U.S. v. Clifford Matley Family Trust, 01-15778.

• Decision Date: 20 January 2004
• Docket Number: No. 01-15813.,No. 01-15778.,01-15778.,01-15813.
• Citation: 354 F.3d 1154
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. CLIFFORD MATLEY FAMILY TRUST; David L. Matley and Christine L. Matley Family Trust; Matley Farms, Defendants-Appellees. United States of America, Plaintiff, v. Alpine Land & Reservoir Company, a Corporation; et al., Defendants, and Pyramid Lake Paiute Tribe of Indians, Respondent-Appellant, Nevada State Engineers, Real-Party-In-Interest-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1154

354 F.3d 1154

UNITED STATES of America, Plaintiff-Appellant, v. CLIFFORD MATLEY FAMILY TRUST; David L. Matley and Christine L. Matley Family Trust; Matley Farms, Defendants-Appellees.

United States of America, Plaintiff, v. Alpine Land & Reservoir Company, a Corporation; et al., Defendants, and Pyramid Lake Paiute Tribe of Indians, Respondent-Appellant, Nevada State Engineers, Real-Party-In-Interest-Appellee.

No. 01-15778.

No. 01-15813.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 7, 2002.

Filed January 20, 2004.

COPYRIGHT MATERIAL OMITTED

James C. Kilbourne, Department of Justice, Washington, DC, argued the case for appellant United States. Katherine J. Barton & John L. Smeltzer, Department of Justice, Washington, DC, assisted on the briefs.

Robert S. Pelcyger, Louisville, CO, argued the case for appellant Pyramid Lake Paiute Tribe of Indians. Julia K. Miller, Louisville, CO, assisted on the briefs.

Gordon H. DePaoli, Reno, NV, argued the case for appellee Clifford Matley Family Trust, et al.

Appeal from the United States District Court for the District of Nevada; Howard D. McKibben, District Judge, Presiding. D.C. Nos. CV-73-00185-HDM, CV-73-00185-HDM.

Before SNEED, McKEOWN, and PAEZ, Circuit Judges.

Opinion by Judge PAEZ; Partial Concurrence and Partial Dissent by Judge SNEED.

PAEZ, Circuit Judge:

This appeal involves another aspect of the many disputes over rights to water from the Newlands Reclamation Project (the "Project") in western Nevada. Appellants United States and Pyramid Lake Paiute Tribe of Indians (the "Tribe") appeal the district court's order affirming a ruling by the court-appointed Water Master to reclassify farm land located in the Project from "bottom land" to "bench land" for water allocation purposes. Although the Appellants raise several procedural issues, the heart of their challenge to the district court's order centers on the legal standard adopted by the court in 1994 when it authorized the Water Master to reclassify Project farm land from "bottom" to "bench" on the basis of a reduction in crop yield. We reject the procedural challenges to the Water Master's ruling, but conclude that the district court adopted an incorrect legal standard for evaluating a petition to reclassify project land. As we explain, the Water Master may approve a reclassification petition only when there has been a reasonably significant loss in crop yield. To apply the standard adopted by the district court would disregard the principles of beneficial use that must apply to the use of water from the Project. Accordingly, we reverse the district court's order and remand for further proceedings.

BACKGROUND

The Pyramid Lake Paiute Tribe of Indians and the United States (collectively "Appellants") appeal the district court's order that affirmed the Water Master's reclassification of a farm near Fallon, Nevada from "bottom" land to "bench" land. This reclassification entitled the farm's owners, the Clifford Matley Family Trust and the David L. Matley and Christine L. Matley Family Trust (the "Matleys"), to an additional acre-foot per acre of water each year from the Truckee-Carson water supply. Appellants contend that the district court's judgment must be reversed because the Water Master (1) conducted the proceedings on the Matleys' reclassification petition without following the procedures contemplated by the Federal Rules of Civil Procedure or the Federal Rules of Evidence, and (2) applied an incorrect legal standard in ruling on the petition. In order to provide some context for the parties' claims, we briefly review the history and development of the classification scheme.

In 1902, Congress passed the Reclamation Act, Pub. L. No. 57-161, 32 Stat. 388, which "directed the Secretary of the Interior to withdraw from public entry arid lands in specified Western States, reclaim the lands through irrigation projects, and then to restore the lands to entry pursuant to the homestead laws and certain conditions imposed by the Act itself." Nevada v. United States, 463 U.S. 110, 115, 103 S.Ct. 2906, 77 L.Ed.2d 509 (1983). The Department of the Interior (the "DOI") ultimately withdrew approximately 200,000 acres in western Nevada from the public domain to create the Newlands Reclamation Project, and relied on water from both the Truckee and Carson Rivers to irrigate this land. Id.

