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By Lars-Eric Hedberg
Feb. 23 — Some Western water and irrigation districts battling drought at home and the federal government in court must decide between trying to recover their water or their lost money. The U.S. Supreme Court has said, in effect, they can't do both under certain circumstances.
And with ramifications of that four-year-old ruling being felt across the legal spectrum, groups and attorneys are calling for Congress to act.
Writing for the court in United States v. Tohono O'odham Nation, 131 S. Ct. 1723, 179 L. Ed. 2d 723, 2011 BL 109773 (2011), Justice Anthony Kennedy held that a plaintiff suing for equitable relief in federal district court cannot then successfully file a claim for monetary damages based on the same facts in the U.S. Court of Federal Claims.
Kennedy wrote that under 28 U.S.C. § 1500—which lays out the jurisdiction of the Court of Federal Claims—“a substantial overlap in operative facts” between a federal district court lawsuit and a subsequently filed Court of Federal Claims case precludes jurisdiction in the Court of Federal Claims.
The ruling doesn't apply exclusively to water rights issues. But with new lawsuits being filed occasionally from the drought-stricken West—and others that were in the legal pipeline before the 2011 Tohono ruling—it is in the areas of water rights and water quality permitting that the decision is having some of its most profound effects, according to lawyers familiar with the issue who spoke to Bloomberg BNA.
Water law attorneys complain that Tohono limits the options of many water and irrigation districts and other plaintiffs while at the same time giving the federal government a powerful tool for moving to dismiss cases subsequently filed in the Court of Federal Claims for lack of subject matter jurisdiction.
“Now that we know about the ruling in Tohono, the biggest problem is that a client must make an election whether to seek damages or injunctive relief, but, unlike most other courts, in the Court of Federal Claims he cannot pursue both in the alternative,” Roger Marzulla, a partner at Marzulla Law, LLC and former assistant attorney general in the Department of Justice's Environment and Natural Resources Division, told Bloomberg BNA.
The Administrative Conference of the United States and the American Bar Association contend that the Supreme Court's interpretation of Section 1500 is outdated and unfair, and they have urged Congress to repeal or amend the law.
“The rule sounds quite sensible until one learns that a ‘claim' is understood to include any claim based on the same operative facts, even if it is grounded in a different source of law, is based on a different legal theory, or offers different relief,” wrote Emily S. Bremer of the Administrative Conference of the United States, joined by George Washington University law professor Jonathan R. Siegel.
“Section 1500's jurisdictional prohibition is therefore broader than it looks, and it causes problems because different kinds of claims against the United States must be presented to different courts. The CFC has exclusive jurisdiction over contract claims and most other claims against the United States for monetary relief bases on a statute or the Constitution. Other types of claims against the government, including tort claims and claims for equitable relief, must be brought in district court,” they wrote in the Alabama Law Review.
The practical effect of the ruling is that it forces a plaintiff to decide whether to pursue damages or equitable relief, depending on when it becomes aware of the claims.
Federal defendants have successfully invoked it to dismiss a takings claim from Washington state related to a Clean Water Act Section 404 (33 U.S.C. § 1344) dredge-and-fill permit and breach of contract claims involving water delivery contracts in Oregon and California.
The historic drought in the U.S. West has put pressure on the Bureau of Reclamation to deliver water to entities holding contracts with the agency, such as irrigation and water districts, and also to ensure adequate instream flows for threatened and endangered species.
If the bureau, which operates some of the federal water delivery projects in the region (the U.S. Army Corps of Engineers also operates water projects) cannot or will not make deliveries, contractors previously could sue the agency in federal district court to compel it to do what it agreed to under the contracts or to declare that the agency has violated the federal reclamation law and then file a lawsuit for monetary damages under takings or breach of contract causes of action in the Court of Federal Claims.
After Tohono, filing these cases in this order is no longer an option.
“The Western drought has brought this issue to the fore again for water districts and irrigators,” Marzulla said.
Because federal law prohibits either the Court of Federal Claims or federal district court from exercising jurisdiction over all claims, and thus from issuing complete equitable and monetary relief, Tohono has, as one water quality and takings case and another water contract case illustrate, acutely affected water plaintiffs.
