Stockton East Water Dist. v. United States , 583 F.3d 1344 ( 2011 )

United States Court of Appeals
for the Federal Circuit
__________________________
STOCKTON EAST WATER DISTRICT,
CENTRAL SAN JOAQUIN WATER
CONSERVATION DISTRICT, AND
CALIFORNIA WATER SERVICE COMPANY,
Plaintiffs-Appellants,
and
SAN JOAQUIN COUNTY,
AND STOCKTON CITY,
Plaintiffs,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
2007-5142
__________________________
Appeal from the United States Court of Federal
Claims in 04-CV-541, Judge Christine O.C. Miller.
__________________________
ON PETITION FOR PANEL REHEARING
__________________________
KATHRYN E. KOVACS, Attorney, Appellate Section,
Environment & Natural Resources Division, United
States Department of Justice, of Washington, DC, filed a
STOCKTON EAST WATER v. US 2
combined petition for panel rehearing and rehearing en
banc for defendant-appellee. With her on the petition
were JOHN C. CRUDEN, Acting Assistant Attorney Gen-
eral, and KATHERINE J. BARTON, Attorney.
JENNIFER L. SPALETTA, Herum Crabtree Brown, of
Stockton, California, filed a response to the combined
petition for plaintiffs-appellants. With her on the re-
sponse were JEANNE M. ZOLEZZI and NATALIE M. WEBER.
Of counsel on the response were ROGER J. MARZULLA and
NANCIE E. MARZULLA, Marzulla Law, of Washington, DC.
__________________________
Before NEWMAN, PLAGER, and GAJARSA, Circuit Judges.
Order for the court filed by Circuit Judge PLAGER. Dis-
sent filed by Circuit Judge GAJARSA.
PLAGER, Circuit Judge.
__________________________
ORDER
I. BACKGROUND
This case began in 1993 when the plaintiff water dis-
tricts (Districts) sued the United States (Government) in
federal district court. The suit claimed that the Govern-
ment had failed to provide the Districts with the water,
which the Government had contracted to supply. The
case eventually was transferred to the Court of Federal
Claims where, in 2007, that court, in an exhaustive 85-
page opinion following an eight day trial, gave judgment
in favor of defendant United States. On appeal, because
of the complexity of the contractual provisions and the
factual record of performance (or lack thereof) by the
3 STOCKTON EAST WATER v. US
parties, we undertook a thorough review of the record and
the trial court’s many rulings. Adding to the complexities
of the case were the changes in state and federal laws and
regulations that had occurred and that had implications
for the rights of the parties.
As a result of our review, we concluded that the Dis-
tricts and the United States had binding contracts regard-
ing the water supplies at issue, and that, as the trial
court had determined, the contracts were breached by the
United States in certain respects. Unlike the trial court,
however, we concluded that the defenses the United
States presented did not, as a matter of law, provide the
Government with the total absolution of liability it
sought, and reversed that part of the trial court’s judg-
ment; we vacated the trial court’s judgment relating to a
non-litigated takings claim; and we remanded the dispute
to the trial court for a determination of damages for the
specific contract breaches we upheld. Stockton East
Water District v. United States, 583 F.3d 1344 (Fed. Cir.
2009).
The Government now petitions for rehearing on the
ground that, after this court had determined that the trial
court erred in its judgment regarding the Government’s
defenses, the court should have remanded the entire case
for further hearings and submission of additional evi-
dence. A sufficient answer to the petition might have
been that litigants cannot expect to re-try the facts of a
case once a trial is concluded. However, in the interest of
justice and again because of the complexity of the issues,
we have granted the Government’s petition for rehearing,
and have reconsidered our original decision.
STOCKTON EAST WATER v. US 4
II. DISCUSSION
The basic issue in the case is whether the Govern-
ment, in the management of the water supply under
contract, breached the contracts by failing to provide the
quantities of water promised to the plaintiff water dis-
tricts, and whether the Government has a valid defense
excusing the breach. The trial judge’s examination of the
facts could not have been more detailed, and its opinion
more thorough. There is no denying that the quantities of
water promised were not delivered, and that therefore a
breach occurred. This is beyond dispute—the evidence is
conclusive; the trial court so held; and this court affirmed
that finding. Id. at 1357. We also concluded that of the
three defense theories that the Government presented to
absolve it of liability for the breaches, two--the ‘sovereign
acts’ defense and the ‘inherency’ defense--were inapplica-
ble on the facts.
With regard to the third defense—the contract de-
fense under Article 9(a), a defense keyed to drought
conditions in the environment—the question was whether
there was a sufficient factual basis in the record to sus-
tain that defense as to the several years in dispute. The
parties stipulated at trial to the determinative water
facts, which were presented in a table that explained the
exact water allocation. See id. at 1370. Because of the
uncontroverted facts, this court for two of the years at
issue (1994 and 1995) sustained the judgment of the trial
court that the Government had proved its case under the
defense provided in the contract under Article 9(a). For
the other years (1999-2004), we concluded that the Gov-
ernment had failed to make its case under the terms of
this defense, the only applicable defense it had.
5 STOCKTON EAST WATER v. US
The Government in its petition for rehearing argues
that had it appreciated fully the burden the law imposes
on a party claiming a contract defense such as that under
Article 9(a), it would have introduced more evidence
regarding the conditions at the facility, and in particular
Reclamation’s decisions regarding operation of the water
resource. In response to the Government’s petition, we
have re-reviewed the history of the case and re-considered
the record the parties made before the trial court. Our
further review leaves us fully satisfied that there was no
absence of evidence introduced by both sides on the
critical questions on which the case turns—what were the
conditions that caused the breach, was there a shortage of
water in any of the years at issue, caused by drought or
otherwise, and ultimately who got what water and when.
