Ak-Chin Indian Community v. Central Arizona Water Conservation District

          ORDER

          DAVID G. CAMPBELL SENIOR UNITED STATES DISTRICT JUDGE.

         Plaintiff Ak Chin Indian Community (the “Community”) sued Defendant Central Arizona Water Conservation District (“CAWCD”) for declaratory judgment and a permanent injunction regarding delivery of Central Arizona Project (“CAP”) water to the Community. Doc. 1. CAWCD counterclaimed, seeking the opposite result. Doc. 16. The Court joined the United States as a party under Rule 19 (Doc. 26), and the United States filed a crossclaim against CAWCD seeking declaratory relief regarding interpretation of relevant statutes and contracts as they relate to the Community's water rights (Doc. 102). CAWCD asserted claims against the United States, but the Court dismissed them on sovereign immunity grounds. Doc. 89. Thus, the remaining claims in this case are the Community's claims against CAWCD, CAWCD's claims against the Community, and the United States' claims against CAWCD.

         The parties have filed motions for summary judgment (Docs. 108, 107, 112), and oral argument was held on March 14, 2019. On the merits of this water dispute, the Court will grant the United States' motion for summary judgment on its claims against CAWCD and grant the Community's motion on CAWCD's counterclaims against the Community. The Court will grant CAWCD's motion to dismiss the Community's claims against it for lack of standing, and for the same reason deny the Community's motion on its claims against CAWCD.^[1]

         I. Undisputed Background Facts.

         The Community is a federally recognized Indian tribe. See Doc. 106 ¶ 1. CAWCD is a multi-county water conservation district and municipal corporation authorized to operate and maintain the CAP, a system of canals, aqueducts, and related structures that deliver Colorado River water throughout central and southern Arizona. Doc. 106 ¶ 2. “The United States” in this case includes a number of federal officials and agencies that oversee reclamation matters. The Court will use the term “Secretary” to describe the role of the Secretary of the Interior in matters discussed in this order.

         A. The 1984 Act and 1985 Contract.

         This case concerns the Ak Chin Water Rights Act of 1984, referred to and cited in this order as the “1984 Act.” See 1984 Act, Pub. L. No. 98-530, 98 Stat. 2698 (Oct. 19, 1984). The 1984 Act addressed water the Community is entitled to receive from the Colorado River.

         Section 2(a) of the Act required the Secretary to deliver a permanent water supply to the Community of “not less than seventy-five thousand acre-feet of surface water suitable for agricultural use except as otherwise provided under subsections (b) and (c).” 1984 Act, § 2(a).^[2]

         Section 2(b), which is the section in dispute in this case, concerns an additional 10, 000 acre-feet (“AF”) of water the Community may receive under certain conditions. It provides that “[i]n any year in which sufficient surface water is available, the Secretary shall deliver such additional quantity of water as is requested by the Community not to exceed ten thousand acre-feet.” 1984 Act, § 2(b). The section further states that “[t]he Secretary shall be required to carry out this obligation referred to in this subsection only if he determines that there is sufficient capacity available in the main project works of the Central Arizona Project to deliver such additional quantity.” Id.

         Section 2(c) of the 1984 Act addresses the same obligation as § 2(a), but reduces the amount of water deliverable in “time of shortage” from 75, 000 AF to 72, 000 AF. Id., § 2(c). Section 2(c) is not at issue in this case.

         Section 2(f) identifies the source of water for the 75, 000 AF called for in § 2(a) and, in times of shortage, the 72, 000 AF called for in § 2(c). It states that “[t]he water supply referred to in subsections (a) and (c) shall be supplied from an aggregate of the following”: (1) a permanent supply of 50, 000 AF to be diverted from the Colorado River under the Act of July 30, 1947 (61 Stat. 638), for beneficial use on lands of the Yuma Mesa Division of the Gila Project; and (2) CAP water allocated to the Community in the Notice of Final Water Allocations to Indians and non-Indian Water Users and Related Decisions (48 Fed. Reg. 12446, March 24, 1983) as is necessary to fulfill the Secretary's water delivery obligations. Id.

