United States v. City of Las Cruces

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAY 7 2002
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Counter-
Defendant-Appellant,

v. No. 00-2451

CITY OF LAS CRUCES; HUDSPETH
COUNTY CONSERVATION AND
RECLAMATION DISTRICT NO. 1;
CITY OF EL PASO; NEW MEXICO
STATE UNIVERSITY; STAHMANN
FARMS, a New Mexico corporation;
STATE OF NEW MEXICO, ex rel.
STATE ENGINEER,

Defendants-Appellees,

EL PASO COUNTY WATER
IMPROVEMENT DISTRICT NO. 1,

Defendant-Counter-
Claimant-Cross-
Claimant,

v.

ELEPHANT BUTTE IRRIGATION
DISTRICT OF NEW MEXICO,

Defendant-Cross-
Defendant-Appellee.

--------------------------------
STATE OF TEXAS; LOWER
VALLEY WATER DISTRICT;
PUEBLO OF ISLETA DEL SUR;
STATE OF COLORADO; JAMES
SCOTT BOYD, Administrator of the
Estate of Nathan Ellington Boyd,

Intervenors.

--------------------------------

UNITED STATES OF AMERICA,

Plaintiff-Counter-
Defendant,

v. No. 00-2459

CITY OF LAS CRUCES; HUDSPETH
COUNTY CONSERVATION AND
RECLAMATION DISTRICT NO. 1;
NEW MEXICO STATE
UNIVERSITY; STAHMANN FARMS,
a New Mexico corporation; STATE
OF NEW MEXICO, ex rel. STATE
ENGINEER,

Defendants-Appellees,

EL PASO COUNTY WATER
IMPROVEMENT DISTRICT NO. 1,

Defendant-Counter-
Claimant-Cross-
Claimant,

and

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CITY OF EL PASO,

Defendant-Appellant,

v.

ELEPHANT BUTTE IRRIGATION
DISTRICT OF NEW MEXICO,

Defendant-Cross-
Defendant-Appellee.

--------------------------------

STATE OF TEXAS; LOWER
VALLEY WATER; PUEBLO OF
ISLETA DEL SUR; STATE OF
COLORADO; JAMES SCOTT BOYD,
Administrator of the Estate of Nathan
Ellington Boyd,

Intervenors.

--------------------------------

UNITED STATES OF AMERICA,

Plaintiff-Counter-
Defendant,

v. No. 00-2473

CITY OF LAS CRUCES; HUDSPETH
COUNTY CONSERVATION AND
RECLAMATION DISTRICT NO. 1;
CITY OF EL PASO; NEW MEXICO
STATE UNIVERSITY; STAHMANN
FARMS, a New Mexico corporation;

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STATE OF NEW MEXICO, ex rel.
STATE ENGINEER,

Defendants-Appellees,
and

EL PASO COUNTY WATER
IMPROVEMENT DISTRICT NO. 1,

Defendant-Counter-
Claimant-Cross-
Claimant-Appellant,

v.

ELEPHANT BUTTE IRRIGATION
DISTRICT OF NEW MEXICO,

Defendant-Cross-
Defendant-Appellee.

-------------------------------

STATE OF TEXAS; LOWER
VALLEY WATER; PUEBLO OF
ISLETA DEL SUR; STATE OF
COLORADO; JAMES SCOTT BOYD,
Administrator of the Estate of Nathan
Ellington Boyd,

Intervenors.

Appeal from the United States District Court
for the District of New Mexico
(D.C. No. CIV-97-803-JP/RLP)

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Andrew C. Mergen, Attorney, U.S. Department of Justice, Washington, D.C.,
(John Cruden, Acting Assistant Attorney General, Washington, D.C.; Jeffrey
Dobbins, Attorney, U.S. Department of Justice, Washington, D.C.; Lynn Johnson,
Attorney, U.S. Department of Justice, Washington, D.C.; John W. Zavitz,
Assistant U.S. Attorney, Albuquerque, New Mexico; Chris Rich, U.S. Department
of the Interior, Salt Lake City, Utah; with him on the briefs), for Plaintiff-
Counter-Defendant-Appellant.

Jay F. Stein, James C. Brockmann, Stein & Brockmann, P.A., Santa Fe, New
Mexico, on the briefs for Defendant-Appellee City of Las Cruces.

Benjamin Phillips, Rebecca Dempsey, White, Koch, Kelly & McCarthy, P.A.,
Santa Fe, New Mexico; Douglas G. Caroom, Delgado, Acosta & Bickerstaff,
Heath, P.L.L.C., on the briefs for Defendant-Appellee City of El Paso.

Luis G. Stelzner, John W. Utton, Sheehan, Sheehan & Stelzner, P.A.,
Albuquerque, New Mexico; Charles T. DuMars, Christina Bruff DuMars, Law &
Resource Planning Assoc., Albuquerque, New Mexico, on the briefs for
Defendant-Appellee New Mexico State University.

Joel T. Newton, Miller, Stratvert & Torgerson, P.A., Las Cruces, New Mexico, on
the briefs for Defendant-Appellee Stahmann Farms.

Susanne Hoffman-Dooley, (Gregory C. Ridgley, with her on the briefs), Santa Fe,
New Mexico, for Defendant-Appellee State of New Mexico, ex rel. State
Engineer.

James M. Speer, Jr., El Paso, Texas, for Defendant-Counter-Claimant-Cross-
Claimant-Appellant El Paso County Water Improvement District No. 1.

Beverly J. Singleman, Stephen A. Hubert, Las Cruces, New Mexico, on the briefs
for Defendant-Cross-Defendant-Appellee Elephant Butte Irrigation District of
New Mexico.

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Before BRISCOE, MURPHY, Circuit Judges, and OBERDORFER, District
Judge *.

MURPHY, Circuit Judge.

I. INTRODUCTION

This is an appeal from the district court’s order dismissing the United

States’ suit to quiet title to water rights in a portion of the Rio Grande River. The

district court dismissed the suit under the Colorado River doctrine and, in the

alternative, under the Brillhart doctrine. This court has jurisdiction under 28

U.S.C. § 1291 and holds that the district court did not abuse its discretion when it

refused to exercise jurisdiction over the federal action pursuant to Brillhart. The

district court, however, did not articulate why it decided to dismiss the action

rather than stay it. For that reason alone, we vacate and remand, with

instructions to consider the propriety of a stay.

II. FACTS

A. Background

This dispute centers around the Rio Grande Reclamation Project (the

“Project”). In 1902, Congress passed the Reclamation Act. Act of June 17, 1902,

*
Honorable Louis F. Oberdorfer, United States District Judge, United States
District Court for the District of Columbia, sitting by designation.

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ch. 1093, 32 Stat. 388 (1902) (codified as amended in scattered sections of 43

U.S.C. beginning at 43 U.S.C. § 371). The purpose of the Reclamation Act was

to facilitate irrigation of arid and semi-arid western territories and states by

providing for the construction of large-scale irrigation works. See Henkel v.

United States, 237 U.S. 43, 49 (1915). The Project is one that grew out of the

Act. It is expansive, running through New Mexico and Texas. The Project begins

in the north at Elephant Butte Reservoir, near the town of Truth or Consequences,

New Mexico. Just below Elephant Butte Reservoir is Caballo Reservoir. From

the reservoirs, water is released into the Rio Grande riverbed. The water is then

diverted by one of six diversion dams into canals running on either side of the

river. From the canals, riverwater is further diverted into channels and ditches

running to farmland. The water is used to irrigate crops. Other channels and

ditches return both run-off from the farmland and groundwater back to the Rio

Grande. The process is repeated several times over the length of the Project to

irrigate land in both southeastern New Mexico and western Texas.

