Mattson v. Montana Power Co.

Decision Date25 August 2009
Docket NumberNo. DA 07-0353.,DA 07-0353.
Citation2009 MT 286,215 P.3d 675
CourtMontana Supreme Court
PartiesRebecca E. MATTSON, Sliters, North Flathead Lake Yacht Club, J. Michael Dockstader, Ray J. Habel, Greg R. Habel, William G. Bowd, Paul & Mary Sullivan, Ray & Maureen Hein, Randa J. McAlpin, Neil R. McAlpin, Pete C. Woll, Loyd Foster, G.W. Ingham II, Benjamin W. Louden, L. Harry Woll, Kenneth D. Louden, Michel O. Speckert, Steven Speckert, Susie Speckert, Hector Speckert, John Does 1-500, Jane Does 1-500, ABC Corporations 1-500, XYZ Partnerships 1-500, DEF Limited Liability Companies, 1-500, and all other parties similarly situated, Plaintiffs, Appellants and Cross-Appellees, v. MONTANA POWER COMPANY, a Montana Corporation, PPL Montana, LLC, a Delaware Limited Liability Company, Touch America Holdings, Inc., a Delaware Corporation, Montana Power, LLC, a/k/a Northwestern Energy, a South Dakota Limited Liability Company, and Northwestern Corporation, a South Dakota Corporation, Defendants, Appellees, and Cross-Appellants.

For Appellants: Thomas R. Meites, Jamie S. Frankin, Meites, Mulder, Mollica & Glink, Chicago, Illinois, James P. Molloy (argued), Molloy Law Firm, Helena, Montana, Larry M. Elison, Gold Canyon, Arizona, Calvin T. Christian, Christian, Samson, Jones & Chisolm, Missoula, Montana.

For Appellees: Martin S. King (argued), Sean M. Morris (argued), Worden, Thane, P.C., Missoula, Montana.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Flathead Lake, located in northwest Montana, is the largest natural freshwater lake west of the Mississippi. It is 28 miles long and 15 miles wide (at its broadest points) and covers 191 square miles. Its two primary tributaries are the upper Flathead River and the Swan River, which enter from the north and east. The lake drains to the south into the lower Flathead River. In the 1930s, Montana Power Company (MPC) constructed Kerr Dam on the lower Flathead River 4.5 miles downstream of the lake's natural outlet. The dam regulates Flathead Lake's water level and generates electrical power for customers in Montana. MPC managed and operated Kerr Dam until December 1999, when it conveyed its interest to PPL Montana, LLC (PPLM). PPLM has operated the dam since.

¶ 2 In November 1999, a group of landowners owning real property on the shores of Flathead Lake and the southern banks of the upper Flathead River (Landowners) commenced the instant action in the Eleventh Judicial District Court, Flathead County, on behalf of themselves and similarly situated landowners1 against MPC and PPLM.2 In due course, the Landowners filed motions to certify the lawsuit as a class action. The District Court granted the motions and certified the following class:

All persons and entities (other than Defendants and the Confederated Salish and Kootenai Tribes of the Flathead Reservation, Montana) that own real property either with frontage on the shoreline of Flathead Lake in Flathead County or Lake County, Montana, or which contains a bank of the Flathead River located in Flathead County, Montana, or both.

¶ 3 The Landowners claim that the manner in which MPC and PPLM have operated Kerr Dam has resulted in continuous erosion, loss of shoreline, and damage to their properties. They contend that the erosion and damage are caused primarily by MPC's and PPLM's practice each year of maintaining Flathead Lake's water level at full pool (i.e., at the highest permitted elevation) into the fall storm season. In response, PPLM points out that the Landowners' properties are subject to easements, obtained from shoreline property owners in the 1930s, '40s, and '50s, which allow the operator of Kerr Dam to flood, subirrigate, drain, or otherwise affect the Landowners' properties with the waters of Flathead Lake. The Landowners argue, however, that MPC and PPLM have acted outside the scope of these easements. They assert claims of trespass, nuisance, a taking of property, and breach of the easements.

¶ 4 Recognizing that the easements might pose a "legal barrier" to the Landowners' claims, the parties filed cross-motions for summary judgment on the easements' legal effect. The District Court ultimately rejected the Landowners' argument that the dam operator may not use, invade, or affect their properties above an elevation of 2,893 feet and concluded instead that the easements "cover entire parcels." The court also ruled that erosion, including "wave action" erosion, is within the scope of the easements. Finally, the court concluded that any duty PPLM has not to cause unreasonable damage to the Landowners' properties applies only to damage unrelated to the use of the easements.

