City of Fresno v. United States
| Decision Date | 25 March 2020 |
| Docket Number | No. 16-1276L,16-1276L |
| Parties | CITY OF FRESNO, et al., Plaintiffs, v. THE UNITED STATES OF AMERICA, Defendant, and SAN LUIS & DELTA-MENDOTA WATER AUTHORITY, et al., and CENTRAL CALIFORNIA IRRIGATION DISTRICT, et al. Defendant-Intervenors. |
| Court | U.S. Claims Court |
Keywords: Takings Clause; Fifth Amendment; Breach of Contract; Water Rights; Bureau of Reclamation; Motion to Dismiss; Subject-Matter Jurisdiction; Failure to State a Claim
Nancie G. Marzulla and Roger J. Marzulla, Marzulla Law, LLC, Washington, DC, for Plaintiffs. Craig Parton and Timothy E. Metzinger, Price, Postel & Parma LLP, Santa Barbara, CA, Of Counsel.
Lucinda J. Bach, Environment and Natural Resources Division, and Geoffrey M. Long, Civil Division, Commercial Litigation Branch, U.S. Department of Justice, Washington, DC, with whom was Jean E. Williams, Deputy Assistant Attorney General, Washington, DC, for Defendant. Amy Aufdemberge, Assistant Regional Solicitor, Office of the Solicitor, U.S. Department of Interior, Sacramento, CA, Of Counsel.
Paul R. Minasian, Andrew J. McClure, and Jackson A. Minasian, Minasian, Meith, Soares, Sexton & Cooper, LLP, Oroville, CA, for Defendant-Intervenor San Joaquin River Exchange Contractors Water Authority.
Daniel J. O'Hanlon, Kronick, Moskovitz, Tiedemann & Girard, Sacramento, CA, for Defendant-Intervenor San Luis & Delta-Mendota Water Authority.
David T. Ralston, Foley & Lardner LLP, Washington, DC, for Defendant-Intervenors Byron Bethany Irrigation District and Del Puerto Water District. Frank S. Murray and Micah Zomer, Foley & Lardner LLP, Washington, DC, Of Counsel.
Jon D. Rubin, General Counsel, Westlands Water District, Sacramento, CA, for Defendant-Intervenor Westlands Water District.
Ellen L. Wehr, Grassland Water District, Los Banos, CA, for Defendant-Intervenor Grassland Water District.
Thomas M. Berliner, Duane Morris LLP, San Francisco, CA, for Defendant-Intervenor San Luis Water District.
Steven Stadler, James Irrigation District, San Joaquin, CA, for Defendant-Intervenor James Irrigation District.
Anthony T. Fulcher, Santa Clara Valley Water District, San Jose, CA, for Defendant-Intervenor Santa Clara Valley Water District. Stanly Yamamoto, Santa Clara Valley Water District, San Jose, CA, Of Counsel.
Plaintiffs in this action include the City of Fresno, California, seventeen irrigation districts in California that have entered contracts with the Bureau of Reclamation to receive water supplied by the Friant Division of the Central Valley Project ("CVP") (hereinafter the District Plaintiffs),1 and eight individual landowners who rely upon water supplied to them by the irrigation districts for agricultural purposes (hereinafter the Individual Plaintiffs).2 The Individual Plaintiffs purport to sue on behalf of themselves and similarly-situated property owners served by the CVP.
Plaintiffs allege that in 2014, in the wake of water shortages caused by a severe drought, Reclamation provided the City and the District Plaintiffs with only a fraction of the water to which they claim entitlement under their contracts. According to Plaintiffs, Reclamation instead "appropriated all of the water of the Friant Division of the [CVP] to satisfy what it determined to be a contractual requirement to provide this water as substitute water under a 1939 Contract . . . to a group of water users referred to as the Exchange Contractors." 2d Am. Compl. ¶ 32. As a result Plaintiffs allege, the City and the District Plaintiffs, as well as their water users, including the Individual Plaintiff landowners, "suffered huge losses of annual and permanent crops, loss ofgroundwater reserves, water shortages and rationing, and incurred millions of dollars to purchase emergency water supplies." Id. ¶ 33.
Plaintiffs contend that Reclamation breached its contract with the City and the District Plaintiffs "by failing to make available to them the quantities required by Article 3 of their contracts." Id. ¶ 46. They also allege that "[t]he water and water rights of the Friant Division appropriated by the United States in 2014 were the property of Plaintiffs, and their landowners and water users, each of which are the beneficial owners of the water rights." Id. ¶ 34. According to Plaintiffs, when Reclamation provided the water to the Exchange Contractors, rather than the City and the District Plaintiffs, it effected a taking of their property without just compensation, in violation of the Fifth Amendment. Id. ¶ 35.
