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Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 1 of 25
In The United States Court of Federal Claims
Nos. 01-591 L, 01-5910L through 01-59125 L
KLAMATH IRRIGATION DISTRICT, et al.
compared to Horowitz
and other Court of Claims and
Nancie Gail Marzulla and Roger J. Marzulla
, Marzulla & Marzulla, Washington, D.C.,
Kristine Sears Tardiff
, United States Department of Justice, Washington, D.C., with
whom was Assistant Attorney General Sue Ellen Woolridge
, for defendant.
Todd Dale True
, Earthjustice Legal Defense Fund, Seattle, Washington, and Robert B.
, Waltzer & Associates, Biloxi, Mississippi, for defendant-intervenor.1
1 Amicus curiae
memoranda in support of defendant were filed by John D. Echeverria,
Georgetown Environmental Law & Policy Institute, Georgetown University Law School, onbehalf of the Natural Resources Defense Council, and by Scott C. Williams, on behalf of theYurok and Klamath Tribes. Other amici
have participated in various stages of this litigation,including the State of Oregon, the Sierra Club, the Northcoast Environmental Center,Waterwatch of Oregon, the Oregon Natural Resources Council, the Klamath Forest Alliance, theWilderness Society, and the Institute for Fisheries Resources.
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 2 of 25
These consolidated cases have their genesis in temporary reductions made by the
Department of Interior’s Bureau of Reclamation (the Bureau) on the use, for irrigation purposes,of the water resources of the Klamath Basin of southern Oregon and northern California. In theiramended complaints, plaintiffs aver that the Bureau’s actions effectuated, alternatively, a takingsand a breach of contract. Previously, this court held that plaintiffs’ interests in the use ofKlamath Basin water did not constitute cognizable property interests for purposes of the TakingsClause, and, therefore, that plaintiffs were not entitled to compensation under the FifthAmendment. Klamath Irr. Dist. v. United States
, 67 Fed. Cl. 504, 531-535, 539-40 (2005). Thecourt instead held that plaintiffs’ claims sound, if at all, in contract. Id.
at 535-37. At issue in thepending motion is whether the so-called “sovereign acts doctrine” provides a complete defense towhat are now viewed only as breach of contract claims. After carefully considering the extensivebriefing on this issue, the court concludes that the doctrine, indeed, precludes plaintiffs fromrecovering in these actions.
This court’s prior opinion fully describes the factual background of this litigation and
held that the facts listed therein would be deemed established for purposes of future proceedingsunder RCFC 56(d). See Klamath Irr. Dist.
, 67 Fed. Cl. at 507 n.2, 507-14. Nonetheless, a briefrecitation of those facts, insofar as is relevant here, is in order.
The plaintiffs in these consolidated actions are 13 agricultural landowners and 14 water,
drainage or irrigation districts (the irrigation districts) in the Klamath River Basin area of Oregonand northern California. They receive, directly or indirectly, water from the Klamath Projectirrigation works constructed and operated by the Bureau pursuant to the Reclamation Act of1902, ch. 1093, 32 Stat. 388 (codified, as amended, at 43 U.S.C. §§ 371 et seq
.) (the ReclamationAct). The Reclamation Act gives the Secretary of the Interior (the Secretary) legal authority toreclaim arid lands in certain states through irrigation projects. Once land has been so claimed, the Department of the Interior, through the Bureau, is responsible for constructing reclamationprojects and for administering the distribution of water to agricultural users. See
ReclamationAct, §§ 2-10, 32 Stat. 388-90. The original terms of the Reclamation Act permitted the UnitedStates to enter into irrigation contracts with individual homesteaders, but, as a result of severalamendments, current law provides that the United States may only enter into new waterdistribution contracts with organized irrigation districts. 43 U.S.C. §§ 423(e), 485h(d).
The Klamath River Basin, naturally a semi-arid region, is the site of extensive water
reclamation and irrigation projects constructed pursuant to the Reclamation Act. See Bennett v.
, 520 U.S. 154, 158-59 (1997); Tulelake Irrigation Distr. v. United States
, 342 F.2d 447,448-49 (Ct. Cl. 1965). The Klamath Project, begun in 1905, provides water to about 240,000
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 3 of 25
acres of irrigable land and several national wildlife refuges. It is operated by the Bureau to“serve and affect a number of interests,” including the supply of irrigation water toagricultural interests in the Klamath River Basin and the supply of water to the Tule Lake andLower Klamath National Wildlife Refuges “for permanent and seasonal marshlands and irrigatedcrop lands.” Pacific Coast Federation of Fishermen’s Ass’ns v. Bureau of Reclamation
, 138 F.
Supp. 2d 1228, 1230 (N.D. Cal. 2001) (hereinafter PCFFA
). Water for the project is storedprimarily in Upper Klamath Lake, on the Klamath River in Oregon; the Link River Damregulates water flows from Upper Klamath Lake into the lower portions of the Klamath River. See Kandra v. United States
, 145 F. Supp. 2d 1192, 1196 (D. Or. 2001). The Klamath Projectlacks a major water storage reservoir, and because Upper Klamath Lake is itself relativelyshallow and “unable to capture and store large quantities of water from spring run-off,” theBureau is unable to store enough water during wet years for use in subsequent dry years – a factthat apparently makes the Klamath Project more vulnerable to droughts. Id.
at 1197. Inoperating the Klamath Project, the Bureau prepares periodic streamflow forecasts and annualoperating plans “in order to provide operating criteria and to assist water users and resourcemanagers in planning for the water year.” Kandra
, 145 F. Supp. 2d at 1197.
The Endangered Species Act (ESA), compels the Bureau, like all federal agencies, to
ensure that its operation of the Klamath Project is not “likely to jeopardize the continuedexistence of any endangered species.” 16 U.S.C. § 1536(a)(2). Under the ESA, the Bureau isrequired to perform a biological assessment “for the purpose of identifying any endangeredspecies which is likely to be affected” by the operations of the Klamath Project. 16 U.S.C.
§1536(c)(1). If the Bureau determines that its proposed action may affect an endangered orthreatened species, it must request a “formal consultation” with the National Marine FisheriesService (NMFS) or the Fish and Wildlife Service (FWS), in response to which the appropriateagency will produce a biological opinion. See
16 U.S.C. §§ 1536(a)(2), 1536(b); 50 C.F.R. § 402.14. If that opinion concludes that the proposed action is likely to jeopardize a protectedspecies, the Bureau must modify its proposal to alter that result.
For decades, Klamath Basin landowners generally received as much water for irrigation
as they needed. In severe drought years, they simply received somewhat less. That changed inthe spring of 2001, when several federal agencies produced studies indicating that water levels inthe basin were so low as to threaten the health and survival of certain endangered species. Waterforecasts for 2001 predicted that year would be “critical[ly] dry,” with an inflow volume intoUpper Klamath Lake of 108,000 acre-feet from April through September – “the smallest amountof inflow on record.” Kandra
, 145 F. Supp. 2d at 1198. In developing its operating plan for2001, the Bureau performed a biological assessment and concluded that operation of the Projectwas likely to affect adversely three endangered species: the coho salmon, the shortnosesuckerfish, and the Lost River suckerfish. Accordingly, the Bureau forwarded its biologicalassessments and requested the initiation of formal consultation with the NMFS and the FWSunder section 7 of the ESA. Id.
at 1198. Shortly thereafter, the agencies issued biologicalopinions consistent with the Bureau’s assessments, concluding that continued operation of theKlamath Project would jeopardize the aforementioned species. The opinions recommended
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 4 of 25
“reasonable and prudent alternatives”2 to address this threat. One such alternative was areduction in the amount of water available during 2001 for irrigation from Upper Klamath Lake.
The distribution of Klamath Project water is governed, in part, by contracts between the
individual irrigation districts and the Bureau, which set forth, inter alia
, the districts’ respectivepriorities to water use within the Project in the event of a water shortage, and the United States’sresultant liability therefor. The Bureau recognizes three basic types of contracts for reclamationwater, designated, in descending order of priority, as “Class A,” “Class B,” and “Class C,”respectively.
Class A contracts are entered into pursuant to Section 9(d) of the Reclamation Act, under
which irrigation districts that receive deliveries of water from the Project are obligated to pay aproportionate share of the Project’s initial construction costs and its annual operation andmaintenance costs. See
43 U.S.C. § 485h(d). As exemplified by the Tulelake Irrigation Districtcontract, these districts typically have a contractual right to receive “all water needed by theDistrict for beneficial irrigation uses,” and in times of a water shortage, the right of the district towater is “equal to those of others executing similar contracts under the Reclamation Act . . . andshall be prior to those rights conferred pursuant to contracts executed under . . . the Warren Act.” Plaintiffs Tulelake Irrigation District and Klamath Irrigation District both have such “Class A”contracts with the Bureau.