Irrigation in the United States is not the sole use of Project water. The river

runs through or near several towns and cities. At least one, El Paso, Texas, uses

Project water to supplement its municipal water system. Project water is also

used outside of the United States. Pursuant to a 1906 treaty with Mexico, the

federal government is obligated to provide 60,000 acre-feet of water a year to

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Mexico. 1 See Convention Between the United States and Mexico Providing for

the Equitable Distribution of the Waters of the Rio Grande for Irrigation

Purposes, May 21, 1906, U.S.-Mex., 34 Stat. 2953 [hereinafter 1906 Treaty]. To

fulfill its treaty obligations, the United States diverts Project water from the Rio

Grande to Mexico at the International Diversion Dam, which is located

approximately two miles northwest of El Paso.

Several legal regimes govern the use of Project water. The Rio Grande

Compact is an agreement entered into by the states of Colorado, New Mexico, and

Texas and ratified by the United States Congress in 1939. See Rio Grande

Compact, 53 Stat. 785 (1939); reprinted at N.M. Stat. Ann. § 72-15-23 (1978).

The Compact is an attempt to equitably apportion Rio Grande water among the

three states. See id. pmbl.

State law governs the United States’ acquisition of water rights. Federal

reclamation law provides that the United States must act in accordance with state

law to acquire title to water used in reclamation projects. 2 See Reclamation Act §

8, 32 Stat. 390 (codified in part at 43 U.S.C. § 383); see also California v. United

1
An acre-foot is the volume of water needed to cover one acre of land to a
depth of one foot. Webster’s Third New International Dictionary 19 (1993).
2
The federal government may also acquire water rights by impliedly
reserving water necessary to give effect to a federal land reservation. See Arizona
v. California, 373 U.S. 546, 597-98, 600 (1963). The United States does not
argue that it so reserved the water rights that are the subject of its federal lawsuit.

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States, 438 U.S. 645, 665 (1978). The United States asserts in its complaint that

it acquired title to all Project water by filing notices with the New Mexico

Territorial Engineer in 1906 and again in 1908. Cf. N.M. Stat. Ann. § 72-5-1

(1978) (requiring any entity, including the United States, who intends to

appropriate surface water to first apply for a permit from the State Engineer).

State law also governs the rights of individual water users in both New

Mexico and Texas. In New Mexico, state law provides for a hierarchy of water

users along a river such as the Rio Grande. Those who first appropriate water for

beneficial use have rights superior to those who appropriate water later. See N.M.

Const. art. XVI, § 2; Snow v. Abalos, 140 P. 1044, 1048 (N.M. 1914) (affirming

that New Mexico follows the “prior appropriation” doctrine ). In years of drought

or when the water level is otherwise low, those with priority use their

appropriation as they wish; those with inferior rights may be left without. See

Norman K. Johnson & Charles T. DuMars, A Survey of the Evolution of Western

Water Law in Response to Changing Economic and Public Interest Demands, 29

Nat. Resources J. 347, 350 (1989) (describing the “first in time is first in right”

characteristic of prior appropriation doctrine).

The hierarchy is established through a state proceeding called a “stream

adjudication.” See generally N.M. Stat. Ann. §§ 72-4-15 to -19 (1978). The State

Engineer first prepares a hydrographic survey of the disputed stream. See N.M.

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Stat. Ann. §§ 72-4-13, -15, -17 (1978). Following completion of a portion of the

survey, all water claimants in that portion are joined in the adjudication. Each

claimant is served with a summons and complaint, to which an “offer of

judgment” is attached. The offer consists of an amount of water that the offeree,

a defendant in the litigation, will be entitled to use in a set time period; a priority

date to determine where in the hierarchy the offeree stands; and other locational

information. Those rejecting offers are given an opportunity to mediate or

adjudicate their claims.

Texas has statutorily adopted a prior appropriation scheme. See Tex. Water

Code Ann. §§ 11.022-.027 (Vernon, WESTLAW through 2001 Reg. Sess.); State

v. Hidalgo County Water Control & Improvement Dist. No. 18, 443 S.W.2d 728,

737-38 (Tex. Civ. App. 1969). The “first in time is first in right” principle is

expressly included in its Water Code. See Tex. Water Code Ann. § 11.027

(Vernon, WESTLAW through 2001 Reg. Sess.). With limited exceptions, not

applicable here, to appropriate surface water, an individual must first receive a

permit from the Texas Natural Resource Conservation Commission (TNRCC).

See id. §§ 11.121, .142. Water rights are adjudicated by the TNRCC, if it first

determines that an adjudication would serve the public interest. See id. §§

11.304-.305.

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 Generally, the water rights of the federal government are also adjudicated

in state proceedings such as a stream adjudication. The McCarran Amendment,

codified at 43 U.S.C. § 666, 3 articulates the policy of the federal government to

make state courts the primary forum for water rights adjudications. The

amendment waives the United States’ sovereign immunity in certain state water

cases. See 43 U.S.C. § 666.

B. Procedural History

1. The New Mexico Stream Adjudication

In 1986, Elephant Butte Irrigation District (EBID) filed a complaint in New

Mexico state court against the New Mexico State Engineer, the United States, the

City of El Paso, and all known and unknown claimants to water rights in the Rio

3
(a) Joinder of United States as defendant; costs
Consent is hereby given to join the United States as a
defendant in any suit (1) for the adjudication of rights to the use of
water of a river system or other source, or (2) for the administration
of such rights, where it appears that the United States is the owner of
or is in the process of acquiring water rights by appropriation under
State law, by purchase, by exchange, or otherwise, and the United
States is a necessary party to such suit. The United States, when a
party to any such suit, shall (1) be deemed to have waived any right
to plead that the State laws are inapplicable or that the United States
is not amenable thereto by reason of its sovereignty, and (2) shall be
subject to the judgments, orders, and decrees of the court having
jurisdiction, and may obtain review thereof, in the same manner and
to the same extent as a private individual under like circumstances:
Provided, That no judgment for costs shall be entered against the
United States in any such suit.

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Grande from Elephant Butte Dam to the Texas state line. EBID claimed a right to

appropriate water superior to all defendants. The complaint sought, among other

things, a New Mexico stream adjudication and an injunction preventing the State

Engineer from allowing appropriation of Rio Grande water until completion of the

stream adjudication.

The procedural history of the New Mexico proceeding is complex but a

summary is helpful. Numerous parties attempted to dismiss the case, including

the United States and the New Mexico State Engineer. The United States’ three

motions to dismiss all asserted that it had not waived sovereign immunity under

the McCarran Amendment because the scope of the lower Rio Grande stream

adjudication, from Elephant Butte Dam to the Texas state line, did not constitute a

“river system.” See Elephant Butte Irrigation Dist. v. Regents of N.M. State

Univ., 849 P.2d 372, 374 (N.M. Ct. App. 1993). All of the motions were denied.

See id. The United States also supported the City of El Paso’s attempt to remove

the case to federal district court in New Mexico. In 1989, however, the district

court remanded the case back to state court.

The New Mexico State Engineer also sought to escape the stream

adjudication. He filed a motion to dismiss based on venue grounds. See id. The

New Mexico state district court granted the motion, but the New Mexico Court of

Appeals reversed. See id. at 381. The State Engineer then filed another motion to

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dismiss, arguing, among other things, that the state court did not have personal

jurisdiction over Project water users in Texas who were indispensable parties.

The state court denied the motion on April 2, 1997. The State Engineer then

ceased contesting the stream adjudication, was realigned as a plaintiff, 4

commenced the hydrographic surveys required by N.M. Stat. Ann. § 72-4-17, and

filed a fourth amended complaint.

Meanwhile, an interested Texas party, the El Paso County Water

Improvement District No. 1 (“El Paso Water District”) moved to intervene in the

stream adjudication. 5 Its motion was opposed by several of the New Mexico

parties. The state court granted El Paso Water District leave to participate as

amicus curiae, holding its motion to intervene in abeyance.