Sen. Roger Wicker (R-Miss.) and Rep. Ron DeSantis (R-Fla.) introduced bills late in the 113th Congress that would have ensured “appropriate judicial review of Federal Government actions by amending the prohibition on the exercise of jurisdiction by the United States Court of Federal Claims of certain claims pending in other courts.”
They would have effectively remedied the jurisdictional bar created by the Supreme Court's interpretation of Section 1500. Congress failed, however, to pass them before the end of 2014.
A congressional staffer with knowledge of the legislation told Bloomberg BNA that the legislation will likely be reintroduced in the 114th Congress, but did not specify a timeline.
The legislation would amend Section 1500 to require a court presiding over the subsequent action to stay that case until the other court resolves the first action. The court could lift the stay with consent of the parties in each action or if the court determines that the stay is not in the interests of justice.
“The Tohono issue could be extremely important to the water rights issues in the West, and this legislation could be critical as the water rights owner certainly can't afford to wait around for years as his livelihood is destroyed by lack of water,” Daniel Syrdal, of counsel at Orrick, Herrington & Sutcliffe LLP, told Bloomberg BNA.
The Tucker Act, 28 U.S.C. § 1491, waives the federal government's sovereign immunity for certain claims and establishes the jurisdiction of the Court of Federal Claims, which is limited to actions at law against the U.S. arising from the Constitution or an act of Congress or regulation, or that are based upon a contract with the U.S. or damages in non-tort cases.
In essence, the court has exclusive jurisdiction over claims in which plaintiffs seek financial damages of more than $10,000 against the U.S. (If the amount in question is less than $10,000, a federal district court can exercise concurrent jurisdiction with equitable claims).
In a water context, this may include a breach of contract claim seeking damages for Reclamation's failure to deliver water as specified in contracts with water districts or irrigators.
The law also establishes the court's jurisdiction over non-contract claims, including regulatory takings related to the an agency's denial of a permit, such as a Clean Water Act dredge-and-fill permit.
However, the Court of Federal Claims can't grant equitable relief, such as non-monetary judgments.
In Tohono, Justice Kennedy noted that after the Civil War, Congress enacted Section 1500 to prevent duplicative lawsuits by residents of the South who sought damages in the Court of Federal Claims for cotton taken by the U.S. and then brought tort claims against federal officials based on the same facts in district court.
Section 1500 bars the Court of Federal Claims from hearing claims “for or in respect to which the plaintiff” has pending in any other court against the U.S.
Prior to Tohono, claims were considered “for or in respect to” each other only if there was overlap in the relief requested and they arose out of the same set of facts. Therefore, “for the Court of Federal Claims to be precluded from hearing a case under Section 1500, the claim in another pending action must arise from the same operative facts and must seek the same relief” (Loveladies Harbor, Inc. v. United States, 27 F.3d 1545, 1551 (Fed. Cir. 1994) (en banc)).
Based on this ruling, a plaintiff could seek equitable relief against a federal agency or official in federal district court and then sue the U.S. for just compensation or contract damages in the Court of Federal Claims, even if the cases arose from the same operative facts.
In Tohono, however, the Supreme Court held that two claims are “for or in respect to the same claim … if they are based on substantially the same operative facts, regardless of the relief sought.”
The Supreme Court's interpretation of Section 1500 thus limits plaintiffs' ability to obtain both equitable relief and money damages, in that order, unless they can show that their claims are not based on the same operative facts.
Two recent rulings in water law cases illustrate the issues raised by the Section 1500 ruling.
In Resource Investments, Inc. v. United States, 114 Fed. Cl. 639, 2014 BL 30855 (Fed. Cl. 2014), the Court of Federal Claims ruled that two municipal solid waste management companies in Washington state could not maintain an “extraordinary delay takings” claim—alleging that the agency's delay in acting on a permit application amounted to a taking—against the U.S. Army Corps of Engineers because it was based on substantially the same operative facts as two counts in the district court complaint.