Because of competing demands for water from the Truckee and Carson Rivers and disputes over who owned the rights to Project water, years of litigation ensued, ultimately resulting in the Alpine¹ and Orr Ditch Decrees.² These judicial decrees adopted basic guidelines for allocating water rights in the Truckee-Carson River system, classifying Project land as either "bench" or "bottom." United States v. Alpine Land & Reservoir Co., 887 F.2d 207, 208 (9th Cir.1989) ("Alpine-Bench/Bottom"). Bench lands have faster-draining soils than bottom lands, and are thus entitled to a maximum water duty³ of 4.5 acre feet per acre/year ("afa"), while bottom lands receive a maximum of 3.5 afa. Id. The decrees did not, however, specify or describe any method for applying these classification schemes to Project lands.

In 1986, the DOI formulated and eventually adopted a classification scheme, based primarily on soil characteristics such as the "Available Water Holding Capacity of the First 5 Feet of Soil" ("AWHC5") and the "Seasonal High Water Table" ("SHWT"), which it mapped from soil surveys. The DOI's stated goal in promulgating this scheme and classifying each parcel was to allocate the Truckee-Carson river system's water more efficiently, thereby enhancing the region's agricultural productivity, while simultaneously providing more water for other uses.

The Truckee-Carson Irrigation District (the "TCID"), representing owners of land within the Project, including the Matleys, challenged that scheme in district court, offering a competing classification scheme based in large part on past allocations. Historically, and under the TCID's proposed scheme, the Matleys received 4.5 afa for their 320-acre alfalfa farm. Under the DOI's plan, the Matleys' land was classified as "bottom" land, entitling them to only 3.5 afa. The district court "ruled in favor of TCID, in what amounted to a de novo review of DOI's bench/bottom classifications." Alpine-Bench/Bottom, 887 F.2d at 209. We reversed that ruling, holding that the Reclamation Act authorized the DOI "to promulgate regulations establishing initial bench/bottom classifications, provided that the state law beneficial use standards mandated by section 8 [of the Reclamation Act were] followed." Id. at 213. Accordingly, we concluded that the district court's review was limited to determining whether the DOI had acted arbitrarily or capriciously in adopting its proposed classification scheme. Id.

On remand, the district court upheld the DOI criteria and classification maps. The court also ordered the Water Master to administer the allocation of water under that scheme and to immediately and carefully consider "data collected by the water users in cooperation with agencies of the United States" to determine if reclassification is "necessary to maintain the integrity of current crop yields." United States v. Alpine Land & Reservoir Co., No. D-185-HDM (D.Nev. Aug. 8, 1994) (the "1994 Order"). Significantly, the district court concluded that "[t]o the extent there may be a reduction in crop yield which can be attributed to the reclassification from bench to bottom land, then the federal water master is authorized to take such action as is appropriate to reclassify the lands from bottom land to bench land." Id. The district court, however, did not specify what procedures the Water Master was to follow or the standards to apply when considering reclassification petitions.

In response to the 1994 Order, the Water Master developed "Procedures and Policy for the Resolution of Disputes Regarding the Bench/Bottom Designation of Lands Within the Newlands Project" ("Protocol"), which created three methods by which a landowner could seek reclassification of his land. First, a landowner could demonstrate that, on the basis of DOI's own criteria, the new classification was incorrect. Alternatively, a landowner could demonstrate that the DOI's measurements of the available water-holding capacity in the top five feet of soil (AWHC5) and the seasonal high water table (SHWT) were inaccurate, and that correct measurements supported reclassification. Finally, a landowner could demonstrate that the DOI's classification and resulting decrease in water allocation had caused a decrease in crop yield. In late August 1996, the Matleys sought reclassification under this third method, alleging that the DOI's classification of their farm as "bottom" land had caused a reduction in their crop yield.

Upon receipt of the Matleys' petition, the Water Master provided the United States Bureau of Reclamation and the Natural Resources Conservation Service with copies of the petition. However, neither the Water Master nor the Matleys notified the Tribe or counsel for the United States that the Matleys had filed a reclassification petition. After obtaining a response from the federal agencies and additional information from the Matleys, the Water Master, without conducting a hearing, issued a report approving the Matleys' petition. The Tribe and counsel for the United States learned of the Matleys' reclassification petition only after the Water Master had issued his initial report. Both the Tribe and the United States objected to the Water Master's recommendations, and requested an evidentiary hearing in district court. The district court remanded the Matleys' petition to the Water Master with instructions to consider the Tribe's evidence, but authorized the Water Master to determine whether an evidentiary hearing was necessary.

On remand, the Water Master received the Tribe's evidence, but...