Casitas Mun. Water Dist. v. U.S.

• Decision Date: 25 September 2008
• Docket Number: No. 2007-5153.,2007-5153.
• Citation: 543 F.3d 1276
• Parties: CASITAS MUNICIPAL WATER DISTRICT, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

543 F.3d 1276

CASITAS MUNICIPAL WATER DISTRICT, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 2007-5153.

United States Court of Appeals, Federal Circuit.

September 25, 2008.

Roger J. Marzulla, Marzulla Law, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Nancie G. Marzulla and Gregory T. Jaeger.

Katherine J. Barton, Attorney, Appellate Section, Environment & Natural Resources Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Ronald J. Tenpas, Assistant Attorney General, and Kathryn E. Kovacs, Kathleen L. Doster, and James D. Gette, Attorneys.

Lisabeth D. Rothman, Hatch & Parent, A Law Corporation, of Los Angeles, CA, for amici curiae California Building Industry Association, et al.

Tara L. Mueller, Deputy Attorney General, California Office of the Attorney General, of Oakland, CA, for amicus curiae California State Water Resources Control Board. With her on the brief was Clifford T. Lee, Deputy Attorney General, of San Francisco, CA.

Hertha L. Lund, Wittich Law Firm, P.C., of Bozeman, MT, for amici curiae Idaho Farm Bureau Federation, et al.

Jeffrey B. Clark, Kirkland & Ellis LLP, of Washington, DC, for amici curiae Tulare Lake Basin Water Storage District, et al. With him on the brief was Scott M. Abeles. Of counsel on the brief was William C. Kuhs, Kuhs & Parker, of Bakersfield, CA.

William P. Pendley, Mountain States Legal Foundation, of Lakewood, CO, for amicus curiae Mountain States Legal Foundation. With him on the brief was J. Scott Detamore.

John D. Echeverria, Environmental Law & Policy Institute, Georgetown University Law Center, of Washington, DC, for amicus curiae Natural Resources Defense Council. Of counsel on the brief was Katherine S. Poole, Natural Resources Defense Council, of San Francisco, CA.

J. David Breemer, Pacific Legal Foundation, of Sacramento, CA, for amicus curiae Pacific Legal Foundation.

Jennifer L. Spaletta, Herum Crabtree Brown, of Stockton, CA, for amicus curiae Stockton East Water District.

Before MAYER, SCHALL, and MOORE, Circuit Judges.

Opinion for the court filed by Circuit Judge MOORE. Opinion dissenting-in-part filed by Circuit Judge MAYER.

MOORE, Circuit Judge.

Casitas Municipal Water District (Casitas) appeals the judgment of the United States Court of Federal Claims granting summary judgment in favor of the government holding that there was no governmental breach of contract and no compensable taking under the Fifth Amendment. We affirm-in-part, reverse-in-part, and remand.

BACKGROUND

Congress authorized the construction of the Ventura River Project (Project) on March 1, 1956. Pub.L. No. 423, 70 Stat. 32 (1956). The Project provides the water supply for farmland irrigation and municipal, domestic, and industrial uses in Ventura County, California. The Project comprises, among other things, the Casitas Dam, Casitas Reservoir, Robles Diversion Dam, and the Robles-Casitas Canal. More specifically, the Project combines water of Coyote Creek and Ventura River in its principal feature, the Casitas Reservoir, generally called Lake Casitas. Lake Casitas itself is located on Coyote Creek and is formed by Casitas Dam. Approximately sixty percent of the Project's water comes from Coyote Creek. The remaining forty percent of the Project's water comes from the nearby Ventura River. Ventura River water is diverted via the Robles Diversion Dam into a four and a half mile long canal (the Robles-Casitas Canal), which carries the water to Lake Casitas. Water from Lake Casitas is distributed for use via a conveyance system comprising thirty-four miles of pipeline, five pumping stations, and six balancing reservoirs. The project is shown in Figure 1.

Figure 1: Ventura River Project

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

On March 7, 1956, the United States and Casitas entered into a contract providing for the construction of the Project by the United States in exchange for a commitment by Casitas to repay the construction costs over a forty-year period,¹ as well as all operation and maintenance costs.² Additionally the contract provided in Article 4 that Casitas "shall have the perpetual right to use all water that becomes available through the construction and operation of the Project." The contract also required Casitas to apply to the State of California to appropriate the water for the Project. State water permits were issued to Casitas on May 10, 1956, and the Project was completed and transferred to Casitas for operation in 1959.