         These statutory water rights are also reflected in a contract between the Secretary and the Community that will be referred to in this order as “the 1985 Contract.” The 1985 Contract tracks exactly the provisions of §§ 2(a), (b), (c), and (f) of the 1984 Act, but renumbers them as §§ 3(a), (b), (c), and (f). See Doc. 102-1. Under the 1985 Contract, the Community submits a schedule of requested water deliveries to the Secretary by October 1 of each year, and the Secretary reviews the Community's requests to ensure they are consistent with the contract. Id. §§7(a)(1)-(2). When the Secretary orders the water to be delivered, it is delivered to the Community through the CAP operated by CAWCD.^[3]

         B. CAWCD's Contracts with the United States.

         In 1988, CAWCD and the United States contracted to construct the CAP and for the CAWCD to repay the United States for the construction. Docs. 102-3 § 2.1; 102-4. Earlier, in August 1987, CAWCD and the United States had entered into a contract for the transfer of operation and maintenance of CAP facilities to the CAWCD. See Docs. 102-2; 102-3 § 2.2. Pursuant to these contracts, CAWCD and the United States executed an operating agreement in 2000 to cover the details of CAP operations, maintenance, funding, environmental compliance, and commitments (the “2000 Operating Agreement”). Doc. 102-3 §§ 2.3; 3.1. Under the 2000 Operating Agreement, CAWCD is required to “[m]ake deliveries of Project Waters and collect payments therefor.” Id. § 7.2.4. The Secretary must provide CAWCD with annual water delivery schedules for Indian contractors. Id. § 7.3.3. If CAWCD cannot confirm that all of the Indian water can be delivered, it must meet and confer with the United States to determine water deliveries. Id.

         In 2007, CAWCD and the United States entered into a stipulated judgment in a dispute over the 1988 repayment contract (“2007 Stipulation”). See Doc. 102-5; see also Doc. 106 ¶ 21. Section 5 of the 2007 Stipulation states that “CAWCD shall have the exclusive right in its discretion to sell or use all Excess Water for any authorized purpose of the CAP.” Doc. 102-5 § 5(d)(2). “‘Excess Water' is all Project Water that is in excess of the amounts used, resold, or exchanged pursuant to long-term contracts and subcontracts for Project Water service.” Id., § 5(d)(1).

         C. Other Relevant Statutes and Agreements.

         1. Arizona Water Settlement Act.

         In 2004, Congress enacted the Arizona Water Settlement Act (“AWSA”). See PL 108-451, 118 Stat. 3478 (Dec. 10, 2004). The AWSA limited the total amount of CAP entitlements under long-term contracts to 1, 415, 000 AF, of which 650, 724 AF is designated for Arizona Indian tribes (“Indian Pool” water). Id. § 104(c)(1)(A)(i)(I)-(II). Of this amount, 67, 300 AF is to be used for resolving Indian water claims in Arizona through “future Arizona Indian water rights settlement agreements approved by Congress after the date of enactment of [the AWSA].” Id.

         2. San Carlos Water Settlement.

         In 1992, Congress approved a water rights settlement establishing the rights of the San Carlos Apache Tribe. See Reclamation Projects Authorization and Adjustments Act of 1992, PL 102-575, §§ 3701-3709, 106 Stat. 4600 (Oct. 30, 1992) (the “San Carlos Act”). Congress directed the Secretary to reallocate the unused water from the Community's permanent allocation set forth in § 2(f)(2) of the 1984 Act. Id. § 3704. The Secretary was also required to amend the CAP water delivery contract between the United States and the Community “as [] necessary to satisfy the requirements of” the reallocation of the § 2(f)(2) water. Id. § 3706.

