United States Court of Appeals
for the Federal Circuit
__________________________
KLAMATH IRRIGATION DISTRICT, TULELAKE
IRRIGATION DISTRICT, KLAMATH DRAINAGE
DISTRICT, POE VALLEY IMPROVEMENT
DISTRICT, SUNNYSIDE IRRIGATION DISTRICT,
KLAMATH BASIN IMPROVEMENT DISTRICT,
KLAMATH HILLS DISTRICT IMPROVEMENT CO.,
MIDLAND DISTRICT IMPROVEMENT CO., MALIN
IRRIGATION DISTRICT, ENTERPRISE
IRRIGATION DISTRICT, PINE GROVE
IRRIGATION DISTRICT, WESTSIDE
IMPROVEMENT DISTRICT NO. 4, SHASTA VIEW
IRRIGATION DISTRICT, VAN BRIMMER DITCH
CO., FRED A. ROBISON, ALBERT J. ROBISON,
LONNY E. BALEY, MARK R. TROTMAN, BALEY
TROTMAN FARMS, JAMES L. MOORE, CHERYL L.
MOORE, DANIEL G. CHIN, DELORIS D. CHIN,
WONG POTATOES, INC., MICHAEL J. BYRNE,
DANIEL W. BYRNE, AND BYRNE BROTHERS,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee,
and
PACIFIC COAST FEDERATION OF FISHERMEN’S
ASSOCIATIONS,
Defendant-Appellee.
__________________________
KLAMATH IRRIGATION v. US 2
2007-5115
__________________________
Appeal from the United States Court of Federal
Claims in 01-CV-591, 01-CV-5910 through 01-CV-59125,
Judge Francis M. Allegra.
________________________
Decided: February 17, 2011
_________________________
ROGER J. MARZULLA, Marzulla Law, of Washington,
DC, argued for plaintiffs-appellants. With him on the
brief was NANCIE G. MARZULLA. Of counsel was GREGORY
T. JAEGER.
KATHERINE J. BARTON, Attorney, Appellate Section,
Environment and Natural Resources Division, United
States Department of Justice, of Washington, DC, argued
for all defendants-appellees. With her on the brief for
defendant-appellee United States were RONALD J.
TENPAS, Acting Assistant Attorney General, and KATHRYN
E. KOVACS, Attorney, of Washington, DC, KRISTINE S.
TARDIFF, Attorney, of Concord, New Hampshire, and
STEPHEN M. MACFARLANE, Attorney, of Sacramento,
California.
TODD D. TRUE, Earthjustice, of Seattle, Washington,
for defendant-appellee Pacific Coast Federation of Fish-
ermen’s Associations. Of counsel was SHAUN A. GOHO.
WALTER R. ECHO-HAWK, Native American Rights
Fund, of Boulder, Colorado, for amicus curiae Klamath
Tribes. With him on the brief was THOMAS P. SCHLOSSER,
Morisset, Schlosser, Jozwiak & McGaw, of Seattle, Wash-
ington, for amicus curiae Hoopa Valley Indian Tribe.
3 KLAMATH IRRIGATION v. US
JOHN ECHEVERRIA, Georgetown Environmental Law &
Policy Institute, of Washington, DC, for amicus curiae
Natural Resources Defense Council. With him on the
brief were HAMILTON CANDEE and KATHERINE S. POOLE,
Natural Resources Defense Council, of San Francisco,
California.
__________________________
Before BRYSON, SCHALL, and GAJARSA, Circuit Judges.
Opinion for the court filed by Circuit Judge SCHALL.
Opinion concurring-in-part and concurring in the
judgment filed by Circuit Judge GAJARSA.
SCHALL, Circuit Judge.
Plaintiffs-Appellants (“plaintiffs”) are fourteen water,
drainage, and irrigation districts and thirteen agricul-
tural landowners in Oregon and California. 1 Plaintiffs
appeal the final judgment of the United States Court of
Federal Claims that, based on two separate summary
judgment decisions, dismissed their Fifth Amendment
takings claims, their claims under the Klamath River
Basin Compact, Pub. L. No. 85-222, 71 Stat. 497 (1957)
(the “Klamath Basin Compact” or the “Compact”), and
their breach of contract claims. See Klamath Irrigation
Dist. v. United States, 67 Fed. Cl. 504 (2005) (“Takings
Decision”); Klamath Irrigation Dist. v. United States, 75
Fed. Cl. 677 (2007) (“Contract Decision”).
On July 16, 2008, we certified three questions relating
to the takings and Compact claims to the Oregon Su-
preme Court. See Klamath Irrigation Dist. v. United
1 We sometimes refer to the plaintiff water, drain-
age, and irrigation districts as the “districts.”
KLAMATH IRRIGATION v. US 4
States, 532 F.3d 1376 (Fed. Cir. 2008) (“Certification
Order”). The certification was pursuant to a procedure
whereby unsettled questions of state law may be certified
to the Oregon Supreme Court. See Or. Rev. Stat.
§§ 28.200-28.255 (2010). Pending action by the Oregon
court, we withheld decision on all of plaintiffs’ claims.
The Oregon Supreme Court accepted the case for certifi-
cation, Klamath Irrigation Dist. v. United States, 202 P.3d
159 (Or. 2009), and on March 11, 2010, the court rendered
its decision, answering our certified questions. See
Klamath Irrigation Dist. v. United States, 348 Or. 15, 227
P.3d 1145 (Or. 2010) (en banc) (“Certification Decision”).
We now vacate the judgment of the Court of Federal
Claims and remand the case to the court for further
proceedings. On remand, the court is to (1) consider the
takings and Compact claims in light of the Certification
Decision; (2) determine whether, as far as the breach of
contract claims are concerned, the government can estab-
lish that, for purposes of its defense based on the sover-
eign acts doctrine, contract performance was impossible;
and (3) decide the breach of contract claims as appropri-
ate.
BACKGROUND
I.
Plaintiffs are users of water in the Klamath River Ba-
sin. Located in southern Oregon and northern California,
the Klamath River Basin is the drainage basin of the
Klamath River, the Lost River, and the Link River, as
well as various other rivers. Water flow from Upper
Klamath Lake in Oregon into the lower Klamath River is
controlled by the Link River Dam. Upper Klamath Lake
has a shallow depth and limited water capacity that
fluctuates with wet and dry periods; thus, downstream
flow to lower portions of the Klamath River and ulti-
5 KLAMATH IRRIGATION v. US
mately the Klamath River Basin is affected by droughts.
See Takings Decision, 67 Fed. Cl. at 509-10.
The Klamath Irrigation Project (the “Klamath Pro-
ject” or the “Project”) is an irrigation project that benefits
primarily southern Oregon and portions of northern
California, including the Klamath River Basin. The
Project has its origins in the Reclamation Act of 1902, ch.
1093, 32 Stat. 388 (codified, as amended, at 43 U.S.C.
§ 371 et seq.) (the “Reclamation Act”). The Reclamation
Act directed the Secretary of the Interior to reclaim arid
lands in certain western states through irrigation pro-
jects. In 1905, Congress authorized the development of
the Klamath Project. See Act of February 9, 1905, ch.
567, 33 Stat. 714. Shortly thereafter, the Oregon legisla-
ture passed its own reclamation legislation. Among other
things, that legislation created a procedure to assist the
United States in appropriating water for the irrigation
works contemplated by the Reclamation Act. See Or. Gen.
Laws, 1905, ch. 228, § 2 (the “1905 Act”) (repealed 1953);
see also Or. Gen. Laws, 1905, ch. 5, §§ 1-2 (authorizing the
United States to both raise and lower the lakes associated
with the Klamath River Basin and also to use the beds of
those lakes for water storage in connection with irrigation
projects).
The Klamath Project is managed and operated by the
Secretary of the Interior, through the United States
Bureau of Reclamation (the “Bureau”). The Project pro-
vides water to about 240,000 acres of irrigable crop lands.
It also provides water to several national wildlife refuges
in the Klamath River Basin, including the Lower
Klamath and Tule Lake National Wildlife Refuges. Over
the years, the Bureau has entered into various types of
contracts with water districts and individual water users
who wish to receive deliveries of Project water for irriga-
tion purposes. In one way or another, each of the plain-
KLAMATH IRRIGATION v. US 6
tiffs receives delivery of water from the Klamath Project
for irrigation purposes.
II.
