Sanpete Water Conserv v. Carbon Water Conserv., No. 99-4136

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Citation226 F.3d 1170
Docket NumberNo. 99-4136
Decision Date15 September 2000

Page 1170

226 F.3d 1170 (10th Cir. 2000)
No. 99-4136
September 15, 2000

Appeal from the United States District Court for the District of Utah (D.C. No. 96-CV-975)

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Copyrighted Material Omitted

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Charles P. Sampson (Claudia F. Berry of Suitter Axland; John W. Anderson and John S. Flitton of Pruitt, Gushee & Bachtell with him on the briefs) of Suitter Axland, Salt Lake City, Utah, for Plaintiff-Appellant.

James B. Lee (James E. Karkut with him on the brief) of Parsons Behle & Latimer, Salt Lake City, Utah, for Defendant-Appellee Carbon Water Conservancy District.

Before BRORBY, HOLLOWAY and BRISCOE, Circuit Judges.

BRORBY, Circuit Judge.

This case flows from yet another skirmish in the never-ending war over water in the American West. Sanpete Water Conservancy District (Sanpete) and Carbon Water Conservancy District (Carbon) are the long-time combatants, and frequent litigants, in this battle concerning the capture and use of water in the Price River watershed in Utah. This most recent lawsuit is a contract interpretation case. The district court granted partial summary judgment to Carbon on Sanpete's breach of contract claim and, after a four-day bench trial, entered judgment against Sanpete on its claim of breach of the implied covenant of good faith and fair dealing. Sanpete appeals. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.1


The basic, background facts are taken largely from the district court's June 3, 1999 Findings of Fact and Conclusions of Law, because they are not in dispute. We also consult previous court cases involving the parties for historical perspective.

This case involves a disagreement over the scope of a contract involving Sanpete, Carbon, and the Price River Water Users Association (Price).2 The parties entered the contract to resolve a decades-old conflict concerning "the priority and use of water rights owned by Price and Sanpete for water from the Price River." "Utah is a prior appropriation state, where the appropriator first in time is first in right." Salt Lake City v. Silver Fork

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Pipeline Corp., 5 P.3d 1206, 1218 (Utah Jan. 7, 2000) (citing Utah Code Ann. § 73-3-1). Therefore, as the district court pointed out, the priority of one's water right becomes very important in times of shortage because the "senior appropriator is guaranteed the full measure of his or her appropriation before any claim by a junior appropriator may be satisfied." Id. The Utah Supreme Court has described the origins of the current dispute:

In 1933, [Reclamation] prepared a water storage plan known as the Gooseberry Project, which called for the creation of a reservoir on Gooseberry Creek, a tributary of the Price River, and for diversion of Gooseberry Creek water through a transmountain tunnel into the Sanpete County area. At that time, Price River Water Conservancy District ... held water rights in Gooseberry Creek, [3] storing this water in the privately owned Scofield Reservoir several miles downstream from the proposed diversion point.

As [Reclamation] prepared to carry out the Gooseberry Project, it became aware that the Scofield Dam was deteriorating and becoming dangerous and began to consider reconstructing the Scofield Dam in connection with the Gooseberry Project. In 1943, the Secretary of the Interior recommended that the Scofield Dam reconstruction be given priority over the Gooseberry Project and [Reclamation] entered into the [T]ripartite [Agreement] with [Price and Carbon], conditionally promising to undertake such reconstruction. As part of the consideration for this reconstruction contract, [Price and Carbon] subordinated their water rights in Gooseberry Creek to the right of [Reclamation] to divert water for the Gooseberry Project at such time as the latter project might be completed....[4]

Although [Reclamation] reconstructed the Scofield Dam according to [the Tripartite Agreement], the Gooseberry Project never materialized. In 1975, [Reclamation] assigned to [Sanpete] three pending applications for water rights relating to the proposed project. The purpose of the assignment, as stated in the parties' assignment contract, was to allow [Sanpete] to keep the water applications current and to pursue any litigation which might be necessary in order to preserve the status of such applications. The assignment contract further provided that the applications would revert to [Reclamation] at such time as the Utah State Engineer might grant the requested rights and that [Sanpete] would reassign the applications to [Reclamation] before that time upon request.

