IN THE UNITED STATES COURT OF FEDERAL CLAIMS

Transcription

1 IN THE UNITED STATES COURT OF FEDERAL CLAIMS CASITAS MUNICIPAL WATER DISTRICT, ) ) ) Plaintiff, ) No L ) ) v. ) ) Hon. John P. Wiese UNITED STATES OF AMERICA, ) ) ) Defendant. ) ) ) MEMORANDUM AMICUS CURIAE OF NATURAL RESOURCES DEFENSE COUNCIL IN SUPPORT OF THE UNITED STATES John D. Echeverria Vermont Law School 164 Chelsea Street, PO Box 96 South Roylaton, VT (802) (802) (fax) Katherine S. Poole Natural Resources Defense Council 111 Sutter Street, 20th Floor San Francisco, CA (415) (415) (fax) April 19, 2010 Counsel for amicus curiae Natural Resources Defense Council

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3 TABLE OF CONTENTS Table of Authorities...ii Introduction and Summary of the Argument...1 Argument...2 I. The Issues Now Presented to the Court Are Very Different from the Issues the Court Addressed in 2007 in Ruling on the United States Motion for Partial Summary Judgment...2 II. III. Plaintiff s Taking Claim is Barred by Background Principles of California Water Law...9 Plaintiff s Taking Claim Presents an Exactions-Type Taking Claim Governed by the Nollan And Dolan Decisions and There Was No Taking Under the Essential Nexus and Rough Proportionality Standards Established by Those Decisions...18 Conclusion...21 i

4 TABLE OF AUTHORITIES Cases Am. Pelagic Fishing Co., LP v. United States, 379 F.3d 1363 (Fed. Cir. 2004)...17 Bernhardt v. Polygraphic Co. of Am., 350 U.S. 198 (1956)...12 Casitas Mun. Water Dist. v. United States, 76 Fed. Cl. 100, 106 (Fed. Cl. 2007)...6 Casitas Mun. Water Dist. v. United States, 543 F.3d 1276 (Fed. Cir. 2008)...passim Dolan v. City of Tigard, 512 U.S. 374 (1994)...1, 5, Envtl. Def. Fund v. E. Bay Mun. Util. Dist., 26 Cal.3d 183 (1980)...14 Erie R. Co. v. Thompkins, 304 U.S. 64 (1938) Esplanade Props., L.L.C. v. City of Seattle, 307 F.3d 978 (9th Cir. 2002)...12 Hudson Water Co. v. McCarter, 209 U.S. 349 (1908)...7 Hughes Commc ns Galaxy, Inc. v. United States, 271 F.3d 1060 (Fed. Cir. 2001)...15 Joslin v. Marin Mun. Water Dist., 67 Cal.2d 132 (1967)...13 Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)...19 Lucas v. S.C. Coastal Council, 505 U.S (1992)...4, 9, 16 Nat l Audubon Soc y v. Superior Court, 658 P.2d 709 (Cal. 1983) Nollan v. Cal. Coastal Comm n, 483 U.S. 825 (1987)...1, 5, Palazzolo v. Rhode Island, 533 U.S. 606 (2001) Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (1978)...3 4, 8 Phillips v. Wash. Legal Found., 524 U.S. 156 (1998)...12 Tulare Lake Basin Water Storage Dist. v. United States, 49 Fed. Cl. 313 (2001)...passim Tulare Lake Irrigation Dist. v. Lindsay-Strathmore Dist., 3 Cal.2d 489 (1935)...14 ii

5 Tahoe-Sierra Preservation Council, Inc. v. Tahoe Reg l Planning Agency, 535 U.S. 302 (2002)...passim United States v. State Water Res. Control Bd., 182 Cal. App.3d 82 (1986)...9 Statutes CAL. FISH & GAME CODE An Act to Provide for the Restoration and Preservation of Fish in the Waters of this State, ch. 457, 3, 1870 Cal Stat Other Sources 19 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE & PROCEDURE (2d ed, 1996)...12, 13 John D. Echeverria, Is Water Regulation a Constitutional Taking?, VT. J. ENVTL. L. (forthcoming 2010) (available at iii

