In Re the Crow Water Compact

July 29 2015

DA 14-0567
Case Number: DA 14-0567

IN THE SUPREME COURT OF THE STATE OF MONTANA

2015 MT 217

IN RE THE CROW WATER COMPACT,

IN THE MATTER OF THE ADJUDICATION
OF EXISTING AND RESERVED RIGHTS
TO THE USE OF WATER, BOTH SURFACE
AND UNDERGROUND, OF THE CROW
TRIBE OF INDIANS OF THE STATE OF
MONTANA.

APPEAL FROM: Montana Water Court, Cause No. WC-2012-06
Honorable Russ McElyea, Chief Water Judge

COUNSEL OF RECORD:

For Appellants:

Hertha L. Lund, Breeann M. Johnson, Lund Law, PLLC,
Bozeman, Montana

Elizabeth A. Brennan, Brennan Law & Mediation, PLLC,
Missoula, Montana

For Appellee United States:

John C. Cruden, Assistant Attorney General, John L. Smeltzer, Appellate
Attorney, United States Department of Justice, Washington, DC

For Appellee Crow Tribe:

Nathan A. Espeland, Espeland Law Office, PLLC, Columbus, Montana

Merrill C. Godfrey, Akin Gump Strauss Hauer & Feld, LLP,
Washington, DC

For Appellee State of Montana:

Timothy C. Fox, Montana Attorney General, Jeremiah D. Weiner,
Assistant Attorney General, Helena, Montana
 Submitted on Briefs: June 10, 2015
Decided: July 29, 2015

Filed:

__________________________________________
Clerk

2
Chief Justice Mike McGrath delivered the Opinion of the Court.

¶1 Members of the Crow Allottees Association appeal from the Montana Water

Court’s order of July 30, 2014, dismissing their objections to the Crow Water Compact

and refusing to stay proceedings. We affirm.

ISSUES

¶2 Issue One: Whether the Water Court applied the proper legal standard of review
in granting the motions to dismiss the Allottees’ objections.

¶3 Issue Two: Whether the Water Court exceeded its jurisdiction by dismissing the
Allottees’ objections rather than staying consideration of the Compact pending
resolution of the Allottees’ action in United States District Court.

¶4 Issue Three: Whether the Water Court erred in determining that the Allottees do
not have individual water rights apart from the Crow Tribal Water Right; that the
United States adequately represented the Allottees during the Compact
negotiations; and whether a “current use list” is a prerequisite for including the
Compact in a final decree.

BACKGROUND

¶5 This case arises from the Crow Compact, an agreement among the United States,

the Crow Tribe, and the State of Montana. The Compact recognizes and specifies a

Tribal Water Right of the Crow Tribe and its members in a number of sources of water

that abut or cross the Crow Indian Reservation in Montana. The Compact also provides

for cash payments to the Tribe, allocates coal tax revenue, and creates a tribal

administrative structure for distribution of the Tribal Water Right. The Crow Tribe, the

United States through the Department of the Interior, and the Montana Reserved Water

Rights Compact Commission agreed to the terms of the Compact in 1999, and the

3
Montana Legislature ratified it the same year. The Compact is codified at § 85-20-901,

MCA. The Crow Tribe ratified the Compact by vote of its members in 2011.

¶6 The United States Congress “authorized, ratified and confirmed” the Compact in

the Crow Tribe Water Rights Settlement Act of 2010 (“Act”), Pub. L. 111-291,

§ 404(a)(1). The Settlement Act provides that the Tribal Water Right established by the

Compact “shall be held in trust by the United States for the use and benefit of the Tribe

and the allottees” and that the right “shall not be subject to forfeiture or abandonment.”

Act, § 407(c). The Crow Tribe on behalf of itself and its members, and the United States

as trustee for the Allottees, waived and released all other claims to water in return for

those recognized in the Compact. Act, § 410(a). The Compact contains a similar

provision. Section 85-20-901, MCA, Art. VII, Sec. C. The Compact is a negotiated

compromise among the parties, in lieu of settling the water claims of the Crow Tribe and

its members in protracted, expensive and uncertain litigation.

