Fekkes Land, LLC v. United States
| Decision Date | 15 June 2017 |
| Docket Number | NO. 2:16-cv-00378-SAB,2:16-cv-00378-SAB |
| Court | U.S. District Court — District of Washington |
| Parties | FEKKES LAND, LLC, a Washington limited liability company, Petitioner, v. UNITED STATES OF AMERICA, and the UNITED STATES DEPARTMENT OF THE INTERIOR, Respondents. |
Before the Court is Petitioner's Motion for Summary Judgment, ECF No. 11, and Respondents' Cross-Motion for Summary Judgment, ECF No. 15. A hearing was held on June 8, 2017 in Spokane, Washington. Petitioner was represented by Christopher Ries and Respondents by Vanessa Waldref. The Court took the motions under advisement. For the reasons stated herein, Petitioner's Motion for Summary Judgment, ECF No. 11, is denied, and Respondents' Motion for Summary Judgment, ECF No. 15, is granted.
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Pursuant to the Reclamation Act of 1902, ("Act") federal irrigation water could not be supplied to lands in excess of 160 acres. 43 U.S.C. § 431. The Act does not place a supply limitation on the amount of land leased nor does it require any reporting regarding the amount of land owned. United States v. Quincy-Columbia Basin Irrigation Dist., 649 F. Supp. 487, 489 (E.D. Wash. 1986). Further, the Secretary of the Interior is authorized to "make such rules and regulations as may be necessary and proper for the purpose of carrying out the provisions" of the Act. 43 U.S.C. § 373.
In 1982, Congress enacted the Reclamation Reform Act ("RRA"), 43 U.S.C. §§ 390aa, et seq., which expanded the acreage limitations for landholders to as much as 960 acres, but also imposed limitations on leased land and required annual reporting through the submission of certification and reporting forms (Annual Forms). There are two paths by which a landholder can qualify for the greater acreage limitations of the RRA: (1) district election; and (2) individual election. 43 U.S.C. § 390cc. With respect to a district election, an irrigation district may voluntarily amend its contract to conform to the new requirements of the RRA (discretionary provisions), in which case all landholders owning land within the district would automatically be subject to the higher acreage limitations of the RRA. Id. § 390cc(a). However, irrigation districts retain the option not to conform to the discretionary provisions, in which case they remain subject to the reclamation law in effect immediately prior to the date of the enactment of the RRA (prior law). If a district elected to remain under prior law, individual landholders within the district would continue to be subject to the 160 acre limitation unless they individually elected to be subject to the discretionary provisions of the RRA. This is known as an individual election and is done by executing an irrevocable election form. Id. § 390cc(b)-(c).
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Petitioner Fekkes Land, LLC, is a Washington Limited Liability Company formed in 2009 and owned by its two members, William and Roberta Fekkes (the Fekkes), husband and wife. Prior to forming Petitioner, the Fekkes personally owned certain lands subject to the RRA upon which they operated a dairy and farm enterprise. The total irrigable acreage was 380.8. This land is located in the Quincy-Columbia Basin Irrigation District (QCBID), which has not amended is contract with the Bureau of Reclamation to conform to the discretionary provisions of the RRA.
In 2006, the Fekkes endeavored to conform to the discretionary provisions of the RRA by executing an irrevocable election in their individual capacities. On November 20, 2009, the Fekkes formed Petitioner Fekkes Land, LLC for taxation and business structure purposes and transferred title to the property to Petitioner. This transfer merely changed the name in which title to the property was held, and daily operations of the dairy and farm did not change.
Prior to the 2010 irrigation season, William Fekkes met with Brenda Poldervart of the QCBID to complete all Annual Forms necessary to establish eligibility to receive reclamation water. Because only ownership of the property changed to Petitioner and the Fekkes were the sole members of Petitioner, it did not occur to William Fekkes to report the change in title to the property to QCBID. As a result, Petitioner was not listed as a wholly-owned legal entity in Section 6 of the 2010 Form 7-2180, nor was an irrevocable election form for Petitioner completed prior to the 2010 irrigation season. Rather, the Fekkes individually submitted the version of the irrevocable election and Annual Forms applicable to landholders subject to the discretionary provisions of the RRA. They did this for the 2010, 2011, and 2012 irrigation seasons.