         D. The Current Dispute and the Parties' Positions.

         Between 2003 and 2018, the Community requested the 10, 000 AF of additional water under § 2(b) of the 1984 Act every year, and the Secretary agreed to provide it. See Doc. 106 ¶¶ 24-25. CAWCD consistently asserted that the Community was not entitled to water in excess of the sources specified in § 2(f). See id. ¶ 25. CAWCD nonetheless usually provided the extra water to the Community. See Docs. 1 ¶ 4; 1-1; 106 ¶ 25; 113-12 to 14. On October 1, 2016, the Community submitted its 2017 water order to the Secretary. Doc. 1 ¶ 36. The Community requested its full 75, 000 AF under § 2(a) and 10, 000 AF under § 2(b), plus additional water to cover transmission losses. Id. ¶ 37. The United States determined there was sufficient surface water and canal capacity available and issued the full order to CAWCD. Id. ¶ 38. CAWCD agreed to provide the water for 2017, but asserted that it no longer would deliver the Community's 10, 000 AF under § 2(b). Docs. 1 ¶ 40; 1-1 at 63-64. The Community then filed this lawsuit. The parties' positions can be summarized as follows.

         The United States and the Community read the 1984 Act and the 1985 Contract as entitling the Community to § 2(a)'s permanent allotment of 75, 000 AF each year from the dedicated sources in § 2(f), and to the additional 10, 000 AF called for in § 2(b) whenever the Secretary determines that “sufficient surface water is available” and CAP has the capacity to deliver the water. 1984 Act, § 2(b). Because all of the water in the CAP system is either under contract with system users or reserved for resolving future Indian disputes, there is no undesignated water in the CAP system to fill the § 2(b) provision. The United States and the Community contend, however, that the § 2(b) water can come from unused CAP water - water for which another entity has an allocation or contractual right but which is not used by that entity in a given year.

         The United States provides this example: Under the AWSA, the Indian Pool portion of CAP water includes 6, 411 AF allocated for an expected future water rights settlement with the Navajo Nation. AWSA § 104(a)(1)(B)(ii). Unlike the Community, the Navajo Nation has not yet reached a water rights settlement with the United States, has no water delivery contract, and therefore does not receive the 6, 411 AF reserved for it each year. The United States and the Community argue that this unused water can be used by the Secretary for other Indian purposes and is “available” within the meaning of § 2(b) to help fill the 10, 000 AF requested by the Community. Doc. 115 at 11-12.^[4]

         CAWCD sees things differently. CAWCD argues that potential users of CAP water can obtain rights to receive such water only in one way: (1) the Secretary must allocate water to the user, and (2) the user must enter a contract with the Secretary for delivery of the water. For ease of reference, the Court will refer to CAWCD's argument as the “two-step rule.” CAWCD argues that both steps must be satisfied before CAP water can be distributed. CAWCD asserts that the Community's right to 75, 000 AF in § 2(a) satisfies the two-step rule because the Community (1) has received an allocation of the water as reflected in § 2(f) of the 1984 Act, and (2) has contracted for the water in § 3(a) of the 1985 Contract (corresponding to § 2(a) of the 1984 Act). Not so for § 2(b) water. CAWCD argues that although the Community has a contract for the 10, 000 AF in § 3(b) of the 1985 Contract, the Secretary has not allocated water to the Community for this purpose and the Community therefore cannot receive it from CAP water. Further, CAWCD asserts that because all water in the CAP system is either contracted for or reserved for settlement of future Indian water disputes, no CAP water is “available” for delivery to the Community within the meaning of § 2(b) of the 1984 Act.

         This includes unused CAP water. CAWCD argues that any unused water in the system belongs to CAWCD under the “excess water” provision of the 2007 Stipulation and cannot be used to fill the requirements of § 2(b). For example, CAWCD contends that because the 6, 411 AF discussed above has been reserved by the Secretary for a future Navajo Nation water settlement, it is not “available” to the Community under § 2(b). The fact that it is not presently used by the Navajo Nation means that it is “excess water” under the 2007 Stipulation that CAWCD can dispose of in its discretion.