6 The Natural Resource Defense Council (NRDC) respectfully submits this memorandum amicus curiae in an effort to assist the Court in framing the legal issues that require resolution following the decision of the U.S. Court of Appeals for the Federal Circuit in this case. INTRODUCTION AND SUMMARY OF ARGUMENT The U. S. Court of Appeals for the Federal Circuit has remanded this case to this Court for consideration of two issues: whether plaintiff possesses a protected property interest sufficient to support a taking claim and, if so, whether plaintiff can demonstrate a taking of a property interest. Because the Court has not previously addressed the threshold property question, and because plaintiff is now presenting a very different taking claim than the claim the Court addressed in 2007, the case now presents entirely new and different questions. Plaintiff cannot establish a protected property interest in the circumstances of this case because the public trust and reasonable use doctrines preclude plaintiff from claiming an entitlement to utilize water in a fashion that is harmful to public fisheries, and under Section 5937 of the California Fish and Game Code plaintiff is under a pre-existing obligation to release water through its fish passage facility to maintain fish below the dam in good condition. Even if plaintiff could point to a protected property interest, plaintiff cannot establish a taking because this case involves an alleged exaction-type taking governed by Dolan v. City of Tigard, 512 U.S. 374 (1994), and Nollan v. Cal. Coastal Comm n, 483 U.S. 825 (1987), and NRDC anticipates that plaintiff will not be able to establish a taking under the essential nexus and rough proportionality standards established by those decisions. 1

7 ARGUMENT I. THE ISSUES NOW PRESENTED TO THE COURT ARE VERY DIFFERENT FROM THE ISSUES THE COURT ADRESSED IN 2007 IN RULING ON THE UNITED STATES MOTION FOR PARTIAL SUMMARY JUDGMENT. The key issues the Court must now address are new and different from the issues the Court previously addressed in ruling on the United States motion for partial summary judgment. This is attributable in part to the new guidance provided by the Federal Circuit s 2009 decision. But it is also attributable to the fact that the issue of whether plaintiff possesses a protected property interest, which the United States has not previously presented, is now front and center in this litigation. In addition, plaintiff made a tactical decision following this Court s 2007 decision to significantly narrow its taking claim, raising a new question about what type of takings analysis now applies in this case. First, the Court must address the threshold question of whether plaintiff can point to a property interest that will support its taking claim and, more specifically, whether relevant background principles of California law preclude plaintiff from claiming a protected property interest under the circumstances of this case. The Court did not previously address this issue in ruling on the United States motion for partial summary judgment because the United States assumed, for the sake of argument, that plaintiff possessed a protected property interest. Now, it appears, the United States intends to jettison that assumption and litigate the issue. Plaintiff erroneously contends that the United States conceded for all time that plaintiff possesses a protected property interest. Plaintiff s Expert Witness Statement and Proposed Conclusions of Law, at 27. This assertion is refuted by the record. On November 22, 2006, the United States filed its motion for partial summary judgment, in anticipation of the then-imminent trial, to obtain clarification from the Court about which takings test the Court intended to apply, a 2

8 per se physical takings analysis or a Penn Central analysis. In the course of briefing the motion, the United States accepted, for the sake of argument, and only for the purpose of the motion, the District s characterization of its alleged property interest: Plaintiff [characterizes the property interest] in its opposition brief [as follows]: In this case, Casitas claims the right to divert through the Ventura River Project 107,800 acre-feet of water from the Ventura River per year and the right to put 28,500 acre-feet of water to beneficial use each year.... In order to streamline this summary judgment process, and to avoid any unnecessary confusion in the resolution of the nature or type of taking at issue in this case (i.e. physical vs. regulatory) defendant will assume for purposes of this motion that Casitas characterization of the scope of its property interest is correct. Defendant s Reply in Support of Motion for Partial Summary Judgment, at 3-4 (emphasis added). The italicized language shows that the United States accepted this assumption solely for the purpose of the motion. Both the majority of the Federal Circuit panel, and Judge Mayer in dissent, acknowledged that the United States assumed that plaintiff possessed a protected property interest solely for the purpose of making its motion for partial summary judgment. See Casitas, 543 F.3d at 1297 n.17 (referring to the fact that the government made certain conditional concessions in order to put the case in a posture for summary judgment ) (emphasis added); see also id. at 1297 (Mayer, J., dissenting) ( Whether Casitas even has a vested property interest in the use of the water is a threshold issue to be resolved [on remand] under California law. ). Because the United States expressly assumed that plaintiff possessed a property interest solely for the purpose of the motion, it is not correct that the United State conceded the issue for all time. Furthermore, contrary to the District s suggestion, there is nothing in the least illogical about the procedure that was followed in this case. Courts routinely address substantive takings 3