¶7 The Settlement Act expresses the “intent of Congress to provide to each allottee

benefits that are equivalent to or exceed the benefits allottees possess as of the date of

enactment of the Act . . . .” Act, § 407(a) (emphasis added). The Act provides that

“allottees shall be entitled to a just and equitable allocation of water for irrigation

purposes” that “shall be satisfied from the tribal water rights.” Act, § 407(d). After

exhausting relief provided under tribal law, Allottees with claims relating to water may

seek relief under 25 U.S.C. § 381 (authorizing the Secretary of the Interior to secure a

just and equal distribution of water) or any other applicable law. Act, § 407(d).

4
¶8 The Compact requires that the Montana Water Court a enter a final decree

incorporating the Tribal Water Right as set out in the Compact:

The water rights and other rights confirmed to the Tribe in this Compact are
in full and final satisfaction of the water right claims of the Tribe and the
United States on behalf of the Tribe and its members, including federal
reserved water rights claims based in Winters v. United States, 207 U.S.
564 (1908). In consideration of the rights confirmed to the Tribe in this
Compact, and of performance by the State of Montana and the United
States of all actions required by this Compact, including entry of a final
order issuing the decree of the reserved water right of the Tribe held in
trust by the United States as quantified in the Compact and displayed in
Appendix 1, the Tribe and the United States as trustee for the Tribe and
Tribal members hereby waive, release, and relinquish any and all claims to
water rights or to the use of water within the State of Montana existing on
the date this Compact is ratified by the State, the Tribe, and Congress and
conditional upon a final decree, whichever date is later.

Section 85-20-901, MCA, Art. VII, Sec. C (emphasis added). The parties to the Compact

complied with this provision by submitting it to the Montana Water Court for entry of a

judicial decree of the Compact’s water rights provisions. Pursuant to § 85-2-702(3),

MCA, the Water Court has limited discretion in this process. Montana law provides that

the terms of a compact “must be included in a preliminary decree,” and unless an

objection to a compact is sustained, the decree of the Water Court must include the rights

established by the compact “without alteration.” Section 85-2-702(3), MCA. The

Compact requires that the Water Court’s review of the Compact be “limited to Article III

and Appendix 1” thereof, which contain the specific water rights agreed to. Section

85-20-901, MCA, Art. VII, Sec. B.3. The Settlement Act contains an automatic repeal if

the Secretary of the Interior does not publish a statement of findings by March 31, 2016,

5
which must include a finding that the Montana Water Court has issued a final judgment

and decree approving the Compact. Act, § 410(e).

¶9 In 2012 the Water Court entered a preliminary decree containing the terms of the

Compact, and served and published notice of the decree and of rights to object. The

Water Court sent notice of the preliminary decree to over 16,000 persons and entities and

received approximately 100 objections.

¶10 In June 2013 a group of Crow tribal member Allottees objected to the Compact in

the Water Court. Allottees are persons who hold interests in allotments, which are

parcels of former Tribal land, mostly created by the General Allotment Act of 1887,

25 U.S.C. §§ 331-358. Big Spring v. Conway, 2011 MT 109, ¶ 31, 360 Mont. 370, 255

P.3d 121. Among other things, the General Allotment Act aimed to break tribal

organization on reservations and replace it with plots of private land farmed by individual

Indians who would then be assimilated into the non-tribal culture. While some Allottees

hold their land in fee simple, the interests of many others are held in trust by the United

States. The Indian Reorganization Act, 25 U.S.C. § 462, ended allotment of reservation

lands in 1934 and extended the allotment trust period indefinitely.

¶11 The Allottees made a number of contentions in their Water Court objections to the

Compact. Their contentions are centered on the argument that they have reserved water

rights appurtenant to their allotments, and that these rights are separate from the reserved

rights held by the Tribe as recognized in Winters v. U.S., 207 U.S. 564, 28 S. Ct. 207

(1907). The Allottees’ second major contention is that they did not receive adequate

notice of the proceedings leading to the Compact and that their interests in the Compact

6
negotiations were not adequately represented by the United States. The contend that their

water rights cannot be part of the decree of the Water Court; that their rights will be

harmed by implementation of the Compact; and that the Water Court lacks jurisdiction to

adjudicate their rights. The Allottees also asked the Water Court to stay its proceedings

concerning the Compact pending resolution of a separate lawsuit the Allottees brought in

United States District Court in May 2014.

