Paslay v. A&B Irrigation Dist.

• Decision Date: 29 November 2017
• Docket Number: Docket No. 44446
• Citation: 162 Idaho 866,406 P.3d 878
• Parties: Daniel PASLAY, an individual; Gary Ottman, an individual; and Tateoka Brothers, LLC, an Idaho limited liability company, Plaintiffs-Appellants, v. A&B IRRIGATION DISTRICT, an Idaho irrigation district, Defendant-Respondent.
• Court: Idaho Supreme Court

162 Idaho 866

406 P.3d 878

Daniel PASLAY, an individual; Gary Ottman, an individual; and Tateoka Brothers, LLC, an Idaho limited liability company, Plaintiffs-Appellants,

v.A&B IRRIGATION DISTRICT, an Idaho irrigation district, Defendant-Respondent.

Docket No. 44446

Supreme Court of Idaho.

Filed: November 29, 2017

Holden, Kidwell, Hahn & Crapo, PLLC, Idaho Falls, for appellants. Robert L. Harris argued.

Barker, Rosholt & Simpson, LLP, Twin Falls, for respondent. Travis L. Thompson argued.

BRODY, Justice

This case is about landowners’ recourse against an irrigation district for diverting a portion of their water source to other landowners within the district. The landowners brought an action for a declaratory judgment regarding their constitutional water and property rights. They also sought injunctive relief against the irrigation district for a breach of fiduciary duty. The district court granted the irrigation district's motion to dismiss on all three of the landowners’ claims. The landowners appeal.

I. FACTUAL AND PROCEDURAL BACKGROUND

Appellants own farms in Jerome County, Idaho. A&B Irrigation District (the "District") distributes water to these farms and others throughout its service area in Jerome and Minidoka Counties. The District serves two distinct sub-areas in its district: Unit A and Unit B. The water the District distributes comes from two sources: (1) surface water from the Snake River and associated reservoirs, and (2) groundwater from the Eastern Snake Plain Aquifer. These two water sources were historically what separated Units A and B, and many owners based their land choices in the 1950s on the water source. Unit A farms have received surface water exclusively since the District's inception. For decades Unit B farms received only groundwater, but the District converted approximately 1400 Unit B acres to surface water in the 1990s in response to decreasing groundwater supply. This conversion did not abate the declining groundwater supply, and the District subsequently proposed the "Unit A Pumping Plan #2 Project" ("Project").

The District's manager claims the Project's benefits are twofold: (1) it will allow the District to deliver surface water to Unit A farms at an increased rate during the peak irrigation season, and (2) it will convert approximately 1500 Unit B acres facing declining groundwater over to surface water—similar to the District's prior conversion in the 1990s. In November 2013, the District held a special election in which its residents approved bonds of up to $7 million to pay for the Project. In 2014, the District's Board of Directors held a hearing at which they assessed Project costs proportionally based on acreage to both Unit A and Unit B landowners. Appellants did not appear at this hearing. The District then sought judicial confirmation (the "Confirmation Proceeding") of the Board's cost assessment in the Minidoka County District Court, which Appellants Paslay and Ottman contested. In the Confirmation Proceeding, the court approved the assessment but withheld consideration of Appellants’ constitutional arguments as beyond that forum's scope.

Appellants claim the Project primarily benefits Unit B landowners at the expense of Unit A by diverting a portion of Unit A's sole water source (surface water) onto Unit B land and "diluting" their annual water supply. Additionally, the District divided Project costs equally among all landowners despite what Appellants claim is the Project's primary purpose: to help sustain Unit B farms as their groundwater supply continues to decline. Appellants claim the Project is part of a decades-long trend whereby the District subjugates Unit A's interests due to Unit B's size—roughly 80% of the District's service area—and comparably large representation and voting strength. Appellants sought relief on three claims in the Jerome County District Court after the Confirmation Proceeding approved the Project's cost apportionment. In Count I of their amended complaint, Appellants sought a declaratory judgment enforcing their water rights under Article XV, sections 1, 3, 4, and 5 of the Idaho Constitution. Count II requested identical relief, challenging the assessment as a violation of their property rights under Article I, sections 13 and 14. In Count III—absent in the original complaint and added in the amended complaint—Appellants sought injunctive relief for breach of fiduciary duty.