In light of its dual purposes of serving agricultural
uses and providing for the needs of wildlife, the Klamath
Project is subject to the requirements of the Endangered
Species Act. See Pub. L. No. 93-205, 87 Stat. 884 (1973)
(codified, as amended, at 16 U.S.C. § 1531 et seq.) (the
“ESA”). In a 1999 Ninth Circuit decision, the interests of
Project water users were declared subservient to the ESA,
the result being that, as necessary, the Bureau has a duty
to control the operation of the Link River Dam in order to
satisfy the requirements of the ESA. See Klamath Water
Users Protective Ass’n v. Patterson, 204 F.3d 1206, 1213
(9th Cir. 1999) (noting that the ESA was enacted to “halt
and reverse the trend toward species extinction, whatever
the cost.”) (emphasis added) (internal citations omitted),
amended by 203 F.3d 1175 (9th Cir. 2000).
Pursuant to the ESA, the Bureau has an obligation
not to engage in any action that is likely to jeopardize the
continued existence of an endangered or threatened
species or result in the destruction or adverse modifica-
tion of the critical habitat of such a species. See 16 U.S.C.
§ 1536(a)(1). As a result, the Bureau is required to per-
form biological assessments to determine the impact of
the diversion of Klamath Project water for irrigation
purposes upon endangered and threatened species and to
adjust water delivery to minimize the impact upon the
habitat of such species. See 16 U.S.C. § 1536(a)(2), (c)(1).
Shortly after the Ninth Circuit’s ruling in Patterson,
several environmental organizations filed suit against the
Bureau in federal court for alleged failure to comply with
the ESA in preparing Klamath Project operating plans.
See Pac. Coast Fed’n of Fishermen’s Ass’ns v. U.S. Bureau
7 KLAMATH IRRIGATION v. US
of Reclamation, 138 F. Supp. 2d 1228, 1238 (N.D. Cal.
2001). During the pendency of that case, in the spring of
2001, severe drought conditions caused the Bureau to
reevaluate its planned water deliveries for the year 2001.
Several federal agencies indicated that water levels in the
Klamath River Basin had become so low as to threaten
the survival of certain endangered species, including the
coho salmon, the shortnose suckerfish, and the Lost River
suckerfish. See Takings Decision, 67 Fed. Cl. at 512-13.
In due course, the Bureau forwarded biological assess-
ments of the Project’s proposed operations to the two
agencies authorized to issue final biological opinions for
those species; the National Marine Fisheries Service (for
coho salmon) and the Fish and Wildlife Service (for
suckerfish). The two agencies performed their analyses
and ultimately issued final biological opinions concluding
that the Project’s proposed operations for 2001 threatened
the continued existence of the species in question. Id. at
513. As statutorily required, both opinions presented
alternatives to address the threat to the three species.
These alternatives included reducing the water available
for irrigation from Upper Klamath Lake during 2001
when flows were below certain levels. Id. (citing 16
U.S.C. § 1536(b)(3)(A)). In addition, at this time, the
Bureau was subject to a preliminary injunction order
issued by the U.S. District Court for the Northern District
of California in the Pacific Coast case. The order barred
the delivery of Klamath Project water for irrigation pur-
poses when water flow was below certain minimum levels,
until the Bureau complied with ESA consultation re-
quirements. See Pac. Coast Fed’n of Fishermen’s Ass’ns,
138 F. Supp. 2d at 1251.
On April 6, 2001, the Bureau issued a revised operat-
ing plan for the Klamath Project that terminated delivery
of irrigation water for the year 2001. Takings Decision,
KLAMATH IRRIGATION v. US 8
67 Fed. Cl. at 513. As a result, the Bureau ceased water
deliveries from Upper Klamath Lake from April through
July of 2001, when it was able to release some water to its
users, including plaintiffs. See Takings Decision, 67 Fed.
Cl. at 513 n.10.
Following the Bureau’s cessation of irrigation water
deliveries in April 2001, various Project users, including
several of the plaintiffs in this case, filed a breach of
contract suit against the United States in the U.S. Dis-
trict Court for the District of Oregon. See Kandra v.
United States, 145 F. Supp. 2d 1192, 1196 (D. Or. 2001).
The suit was dismissed in October 2001 after the court
denied the users’ motion for a preliminary injunction
against the halting of water deliveries. Id. at 1211.
III.
A
On October 11, 2001, plaintiffs brought this action in
the Court of Federal Claims. In their Second Amended
Complaint, which was filed on January 31, 2005 (“Com-
plaint”), plaintiffs assert three claims against the United
States. 2 First, they allege that, when the Bureau halted
the delivery of water in 2001, it took their water rights for
public use without just compensation, in violation of the
Fifth Amendment to the Constitution. Complaint, ¶¶ 32-
33. Second, they allege that the Bureau’s action impaired
their water rights without just compensation, in violation
2 Several organizations, including defendant-
appellee Pacific Coast Federation of Fishermen’s Associa-
tions (“PCFFA”), moved for leave to intervene in the suit
as a matter of right, based on asserted interests relating
to the allocation and ownership of Klamath Project water.
The court ruled that only PCFFA was entitled to inter-
vene. See Klamath Irrigation Dist. v. United States, 64
Fed. Cl. 328, 331, 336 (2005).
9 KLAMATH IRRIGATION v. US
of the Klamath Basin Compact. Id. at ¶¶ 38-39. The
Compact, which was entered into between Oregon and
California for the division of Klamath Project water,
received the consent of Congress. 71 Stat. at 497. It
states that “the United States shall not, without payment
of just compensation, impair any rights to the use of
water for [domestic or irrigation purposes] within the
Upper Klamath River Basin.” Id. at 507. Lastly, plain-
tiffs allege that, when the Bureau halted the delivery of
water, its action breached water service contracts with
the plaintiff districts. Complaint, ¶ 47. Among other
things, the individual plaintiffs in the case claim rights as
third-party beneficiaries of the contracts between the
Bureau and the districts. Id. at ¶ 46.
Several plaintiffs also asserted equitable or beneficial
property interests in the use of Klamath Project water
through claims based on patent deeds and claims based
on state water permits. 3 Five landowner plaintiffs—Fred
A. Robison, Albert Robison, Mark Trotman, Lonny Baley,
and Baley Trotman Farms—claim they were granted title
to their land in “patent deeds” and that once they filed
applications for the beneficial use of Klamath Project
water, the deeds conveyed their land to them together
with the right to the use of water from the Klamath
Reclamation Project as an appurtenance to the land. See
3 The United States issued patent deeds to individ-
ual water users who filed an “Application for Permanent
Water Right-Form A” and an affidavit “attesting to the
fact that [the user] had put Klamath Project water to
beneficial use.” Once an applicant met these require-
ments, he or she was issued a patent deed conveying land
“together with the right to the use of water from the
Klamath Reclamation Project as an appurtenance” to the
land. Takings Decision, 67 Fed. Cl. at 512. In addition,
the State of Oregon issued water rights permits to certain
districts after the state repealed the 1905 Act in 1953. Id.
KLAMATH IRRIGATION v. US 10
Takings Decision, 67 Fed. Cl. at 512. Two plaintiffs, the
Klamath Drainage District and the Klamath Hills District
Improvement Company, assert property interests based
on water permits issued by the State of Oregon. They
claim that the permits demonstrate ownership of a
“vested and determined” state law water right. Id.
Under Oregon’s Water Rights Act of 1909, Or. Rev.
Stat. §§ 539.005-240 (the “Water Rights Act”), once all
competing water rights claims are filed and entered into
state records, they are made subject to a final determina-
tion of rights through a statutory adjudication process.
See Or. Rev. Stat. §§ 539.240(8), 539.010-240. Pertinent
to this case, the Water Rights Act authorizes the adjudi-
cation of federal and state law water rights vesting prior
to passage of the 1905 Act. Id. In 1976, the Klamath
Basin Adjudication (the “Adjudication”) was initiated to
determine water rights in the Klamath Basin. On No-
vember 13, 2003, the Court of Federal Claims ruled that
plaintiffs were barred from asserting claims based on
rights, titles, or interests that could be subject to deter-
mination in the Adjudication, which remains pending.
See Takings Decision, 67 Fed. Cl. at 514 (citing the court’s
November 13, 2003 summary judgment order).