¶12 The Allottees’ action, Crow Allottees Assoc. v. United States, Cause No.

CV-14-62-BLG, United States District Court for the District of Montana, asserts claims

that the United States breached its fiduciary duties to the Allottees by failing to protect

their water rights in the Compact. The Allottees further contend that the United States

violated their due process rights by failing to adequately represent them in Compact

proceedings. The complaint seeks a declaratory ruling and order that the United States be

required to provide the Allottees with adequate legal counsel in all matters regarding the

Compact.

¶13 Upon motion of the Crow Tribe and the United States, the Water Court dismissed

the Allottees’ objections to the Compact and denied their request for a stay. The Water

Court concluded that it had jurisdiction to review the Compact under federal and state

law, including the McCarran Amendment, 43 U.S.C. § 666; §§ 85-2-231, -234, and -702,

MCA; and Article VI of the Compact. The Water Court concluded that under federal

law, United States v. Powers, 305 U.S. 527, 59 S. Ct. 344 (1939), and the Compact, the

Allottees are entitled to a “just and equal share” of the Tribal Water Right recognized by

Winters and established in the Compact as “the right of the Crow Tribe, including any

7
Tribal member, to divert, use, or store water as described in Article III of this Compact.”

Section 85-20-901, MCA, Art. II, Sec. 30. The right of Allottees to a just and equitable

allocation of the Tribal Water Right was confirmed by Congress in the Settlement Act,

§ 407(d)(2), (3).

¶14 The Water Court noted that the responsibility for allocating water to the Allottees

rests with the Secretary of the Interior under the General Allotment Act, 25 U.S.C. § 381,

and is delegated to the Crow Tribe by the Compact. Section 85-20-901, MCA, Art. IV,

Sec. A.2.a, b. The Compact requires the Tribe to provide “Indians residing on the

Reservation . . . to a just and equal portion of the Tribal Water Right.” Art. IV, Sec. B.1.

Congress included similar guarantees in the Settlement Act, §§ 402(1)(B) and

407(f)(2)(A). Pursuant to these provisions, the Water Court determined that any claims

that the Allottees have regarding allocation of the Tribal Water Right must be addressed

in some forum other than the Montana Water Court.

¶15 The Water Court observed that the United States, pursuant to its trust

responsibility to administer Indian lands and property, Lewis v. Hanson, 124 Mont. 492,

496-97, 227 P.2d 70, 71 (1951), agrees that it represented the Allottees during the process

of negotiating the Compact. The United States as trustee waived and released any claims

of the Allottees in exchange for recognition of the Tribal Water Right and the Allottees’

right to use a just and equal share of that right. Section 85-20-901, MCA; Act,

§ 410(a)(2). The Allottees contend that they were not individually consulted and were

entitled to independent legal representation furnished by the United States. As noted,

8
they commenced an action in United States District Court seeking to establish that

position.

¶16 The Water Court determined that because the Allottees were represented by the

United States during Compact proceedings, their status is that of represented parties. The

Water Court noted the “unique nature of water rights Compacts, including prior review

and approval by the Governor, the Legislature, the Department of the Interior, Congress,

and the Crow Tribe.” Relying on case law regarding objections to consent decrees, the

Water Court concluded that consideration of objections by represented parties is limited

to a required showing that the negotiations were the product of fraud, collusion or

overreaching among the negotiating parties. Officers for Justice v. Civil Service Comm.,

688 F.2d 615, 625 (9th Cir. 1982). This high standard precludes a reviewing court from

substituting its judgment for that of the negotiating and settling parties. The Water Court

determined that the Allottees, while dissatisfied, have not asserted that the Compact was

the product of fraud, collusion or overreaching and so are bound by its terms.