Organized into surveys of five regions, the hydrographic surveys proceeded

quickly. Nutt-Hockett Basin was completed in 1998, and the survey of the Rincon

section was completed in 1999. As of early 2000, virtually all of the claims in the

Nut-Hockett Basin had been adjudicated, and over one-third of the offers of

judgment in the Rincon section had been served. The survey of two more regions,

Northern and Southern Mesilla Valley, were expected to be completed in 2000,

4
Pursuant to a stipulated order, the State Engineer was removed as an
individual defendant and was added as a plaintiff acting on behalf of the State of
New Mexico.
5
The City of El Paso has been a named defendant since the initiation of the
lawsuit.

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while the fifth, the “Outlying Areas,” was expected to be completed near the end

of 2000. The Appellees report in their appellate brief that the State Engineer has

now filed with the state court survey reports and maps for all five regions.

2. The Texas Natural Resources Conservation Commission Proceeding

There is little in the record indicating the progress or scope of the Texas

proceeding. The adjudication started upon the April 21, 1994 request of the El

Paso Water District. Pursuant to Texas Water Code §§ 11.304-.305, the TNRCC

ordered an adjudication of the Rio Grande from the New Mexico border to Fort

Quitman, Texas (corresponding to the extent of the Project within Texas). On

April 22, 1996 the United States filed claims pursuant to Texas Water Code §

11.307. It asserted rights to 27,000 acre-feet/year to which TNRCC previously

issued a permit to Hudspeth County Conservation and Reclamation District No. 1;

70,000 acre-feet/year to which TNRCC previously issued a permit to El Paso

Water District; and 315,548 acre-feet/year, which the Bureau of Reclamation

transports from New Mexico into Texas. The progress of the adjudication beyond

this single claim form filed by the United States is not clear from the record.

3. The Federal Proceeding

Shortly following the denial of its third attempt to dismiss the New Mexico

stream adjudication, the United States filed this federal civil action in the District

Court for the District of New Mexico. The United States sued to quiet its title to

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Project water. The alleged jurisdictional bases were 28 U.S.C. § 1345, United

States as a plaintiff; 28 U.S.C. § 1341, federal question; and 28 U.S.C. §§ 2201-

2202, declaratory judgment action. The United States asserted that the named

defendants had clouded its title to Project water. 6 In particular, the United States

alleged that EBID asserted title to Project water because it finished paying off its

debt to the United States for construction of irrigation works; that El Paso Water

District asserted title to the Project water it received by means of its TNRCC

permit; and that Hudspeth County Conservation and Reclamation District No. 1

asserted title to Project water, again, as evidenced by a permit it held from the

TNRCC.

The district court dismissed the United States’ suit. It applied the

“abstention” doctrine of Colorado River Water Conservation District v. United

States, 424 U.S. 800 (1976). The court determined that this case presented the

exceptional circumstances required for dismissal under Colorado River.

According to the district court, the United States’ quiet title action was very

similar to other cases in which Colorado River dismissal was appropriate. The

court stated, “It is a conspicuous fact that [those] cases, like this one, were water

6
The defendants named in the complaint were EBID, El Paso Water
District, the City of El Paso, Hudspeth County Conservation and Reclamation
District No. 1, New Mexico State University, Stahmann Farms, Inc., and the State
of New Mexico ex rel. State Engineer.

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law cases involving McCarran Amendment considerations.” Dist. Ct. Opinion at

21.

The district court dismissed the United States’ complaint on the alternative

ground that it had discretion under Brillhart v. Excess Insurance Co. of America

to dismiss a declaratory judgment action. See Brillhart, 316 U.S. 491 (1942).

The district court weighed the five factors enunciated by this court in State Farm

Fire & Casualty Co. v. Mhoon, 31 F.3d 979 (10th Cir. 1994). Finding that all five

factors weighed against the exercise of jurisdiction, the district court determined

that it should not entertain the suit. Dist. Ct. Opinion at 23-26. 7

III. STANDARD OF REVIEW

The district court’s decision to decline jurisdiction over a declaratory

judgment action will not be overturned absent a clear abuse of discretion. See

ARW Exploration Corp. v. Aguirre, 947 F.2d 450, 453-54 (10th Cir. 1991); see

also Wilton v. Seven Falls Co., 515 U.S. 277, 289-90 (1995). On review, this

court should not reevaluate the district court’s assessment of each of the

Brillhart/Mhoon factors, but only resolve whether the court’s assessment was so

unsatisfactory as to constitute an abuse of discretion. See Mhoon, 31 F.3d at 983.

7
The court also dismissed on venue grounds El Paso Water District’s
counterclaim against the United States and cross-claim against EBID, unless the
Water District timely applied for a transfer to federal district court in Texas. See
43 U.S.C. § 390uu. It is not clear from the record whether the Water District did
so.

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IV. DISCUSSION

The Supreme Court held in Wilton v. Seven Falls Co. that district courts

have “unique and substantial discretion” in determining whether to declare the

rights of litigants when duplicative state proceedings exist. 515 U.S. at 286-87.

This discretion is conferred upon the district courts by the Declaratory Judgment

Act. See id. (“On its face, the statute provides that a court ‘may declare the rights

and other legal relations of any interested party seeking such

declaration.’”(quoting 28 U.S.C. § 2201(a))). The Court thereby reaffirmed the

holding of Brillhart v. Excess Insurance Co. of America that district courts are

“under no compulsion” to grant declaratory relief but have discretion to do so.

See Brillhart, 316 U.S. at 494-95.

The appellants’ argument regarding the district court’s Brillhart holding is

twofold: first, it was error even to apply Brillhart; second, the district court’s

analysis of the Brillhart/Mhoon factors was an abuse of discretion. This court

holds that the district court properly applied Brillhart and that it did not abuse its

discretion. We further hold, however, that on remand the district court should

consider whether a stay is the preferable remedy. We do not reach the propriety

of a stay pursuant to the more exacting standard of Colorado River. 8

8
In Colorado River Water Conservation District v. United States, the Court
held that dismissal or stay of a federal suit in favor of a concurrent state
proceeding should be granted only in exceptional circumstances. See 424 U.S.

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A. Whether Brillhart Applies

1. Applicability of Brillhart to suits brought under 28 U.S.C. § 1345

Under Wilton and this circuit’s case law, a district court has discretion to

withhold its exercise of jurisdiction over “declaratory judgment actions.” See

Wilton, 515 U.S. at 289-90; Mhoon, 31 F.3d at 982-83. The United States and

Texas parties argue that the federal action in this case is not a declaratory

judgment action but rather a quiet title action. They do not dispute that the

United States’ complaint prays only for declaratory relief. They argue, however,

that because the district court had subject matter jurisdiction under 28 U.S.C. §

1345 (United States as a plaintiff), a jurisdictional basis independent from the

Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, the action is not a

declaratory judgment action. We disagree.

800, 818 (1976). As in Colorado River, the United States in this case is seeking
only a declaration of water rights and jurisdiction is based on 28 U.S.C. § 1345.
See id. at 806-09. Colorado River does not, however, stand for the proposition
that the narrow abstention doctrine announced in that case is the only basis upon
which district courts may refuse jurisdiction in § 1345 suits seeking declaratory
relief. Colorado River did not discuss the propriety of a Brillhart analysis in such
suits because the district court did not invoke its discretion under the Declaratory
Judgment Act, and the issue was thus not presented to the Court. See United
States v. Akin, 504 F.2d 115, 117 (10th Cir. 1974) (noting that district court
abstained on “comity” grounds), rev’d, Colorado River, 424 U.S. 800 (1976); see
also Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995) (noting Colorado River
was not a case “brought under” the Declaratory Judgment Act). The Supreme
Court subsequently has made clear that Colorado River does not supplant the
Brillhart analysis when applicable. See Wilton, 515 U.S. at 286. For the reasons
stated in Section IV.A., infra, we hold Brillhart does apply in this case.