B
The Fifth Amendment to the United States Constitu-
tion proscribes the taking of private property “for public
use, without just compensation.” U.S. Const. amend. V,
cl. 4. When evaluating whether governmental action
constitutes a taking, a court employs a two-part test.
First, the court determines whether the claimant has
identified a cognizable Fifth Amendment property inter-
est that is asserted to be the subject of the taking. Sec-
ond, if the court concludes that a cognizable property
interest exists, it determines whether the government’s
11 KLAMATH IRRIGATION v. US
action amounted to a compensable taking of that property
interest. See, e.g., Palmyra Pac. Seafoods, L.L.C. v.
United States, 561 F.3d 1361, 1364 (Fed. Cir. 2009); Am.
Pelagic Fishing Co., L.P. v. United States, 379 F.3d 1363,
1372 (Fed. Cir. 2004); see also Air Pegasus of D.C., Inc. v.
United States, 424 F.3d 1206, 1212-13 (Fed. Cir. 2005).
In due course, the parties filed cross-motions for
summary judgment on the threshold question of whether
plaintiffs have property interests in Klamath Project
water rights cognizable under the Fifth Amendment. In
the Takings Decision, the Court of Federal Claims
granted the government’s motion for summary judgment
and held that plaintiffs had failed to assert cognizable
property interests in Klamath Project water for purposes
of their taking claims, their Compact claims, or other
asserted property rights. See Takings Decision, 67 Fed.
Cl. at 540.
In determining whether a party has asserted a cogni-
zable property interest for Fifth Amendment purposes, a
court must look to “existing rules and understandings and
background principles derived from an independent
source, such as state, federal, or common law, [that]
define the dimensions of the requisite property rights for
purposes of establishing a cognizable taking.” Air Pega-
sus, 424 F.3d at 1213 (internal quotations and citations
omitted). In the Takings Decision, the Court of Federal
Claims rejected plaintiffs’ argument that the Reclamation
Act created property interests for plaintiffs owning land
appurtenant to Klamath Project waters, holding that the
statute and its legislative history clearly intended for
state law to govern plaintiffs’ asserted usufruct property
rights, i.e., the right to the use of the water that had been
appropriated by the federal government. 67 Fed. Cl. at
516-519. The court also rejected plaintiffs’ contention
that Supreme Court cases recognizing usufructuary rights
KLAMATH IRRIGATION v. US 12
in water sources created by Section 8 of the Reclamation
Act established property rights in Klamath Project water
under federal law. 4 The court noted that each of the cases
cited by plaintiffs applied the law of the relevant state or
states providing for such rights. Id. at 519-523, discuss-
ing Ickes v. Fox, 300 U.S. 82, 94 n.3 (1937) (relying on
contracts and a Washington statute); Nebraska v. Wyo-
ming, 325 U.S. 589, 612-15 (1945) (applying Nebraska
and Wyoming law); Nevada v. United States, 463 U.S.
110, 122, 126 (1983) (applying Nevada law). The court
ruled that Oregon law, therefore, was the governing law
for determining the existence of property rights in
Klamath Project water. Id. at 523.
The Court of Federal Claims next considered whether
Oregon law established any property rights for the plain-
tiffs, as users of Klamath Project water, as against the
United States. Focusing on the 1905 Act, the court noted
that the statute expressly provided the procedure by
which the United States could appropriate the waters
deemed necessary for the Klamath Project. Once the
4 Section 8 of the Reclamation Act states that:
[N]othing in this Act shall be construed as affecting or
intended to affect or to in any way interfere with the laws
of any State or Territory relating to the control, appro-
priation, use, or distribution of water used in irrigation, or
any vested right acquired thereunder, and the Secretary
of the Interior, in carrying out the provisions of this Act,
shall proceed in conformity with such laws, and nothing
herein shall in any way affect any right of any State or of
the Federal Government or of any landowner, appropria-
tor, or user of water in, to, or from any interstate stream
or the water thereof: Provided, That the right to use of
water acquired under the provisions of this Act shall be
appurtenant to the land irrigated, and beneficial use shall
be the basis, the measure, and the limit of the right.
32 Stat. 388, 390 (codified at 43 U.S.C. §§ 372, 383)
(emphasis added).
13 KLAMATH IRRIGATION v. US
United States had complied with all of the statutory
requirements for acquiring water rights, the court rea-
soned, the 1905 Act vested the United States with title to
all the waters unappropriated as of the date of filing, and
those waters could not be subject to further appropriation
or adverse claims except as permitted by the United
States. See id. at 523-25 (citing In re Waters of the Uma-
tilla River, 88 Or. 376, 168 P. 922, 925 (Or. 1917) (under
the 1905 legislation, the filing of notice by the United
States, upon compliance with the various procedural
strictures of the statute, “vested the United States with
title to all the then unappropriated water of the Umatilla
River.”)). The court acknowledged the Oregon legislation
could not displace any water rights which had vested
prior to the acceptance by the United States of the provi-
sions of the statute, but found no evidence of such
pre-1905 rights still existing. Thus, because the United
States had perfected its property rights by complying with
necessary procedural requirements, the court concluded
that “pursuant to relevant Oregon law, in 1905, the
United States obtained rights to the unappropriated
water of the Klamath Basin and associated tributaries.”
Id. at 526.
The court recognized, however, that this conclusion
did not answer the question whether any of the individual
plaintiffs held water rights that predated the govern-
ment’s 1905 notice appropriating water for the Klamath
Project—specifically, water rights that were already
appropriated as of the date of the government’s notice of
appropriation. It also recognized that it did not answer
the question whether any of the individual plaintiffs held
water rights that post-dated the 1905 notice that were
obtained from the United States. Id.
Addressing first water rights that predated the gov-
ernment’s 1905 appropriation notice, the Court of Federal
KLAMATH IRRIGATION v. US 14
Claims noted that plaintiffs did not seriously dispute that
these water rights had been acquired by the government
and integrated into the Klamath Project. Id. The court
also noted, however, the contention that alleged pre-1905
rights of at least seven plaintiffs 5 had been exchanged for
a perpetual right to receive water from the Project. In the
court’s view, the record revealed that these alleged ex-
changes had arisen from a series of post-1905 contracts
with the United States, under which the government
made various commitments regarding Project water. Id.
at 527.
The court next considered whether, after 1905, plain-
tiffs obtained any property rights in Klamath Project
water from the United States. The court classified the
asserted interests into the following types: rights based on
contracts with the United States; rights based on applica-
tions for beneficial use and patent deeds granted by the
United States to individual users; and rights based on
state water permits (involving the Klamath Drainage
District and the Klamath Hills District Improvement
Company). Id. at 530-31. The court first determined that
any rights obtained by contract with the United States,
including rights of individual users as third-party benefi-
ciaries of district contracts, were subject to contract,
rather than takings, remedies. Id. at 532-35. In that
regard, the court noted that briefing on the contract issue
had been stayed and that the ultimate issue of whether
the Bureau had breached the district contracts in ques-
tion remained to be decided. Id. at 535.
5 The Van Brimmer Ditch Company, Michael J.
Byrne, Daniel W. Byrne, Daniel G. Chin, Deloris D. Chin,
Cheryl M. Moore and James L. Moore. See 67 Fed. Cl.
526-27 n.38.
15 KLAMATH IRRIGATION v. US
The court next determined that any rights obtained
contractually by patent deeds or state water permits were
junior in priority to the rights of the United States in
carrying out its Klamath Project duties. Id. at 538-39.
The court reasoned that the United States could not have
taken rights to receive water based on patent deeds and
water permits with priority dates after the 1905 appro-
priation by the United States of water for the Project.
This determination rested on the prior appropriation
doctrine and the Water Rights Act’s recognition of claims
of water rights according to the “first in time, first in
right” rule. 6 Id. at 539 (citing Or. Rev. Stat. §§ 537.120,
537.160, 537.250). Accordingly, the court concluded that
any water rights of plaintiffs arising from patent deeds
and water permits were subservient to the prior interests
of the United States (as well as to those of various Native
American tribes). Id. Finally, the court determined that
the Compact, as a contract between California and Ore-
gon to which the United States consented, did not alter
this analysis in any manner so as to impair the rights of
the United States “over and to the waters of the Klamath
River Basin.” Id. Having ruled that neither federal nor
Oregon state law provided plaintiffs with any property
rights as against the United States that were com-
pensable under the Fifth Amendment or the Compact, the
6 Under the prior appropriation doctrine, a water
rights holder who appropriates water for beneficial use is
granted priority for that use in times of shortage over
other appropriators who made later use of the water. See
Takings Decision, 67 Fed. Cl. at 539 (citations omitted).