9 issues while recognizing that the taking claim may ultimately be disposed of based on a threshold property issue. See, e g., Lucas v. South Carolina Coastal Council, 505 U.S (1993) (articulating the so-called denial-of-all-economically-viable-use takings test and then remanding the case to determine whether the claim was barred under background principles of South Carolina law). Moreover, in this case, the United States did not file its motion to seek a definitive resolution of the case, but rather to obtain guidance on a single legal issue in preparing for trial. The Court s ruling on the motion for partial summary judgment only became dispositive of the case at the trial level when the District subsequently conceded that it could not mount a successful claim under Penn Central and requested that judgment be entered for the United States. These circumstances belie the suggestion that the United States intended to concede away the threshold property issue. Accordingly, the threshold property question is now properly before the Court for resolution for the first time. As discussed below, in section II, NRDC believes that plaintiff lacks a protected property interest sufficient to support this taking claim. Second, assuming the Court concludes the plaintiff possesses a protected property interest, the Court will then need to determine whether there was a taking of the interest. The U.S. Court of Appeals for the Federal Circuit did not resolve the takings liability question, leaving to this Court the ultimate question of whether a taking occurred. Casitas, 543 F.3d at 1297 n.17. (Plaintiff s recent pretrial filing includes proposed conclusions of law quoting passages stating that a taking occurred in this case. However, the quoted passages are from Judge Moore s opinion concurring in the denial of the petition for rehearing en banc, not the panel decision itself. The panel s opinion is obviously controlling on the question of what the panel actually decided.). 4

10 As we explain below, in section III, the taking claim in this case should be evaluated under the standards for a regulatory exaction established by the Supreme Court in Nollan v. Cal. Coastal Comm n, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994). Application of these tests is the logical consequence of plaintiff s tactical decision, following this Court s grant of the United States motion for summary judgment, to significantly narrow its taking claim and to focus largely if not exclusively on the alleged taking of the water required to be routed through the fish ladder. Properly understood, and in light of the Federal Circuit s 2009 decision, plaintiff is now presenting neither a pure regulatory taking claim nor a pure per se physical taking claim. Instead, it is presenting an exaction claim. A brief review of the history of this case, and the prior Tulare Lake litigation, is necessary to explain how and why plaintiff s claim has changed during the course of this litigation. As the Court is well aware, Tulare Lake Basin Water Storage Dist. v. United States, 49 Fed. Cl. 313 (2001), involved a taking claim based on a decision by the California Department of Water Resources, the operator of the California State Water Project, to limit pumping of water from the Sacramento-San Joaquin Delta to comply with the Endangered Species Act and to reduce the adverse effects of pumping operations on endangered fish. The plaintiff in that case contended that this restriction on water withdrawals constituted a per se physical taking of the water. The Court adopted that position. Understandably, at the commencement of this litigation, plaintiff (represented by the same counsel who represented plaintiff in Tulare Lake), relied heavily on Tulare Lake and its reasoning. Plaintiff characterized its claim as resting on the fact that the Biological Opinion prepared by the National Marine Fisheries Service called for a certain quantity of water not to be diverted to storage in Lake Casitas and instead required that the water be left in the river. While 5

11 a portion of the water required to flow past the Robles Diversion Dam arrives downstream via the fish ladder and part arrives downstream via a bypass pipe, plaintiff placed no importance on these plumbing details. What mattered, according to plaintiff s original theory of this case, was that water was required to be left in the river and could not be diverted. This Court understood the case in precisely the terms plaintiff presented it, that is, as involving a challenge to a restriction on permitted diversions and a requirement to leave water in the river, just as in Tulare Lake. In the Court s words: The revised operating criteria intended to augment flow requirements essential for fish migration and the preservation of their downstream habitat prescribed an increase in downstream river flow volumes which correspondingly demanded a decrease in the amount of water Casitas would be allowed to divert. Casitas implemented the revised operating criteria pursuant to BOR's direction. The claim we now have before us is grounded on these revised project operating criteria. Specifically, plaintiff contends that the restrictions on water diversion that were adopted in the Biological Opinion have required Casitas permanently to forgo the exercise of a right to divert up to an additional 3,200 acre-feet of water per year from the Ventura River for irrigation purposes. Casitas Mun. Water Dist. v. United States, 76 Fed.Cl. 100, 102 (2007). Noticeably absent from this description is any suggestion that the claim turned on the fact that a portion of the water in the stream had to be passed through the fish ladder on its way past the dam to the area downstream. Thus, in 2006, when the United States filed its motion for partial summary judgment, the Court understood, accurately, that the key issue to be resolved was whether or not the Court should continue to abide by its reasoning in Tulare Lake. The Court ruled, in light of the intervening Supreme Court decision in Tahoe-Sierra, that this type of claim should be evaluated using a regulatory takings analysis rather than a per se physical takings test. NRDC has 6