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 Whether a district court has discretion to entertain a suit for declaratory

judgment does not depend solely on the jurisdictional basis of the suit. As the

Supreme Court stated in Wilton, “district courts possess discretion in determining

whether . . . to entertain an action under the Declaratory Judgment Act, even

when the suit otherwise satisfies subject matter jurisdictional prerequisites.” 515

U.S. at 282 (emphasis added). This is because the Declaratory Judgment Act

itself is “an enabling Act, which confers a discretion on the courts,” regardless of

the jurisdictional bases upon which the suit is brought. Id. at 287 (quotation

omitted); see also Nat’l Union Fire Ins. Co. v. Karp, 108 F.3d 17, 21 (2d Cir.

1997). Thus, in both Wilton and Brillhart, the seminal cases dealing with

discretion to dismiss or stay “declaratory judgment actions,” the Supreme Court

held the district court had discretion to abstain even though an independent

jurisdictional basis for the suit, diversity of citizenship, existed. See Wilton, 515

U.S. at 280, 290; Brillhart, 316 U.S. at 493, 494-95.

Other courts have applied the Brillhart rule when subject matter

jurisdiction was premised on grounds other than diversity. In Odeco Oil & Gas

Co. v. Bonnette, the Fifth Circuit held that the district court did not abuse its

discretion in dismissing a suit for declaratory relief brought under admiralty

jurisdiction. See 4 F.3d 401, 403 n.2, 404 (5th Cir. 1993). Some courts have held

that district courts have discretion to refuse to entertain suits involving a federal

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question if the relief requested is declaratory in nature. See, e.g., Int’l Ass’n of

Entrepreneurs of Am. v. Angoff, 58 F.3d 1266, 1270 (8th Cir. 1995) (finding no

abuse of discretion in district court’s refusal to exercise jurisdiction over suit

asserting that ERISA preempted state insurance licensing requirement); Dr. Beck

& Co. G.M.B.H. v. Gen’l Elec. Co., 317 F.2d 538, 539 (2d Cir. 1963) (patent

infringement); see also 10B Charles Alan Wright et al., Federal Practice and

Procedure § 2761 (3d ed. 1998). But see Wilton, 515 U.S. at 290 (describing a

case raising issues of federal law as one which lies on the “outer boundaries” of

Brillhart discretion). Additionally, the Second and Third Circuits have held that a

district court with jurisdiction pursuant to the federal interpleader statute had

discretion under Brillhart to dismiss claims for declaratory relief. See Karp, 108

F.3d at 21; NYLife Distribs., Inc. v. Adherence Group, Inc., 72 F.3d 371, 372 (3d

Cir. 1995). 9

The nature of the relief requested by the plaintiff, not the jurisdictional

basis of the suit, is the touchstone. In Sinclair Oil Corp. v. Amoco Production

Co., this court drew a distinction between suits seeking declaratory relief and

those seeking coercive relief: “The Federal Declaratory Judgments Act authorizes,

but does not compel, federal jurisdiction over suits seeking declaratory relief.

9
This court has observed that “a general water adjudication is comparable
to interpleader.” New Mexico ex rel. Reynolds v. Molybdenum Corp. of Am., 570
F.2d 1364, 1366 (10th Cir. 1978).

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Thus, unlike coercive actions, declaratory actions do not invoke the federal

judiciary’s ‘virtually unflagging obligation’ to exercise its jurisdiction.” 982 F.2d

437, 440 (10th Cir. 1992) (emphasis added) (footnote and citation omitted). If the

plaintiff only requests a declaration of its rights, not coercive relief, the suit is a

declaratory judgment action for purposes of determining whether the district court

has broad discretion under Brillhart to refuse to entertain the suit. See Safety

Nat’l Cas. Corp. v. Bristol-Meyers Squibb Co., 214 F.3d 562, 564 (5th Cir. 2000)

(holding that in a suit seeking coercive relief as well as declaratory relief, broad

Brillhart standard inappropriate). Because the United States requested only

declaratory relief, 10 the federal action in this case is a declaratory judgment

action. 11

10
The United States argues that it also prayed for all relief “as may be
necessary and proper.” This court rejects the contention that a boilerplate prayer
for “necessary and proper relief” converts a declaratory judgment action into
some other type of lawsuit. Cf. Frazier v. Simmons, 254 F.3d 1247, 1254 (10th
Cir. 2001) (cautioning practitioners that a “boilerplate recitation” of for “just and
equitable relief” was “far from an exemplary request” for prospective injunctive
relief necessary to invoke Ex parte Young, 209 U.S. 123 (1908)); Rosen v.
Cascade Int’l , Inc., 21 F.3d 1520, 1526 n.12 (11th Cir. 1994) (holding that
appellees failed to invoke district court’s equitable jurisdiction in securities fraud
case by praying for any “just and proper” relief in addition to the damages
requested).
11
The United States argues that its suit is a quiet title action and that this
court has previously decided that a quiet title action can never be a declaratory
judgment action. See Rosette, Inc. v. United States, 141 F.3d 1394 (10th Cir.
1998). Rosette dealt with a suit against the United States in which the plaintiff
sought to quiet its title to geothermal resources. See id. at 1396. The plaintiff
asserted jurisdiction under both the Declaratory Judgment Act and the Quiet Title

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 2. Applicability of Brillhart when the state and federal proceedings are
not perfectly parallel

The appellants also argue that Brillhart does not apply unless there is an

identity of parties and issues in the state and federal actions. Because the United

States’ rights in Elephant Butte Reservoir are not at issue in the New Mexico

proceeding and the Texas parties are not parties to the New Mexico stream

adjudication, they assert the proceedings are not parallel.

The circuit has addressed this issue with respect to Colorado River

abstention and decided that a finding of parallel proceedings is a threshold

condition for engaging in the Colorado River analysis. See Fox v. Maulding, 16

Act, 28 U.S.C. § 2409a. See id. This court held that even though the plaintiff
sought declaratory relief, the suit was one to establish ownership and therefore
was a quiet title action subject to the statute of limitations contained in the Quiet
Title Act. Id.
Rosette is distinguishable. First, the plaintiff in Rosette sought injunctive
as well as declaratory relief. See id. (noting that plaintiff sought to enjoin the
United States from asserting authority over geothermal resources). Second, the
Quiet Title Act applied. Because the Supreme Court had previously observed that
“‘Congress intended the [Act] to provide the exclusive means by which adverse
claimants could challenge the United States’ title to real property,’” this court
concluded that the “Quiet Title Act . . . is [the] only recourse for haling the
United States into court on the issue of ownership.” Id. at 1397 (quoting Block v.
North Dakota ex rel. Bd. of Univ., 461 U.S. 273, 286 (1983)). To allow the
plaintiff to maintain a declaratory judgment action “would render the Quiet Title
Act’s statute of limitations meaningless.” Id. Because the United States brought
the instant suit, seeks nothing but declaratory relief, and the congressional intent
behind the Quiet Title Act is not subverted by deeming this suit a declaratory
judgment action, this quiet title action is a declaratory judgment action for
purposes of Brillhart/Mhoon.

-22-
F.3d 1079, 1081 (10th Cir. 1994). Even in the Colorado River context, however,

exact identity of parties and issues is not required. Rather, state and federal

proceedings are sufficiently parallel if “substantially the same parties litigate

substantially the same issues.” Id. (quotation omitted). This court has not

declared previously what level of similarity is required before a district court may

engage in the Brillhart analysis. We now hold the degree of similarity should be

considered in the evaluation of the Brillhart/Mhoon factors, rather than

considered as a threshold condition.