Sanpete County Water Conservancy Dist. v. Price River Water Users Ass'n, 652 P.2d 1302, 1303 (Utah 1982).

After Reclamation assigned the three pending applications, Sanpete filed change applications with the Utah State Engineer5 in order "to obtain permission to change the point of diversion, place of use, and nature of use of the three water rights." Carbon filed protests with the State Engineer objecting to the change applications, and later joined others in filing a lawsuit in federal district court claiming Reclamation's assignment was defective. In the wake of Sanpete's desire to move forward with the Gooseberry Plan, and the pressure from Carbon to reject the change applications, the State Engineer began to broker an agreement between

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the parties. The parties eventually signed an agreement on June 8, 1984, which is the subject of the current litigation.

The initial recitals in the agreement state:

WHEREAS, there has been a long standing controversy concerning the building of storage and diversion works on the Price River System for transmountain diversion of Gooseberry Creek water to the San Pitch River System; and

WHEREAS, the parties hereto desire to compromise and settle the controversy and their respective claims to such water.

The agreement then defines the approximate location of the proposed dam as the "Narrows Site" and names the "Narrows Project" as the successor project to the old Gooseberry Plan detailed in the Tripartite Agreement. Section II of the agreement lists the water rights owned by Price and Sanpete, and in Section III, Price subordinates its rights to Sanpete's rights in order for Sanpete to divert, store and convey 5,400 acre-feet of water from the Narrows Site to the San Pitch River System. Section IV sets the storage capacity of the Narrows Project, increases Carbon's storage rights in Scofield Reservoir an additional 35,000 acre-feet, and discusses the procedure to be followed in order to satisfy the prior water rights held downstream from Scofield Reservoir.

Finally, we come to the portions of the agreement that are the source of the current conflict. In addition to the sections we have just described, the agreement provides the following: (1) Carbon would voluntarily dismiss the lawsuit challenging Reclamation's assignment of the three applications to Sanpete; (2) Reclamation would withdraw an application seeking additional water from Fish Creek, and the State Engineer would reject a competing application made by Price; (3) the State Engineer would approve Reclamation's application to increase the storage capacity of Scofield Reservoir; (4) Sanpete would withdraw an application seeking to appropriate 15,000 acre-feet of water from Gooseberry Creek; and (5) pursuant to Section V.E., Carbon agreed to refrain from making certain protests: "The parties agree that no protest shall be filed to any of the foregoing approvals, withdrawals, rejections, dismissals or assignments or to any further change applications or permits from any state or federal agencies necessary to carry out the purpose and intent of this Agreement." (Emphasis added.) This section of the agreement does not mention Sanpete's three change applications, the State Engineer's disposition of the applications, or Carbon's filed petitions in opposition to the applications, although the parties did agree the terms and conditions of the agreement could be incorporated as part of the State Engineer's decisions on the change applications.

The parties agree the specific, detailed actions listed in the agreement were carried out. Carbon voluntarily dismissed its lawsuit, telling the judge "the issues have been fully compromised and settled by a written Agreement" between Sanpete and Carbon. The various applications were appropriately withdrawn, approved, or denied. Carbon did not protest any of these actions. In addition, while the agreement did not specifically require him to do so, the State Engineer approved Sanpete's three change applications on January 7, 1985. Again, Carbon did not protest the approvals.

However, as Sanpete moved ahead with its efforts to fund the Narrows Project and obtain the necessary permits to build the dam, Carbon began to coordinate an effort in opposition to the dam's construction. In a 1991 letter to Carbon from Barnett Intermountain Water Consulting, the consultants outlined possible efforts to "help you further your cause to ultimately prevent the building of the Gooseberry Narrows Project." To this end, Carbon participated in a group that submitted comments to various federal and state agencies opposing the project. This group

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commented on Reclamation's draft and final Environmental Impact Statements, objected to an application to the Utah Department of Community and Economic Development for a loan to help design the Project, requested Reclamation deny an application for federal funds for the Project, met with political leaders to share its concerns with the Project, submitted comments to the Army Corps of Engineers opposing the § 404 permit needed to move ahead with any...

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