One of the Class A contracts, that of Van Brimmer Ditch Company (VBDC), has first
priority to irrigation water from the Project. VBDC was the first entity to contract with theBureau for Klamath Project water, and by the terms of its original contract, was subject only topriorities established prior to reclamation by the United States and not to any priority of theUnited States or any party claiming through the United States. In 1922, VBDC’s contract wassuperceded when the United States entered into a contract with the Klamath Irrigation District(KID), under which KID assumed liability for the annual cost of carrying and delivering water toVBDC. Klamath Irr. Dist.
, 67 Fed. Cl. at 529. The successor contract retained for VBDC thehighest priority among all the Klamath Project contracts.
Class B contracts are entered into pursuant to the Warren Act, Ch. 141, 36 Stat. 925,
codified at 43 U.S.C. § 523, which permits the Secretary to contract for Project water to theextent that it has excess
storage or carrying capacity. The Warren Act makes clear that theseClass B contracts must “preserv[e] a first right to lands and entrymen under the project,” id.
, thatis, to Class A contract holders. Accordingly, when there is no excess capacity, water is notprovided to any irrigation districts holding Class B contracts. Among the Class B contracts,
2 The ESA directs the Secretary of the Interior or the Secretary of Commerce to suggest
“reasonable and prudent alternatives” when consulted about Federal activities that might adverselyaffect endangered species. See Tulare Lake Basin Storage Dist. v. United States,
49 Fed. Cl. 313,315 n.2 (2001) (citing 16 U.S.C. § 1536(b)(3)(A)); see also
16 U.S.C. § 1532(15).
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 5 of 25
priority is determined by date of contracting. Such contracts were entered into by plaintiffsKlamath Drainage District, Poe Valley Improvement District, Sunnyside Irrigation District,Klamath Basin Improvement District, Midland District Improvement Co., Malin IrrigationDistrict, Enterprise Irrigation District, Pine Grove Irrigation District, Westside ImprovementDistrict No. 4 (Colonial Realty Co.), and Shasta View Irrigation District.
Class C contracts are entered into with individual farmers for rental water on an “if and
when available” status. They have third priority of use, and are the first to be deprived of waterin the event of a shortage. None of the plaintiffs in this case have such contracts.
In all the contracts but that with VBDC, the United States expressly disclaims liability for
water shortages attributable to drought. For example, in this regard, the Klamath IrrigationDistrict contract states –
On account of drought or other causes, there may occur at times a shortage in thequantity of water available in Project reservoirs and, while the United States willuse all reasonable means to guard against such shortage, in no event shall anyliability accrue against the United States or any of its officers, agents, oremployees for any damage, direct or indirect, arising therefrom . . . .
Most of the other district contracts have identical provisions, while a few have similar provisionsthat do not include the phrase “or other causes” in the first line of the above quote.3
This litigation arose not long after the Bureau issued its revised operation plan on April 6,
2001, in which it terminated altogether the delivery of irrigation water to plaintiffs.4 On April 9,2001, two of the plaintiffs herein, Klamath Irrigation District and the Tulelake Irrigation District,filed actions in the U.S. District Court for the District of Oregon, alleging, inter alia
, breach ofcontract, challenging the validity of the biological opinions and seeking to enjoin the Bureaufrom implementing the revised operation plan. That court denied a preliminary injunctionmotion, and the two districts voluntarily dismissed their suit in early October 2001. On October
Tulelake Irrigation District contract, art. 26; Klamath Drainage District contract, art.
24; Sunnyside Irrigation District contract, art. 9; Klamath Basin Improvement District contract,
art. 4; Malin Irrigation District contract, art. 11; Westside Improvement District No. 4/Colonial
Realty Company contract, art. 13; Shasta View Irrigation District contract, art. 11. Others of the
contracts contained water shortage clauses that are somewhat different from that in the Klamath
District contract. See
Poe Valley Improvement District contract, art. 11;
Improvement Company contract, art. 5; Enterprise Irrigation District contract, art. 10 Pine Grove
Irrigation District contract, art. 10
4 Plaintiffs concede that defendant released 70,000 acre-feet of Klamath Project water to
users in July of 2001, but assert that this water came too late to allow them to grow crops.
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 6 of 25
11, 2001, plaintiffs then brought suit in this court, raising two takings claims under the FifthAmendment. On March 24, 2003, they filed an amended complaint, in which they added abreach of contract count.
In September 2003, plaintiffs filed a motion for partial summary judgment seeking a
determination that their interests in Klamath Project water were not property interests at issue inan ongoing state-law adjudication of rights proceeding in Oregon state courts. On October 3,2003, defendant filed a cross-motion for summary judgment on the issue of the nature and scopeof plaintiffs’ property interest in Klamath Project water and the question whether that interestwas a compensable property interest for purposes of the Takings Clause of the Fifth Amendment. On November 13, 2003, this court, by unpublished order, granted plaintiffs’ motion for partialsummary judgment, but did not resolve defendant’s outstanding cross-motion. Shortly thereafter,on January 27, 2004, plaintiffs filed a cross-motion for summary judgment on the issues of thenature and scope of their property interest, and whether the United States was liable to pay justcompensation for the taking of that interest.
This case was transferred to the undersigned on December 9, 2004. On January 11, 2005,
plaintiffs were permitted to file a second amended complaint, in which they reduced theirdamages claim. On February 28, 2005, the court granted a motion to intervene filed by thePacific Coast Federation of Fishermen’s Associations. See Klamath Irr. Dist. v. United States
,64 Fed. Cl. 328 (2005). On April 21, 2005, the court ordered the claims of the individualplaintiffs severed, but consolidated those cases for purposes of decision. On August 31, 2005,this court issued an opinion in which it found that plaintiffs had no cognizable property interestscompensable under the Fifth Amendment. See Klamath Irr. Dist.
, 67 Fed. Cl. at 514-40.5
As a result of this ruling, plaintiffs are left only with their claims for breach of contract.
The water districts seek damages on their own behalf for breach of their contracts with theUnited States, while the landowning plaintiffs seek damages as beneficiaries of the districtplaintiffs’ contracts. On February 17, 2006, defendant filed a motion for summary judgment. Extensive briefing on that motion has been completed. After carefully considered the briefs ofthe parties and their respective positions, the court concludes that oral argument is unnecessary.
Following the court’s prior opinion, one question remains – did the Bureau breach the
subject contracts? The court previously made several observations in this regard, which providea helpful starting point.
5 Subsequently the reasoning of this court was adopted by a California appellate court,
see Allegretti & Co. v. County of Imperial
, 138 Cal. App. 4th 1261, 1273-75, 42 Cal. Reptr. 3d122 (Cal. App. 2006), rev. denied
, 2006 Cal. LEXIS 9142 (Cal. July 26, 2006), cert. denied
, 127S.Ct. 960 (2007).
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 7 of 25
First, the court observed that, under most of the district contracts, plaintiffs did not have
an absolute contractual right to water, limited, as claimed, only by appurtenancy and beneficialuse. “This is particularly true,” the court concluded, “as to those contracts which provide, eitherin exact or similar terms, that the government shall not be liable for ‘water shortages’ resultingfrom ‘drought or other causes.’” Klamath Irr. Dist.
, 67 Fed. Cl. at 535. It further observed that“[t]he plain language of these provisions expressly absolves the United States from liability forall types of water shortages – not only the hydrologic causes, as claimed by plaintiffs, but alsoany other cause that impacts the availability of water through the system.” Id.
Citing numerouscases, but relying particularly on O’Neill v. United States
, 50 F.3d 677, 682-84 (9th Cir.), cert.
, 516 U.S. 1028 (1995), the court noted that “various courts have construed similar watershortage clauses as protecting the United States from damages based upon the enforcement of theESA,” with such courts particularly focusing on language typical in such clauses exempting theUnited States from damages arising from a shortage on account of “errors in operation, drought,or any other causes.” Klamath Irr. Dist
., 67 Fed. Cl. at 536. Almost identical language is foundin many of the contracts at issue here. Indeed, with the exception of the VBDC contract, whichlacks any liability-limiting clause, even those contracts that do not expressly absolve the UnitedStates for water shortages arising from “any other causes” arguably exempt defendant fromliability here.
As it turns out, however, the court need not resolve these questions. Instead, they serve
merely to frame the court’s consideration of what turns out to be the controlling issue here, towit
, whether the contracts must be read to imply that the United States reserved its ability toexercise its sovereign powers without the threat of liability for failing to deliver water.
1. This court previously observed that “even as to the contracts that do not contain broad
water shortage clauses, it is at least arguable that any reductions ordered by the Bureau here didnot result in a breach under the so-called sovereign acts doctrine.” Klamath Irr. Dist
., 67 Fed.
Cl. at 536. As it explained, the latter doctrine “recognizes that ‘the Government-as-sovereignmust remain free to exercise its powers’ . . . and shields the United States from contract liabilitybased upon its ‘public and general acts as a sovereign’ . . . .” Id.
(quoting Yankee Atomic Elec.