The Brillhart analysis differs fundamentally from the Colorado River

analysis. Because federal courts have a “virtually unflagging obligation . . . to

exercise the jurisdiction given them,” a district court should decline jurisdiction

under Colorado River only in “exceptional” circumstances. Colorado River, 424

U.S. at 817-18. Requiring district courts to first determine whether the federal

and state proceedings are parallel before considering the other Colorado River

factors is consistent with the narrowness of the doctrine. Brillhart, however,

gives district courts a freer hand. The Declaratory Judgment Act, the backbone of

the Brillhart doctrine, confers upon district courts “unique and substantial

discretion in deciding whether to declare the rights of litigants.” Wilton, 515 U.S.

at 286; see also 28 U.S.C. § 2201(a). To guide the district courts in the exercise

of such substantial discretion, this court articulated in Mhoon several factors to

-23-
weigh. See 31 F.3d at 983. We give the district court’s assessment of each factor

great deference. See id. (“[This court] will only ask whether the trial court’s

assessment of [the factors] was so unsatisfactory as to amount to an abuse of

discretion.”). Requiring evaluation of the parallel nature of the proceedings prior

to the Brillhart/Mhoon analysis would shortcircuit the district court’s weighing of

these factors and would thus unnecessarily limit the district court’s broad

discretion.

Moreover, the Mhoon factors clearly encompass inquiry into the

proceedings’ similarity. The five factors include “[1] whether a declaratory

action would settle the controversy; [2] whether it would serve a useful purpose in

clarifying the legal relations at issue.” Id. These two factors are necessarily

driven by the degree of identity of parties and issues in the concurrent

proceedings. Without some degree of similarity between the proceedings, a

federal declaratory judgment will likely not settle the controversy between the

parties, nor would it clarify all the legal relations at issue. These remain,

however, only factors in the analysis; they are not determinative. See Aetna Cas.

& Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 423 (4th Cir. 1998) (“Clearly, the

existence of [a parallel] proceeding should be a significant factor in the district

court’s determination. But it is not dispositive.”); Am. Nat’l Fire Ins. Co. v.

Hungerford, 53 F.3d 1012, 1016 (9th Cir. 1995) (“[O]ur precedent and Supreme

-24-
Court decisions clearly indicate that a number of additional factors must be

considered [in addition to the identity of issues and parties].”), overruled on other

grounds, Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998)

(en banc).

Tenth Circuit precedent is not to the contrary. In ARW Exploration Corp.

v. Aguirre, this court deemed the district court’s dismissal of a declaratory

judgment action an abuse of discretion because there was no pending state

proceeding whatsoever. See 947 F.2d at 454; see also Fed. Reserve Bank v.

Thomas, 220 F.3d 1234, 1247 (11th Cir. 2000) (“It is an abuse of discretion . . . to

dismiss a declaratory judgment action in favor of a state proceeding that does not

exist.”). But see Found. for Interior Design Educ. Research v. Savannah Coll. of

Art & Design, 244 F.3d 521, 525-26 (6th Cir. 2001) (applying abuse of discretion

standard when no parallel proceeding existed). We recognized that the state

proceeding could not provide an adequate remedy because it had been dismissed

without adjudicating the questions at issue in the federal action. See Aguirre, 947

F.2d at 454-55. Accordingly, the federal declaratory action would serve some

useful purpose. See id. Rather than dictate that the parallel nature of the

proceedings be considered in a preliminary step, Aguirre firmly places the

similarity of the proceedings in the process of balancing the Brillhart/Mhoon

factors. See Mhoon, 31 F.3d at 983 (listing as factors “[2] whether [the

-25-
declaratory judgment action] would serve a useful purpose” and “[5] whether

there is an alternative remedy which is better or more effective”).

3. The existence of a federal question

In Brillhart, the Supreme Court cast some doubt on whether a district court

has discretion to decline jurisdiction over a declaratory judgment action

presenting a federal question. The Court observed, “Ordinarily it would be

uneconomical as well as vexatious for a federal court to proceed in a declaratory

judgment suit . . . not governed by federal law.” 316 U.S. at 495 (emphasis

added). In Wilton, the Court specifically reserved the question of whether the

presence of a federal question deprives a district court of discretion to refuse

jurisdiction. 515 U.S. at 290 (“We do not attempt at this time to delineate the

outer boundaries of that discretion in other cases, for example, cases raising

issues of federal law.”). This court need not decide whether the presence of a

federal question renders the exercise of Brillhart discretion inappropriate because

appellants have not demonstrated that issues of federal law will arise in the

federal action.

The United States and Texas parties contend that the federal action

implicates three sources of federal law: (1) Section 8 of the Reclamation Act; (2)

the interstate and international obligations contained in the Rio Grande Compact

and the 1906 treaty with Mexico; and (3) the contracts between the United States

-26-
and the New Mexico and Texas parties.

a. Section 8 of the Reclamation Act

The United States first argues that in Section 8 of the Reclamation Act,

“Congress was careful to reserve authority over interstate streams.” Section 8

provides that though the federal government must honor state law when it

appropriates water for Reclamation projects, “nothing herein shall in any way

affect any right of . . . the Federal Government . . . in, to, or from any interstate

stream or the waters thereof.” Reclamation Act, § 8, 32 Stat. 390 (codified at 43

U.S.C. § 383). Section 8 does not create an issue of federal law in the United

States’ federal suit. Rather, the interstate stream provision of Section 8 was

intended to make clear that the Reclamation Act should not be construed to affect

a then-pending equitable apportionment dispute between two states in the

Supreme Court. See Wyoming v. Colorado, 259 U.S. 419, 463 (1922); see also

Arizona v. California, 373 U.S. 546, 623 (1963) (holding that Congress intended

“to leave untouched the law of interstate equitable apportionment” with interstate

portion of Section 8). The United States and Texas parties cite to no authority for

the proposition that interstate streams are exempted from the rest of Section 8,

which requires the federal government to comply with state law in the acquisition

and distribution of water to the extent such law is “not inconsistent with

-27-
congressional provisions authorizing the project in question.” 12 See California v.

United States, 438 U.S. at 665, 674. Indeed, this court has held otherwise. See

Jicarilla Apache Tribe v. United States, 657 F.2d 1126, 1144 (10th Cir. 1981)

(holding United States must comply with state law in distribution of water from

the Navajo River, an interstate stream). Because the instant federal action does

not involve an interstate equitable apportionment dispute, the interstate portion of

Section 8 is not relevant.

b. Interstate and international obligations imposed by the Rio Grande
Compact and the 1906 Treaty with Mexico

The Rio Grande Compact was joined by the states of Colorado, New

Mexico, and Texas for the purpose of equitably apportioning water between the

three states. See Rio Grande Compact pmbl., reprinted at N.M. Stat. Ann. § 72-

15-23 (1978). To that end, the Compact contains tables outlining the delivery

obligations of each state to the next downstream state. In Article IV, New

Mexico is obligated to deliver a quantity of water to Texas every year as

determined by a table. The 1906 Treaty with Mexico obligates the United States

to deliver 60,000 acre-feet of water every year to Mexico. See 1906 Treaty, 34

Stat. 2953.

12
Appellants do not argue that New Mexico and Texas law conflict with the
congressional authorization of the Project.

-28-
 Because Congress consented to its creation, the Compact is federal law.

See New Jersey v. New York, 523 U.S. 767, 811 (1998). Likewise, interpretation

of international treaties raises questions of federal law. See Air Fr. v. Saks, 470

U.S. 392, 396 (1985). Because, however, neither the Rio Grande Compact nor the

1906 Treaty will be consulted in the federal action, no issues of federal law arise.

The Treaty and the Compact do obligate delivery of water, but the

appellants have not referenced any language in either that purports to create water

rights in any of the signatory parties. Even reading the obligation to deliver water

as giving the water recipient a right to the water, those water rights are irrelevant

to the quiet title action. The Treaty and the Compact only require water deliveries

to the states or Mexico, not the named defendants. Because the federal quiet title

action only involves the competing claims of the United States and the named

defendants, the water rights given to the states or Mexico are irrelevant.

The United States and Texas intimate several times in their brief that, apart

from the Compact and the Treaty, the interstate and international nature of the

Project favors a federal forum. There are statements in numerous cases that any

adjudication of rights in an interstate stream raises questions of federal common

law. See, e.g., Hinderlider v. La Plata River & Cherry Creek Ditch Co., 304 U.S.