¶17 The Water Court determined that the purpose of its proceeding

is not for the Court to assess the relative merits of each party’s position and
adjust the outcome to conform to what the parties might have obtained from
trial. That balancing of interests was addressed by the parties themselves
during the negotiation process and reviewed at numerous levels by
representatives of those parties after the Compact was finalized.

Further, since the objective of the Compact is “to define the Tribe’s Winters rights,

eliminate litigation risk and expense and achieve finality for the Tribe and other parties,”

there is no requirement at this stage that the Allottees’ water claims be separately

quantified. The Water Court determined that it was not tasked to review whether the

9
Tribe or other parties have fulfilled their responsibilities under the Compact, such as

preparing a current water usage list.

¶18 The Water Court therefore granted the motions of the United States and the Crow

Tribe and dismissed the Allottees’ objections to the adoption of the Compact. The

Allottees appeal.

STANDARD OF REVIEW

¶19 This Court applies the same standards of review to decisions of the Water Court as

it does to decisions of a district court. Mont. Trout Unlimited v. Beaverhead Water Co.,

2011 MT 151, ¶ 16, 361 Mont. 77, 255 P.2d 179. This Court reviews the Water Court’s

findings of fact under the clearly erroneous standard. Weinheimer Ranch v. Pospisil,

2013 MT 87, ¶ 19, 369 Mont. 419, 299 P.3d 327. This Court reviews the Water Court’s

conclusions of law de novo to determine whether they are correct. Skelton Ranch v.

Pondera Co. Canal & Res. Co., 2014 MT 167, ¶ 26, 375 Mont. 327, 328 P.3d 644.

¶20 This Court reviews a court’s orders related to trial administration, such as a motion

to stay proceedings, for an abuse of discretion. Wamsley v. Nodak Mut. Ins. Co., 2008

MT 56, ¶ 23, 341 Mont. 467, 178 P.3d 102.

DISCUSSION

¶21 Issue One: Whether the Water Court applied the proper legal standard of review
in granting the motions to dismiss the Allottees’ objections.

¶22 The Allottees contend that the Water Court erred in dismissing their objections

without applying Rule 12(b)(6), M. R. Civ. P., and accepting the truth of their allegations.

10
¶23 Water Court judges have the powers of a district court within their area of

jurisdiction, § 3-7-224(3), MCA, and the Montana Rules of Civil Procedure generally

apply to Water Court proceedings. Rule 2(b), Montana Water Adjudication Rules.

However, that does not mean that Rule 12 (b)(6), M. R. Civ. P., applies to the Water

Court’s consideration of an objection to a water compact.

¶24 The Allottees have not presented any persuasive authority that the Water Court is

bound to apply Rule 12(b)(6) when considering the disposition of an objection to a

preliminary decree. Rule 12(b)(6) applies when a party moves to dismiss a complaint in

a civil action. Western Sec. Bank v. Eide Bailly, 2010 MT 291, ¶ 55, 359 Mont. 34, 249

P.3d 35. There is nothing that requires the Water Court to apply Rule 12(b)(6)

jurisprudence in its consideration of an objection to a preliminary decree. There is no

authority that requires the Water Court to accept the truth of factual allegations made in

an objection to a preliminary decree.1 To the contrary, in water rights matters a properly

filed claim of water right “constitutes prima facie proof of its content until the issuance of

a final decree.” Section 85-2-227(1), MCA.

¶25 Therefore, the Water Court did not err by not applying Rule 12(b)(6),

M. R. Civ. P., in its review of the Allottees’ objections to the Compact.

1
In the Water Court proceedings the Allottees argued that the court “must construe
Allottees’ objections as being true . . . .”

11
¶26 Issue Two: Whether the Water Court exceeded its jurisdiction by dismissing the
Allottees’ objections rather than staying consideration of the Compact pending
resolution of the Allottees’ action in United States District Court.

¶27 The Allottees acknowledge that the McCarran Amendment, 43 USC § 666,

specifically allows state courts to adjudicate federal and Indian reserved water rights.

