in Ickes and Nebraska would appear to indicate that upon application by water users of project waters to beneficial uses, all interests incident to the water right flow to the project water users.” Filings of Claims for Water Rights in General Stream Adjudications, Op. Solicitor, Dep’t of Interior, 97 I.D. 21, 27; 1989 I.D. LEXIS 101 at *1, 18 (July 6, 1989).  Noting, however, that “the Court in Nevada speaks of ‘obligations that necessarily devolve upon [the United States ] from having mere title to water rights . . . ,’” 1989 I.D. LEXIS 101 at *18, the Solicitor identifies those obligations:

[T]he filing of project water rights by the United States in a general stream adjudication is the necessary means by which the United States must protect the ability of the project to deliver or store water, and thereby meet the mandatory obligation as enunciated by the Supreme Court to maintain appropriate deliveries of water to beneficial owners.

1989 I.D. LEXIS 101 at *20.  

            Defendant’s “mandatory obligation as enunciated by the Supreme Court to maintain appropriate deliveries of water to beneficial owners,”1989 I.D. LEXIS 101 at *20, cannot fairly be called a limitation on plaintiffs’ beneficial interest in Klamath Project water.  As defendant itself states:

None of the cases discussed above held that the rights of the United States to protect project water rights stemmed from any beneficial interest in the water rights. Rather, they clearly recognized in the United States as distributor and legal titleholder of the appropriative right an interest in protecting project water rights for the benefit of the project.

1989 I.D. LEXIS 101 at *25.

B.        There Was No Shortage in the Quantity of Water Available in Project Reservoirs in 2001, and This Issue Is Irrelevant to the Present Motion.

            Defendant’s argument that “[s]imply stated, as a matter of law, the liability of the United States is expressly limited  under its contracts with the irrigation districts in times of shortage such as occurred during the severe drought in 2001” does nothing to demonstrate that “plaintiffs do not have a compensable property right in the Project water.” Opposition at 24. 

            First, the assertion is factually incorrect on several counts. There was no shortage of water available for delivery to plaintiffs in 2001.  As stated in the April 6, 2001 biological opinions of the Fish and Wildlife Service and the National Marine Fisheries Service, the reason defendant withheld the water was not the drought, but a scientifically incorrect belief that “the proposed action of water delivery was likely to jeopardize the continued existence of the [Coho salmon and Lost River and Shortnose suckers].” Pl.’s Ex. 8, App. at 64-65; see also Committee on Endangered and Threatened Fishes in the Klamath River Basin, National Research Council, National Academies, Endangered and Threatened Fishes in the Klamath River Basin: Causes of Decline and Strategies for Recovery, Summary (2003), available at http://www.nap.edu /catalog/10838.html, attached as Pls.’ Ex. 37, Supp. App. at 255.  

            Of course, the availability of water for delivery in 2001 and why defendant failed to deliver it goes to the question of whether a taking occurred, not whether plaintiffs hold a property right.  Accordingly, it is outside the scope of the motion this Court ordered the parties to file.

            The decision in O’Neill v. United States, 50 F.3d 677 (9th Cir. 1995) (which is not binding on this Court) also does not help defendant. O’Neill involved a suit by Central Valley Project (CVP) contractors, based on their contracts, to compel delivery of water.  Unlike any of the plaintiffs’ contracts, the O’Neill contract contained the provision that “[t]o the extent of such deficiency, such adjustment shall constitute the sole remedy of the District or anyone having or claiming to have by, through, or under the District the right to the use of any of the water supply provided for herein.” Id. at 683 n.2 (quoting Article 11(b) of the O’Neill contract).   Moreover, the O’Neill contract, unlike plaintiffs’ contracts that contain similar shortage provisions, did not obligate defendant to “use all reasonable means to guard against such shortage.” See, e.g., Pls.’ Amended Compl. App. at Ex. 1 at 33, Ex. 2 at 70, Ex. 3 at 118. [14]  Defendant’s unjustified withholding of plaintiffs’ water, based on unsound science, fails this “reasonable means” test. See  Committee on Endangered and Threatened Fishes in the Klamath River Basin, National Research Council, National Academies, Endangered and Threatened Fishes in the Klamath River Basin: Causes of Decline and Strategies for Recovery, Summary at 6 (2003), available at http://www.nap.edu /catalog/10838.html, (“There is no evidence of a causal connection between water level and water quality or fish mortality over the broad operating range in the 1990s, the period for which the most complete data are available for Upper Klamath Lake. Neither mass mortality of fish nor extremes of poor water quality shows any detectable relationship to water level.”), attached as Pls.’ Ex. 37, Supp. App. at 261.  