92, 110 (1938) (“Jurisdiction over controversies concerning rights in interstate

streams is not different from those concerning boundaries. These have been

-29-
recognized as presenting federal questions.”); Texas Indus., Inc. v. Radcliff

Materials, Inc., 451 U.S. 630, 641 n.13 (1981) (“Many of these cases arise from

interstate water disputes. Such cases do not directly involve state boundaries . . .

; they nonetheless involve especial federal concerns to which federal common law

applies.”); Illinois v. City of Milwaukee, 406 U.S. 91, 103 (1972) (“When we deal

with air and water in their ambient or interstate aspects, there is federal common

law . . . .” (footnote and citation omitted)).

Unlike Hinderlider and the other interstate stream cases, this case is not an

equitable apportionment dispute between two states. Hinderlider involved a

dispute between a water user in Colorado and the Colorado State Engineer, who,

pursuant to a Compact with New Mexico, shut off water to Colorado users for a

ten day period. See 304 U.S. at 95-97. The defendant water officials contended

that the federal courts lacked jurisdiction, but the Supreme Court held that

“whether the water of an interstate stream must be apportioned between the two

States is a question of ‘federal common law.’” Id. at 110; see also Banco

Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427 (1964) (“[Hinderlider] implies

that no State can undermine the federal interest in equitably apportioned interstate

waters . . . .”). The United States and Texas parties contend that the United States

seeks to remove a cloud over its title to Project water so that it may fulfill its

delivery obligations under the Compact and the Treaty. The equitable

-30-
apportionment of the Rio Grande is the goal of both the Compact and the Project,

they argue. The federal action is, however, a suit for declaratory relief seeking a

determination of the relative rights of the United States and the named

defendants. The question of whether and how Rio Grande water should be

apportioned among states is not directly at issue.

This court declines to expand the interstate equitable apportionment line of

cases to encompass this case. The reluctance to create common law is a core

feature of federal court jurisprudence. See Erie R.R. v. Tompkins, 304 U.S. 64, 78

(1938); United States v. Hudson, 11 U.S. (7 Cranch) 32, 33-34 (1812) (declining

to create a federal common law libel criminal offense). Federal courts should

only fashion common law in a “few and restricted” circumstances. Wheeldin v.

Wheeler, 373 U.S. 647, 651 (1963). Moreover, federal common law exists, only

when “state law cannot be used.” City of Milwaukee v. Illinois, 451 U.S. 304, 314

n.7 (1981). The federal courts created common law in the equitable

apportionment disputes because there were dueling state legal regimes. Erwin

Chemerinsky, Federal Jurisdiction § 6.2.5 (3d ed. 1999) (“Obviously, in a conflict

between two states, neither states’ laws can be applied to resolve the dispute.

Therefore, in the absence of a pertinent federal statute, federal common law must

be created” to ensure interstate harmony.). There is no need in this case for

interstitial federal common law. The United States asserts title to Project water

-31-
under either New Mexico or Texas law, depending on which right is asserted.

There is, however, no uncertainty over which state’s laws applies to determine the

United States’ rights. Because there is no legal vacuum to fill, federal common

law need not, and will not, arise in the federal action.

c. Federal Contracts

The “obligations to and rights of the United States under its contracts are

governed exclusively by federal law.” Boyle v. United Techs. Corp., 487 U.S.

500, 504 (1988). Thus, the question is whether the United States’ declaratory

judgment action involves obligations to or rights of the United States under its

contracts.

The United States’ and Texas parties’ assertion that the federal action will

involve the construction of federal contracts is fatally weakened by the lack of

citation to the record. The United States and Texas parties do not cite to specific

contractual language relevant to the title dispute that is the subject of this federal

action. Indeed, there is not even a citation to a contract contained in the record.

Moreover, the United States’ complaint fails to mention the existence and

relevance of federal contracts. This court declines to “sift through” the record to

find support for the appellants’ contentions. See S.E.C. v. Thomas, 965 F.2d 825,

827 (10th Cir. 1992) (quotation omitted).

-32-
B. Weighing of the Brillhart/Mhoon Factors

In Brillhart, the Supreme Court listed several factors to guide a district

court’s decision whether to exercise jurisdiction over a declaratory judgment

action. A district court should evaluate the scope of the state proceeding, whether

the claims of all parties can be adjudicated in that proceeding, whether necessary

parties have been joined, whether they are amenable to process, and any other

factor bearing on the central question of which forum can better resolve the

controversy. See 316 U.S. at 495. This circuit has adopted a list of five factors a

district court should evaluate. See Mhoon, 31 F.3d at 983. The Mhoon factors are

[1] whether a declaratory action would settle the controversy; [2]
whether it would serve a useful purpose in clarifying the legal
relations at issue; [3] whether the declaratory remedy is being used
merely for the purpose of procedural fencing or to provide an arena
for a race to res judicata; [4] whether use of declaratory action
would increase friction between our federal and state courts and
improperly encroach upon state jurisdiction; and [5] whether there is
an alternative remedy which is better or more effective.

See id. (quotations omitted)

The district court considered all five Mhoon factors. This court has

evaluated the record and concludes that the district court’s assessment of the

Mhoon factors was not so unsatisfactory as to result in an abuse of discretion.

1. Whether the declaratory action would settle the controversy and
clarify legal relationships

-33-
 The district court found that the requested federal declaratory relief would

not settle the entire controversy over water rights or even clarify the relative

rights of the parties to Rio Grande water, because any declaration of the United

States’ rights to divert, impound, and store Project water would not be binding on

parties not joined to the action. The United States and Texas parties, however,

define the controversy as involving only the cloud placed on the United States’

title by the named defendants. Because the federal action will completely settle

this controversy, dismissal pursuant to Brillhart/Mhoon was inappropriate, they

argue.

The appellants fail to acknowledge that the inquiry into whether the

declaratory judgment settles a controversy and clarifies the legal relationships at

issue is designed to shed light on the overall question of whether the controversy

would be better settled in state court. See Brillhart, 316 U.S. at 495. The federal

suit may settle the controversy of whether the United States has superior title to

the named defendants. As the district court pointed out, however, the declaration

of superior title will not be binding on parties not joined to the action. See State

Farm Mut. Auto Ins. Co. v. Mid-Continent Cas. Co., 518 F.2d 292, 295 (10th Cir.

1975). There are thousands of water users in New Mexico who may assert a right

to Project water just as New Mexico State University and Stahmman Farms have

in this case. Their claims will be adjudicated in the comprehensive New Mexico

-34-
stream adjudication. By declining jurisdiction, the district court avoided a

piecemeal approach to adjudicating the rights of the United States vis-a-vis

innumerable water users in New Mexico. The district court acted within its

discretion in determining that the United States’ claims against the named

defendants and other water users would be better settled in a unified proceeding.

See State Farm Mut. Auto Ins. Co. v. Scholes, 601 F.2d 1151, 1155 (10th Cir.

1979) (quoting with approval a lower court opinion that considered the

“desirability of avoiding piecemeal adjudication”); 10B Charles Alan Wright et

al., Federal Practice and Procedure § 2759; cf. Rienhardt v. Kelly, 164 F.3d 1296,

1303 (10th Cir. 1999) (noting that “avoidance of piecemeal adjudication may

counsel against hearing the case in federal court” in Colorado River context).