They contend, however, that this only allows state courts to “decide issues of federal

Indian or constitutional law” but withholds from state courts the power to “decide Indian

law issues of first impression; [they] can only apply existing federal law.” Allottees cite

Greely v. Confederated Salish and Kootenai Tribes, 219 Mont. 76, 712 P.2d 754 (1985)

in support of this novel proposition. However, nothing in that decision supports such a

proposition. Greely establishes that Montana courts are sufficient to provide a McCarran

Amendment forum for the determination of federal and Indian water rights, and that they

are “required to follow federal law with regard to those rights.” Greely, 219 Mont. at 95,

712 F.2d at 765.

¶28 In this case the Water Court expressly applied federal law in its consideration of

the Allottees’ arguments that they have water rights that are “distinct from the Crow

Tribe’s reserved right.” The Water Court applied Powers to determine that the Allottees’

have water rights that are derived from the reserved rights of the Crow Tribe, and that

they are entitled to use a just and equitable share of the Tribe’s rights. As discussed

above, the Tribe, the United States Congress and the State of Montana have all expressly

recognized the Allottees’ rights to a share of the Crow Tribal Water Right. Allottee

rights are recognized in the Compact, which requires the Tribe to provide “Indians

residing on the Reservation of . . . a right . . . to a just and equal portion of the Tribal

12
Water Right.” Section 85-20-901, MCA, Art. IV, Sec. B.1. Congress included similar

express guarantees in the Settlement Act, §§ 402(1)(B) and 407(f)(2)(A), stating “the

intent of Congress to provide to each allottee benefits that are equivalent to or exceed the

benefits allottees possess as of the date of enactment of this Act . . . .”

¶29 The Allottees contend that the Water Court erred in treating them as represented

parties for purposes of considering the Compact. As noted above, existing law restricts

the Water Court’s power over Compact issues. The Compact was the product of

extensive negotiations over a period of years, resulting in a negotiated compromise of

interests and claims.

¶30 Montana law requires that the terms of a compact “must be included in a

preliminary decree” and unless an objection to a compact is sustained, the terms of the

compact must be included in the decree “without alteration.” Section 85-2-702(3), MCA.

The Compact requires that the Water Court’s review of the Compact be “limited to

Article III and Appendix 1” thereof, which specify in detail the Crow Tribe’s reserved

water rights. Section 85-20-901, MCA, Art. VII, Sec. B.3. As the Water Court

recognized, determining the adequacy of the United States’ representation of the

Allottees is not within the scope of its review. The Water Court properly concluded that

since the Allottees were represented in the Compact negotiations, its review of the

compact was limited to determining whether the Compact was the “product of fraud,

collusion or overreaching.” In doing so, the Water Court relied, as it has in other cases,2

2
Matter of the Adjudication of Existing and Reserved Rights to the Use of Water of the
United States Forest Service Within the State of Montana, Water Court Cause No. WC-2007-04.

13
upon the established rules for judicial oversight of consent decrees as set out in Officers

for Justice.

¶31 The Allottees contend that the United States inadequately represented their

interests during the extended negotiations that led to adoption of the Compact. They

contend that they were entitled to separate representation that should have resulted in

recognition and a listing of their claimed separate water rights. However, they have

acknowledged, by filing a separate action on these issues in United States District Court,

that this is not an issue that the Water Court can resolve. In fact, the Allottees contend

that only the United States District Court can determine whether the United States

breached a fiduciary duty to them. The Water Court determined only that the Allottees

were represented by the United States, which they do not deny, and that this

representation determined the level of scrutiny. The Water Court applied the fraud or

collusion analysis from Officers for Justice. The Allottees contend that this was the

wrong analysis to apply, but their alternative is that the Water Court should have applied

a Rule 12(b)(6) analysis, construing all their allegations as true. As discussed above,

Rule 12(b)(6) does not apply to this situation and the Water Court conducted the proper

analysis.

¶32 The Allottees’ contend that the Water Court should have stayed its final action on

the Compact pending resolution of their separate lawsuit in United States District Court.