In August, 1997, almost forty years after the construction of the project, the National Marine Fisheries Service (NMFS) listed the West Coast steelhead trout as an endangered species in the Project watershed. Section 9 of the Endangered Species Act (ESA) makes it illegal to "take" any species listed as endangered under the Act.³ 16 U.S.C. § 1538. To avoid ESA section 9 liability, the Bureau of Reclamation (BOR) sought a biological opinion by the NMFS (BiOp) pursuant to section 7 of the ESA. Id. § 1536(a)(2). For the purposes of this appeal, the government concedes that the BOR's May 2, 2003 directive advising Casitas that it was obligated to comply with the requirement of the BiOp compelled Casitas to: (1) construct a fish ladder facility, which is located at the intersection of the Ventura River, Robles Diversion Dam, and the Robles-Casitas Canal; and (2) divert water from the Project to the fish ladder, resulting in a permanent loss to Casitas of a certain amount of water per year.⁴ Under protest Casitas complied, but on January 26, 2005, Casitas filed suit against the government alleging that these actions constituted a breach of contract and a compensable Fifth Amendment taking of its water.

After filing its answer, the government filed a motion for summary judgment seeking to resolve the breach of contract claim, and a motion for partial summary judgment regarding the takings claim. In this latter motion, the government requested the trial court to determine the appropriate takings standard to be applied to Casitas' claim that the government's appropriation of water to operate the fish ladder constituted a compensable taking.

With respect to the breach of contract claim, Casitas contended that the United States breached the 1956 repayment contract by ordering Casitas to pay the costs of installing the fish ladder, which allegedly brought the total reimbursable project construction costs to more than the contract's $30.9 million limit. Casitas also argued that the BiOp's provision for changes to the Project's operating criteria breached Article 4 of the contract.

On October 2, 2006, the trial court granted summary judgment on the contract claims in favor of the United States. See Casitas Mun. Water Dist. v. United States, 72 Fed.Cl. 746 (2006) (Casitas I). Relying principally upon the Supreme Court's decision in Nampa & Meridian Irrigation District v. Bond, 268 U.S. 50, 45 S.Ct. 383, 69 L.Ed. 843 (1925), the trial court ruled that the costs associated with the construction of the fish ladder facility, more than forty years after the Project's initiation, were in the nature of operation and maintenance costs and, thus, not reimbursable under the repayment contract. Casitas I, 72 Fed.Cl. at 751. The trial court held that even if Article 4 of the contract was breached by the government, the sovereign acts doctrine applied, shielding the government from liability. Id. at 755.

On March 29, 2007, the trial court granted the government's partial summary judgment motion and held that the regulatory takings standard applied to Casitas' claim rather than the physical takings standard. Casitas Mun. Water Dist. v. United States, 76 Fed.Cl. 100, 105-06 (2007) (Casitas II). While the court recognized that a prior trial court decision— Tulare Lake Basin Water Storage District v. United States, 49 Fed.Cl. 313 (2001), rendered by Judge Wiese who also presided in this case—held that a deprivation of water amounts to a physical taking under somewhat similar circumstances, the court concluded that the Supreme Court's intervening decision Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002), clarified takings law so as to require a different result. Casitas II, 76 Fed.Cl. at 106. On August 2, 2007, in response to Casitas' concession that it could not prevail under the regulatory takings framework laid out in Penn Central Transportation Co. v. New York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978), the trial court dismissed the complaint and entered final judgment for the United States. Casitas appealed.

DISCUSSION

This court reviews a grant of summary judgment de novo. Anderson v. United States, 344 F.3d 1343, 1349 (Fed. Cir.2003). Summary judgment is only appropriate if the record shows 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. Ct. Fed. Cl. R. 56(c); see also Fed.R.Civ.P. 56(c). In reviewing the record, the appellate court must draw all justifiable inferences in favor of the party opposing summary judgment. Turner v. United States, 901 F.2d 1093, 1095 (Fed.Cir.1990). Contract interpretation is a question of law, which this court reviews de novo. Greenbrier v. United States, 193 F.3d 1348, 1354 (Fed. Cir.1999). The issue of whether a taking has occurred also is a question of law, reviewed de novo, based on factual underpinnings. Stearns Co. v. United States, 396 F.3d 1354, 1357 (Fed.Cir.2005).

I. CONTRACT CLAIMS

Casitas argues that the United States' enforcement of the ESA breached the repayment contract by requiring Casitas to install a fish ladder and to change its operational criteria, resulting in a loss of water to Casitas. The government argues that the contract's terms neither indemnify Casitas for installing and paying...