Co. v. United States
, 112 F.3d 1569, 1575 (Fed. Cir. 1997), cert. denied
, 524 U.S. 591 (1998)and Horowitz v. United States
, 267 U.S. 458, 461 (1925)). In terms of this argument, the courtfound that “[s]everal courts have concluded that the enactment and subsequent enforcement ofthe ESA should be viewed as sovereign acts that override the Bureau’s obligations to providewater under various contracts.” Klamath Irr. Dist
., 67 Fed. Cl at 537 (citing, inter alia
, KlamathWater Users Protective Ass’n v. Patterson
, 204 F.3d 1206, 1213 (9th Cir. 1999), cert. denied
, 531U.S. 812 (2000)). The court now joins these courts in concluding that the actions taken by theBureau did not breach any of the contracts at issue under the sovereign acts doctrine. Obviously,a few words of elaboration on this critical conclusion are required.
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 8 of 25
The Supreme Court first recognized the sovereign acts doctrine in Horowitz
. There, the
Court found no breach of contract where a wartime embargo on certain railroad shipmentsinterfered with a contractor’s receipt of a shipment from a government agency. It reasoned that“the United States when sued as a contractor cannot be held liable for an obstruction to theperformance of the particular contract resulting from its public and general acts as a sovereign.” Id
. at 461. In so holding, the Court quoted approvingly from Jones v. United States
, 1 Ct. Cl.
383, 384 (1865), in which the Court of Claims stated –
The two characters which the government possesses as a contractor and as asovereign cannot be thus fused; nor can the United States while sued in the onecharacter be made liable in damages for their acts done in the other. Whateveracts the government may do, be they legislative or executive, so long as they bepublic and general, cannot be deemed specially to alter, modify, obstruct orviolate the particular contracts into which it enters with private persons.
, 267 U.S. at 461; see also Yankee Atomic
, 112 F.3d at 1574; Klamath Irr. Dist.
, 67 Fed.
Cl. at 537 n.56. More recently, in United States v. Winstar Corp
., 518 U.S. 839 (1996), aplurality of the Supreme Court emphasized that the United States, as sovereign, must remain freeto exercise its powers, noting that the sovereign acts doctrine seeks to “balance theGovernment’s need for freedom to legislate with its obligation to honor its contracts by askingwhether the sovereign act is properly attributable to the Government as contractor.” Id
. at 840;see also Stockton East Water Dist. v. United States
, 70 Fed. Cl. 515, 529 (2006). The latterquestion calls for a “case-specific inquiry that focuses on the scope of the legislation in an effortto determine whether, on balance, that legislation was designed to target prior governmentalcontracts.” Yankee Atomic
, 112 F.3d at 1575; see also Amber Resources Co. v. United States
, 68Fed. Cl. 535, 556 (2005); Cuyahoga Metro. Hous. Auth. v. United States
, 57 Fed. Cl. 751, 763n.18 (2003).6 Accordingly, for purposes of the sovereign acts doctrine, the critical thresholdissue here is whether the ESA was passed for the benefit of the government-as-contractor or forthe benefit of the public.7
6 Commenting on this same inquiry, the plurality in Winstar
[G]overnmental action will not be held against the Government for purposes ofthe impossibility defense so long as the action's impact upon public contracts is, asin Horowitz, merely incidental to the accomplishment of a broader governmentalobjective. The greater the Government's self-interest, however, the more suspectbecomes the claim that its private contracting partners ought to bear the financialburden of the Government's own improvidence, and where a substantial part ofthe impact of the Government's action rendering performance impossible falls onits own contractual obligations, the defense will be unavailable.
518 U.S. at 898 (internal citations omitted).
7 On brief, plaintiffs cite Sierra Club v. Babbitt
, 65 F.3d 1502 (9th Cir. 1995), as holding
that the ESA does not apply to preexisting contracts. But, that case merely holds that the ESA
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 9 of 25
2. The ESA “contains a variety of protections designed to save from extinction species
that the Secretary of the Interior designates as endangered or threatened.” Babbitt v. Sweet HomeChapter of Communities for a Greater Oregon
, 515 U.S. 687, 690 (1995). In Tenn. Valley Auth.
, 437 U.S. 153, 180 (1978), the Supreme Court described the ESA as “the mostcomprehensive legislation for the preservation of endangered species ever enacted by anynation.” See also Babbitt
, 515 U.S. at 698. “The plain intent of Congress in enacting thisstatute,” the Court recognized, “was to halt and reverse the trend toward species extinction,whatever the cost,” a view “reflected not only in the stated policies of the Act, but in literallyevery section of the statute.” Hill
, 437 U.S. at 184. As noted in Hill
, section 7 of the ESA,codified at 16 U.S.C. § 1536(a)(2), provides a “particularly good gauge of congressional intent.” Hill
, 437 U.S. at 181. That section requires each Federal agency to “insure that any actionauthorized, funded or carried out by such agency . . . is not likely to jeopardize the continuedexistence of any endangered species or threatened species or result in the destruction or adversemodification of habitat of such species which is determined by the Secretary, after consultationas appropriate with affected States, to be critical.”8
The findings provision of the statute emphasizes that this and other provisions of the ESA
were passed because Congress found that “various species of fish, wildlife and plants in theUnited States have been rendered extinct as a consequence of economic growth and developmentuntempered by adequate concern and conservation” and that such species “are of esthetic,ecological, historical, recreational, and scientific value to the Nation and its people.” 16 U.S.C. §§ 1531(a)(1), (3). Congress added that the development and maintenance of conservationprograms is “key to meeting the Nation’s international commitments and to better safeguarding,
does not apply where an agency has granted a third-party a right-of-way and has no ability toimpact how the third party approaches a threatened species. Id
. at 1508. By contrast, the courtmade quite clear that the ESA applied to a preexisting contract if, as here, “the project’simplementation depended on an additional agency action.” Id
. It is difficult to understand howplaintiffs could have missed this distinction, since Sierra Club
, as“explaining why section 7(a)(2) of the ESA applies to a preexisting water service contract wherethe United States must act each year to supply the water.” Id
. (citing 50 F.3d at 680-81).
8 An action “jeopardize[s] the continued existence” of a species when the action
“reasonably would be expected, directly or indirectly, to reduce appreciably the likelihood ofboth the survival and recovery of a listed species in the wild by reducing the reproduction,numbers, or distribution of that species.” 50 C.F.R. § 402.02. An action results in “destructionor adverse modification” when the action results in a “direct or indirect alteration thatappreciably diminishes the value of critical habitat for both the survival and recovery of a listedspecies.” Id
. As noted in the statute’s legislative history, section 7 “requires the Secretary andthe heads of all other Federal departments and agencies to use their authorities in order to carryout programs for the protection of endangered species, and it further requires that those agenciestake the necessary action that will not jeopardize the continuing existence of endangered speciesor result in the destruction of critical habitat of those species.” H.R. Rep. No. 93-412, at 14(1973); see also Hill
, 437 U.S. at 183-84 (further describing the legislative history of thissection).
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 10 of 25
for the benefit of all citizens, the Nation’s heritage in fish, wildlife and plants.” Id.
at §1531(a)(5). Similar sentiments were echoed in the statute’s purposes clause, see id.
at 1531(b),as well as in its legislative history, making it amply clear that the ESA was enacted with thebroadest possible public purposes in mind.9 Conversely, nothing in the statute or its legislativehistory remotely suggests even the slightest intent to relieve the United States of anyresponsibilities under pre-existing contracts, particularly, water delivery contracts, and,especially, the contracts at issue.10
While the court must be vigilant to ensure that action designed to benefit the government
is not couched in “vocabulary of the public weal,” McGrath v. Rhode Island Retirement Bd.
, 88F.3d 12, 16 (1st Cir. 1997); see also Cuyahoga
, 57 Fed. Cl. at 778, it seems beyond peradventure,given the language, structure and underlying legislative history of the ESA, that its passage was asovereign act that cannot give rise to contract liability here. As noted earlier, the sameobservation has been made in a variety of legal settings. See
, Rio Grande Silvery Minnow v.
, 333 F.3d 1109, 1140-41 (10th Cir. 2003) (Seymour, J., concurring), vacated on othergrounds
, 355 F.3d 1215 (10th Cir. 2003) (“the duties imposed under the [ESA] . . . embody actsof sovereign authority”); Precision Pine & Timber Co. v. United States
, 50 Fed. Cl. 35, 72-73(2001); Croman Corp. v. United States
, 44 Fed. Cl. 796, 806 (1999), withdrawn, in part, onother grounds
, 49 Fed. Cl. 776 (2001), vacated on other grounds
, 89 Fed. Appx. 237 (Fed. Cir.
2004) (“[t]he enactment of the ESA . . . and the implementation by the Forest Service of ESArequirements . . . all constituted sovereign acts”).11 As these opinions suggest, there is no
S. Rep. No. 93-307, at 1 (1973) (“The purpose of this bill is to provide for
conservation, protection and propagation of endangered species of fish and wildlife by Federalaction and by encouraging the establishment of State endangered species conservationprograms.); id.
at 2 (“It has become increasingly apparent that some sort of protective measuresmust be taken to prevent the further extinction of many of the world’s animal species . . . . Consideration of this need to protect endangered species goes beyond the aesthetic [and includes]the need for biological diversity for scientific purposes.”); H.R. Rep. No. 93-412, at 5, 6 (1973)(noting that the legislation is “in the best interests of mankind” and stating further – “The basicpurpose of the Act is clearly stated in the legislation; to provide a means whereby the ecosystemsupon which endangered species and threatened species depend may be conserved, protected orrestored.”).