12 maintained and continues to maintain that this ruling is correct and entirely in accord with governing precedent. 1 Moreover, despite the fact that the Federal Circuit reversed this Court s grant of summary judgment to the United States, nothing in the Federal Circuit s subsequent decision casts doubt on the correctness of this Court s ruling, based on the claim as it was originally presented to this Court. The reason the Federal Circuit decision does not contradict the reasoning of this Court is that the taking claim plaintiff presented to this Court was dramatically different from the claim plaintiff subsequently presented to the Federal Circuit. Whereas the fact that a portion of the water passed through the fish ladder on its way downriver hardly figured in the plaintiff s case before this Court, it became the central feature of plaintiff s revised claim before the Federal Circuit. In accord with this understanding, the Federal Circuit identified this feature of the claim as the crucial factor supporting its conclusion that the case involved a potential physical taking. In the Federal Circuit s words, the record make[s] clear that the government did not merely require some water to remain in the stream, but instead actively caused the physical diversion of the water away from the Robles-Casitas canal after the water had left the Ventura River and was in the Robles-Casitas Canal and towards the fish ladder. Casitas, 543 F.3d at (emphases added). See also id. at 1294 (stating, to like effect, that the the United States actively caused the water to be physically diverted away from Casitas after the water had left the Ventura 1 In brief, the Court ruled correctly on the claim as it was originally presented to this Court because: (1) there is no distinction between a regulatory restriction on the use of water and a regulatory restriction on the use of any other type of resource (e.g., land, minerals) that would justify a special per se takings rule for regulatory restrictions on water use; (2) the usufructuary nature of private interests in water under California law makes a regulatory takings analysis (as opposed to a physical takings analysis) even more appropriate in the case of water than other resources; (3) the most directly relevant Supreme Court precedent, Hudson Water Co. v. McCarter, 209 U.S. 349 (1908), in which a taking claim based on a restriction on water use was rejected, contradicts the per se theory; and (4) the Supreme Court s 2002 decision in Tahoe-Sierra Pres. Council, Inc v. Tahoe Reg l Planning Agency, 535 U.S. 302 (2002), counsels strongly, in the event of doubt, in favor of a regulatory takings analysis as opposed to a per se physical takings analysis. 7

13 River and was in the Robles-Casitas Canal... and compelled the water to be routed to the fish ladder in order for the fish ladder to operate ). As a result, the Federal Circuit s conclusion that a regulatory takings analysis did not apply to the taking claim presented on appeal in no way suggests that this Court erred in ruling that the version of the claim submitted to this Court, which focused on mere restrictions on water withdrawals, did present a regulatory takings claim. Indeed, consistent with its reasoning that the case presented a potential physical taking because it involved a requirement that the water be routed through the fish ladder, and not merely a restriction on water use, the Federal Circuit explicitly stated that it was not disputing that a regulatory takings analysis should apply to mere regulatory restrictions on water withdrawal. The Federal Circuit stated, [w]e do not opine on whether Tulare was rightly decided, explaining that Tulare Lake was distinguishable because it involved a regulatory restriction on water withdrawals, whereas, [i]n the instant case, the government s admissions made clear that it did not merely require water to be left in the stream, but instead actively caused the physical diversion of water away from the Robles-Casitas Canal and towards the fish ladder. Casitas, 543 F.3d at 1295 n.16. In other words, the Court stated, in the case of a mere restriction on water withdrawal, such as in Tulare Lake, or in the version of the case originally presented to this Court, a traditional regulatory takings analysis might well apply. In sum, the takings liability question presented at this stage of the litigation is very different from the takings liability question previously presented to this Court. As discussed, plaintiff previously presented a version of its claim that was properly evaluated under the Penn Central regulatory takings framework, as this Court correctly ruled and the Federal Circuit has not disputed. Following this Court s decision, presumably because it recognized the 8

14 considerable persuasive force of this Court s decision, plaintiff changed course and decided to present a far narrower claim. Before the Federal Circuit and, now, before this Court, plaintiff presents a claim focused largely, if not exclusively, on the water required to be routed down the fish ladder. Without determining that this requirement amounts to a taking, much less a per se taking, the Federal Circuit has said that the claim focused on the fish-passage requirement had to be analyzed under a physical taking rubric, Casitas, 543 F.3d at 1297 n.17, rather than under Penn Central. What does this mean for the purpose of these proceedings on remand? As we explain below in section III, plaintiff s current version of its claim, properly understood in light of the Federal Circuit s 2009 decision, present a potential Nollan/Dolan exactions claim. II. PLAINTIFF S TAKING CLAIM IS BARRED BY BACKGROUND PRINCIPLES OF CALIFORNIA WATER LAW. Turning to the government s background principles defense, NRDC submits that at least three relevant background principles of California law should bar this claim, requiring dismissal of this case regardless of whether plaintiff might be able to establish a taking on some theory. The relevant principles include the California public trust doctrine, the California reasonable use doctrine, and the longstanding California statutory requirement that dam operators provide water via fishways to support fisheries below dams. The Supreme Court in Lucas v. S.C. Coastal Council, 505 U.S. at , made clear that background principles defenses are equally applicable in a regulatory taking or a physical taking case and, therefore, these defenses apply regardless of what takings theory the Court embraces. A. Public Trust and Reasonable Use Doctrines. NRDC believes there is likely to be little dispute between the parties about the general proposition that the California public trust and reasonable use doctrines limit private rights in appropriative water interests granted under California law. See Nat l Audubon Soc y v. Superior 9