¶ 5 The Landowners now appeal from the District Court's order granting summary judgment in favor of all defendants, while PPLM cross-appeals from the District Court's order certifying this lawsuit as a class action as to PPLM. The parties present four issues, which we restate as follows:

1. Are the easements restricted in scope by a limiting contour line around Flathead Lake at 2,893 feet above mean sea level?

2. Is the operator of Kerr Dam allowed under the easements to cause erosion to the Landowners' properties?

3. Is the operator of Kerr Dam required not to cause unreasonable damage to, or interfere unreasonably with the enjoyment of, the Landowners' properties?

4. In evaluating the Landowners' motion for class certification, was the District Court required to take all of their allegations "as true"?

¶ 6 As detailed below, we conclude that the easements are not restricted by a limiting "contour line" around Flathead Lake; rather, they extend to those parts of the Landowners' properties which are "affected" when the lake's water level is at 2,893 feet above mean sea level as measured at Kerr Dam. We further conclude that the easements include an incidental right to cause reasonably necessary erosion to the Landowners' properties. However, we hold that the dam operator is not entitled to cause unreasonable damage to those properties or interfere unreasonably with the enjoyment of those properties. Finally, with respect to the cross-appeal issue, we hold that the District Court erred in taking all of the Landowners' allegations "as true." We accordingly affirm in part, reverse in part, and remand for further proceedings.

ADDITIONAL BACKGROUND

¶ 7 In 1930, the Federal Power Commission issued Rocky Mountain Power Company (RMPC, a subsidiary of MPC) a 50-year license to construct and operate a dam on the lower Flathead River. RMPC transferred the license to MPC in 1938. Construction of Kerr Dam commenced in 1930 but then was delayed due to the Great Depression. The dam was finally completed in 1938, and commercial operations began in 1939.

¶ 8 Kerr Dam and the southern half of Flathead Lake are located within the exterior boundaries of the Flathead Indian Reservation. In 1976 (four years before the expiration of the original license), MPC and the Confederated Salish and Kootenai Tribes of the Flathead Reservation filed competing applications for a new license to operate the Kerr Project (the dam, the reservoir, and appurtenant facilities). They eventually reached a settlement under which a new 50-year license would issue to MPC and the Tribes jointly, and MPC would hold and operate the project for the first 30 years of the term, at which point the Tribes would have the option of taking over the project upon payment of a specified sum to MPC. The Federal Energy Regulatory Commission approved the settlement and issued the joint license in July 1985. See Montana Power Co., 32 F.E.R.C. ¶ 61,070 (1985). The dam is presently operated under this license.

¶ 9 Flathead Lake is fed by snowmelt and by releases from Hungry Horse Dam on the South Fork of the upper Flathead River.3 Prior to the construction of Kerr Dam, the lake's water level rose an average of eight feet each year from mid-April to early June due to spring runoff. The average peak elevation was 2,890 feet above mean sea level. The water level then dropped steadily during the summer to a base level where it would remain until the following spring. Under Kerr Dam operations, however, the lake rises to an elevation some three to four feet above the average pre-dam peak and is maintained at this level into October. It is then lowered gradually over the winter to an elevation two or three feet above the pre-dam base level, after which spring runoff begins the cycle anew.

¶ 10 The 1930 and 1985 dam licenses authorize the dam operator to regulate Flathead Lake between elevations 2,883 and 2,893 feet above mean sea level. In this connection, Frank M. Kerr (RMPC's vice president and general manager at the time) testified before the Federal Power Commission in October 1929 concerning RMPC's application to develop power on Flathead Lake and the Flathead River. He acknowledged that there had been "a good deal of controversy and discussion as to the effect of high water in the lake" and that a great deal of study had been conducted on the subject. Noting that "no one wants to buy or pay for any damage that can possibly be avoided," Kerr testified that

the result of these things that I have described has indicated to us as businessmen and as engineers that the elevation 2,893 is the logical development in the interest of everyone that may be concerned. Unquestionably this takes some land, but nothing of importance except at the north end of the lake, where the delta of the Flathead River has made a large area very flat.

Kerr further testified that he had been

asked the question many times as to what effect this storage at 2,893 will have upon the lake shore in general, and in order to use an expression that I thought would be best understood by a layman, I have said to these people that "If you will build or do anything on your property in the light of your experience as to what elevations of the lake have...

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