10 The policy section of the ESA does state that “[i]t is further declared to be the policy of
Congress that Federal agencies shall cooperate with State and local agencies to resolve waterresource issues in concert with conservation of endangered species.” 16 U.S.C. § 1531(c). While this statement certainly indicates that Congress was aware that the ESA could impactwater resources – after all, the statute was designed to protect fish – there is no indication thatCongress considered the impact of the statute on the Bureau’s water delivery contracts.
11 Several other cases have held that the rights to irrigation water of the Klamath
Irrigation District and the Tulelake Irrigation District “are subservient to ESA and tribal trust
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 11 of 25
indication whatsoever that the ESA was designed to eliminate the benefit of the bargain in anygovernment contracts, let alone those at issue.12 Described using the words of the Winstar
plurality, the passage of the ESA was “relatively free of Government self interest,” not tainted by“a governmental object of self-relief,” and in no way “targeted” on the subject contracts. Winstar
, 518 U.S. at 896. Rather, any impact that the enactment of the statute had on thecontracts sub judice
was “merely incidental to the accomplishment of a broader governmentalobjective.” Id.
at 898; see also Centex Corp. v. United States
, 395 F.3d 1283, 1305-06 (Fed. Cir.
Based on the foregoing, it thus would appear preliminarily that the sovereign acts doctrine
applies here, absolving defendant of any breaches that might otherwise have arisen when, as aresult of the ESA, it failed to deliver irrigation water in 2001.
Plaintiffs, however, mount a multi-front attack on this proposition.
1. Their first thrust asserts that the Bureau was not compelled by the ESA to diminish
water deliveries in 2001. This claim, however, runs headlong into the host of rulings construingthe ESA that essentially dictated the Bureau’s decision – rulings largely ignored by plaintiffs intheir brief. In the earliest of these cases, the Ninth Circuit rejected claims by some of the veryplaintiffs in this action that the private operator of the Link River Dam did not have a duty tooperate the dam to meet the Bureau’s ESA obligations. Patterson,
204 F.3d at 1213. Affirmingthe district court’s ruling that the irrigators’ rights to water are subservient to the ESA, the NinthCircuit concluded that the Bureau’s responsibilities “include taking control of the Dam whennecessary to meet the requirements of the ESA, requirements that override the water rights of theIrrigators.” Id
Later, in May of 2000, the PCFFA and others filed a lawsuit challenging the Bureau’s
plan to release water for irrigation, claiming that the agency had violated the ESA by failing toconsider the impact of its plan on threatened coho salmon. The Klamath Water UsersAssociation (KWUA) intervened in this action as a defendant. On April 3, 2001, the United
, 145 F. Supp. 2d at 1201 (purporting to resolve a government contractclaim); see also Patterson
, 204 F.3d at 1213-14.
. Franconia Assocs. v. United States
, 61 Fed. Cl. 718, 736 (2004) (no sovereign act
where “Congress deliberately targeted the FmHA’s contractual obligations under preexistingnotes in an effort to obtain a better deal); Cuyahoga
, 57 Fed. Cl. at 777 (“In passing the 1994amendments, the Congress did not act to protect public safety, morals or the economy, throughthe exercise, for example, of its police powers. Rather, in an appropriations measure, itdeliberately targeted, at HUD's behest, that agency's contractual obligations under preexisting . . .
contracts in an effort to reduce outlays under the Section 8 program.”).
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 12 of 25
States District Court for the Northern District of California found that the Bureau had failed tocomply with the requirements of the ESA before implementing its 2000 operations plan for theKlamath Project. PCFFA
, 138 F. Supp. 2d at 1242-47. It permanently enjoined the Bureau fromsending water irrigation deliveries from the Project if the flows dropped below the minimumflows recommended in a report prepared by the NMFS, stating:
the Bureau of Reclamation hereby is enjoined from sending irrigation deliveriesfrom Klamath Project whenever Klamath River flows at Iron Gate dam dropbelow the minimum flows recommended in the [NMFS] report, until such time asthe Bureau completes a concrete plan to guide operations in the new water year, and consultation concerning that plan is completed, either by (1) formalconsultation to a “no jeopardy” finding by the NMFS, or (2) the Bureau’s finaldetermination, with the written concurrence of the NMFS, that the proposed planis unlikely to adversely affect the threatened coho salmon.
. at 1250. On April 6, 2001, three days after this injunction was issued, the FWS and theNMFS issued their 2001 biological opinions, which concluded that the low flow levels proposedby the Bureau for 2001 were likely to jeopardize the continued existence of coho salmon andsuckers, and adversely modify their habit. On that same date, the Bureau issued its 2001operations plan, which incorporated the conclusions and flow recommendations contained in thebiological opinions.
Subsequently, several of the irrigation districts, the KWUA and others filed suit in the
United States District Court for the District of Oregon, challenging the 2001 operating plan asviolative of their contractual rights to irrigation water and seeking an order enjoining the Bureaufrom implementing the plan and instead requiring it to “release unspecified ‘historic’ amounts ofirrigation water.” Kandra
, 145 F. Supp. 2d at 1195-96. On April 30, 2001, the district courtdenied the plaintiffs’ request for a preliminary injunction, rejecting their claims, inter alia
, thatthe NMFS had improperly determined that the ESA compelled agency action. Id
. at 1207, 1211. Citing the Ninth Circuit’s ruling in Patterson
, the court found that “plaintiffs’ contract rights toirrigation are subservient to ESA and tribal trust requirements,” adding, “[t]herefore, plaintiffscannot assert breach of contract based on Reclamation’s allocation of water to protect the suckersand salmon.” Id
. at 1201. Thereafter, the Kandra
plaintiffs voluntarily dismissed their claims.
Accordingly, in 2000 and 2001, the Bureau was caught in a crossfire of lawsuits, sued
both parties seeking to preclude and to compel the release of irrigation water. The former wonout, as the courts concluded that the ESA compelled the Bureau to reduce irrigation deliveries in2001. Compare Precision Pine & Timber
, 50 Fed. Cl. at 72-73 (Forest Service’s compliancewith ESA duties were “public and general” acts where an Arizona district court had “specificallydirected the Forest Service . . . to comply with the ESA by suspending all timber harvestingactivities . . . during consultations.”). Subsequent cases have served to reinforce the restrictionsimposed by the ESA on the Bureau’s release of irrigation water. In one such case filed by thePCFFA, and in which certain of the plaintiffs here again participated as intervening-defendants,
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the Ninth Circuit held that the Bureau’s proposal to provide only 57 percent of the total waterneeds of threatened species for the first eight years of a ten-year operating plan was arbitrary andcapricious. PCFFA v. United States Bureau of Reclamation
, 426 F.3d 1082, 1090-95 (9th Cir.
2005). On remand, the United States District Court for the Northern District of California,finding that “the law is clear that injunctive relief to protect the listed species should issue,”enjoined the Bureau from making any diversion to irrigators at the Klamath Project untilcompletion of a new biological opinion. PCFFA v. Bureau of Reclamation
, 2006 WL 798920 at*1 (N.D. Cal. Mar. 27, 2006), modified
, 2006 WL 1469390 at *8-9 (N.D. Cal. May 25, 2006).
2. Again all but treating these cases as nonevents, plaintiffs would have this court revisit
the issues addressed by these courts, contending, inter alia
, that numerous alternatives to shuttingdown water deliveries were available to the Bureau and that, in particular, the decision towithhold water was not supported by sound biological science. But, this court must decline thisopen invitation to leap outside the realm of government contract law for at least two reasons.
First, while plaintiffs argue that the prior cases are not binding precedent, they seemingly
overlook the fact that many of the plaintiffs herein also were involved in the prior litigation,making the rulings in those cases binding under the doctrine of res judicata
. Under that doctrine,also known as “claim preclusion,” “a judgment on the merits in a prior suit bars a second suitinvolving the same parties or their privies based on the same cause of action.” Parklane HosieryCo., Inc. v. Shore
, 439 U.S. 322, 326 n. 5 (1979); see also In re Bose Corp.
2007 WL 416919, at*3 (Fed. Cir. Feb. 8, 2007). While some of the cases recited above involved only preliminaryinjunctions and did not result in judgments on the merits, see, e.g.