As defendant itself concedes, the “shortage” provision varies from contract to contract within the Klamath Project, and the VANBRIMMER DITCH COMPANY contract contains no limitation of liability at all. See Opposition at 21.  If any of these provisions applies as a defense to liability in this case is certainly an issue of fact – and do not determine if plaintiffs hold a property right.

That the O’Neill contract did not prohibit Congress from passing a statute that prohibited Reclamation from making certain water deliveries is unremarkable.[15]  Such a statute may be a legislative taking of the contract. See Cienega Gardens v. United States , 331 F.3d 1319, 1329-30 (Fed. Cir. 2003) (“[T]here is also ample precedent for acknowledging a property interest in contract rights under the Fifth Amendment.”) (citing   Lynch v. United States, 292 U.S. 571, 579 (1934) (“The Fifth Amendment commands that property be not taken without making just compensation. Valid contracts are property, whether the obligor be a private individual, a municipality, a State or the United States. ”). 

As the Federal Circuit has also stated:

Money damages, in contrast to injunctive relief, presents little threat to the government’s sovereign powers, other than the obvious financial incentive to honor its contracts. The Supreme Court’s decision in POSSE is predicated on the need to protect the sovereign’s legislative power and that concern is inapplicable where money damages alone are at issue.  Hughes Communications, 998 F.2d at 958 (distinguishing POSSE and other unmistakability cases as cases seeking to enjoin the sovereign power to legislate from cases in the Court of Federal Claims where the plaintiff seeks only money damages). In sum, Congress was always free to deem supervisory goodwill a bad idea and legislate it out of existence. Where that legislation breached the government’s prior contractual obligations regarding the treatment of supervisory goodwill, however, the government remains liable in money damages for the breach.

Winstar Corp. v. United States , 64 F.3d 1531, 1547 (Fed. Cir. 1995), aff’d & remanded, 518 U.S. 839 (1996).

Finally, defendant’s suggestion that the plaintiff districts, by contract, waived the water users’ constitutional right to just compensation for taking of their water is entirely unsupported:

Under the well-settled doctrine of “unconstitutional conditions,” the government may not require a person to give up a constitutional right -- here the right to receive just compensation when property is taken for public use -- in exchange for a discretionary benefit conferred by the government where the property sought has little or no relationship to the benefit.

Dolan v. City of Tigard, 512 U.S. 374, 385 (1994); see also D.H. Overmeyer Co. v. Frick Co., 405 U.S. 174, 185-86 (1972) (“[T]he standard for waiver in a corporate-property-right case of this kind is the same standard applicable to waiver in a criminal proceeding, that is, that it be voluntary, knowing, and intelligently made, or ‘an intentional relinquishment or abandonment of a known right or privilege,’ and . . . as the Court has said in the civil area, ‘we do not presume acquiescence in the loss of fundamental rights’ . . .”) (citations omitted); Fuentes v. Shevin, 407 U.S. 67, 94 n.31 (1972) (“In the civil area, the Court has said that ‘we do not presume acquiescence in the loss of fundamental rights.’ Indeed, in the civil no less than the criminal area, ‘courts indulge every reasonable presumption against waiver.’”) (citation omitted). 

C.        The Possible Existence of Tribal Water Rights Is Irrelevant Because Plaintiffs’ Property Rights Co-Exist With All Other Water Rights in the Klamath Basin .  

Defendant’s discussion of tribal water rights, see Opposition at 12, 25-27, has no bearing on whether plaintiffs hold a property right protected by the Fifth Amendment.  Those tribal rights (like plaintiffs’) have not yet been adjudicated. See United States v. Adair, 723 F.2d 1394, 1406 (9th Cir. 1983).  Defendant claims title to those rights, just as it claims title to the Klamath Project rights. See Summary Report of Bureau of Indian Affairs Claims at http://www.wrd.state.or.us/publication/pdfs/kba_v.pdf (last visited Oct. 17, 2003 ); see also Pls.’ Ex. 29, Supp. App. at 218-230.  If defendant is asserting that the Indian tribes own all Klamath Basin water, and that there is no water for irrigators in the Klamath Project, one wonders what the Klamath Basin Adjudication, Case No. 003, is about.[16]  Having raised the issue of tribal water rights, defendant really makes no relevant  point.

