recent developments in water rights litigation - property rights arguments

At law.com Marcia Coyle of the National Law Journal gives a roundup along with some nice background of current major federal water rights litigation involving property rights arguments.

The U.S. Supreme Court early next year will hear arguments in a breach-of-contract case whose legal question, while narrow, arises from what is fast becoming a familiar battle: The federal government, implementing a congressional mandate to preserve an endangered species or some other policy, diverts or reduces the amount of water from a federal water management project or river that farmers believe they have a legal right to use. Orff v. U.S., No. 03-1566.

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government lawyers are negotiating with leading property rights advocates over a recent $26 million damages ruling -- the first of its kind -- for another group of California farmers.

A U.S. Court of Federal Claims judge held three years ago that water restrictions imposed on the farmers by the government under the Endangered Species Act ESA) were an unconstitutional taking without just compensation. Tulare Lake Basin Water Storage District v. U.S., No. 98-101 L.

And waiting in the wings is a $1 billion lawsuit filed by the Klamath Tribes against power company PacifiCorp last spring in the U.S. district court in Portland, Ore., seeking damages for dam construction on the Klamath River that prevents salmon from reaching the upper Klamath Basin. The tribes, whose lawyers say the federal government may be sued as well, are seeking compensation for loss of their historic treaty rights to fish in the river's headwaters.

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"There's a whole series of cases, at least a dozen in the Supreme Court, going back many years, that involve similar issues," said Stouck. "Historically, the government was trying to improve the water-management system. They were doing water management for water management's sake."

The U.S. Bureau of Reclamation did that by building dams, or as in the Orff and Tulare cases, building the Central Valley Project, the largest federal water-management project in the United States, a 400-mile-long system of dams, reservoirs and canals begun in 1937. Along the way, farmers and others created water districts that entered into contracts with the bureau for distribution of water.

"What is happening now -- which is reflected in the current wave of litigation, with ESA cases so far the predominant type -- is that the government is doing something other than water management," said Stouck. "It's trying to pursue some other policy in a way that affects the flows of water."

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Raising the temperature of the already-heated water rights litigation, according to some scholars and observers, is the involvement of the property rights movement.

In the Tulare case, for example, the water districts and farmers are represented by Roger and Nancie Marzulla of Washington, D.C.'s Marzulla & Marzulla, long-time property rights advocates. Nancie Marzulla is head of Defenders of Property Rights, a public interest law firm. Another major property rights group, the Pacific Legal Foundation (PLF), is also handling a number of water rights cases.

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In Tulare, the water districts and farmers argued that they had contract rights entitling them to the use of a specified quantity of water. The government reduced that quantity three years in a row. By preventing them from using that water, the farmers argued that the government had deprived them of the entire value of their contract right -- a physical taking of property.

The Court of Federal Claims rejected all of the government's arguments, including that this was a regulatory, not a physical, taking, and that the public trust doctrine, the doctrine of reasonable use and nuisance law limited the scope of the farmers' property right.

"The federal government is certainly free to preserve the fish; it must simply pay for the water it takes to do so," said Senior Judge John Paul Wiese.

"Wiese said every drop of water is a piece of property you own," said Stouck. "That concept has implications for lots and lots of takings.