, 145 F. Supp. 2d at1207, 1211, others yielded permanent injunctions and plainly constituted final rulings on themerits, see
, 138 F. Supp. 2d at 1250. Some of the named parties in those cases –for example, Klamath Irrigation District, Klamath Drainage District, Tulelake Irrigation District,and Lonny E. Baley – are also parties here. Others of the plaintiffs here were in privity with theparties in those cases. In particular, defendant alleges – and plaintiffs have not denied – that allthe irrigation districts before the court are members of the Klamath Water Users Association(KWUA), which actively participated in the earlier cases as both a plaintiff and a third-partydefendant. It was, of course, the claimed rights of these districts that gave the KWUA standingto participate in these earlier cases, and the decisional law makes clear that those districts thusshould not be heard to argue that they are unfettered by the decisions rendered against theirassociation in those cases.13 Hence, most of the plaintiffs before the court are, in one fashion or
13 Both Federal courts and the Restatement (Second) on Judgments recognize that an
entity that expressly or impliedly gives a party authority to represent it may be bound by the ruleof res judicata
as though it were a party. See
, Collins v. E.I. DuPont de Nemours & Co.
, 34F.3d 172, 176 (3d Cir. 1994); Meza v. General Batter Corp.
, 908 F.2d 1262, 1266-67 (5th Cir.
1990); General Foods Corp. v. Mass. Dept. of Pub. Health
, 648 F.2d 784, 787 (1st Cir. 1981);Southwest Airlines Co. v. Texas Int’l Airlines
, 546 F.2d 84, 95 (5th Cir.), cert. denied
, 434 U.S.
832 (1977); Restatement (Second) on Judgments § 41 (“A person who is not a party to an actionbut who is represented by a party is bound by and entitled to the benefits of a judgment as thoughhe were a party.”).
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 14 of 25
another, bound by the prior judicial rejections of their claims and are prohibited from relitigatingwhether the Bureau was bound by the ESA to reduce water deliveries in 2001.
Second, even to the extent this is not the case, the court rejects the notion that this
contract case should be a vehicle for challenging the provenance and ultimate validity of everyaction taken by the Bureau and other Federal agencies leading up to and including the applicationof the ESA here. Under the Administrative Procedures Act, 5 U.S.C. §§ 702 et seq
., thoseactions were reviewable – indeed, were reviewed – under a deferential arbitrary and capriciousstandard, applied based upon the administrative record before the agency. Plaintiffs, however,would subject these same determinations to a novel form of de novo
review, framing the questionnot as whether the agencies acted rationally based upon the administrative record, but ratherwhether, over a course of years and based upon any evidence that could have been obtained, theagencies somehow could have avoided the sovereign act that impacted performance of thecontracts. In particular, plaintiffs argue that the Bureau cannot be excused from liability becauseit could have taken actions prior to 2001 that, anticipating a drought, might have avoided theeventual application of the ESA – actions that would have, according to plaintiffs, caused morewater to be available in the Klamath basin or, alternatively, increased the fish population beyondendangered or threatened levels.14 Plaintiffs assert that material questions of fact exist in thisregard, barring the granting of summary judgment and upon which they should be allowed toconduct discovery. Of course, if they are right, there should be no temporal limit either to theirclaims or the resulting discovery – seemingly, it would be equally relevant herein whether theBureau, any other Federal agency, or even Congress could have taken actions in 1980, 1950, orperhaps even 1905, that would have increased the water (or fish) supply available in the KlamathBasin in 2001, thereby obviating the necessity for halting water deliveries under the ESA in orderto protect endangered species.
But are such broad inquiries really relevant to the question at hand? Must the court, in
order to apply the sovereign acts doctrine, consider the entire course of conduct that led up to theapplication of statute or, perhaps, even all the actions that led up to the passage of the statuteitself, so as to determine that the United States had no other alternative but to violate the contractterms? Certainly, no decision has employed this tour d’horizon
approach to the sovereign actsdoctrine, despite ample opportunities to do so. Instead, the decisions have approached cautiouslyquestions regarding what “caused” a sovereign act to occur. For example, in Derecktor v. UnitedStates
, 128 F. Supp. 136 (Ct. Cl. 1954), cert. granted
, 348 U.S. 926 (1955), cert. denied
14 Among the dozen or so steps that plaintiffs assert the Bureau should have taken in the
decade or so prior to 2001 are: (i) instituting a water bank; (ii) compensating landowners forland idling; (iii) providing for groundwater substitution; (iv) instituting a conservationimplementation program designed to promote fish recovery; (v) constructing screens and dampassages to protect suckerfish and enable them to migrate upstream to spawn; (vi) looking forwater savings in other federal projects within the Klamath Basin (e.g.
, the Klamath MarshWildlife Refuge); (vii) promoting well-drilling and water conservation; and (viii) taking othersteps that “could have ameliorated the water shortage in 2001.”
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 15 of 25
U.S. 802 (1955), the Court of Claims considered whether the United States MaritimeCommission had breached a contract by failing to approve the transfer of a ship when the StateDepartment determined that the transfer would seriously prejudice foreign relations with Britain. In holding that the sovereign acts doctrine prevented such a breach, the court did not conduct anin-depth analysis of foreign policy, but merely observed that the State Department had to have“probable cause” to believe as it did, ultimately concluding that “the State Department kept wellwithin the boundaries of its responsibilities in refusing to let the ship get beyond the control ofthe Government.”15 Id
. at 141- 42; see also Miller v. United States
, 140 F. Supp. 789, 794 (Ct.
Cl. 1956) (applying the “probable cause” standard in concluding that the national interests of theUnited States did not dictate violation of a contract). Later decisions have likewise refused toexamine separately either the tasks leading up to an exercise of a sovereign act or the subsidiarytasks making up that exercise.16 Rather, in defining what might be termed the “causation in fact”
15 Indeed, the facts in Derecktor
certainly suggest that there would have been room to
debate whether the action taken by the State Department truly would have prejudiced foreignrelations, as the transfer was prohibited because of concerns that the ship would be used totransfer Jews to Palestine. Nor did the court consider whether the State Department could havetaken different actions before the Maritime Commission entered into the contract, so as to avoidthe problem encountered.
16 Thus, in Walter Dawgie Ski Corp. v. United States
, 30 Fed. Cl. 115 (1993), the court
held that, under the sovereign acts doctrine, a government road repair project did not violate a skioperator’s license to use government property. While the resort operator admitted that thedecision to reconstruct the road was a sovereign act, it asserted that various steps taken toeffectuate that plan violated its license. Rejecting this claim, this court stated –
This Court finds, however, that the sovereign acts doctrine, if applicable, appliesto all aspects of the Government act. . . . Here, as the plaintiff admits, thereconstruction and improvement of the General Hitchcock Highway constitutes asovereign act. As such, all the corresponding facets of that Government actionlikewise comprise a sovereign act. If this Court allowed the plaintiff to attack asingle aspect of the action, such as the road closure schedule, this disintegration ofthe doctrine would subvert the justification for the precept. What would be next:where the engineers choose to locate the highway, when the majority ofconstruction or demolition should take place, how the excavation crew shouldprosecute the blasting, or what process to use in transporting fill? While faciallydubious, in challenging the daytime road closure schedule, the plaintiff in factseems to challenge all of these aspects of the highway construction process. ThisCourt, however, denies the plaintiff the opportunity to dissect this sovereign act.
The subject road reconstruction and improvement comprise a sovereign act ofpublic and general nature, as even admitted by the plaintiff, and this Court finds
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 16 of 25
component of the sovereign acts doctrine, courts merely have required that: (i) there be a causalconnection between the sovereign act and the interference that brought about the nonperformanceof the contract; and (ii) in appropriate circumstances, the sovereign act triggering this chain ofevents itself not be arbitrary, capricious or unauthorized. See
, 267 U.S. at 461(government not liable for obstruction of the performance of a contract “resulting from” itssovereign acts); Wah Chang Corp. v. United States
, 282 F.2d 728, 735 (Ct. Cl. 1960); Ottinger v.
, 88 F. Supp. 881 883 (Ct. Cl. 1950) (sovereign act defense not available forunauthorized conduct); Coast Federal Bank, FSB v. United States
, 48 Fed. Cl. 402, 429 (2000),aff’d
, 323 F.3d 1035 (Fed. Cir. 2003) (“[t]he sovereign acts doctrine requires that the breachingact be viewed as the particular [statutory] provisions . . . causing the breach of plaintiff’scontract”); see also McCloskey & Co. v. United States
, 98 Ct. Cl. 90, 113 (1942). Theserequirements, of course, are met here.
As a matter of judicial economy, predictability and precedent, plaintiffs’ argument leaves
much to be desired. Their backward-looking approach threatens to convert every invocation ofthe sovereign acts doctrine into a far-reaching, de novo
examination of agency or evenCongressional conduct, likely putting this court in the position of having to second guessdecisions rendered by other courts. Their approach would deprive defendant of any predictabilityin taking truly sovereign acts without fear of contract liability. If plaintiffs are correct, an agencyriveted upon the public good, and unmotivated whatsoever by any desire to relieve itself of anycontractual obligations, would still be subject to liability unless it could show that, over anextended period of time, perhaps spanning multiple Administrations, it could have chosen nopath that would have avoided the sovereign act that violated the contract. Of course, in makingthis contention, plaintiffs disregard the possibility that these earlier actions themselves qualify assovereign acts that would also be protected by the doctrine. Indeed, they do not assert that theBureau or any other Federal agency failed to adopt the cited ameliorative steps with some viewtoward eventually violating the contracts or otherwise because of self-interest. Rather, theywould predicate liability here based upon an extended concept of negligence (perhapsapproaching strict liability) that hinges on a healthy dose of 20-20 hindsight – that the Bureaufailed to appreciate and adopt, prior to 2001, alternatives which, if executed, would have avoidedthe breaching application of the ESA. But, no authority – certainly, nothing that plaintiffs cite –suggests that the sovereign acts defense, and, correspondingly, defendant’s liability in contract,should hinge on such captious considerations.
no authority for reviewing every minor decision that is made in implementing thesovereign act at issue.