15 Court, 658 P.2d 709 (Cal. 1983); United States v. State Water Res. Control Bd., 182 Cal. App.3d 82 (1986). Furthermore, NRDC anticipates that amicus California State Water Resources Control Board will address the scope and proper application of these doctrines in detail. Accordingly, NRDC confines itself to a discussion of potential objections to the invocation of these doctrines in this case. Federal Court Responsibility to Apply State Background Principles. First, plaintiff may contend that this Court, as a federal court, cannot decide how California background principles may limit a private property interest in water for the purpose of resolving a federal taking claims See Tulare Lake, 49 Fed. Cl. at With respect, NRDC submits that this potential argument would be mistaken and should be rejected. This argument apparently has two components. The first component is the notion that the terms of a permit issued by the State Water Resources Control Board define the scope of a permit holder s property interest in the water. See id. at 322 (stating that the state appropriative water right permit define[s] the scope of plaintiffs property rights ). The second component is the notion that only the State Water Resources Control Board or the California courts can decide how either the public trust doctrine or the reasonable use doctrine limit private property rights in water. See id. at Neither part of this argument can be sustained. The idea that a state water permit defines a permit holder s property interest in the water improperly conflates the question of the scope of the Board s authority in issuing permits and the issue of how background principles, and the public trust doctrine in particular, limit private property rights in water. The California Supreme Court explained this distinction in National Audubon Society v. Superior Court, 658 P.2d 709 (Cal. 1983), California s landmark public trust decision. The Court stated that the Board, consistent with its public trust responsibilities, might 10

16 authorize a wide variety of intensive water uses, even uses impairing public trust values, but a permit or license granting such permission does not create a property right to engage in those activities. National Audubon states, on the one hand, that the Board has the authority, after giving due consideration to public trust values and other aspects of the public interest, to issue permits or licenses authorizing the impairment of public trust resources; in the Court s words, the Board has the power to grant usufructuary licenses that will permit an appropriator to take water from flowing streams and use that water in a distant part of the state, even though this taking does not promote, and may unavoidably harm, the trust uses at the source stream. Id. at 727 (emphasis added.) But the decision also states, on the other hand, that no water right holder can claim any property entitlement to use water in a way that is harmful to trust resources: One consequence of [the public trust doctrine of] importance to this and many other cases, is that parties acquiring rights in trust property generally hold those rights subject to the trust, and can assert no vested right to use those rights in a manner harmful to the trust. Id. at 721 (emphasis added). It follows from the California Supreme Court s distinction between the scope of the board s authority to issue permits and the limitations on private property rights in water that a permit issued by the board cannot create a property right to exploit a water right in a fashion that impairs public trust resources. As the California Supreme Court put it, the state water board has only the power to grant nonvested usufructuary rights to appropriate water even if such diversions harm public trust uses. Id. at 172 (emphasis added) The description of a permit or license as granting a nonvested right reflects the fact that a water permit or license confers a right enforceable against competing water users, but not a right enforceable against the public in the event that exercise of the water right harms public trust resources, such as fisheries. 11

17 In addition, the idea that the U.S. Court of Federal Claims, as a federal court, lacks the authority to interpret and apply the state public trust doctrine in the same fashion as the Board or a state court would is mistaken. Under Erie R. Co. v. Thompkins, 304 U.S. 64 (1938), a federal court has an obligation to apply state law in the same fashion that a state court would in any case within its jurisdiction that presents a state law question. Erie, of course, establishes a broad doctrine of federal-state legal relations within our system of federalism. See 19 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE & PROCEDURE 4520 (2d ed, 1996) ( [T]he Erie doctrine applies, whatever the ground for federal jurisdiction, to any issue or claim which has its source in state law. ). And it applies as well in the specific context of federal takings litigation where the threshold question of the nature and scope of the claimed property interest is generally defined by state law. Id ( [S]tate law has been applied [under Erie] to determine the character of property... in federal condemnation actions to determine what property interests are compensable ); see, e g., Phillips v. Wash. Legal Found., 524 U.S. 156, (1998) (applying Texas law in a federal court Takings Clause case to determine whether a legal client had a property interest in interest earned by the attorney s IOLTA account); Esplanade Props., L.L.C. v. City of Seattle, 307 F.3d 978, 980 (9th Cir. 2002) (federal court rejecting taking claim based on application of Washington s public trust doctrine). In fact, in National Audubon the California Supreme Court, in accord with the Erie doctrine, explicitly recognized that the federal courts would have the authority and responsibility to apply the limitations on private water rights under the California public trust doctrine. 658 P.2d at To comply with the Erie doctrine, a federal court addressing a state law issue must act as, in substance, only another court of the State. Bernhardt v. Polygraphic Co. of Am., 350 U.S. 12