The doctrine prioritizes water rights according to the
“first in time, first in right” rule, where claims of rights to
the use of water are prioritized so that the senior-most
(i.e., oldest) rights holder is entitled to have his or her
entitlement fully satisfied before the next rights holder
can appropriate water for his or her needs. Id.
KLAMATH IRRIGATION v. US 16
court entered judgment in favor of the United States on
the takings and Compact claims. Id. at 540.
Subsequently, in the Contract Decision, the court
turned to the unresolved matter of whether the United
States’ failure to deliver irrigation water in 2001 breached
any of plaintiffs’ contract rights, asserted directly by the
district plaintiffs and indirectly by the landowning plain-
tiffs as beneficiaries of the district plaintiffs’ contracts.
The court emphasized that many (though not all) of the
contracts had provisions absolving or limiting the United
States’ liability for Klamath Project water shortages. 75
Fed. Cl. at 681-82. However, the court stated that it did
not have to resolve the bounds of the government’s ex-
emption from liability on that basis, because the “control-
ling issue” in the case was whether the sovereign acts
doctrine foreclosed government liability as to plaintiffs’
breach of contract claims. Id. at 682.
The court first noted that the sovereign acts doctrine
immunizes the federal government for any and all acts
taken in its sovereign capacity, rather than its capacity as
a contractor. The court then rejected plaintiffs’ argument
that the sovereign acts doctrine did not apply because the
Bureau was not compelled “as a sovereign” by the ESA to
diminish water deliveries in 2001. Id. at 683-85. The
court reasoned that because the ESA was a general
statute enacted for public benefit, the United States could
not be held liable for an obstruction to its performance as
a contractor that resulted from its public and general acts
of compliance as a sovereign. Id. at 683-84 (citing
Horowitz v. United States, 267 U.S. 458, 461 (1925)).
The court noted that compliance with the ESA was
mandatory upon the government and that the Bureau
modified the Klamath Project operating plan in 2001 in
order to protect the endangered species of fish, not to
17 KLAMATH IRRIGATION v. US
provide an excuse for decreasing the amount of water
provided to plaintiffs in its role as government contractor.
Id. at 684-85. On this basis, the court deemed the gov-
ernment was immunized from liability for breach of
contract based on sovereign acts that impacted its “sub-
servient” performance of the water contracts at issue. Id.
at 686-87.
In addition, the court rejected plaintiffs’ argument
that, even if the sovereign acts doctrine did apply, it did
not excuse the government’s breach of the water supply
contracts because the government had failed to show the
contract was impossible to perform. The court acknowl-
edged that, in United States v. Winstar Corp., 518 U.S.
839 (1996), four justices deemed impossibility of perform-
ance a requirement of a sovereign act defense. The court
reasoned, however, that the Court’s non-majority opinion
was not binding. See Contract Decision, 75 Fed. Cl. at
691. Accordingly, the court concluded that the common
law doctrine of impossibility of performance is not a
component of the sovereign acts doctrine and that the
latter doctrine therefore provided a complete defense to
plaintiffs’ breach of contract claims. Id. at 695.
Based on the Takings Decision and the Contract Deci-
sion, the Court of Federal Claims entered judgment in
favor of the United States and dismissed the Complaint.
Plaintiffs timely appealed. We have jurisdiction pursuant
to 28 U.S.C. § 1295(a)(3).
IV.
Following briefing and oral argument, we concluded
that Oregon property law was pertinent to the question of
whether plaintiffs possessed property rights in Klamath
Project water. We therefore certified three questions to
the Oregon Supreme Court. See Certification Order.
Pending action by the Oregon Supreme Court, we with-
KLAMATH IRRIGATION v. US 18
held decision on the takings, Compact, and breach of
contract claims.
Our first certified question asked whether, assuming
that Klamath Project water was deemed appropriated by
the United States pursuant to the 1905 Act, the statute
precluded irrigation districts from acquiring a beneficial
or equitable property interest in the water right acquired
by the United States. Id. at 1377-78. The second ques-
tion asked whether, in light of the 1905 Act, landowners
who receive and put to beneficial use Klamath Project
water have a beneficial or equitable property interest
appurtenant to their land in the water right acquired by
the United States, and whether district plaintiffs who
receive Project water have a beneficial or equitable prop-
erty interest in the water right acquired by the United
States. Id. at 1378. The third question asked, with
respect to surface rights where appropriation was initi-
ated under Oregon law prior to February 24, 1909, and
where such rights were not within any previously adjudi-
cated area of the Klamath Basin, whether Oregon law
recognizes any property interest, whether legal or equita-
ble, in the use of Project water that is not subject to the
Adjudication. 7 Id.
The Oregon Supreme Court accepted the case for cer-
tification, and on March 11, 2010, the court rendered its
decision in response to the Certification Order. See Certi-
fication Decision. The Certification Decision was filed
with this court on March 22, 2010.
7 Under the Water Rights Act, all water rights “that
had vested prior to 1909, but had never been subject to a
judicial determination” were “left intact as ‘undetermined
vested rights.’” United States v. Oregon, 44 F.3d 758, 764
(9th Cir. 1994) (quoting Or. Rev. Stat. § 536.007(11)).
19 KLAMATH IRRIGATION v. US
The Oregon Supreme Court answered our three ques-
tions as follows:
1. The 1905 [Act] did not preclude plaintiffs from
acquiring an equitable or beneficial property in-
terest in a water right to which the United States
holds legal title. Moreover, under the 1905 [A]ct,
a formal written release from the United States is
not necessary for plaintiffs to have acquired an
equitable or beneficial property interest in the wa-
ter right that the United States appropriated.
2. Under Oregon law, whether plaintiffs ac-
quired an equitable or beneficial property interest
in the water right turns on three factors: whether
plaintiffs put the water to beneficial use with the
result that it became appurtenant to their land,
whether the United States acquired the water
right for plaintiffs' use and benefit, and, if it did,
whether the contractual agreements between the
United States and plaintiffs somehow have al-
tered that relationship. In this case, the first two
factors suggest that plaintiffs acquired a benefi-
cial or equitable property interest in the water
right to which the United States claims legal title,
but we cannot provide a definitive answer to the
court’s second question because all the agree-
ments between the parties are not before us.
3. To the extent that plaintiffs assert only an eq-
uitable or beneficial property interest in the water
right to which the United States claims legal title
in the [A]djudication, plaintiffs are not “claim-
ants” who must appear in that adjudication or
lose the right. As a general rule, equitable or
beneficial property interests in a water right to
which someone else claims legal title are not sub-
KLAMATH IRRIGATION v. US 20
ject to determination in a state water rights adju-
dication.
See Certification Decision, 227 P.3d at 1169.
By letter dated April 5, 2010, we asked the parties to
“advise the court as to how they think the court should
proceed in this matter in view of the Oregon Supreme
Court’s decision.” See Letter from Jan Horbaly, Clerk of
the Court, in Case No. 2007-5115, Docket No. 100. The
parties have now submitted responsive briefs and pre-
sented oral argument on that question.
DISCUSSION
I.
A
Plaintiffs argue that the Certification Decision com-
pels reversal of the Takings Decision. Plaintiffs contend
that, in light of the Oregon Supreme Court’s answers to
our questions, it is clear that the Takings Decision is
based on two erroneous rulings: (1) that plaintiffs lacked
beneficial or equitable property interests under Oregon
law; and (2) that the 1905 Act precluded plaintiffs from
acquiring equitable or beneficial property interests in
Klamath Project water rights. See Appellants’ Suppl. Br.
at 2. Turning to the Oregon Supreme Court’s statement
in answering certified question 2 that it lacked all the
information (i.e., record of contracts) from which it could
determine if plaintiffs had contractually given away any
of their water rights, plaintiffs state that “there is abso-
lutely no evidence in the record that the individual water
users contractually bargained away or relinquished their
vested water rights to the United States—and substantial
evidence that they did not, not the least of which is the
fact that none of the named individual Klamath Irrigators
has a contract with the Government.” Id. at 2-3.