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 17 of 25
3. Accordingly, while plaintiffs argue that discovery is now needed to resolve this case,17
it is plain that discovery would served no purpose, at least in terms of producing evidencerelevant to whether the sovereign acts doctrine applies here.
Relatedly, plaintiffs next assert that the act which must be sovereign here is not the
passage of the ESA, but rather the agency’s application of that statute to their contracts. Theycontend that the latter actions “targeted” their contracts and should not qualify as sovereign acts. This claim, however, again fundamentally misconceives the nature of the sovereign acts defense. First, the critical focus here must be on the extent to which the ESA compelled the agency to act. If, as concluded above, the statute left the agency with little alternative but to deny water, itmakes little sense legally to focus on the individual application of the law, rather than its passage,in applying the sovereign acts doctrine.18 Every normative statute, after all, eventually is applied
17 It is worth noting that, earlier in this case, plaintiffs seemingly took the position that
the ESA dictated the Bureau’s action. Thus, in previously seeking partial summary judgmentherein, plaintiffs asserted that it was uncontroverted that the biological opinions issued by FWSand NMFS in 2001 “prohibited Reclamation from delivering water to plaintiffs in accordancewith historical practices on the ground that it was ‘likely to jeopardize the continued existence’ ofthe Lost River and Shortnose sucker fish and the coho salmon.” Such statements might well beviewed as “admissions on file” within the meaning of RCFC 56(c), so as to preclude plaintiffsfrom raising factual issues as to the same claims now, see Woods v. City of Chicago
, 234 F.3d979, 989 (7th Cir. 2000), cert. denied
, 534 U.S. 955 (2001); 10A Charles Alan Wright, Arthur R.
Miller & Mary Kay Kane, Federal Practice & Procedure §§ 2722, 2724. The court, however, haschosen to address directly the relevance of plaintiffs’ current factual claims to make clear thatthey are irrelevant under the law.
18 While plaintiffs assert that the Bureau had ample discretion not to follow the biological
opinions, the main case that they cite for that proposition, Bennett v. Spear
, 520 U.S. 154 (1997),in fact, emphasizes just how little, if any, discretion the Bureau had to deviate from thealternatives set forth in the opinions. In Bennett
, Justice Scalia, writing on behalf of the courtstressed the “powerful coercive” and “virtually determinative” effect of such biological opinions. Id
. at 170. Indeed, he noted that an agency that disagrees with such opinion “does so at its ownperil (and that of its employees)” because such a disagreement “ordinarily requires species andhabitat investigations that are not within the agency’s expertise” and risks “substantial civil andcriminal penalties, including imprisonment.” Id
. at 169-70. Plaintiffs have not explained how,consistent with the dictates outlined in Bennett
, the Bureau could have, during the few months ithad and consistent with various court rulings, performed the sorts of studies that would haveallowed it to avoid the alternatives in the biological opinions. Rather, they cite studies that post-date the period in question and that obviously were not fully credited by the courts that latercontinued to enjoin the Bureau from releasing irrigation water. And while plaintiff raise variousother factual issues – for example, that the biological opinions themselves were defective – their
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 18 of 25
to an individual circumstance – either voluntarily by those subject to the law, administratively byan agency charged with administering the law, or via enforcement. The focus of, and resultunder, the sovereign acts doctrine should not shift depending upon how the law is applied – theanalysis should not focus on the passage of the law for those who comply voluntarily, but uponthe enforcement of the law for those who refuse to do so or debate the law’s applicability. Rather, at least where the law does not imbue an agency with substantial discretion, the focusshould remain fixed on what the law demands, not how it is applied. Compare Yankee Atomic
,112 F.3d at 1575 (the inquiry “focuses on the scope of the legislation”).
It is further obvious that, in performing this analysis, the court should avoid semantics.
While the sovereign act doctrine sometimes is framed as excluding actions that “target” a
contract, the latter phrase, despite plaintiffs’ claims, neither reflects any metonymic logic nor
subsumes every action directed at a contract or taken by the government with knowledge thereof.
The question instead is why
a particular action is taken. If the violation of a contract occurs
owing to the need to preserve the common good and the general welfare, rather than to relieve
the United States of its contractual or financial responsibilities, the action should be viewed as
sovereign in nature and covered by the implied contractual right of the government to meet its
responsibilities to the citizenry at large, unless waived in unmistakable terms. As this court
stated in Casitas Municipal Water Dist. v. United States
, 72 Fed. Cl. 746 (2006), “[t]he targeting
of a particular contract is not itself an action that would foreclose reliance on the sovereign acts
doctrine,” provided “‘the action’s impact upon public contracts is . . . merely incidental to the
accomplishment of a broader governmental objective.’” Id
. at 754 (quoting Winstar
, 518 U.S. at
1. Lastly, plaintiffs asseverate that, even if applicable, the sovereign acts defense does
not necessarily excuse defendant’s nonperformance here, as defendant has not shown that itmeets the common law test for impossibility of performance. There is certainly decisionalsupport for this analysis. Thus, the plurality in Winstar
clearly felt that the sovereign actsdoctrine was merely a prelude to the application of a common law impossibility defense:
makes clear, that defense simply relieves the Government ascontractor from the traditional blanket rule that a contracting party may not obtaindischarge if its own act rendered performance impossible. But even if theGovernment stands in the place of a private party with respect to “public andgeneral” sovereign acts, it does not follow that discharge will always be available,for the common-law doctrine of impossibility imposes additional requirementsbefore a party may avoid liability for breach. As the Restatement puts it,
brief is more notable for what it does not say – that is, there is no assertion that the Bureau’sapplication of the ESA to the contracts in question was done based on agency self-interest orwith anything other than the public good in mind.
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 19 of 25
“[w]here, after a contract is made, a party's performance is madeimpracticable without his fault by the occurrence of an event thenon-occurrence of which was a basic assumption on which thecontract was made, his duty to render that performance isdischarged, unless the language or the circumstances indicate thecontrary.” Restatement (Second) of Contracts § 261.
. . . . Thus, since the object of the sovereign acts defense is to place theGovernment as contractor on par with a private contractor in the samecircumstances, Horowitz
, 267 U.S., at 461 . . . the Government, like any otherdefending party in a contract action, must show that the passage of the statuterendering its performance impossible was an event contrary to the basicassumptions on which the parties agreed, and must ultimately show that thelanguage or circumstances do not indicate that the Government should be liable inany case.
, 518 U.S. at 904 (citations omitted). Under this approach, defendant, in particular,would be obliged to show that the passage of the ESA was an event the “non-occurrence ofwhich was a basic assumption on which the [water] contracts were made.” Id
.19 Various cases inthis court have applied a similar analysis.20
19 As described by Professor Schwartz –
In addition, the plurality reads preconditions into the sovereign acts doctrine thatare traditionally associated with the common law impossibility doctrine applicable to private contracts. These include: (1) a requirement that the possibility ofregulatory interference by governmental action must not have been foreseeable bythe contracting parties and (2) a caveat that the sovereign acts doctrine createsonly a rebuttable presumption that the government is immunized from liability forbreach of contract arising from public and general regulatory change.
Joshua Schwartz, “The Status of the Sovereign Acts and Unmistakability Doctrines in the Wakeof Winstar
: An Interim Report,” 51 Ala. L. Rev. 1177, 1191-92 (2000).
20 See Precision Pine
, 50 Fed. Cl. at 72-73; Croman Corp. v. United States
, 49 Fed. Cl.
776, 781-82 (2001), vacated
, 89 Fed. Appx. 237 (Fed. Cir. 2004); Scott Timber Co. v. UnitedStates
, 40 Fed. Cl. 492, 507-08 (1998), modified
, 44 Fed. Cl. 170 (1999), aff’d
, in part
, 333 F.3d 1358 (Fed. Cir. 2003).
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But, the portion of the plurality’s opinion quoted above did not enjoy the support of five
justices and thus is not binding.21 Indeed, given the fractured nature of the opinions in Winstar
,22it is difficult to say whether referring to the sovereign acts doctrine as a “defense” is truly amisnomer, with the doctrine perhaps better described as a precondition to the application of amore traditional impossibility defense. See
Gerard Wimberly & Kristin Amerling, “SovereignActs Doctrine After Winstar
,” 6 Fed. Cir. B.J. 127, 144 (“The Supreme Court in Winstar
. . . didnot produce a coherent doctrinal test for applying the sovereign acts defense.”). Critically, thelatter common law defense brings with it additional requirements regarding what the parties“basic assumptions” were in drafting the contract, requirements that have not been historicallyassociated with the sovereign acts doctrine. While the plurality opinion obviously should begiven considerable weight (and, indeed, in other respects, has been followed in this and manyother opinions), there are many reasons why its treatment of the sovereign acts doctrine as beinglinked to the common law impossibility defense should not be viewed as the law – certainly, notin this circuit, where the sovereign acts doctrine first emerged.
