Attorney Jesse J. Richardson, Jr., advisor to the Water Systems Council and an Associate Professor of Urban Affairs and Planning at Virginia Tech, kindly provided this summary of the recent Casitas case. He had no stake in the case.
Background: reporter Zeke Barlow wrote:
A judge Monday [5 December 2011] dismissed a lawsuit the Casitas Municipal Water District filed against the federal government seeking reimbursement for water it had to provide for endangered species.
The suit was "not ripe" because there was no proof Casitas lost anything by sending water down a fish ladder used by endangered steelhead trout, U.S. Court of Federal Claims Judge John Wiese wrote in his opinion.
The case was being monitored across the West for its potential to set a precedent in the area of water rights and endangered species. In the coming weeks, Casitas board members will discuss whether to drop the case, which has cost the district more than $600,000, or appeal Monday's ruling.
Here is Richardson's summary:
The Casitas Municipal Water District brought this case to allege that a requirement under the Endangered Species Act that required the district to divert water to a fish ladder for the benefit of endangered steelhead trout amounted to a taking of private property for public use. The Court of Appeals for the Federal Circuit ruled in a previous round of litigation that these requirements should be analyzed as a “physical taking”. Casitas Mun. Water Dist. v. United States, 543 F.3d 1276, 1295 (Fed.Cir.2008), reh'g and reh'g en banc denied, 556 F.3d 1329 (Fed.Cir.2009). This was an extremely important ruling because proving a “physical taking” (in essence a confiscation of the property) is much easier than proving a “regulatory taking” (where a regulation does not physically confiscate the property, but so affects the value of the property that it is equivalent to confiscation).
The Federal Circuit then sent the case back to the Federal Claims Court to address two issues: first, the nature of plaintiff's property right and the extent to which state law imposes limitations on that right, and second, the appropriate method for calculating potential damages, in particular by determining the quantity and value of the water lost. With respect to both issues, the parties presented diametrically opposed positions.
With respect to the nature of the property right, Casitas claimed that it is entitled to divert, store and use water pursuant to its license and should be compensated for any water that was diverted to the fish ladder. The United States argued that the property right extends only to water that can actually be put to beneficial use and where the use complies with state law principles. The court characterized this as a question of whether Casitas holds the right, under California law, to divert water independent of any application of that water to beneficial use. The court opined that no right to divert exists independent of beneficial use of the diverted water. Therefore, Casitas must show an interference with beneficial use to prevail on a takings claim.
The United States claimed that there was no interference with beneficial use because state law requires that fish not be harmed. Casitas countered that no court or agency ruling found their use to be contrary to any law, so any restriction on that use is compensable. The court adopted a middle ground, finding that the public trust doctrine and other state laws do not trump water rights. Instead, the competing interests must be balanced.
Next, the court addressed damages. Faced with two diametrically opposed views on damages from the parties, the court again adopted a middle ground. The court ruled that if Casitas could show that, because of the requirements under the Endangered Species Act, it had to turn away delivery requests, refuse new customers, compile a waiting list of unserved customers, or even employ conservation measures to make up for the shortfall of waters, then damages were proven.
However, in this case, none of these events had happened. Casitas had made all deliveries of water and had not had to turn away any customers. The evidence showed that plenty of water existed, even after the diversion, to supply the water that Casitas was entitled to receive. Therefore, no damages exist and the claim is not “ripe”. Essentially, the court found that the claim by Casitas was premature, so dismissed the suit. If Casitas is actually damaged, they can bring the claim later.
The opinion is a mixed bag for the water industry. The court took a middle ground on most issues. The court confirmed that the right to use water is a property right that is protected by the United States Constitution and if requirements under federal law cause damages to that property, a taking may be found. The court further confirmed, in light of arguments by the United States to the contrary, that it was bound by the Federal Court of Appeals’ conclusion that this claim must be analyzed as a physical taking. However, the court limited the right to water to water actually applied to a beneficial use. In California, there is no property right in merely diverting water.
In the final analysis, the fight over water rights is far from over. The court’s opinion leaves the door open for Casitas or other parties to bring a takings claim in the future. If damages are shown (and the court’s definition of damages is much broader than that which the United States argued), then a taking may be found. In addition, the physical taking standard will be applied in the Federal Circuit, presenting fewer hurdles to the water rights owner. Future litigation will have to sort out more answers to these difficult questions.
"When the facts change, I change my mind. What do you do, sir?" - John Maynard Keynes
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