18 198, 203 (1956), quoting Guaranty Trust Co. v. New York, 326 U.S. 99, 108 (1945). In other words, a federal court addressing a substantive issue of state law functions as a proxy for the entire state court system, and therefore must apply a substantive law that it conscientiously believes would have been applied in the state court system. WRIGHT, supra, at In the context of this case, this means that the Court must determine, in the same fashion that a state court would, whether the requirement to pass water through the fish ladder is designed to minimize harm to the public fishery and therefore does not impinge on a protected property right. See Joslin v. Marin Mun. Water Dist., 67 Cal.2d 132, 143 (1967) ( While plaintiffs correctly argue that a property right cannot be taken or damaged without just compensation, they ignore the necessity of first establishing the legal existence of a compensable property interest. Such an interest consists in their right to the reasonable use of the flow of the water. Their riparian rights attach to no more of the flow of the stream than that which is required for such use. ) Importantly, in discharging its responsibility to apply the limitations on private rights in water imposed by the public trust doctrine, the Court s job is an extremely narrow one. The Court must simply determine whether the ESA regulation serves to restrict a use of water that would be harmful to the fish and therefore parallels the restrictions that the California public trust doctrine already place on plaintiff s property right in the water. The Court need not conduct the same kind of evaluation of all of the competing private and public interests that the State Water Resources Control Board needs to conduct in deciding whether and on what terms to issue, or amend, a water permit or license. As discussed above, National Audubon teaches that there is an important difference between the limitations on private property rights in water imposed by the public trust doctrine and the scope of the Board s regulatory authority to issue permits and licenses conferring non-vested rights in water. 13

19 All or most of the evidence required to support the conclusion that this claim is barred by background principles of California law is collected in the Biological Opinion supporting the installation of the fish ladder as a means of avoiding an illegal taking of the fish by the project. Additional relevant evidence will no doubt be marshaled through witnesses presented at trial. 2 The Alleged Contractual Basis for the District s Water Interest. Plaintiff s pretrial memorandum hints at a possible alternative argument against the conclusion that the plaintiff s interest in water is limited by the public trust and reasonable use doctrines. The first proposed conclusion of law states that Article 4 of the contract between Casitas and the Government provides that [Casitas] shall have the perpetual right to use all water that becomes available through the construction and operation of the Project, Plaintiff s Expert Witness Statement and Proposed Conclusions of Law, at The proposed conclusion goes on to state: Article 4 constitutes a promise by the United States that Casitas shall have the perpetual right to water made available by the construction and operation of the Project and that the United States will not appropriate any of the Project water for other uses (i.e., fish ladder or delivery under water contracts). Id. Plaintiff makes no reference to the District s claimed property interest based on its appropriative water right. Perhaps plaintiff is seeking to ground its claimed property interest in its contract with the United States, and thereby possibly evade the inherent limitations on its appropriative water interest established by the public trust and reasonable use limitations. If so, this effort is unavailing. 2 Plaintiff has submitted an expert report apparently designed to support the argument that projected water shortages in the future as a result of climate change should bolster its taking claim. To the contrary, climate-induced shortages in water supplies will redefine what constitutes a reasonable of water, see Envtl. Def. Fund v. E. Bay Mun. Util. Dist., 26 Cal.3d 183, 194 (1980) ( What constitutes a reasonable use of water is dependent upon not only the entire circumstances presented but varies as the current situation changes. ), and also whether public trust interests are impaired, and therefore will tend to reduce plaintiff s entitlement to water in the future. See also Tulare Lake Irrigation Dist. v. Lindsay-Strathmore Dist., 3 Cal.2d 489, 567 (1935) ( What may be a reasonable beneficial use, where water is present in excess of all needs, would not be a reasonable beneficial use in an area of great scarcity and great need. ). However, the Court need not explore this issue in order to dispose of this straightforward case. 14