Appellants also argue the New Mexico adjudication will not settle the

federal controversy because the stream adjudication will not resolve rights to

store and divert Elephant Butte Reservoir water. The New Mexico proceeding as

it currently exists may not encompass storage rights in the Elephant Butte

Reservoir, but the New Mexico State Engineer has notified all parties that he

intends to include the Reservoir in the stream adjudication. 13 The United States

13
The Notice of Intent, filed with the New Mexico court on April 20, 2000
states in part:

Notice is hereby given to all parties that the State of New Mexico
shall tender a storage and diversion offer of judgment to the United

-35-
and Texas parties contend that the Notice of Intent does not guarantee the

Reservoir will be included in the stream adjudication. They also argue that the

Reservoir cannot be included in the adjudication without adding the portion of the

Rio Grande north from the Reservoir to Otowi Gauge, near Santa Fe. There is no

merit to either of these contentions. 14

Although the Notice of Intent is not a guarantee that the Reservoir will be

included in the stream adjudication, the district court was well within its

discretion in determining that the Notice of Intent signaled that the Reservoir

States upon conclusion of the hydrographic survey for any Rio
Grande Project rights the United States may have to store and divert
the waters of the Rio Grande in Elephant Butte Reservoir and
Caballo Reservoir, to divert said waters below the Reservoirs, and to
deliver Rio Grande Project water to the New Mexico-Texas state line
and to Mexico under the 1906 Treaty with Mexico.

14
As to the contention that adding Elephant Butte Reservoir to the New
Mexico stream adjudication will necessitate adding the entire Upper Rio Grande,
the United States and Texas position is not persuasive. They point to nothing
demonstrating the necessity for expansion of the stream adjudication. The
Regents of New Mexico State University case stands only for the proposition that
though the portion of the Rio Grande south of Elephant Butte dam is not a
“stream system,” the United States waived its sovereign immunity as to any
stream adjudication of that portion. See Elephant Butte Irrigation Dist. v.
Regents of N.M. State Univ., 849 P.2d 372, 378-79 (N.M. Ct. App. 1993).
Regents does not address whether the Lower Rio Grande with the addition of
Elephant Butte Reservoir would qualify as a stream system or otherwise waive the
United States’ sovereign immunity.

-36-
likely would be included. 15 The United States and Texas parties have pointed to

nothing in the record indicating that the state court will not grant the Engineer

leave to amend his complaint to include the Reservoir. The state court has

allowed the complaint to be amended four times to reflect changes in parties and

claims; it will likely do so again. See First Nat’l Bank of Santa Fe v. Southwest

Yacht & Marine Supply Corp., 684 P.2d 517, 520 (N.M. 1984) (amendments to

pleadings are generally favored and liberally permitted).

Finally, appellants argue that the New Mexico adjudication would not

settle the federal controversy because the stream adjudication excludes the Texas

Parties. The district court, however, found that the state court would likely allow

the Texas parties to intervene in the stream adjudication. The City of El Paso has

been a party to the steam adjudication since it began in 1986. While El Paso

Water District’s attempt to intervene was opposed by some of the New Mexico

parties, when the state court granted the District amicus status it also ruled that

the District could request a ruling on its motion to intervene at any time.

15
Unlike a decision under Colorado River to refuse jurisdiction, there is no
requirement under Brillhart that the district court look at the state and federal
proceedings only as they currently exist. This court has noted that a factor a
district court should consider in deciding to decline jurisdiction over a declaratory
judgment action is whether “‘the same fact-dependent issues are likely to be
decided in another pending proceeding.’” St. Paul Fire & Marine Ins. Co. v.
Runyon, 53 F.3d 1167, 1169-70 (10th Cir. 1995) (quoting Kunkel v. Cont’l Cas.
Co., 866 F.2d 1269, 1276 (10th Cir. 1989)) (emphasis added).

-37-
 In New Mexico, as in the federal courts, there are two types of intervention,

intervention as of right and permissive intervention. See N.M. Ct. R. 1-024

(2001). 16 There are obviously common questions of fact and law relating to both

the Texas parties’ claims to Project water and the claims to Rio Grande water

adjudicated in the New Mexico proceeding. The Texas parties may be entitled to

intervention as of right since an adjudication of water rights in New Mexico could

impede their ability to collect Project water. The continued, unmolested presence

of El Paso and the state court’s unwillingness to rule out intervention indicate that

the Texas parties’ assertion of Project water rights water can and will likely be

adjudicated in the stream adjudication. Without a showing that intervention is

impossible or the state forum is clearly hostile to the parties to the federal suit,

this court cannot say that the district court abused its discretion.

An additional reason exists to reject the United States’ and Texas parties’

argument that the federal suit should proceed because it alone adjudicates the

Texas parties’ rights to Project water: the Texas adjudication will be more than

adequate to decide the rights of the United States vis-a-vis the Texas parties. The

16
Intervention as of right requires (1) a timely application, (2) that the
“applicant claims an interest relating to the property,” (3) the applicant is situated
so that the disposition of the suit may impede the applicant’s ability to protect the
interest, and (4) the interest is not adequately protected by the existing parties.
N.M. Ct. R. 1-024(A)(2). Permissive intervention requires (1) a timely
application and (2) that the applicant’s claim or defense has a question of fact or
law in common with the suit. See id. 1-024(B)(2).

-38-
United States filed a claim with the TNRCC on April 22, 1996, asserting claims

against the Texas parties to the federal lawsuit identical to the claims made in its

federal complaint, namely, that it held title to the Project water delivered to the

City of El Paso, the El Paso Water District, and the Hudspeth County

Conservation and Reclamation Dist. No. 1. According to Texas water law, the

adjudication will resolve all storage, diversion, and use rights. See Tex. Water

Code § 11.307 (Vernon, WESTLAW through 2001 Reg. Sess.) (requiring “[e]very

person claiming a water right of any nature” to file a claim with the TNRCC

during an adjudication) (emphasis added). Thus, the Texas adjudication can be

expected to decide the title to Project water delivered to the Texas parties named

in the federal suit.

2. Whether the United States is engaging in procedural fencing

The district court was concerned that the United States engaged in

procedural fencing because it had moved to dismiss the New Mexico case on

jurisdictional grounds several times. The court found that the United States’

jurisdictional argument was rejected by every court to consider it, including the

New Mexico Court of Appeals, and that the United States brought the present

federal action shortly after losing its third attempt to dismiss on jurisdictional

grounds.

The United States has attempted at every juncture in the New Mexico

-39-
adjudication to resist jurisdiction. Other parties have made motions to dismiss.

The State Engineer himself made several. This preliminary skirmishing has

ended, however. After an extended period of pleadings and dismissal motions in

the New Mexico proceedings and after realignment, the New Mexico stream

adjudication is progressing rapidly. In the three years since the realignment and

the denial of the State Engineer’s last motion to dismiss, the parties have been

cooperating; none have questioned the state court’s jurisdiction. Only the United

States and Texas parties still resist the stream adjudication.

As the district court found, it is significant that the United States filed the

instant action just a short time after the last jurisdictional objections to the New

Mexico adjudication were rejected and it became clear the adjudication will

proceed to judgment. See St. Paul Fire & Marine Ins. Co. v. Runyon, 53 F.3d

1167, 1170 (10th Cir. 1995) (holding no abuse of discretion when district court

determined that insurer’s filing of federal declaratory action on eve of insured’s

state contract suit after waiting three years before seeking declaration constituted

procedural fencing). The United States contends that it waited until 1997 to file

the present suit because only then did it become clear that the New Mexico and

Texas adjudications would not reach the claims enumerated in its federal

complaint. The exclusion of Elephant Butte Reservoir from the New Mexico

adjudication, however, was apparent from the filing of the first complaint in

-40-
1986. Moreover, the Texas adjudication was initiated in 1994. This court agrees

that the procedural fencing factor weighs against the exercise of jurisdiction.

3. Whether the exercise of federal jurisdiction would result in friction
with the state courts and encroach upon their traditional jurisdiction

The district court expressed concern that if it declared relative rights to

Project water, it could cause friction between the federal and state courts. The

court’s concern centered around the special role and expertise state courts have in

adjudicating water rights. This court agrees with the district court that a federal

declaration of rights could encroach upon the state courts’ traditional role as

arbiter of water rights disputes.