After the Corps denied their 1989 permit applications to fill wetlands on the property they had purchased to create a solid waste landfill, the companies filed an Administrative Procedure Act lawsuit in federal district court in 1996 and a takings claim in the Court of Federal Claims in 1998.
The Corps, according to the decision, had been considering the companies' Section 404 permit applications for seven years.
The Court of Federal Claims principally relied upon Tohono in granting the federal government's motion to dismiss. It found that the act of denying the permit, rather than, as the plaintiffs contended, the delay in acting on the permit, was the common operative fact for the purpose of its analysis.
It concluded that “despite the anachronistic nature of the statute and the harsh outcomes for plaintiffs, because of Section 1500, the court has no choice but to GRANT defendant's motion to dismiss.”
Resource Investments and Land Recovery, Inc. appealed the Court of Federal Claims' decision to the Federal Circuit in April 2014 (Res. Invs., Inc. v. United States, Fed. Cir., No. 14-05069, appeal docketed 4/2/14). In their Aug. 15 opening brief, they contended that they “asserted entirely distinct claims in the district court and the Court of Federal Claims,” and “concluding otherwise, the lower court erroneously applied Section 1500 jurisprudence and Tohono.”
Specifically, they argued the denial of the permit was the operative fact in the district court claim, while the extraordinary delay takings claim was based on the Corps' delay in acting on the permit.
The Federal Circuit has scheduled oral argument for March 2.
The Court of Federal Claims also relied upon Tohono in a water contract and takings case brought by water, drainage and irrigation districts and agricultural landowners in southern Oregon and northern California.
Due to low water levels that threatened the health and survival of listed species in violation of the Endangered Species Act in the Klamath Basin in 2001, the Bureau of Reclamation issued a revised operation plan for the Klamath Project that terminated the delivery of water to irrigation districts and some individuals for that year.
Two individual landowners, two irrigation districts and a water users association sued the U.S. in federal district court, alleging that the plan breached existing contracts and violated reclamation law, the Administrative Procedure Act and the National Environmental Policy Act. They sought declaratory relief and a preliminary injunction that would prevent the bureau from implementing the plan.
Later that year, a number of water, drainage and irrigation districts and agricultural landowners in Oregon and California, including the parties to the district court action, filed a lawsuit in the Court of Federal Claims, alleging that the U.S. effected takings of their water rights and impaired their water rights in violation of the Klamath Compact without paying just compensation as required by the Fifth Amendment and breached various contracts by refusing to deliver water.
In Klamath Irrigation District v. United States, 113 Fed. Cl. 688, 2013 BL 326217 (Fed. Cl. 2013), the Court of Federal Claims concluded that the takings claims in this case are not “for or in respect to” the claims filed in the district court. As such, Section 1500 does not apply to them.
However, the court found that the breach of contract claims asserted by the district court plaintiffs are “for or in respect to” the claims those same plaintiffs filed in the district court. Thus, the court dismissed those plaintiffs' breach of contract claims for lack of subject matter jurisdiction.
The cases illustrate three obstacles facing water law plaintiffs after the Tohono ruling:
• reliance on the 1994 Loveladies Harbor case;
• incomplete relief stemming from an election of remedy, as parties may only choose to seek either equitable relief or monetary damages; and
• the Court of Federal Claims causes of action accruing secondly.
“I had no inkling of Tohono and nothing to worry about because my client, Resource Investments, sought different relief from its district court case when it filed the extraordinary delay takings claim in the Court of Federal Claims,” said Syrdal, the counsel at Orrick, Herrington & Sutcliffe LLP. “The new interpretation of Section 1500 really harmed people already in the judicial system.”
Marzulla also said that his clients in Klamath suffered a similar fate, as Tohono had not been decided.
“Right after the Supreme Court decided Tohono, the main problem was that cases had been filed in reliance on the Federal Circuit's earlier ruling that if you sought damages in the Court of Federal Claims and equitable relief in the district court, it was not the same case, and Section 1500 did not apply,” he said.
Even after Tohono, plaintiffs continue to encounter issues with Section 1500.