Even assuming the Government was confused as to
exactly who had to prove what, and that it might have
called additional witnesses had it thought it helpful, the
evidence on the key disputed issue is fully developed in
the record. There is ample precedent that, under circum-
stances such as this, the appellate court may apply the
appropriate burdens to the facts and determine the
proper outcome. For example, in Brunswick Bank &
Trust Company v. United States, 707 F.2d 1355 (Fed. Cir.
1983), this court dealt with a similar situation. In that
case, the trial court had erroneously imposed on the
plaintiff bank the burden of proving that the bank had
operated reasonably, when the burden properly should
have been the Government’s to prove negligence. Rather
than remand for further hearings by the trial court, this
court, having a full factual record before it, applied the
correct burden to the facts and in the interest of efficient
judicial administration decided the case accordingly.
STOCKTON EAST WATER v. US 6
More importantly, the witnesses the Government now
wants to produce would not help the Government’s cause.
According to the Government’s petition, the witnesses on
the Government’s pre-trial witness list who were not
called would now testify to “Reclamation’s water supply
operations and ‘decisions regarding quantities of water
available to deliver to Plaintiffs’” (C. Bowling and J.
Davis); to “water supply forecasting” (P. Fujitani); to
“Reclamation’s long-term planning models” (D. Hilts); to
“Reclamation’s water supply planning, modeling, forecast-
ing …(P. Manza); “Reclamation’s operational decision-
making and the factors that influence those decisions,…”
(L. Peterson), and so on. See Government Pet. at 9.
But all of that misses the point. None of these wit-
nesses address the only issue relevant to the Govern-
ment’s defense under the contract provisions as this court
has construed them. Perhaps if the question being ad-
dressed is whether the Government operated the water
supply ‘reasonably,’ the witnesses the Government now
wants to have testify might have something relevant to
say. But this court’s construction of the contract, which
the Government does not here contest, 1 makes such
operational issues irrelevant. It would seem that under
the guise of claiming additional evidentiary needs the
Government is actually trying to reargue the defenses
that we have held unavailable to it.
As we explained in our opinion, the issue under the
Article 9(a) defense is not the reasonableness of the
Government’s operation of the water resources, or its
careful (or not) planning thereof; as this court noted in its
opinion, a ‘reasonable’ breach of a contract is still a
1 See Government Br. at 1 n.1 (“[W]e seek rehearing
only to correct this one error [the absence of a remand].”).
7 STOCKTON EAST WATER v. US
breach. Id. at 1365. The only relevant issue regarding
the Government’s defense under the drought-type provi-
sion of Article 9(a) relates to the availability of the water
and to whom it was allocated. As we explained in our
opinion, that is a question of available water supplies, not
operational decisions.
III. CONCLUSION
For all these reasons, the Government’s arguments
for why it should have another bite at the apple are
unpersuasive. No valid basis exists for imposing a further
delay in vindicating the rights of the non-breaching
Districts in this case. The issue is whether, as a matter of
justice and efficient use of judicial resources, further
evidentiary wrangling over liability is necessary or appro-
priate. We think not.
The Government’s petition for rehearing is granted
for the limited purpose of providing this further explana-
tion as to why no remand for additional taking of evidence
regarding liability is warranted; the petition is otherwise
denied. The original remand as previously ordered, for
the purpose of damages determination, is affirmed. On
remand, the trial court of course is at liberty to fashion an
appropriate record for the damages phase of the case,
which to the extent feasible should be expedited.
IT IS SO ORDERED
March 18, 2011
Date
United States Court of Appeals
for the Federal Circuit
__________________________
STOCKTON EAST WATER DISTRICT, AND
CENTRAL SAN JOAQUIN WATER
CONSERVATION DISTRICT,
Plaintiffs-Appellants,
And
SAN JOAQUIN COUNTY, STOCKTON CITY,
AND CALIFORNIA WATER SERVICE COMPANY,
Plaintiffs,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
2007-5142
__________________________
Appeal from the United States Court of Federal Claims in
Case No. 04-CV-541, Judge Christine O.C. Miller.
__________________________
GAJARSA, Circuit Judge, dissenting.
Because the Order does not correct the myriad of er-
rors flowing throughout the panel decision, reported at
583 F.3d 1344, I respectfully dissent.
The United States failed to file an appropriate peti-
tion for rehearing or rehearing en banc pointing out the
STOCKTON EAST WATER v. US 2
many erroneous courses taken by the panel in reaching its
conclusion. Specifically, although the United States did
submit a petition for rehearing and rehearing en banc, the
petition only requested a remand to establish additional
facts. Petition at 12.
First, the United States should have challenged the
majority’s conclusion that a party to a contract with the
United States, having failed to establish damages in a
contract action, may proceed with a Fifth Amendment
takings action. See Castle v. United States, 301 F.3d
1328, 1342 (Fed. Cir. 2002). Second, the United States
should have challenged the majority opinion for its shift-
ing sands conflation of the impossibility defense and the
sovereign acts defense. I believe these defenses to be
distinct; their conflation demands correction. See
Klamath Irr. Dist. v. United States, 75 Fed. Cl. 677, 691-
95 (2007) (Allegra, J.), vacated, --- F.3d ---, 2011 WL
537853 (Fed. Cir. 2011).