21 KLAMATH IRRIGATION v. US
Finally, plaintiffs urge that the Oregon Supreme
Court’s answer to our third certified question compels the
conclusion that the beneficial or equitable rights at issue
in this case are not involved in the Adjudication. The
significance of this point is that plaintiffs who have filed
claims in the Adjudication have agreed to proceed in the
Court of Federal Claims litigation on the understanding
that they are barred by the court’s November 13, 2003
order from making any claims or seeking any relief based
on rights, titles, or interests that are, or may be, subject
to determination in the Adjudication. See Takings Deci-
sion, 67 Fed. Cl. at 514.
For its part, the United States contends that, in the
wake of the Certification Decision, we should affirm the
Takings Decision. The government takes this position
based on its assessment of the Oregon Supreme Court’s
analytical approach to our second certified question.
Addressing that question, the court stated:
As we understand the second question, it asks
whether beneficial use alone is sufficient to ac-
quire a beneficial or equitable property interest in
a water right to which another person holds legal
title. The answer to that question, as we have re-
stated it, is “no.” Beneficial use is a necessary but
not a sufficient condition to acquire a beneficial or
equitable property interest in a water right.
Certification Decision, 227 P.3d at 1160. From there, the
court went on to state the two additional factors that
must be considered in determining whether plaintiffs
acquired a beneficial or equitable property interest in the
water rights at issue. Those factors are “whether the
United States acquired the water right for plaintiffs’ use
and benefit, and, if it did, whether the contractual agree-
KLAMATH IRRIGATION v. US 22
ments between the United States and plaintiffs somehow
have altered that relationship.” Id. at 1169.
The government argues that, by restating the second
question and then answering it in the negative, the Ore-
gon Supreme Court rejected the arguments made by
plaintiffs on appeal. See United States Appellee’s Suppl.
Br. at 10-11. Although the government recognizes that
the court spelled out the two additional factors under
Oregon law that must be considered in determining
whether a beneficial or equitable property interest has
been acquired, it takes the position that the Oregon
Court’s three-factor test embodies a new legal theory that
has not heretofore been argued by plaintiffs. Id. at 11. As
we understand it, the government’s position is that, up to
now, plaintiffs have not argued they possess equitable
rights to Klamath Project water based upon the operation
of state law (the Oregon Supreme Court’s three-factor
test), but, rather, that they possess such rights by virtue
of a uniform, federally-established rule that is not de-
pendent on or limited by their contracts with the United
States. Id. at 8, 11. For this reason, the government
urges that plaintiffs have “waived any claim to property
rights based on the Oregon court’s three-factor analysis.”
Id. at 11. The government states that a remand by this
court to the Court of Federal Claims for consideration of
the three-factor test would be inappropriate because the
test rests on a theory that is “fundamentally different”
from the one heretofore advanced by plaintiffs. Id. at 14-
15.
In the alternative, the government argues that we
should remand to the Court of Federal Claims for a de-
termination of whether, under the Oregon Supreme
Court’s three-factor test, any of the plaintiffs has a com-
pensable property interest in Klamath Project water
rights. Id. at 17-21. The government states, however,
23 KLAMATH IRRIGATION v. US
that even if we generally remand the takings and Com-
pact claims, we should nonetheless affirm the judgment
with respect to plaintiff Van Brimmer Ditch Company’s
takings claim, and plaintiffs’ takings claims based upon
patent deeds and state water permits. Id. at 21-22.
According to the government, the Van Brimmer Ditch
Company’s claim is identical to the claim it has presented
for determination in the Adjudication and is therefore
barred from this case by the Court of Federal Claims’
November 13, 2003 order. Id. at 21. Turning to claims
based on patent deeds and the claims of the Klamath
Drainage District and the Klamath Hills District Im-
provement Company based on state water permits, the
government contends that plaintiffs have not challenged
the Takings Decision with respect to those claims. Id. at
22.
B
In our view, the Oregon Supreme Court’s answers to
our three certified questions compel further proceedings.
The court’s first answer makes clear that the district
plaintiffs are not precluded, under Oregon’s 1905 Act,
from acquiring a beneficial or equitable property interest
in Klamath Project water that was appropriated by the
United States under that statute. See Certification Deci-
sion, 227 P.3d at 1157-60. The Oregon Supreme Court
stated: “[W]e find nothing in the text and context of the
1905 [Act] that would preclude plaintiffs from acquiring a
beneficial or equitable property interest in the water right
appropriated by the United States.” Id. at 1160.
The Oregon Supreme Court did not answer our second
question in yes-or-no terms. Instead, it restated the
question and responded “no” to whether beneficial use
alone is sufficient to acquire a beneficial or equitable
property interest in a water right to which another person
KLAMATH IRRIGATION v. US 24
holds legal title. The court explained why, under Oregon
law, district plaintiffs who receive Klamath Project water
and individual plaintiffs who have put to beneficial use
Project water appurtenant to their land do not, on that
basis alone, have a beneficial or equitable property inter-
est in the water. The court stated: “Beneficial use is a
necessary but not a sufficient condition to acquire a
beneficial or equitable property interest in a water right.”
Id. at 1160.
Explaining its answer, the court began by noting that
Oregon law has long recognized the distinction between
equitable title and legal title to property, with the result
that one party may hold legal title to a water right while
another holds equitable title. Id. at 1161 (citing Fort
Vannoy Irrigation Dist. v. Water Res. Comm’n, 345 Or. 56,
86, 188 P.3d 277, 295 (2008) (irrigation district holds legal
title to a water right as trustee while its members hold
equitable title as beneficiaries); In re Water Rights of
Willow Creek, 119 Or. 155, 195, 199, 236 P. 487, 500
(1925) (corporation held appropriated water right in trust
for use and benefit of shareholders who put the water to
beneficial use)). The court reasoned that beneficial use
alone does not always give the user a property interest in
a water right appropriated by another, however. Citing
In re Waters of Walla Walla River, 141 Or. 492, 497-98, 16
P.2d 939, 941 (1933), it stated that two other factors, in
addition to beneficial use, must be considered in deter-
mining whether a beneficial or equitable property interest
exists: the relationship between the parties as well as
any contractual relationships between them. See Certifi-
cation Decision, 227 P.3d at 1162. The court pointed to
the United States Supreme Court’s consideration of the
three factors in Nevada v. United States, where the Court
stated: “[T]he beneficial interest in the rights confirmed
to the Government resided in the owners of the land
25 KLAMATH IRRIGATION v. US
within the Project to which these water rights became
appurtenant upon the application of Project water to the
land. As in Ickes v. Fox and Nebraska v. Wyoming, the
law of the relevant State and the contracts entered into by
the landowners and the United States make this point
very clear.” 463 U.S. at 126.
Having found the Nevada Court’s analysis “both per-
suasive and consistent with Oregon law,” the Oregon
Supreme Court adopted the three-factor test in this case.
See Certification Decision, 227 P.3d at 1163. Applying
that test, the court concluded that, as a matter of Oregon
law, (1) plaintiffs who have taken Klamath Project water,
applied it to their land, and put it to beneficial use have
acquired a water right appurtenant to their land, id. at
1163; and (2) the relationship between the United States,
as appropriator of the Klamath Project water, and plain-
tiffs as water users is similar to that of a trustee and
beneficiary, id. at 1164-65. As for the last factor, the
contractual relationships between the United States and
plaintiffs, the court stated that whether the parties en-
tered into agreements that “clarified, redefined, or even
altered” the aforementioned trustee-beneficiary relation-
ship “requires a full consideration of the agreements
between plaintiffs and the United States.” Id. at 1165.
Because it did not have the pertinent contracts before it,
the court stated that it was not in a position to undertake
that analysis. Id. at 1165-66.