2. For starters, with all due respect, Horowitz
plainly enunciated an independent defense
to government liability, not one subservient to the separate application of a common law
21 Although the Federal Circuit has never directly dealt with this question, the decisional
law unanimously holds that an opinion that does not draw the support of a majority of votingjustices is not precedential. See
, Texas v. Brown
, 460 U.S. 730, 737 (1983) (stating that aplurality view that does not command a majority is not binding precedent); Hertz v. Woodman
,218 U.S. 205, 213-14 (1910) (“[T]he principles of law involved not having been agreed upon bya majority of the court sitting prevents the case from becoming an authority for the determinationof other cases, either in [the Supreme Court] or in inferior courts.”); see also Positive SoftwareSolutions, Inc. v. New Century Mortg. Corp.
, 2007 WL 111343 at *3 (5th Cir. Jan. 18, 2007) (enbanc); Barbour v. Haley
, 471 F.3d 1222, 1229 (11th Cir. 2006) (“[p]lurality opinions are notbinding on this court”); DeStefano v. Emergency Housing Group, Inc.
, 247 F.3d 397, 418 (2dCir. 2001); compare Commonwealth Edison Co. v. United States
, 271 F.3d 1327, 1339 (Fed. Cir.
2001) (en banc), cert. denied
, 535 U.S. 1096 (2002) (court obliged to follow the view of amajority of justices even if they are spread between a plurality and dissents).
22 Justices Stevens and Breyer joined Justice Souter's full plurality opinion, while Justice
O’Connor joined the opinion with the exception of two sections addressing the issue of whetherthe Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73,103 Stat. 183 (1999), constituted a “public and general” act of the sovereign. Winstar
, 518 U.S.
at 843-910. Justice Breyer wrote a concurring opinion criticizing the unmistakability doctrine. Id
. at 910-18. Justices Scalia, Kennedy, and Thomas, who concurred only in the result, arguedthat the unmistakability doctrine did apply but that the contracts at issue met its requirements. Id
at 919-24. Chief Justice Rehnquist and Justice Ginsburg dissented, concluding that the thrifts didnot meet the unmistakability doctrine. Id
. at 924-37. Chief Justice Rehnquist, in a section of thedissent in which Justice Ginsburg did not join, also concluded that the sovereign acts doctrinewas not satisfied. Id
. at 931-34; see also Yankee Atomic
, 112 F.3d at 1575 n.5.
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 21 of 25
impossibility defense. The latter defense is neither mentioned nor even obliquely referenced inthe one-page opinion in Horowitz
– an observation made by Chief Justice Rehnquist in hisdissent in Winstar
. See Winstar
, 518 U.S. at 931 (Rehnquist, C.J., dissenting) (“[b]ut neitherHorowitz
, nor the Court of Claims cases upon which it relies, confine themselves to so narrow arule”). Second, in marking the boundaries of the sovereign acts defense, Horowitz
relied heavilyupon a series of Court of Claims decisions – Deming v. United States
, 1 Ct. Cl. 190, 191 (1865);Jones
, 1 Ct. Cl. at 384, and Wilson v. United States
, 11 Ct. Cl. 513, 520-21 (1875) – none ofwhich give the slightest hint that the sovereign acts doctrine should be viewed as a preconditionto a common-law impossibility defense. For the plurality in Winstar
to be correct, then,Horowitz
would have to be viewed as having sub silentio
modified the sovereign acts defense ina way unenvisioned by any of the Court of Claims decisions upon which it relied.23 Nor was thesovereign acts doctrine ever viewed as a prong of a common law impossibility defense in thelengthy series of Court of Claims and Federal Circuit decisions that applied the doctrine duringthe interim between Horowitz
.24 Many of these cases likely would not have been
23 Indeed, the Supreme Court, in the year after Horowitz
was decided, affirmed a decision
of the Fourth Circuit, in which the latter applied the sovereign acts doctrine without any referenceto the impossibility defense. See Maxwell v. United States
, 3 F.2d 906, 911-12 (4th Cir. 1935),aff’d
, 271 U.S. 647 (1926).
24 A long and unbroken line of cases from the old Court of Claims and the Federal
Circuit, many of which arose during or shortly after the Second World War, applied thesovereign acts defense without any mention or hint of the impossibility defense. See, e.g.
, AtlasCorp. v. United States
, 895 F.2d 745, 754 (Fed. Cir.), cert. denied
, 498 U.S. 811 (1990)(Uranium Mill Tailings Radiation Control Act “and its regulations are sovereign acts which thegovernment has undertaken for the public good;” “[t]hose acts are not a contractual modificationof the agreement . . . and cannot alone serve as the basis for a breach claim”); Tony Downs FoodCo. v. United States
, 530 F.2d 367, 370-71 (Ct. Cl. 1976) (sovereign acts doctrine barred pricerelief where excess costs were the result of an Executive order); Bruno New York Indus. Corp. v.
, 342 F.2d 75, 79-80 (Ct. Cl. 1965) (adopting the opinion and recommendation ofthe Trial Commissioner on defendant’s motion for summary judgment, who held that defendantwas not liable to plaintiff for increased costs caused by Electronics Production Resources Agencydirectives which had the effect of restricting plaintiff’s production of the contract items);Gothwaite v. United States
, 102 Ct. Cl. 400 (1944) (sustaining defendant’s demurrer to plaintiff’spetition for damages based on delays caused by War Powers Board regulations which preventedplaintiff from obtaining necessary materials to perform under the contract, stating: “This was anAct of a general and public character affecting all persons situated similarly to plaintiff. Itauthorized the exercise of sovereign powers in the defense of the nation. That the Government isnot liable for such acts needs no argument. We have so held from the creation of this court.”);J.F. Barbour & Sons v. United States
, 63 F. Supp. 349, 350-51 (Ct. Cl. 1945) (sustainingdefendant’s demurrer because plaintiff stated no cause of action when it complained thatdefendant’s decision to direct materials plaintiff needed to perform under the contract to otherprojects, as a result of priorities dictated by world war, made it impossible for plaintiff toperform); Standard Accident Ins. Co. v. United States
, 59 F. Supp. 407, 409-10 (Ct. Cl. 1945),
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 22 of 25
decided in the government’s favor had the traditional impossibility defense, with its additionalrequirements, been employed.25 Third, the only Federal Circuit decision to apply the sovereignacts doctrine since Winstar
– Yankee Atomic
– indisputably did so without conducting anyimpossibility analysis whatsoever, reversing a judgment against the United States in the process. Thus, upon concluding that the Energy Policy Act constituted a sovereign action – “a generalexercise of Congress’s taxing power for the purpose of addressing a societal problem” – theYankee Atomic
court immediately proceeded to consider whether the unmistakability doctrineapplied. 112 F.3d at 1577. And upon finding that the contract in question did not unmistakablyexempt the utility from subsequent sovereign acts, it held that the government was not liable. Id
at 1581-82; see also Commonwealth Edison Co. v. United States
, 46 Fed. Cl. 29, 35-36 (2000),aff’d
, 271 F.3d 1327 (Fed. Cir. 2001), cert. denied
, 535 U.S. 1096 (2002).26
Treating the sovereign act doctrine as a prelude to a common law impossibility defense,
indeed, clashes with the underlying rationale of that doctrine and of the unmistakability doctrine,as well. Both doctrines exist for reasons totally unrelated to those underlying the common lawimpossibility defense – reasons that stem from the responsibilities of government, rather thanprivate, actors. First, unlike the common law impossibility defense, both doctrines hinge on thenotion that the federal government, when acting in a contracting capacity, cannot be held liabledirectly or indirectly for the public acts of the United States as sovereign. Jones
, 1 Ct. Cl. at 384
, 326 U.S. 729 (1945) (sustaining defendant’s demurrer on plaintiff’s claim forexcess costs it incurred as a result of government’s decision to enter into other contracts pursuantto national defense statutes, which had the effect of making plaintiff’s performance moreexpensive than originally contemplated); Pearson, Dickerson, Inc. v. United States
, 115 Ct. Cl.
236 (Ct. Cl. 1950) (holding that plaintiffs were not entitled to recover damages when, inter alia
,plaintiffs knew that this was a war contract, and that the War Department would have to setpriorities for shortages of materials, and that delays might result); Barnes v. United States
, 105 F.
Supp. 817, 820 (1952) (dismissing plaintiff’s claim for increased costs on a construction projectwhich it incurred as a result of War Manpower Commission regulations affecting wage rates);see also Wunderlich Contracting Co. v. United States
, 351 F.2d 956, 967 (Ct. Cl. 1965);Aragona Construction Co., Inc. v. United States
, 165 Ct. Cl. 382, 388 (1964); compare Sun OilCo. v. United States
, 572 F.2d 786, 817 (Ct. Cl. 1978).
