Hardy Salt Co. v. Southern Pac. Transp. Co.

• Decision Date: 27 September 1974
• Docket Number: Nos. 73-1714,s. 73-1714
• Citation: 501 F.2d 1156
• Parties: HARDY SALT COMPANY, Plaintiff-Appellant, Sanders Brine Shrimp Company, Plaintiff-Appellant, Morton-Norwich Products, Inc., Plaintiff-Appellant, v. SOUTHERN PACIFIC TRANSPORTATION COMPANY, Defendant-Appellee, Great Salt Lake Minerals & Chemicals Corporation, Intervenor-Defendant-Appellee. to 73-1716.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1156

501 F.2d 1156

HARDY SALT COMPANY, Plaintiff-Appellant, Sanders Brine

Shrimp Company, Plaintiff-Appellant, Morton-Norwich Products, Inc., Plaintiff-Appellant, v. SOUTHERN PACIFIC TRANSPORTATION COMPANY, Defendant-Appellee,

Great Salt Lake Minerals & Chemicals Corporation,

Intervenor-Defendant-Appellee.

Nos. 73-1714 to 73-1716.

United States Court of Appeals, Tenth Circuit.

Argued March 19, 1974.

Decided July 26, 1974, As Amended on Denial of Rehearing

Sept. 27, 1974.

J. Thomas Greene, Salt Lake City, Utah (Gifford W. Price of Greene & Nebeker, Salt Lake City, Utah, and F. William McCalpin, St. Louis, Mo., of counsel, were on the brief), for plaintiff-appellant Hardy Salt Co.

Frank J. Allen of Clyde, Mecham & Pratt, Salt Lake City, Utah, for plaintiff-appellant Sanders Brine Shrimp Co.

Frank A. Wollaeger, Chicago, Ill. (Hardin A. Whitney and John W. Horsley of Moyle & Draper, Salt Lake City, Utah, and Paul D. Frenz of McBride, Baker, Wienke & Schlosser, Chicago, Ill., were on the brief), for plaintiff-appellant Morton-Norwich Products, Inc.

Clifford L. Ashton, Salt Lake City, Utah (Haldor T. Benson, Salt Lake City, Utah, was on the brief), for defendant-appellee Southern Pacific Transportation Co.

Claron C. Spencer, Salt Lake City, Utah (Richard G. Allen of Senior & Senior, Salt Lake City, Utah, was on the brief), for intervenor-defendant-appellee Great Salt Lake Minerals & Chemicals Corp.

Amici curiae, The United States of America and The State of Utah submitted briefs.

Before DURFEE, ^* Senior Judge, and HOLLOWAY and BARRETT, Circuit judges.

HOLLOWAY, Circuit Judge.

These consolidated appeals seek reversal of a judgment of the District Court dismissing the appellants' actions for damages and injunctive relief for injuries claimed to result from the construction and operation of a causeway across the Great Salt Lake of Utah by appellee Southern Pacific Transportation Company.

In 1956 the State of Utah granted Southern Pacific an easement across the Lake for railroad purposes. In 1959 Southern Pacific completed construction of the rock and earth fill causeway which separated the northern one-third of the Lake from the southern two-thirds.

The causeway is approximately 12.8 miles in length and contains only two 15-foot culvert openings to allow for circulation between the two arms of the Lake. The total fill causeway has created a static head water surface differential between the south and north arms of the Lake, causing the water to be about 17 inches to 22 inches higher on the south than the north. The differential has caused the migration of thousands of tons of salt from the south to the north, resulting in an increasing concentration of salt in the north lake and the dilution of brines in the south lake. Approximately 95 per cent of the total water flowing into the Lake enters the south lake, further contributing to the build up of the static head differential and moving the salt northward.

Appellants Hardy Salt Company (Hardy) and Morton-Norwich Products, Inc. (Morton) are engaged in the business of extracting sodium chloride (salt) from the waters of the Lake. The proof of Hardy and Morton showed the following facts.

Morton and Hardy operate under royalty agreements with the State of Utah for the extraction of salt from the Lake. The processing plants and related facilities of both companies are located along what is now the south arm of the Lake. Since the brine in the south arm is becoming more dilute each year, more water must be evaporated to recover the same quantity of salt. This has required the acquisition of land for additional concentrating ponds and increased the costs of production. Essentially it is these difficulties and increased costs resulting from them that Hardy and Morton complain of.

Appellant Sanders Shrimp Company (Sanders) is in the business of harvesting brine shrimp and shrimp eggs from the Lake and selling them as tropical fish food. Sanders' proof showed the following facts.

Sanders has a 1970 ten-year contract with the Utah State Division of Fish and Game giving Sanders the full and exclusive right to seine for and harvest brine shrimp and brine shrimp eggs in two designated areas south of the causeway, it being stipulated that another company is permitted to collect up to 10,000 pounds of brine shrimp annually from one of the two areas. Also Sanders has an annual seining permit from the State.