We do not agree that plaintiffs are barred from pro-
ceeding under the three-factor test articulated by the
Oregon Supreme Court. We have reviewed plaintiffs’ July
16, 2007 brief in this court (“Blue Brief”), the govern-
ment’s October 25, 2007 brief in response (“Red Brief”),
and plaintiffs’ November 13, 2007 reply brief (“Grey
Brief”). Based upon that review, we have no difficulty
concluding that plaintiffs have consistently argued that
KLAMATH IRRIGATION v. US 26
the beneficial/equitable rights to project water which they
claim arose by operation of state law. See Blue Brief at
24-43, Red Brief at 32-42, Grey Brief at 5-9. 8 Moreover,
in response to our certified question 2, the Oregon Su-
preme Court has told us what the pertinent law of Oregon
is. The case should now proceed under the Oregon
Court’s three-factor test for determining whether plain-
tiffs hold beneficial or equitable property interests in
Klamath Project water. 9
Finally, the court’s answer to our third question
makes clear that plaintiffs may assert, under Oregon law,
beneficial or equitable property interests in Klamath
Project water to which the United States claims legal
title; plaintiffs need not pursue those claims in the Adju-
dication. Certification Decision, 227 P.3d at 1166-68. The
Oregon Supreme Court stated: “The answer to the Fed-
eral Circuit’s third question is ‘yes.’ A person asserting
only a beneficial or equitable property interest in a water
right is not a ‘claimant’ who must appear in the Klamath
Basin adjudication and file a claim to determine that
8 The beneficial or equitable water rights at issue in
this case are in the nature of usufructuary rights. Such a
right is chiefly a right of use, not a right of possession or
other right associated with land ownership, and has been
acknowledged as a cognizable property interest. Dugan v.
Rank, 372 U.S. 609, 625-26 (1963); Washoe County, Ne-
vada v. United States, 319 F.3d 1320, 1322 (Fed. Cir.
2003) (“Although a water right is property subject to
constitutional protection, it is usufructuary in nature,
meaning that it is a ‘right to use’ water in conformance
with applicable laws and regulations.”)
9 We do not agree with the government that plain-
tiffs have not challenged the Takings Decision insofar as
it relates to claims based on patent deeds and the claims
of the Klamath Drainage District and the Klamath Hills
District Improvement Company based on state water
rights. See Blue Brief at 43-45; Grey Brief at 22-23.
27 KLAMATH IRRIGATION v. US
interest.” Id. at 1166. Accordingly, because Oregon law
does not preclude plaintiffs from acquiring a beneficial or
equitable interest in Project water rights held by the
United States, and because plaintiffs’ claims thereto need
not be determined in the Adjudication, they should be
considered in this case. 10
In sum, we remand plaintiffs’ takings and Compact
claims for (1) determination, based on the Certification
Decision, on a case-by-case basis, of any outstanding
property interest questions; and (2) determination on the
merits, on a case-by-case basis, of all surviving takings
and Compact claims. On remand, the Court of Federal
Claims should proceed as follows: First, it should deter-
mine, for purposes of plaintiffs’ takings and Compact
claims, whether plaintiffs have asserted cognizable prop-
erty interests. In making that determination, the court
should direct its attention to the third part of the three-
part test set forth by the Oregon Supreme Court in re-
sponse to our certified question 2. That is because it is
not disputed that, in this case, the first two parts of the
three-part test have been met. Specifically, the parties do
not dispute that plaintiffs have put Klamath Project
water to beneficial use and that the United States ac-
quired the pertinent water rights for plaintiffs’ use and
benefit. As far as the third part of the three-part test is
concerned, the court should address whether contractual
agreements between plaintiffs and the government have
clarified, redefined, or altered the foregoing beneficial
relationship so as to deprive plaintiffs of cognizable prop-
erty interests for purposes of their takings and Compact
10 We leave it to the Court of Federal Claims to de-
termine, in the first instance, whether the claim of the
Van Brimmer Ditch Company is not properly before the
court because it is identical to the claim the company has
presented in the Adjudication.
KLAMATH IRRIGATION v. US 28
claims. In that regard, as seen, plaintiffs assert that
there are no such contracts. 11 On remand, the Court of
Federal Claims should give the government the opportu-
nity to demonstrate how plaintiffs’ beneficial/equitable
rights to the use of Klamath Project water have been
clarified, redefined, or altered. In that context, it will be
the government’s burden to demonstrate with specificity
how the beneficial/equitable rights of one or more plain-
tiffs have been clarified, redefined, or altered. 12 After the
government has come forward with its showing, plaintiffs
will have the opportunity to respond. To the extent the
Court of Federal Claims determines that one or more
plaintiffs have asserted cognizable property interests, it
then should determine whether, as far as the takings and
Compact claims are concerned, those interests were taken
11 At oral argument on November 18, 2010, the gov-
ernment acknowledged that there are no contracts that
serve as a complete surrender of plaintiffs’ rights.
12 It is plaintiffs’ burden to establish cognizable
property interests for purposes of their takings and Com-
pact claims. Air Pegasus, 424 F.3d at 1212-13; American
Pelagic Fishing Co., 379 F.3d at 1372. In that regard,
with respect to the third part of the Oregon Supreme
Court’s answer to certified question 2, plaintiffs assert
there are no contracts which have clarified, redefined, or
altered their property rights. On remand, if the govern-
ment contends that there are such contracts, it will have
the burden of coming forward with appropriate evidence.
See Nat’l Commc’ns Ass’n, Inc. v. AT & T Corp., 238 F.3d
124, 129-31 (2d Cir. 2001) (“[A]ll else again being equal,
courts should avoid requiring a party to shoulder the
more difficult task of proving a negative. ‘The general rule
is that the party that asserts the affirmative of an issue
has the burden of proving the facts essential to its
claim.’”) (quoting Auburndale State Bank v. Dairy Farm
Leasing Corp., 890 F.2d 888, 893 (7th Cir. 1989)).
29 KLAMATH IRRIGATION v. US
or impaired. That determination will turn on existing
takings law. 13
II.
A
Turning to the breach of contract claims, plaintiffs
contend that the Court of Federal Claims erred in not
holding impossibility of performance a threshold require-
ment the government must meet when asserting the
sovereign acts defense. Although plaintiffs acknowledge
that the Supreme Court’s Winstar plurality opinion
commanded the votes of only four Justices on the impos-
sibility of performance issue, they argue that, in Cara-
betta Enterprises, Inc. v. United States, 482 F.3d 1360
(Fed. Cir. 2007), we relied upon the Winstar plurality
holding. Plaintiffs argue that the government should not
be absolved from liability based on the sovereign acts
doctrine for breach of contract without first proving
impossibility of performance, which it contends the gov-
ernment failed to do in this case. See Appellants’ Br. at
49-52.
Responding, the government argues that the Court of
Federal Claims correctly held that the sovereign acts
doctrine provides a complete defense to plaintiffs’ breach
of contract claims. In the government’s view, the “ESA
compelled the Bureau to reduce irrigation deliveries in
2001.” Contract Decision, 75 Fed. Cl. at 686.
13 On remand, counsel for plaintiffs should confirm
which plaintiffs are asserting takings and Compact claims
and which plaintiffs are asserting breach of contract
claims.
KLAMATH IRRIGATION v. US 30
B
The sovereign acts doctrine is designed to balance
“the government's need for freedom to legislate with its
obligation to honor its contracts.” Winstar, 518 U.S. at
895-96. Under the doctrine, “the United States when
sued as a contractor cannot be held liable for an obstruc-
tion to the performance of the particular contract result-
ing from its public and general acts as a sovereign.”
Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569,
1574 (Fed. Cir. 1997) (quoting Horowitz v. United States,
267 U.S. 458, 461 (1925)). The government is not liable
for breach of contract whenever it takes any generally
applicable action in its sovereign capacity that inciden-
tally frustrates performance of a contract to which it is a
party. Horowitz, 267 U.S. at 461. Discussing the sover-
eign acts doctrine in Winstar, Justice Souter, joined by
Justices Stevens, O’Connor, and Breyer, stated:
As Horowitz makes clear, that defense simply re-
lieves the Government as contractor from the tra-
ditional blanket rule that a contracting party may
not obtain discharge if its own act rendered per-
formance impossible. But even if the Government
stands in the place of a private party with respect
to “public and general” sovereign acts, it does not
follow that discharge will always be available, for
the common-law doctrine of impossibility imposes
additional requirements before a party may avoid
liability for breach.
518 U.S. at 904.
We have stated that “[a]lthough the portion of the
principal [Winstar] opinion addressed to the sovereign
acts doctrine had the support of only four (and as to some
portions, only three) justices, this court has treated that
opinion as setting forth the core principles underlying the
31 KLAMATH IRRIGATION v. US
sovereign acts doctrine.” Conner Bros. Const. Co., Inc. v.