Presently before the Court are motions to dismiss filed by the United States and the Defendant Intervenors3 pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the Court of Federal Claims ("RCFC"). The government contends that the City and District Plaintiffs lack standing to pursue Fifth Amendment takings claims because under California law they do not have property interests in the water supplied to them by Reclamation. According to the government, whatever rights the City and the District Plaintiffs possess arise exclusively under their water-supply contracts with Reclamation.
The United States further argues that the City and the District Plaintiffs have failed to state a claim for breach of the water-supply contracts because those contracts immunize the United States from any liability in cases of shortages caused by actions Reclamation took to meet its obligations under the exchange contracts. Further, the government contends that the Individual Plaintiffs also have no water rights under California law; nor are they third-party beneficiaries to the water-supply contracts between Reclamation and the City or Reclamation and the District Plaintiffs.4
The Intervenor Exchange Contractors make similar arguments, but offer additional grounds for dismissal. They contend that Plaintiffs' claims seek declaratory relief that is beyond the Court's power to grant. They also argue that Plaintiffs' Second Amended Complaint fails to allege that the United States' determination of the condition of shortage was arbitrary and capricious, as required by the shortage provisions in the water-supply contracts. For the reasonsset forth below, the motions to dismiss are GRANTED-IN-PART and DENIED-IN-PART. The City and the District Plaintiffs have adequately pleaded a breach of contract and, thus, the motions are DENIED as to those claims. The motions are GRANTED as to all remaining claims, including those presented by the Individual Plaintiffs as third-party beneficiaries of the water-supply contracts.
"The Central Valley Project is the largest federal water management project in the United States." Stockton E. Water Dist. v. United States, 583 F.3d 1344, 1349 (Fed. Cir. 2009). It consists of a massive set of dams, reservoirs, hydropower generating stations, canals, electrical transmission lines, and other infrastructure. United States v. Gerlach Live Stock Co., 339 U.S. 725, 728 (1950). The CVP "was built to serve the water needs in California's Central Valley Basin," Stockton E. Water Dist., 583 F.3d at 1349, which has been characterized as "the most agriculturally-productive region in the world," Westlands Water Dist. v. United States (Westlands Water Dist. I), 153 F. Supp. 2d 1133, 1138 (E.D. Cal. 2001), aff'd, 337 F.3d 1092 (9th Cir. 2003). The CVP was originally conceived by the State of California, but "was taken over by the United States in 1935 and has since been a federal enterprise." Gerlach Live Stock Co., 339 U.S. at 728. It is operated by the Bureau of Reclamation, a division of the Department of the Interior. Stockton E. Water Dist., 583 F.3d at 1349.
The CVP's purposes were to "improv[e] navigation, regulat[e] the flow of the San Joaquin River and the Sacramento River . . . [to store and deliver] waters thereof, for the reclamation of arid and semiarid lands . . . and other beneficial uses." Westlands Water Dist. v. United States (Westlands Water Dist. II), 337 F.3d 1092, 1095 (9th Cir. 2003) (quoting Act of August 26, 1937, Pub. L. No. 75-392, 50 Stat. 844, 850). The CVP achieved these purposes by "re-engineer[ing] [the] natural water distribution" of California's Central Valley. Gerlach Live Stock Co., 339 U.S. at 728.
As the government observes, "[a]s originally conceived, the CVP developed a water supply from two rivers: the Sacramento and the San Joaquin." Corrected Resp. of the U.S. to Show Cause Order at 4, ECF No. 113. The Sacramento River generates a "surplus of water because of heavier rainfall in the northern region but has little available tillable soil." Westlands Water Dist. I, 153 F. Supp. 2d at 1146 (quoting Cty. of San Joaquin v. State Water Res. Control Bd., 63 Cal. Rptr. 2d 277, 279 (Cal. Ct. App. 1997)) (alterations omitted). The San Joaquin River, by contrast, cannot supply sufficient water for irrigation and other beneficial uses in the San Joaquin Valley. Id.
The claims before the Court in this case arise out of the Project's Friant Division, 2d Am. Compl. ¶ 29,6 where the Friant Dam impounds all of the waters of the San Joaquin River and stores them in Millerton Lake. The waters stored in Millerton Lake are distributed via the Madera and Friant-Kern Canals to water and irrigation districts like the District Plaintiffs that hold contracts with Reclamation. See Dugan v. Rank, 372 U.S. 609, 613 (1963); Westlands Water Dist. II, 337 F.3d at 1096; United States v. State Water Res. Control Bd. ("SWRCB"), 227 Cal. Rptr. 161, 167 (Cal. Ct. App. 1986).
Congress passed the Reclamation Act of 1902 to facilitate federal management of limited water resources in the western states. See California v. United States, 438 U.S. 645, 649 (1978). Under the act, funds reserved from the sale of public lands in several western states, including California, are deposited into a "reclamation fund," controlled by the Treasury, which is used for "the construction and maintenance of irrigation works for the storage,...
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