Marzulla said the challenge of having to choose between seeking equitable relief or monetary damages is unique to cases between private parties and the federal government, and is limited to the jurisdictional relationship between district courts and the Court of Federal Claims.
“State courts as well as federal courts in litigation between private parties, allow alternative requests for relief—if the court decides that the equities do not support an injunction, it can provide damages in the alternative. But Section 1500 forces a plaintiff filing suit against the federal government to choose between the two remedies, although his cases are based on the same facts, and to either forgo one remedy or else try the same case twice,” Marzulla said.
Sometimes, however, the damages claim does not arise until after the first action has been filed in the district court.
Another issue facing water law plaintiffs is having the Court of Federal Claims cause of action, such as a takings or contract damages claim, crystallize after they have filed their district court action.
In Resource Investments, the plaintiffs filed their takings claim in the Court of Federal Claims after the Corps had denied their permit and the district court had upheld the denial. The appeal, however, was ongoing in the U.S. Court of Appeals for the Ninth Circuit.
“At the time, it was impossible to know whether this was a permanent takings claim, or a temporary takings claim based on the Corps' extraordinary and unreasonable delay on the permit application,” Syrdal said.
A permanent regulatory taking occurs when a regulation or permit denial deprives a claimant of all economically beneficial use of its land, whereas a temporary taking occurs when an agency significantly delays a decision on a permit, depriving a claimant of the economically beneficial use of its land for a period of time.
The lawsuit only became a temporary takings claim when the Ninth Circuit reversed the district court, three months into the Court of Federal Claims litigation, requiring the plaintiffs to file an amended complaint.
Thus, Syrdal said, Tohono forces the plaintiff to file its takings claim first when the permit is denied, without knowing whether it is permanent or temporary, and then pursue the APA claims to get the permit denial overturned in district court.
The order of filing mandated by Tohono, he cautioned, can negatively affect the efficiency of the judicial process.
Due to Tohono, a plaintiff must first bring a permanent takings claim after the agency denies the permit. After filing the takings claim, the plaintiff may actually have an adverse permit decision overturned by the district court or court of appeals, after months or years of litigating in the Court of Federal Claims and possibly the Federal Circuit. If the agency then grants the permit on remand from the district court, the plaintiff is left with a temporary takings claim, rather than the permanent takings claim first filed.
Marzulla said the “accrual problem” not only affects plaintiffs raising APA claims but also those bringing water delivery contract claims, such as in Klamath, where the takings claim had not accrued until after the contract claims.
Syrdal also acknowledged that accrual problems may limit water delivery contract plaintiffs.
“While that isn't a typical administrative action such as a permitting decision under the APA, it would still present a case where a plaintiff, in order to preserve its rights, might need to first file an injunction action in district court to force water delivery before it knew if there were going to be a damages, either contract or takings, for failing to deliver water,” Syrdal said.
Another issue clouding the order of filing necessitated by Tohono is the statute of limitations, which is six years for claims against the federal government. Should the district court case be pending for the purposes of Section 1500 beyond six years from the accrual of the contract or takings claim, then the plaintiff will be unable to file a challenge in the Court of Federal Claims.
Although Section 1500 has, in the aftermath of Tohono, adversely affected water law plaintiffs seeking both equitable relief and damages, attorneys can employ several approaches to avoid or lessen the effect of the jurisdictional bar.
Marzulla identified three strategies plaintiffs can employ with advance planning.
Absent the accrual issue, “the best strategy is to file one day in the Court of Federal Claims, seeking damages, and the next day file in district court seeking injunctive and declaratory relief,” Marzulla said. “The subsequent district court filing does not trigger Section 1500, which only asks whether the district court case was pending on the day you filed” in the Court of Federal Claims.
He also suggested that in water contract cases where multiple plaintiffs are involved, such as Klamath, a lawyer can file a case in district court for a water district client and then file in the Court of Federal Claims for other clients, such as individual water users.
“Section 1500 allows you to pursue both cases simultaneously because it applies only to filings in the Court of Federal Claims by the same party,” he said.
A plaintiff also can file a case in district court, and, if he fails to get a preliminary injunction, he could dismiss that case and alternatively seek damages in the Court of Federal Claims, Marzulla said.