Geren, 550 F.3d 1368, 1374 (Fed. Cir. 2008) (citing Cara-
betta, 482 F.3d at 1365; Yankee Atomic, 112 F.3d at 1574-
77). Relevant to this case, in Carabetta, we stated that
even if the sovereign acts defense applies, “it does not
follow that discharge will always be available, for the
common-law doctrine of impossibility imposes additional
requirements before a party may avoid liability for
breach.” 482 F.3d at 1365 (quoting Winstar, 518 U.S. at
904). See also, Seaboard Lumber Co. v. United States, 308
F.3d 1283, 1294 (Fed. Cir. 2002) (stating that contract
performance by the government is excused under the
sovereign acts defense when “it is objectively impossible”).
We reaffirmed this requirement in Casitas Municipal
Water District v. United States, 543 F.3d 1276, 1287 (Fed.
Cir. 2008), stating that “performance by the government
is excused under the sovereign acts defense only when the
sovereign act renders the government’s performance
impossible.”
The sovereign acts defense involves the following
two-part test:
[F]irst [we ask] whether the sovereign act is prop-
erly attributable to the Government as contractor.
That is, is the act simply one designed to relieve
the Government of its contract duties, or is it a
genuinely public and general act that only inci-
dentally falls upon the contract? If the answer is
that the act is a genuine public and general act,
the second part of the test asks whether that act
would otherwise release the Government from li-
ability under ordinary principles of contract law.
This second question turns on what is known in
contract law as the impossibility (sometimes im-
practicability) defense.
KLAMATH IRRIGATION v. US 32
Stockton East Water Dist. v. United States, 583 F.3d 1344,
1366 (Fed. Cir. 2009) (internal quotations and citations
omitted).
Turning to the first question, we agree with the Court
of Federal Claims that, in this case, the Bureau’s halting
of water deliveries in response to the biological assess-
ments of the National Marine Fisheries Service and the
Fish and Wildlife Service constituted a genuine public
and general act that only incidentally fell upon the con-
tracts at issue. We concluded in Casitas that “the
[agency’s biological] opinion and the decision of the [Bu-
reau] to adopt the [biological] opinion are sovereign acts.”
543 F.3d at 1288. In reaching that conclusion, we rejected
the argument that narrowly cabined a public and general
sovereign act to only the ESA itself, holding instead that
both the agency’s issuance of a formal biological opinion
and the Bureau’s decision to adopt that opinion are gov-
ernmental actions that are “sovereign in character [so
that] the sovereign acts doctrine may be invoked.” Id. at
1287-88. We therefore find no error in the Court of Fed-
eral Claims’ ruling that the Bureau’s withholding of water
releases in 2001 was a public and general act.
However, the Court of Federal Claims failed to under-
take the second part of the sovereign acts doctrine analy-
sis, which addresses whether the sovereign act would
otherwise release the Government from liability under
ordinary principles of contract law. See Stockton, 583
F.3d at 1366. This implicates the impossibility of per-
formance component of the sovereign acts defense, which
the government must establish. See id. at 1367 (“the
Government would have to demonstrate that the agencies’
actions made it impossible for [the Bureau] to deliver to
the Districts the full amount of water provided for in the
contracts . . .”); Seaboard Lumber, 308 F.3d at 1294
(“[T]he doctrine of impossibility does not require a show-
33 KLAMATH IRRIGATION v. US
ing of actual or literal impossibility of performance but
only a showing of commercial impracticability.”).
In sum, the Court of Federal Claims erred in holding
that impossibility of performance is not a factor to be
taken into account in considering the sovereign acts
doctrine. The Bureau’s reduction of water deliveries in
order to comply with the requirements of the ESA was a
public and general act. However, in order to escape
liability from breach of contract in this case based on the
sovereign acts doctrine, the government has the burden of
establishing that performance of the various contracts at
issue was impossible. The case is remanded to the Court
of Federal Claims so that the government may have the
opportunity to carry that burden. 14 Once the court de-
termines whether the government is entitled to assert the
sovereign acts doctrine in this case, it should proceed to
resolve, in the appropriate manner, plaintiffs’ breach of
contract claims.
CONCLUSION
For the foregoing reasons, we vacate the judgment of
the Court of Federal Claims which dismissed plaintiffs’
takings and Compact claims based upon the Takings
14 After receiving the views of the parties, the court
should determine whether the impossibility of perform-
ance question can be decided based upon the existing
record or whether additional evidence should be received.
Specifically, the court should determine whether addi-
tional evidence should be received in order to give the
government the opportunity to show that the Bureau
lacked alternatives to halting water deliveries in 2001.
The court also should determine whether additional
evidence should be received in order to give plaintiffs the
opportunity to respond to any such showing by the gov-
ernment. Finally, we do not view any party as having
waived any arguments it may wish to make on the ques-
tion of impossibility of performance.
KLAMATH IRRIGATION v. US 34
Decision and which dismissed plaintiffs’ breach of con-
tract claims based upon the Contract Decision. The case
is remanded to the Court of Federal Claims for further
proceedings consistent with this opinion. If the court
determines that the government is liable for takings or for
breach of contract, or both, it will be necessary for it to
address the question of damages. Needless to say, we
express no views on whatever issues may arise in the
setting of a damages determination.
COSTS
No costs.
VACATED and REMANDED.
United States Court of Appeals
for the Federal Circuit
__________________________
KLAMATH IRRIGATION DISTRICT, TULELAKE
IRRIGATION DISTRICT, KLAMATH DRAINAGE
DISTRICT, POE VALLEY IMPROVEMENT
DISTRICT, SUNNYSIDE IRRIGATION DISTRICT,
KLAMATH BASIN IMPROVEMENT DISTRICT,
KLAMATH HILLS DISTRICT IMPROVEMENT CO.,
MIDLAND DISTRICT IMPROVEMENT CO., MALIN
IRRIGATION DISTRICT, ENTERPRISE
IRRIGATION DISTRICT, PINE GROVE
IRRIGATION DISTRICT, WESTSIDE
IMPROVEMENT DISTRICT NO. 4, SHASTA VIEW
IRRIGATION DISTRICT, VAN BRIMMER DITCH
CO., FRED A. ROBISON, ALBERT J. ROBISON,
LONNY E. BALEY, MARK R. TROTMAN, BALEY
TROTMAN FARMS, JAMES L. MOORE, CHERYL L.
MOORE, DANIEL G. CHIN, DELORIS D. CHIN,
WONG POTATOES, INC., MICHAEL J. BYRNE,
DANIEL W. BYRNE,
AND BYRNE BROTHERS,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee,
and
PACIFIC COAST FEDERATION OF FISHERMEN’S
ASSOCIATIONS,
Defendant-Appellee.
__________________________
KLAMATH IRRIGATION v. US 2
2007-5115
__________________________
Appeal from the United States Court of Federal
Claims in 01-CV-591, 01-CV-5910 through 01-CV-59125,
Judge Francis M. Allegra.
__________________________
GAJARSA, Circuit Judge, concurring-in-part and concur-
ring-in-judgment.
In my judgment, the majority opinion is incomplete in
some respects. Thus, although I generally agree with the
opinion of the court, I write separately to clarify my
reasoning on certain issues before us.
I.
When this matter was last before this court, I dis-
sented from the panel’s decision to certify certain ques-
tions to the Oregon Supreme Court. Klamath Irr. Dist. v.
United States, 532 F.3d 1376, 1378-81 (Fed. Cir. 2008)
(Gajarsa, J., dissenting). Nevertheless, we now have the
guidance of the Oregon Supreme Court, and it is binding
upon us. See Engel v. CBS, Inc., 182 F.3d 124, 125-26 (2d
Cir. 1999); Grover v. Eli Lilly & Co., 33 F.3d 716, 719 (6th
Cir. 1994).
In its certification order, the panel identified three
questions for certification to the Oregon Supreme Court:
1. Assuming that Klamath Basin water for the
Klamath Reclamation Project “may be deemed to
have been appropriated by the United States”
pursuant to Oregon General Laws, Chapter 228, §
2 (1905), does that statute preclude irrigation dis-
tricts and landowners from acquiring a beneficial
or equitable property interest in the water right
acquired by the United States?
3 KLAMATH IRRIGATION v. US
2. In light of the statute, do the landowners who
receive water from the Klamath Basin Reclama-
tion Project and put the water to beneficial use
have a beneficial or equitable property interest
appurtenant to their land in the water right ac-
quired by the United States, and do the irrigation
districts that receive water from the Klamath Ba-
sin Reclamation Project have a beneficial or equi-
table property interest in the water right acquired
by the United States?