Water rights adjudications traditionally have been within the ambit of state

court expertise. See Arizona v. San Carlos Apache Tribe, 463 U.S. 545, 569

(1983) (observing that “considering the specialized resources and experience of

the state courts” in adjudicating water rights, it was far from obvious federal

adjudications would proceed faster). Congress recognized as much when it

enacted Section 8 of the Reclamation Act, requiring the federal government to

procure water for reclamation projects in accordance with state law. See 43

U.S.C. § 383. As stated by the 1951 Senate Judiciary Committee in discussing

Section 8 of the Reclamation Act,

Down through the years the courts of the respective States marked
out the pathway whereby order was instituted in lieu of chaos.
[Water] [r]ights were established, and all of this at the expense, trial,

-41-
 and labor of the pioneers of the West, without material aid from our
United States Government until a much later time when irrigation
projects were initiated by Congress through the Department of
Interior and later the Bureau of Reclamation. Even then Congress
was most careful not to upset, in any way, the irrigation and water
laws of the Western States.

S. Rep. No. 82-755, at 3 (1951). Declaring title to water would thus encroach

upon the traditional jurisdiction of the state courts.

In addition, the federal action carries the danger of grave interference with

the state proceedings. The likelihood of such interference is another justification

for the refusal of jurisdiction. See Mhoon, 31 F.3d at 984 (finding no abuse of

discretion when federal proceeding “involved no undue interference with the state

proceeding”). The McCarran Amendment was enacted out of the concern that

without the participation of the United States, state adjudications, intended to

adjudicate the interlocking rights of all users, would be left unable to adjudicate

the rights of any. See S. Rep. No. 82-755, at 4-5 (1951); see also United States v.

Dist. Court for Eagle County, 401 U.S. 520, 525 (1971). Precisely the same

chaos could result in this case if the United States is permitted to litigate its claim

in federal court. Faced with an ongoing federal dispute, the New Mexico court

could be faced with the question whether to defer resolution of the claims of

water users dependent on the resolution of the United States’ fight with the named

defendants over title. Unable to reach some claims, and needing to reach all in

order to establish priority, the state adjudication could grind to a halt. On the

-42-
other hand, the New Mexico state court could adjudicate the title fight that is the

subject of the federal action. The district courts are given discretion to decline

jurisdiction over declaratory judgment actions, however, precisely to avoid

becoming such an “arena for a race to res judicata.” See Mhoon, 31 F.3d at 983

(quotations omitted).

4. Whether the state remedy is the most effective remedy

The district court concluded that the state adjudications would provide a

more effective remedy to the general controversy than the federal declaratory

judgment action. The state proceedings would produce a “more comprehensive

and cohesive” remedy, because the rights of all, including the parties to the

federal action, would be decided. The district court was correct in concluding

that the state adjudications are the more effective remedy.

In arguing that the state proceedings are not the more effective remedies,

the United States and Texas parties fail to acknowledge the reality of water rights

disputes in the West. Thousands of individuals claim water rights that depend on

the resolution of the claims of others. The situation has long been recognized as

demanding a comprehensive adjudication of all users’ claims. See El Paso & R.I.

Ry. Co. v. District Court, 8 P.2d 1064, 1067 (N.M. 1931). Congress recognized

this need when it passed the McCarran Amendment:

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 [The concern over inconsistent dispositions of property] is
heightened with respect to water rights, the relationships among
which are highly interdependent. Indeed, we have recognized that
actions seeking the allocation of water essentially involve the
disposition of property and are best conducted in unified
proceedings. The consent to jurisdiction given by the McCarran
Amendment bespeaks a policy that recognizes the availability of
comprehensive state systems for adjudication of water rights as the
means for achieving these goals.

Colorado River, 424 U.S. at 819 (citation omitted). The New Mexico and Texas

adjudications are designed to provide such a comprehensive solution to a complex

problem. See United States v. Bluewater-Toltec Irrigation Dist., 580 F. Supp.

1434, 1446 (D.N.M. 1984) (“The idea that New Mexico lacks a comprehensive

system for adjudication of water rights is not grounded in facts and needs no

further comment.”); Tex. Water Code Ann. § 11.307 (Vernon, WESTLAW

through 2001 Reg. Sess.) (requiring “[e]very person claiming a water right of any

nature” to file a claim with the TNRCC during an adjudication) (emphasis added).

As such, they are the preferred mechanisms for settling water rights disputes.

Moreover, a federal declaration of rights will be particularly ineffective.

Even if the federal action proceeds, both state adjudications will continue to go

forward with the United States as a party. Because a federal declaratory judgment

will affect only the named defendants, the United States will be forced to litigate

its rights relative to other water users in the state proceedings. The federal

declaration can hardly be considered an “effective” remedy since the United

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States will have to reargue numerous factually similar issues against water users

excluded from the federal action. See Runyon, 53 F.3d at 1169-70 (noting that

district courts generally should not entertain jurisdiction over declaratory

judgment action involving the “same fact-dependent issues” likely to be decided

in another proceeding).

C. Proper Remedy

This court has not previously addressed the question of the preferred

remedy once a district court, in the sound exercise of discretion, determines that it

should not exercise jurisdiction over a declaratory judgment action. In Fox v.

Maulding, this court held that district courts should not dismiss federal actions

pursuant to Colorado River, but rather should enter stays. See Fox v. Maulding,

16 F.3d at 1083. “In the event the state court proceedings do not resolve all the

federal claims, a stay preserves an available federal forum in which to litigate the

remaining claims, without the plaintiff having to file a new federal action.” Id.

A stay will often be preferable in the declaratory judgment context as well.

The Brillhart/Mhoon analysis involves some measure of prognostication. In

determining which forum would be best, the district court considers such

questions as whether the state proceedings will likely adjudicate the claims of the

federal parties and whether the federal proceeding will serve any useful purpose

considering the likely scope of the state proceeding. In this case, for example, the

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district court’s exercise of discretion involved an appraisal of the likelihood that

the United States’ rights in the Elephant Butte Reservoir will be adjudicated in

the New Mexico proceeding, that the Texas parties will be allowed to intervene,

and that the United States’ rights will be adjudicated in the Texas proceeding. A

stay would allow the district court to quickly reconsider whether the state forum

remains the best in which to hear the federal parties’ claims should the court’s

predictions regarding the scope of the state proceedings turn out to be erroneous.

See Capitol Indem. Corp. v. Haverfield, 218 F.3d 872, 875 n.2 (8th Cir. 2000)

(applying Brillhart and noting that a stay is preferred to dismissal “where the

possibility of a return to federal court remains”); see also Kaiser Steel Corp. v. W.

S. Ranch Co., 391 U.S. 593, 594 (1968) (per curiam). Additionally, a stay may be

appropriate if the district court determines that there exists a significant

possibility of delay or other procedural inadequacy in the state proceedings.

Moreover, the Supreme Court has noted that a stay may be the preferred remedy if

the application of a time bar could prevent a dismissed federal action from being

refiled. See Wilton, 515 U.S. at 288 n.2.

The district court dismissed the United States’ suit without providing

reasons for its choice of remedy. Without reasons “appellate review is

impossible,” and the appropriate procedure is to remand for further findings and

determinations by the district court. ARW Exploration Corp. v. Aguirre, 45 F.3d

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1455, 1459 (10th Cir. 1995). Accordingly, we remand to the district court to

decide on an appropriate remedy considering the extent to which its decision to

decline jurisdiction depended on predictions about the scope of the state

proceedings, the possibility of delay or procedural inadequacy in the state

proceedings, the possibility that another federal action will be time-barred should

the instant suit be dismissed, and any other appropriate factor.

V. CONCLUSION

This court concludes that the district court’s decision to apply Brillhart and

withhold jurisdiction over this declaratory judgment action was not an abuse of

discretion. It is thus unnecessary to resolve whether the district court erred in

dismissing under the Colorado River doctrine. The district court, however,

should consider whether the preferable remedy is to stay the federal proceedings.

The judgment of the District Court for the District of New Mexico is therefore

VACATED and the case is REMANDED for further proceedings consistent with

this opinion.

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