The described changes in salinity of the two arms of the Lake have affected the brine shrimp and their eggs. With the increased salinity in the north arm, the shrimp can no longer survive there. Although the south arm provides a suitable environment, the decreased salinity has caused them to adjust the density of their eggs to the lower density of the water. More worthless egg shells are produced and there is a lessening supply of shrimp eggs available for collection by normal methods. And a lower percentage of the eggs which can be harvested by normal methods are viable.

Hardy and Sanders brought their suits for injunctive relief and damages in the State Court, based on claims of public and private nuisance, waste, interference with business interests and like theories. Morton brought its action in the Federal District Court, asserting only a claim under the Rivers and Harbors Act of 1899, 33 U.S.C.A. 401 et seq. The Hardy and Sanders suits were removed to the Federal District Court on diversity grounds, and the suits were all consolidated for trial later. Hardy then also asserted a claim for relief under the Rivers and Harbors Act. Before trial appellee Great Salt Lake Minerals & Chemicals Corporation, which is engaged in recovering salt from the north arm of the Lake, was permitted to intervene as a party defendant, asserting that any significant dilution of the concentrated brine in the north arm would adversely affect its operations.

After completion of the plaintiffs' proof, Southern Pacific moved to dismiss. The District Court sustained the motion, made findings and conclusions adverse to the plaintiffs and dismissed the action.

The Court found that neither the royalty agreements between the State of Utah and Hardy and Morton, nor the seining permits granted to Sanders, purported to grant exclusive rights to remove salt or brine shrimp or shrimp eggs from the Great Salt Lake, and that the agreements did not purport to guarantee any given salinity of the waters in the entire lake or any part of it. The Court held that under Morton International, Inc. v. Southern Pacific Transportation Co., 27 Utah 2d 256, 495 P.2d 31, cert. denied, 409 U.S. 934, 93 S.Ct. 238, 34 L.Ed.2d 189, the royalty agreements held by Hardy and Morton were nonexclusive in nature, and that because of this fact neither Hardy nor Morton could recover for any damages resulting from diminution of the salt content in the south arm.

The Court concluded also that Sanders has nothing more than a nonexclusive license to fish and, therefore, under the Morton opinion, Sanders has no cause of action against Southern Pacific for any damages resulting from diminution of the brines of the south arm, or the strengthening of the brines of the north arm that may be due to construction of the causeway.

Hardy, Morton and Sanders all appeal. We treat first the State law claims of nuisance, waste, interference with business interests and like theories, and will later consider the Federal claims under the Rivers and Harbors Act.

1. The State law claims of nuisance, waste, interference with business interests and like theories.

Applying State law to the diversity claims as required by Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, the District Court relied primarily on Morton International, Inc. v. Southern Pacific Transportation Co., 27 Utah 2d 256, 495 P.2d 31, cert. denied, 409 U.S. 934, 93 S.Ct. 238, 34 L.Ed.2d 189, in denying relief sought on State law claims. The case must be carefully considered.

The Morton case involved State law claims similar to those of Hardy and Sanders and concerned injury from the same causeway. Morton's claims were premised on 'diligence rights' which are not clearly defined in the opinion. Before Utah law provided for applications for certificates for water appropriation, such as obtained by Hardy, such diligence rights described the right to take water obtained by a continued beneficial use. See Hanson v. Salt Lake City, 115 Utah 404, 205 P.2d 255; Hague v. Nephi Irrigation Co., 16 Utah 421, 52 P. 765, 768. However, the source of the right does not appear dispositive in the case. The Utah Supreme Court in fact referred to Morton's failure to have made application for appropriation of water under Titles 73 and 65-1-15, Utah Code Annotated (1953), but said that this was not dispositive. The reasons for denial of relief to Morton were spelled out by the Court as follows:

What we do think is important and dispositive here, is the question of who owns the salt in solution in the waters of the lake. Although there was some question about this important matter before 1946, there was none thereafter, since we held in a somewhat similar case that 'the salt . . . is contained within Great Salt Lake, which is a navigable body of water. Because it is a navigable body of water its bed belongs to the state subject to the control of Congress for navigation in commerce . . .. It is our opinion that the state as the owner of the beds of navigable bodies of waters is entitled to all valuable minerals in or on them,'-- such conclusion being affirmed and established by the U.S. Supreme Court in the most recent decision of June 6, 1971 . . ..

. . . .of

. . . It is obvious that plaintiff's right to divert and precipitate the salt is a nonexclusive right, and that no matter what you call it,-- a diligence right, a license, a profit a prendre, a lease, or a contract to sell,-- the right is circumscribed by the provisions of Title 65-1-15, U.C.A.1953, reserving...