KLAMATH IRRIGATION DIST. v. US

• Decision Date: 11 March 2010
• Docket Number: SC S056275.,Federal CC 2007-5115
• Parties: 227 P.3d 1145 (2010) 348 Or. 15 KLAMATH IRRIGATION DISTRICT, Tulelake Irrigation District, Klamath Drainage District, Poe Valley Improvement District, Sunnyside Irrigation District, Klamath Basin Improvement District, Klamath Hills District Improvement Co., Midland District Improvement Co., Malin Irrigation District, Enterprise Irrigation District, Pine Grove Irrigation District, Westside Improvement District No. 4, Shasta View Irrigation District, Van Brimmer Ditch Co., Fred A. Robison, Albert J. Robison, Lonny E. Baley, Mark R. Trotman, Baley Trotman Farms, James L. Moore, Cheryl L. Moore, Daniel G. Chin, Deloris D. Chin, Wong Potatoes, Inc., Michael J. Byrne, Daniel W. Byrne, and Byrne Brothers, Plaintiffs, v. UNITED STATES of America and Pacific Coast Federation of Fishermen's Associations, Defendants, and State of Oregon, by and through the Oregon Water Resources Department, Intervenor.
• Court: Oregon Supreme Court

227 P.3d 1145

KLAMATH IRRIGATION DISTRICT, Tulelake Irrigation District, Klamath Drainage District, Poe Valley Improvement District, Sunnyside Irrigation District, Klamath Basin Improvement District, Klamath Hills District Improvement Co., Midland District Improvement Co., Malin Irrigation District, Enterprise Irrigation District, Pine Grove Irrigation District, Westside Improvement District No. 4, Shasta View Irrigation District, Van Brimmer Ditch Co., Fred A. Robison, Albert J. Robison, Lonny E. Baley, Mark R. Trotman, Baley Trotman Farms, James L. Moore, Cheryl L. Moore, Daniel G. Chin, Deloris D. Chin, Wong Potatoes, Inc., Michael J. Byrne, Daniel W. Byrne, and Byrne Brothers, Plaintiffs, v. UNITED STATES of America and Pacific Coast Federation of Fishermen's Associations, Defendants, and State of Oregon, by and through the Oregon Water Resources Department, Intervenor

Federal CC 2007-5115; SC S056275.

Supreme Court of Oregon, En Banc

Certification Order July 16, 2008.

Certification Accepted January 29, 2009.

Argued and Submitted May 13, 2009.

Decided March 11, 2010.

COPYRIGHT MATERIAL OMITTED

William M. Ganong, Klamath Falls, argued the cause for plaintiffs Klamath Irrigation District, Tulelake Irrigation District, Klamath Drainage District, Poe Valley Improvement District, Sunnyside Irrigation District, Klamath Basin Improvement District, Klamath Hills District Improvement Co., Midland District Improvement Co., Malin Irrigation District, Enterprise Irrigation District, Pine Grove Irrigation District, Westside Improvement District No. 4, Shasta View Irrigation District, Van Brimmer Ditch Co., Fred A. Robison, Albert J. Robison, Lonny E. Baley, Mark R. Trotman, Baley Trotman Farms, James L. Moore, Cheryl L. Moore, Daniel G. Chin, Deloris D. Chin, Wong Potatoes, Inc., Michael J. Byrne, Daniel W. Byrne, and Byrne Brothers. Michael H. Simon, of Perkins Coie, Portland, filed the briefs for plaintiffs. With him on the briefs were Julia E. Markley, Nicholle Y. Winters, Nancie G. Marzulla, Roger J. Marzulla, and Paul S. Simmons.

David C. Shilton, United States Department of Justice, Environment and Natural Resources Division, Washington, D.C., filed the briefs and argued the cause for defendant United States of America. With him on the briefs were John C. Cruden, Acting Assistant Attorney General, Katherine J. Barton, and Suzanne Bratis, Assistant United States Attorneys.

Todd D. True, Earthjustice, Seattle, Washington, argued the cause and filed the briefs for defendant Pacific Coast Federation of Fishermen's Associations. With him on the briefs was Stephanie M. Parent.

Stephanie L. Striffler, Senior Assistant Attorney General, Salem, argued the cause and filed the briefs for intervenor. With her on the briefs were John R. Kroger, Attorney General, and Jerome Lidz, Solictor General.

Carl Ullman, Klamath Water Project, Chiloquin, filed the brief for amicus curiae Klamath Tribes.

John T. Bagg, Salem, filed the brief for amicus curiae Natural Resources Defense Council. With him on the brief was John D. Escheverria.

KISTLER, J.