, Amino Bros. Co. v. United States
, 372 F.2d 485, 490-91 (Ct. Cl.), cert.
, 389 U.S. 846 (1967) (opening of flood gates that washed out contractors’ work wassovereign act even though the contract included a “changed conditions” clause that allocatedcertain risks among the parties).
in the recent decision of this court in Stockton East Water Dist. v. United States
2007 WL 548819 (2007) could be read as indicating that the Federal Circuit has held that thesovereign acts doctrine applies only where performance is “objectively impossible.” Id
. at *59(quoting Seaboard Lumber Co. v. United States
, 308 F.3d 1283, 1294 (Fed. Cir. 2002)). However, Seaboard Lumber
did not consider the sovereign acts doctrine, but instead merelyinvolved a contractor asserting an impossibility defense. 308 F.3d at 1294.
Case 1:01-cv-00591-FMA Document 295 Filed 03/16/2007 Page 23 of 25
(“The two characters which the government possesses as a contractor and as a sovereign cannotbe thus fused; nor can the United States while sued in the one character be made liable indamages for their acts done in the other.”); Deming
, 1 Ct. Cl. at 191 (“The United States as acontractor are not responsible for the United States as a lawgiver.”).27 Second, the doctrinesproceed upon the well-established principle that “[t]he sovereign act defense is an inherentelement of every contract to which the government is a party, whether or not explicitly stated.” Hughes Communications Galaxy, Inc. v. United States
, 998 F.2d 953, 959 (Fed. Cir. 1993); seealso General Dynamics Corp. v. United States
, 47 Fed. Cl. 514, 534 (2000); Walter Dawgie SkiCorp.
, 30 Fed. Cl. at 131. In other words, unless the contract, in unmistakable terms, precludesthe government from escaping liability for its sovereign acts, then the parties are presumed tohave reserved to the United States the right to perform such acts without incurring liability. Viewed in this fashion, the sovereign act and unmistakability doctrines intertwine to create a“double helix” of contract interpretation applicable only to sovereign entities, see Cuyahoga
, 57Fed. Cl. at 776, no strand of which depends upon – or should depend upon – the existence ofparameters uniquely related to a private common law defense, to wit
, the common law version ofthe impossibility defense.
27 Various cases holding that the common law impossibility requirements must be met
mistakenly cite older Court of Claims cases for the proposition that the sovereign acts doctrine isdesigned to treat the government like a private individual, with the latter able to invoke thecommon law impossibility defense. In fact, the early cases suggest a different rationale to thesovereign acts defense – that a private individual would not be liable if the government passes astatute that prohibits performance and that the government should fare no worse simply it is adefendant in a contract action. Summarizing these older cases, the Court of Claims, in O’Neill v.
, 231 Ct. Cl. 823 (1981), stated:
From its earliest days, however, application of the sovereign act doctrine has
proceeded from the recognition that in governing the country, the Government’s
actions, otherwise legal, will occasionally incidentally impair the performance of
contracts. Were those contracts exclusively between private parties, the party hurt
by such governing action could not claim compensation from the other party for
the governing action
. Given the large number of contracts the Government
contracts will sometimes be affected by those same governing acts. The
policy underlying the sovereign act doctrine is that in those circumstances, the
Government in its contracting role, like its private counterpart, should not incur
liability for its act done in the governing role
. at 826 (emphasis in original); see also Jones
, 1 Ct. Cl. at 384-85 (“Though [the government’s]sovereign acts performed for the general good may work injury to some private contractors, suchparties gain nothing by having the United States as their defendants.”). Accordingly, thesovereign acts defense focuses only on a particular form of impossibility – that prompted bysovereign acts.
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Grafting the sovereign acts doctrine onto a common law impossibility defense thus
largely deprives the former of its raison d’etre
– enabling “the government to serve the publicand respond to crises without fear of liability for the incidental effects its actions may have on itswide range of contracts.” “The Sovereign Acts Doctrine After Winstar
, at 130; seeDeming
, 1 Ct. Cl. at 191. Such an approach, moreover, raises serious interaction questionsinvolving the common law impossibility defense and the unmistakability doctrine. Bothconcepts concern whether the parties anticipated that certain actions would render performanceimpracticable, but approach that issue with diametrically different presumptions: theunmistakability doctrine proceeds from the notion that, absent clear indication otherwise, thegovernment reserves its sovereign powers, while at least the common-law version of theimpossibility defense proceeds from the reverse assumption, that is, that unless the governmentcan show otherwise, its sovereign powers were relinquished.28 These two approaches cannotpeacefully coexist where a contract anticipates that there will be some situations of government nonperformance, but does not absolve the government entirely of liability for every sovereignact. Under the traditional sovereign acts defense, the fact, for example, that the parties hereundoubtedly did not consider the possibility of the passage of the ESA or a like statute isirrelevant. Under the common law impossibility test, however, the fact that the parties allocatedsome risks in the water shortage clauses seemingly would preclude invocation of the broadersovereign acts doctrine. Cf. Precision Pine & Timber
, 50 Fed. Cl. at 72-73 (finding that thesuspension of a contract owing to the ESA was a sovereign act, but that there was a breachbecause the contract anticipated that it could be suspended for other environmental reasons). Thelatter result makes little sense, if, as is true, the purpose of the sovereign acts doctrine is to retainthe ability of the government to respond to unanticipated public needs without the specter ofliability.
28 To appreciate this, consider Justice Scalia’s exegesis on how the sovereign acts and
[I]t is reasonable to presume (unless the opposite clearly appears
) that the
sovereign does not
promise that none of its multifarious sovereign acts, needful
for the public good, will incidentally disable it or the other party from performing
one of the promised acts . . . . Governments do not ordinarily agree to curtail
their sovereign or legislative powers, and contracts must be interpreted in a
common-sense way against that background understanding.
, 518 U.S. at 921 (Scalia, J., concurring); see also
Joshua Schwartz, “AssemblingWinstar:
Triumph of the Ideal of Congruence in Government Contracts Law?,” 26 Pub. Cont.
L.J. 481, 554 (1997). An analytical approach that treats the sovereign acts doctrine as a preludeto an impossibility defense also creates problems for the reserved powers doctrine, which holdsthat some sovereign powers cannot be ceded even if the contractual intent to do so is patentlyclear. See
, Atlantic Coast Line R. Co. v. City of Goldsboro
, 232 U.S. 548, 558 (1914); seealso Winstar
, 518 U.S. at 889 & n.34.
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3. For these many reasons, the court concludes that there is no callus bridge between the
scion of the sovereign acts doctrine and the stock of the traditional common-law impossibility
defense. Rather, Horowitz
, as well as a more than a dozen cases pre- and post-dating that
decision, establish that if the sovereign acts doctrine is applicable, the government is not liable
for contract violations caused by a sovereign act, unless the unmistakability doctrine is triggered.
With all due respect, the plurality opinion in Winstar
neither alters this conclusion nor upsets the
phalanx of binding precedent from which it springs. Here, as plaintiffs readily admit, there are
no unmistakable terms in any of the contracts precluding the government from exercising its
sovereign powers – indeed, the water shortage clauses in most of the contracts reflect the
opposite intent. Instead, plaintiffs assert that any silence of the contracts on this point should be
read in their favor, as precluding the United States from enforcing the ESA. That claim,
however, is decidedly contrary to the law regarding the unmistakability doctrine and, indeed,
would turn that doctrine on its head. See Winstar
, 518 U.S. at 872 (“Sovereign power governs all
contracts subject to the sovereign’s jurisdiction, and will remain intact unless surrendered
unmistakable terms.” (emphasis added)); Cuyahoga
, 57 Fed. Cl. at 763.
Finding the remainder of plaintiffs’ arguments unpersuasive, the court, therefore,
concludes that sovereign acts occurred here that prevented defendant from performing under thecontracts and that no breach of the contracts at issue occurred.
This court need go no farther. Based on the foregoing discussion, the court GRANTS
defendant’s motion for summary judgment. The Clerk is hereby ordered to dismiss thecomplaints in question, with prejudice.
IT IS SO ORDERED
s/ Francis M. Allegra Francis M. AllegraJudge
Diplomate American Board of Allergy and Immunology IMMUNOTHERAPY – HYPOSENSITIZATION – ALLERGY SHOTS Allergic hyposensitization therapy is a well-established form of medical treatment that attempts to decrease the allergy sufferer’s allergic sensitivity. It entails giving the patient repeated injections of the allergenic materials to which he is most sensitive. The offending substances
The British Journal of Psychiatry (2009)194, 252–259. doi: 10.1192/bjp.bp.108.057554Current episode duration, weeks: mean (s.d.)Montgomery–A˚sberg Depression Rating ScaleHamilton Rating Scale for Depression–17SSRI, selective serotonin reuptake inhibitor. Antidepressant dosage in milligrams by study week12 for MADRS (w2(1)=5.87, P=0.015) and BDI (w2(1)=7.14,Response and remission with