Casitas Mun. Water Dist. v. United States

Casitas Mun. Water Dist. v. United States, 708 F.3d 1340 (Fed. Cir. 2013) (holding that (1) the municipal water district’s compensable water right was constitutionally limited by the amount of water the license granted for beneficial use and (2) a diversion potentially constituting a compensable taking of the water district’s water right had not yet occurred, rendering the district’s claim not ripe for adjudication).

Constructed pursuant to a contract between the Casitas Municipal Water District (“Casitas”) and the U.S. Bureau of Reclamation (“BOR”), the Ventura River Project (“Project”) provides water to residential, industrial, and agricultural customers in Ventura County, California.  Ownership of the Project remained with BOR while the agreement gave operational responsibilities to Casitas as well as a perpetual right to all the water that became available through the Project.  The contract also required Casitas to apply to the California State Water Resources Control Board (“SWRCB”) to appropriate the water necessary for the Project.  SWRCB issued Casitas the requisite license in May 1956, and Casitas began operating the Project three years later.  The license stipulated that Casitas could divert up to 107,800 acre-feet per year into the Project and put up to 28,500 acre-feet per year to beneficial use.

In order to avoid civil and criminal liability under the Endangered Species Act (“ESA”) following the listing of the West Coast steelhead trout, Casitas began exploring ways to mitigate the Project’s impact on the steelhead population in the Ventura River.  Following consultation with local water agencies and the National Marine Fisheries Service (“NMFS”), Casitas concluded that the most effective way to achieve mitigation would be to improve upstream access to steelhead habitats.  In 2003, NMFS issued an incidental take permit allowing Casitas and BOR to avoid ESA liability if they agreed to construct and maintain a fish ladder to allow migrating steelheads to safely bypass the Project.  NMFS also required Casitas to divert sufficient water from the Project in order to allow passage through the ladder.  Casitas opened the fish ladder under protest on December 9, 2004.

On January 26, 2005, Casitas filed suit in the United States Court of Federal Claims (“trial court”).  Casitas first asserted that the United States had breached the terms of the 1956 contract by forcing Casitas to divert water through the fish ladder.  Alternatively, Casitas asserted that, by imposing the diversion requirement, the United States had physically taken Casitas’ constitutionally protected property without just compensation, in violation of the Fifth Amendment.  The trial court dismissed the contract claim under the sovereign acts doctrine and entered summary judgment for the government on the takings claim.

Casitas appealed and the United States Court of Appeals for the Federal Circuit (“court”) affirmed the dismissal of Casitas’ contract claim.  The court reversed the granting of summary judgment on the takings claim, however, and remanded for further proceedings on that issue.  On remand, the trial court held that, for purposes of a takings claim, California law limits a licensee’s compensable water right to its right to beneficial use.  Even though NMFS had forced Casitas to divert water into the fish ladder, the trial court held that the diversion had not forced Casitas to actually deliver less water to its customers than it would have otherwise.  The trial court dismissed Casitas’ takings claim on grounds that the claim was not yet ripe and Casitas appealed.

On appeal, Casitas claimed that, in its first appeal, the court had held that a physical taking had already occurred due to the fish ladder diversion, and thus the trial court erred by conducting its own takings analysis on remand.  The court held that Casitas had interpreted its opinion in the first appeal too broadly.  First, Casitas erroneously relied on concessions that the government had only stipulated to in order to put the case in a posture for summary judgment.  Second, the court held that neither it nor the trial court had addressed the actual scope of Casitas’ water right prior to the appeal at bar.  The court held that the trial court had not erred in conducting a complete physical takings analysis on remand.   Moreover, the court upheld the trial court’s holding that under California water law, a court will not find a compensable taking unless the government action complained of has actually impacted a licensee’s beneficial use.

Casitas then challenged the trail court’s holding that the diversion through the fish ladder would not impinge on Casitas’ right to beneficial use until such time as the diversion caused Casitas to deliver to its customers less water than it otherwise would have.  The court found that this was the correct measure of a physical taking in this context and that Casitas had failed to show that the fish ladder diversion had actually impinged on Casitas’ deliveries to its customers.

Casitas also argued that its water license was evidence that the SWRCB had already determined that Casitas could beneficially use all 107,800 acre-feet of diversions allowed to it under the license.  Thus, Casitas argued, it had a compensable right to this entire amount.  The court first confirmed the trial court’s holding that California does not recognize a compensable property right in water that a licensee diverts but never puts to a beneficial use.  The court then held that a maximum limit on diversion in the license did not establish that the SWRCB had determined that Casitas could in fact put that maximum amount to beneficial use.  The court likewise pointed to the fact that the SWRCB had expressly limited Casitas’ beneficial use under the license to 28,500 acre-feet per year, thus limiting Casitas’ compensable right to that amount.

Casitas next claimed that diverting water for storage was a per se beneficial use, compensable under a takings claim.  The court disagreed, holding that California water law does not recognize storage as a per se beneficial use, but simply as a means to a beneficial end.  Likewise, the license itself limited Casitas’ right to an enumerated list of beneficial uses, mere storage not among them.

Casitas also asserted that its takings claim had begun to accrue the moment that NMFS took the regulatory action requiring Casitas to divert water through the fish ladder.  Casitas argued that it was this regulatory action potentially causing a property injury, here the NMFS diversion requirement, and not the injury itself that gave rise to its takings claim.  However, the court held that a physical takings claim only accrues when the physical act constituting the taking occurs, not at the time of the regulatory action potentially causing a taking.  Under this rubric, Casitas would have had to show that the fish ladder diversion had physically impinged on its right to beneficial use, which is to deliver water to its customers.  Because Casitas made no such showing, the court affirmed the trial court’s dismissal of Casitas’ takings claim as not ripe.

In conclusion, the Federal Circuit held that California water law limits a licensee’s compensable water right to the right to beneficial use.  The court held that Casitas’ takings claim was therefore not ripe because a governmental action physically impinging on its right to beneficial use had not yet occurred.  The court affirmed the trial court’s decision to dismiss Casitas’ complaint without prejudice.

 

The title picture is of Lake Casitas, located in southern California.