Prior to the 2013 irrigation season, the Fekkes purchased another parcel of property subject to the RRA, which was taken in the name of Fekkes Dairy, LLC.William Fekkes met with Poldervart again prior to the 2013 irrigation season to establish eligibility to receive reclamation water in 2013, and at such time advised Poldervart of the new acquisition. This led to the realization that Petitioner should have been listed as a wholly-owned entity on Section 6 of the Form 7-2180 for the 2010, 2011, and 2012 seasons and Petitioner should have submitted the irrevocable election, not the Fekkes individually.
Immediately upon recognizing the oversight, Petitioner executed an irrevocable election. In August 2013, the Bureau instructed the Fekkes to submit corrected forms for the 2010, 2011, and 2012 irrigation seasons, which they completed immediately. On September 11, 2013, bills for collection were sent to QCBID which assessed compensation charges for reclamation irrigation water delivered to Petitioner for ineligible excess land during the 2010, 2011, and 2012 water years; the bills also assessed administrative fees for each year. The compensation charges were as follows: $8,659.12 in 2010; $8,529.44 in 2011; and $ 8,287.11 in 2012. The administrative fee was $230.00 for each year.
On October 9, 2013, Petitioner appealed the bills imposing compensation charges and administrative fees for the 2010, 2011, and 2012 irrigation season. On November 16, 2015, the Commissioner issued the Bureau's final determination denying Petitioner's appeal and affirming the imposition of the compensation charges. Petitioner appealed to the Office of Hearings and Appeals of the United States Department of Interior (OHA), which issued its Final Order on September 26, 2016, affirming the imposition of compensation charges. Petitioner filed the instant Petition for Judicial Review of Administrative Order on October 25, 2016, and paid all of the compensation charges and administrative fees on December 22, 2016.
This is an action for judicial review of the Final Order entered by OHA pursuant to the Administrative Procedure Act (APA). Under the APA, the Court"shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of agency action." 5 U.S.C. § 706. The Court shall "hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;" or "in excess of statutory jurisdiction, authority, or limitations, or short of statutory right." Id. Under the arbitrary or capricious standard, the Court "will sustain an agency action if the agency has articulated a rational connection between the facts found and the conclusions made." Pac. Coast Fed'n of Fishermen's Ass'ns v. U.S. Bureau of Reclamation, 426 F.3d 1082, 1090 (9th Cir. 2005). "This standard of review is 'highly deferential, presuming the agency action to be valid and affirming the agency action if a reasonable basis exists for its decision.'" Ctr. for Biological Diversity v. Bureau of Land Mgmt., 833 F.3d 1136, 1146 (9th Cir. 2016) (quoting Ranchers Cattlemen Action Legal Fund United Stockgrowers of Am. v. U.S. Dep't of Agric., 499 F.3d 1108, 1115 (9th Cir. 2007)). Judicial review under § 706 is a review of the administrative record. 5 U.S.C. § 706.
Petitioner's primary argument is that the Bureau lacks the statutory authority to impose the full-cost compensation charges assessed for water deliveries in excess of 160 acres for the water years 2010, 2011, and 2012. Respondents argue, to the contrary, that it is required by law to seek collection of full-cost charges for water delivered to Petitioner in excess of 160 acres. The Court agrees with Respondents.
Pursuant to 43 U.S.C. § 390ii(a), irrigation water "may not be delivered for use in the irrigation of lands held in excess of the ownership limitations imposed by Federal reclamation law." Excess land is "nonexempt land that is in excess of a landowner's maximum ownership entitlement under the applicable provisions ofFederal reclamation law." 43 C.F.R. § 426.2. The Bureau's statutory basis for the collection of underpayments is 43 U.S.C. § 390ww. It provides:
When the Secretary finds that any individual or legal entity subject to reclamation law, including this subchapter, has not paid the required amount for irrigation water delivered to a landholding pursuant to reclamation law, including this subchapter, he shall collect the amount of any underpayment with interest accruing from the date the required payment was due until paid.
Id. §390ww(i). The statute does not define what constitutes an underpayment, but rather directs the Bureau to collect underpayments where individuals have not paid the full amount for water deliveries as required by law.
As noted in OHA's Final Order, the Bureau's decision to charge full-cost for the irrigation water delivered in excess of 160 acres was based on its interpretation of 43 C.F.R. § 426.12(h), which states:
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