Respondents filed a Rule 12(b)(6) motion to dismiss the claims, and submitted additional materials—including affidavits and the Confirmation Proceeding order. Appellants responded and requested the court deny the motion and strike matters outside the pleadings as immaterial and improper under the Rule 12(b)(6) standard. Alternatively, Appellants requested the court continue the proceedings—and allow discovery—if the court was to consider matters outside the pleadings. They argued that considering the additional information would effectively convert the decision from a Rule 12 to a Rule 56 analysis, and thus required discoverable facts to defend against a summary judgment grant. In its first of two decisions below, the district court denied Appellants’ motion to strike and motion to continue, and dismissed Counts I and II. The court dismissed Count I as non-justiciable, finding the claim unripe and that the Appellants lacked standing. The court dismissed Count II as barred by res judicata based on the Confirmation Proceeding decision. Pending the court's decision on Count III, Appellants filed a motion for reconsideration of the district court's first decision. In its second decision, the district court dismissed Count III as non-justiciable on standing and ripeness grounds, just as with Count I. The court also denied Appellants’ motion to reconsider its previous dismissal of Counts I and II. Appellants timely appealed.

II. ISSUES PRESENTED ON APPEAL

1. Whether the district court erred in dismissing Counts I and III of Appellants’ amended complaint as non-justiciable.

2. Whether the district court erred in dismissing Count II of Appellants’ amended complaint as barred by res judicata.

3. Whether the district court erred in denying Appellants’ motions to strike, continue, and reconsider.

4. Whether the District is entitled to attorney fees.

III. STANDARD OF REVIEW

This Court exercises free review over jurisdictional issues, including "whether dismissal for lack of jurisdiction was properly granted." Tucker v. State , 162 Idaho 11, 17, 394 P.3d 54, 60 (2017) (citing Meisner v. Potlatch Corp. , 131 Idaho 258, 260, 954 P.2d 676, 678 (1998) ).

This Court reviews de novo both Rule 12(b)(6) dismissal orders and Rule 56 summary judgment grants. Syringa Networks, LLC v. Idaho Dep't of Admin. , 159 Idaho 813, 823, 367 P.3d 208, 218 (2016). Under Rule 12(b)(6), "[a]fter viewing all facts and inferences from the record in favor of the non-moving party, the Court will ask whether a claim for relief has been stated." Losser v. Bradstreet , 145 Idaho 670, 673, 183 P.3d 758, 761 (2008) (quoting Gallagher v. State , 141 Idaho 665, 667, 115 P.3d 756, 758 (2005) ). Dismissal "for failure to state a claim should not be granted ‘unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief.’ " Taylor v. Maile , 142 Idaho 253, 257, 127 P.3d 156, 160 (2005) (quoting Gardner v. Hollifield , 96 Idaho 609, 611, 533 P.2d 730, 732 (1975) ). A Rule 12(b)(6) motion to dismiss in which "matters outside the pleadings are presented to and not excluded by the court ... must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." I.R.C.P. 12(d). "Summary judgment is appropriate if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Lockheed Martin Corp. v. Idaho State Tax Comm'n , 142 Idaho 790, 793, 134 P.3d 641, 644 (2006).

IV. ANALYSIS

The landowners’ appeal centers on two issues with respect to their three claims against the District: the legal standard under which the district court dismissed Appellants’ claims, and the court's substantive determinations under that standard. Appellants contend the district court erred both procedurally and substantively in dismissing all three counts in its amended complaint. Procedurally, they claim the district court improperly considered matters outside the pleadings in dismissing all three claims under Rule 12(b)(6) —rather than converting to the Rule 56 summary judgment standard. Substantively, Appellants contend that Counts I and III are justiciable as presented on the face of their amended complaint, and that res judicata does not bar relief under Count II.

For the reasons that follow, this Court determines that Counts I and III—the alleged violation of Appellants’ water rights and breach of fiduciary duty—do not present justiciable controversies. The district court procedurally erred, however, in dismissing Count II as barred by res judicata.

A. Appellants have failed to demonstrate that Counts I and III present justiciable claims.

Appellants contend that Counts I and III are currently justiciable controversies since the Project will result in an annual diminution of their available, dedicated water source. The District noted that the surface water supplies are variable from one season to the next, and have the potential to completely refill annually. This, they claim, necessarily reduces Appellants’ claims to speculation since they allege no current deprivation, nor can they point to a future deprivation.

Appellants seek both injunctive relief and a declaratory judgment regarding their water rights. Under Idaho law, courts "shall have power to declare rights, status, and other legal relations, whether or not further...