We review a lower court’s determination on a motion to stay proceedings to determine

whether the court abused its discretion. Lamb v. Dist. Ct., 2010 MT 141, ¶ 14, 356 Mont.

534, 234 P.3d 893. We consider whether the decision on the request for a stay was

14
arbitrary or exceeded the bounds of reason resulting in substantial injustice. Wamsley,

¶ 33.

¶33 It is clear that a final resolution of the Allottees’ federal action will take an

unknown but substantial period of time, which alone could fatally doom the future of the

Compact. This would happen not because of any determination of the merits of the

Compact, but simply because of the time it would take to finally resolve the Allottees’

lawsuit and its aftermath. Congress provided for an automatic repeal of its approval of

the Compact if the Water Court’s decree, including the Compact, is not issued prior to

March 31, 2016. Act, § 415. It would work a hardship and a potential injustice on the

parties who have worked for many years to develop and implement the Compact to put

everything in abeyance for an unlimited time, and to risk repeal of the Compact, to see

whether the Allottees can prevail on their representation claims in federal court. We have

upheld a district court’s discretion refusing to stay a Montana lawsuit pending the

outcome of a related lawsuit in another state, Wamsley, ¶ 33, or in a federal court, Henry

v. Dist. Ct., 198 Mont. 8, 14, 645 P.2d 1350, 1353 (1982).

¶34 The Water Court acted within its discretionary power to deny the Allottees’

request for a stay and we find no error.

¶35 Issue Three: Whether the Water Court erred in determining that the Allottees do
not have individual water rights apart from the Crow Tribal Water Right; that the
United States adequately represented the Allottees during the Compact
negotiations; and whether a “current use list” is a prerequisite for including the
Compact in a final decree.

¶36 The issues regarding the nature of the Allottees’ water rights and the

representation of the Allottees during the negotiations were discussed above and need not

15
be repeated. The Allottees’ objections to the Compact filed in the Water Court included

the assertion that the Crow Tribe and the United States had not prepared a list of “current

uses” of the Tribal Water Right, and that no action should be taken on the Compact until

that list is prepared.

¶37 Article IV, Section E.2 of the Compact provides that after the Montana Legislature

ratifies the Compact, the United States and the Crow Tribal Water Rights Division will

provide the State with a “report listing all current uses of the Tribal Water Right,

including uses by Tribal members . . . . The Allottees contend that no such report has

been submitted to the State and that the Water Court should therefore not include the

Compact in a final decree. However, the Compact attaches no such significance to the

water use report, and specifically provides that the Compact is effective when “ratified by

the Tribe, by the State and by the Congress of the United States. . . .” Section 85-20-902,

MCA, Art. VII, Sec. A. Those ratifications have taken place. The Congressional

Settlement Act, § 410(e), likewise, does not make the water use report a prerequisite to

the validity of the Compact.

¶38 More to the point, there is no requirement that the specific water rights or claims

of these Allottees be quantified as a precondition to implementing the Compact. As the

Water Court explained:

The objective of the Compact, which is a negotiated settlement, is to define
the Tribe’s Winters rights, eliminate litigation risk and expense, and
achieve finality for the Tribe and other parties to the agreement. Although
the parties to a Compact might agree to define allottees’ right to use of the
Tribal reserved water right, such a definition is not required to achieve
settlement. Because the allottees’ rights to use of water are derived from
the Tribal reserved water right, there is no requirement in case law or

16
 statute that a Compact separately quantify the allottees’ rights to use of that
water.

We find no basis for concluding that the Water Court should have deferred action on the

Compact based upon the absence of a current use list.

¶39 We affirm the Water Court’s order dismissing the Allottees’ objections to the

Compact and refusing to order a stay.

¶40 The Water Court’s order of July 30, 2014, is affirmed.

/S/ MIKE McGRATH

We Concur:

/S/ BETH BAKER
/S/ PATRICIA COTTER
/S/ JAMES JEREMIAH SHEA
/S/ MICHAEL E WHEAT
/S/ LAURIE McKINNON
/S/ JIM RICE

17