To the extent defendant means to imply that Klamath Project water was withheld in 2001 on account of tribal water rights, that contention goes to the issue of whether a taking occurred, and not to the existence of plaintiffs’ property right in Klamath Project water.  It is also a disputed issue of fact.  Defendant itself states:

Water lawfully stored in the project’s reservoirs can be used for do mestic and irrigation purposes to the extent the water is applied to beneficial use within the project.  Reclamation cannot store or divert water for project purposes that is needed to satisfy prior existing rights.    

Memorandum from Regional Solicitor, Pacific Southwest Region to Regional Director, Bureau of Reclamation, Mid-Pacific Region at 7 ( July 25, 1995 ), Pls.’ Ex. 2, App. at 40.

D.        Whether Plaintiffs’ Claim Should Be Addressed as a Taking or Breach of Contract Is Outside the Scope of the Court’s Order.  

Defendant’s entire argument about the appropriate cause of action, see Opposition at 27-30, in the course of which defendant admits that “contract rights generally can constitute property under the Fifth Amendment,” has nothing to do with the issue the Court ordered the parties to brief: do plaintiffs have a property right, not is a taking or breach of contract the appropriate cause of action.  Plaintiffs will brief this issue at such time as the Court designates. 

E.         Plaintiffs Are the Owners of “Vested Rights to the Use of Waters Originating in the Upper Klamath River Basin Validly Established and Subsisting” as of the Date of the Klamath Compact.

Defendant argues that Congress’ agreement that “[t]here are hereby recognized vested rights to the use of waters originating in the Upper Klamath River Basin validly established and subsisting as of the effective date of this compact under the laws of the state in which the use or diversion is made, including rights to the use of waters for domestic and irrigation uses within the Klamath Project,” does not identify who holds those rights. Klamath River Basin Compact, art. III(A), Pub. L. No. 85-222, 71 Stat. 497 ( Aug. 30, 1957 ), Pls.’ Ex. 1, App. at 30.  But defendant fails to offer a suggestion as to who might own the Congressionally recognized “rights to the use of waters for domestic and irrigation uses within the Klamath Project” other than landowners who live on and irrigate Klamath Project lands.  The only reasonable construction of this statute[17] is that plaintiffs are the owners of those vested rights.

That the United States agrees that it must pay just compensation if it impairs those rights certainly demonstrates that it is not defendant who owns the vested right to irrigate plaintiffs’ lands. See Klamath River Basin Compact, art. XIII(B)(2), Pls.’ Ex. 1, App. at 30 (“The United States shall not, without payment of just compensation, impair any rights to the use of water for use (a) [domestic] or (b) [irrigation] within the Upper Klamath River Basin by the exercise of any powers or rights to use or control water . . . .”). 

F.         KDD Owns a Perfected Right to Delivery of Water Year-Round.

            Defendant fails to correctly read the Klamath Drainage District (KDD) permit when it asserts that “the rights granted by this permit limits KDD’s use of water from the Klamath River to the ‘time between October 1 and March 1.’ Accordingly, KDD had no right under this permit to receive water during the April to September irrigation season when the alleged taking in 2001 occurred.” Opposition at 46 (citing Pls.’ Ex. 10, p. 89). 

That is not true.  KDD’s permit explicitly allows KDD to use irrigation water from the Klamath River year-round. See Pls.’ Ex. 10, App. at 90 (“If for irrigation, this appropriation . . . shall be further limited to a diversion of not to exceed 3 acre feet per acre for each acre irrigated during the period from March 1 to September 30 and shall be further limited to a diversion of not to exceed 1 acre foot per acre for each acre irrigated during the period from October 1 to March 1 . . . .”).  This permit gives KDD the right to receive water from the Klamath River , and the defendant prohibited KDD’s from taking and using its water in 2001. See Pls.’ Ex. 10 at ¶16, App. at 75; Pls.’ Ex. 8 at ¶¶ 14-15, App. at 65.

CONCLUSION

            For all of these reasons, plaintiffs ask this Court to grant their motion for partial summary judgment.  Plaintiffs also request that the Court hold oral argument on their motion for partial summary judgment. See Court’s Special Procedures ( Oct. 23, 2001 ) at ¶ 3.   

                                                                        Respectfully submitted,  

                                                                        __________________________

                                                                        Roger J. Marzulla

                                                                        Nancie G. Marzulla

                                                                        MARZULLA & MARZULLA

1350 Connecticut Ave., N.W.

                                                                        Suite 410

                                                                        Washington , DC   20036

                                                                        202-822-6760

                                                                        202-822-6774 (facsimile)

Dated:  October 27, 2003