         Although no CAP water may be used for § 2(b), CAWCD argues that the Secretary could fulfill its obligation to the Community by providing 10, 000 AF of water from non-CAP sources through leases or other means. Doc. 112 at 7, 11-14. CAWCD argues that the United States is simply trying to avoid this responsibility by appropriating unused water in the CAP system - water that rightly belongs to CAWCD.

         II. Legal Standard.

         Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The parties agree that the facts of this case are not in dispute and that interpretation of the relevant statutes and contracts may occur on the cross-motions for summary judgment.

         “When interpreting a statute, we look first to the plain language of the statute, construing the provisions of the entire law, including its object and policy, to ascertain the intent of Congress.” Maricopa-Stanfield Irr. & Drainage Dist. v. United States, 158 F.3d 428, 435-36 (9th Cir. 1998). Interpretation of a contract entered into pursuant to federal law, when the United States is a party, is governed by federal law. O'Neill v. United States, 50 F.3d 677, 682 (9th Cir. 1995). The plain language of the contract should be considered first. Klamath Water Users Ass'n v. Patterson, 204 F.3d 1206, 1210 (9th Cir. 1999).

         III. The Community's Standing.

         CAWCD argues that the Community lacks standing to sue under CAWCD's operating agreement with the United States. See Doc 112 at 17. Before a third party can obtain relief under a contract, it must show that it is an intended beneficiary of the contract. Klamath, 204 F.3d at 1210.

         Parties that benefit from a government contract are generally incidental beneficiaries and may not enforce the contract absent a clear intent to the contrary. Id. “This clear intent hurdle is not satisfied by a contract's recitation of interested constituencies, vague hortatory pronouncements, statements of purpose, explicit reference to a third party, or even a showing that that the contract operates to the third parties' benefit and was entered into with them in mind.” County of Santa Clara v. Astra USA, Inc., 588 F.3d 1237, 1244 (9th Cir. 2009) (quotation marks and alterations omitted) (citing Klamath, 204 F.3d at 1212; Orff v. United States, 358 F.3d 1137, 1145 (9th Cir. 2004)).

         In Klamath, the Ninth Circuit found irrigators that benefited from a government contract to impound irrigation water were not third-party beneficiaries for purpose of standing, even if the contract was undoubtedly entered into with the irrigators in mind. See Klamath, 204 F.3d at 1212. Similarly, in Orff, the Ninth Circuit found farmers were not clearly intended beneficiaries of a water district contract because the contract did not manifest “an intent to create enforceable rights” in the third-party farmers. 358 F.3d at 1145. The farmers asserted that a provision requiring water users to pay assessments and charges to the water district demonstrated that the contract intended to grant them third-party rights. Id. at 1146. The court found that this provision merely detailed the requirements to obtain water rather than an intent to create enforceable rights for individual water users. Id.

         The Community argues that “[w]hile [it] is not mentioned by name in the United States' various contracts with CAWCD, at least one of those contracts singles out CAWCD's obligations to make water deliveries to Indian contractors such as [the Community].” Doc. 116 at 14 (citing Doc 102-3 § 7.3.3). Because the contracts focus special attention on the obligations owed to Indian contractors, the Community contends, they “evince special consideration for and an intent to confer benefits on Indian contractors that are not generally provided to all contractors.” Id. The Community asserts that the unique trust relationship between the United States and Indian contractors distinguishes the Community and other Indian tribes from the incidental beneficiaries in Klamath, Orff, and other Ninth Circuit cases. The Court disagrees.

         The Community cites no case law to support its position. The closest Ninth Circuit authority involves a consent decree where, applying contract principles, the court held that a tribe did not have third-party beneficiary status despite the tribe's involvement in the decree negotiations, its mention multiple times in the decree, and the decree's granting of certain rights to the tribe. See United States v. FMC Corp.,531 F.3d 813, 820 (9th Cir. 2008). The Ninth Circuit found that two key facts undermined the tribe's third-party beneficiary status: (1) the government, as a party to the decree, had an ongoing incentive to enforce its contract and therefore the party was assumed to be an ...