20 The contract between Casitas and the United States states that Casitas shall have a right to the water made available by the construction and operation of the project. At the same time, the contract provides that Casitas will apply to the state for an appropriative permit for the project. See Casitas, 543 F.2d at Reading these contract provisions together, the character of the water interest to be made "available" to Casitas is defined and limited by the nature of the appropriative water right for the project, including the background principles that limit that right. This is confirmed by the Federal Circuit s decision, which acknowledges that Article 4 did not promise unlimited access to water, id. at 1286, but only up to the volume caps specified in the permit. This conclusion acknowledges that the scope of the United States promise under the contract is defined and limited by the appropriative permit. Because the public trust and reasonable use doctrines are additional limitations on the appropriative right, they too help define what the United States promised to make available. This straightforward reading of the contract refutes any effort to evade the effect of California background principles and makes it unnecessary for the Court to address the additional point that the District cannot claim a taking of private property based on what, in substance, is a breach of contract claim. See Hughes Commc ns Galaxy, Inc. v. United States, 271 F.3d 1060 (Fed. Cir. 2001) (quoting Sun Oil Co. v. United States, 572 F.2d 786, 818 (Ct. Cl. 1978) ( [T]he concept of a taking as a compensable claim theory has limited application to the relative rights of party litigants when those rights have been voluntarily created by contract. In such instances, interference with such contractual rights generally gives rise to a breach claim not a taking claim. ). Having failed in its effort to obtain recovery on a breach of contract theory, plaintiff is not entitled to a second bite at the apple using a takings theory. 15

21 B. California Fish Passage Legislation. Another applicable background principle of California law is the longstanding California statutory requirement that dam operators such as the District provide water via fish ladders for the protection of public fisheries. Section 5937 of the California Fish and Game Code provides: The owner of any dam shall allow sufficient water at all times to pass through a fishway, or in the absence of a fishway, allow sufficient water to pass over, around or through the dam, to keep in good condition any fish that may be planted or exist below the dam. (While the language quoted above refers to an owner, the California Fish and Game Code defines owner to include an operator such as the District. See CAL. FISH & GAME CODE 5900(c) (West 1998)). This language, with changes in wording, dates back to legislation originally adopted in See An Act to Provide for the Restoration and Preservation of Fish in the Waters of this State, ch. 457, 3, 1870 Cal Stat. 663, This requirement has been in effect for so long that it should be regarded as a common, shared understanding that limits the property interests of a dam operator such as the District in the circumstances of this case. While common law rules are perhaps the more familiar source of background principles in takings cases, statutory provisions may qualify as background principles as well. In Lucas, the Court said that legal rules, to qualify as background principles, cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State's law of property and nuisance already place upon land ownership. 505 U.S. at 1029 (emphasis added). In Palazzolo v. Rhode Island, 533 U.S. 606, 630 (2001), sounding the same basic theme, the Court said that the background principles 16

22 concept is explained in terms of those common, shared understandings of permissible limitations derived from a State s legal tradition. Under both of these similar definitions, longestablished statutory measures may qualify as background principles. See id. at 629 (stating that [w]e have no occasion to consider the precise circumstances when a legislative enactment can be deemed a background principle of state law or whether those circumstances are present here ); Am. Pelagic Fishing Co., LP v. United States, 379 F.3d 1363 (Fed. Cir. 2004) (treating the 1976 Magnuson Act as a background principle of law governing commercial fishing out to the 200-mile limit, precluding claims of private property rights to fish in the area). A longstanding statutory provision is especially worthy of treatment as a background principle when it parallels and grows out of a common law tradition. Thus, in Am. Pelagic, the Federal Circuit stated that its conclusion that the Magnuson Act represented a background principle is consistent with the historical role played by the sovereign, state or federal, with respect to its waters, id. at 1379, and also observed that as early as 1876, the Supreme Court concluded that [t]he principle has long been settled in this court, that each State... owns the tide-waters themselves, and the fish in them, so far as they are capable of ownership while running. Id. (quoting McCready v. Virginia, 94 U.S. 391, 394 (1876). Likewise in this case, treating section 5937 as a background principle is supported by the fact that it parallels the limitations imposed on California water interests by the public trust and the reasonable use doctrines. 17

23 III. PLAINTIFF S TAKING CLAIM PRESENTS AN EXACTIONS-TYPE TAKING CLAIM GOVERNED BY THE NOLLAN AND DOLAN DECISIONS AND THERE WAS NO TAKING UNDER THE ESSENTIAL NEXUS AND ROUGH PROPORTIONALITY STANDARDS ESTABLISHED BY THOSE DECISIONS. The Court also should reject this claim because, assuming plaintiff had a protected property interest (it does not), the claim fails because it is governed by the standards for a regulatory exaction established by Nollan and Dolan and plaintiff cannot show that a taking occurred under the Nollan and Dolan tests. The Nollan and Dolan tests apply in cases at the intersection of regulatory constraints on property use and regulatory conditions that involve physical occupations or direct appropriations of private property. In Nollan the coastal commission granted permission to the Nollans to build a larger building on their shorefront property, but on the condition that they grant the public a right of way along the beach in front of their property. In Dolan, the City of Tigard granted permission to Mrs. Dolan to expand her hardware store, but on the condition that she grant the public access to a greenway running through the property. The Supreme Court recognized in these cases that if the government had rejected the owners development proposals or otherwise restricted use of their properties, any resulting takings claims would have to be evaluated under the regulatory takings framework. At the same time, the Court recognized that if the conditions had been imposed unilaterally they would have resulted in per se physical-occupation takings. The Court concluded that when a condition of this type is attached to a regulatory authorization, the condition does not necessarily result in a taking. Instead, the Court ruled, such a condition will be held to be a taking only if there is no essential nexus between the condition and the government s legitimate regulatory purposes, or if the burden imposed by the condition is not roughly proportional to the public harm the regulation is designed to avoid. 18