These solutions, however, address situations where both the damages and equitable claims accrue simultaneously, or the damages claim accrues before the equitable claim.
Even without Section 1500, Marzulla said that courts hearing these claims have adequate tools, such as issuing stays, and finding issue preclusion to address concerns about judicial economy and redundant lawsuits.
Issue preclusion, also called collateral estoppel, prevents a party from relitigating a particular issue in the second case when the parties litigated that issue and a court ruled upon it in the first case.
Section 1500, Marzulla said, may affect judicial economy because it forces a plaintiff to file two separate cases, first in the Court of Federal Claims, then in district court, and potentially litigate both. “How much more efficient would it be to litigate the case once and just have the court decide the appropriate remedy?” he asked.
According to Syrdal, if the second case were duplicative, courts have the authority to limit issues, although issue preclusion and transfers are not necessarily available because the Court of Federal Claims and district court have jurisdiction over different types of claims that necessarily invoke different issues and facts.
“The facts necessary to prove an APA claim stemming from the denial of a Clean Water Act permit are different from the facts needed to prove a takings clam, and the facts before the courts necessarily differ in these cases,” he said. “In the APA claim, the district court is limited in its judicial review to the record before the agency and no outside evidence can be introduced, whereas in the Court of Federal Claims, a plaintiff can offer new facts through discovery and depositions to show how it has been wronged by the agency's decision.”
The issues of fairness and judicial economy surrounding Section 1500 have caught the attention of a variety of interests, ranging from a government agency to the American Bar Association.
In addition to water law attorneys, the Administrative Conference of the United States, the ABA and former, current and future plaintiffs have urged Congress to repeal or amend the law.
The Court of Federal Claims has described Section 1500 in its decisions as a “trap for the unwary” and that “it is worth recognizing” that certain cases present “exactly the type of incomplete relief the Supreme Court noted could result from application of Section 1500.”
Although the Supreme Court noted in Tohono that “if indeed the statute leads to incomplete relief, and if plaintiffs like the Nation are dissatisfied, they are free to direct their complaints to Congress,” because this “Court enjoy[s] no liberty to add an exception…to remove apparent hardship.”
If the legislation to be reintroduced is similar to the bills in the previous Congress, it could, from a plaintiff's perspective, alleviate the Section 1500 problem posed by Tohono.
The previous bills would have required a court presiding over the subsequent action to stay that case until the first action is resolved. The stay could be lifted if the parties in each action agree to do so, or the court determines that the stay is not “in the interests of justice.”
The Senate version, co-sponsored by Sen. Jon Tester (D-Mont. and Sen. John Cornyn (R-Texas), would have effectively allowed a plaintiff to file a lawsuit “arising from substantially the same set of facts” in the Court of Federal Claims while he or she has an action pending in federal district court. The plaintiff also has the option of filing first in the Court of Federal Claims and then in district court.
“Current law relating to the jurisdiction of federal courts and the U.S. Court of Federal Claims is both cumbersome and duplicative,” Wicker, the senator who introduced the bill in the 113th Congress, told Bloomberg BNA in an e-mail.
He added that calls to the amend Section 1500 served as the impetus for this bill.
Both bills had relied on a model of recommended reforms adopted in January 2013 by the Administrative Conference (Adoption of Recommendations, 78 Fed. Reg. 2939 (Jan. 15, 2013)).
Marzulla and Syrdal agreed that the bills would have been an improvement over the present law.
The complexity, brought about by the stay provision in the bills, and cost, necessitated by keeping appeals alive long, are two concerns raised by the attorneys.
In comments submitted to the conference, the Department of Justice also raised issues with the stay provision and generally opposed the conference's recommended reforms.
According to Syrdal, although the stay provision only applies where there are substantially the same operative facts in each case, “this could cause some added complications as a court will have to first decide if this is the case and, if so, then order the stay.”
Marzulla said it would be better to leave it to individual judges to stay a case or use their judicial tools as they see fit, rather than rely on a statutory command.
To contact the reporter on this story: Lars-Eric Hedberg in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Greg Henderson at email@example.com
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