3. With respect to surface water rights where ap-
propriation was initiated under Oregon law prior
to February 24, 1909, and where such rights are
not within any previously adjudicated area of the
Klamath Basin, does Oregon State law recognize
any property interest, whether legal or equitable,
in the use of Klamath Basin water that is not sub-
ject to adjudication in the Klamath Basin Adjudi-
cation?
Klamath Irr. Dist. v. United States, 532 F.3d 1376, 1377-
78 (Fed. Cir. 2008). The Oregon Supreme Court unequivo-
cally answered “no” to the first certified question, and
“yes” to the third. Klamath Irr. Dist. v. United States, 227
P.3d 1145, 1157, 1166 (Or. 2010) (“Certification Deci-
sion”).
The Oregon court’s answer to the second question,
however, was not definitive. It began by making clear that
“[b]enefical use is a necessary but not sufficient condition
to acquire a beneficial or equitable property interest in a
water right.” Certification Decision, 227 P.3d at 1160. The
KLAMATH IRRIGATION v. US 4
Oregon court then adopted the three factors considered in
Nevada v. United States, 463 U.S. 110 (1983), as proba-
tive, as a matter of state law, of whether landowners have
an equitable or beneficial property interest in a water
right to which the United States holds legal title. Certifi-
cation Decision, 227 P.3d at 1163. Discussing the first
factor—whether the water right was appurtenant to the
land—the Oregon court found that it was. Id. And dis-
cussing the second factor—the relationship that exists
between the federal government and plaintiffs—the
Oregon court found that “the United States holds the
water right that it appropriated . . . for the use and bene-
fit of the landowners.” Id. at 1163-64. I have no objection
to the majority’s decision on these two factors, and I join
it.
The third factor adopted by the Oregon Supreme
Court is “the contractual agreements between the United
States and plaintiffs.” Id. at 1165. I agree with the major-
ity that, on remand, the trial court should direct its
attention to the third factor set forth by the Oregon court.
Majority Op. at 27. But I disagree with the majority’s
assumption that an equitable water right has been cre-
ated by the first two factors, and that the contractual
agreements between plaintiffs and the government can
only “have clarified, redefined, or altered” that pre-
existing property interest. Id. at 28; see also Certification
Decision, 227 P.3d at 1165. Instead, I read the Certifica-
tion Decision as making the creation of such an interest
dependent upon the content of the agreements between
the various plaintiffs and the government. See Certifica-
tion Decision, 227 P.3d at 1165 (“[W]e are in no position to
provide a definitive answer whether . . . the various
contractual agreements between the United States and
plaintiffs support or defeat plaintiffs’ claim that they have
an equitable or beneficial property interest . . . .” (empha-
5 KLAMATH IRRIGATION v. US
sis added)). I therefore believe that the Oregon court was
neutral on this factor, but noted its dependency on the
terms and conditions of the relevant agreements.
Regardless of how the third factor is analyzed, I agree
fully with—and want to emphasize—the majority’s
statement that the existence of any right must be deter-
mined on a case-by-case basis. Majority Op. at 27; see also
Certification Decision, 227 P.3d at 1165-66. The effect of
each contract, patent, or other document serving as the
basis for plaintiffs’ claims must be analyzed in light of its
internal content, as well as the law and regulations in
effect at the time. See Hash v. United States, 403 F.3d
1308, 1315 (Fed. Cir. 2005).
II.
In addition to the over-arching issue of equitable or
beneficial water rights, plaintiffs Van Brimmer Ditch
Company (“Van Brimmer”), Klamath Drainage District,
and Klamath Hills District Improvement Company assert
specific alternative sources of water rights. Appellants
2007 Br. at 45; see also Appellants 2007 Reply Br. at 22-
23. Because these claims are squarely before us and their
disposition depends only upon conclusions of law, I would
reach the claims of these three plaintiffs.
A.
Resolution of the claims asserted by plaintiffs
Klamath Drainage District and Klamath Hills District
Improvement Company is straight-forward. These plain-
tiffs assert claims based on water right permits with
priority dates of 1977 and 1983, respectively. J.A. 43414-
17. In their briefing, plaintiffs repeatedly characterize the
referenced documents as “water rights certificates” grant-
ing them vested rights. 2007 Reply Br. at 23 (emphasis
added). But these documents are identified as “permits”
KLAMATH IRRIGATION v. US 6
on their face. And the trial court, in addition to noting
other defects associated with these claims 1 , explicitly
found that the record contains “no evidence that Oregon
has issued a [subsequent] water rights certificate.”
Klamath Irr. Dist. v. United States, 67 Fed. Cl. 504, 539
n.62 (2005) (emphasis added). Absent evidence of subse-
quent water right certificates, the permits provide “only
an inchoate right that . . . does not constitute a vested
water right.” Fort Vannoy Irr. Dist v. Water Res. Comm’n,
188 P.3d 277, 290 (Or. 2008) (en banc). I would therefore
hold that plaintiffs Klamath Drainage District and
Klamath Hills Improvement Company lack any protected
property interest based upon the documents in the record.
B.
Turning to the rights of Van Brimmer, plaintiffs ar-
gue that Van Brimmer “does possess a pre-1905 water
right” and that a 1909 contract between Van Brimmer
1 For example, the trial court noted that the
Klamath Drainage District permit is for use during a
period of time that appears to be outside the period when
delivery was suspended in 2001. Klamath Irr. Dist. v.
United States, 67 Fed. Cl. 504, 539 n.62 (2005). The trial
court also included the Klamath Drainage District and
Klamath Hills District Improvement Company permits in
a discussion of the availability of damages, id. at 539, an
issue which I do not believe the parties have adequately
considered. Assuming that plaintiffs do have an equitable
or beneficial property interest in the waters to which the
United States took title in 1905, plaintiffs’ interests are
likely junior to the aboriginal fishing rights of amici
Indian tribes. I also think it very likely that the water
flow allocations associated with Indian fishing rights may
be largely co-extensive with the flow allocations made by
the United States in 2001. In any event, plaintiffs’ dam-
ages, if such damages exist, may not be calculable—or
even ascertainable—prior to resolution of the state-level
adjudication of Klamath Basin water rights.
7 KLAMATH IRRIGATION v. US
and the United States “relinquishes only Van Brimmer’s
riparian rights in lower Klamath Lake, not its appropriat-
ive rights.” 2007 Reply Br. at 22-23. Assuming, arguendo,
that Van Brimmer did obtain a water right with a priority
date earlier than that of the United States, I disagree
with plaintiffs’ interpretation of the 1909 agreement.
We have the ability to interpret the language of the
agreement, San Carlos Irrigation and Drainage District v.
United States, 111 F.3d 1557, 1564 (Fed. Cir. 1997), and
we should do so. The 1909 agreement includes a contrac-
tual promise by the United States to deliver water, in
consideration for which Van Brimmer
hereby waives and renounces to the use and bene-
fit of the United States any and all of its riparian
rights, in relation to the waters and shores of
Lower Klamath Lake appurtenant or incident to
the lands now being irrigated by [Van Brimmer]
. . . and also waives and renounces any and all
claims for damages consequent upon or arising
from any change of the course or water level of the
said Lower Klamath Lake . . . .
J.A. 4270. I interpret this portion of the contract to consti-
tute a quit-claim of Van Brimmer’s “riparian rights,” a
position with which plaintiffs apparently agree. 2007
Reply Br. at 23. The question is what does the contract
mean by “riparian rights”?
Prior to February 24, 1909, the State of Oregon ap-
plied both the riparian doctrine and the prior appropria-
tion doctrine to the use of surface waters. Fort Vannoy Irr.
Dist., 188 P.3d at 283-84 (citing Wells A. Hutchins, The
Common-Law Riparian Doctrine in Oregon: Legislative
and Judicial Modification, 36 Or. L. Rev. 193 (1957)); cf.
Oregon General Laws, Chapter 216 (1909) (adopting prior
appropriation doctrine). Given this historical context, I
KLAMATH IRRIGATION v. US 8
believe that the 1909 contract’s quit-claim of “riparian
rights” is ambiguous, and I would remand for additional
briefing of this specific issue.
III.
In conclusion, my view differs only by a limited degree
with that of the majority. I agree that remand is appro-
priate, but my guidance would differ on certain aspects of
the Certification Decision. I therefore concur with the
majority in part, and I concur in the judgment.