24 This case presents a Nollan/Dolan type situation because enforcement of the ESA has resulted in a grant of legal permission to the District to continue operating the project but on the condition that it pass water through the fish ladder. Accepting, for the present, the Federal Circuit s ruling that the requirement to pass water through the fish ladder must be analyzed under a physical taking rubric, Casitas, 543 F.3d at 1297 n.17, 3 but also recognizing that this requirement has been imposed as part of a larger regulatory process affecting the project as a whole, the condition represents an exaction within the meaning of Nollan and Dolan. The current litigation has its origins in a sixty-day notice letter sent by California Trout dated December 18, 1998, to the District and various government officials stating that the group intended to bring suit to enjoin them from unlawfully taking, jeopardizing, and failing to conserve, endangered southern California steelhead trout (Onchoryinchus mykiss), through the operation of the Robles Diversion dam on the Ventura River in Ventura County, California. As a result of this letter, the District was under threat that it would be required to cease impounding and diverting water, at least during those periods that steelhead trout were present in the river. Under the Court s previous ruling in this case on how regulatory restrictions on water withdrawals should be analyzed under the Takings Clause (a ruling which has not been disturbed by the Federal Circuit, as discussed above), any claim under the Takings Clause based on such regulatory restrictions would have had to be evaluated as a potential regulatory taking. The enforcement of the ESA, of course, did not proceed in this fashion. Instead, the District, the Bureau of Reclamation, and the National Martine Fisheries Service launched a successful 3 While the Federal Circuit s decision is, of course, binding for the purpose of this proceeding, NRDC believes the Federal Circuit erred in concluding that the physical taking rubric applies to the requirement to pass water through the fish ladder. The only distinction between the requirement to pass water through the fish ladder and the requirement to leave water in the river is that the former imposes an affirmative obligation while the latter imposes a negative restraint. Supreme Court precedent rejects this distinction as a basis for applying a physical takings analysis as opposed to a regulatory takings analysis. See Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 436 (1982); see generally John D. Echeverria, Is Water Regulation a Constitutional Taking?, VT. J. ENVTL. L. (forthcoming 2010) (available at 19

25 process to devise a fish passage strategy that would resolve the ESA problems facing the project and allow the project to continue to operate essentially as it had been operating before. See Biological Opinion on the Authorization for the Construction and Future Operations of the Robles Fish Passage Facility, at 54 (stating that if plaintiff constructed and operated the fish passage facility in accordance with the terms of the Biological Opinion, NOAA Fisheries believed the project would not likely jeopardize the continued existence of the southern California steelhead ESU ). NRDC does not dispute that the District s involvement in this ESA consultation process was in a very real sense involuntary, nor does it dispute that the District is entitled to challenge the outcome of the process as a taking. But to establish a taking, the District is not entitled to application of a per se takings rule, but must instead demonstrate a taking under the Nollan/Dolan tests. 4 While confirmation of this conclusion must await the actual presentation of evidence at the upcoming trial, NRDC anticipates that the evidence will clearly show that there is an essential nexus between the requirement that the District pass water through the fish ladder and the goal of the ESA in the context of this case to avoid or minimize harm to endangered fish. In addition, NRDC anticipates that the evidence will clearly show that the very modest (if any) burden imposed on the District s water supply by the fish passage requirement is more than roughly proportional to the harm the ESA is addressing in this case. 4 To the extent plaintiff is now claiming a taking of any quantity of water that plaintiff is not required to pass through the fish ladder, the claim is governed by Penn Central and, on the facts of this case, must fail, as plaintiff has already conceded by seeking and accepting dismissal of its Penn Central claim. 20

26 CONCLUSION For the foregoing reasons, the Natural Resources Defense Council urges the Court, following trial, to enter judgment for the United States and to dismiss this taking claim. Respectfully submitted, /s/ John D. Echeverria Vermont Law School 164 Chelsea Street, PO Box 96 South Roylaton, VT (802) (802) (fax) /s/ Katherine S. Poole Natural Resources Defense Council 111 Sutter Street, 20th Floor San Francisco, CA (415) (415) (fax) April 19, 2010 Counsel for amicus curiae Natural Resources Defense Council 21