The United States Court of Appeals for the Federal Circuit certified three questions to this court, which this court accepted. Klamath Irrigation District v. United States, 345 Or. 638, 202 P.3d 159 (2009). All three questions arise out of a dispute over water rights in the Klamath River basin. Essentially, they ask whether, as a matter of state law, the fanners and irrigation districts that use water from a federal reclamation project have an equitable property interest in a water right to which the United States holds legal title and whether an equitable property interest in a water right is subject to adjudication in the ongoing Klamath Basin water rights adjudication. In answering those questions, we begin by describing the procedural posture in which the questions arise. We then discuss briefly the common law and statutory context that preceded a 1905 state statute on which the parties' arguments turn. Finally, we answer the certified questions.

I

The Federal Bureau of Reclamation (the Bureau) manages the Klamath Project, which stores and supplies water to farmers, irrigation districts, and federal wildlife refuges in the Klamath River basin. The plaintiffs in the underlying federal litigation are farmers and irrigation districts that use water from the Klamath Project for irrigation and other agricultural purposes. As a result of drought conditions in 2001, the Bureau terminated the delivery of water to plaintiffs that year in order to make water available for three species of endangered fish.¹

Claiming a property right in the water, plaintiffs brought an action in the United States Court of Federal Claims, alleging that the United States had taken their property in violation of the Fifth Amendment and, alternatively, that the United States had breached its contractual obligation to deliver water to them. The United States asked the federal claims court to abstain from deciding plaintiffs' takings claim until an ongoing state water rights adjudication determined what, if any, property rights plaintiffs had in the water from the Klamath Project. Cf. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 819-20, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) (upholding a federal district court ruling abstaining from deciding federal government and tribal water rights that were at issue in a state water rights adjudication).

In response to that argument, plaintiffs told the federal court that they were not asserting, in federal court, any right to water that the state water rights adjudication would determine. Plaintiffs took the position that the state water rights adjudication would resolve who has the legal title to use the water from the Klamath River basin but that it would not resolve who has an equitable or beneficial property interest in using the water. Plaintiffs accordingly assumed, for the purposes of their federal takings claim, that the United States holds legal title to the water rights, and they elected to proceed in the federal action solely on the theory that they hold an equitable or beneficial interest in the water rights, which the government took when it refused to deliver water to them in 2001. The Court of Federal Claims proceeded on that theory, see Klamath Irrigation District v. United States, 67 Fed. Cl. 504, 513-14 (2005) (describing plaintiffs' position), and so do we in answering the certified questions.²

Plaintiffs have argued in the federal action that their equitable property interest in the water arose from two sources: Section 8 of the Reclamation Act of 1902, ch. 1093, 32 Stat. 388, and state water law. The Court of Federal Claims held that neither source of law gave plaintiffs an equitable interest in the water from the Klamath Project. The court initially reasoned that federal law did not define the scope of plaintiffs' water rights. 67 Fed. Cl. at 518-23.³ Turning to plaintiffs' state law claims, the court held that, the United States appropriated, pursuant to a 1905 Oregon statute, all the then-unappropriated waters of the Klamath Basin and that, under the terms of the 1905 statute, a person could not obtain any property interest in that water without a formal written release from the United States. Id. at 526-27.

At two points in its opinion, the Court of Federal Claims summarized and quoted excerpts of various contracts between the United States and plaintiffs concerning the distribution of water. Id. at 510-12, 527-30. The court later explained that plaintiffs' contractual agreements with the United States divided into five basic categories:

"(i) interests based upon an exchange agreement, in which preexisting water rights were exchanged for an interest in the Project water; (ii) interests deriving from district contracts with the United States or the Bureau, claimed by the districts; (iii) interests deriving from the district contracts with the United States, claimed by individual irrigators as alleged third-party beneficiaries; (iv) interests based upon application for the beneficial use of water filed either by homesteaders on reclaimed lands (Form A), or by homesteaders or other landowners whose property does not involve reclaimed lands (Form B), and the patent deeds issued allegedly in response thereto; and (v) interests based upon alleged water rights permits granted by the State Oregon after the repeal of the 1905 Oregon legislation in 1953."

Id. at 530-31. The court concluded that agreements falling into the first three categories resulted in contractual rights to receive water and that a contractual interest is not a property interest that gives rise to a takings claim under the Fifth Amendment.⁴ Id. at 531-32. Regarding the fourth and fifth categories, the court concluded that, because the patent deeds and the water rights granted by the state had a later priority date than the United States' water right, the United States had not taken those rights when it denied water to plaintiffs. Id. at 538-39.

Having reached those conclusions, the Court of Federal Claims granted summary judgment for the United States on plaintiffs' takings claim. Id. at 540. Later, in a separate opinion, that court granted summary judgment for the United States on plaintiffs' contractual claim, reasoning that the sovereign acts doctrine provided a complete defense to that claim. Klamath Irrigation District v. United States, 75 Fed. Cl. 677, 695 (2007). Having disposed of both claims, the court entered judgment in the United States' favor.

Plaintiffs appealed to the United States Court of Appeals for the Federal...