Kansas v. Nebraska , 135 S. Ct. 1042 ( 2015 )

(Slip Opinion) OCTOBER TERM, 2014 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
KANSAS v. NEBRASKA ET AL.
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
No. 126, Orig. Argued October 14, 2014—Decided February 24, 2015
In 1943, Congress approved the Republican River Compact, an agree-
ment between Kansas, Nebraska, and Colorado to apportion the “vir-
gin water originating in” the Republican River Basin. 57 Stat. 87. In
1998, Kansas filed an original action in this Court contending that
Nebraska’s increased groundwater pumping was subject to regula-
tion by the Compact to the extent that it depleted stream flow in the
Basin. This Court agreed. Ensuing negotiations resulted in the 2002
Final Settlement Stipulation (Settlement), which established mecha-
nisms to accurately measure water and promote compliance with the
Compact. The Settlement identified the Accounting Procedures, a
technical appendix, as the tool by which the States would measure
stream flow depletion, and thus consumption, due to groundwater
pumping. The Settlement also reaffirmed that “imported water”—
that is, water brought into the Basin by human activity—would not
count toward a State’s consumption. Again, the Accounting Proce-
dures were to measure, so as to exclude, that water flow.
In 2007, following the first post-Settlement accounting period,
Kansas petitioned this Court for monetary and injunctive relief,
claiming that Nebraska had substantially exceeded its water alloca-
tion. Nebraska responded that the Accounting Procedures improper-
ly charged the State for using imported water and requested that the
Accounting Procedures be modified accordingly. The Court appointed
a Special Master. His report concludes that Nebraska “knowingly
failed” to comply with the Compact, recommends that Nebraska dis-
gorge a portion of its gains in addition to paying damages for Kan-
sas’s loss, and recommends denying Kansas’s request for an injunc-
tion. In addition, the report recommends reforming the Accounting
Procedures. The parties have filed exceptions.
Held:
2 KANSAS v. NEBRASKA
Syllabus
1. Proceedings under this Court’s original jurisdiction are “basically
equitable in nature,” Ohio v. Kentucky, 410 U.S. 641, 648, and in ex-
ercising that jurisdiction over a controversy between two States, the
Court may “mould the process [to] best promote the purposes of jus-
tice.” Kentucky v. Dennison, 24 How. 66, 98. Where the States have
negotiated a Compact, the Court is confined to declaring rights under
and enforcing its terms. But within those bounds, the Court may in-
voke equitable principles to devise “fair … solution[s]” to compact vio-
lations. Texas v. New Mexico, 482 U.S. 124, 134. And where Con-
gress has approved the Compact so that it counts as federal law, see
Cuyler v. Adams, 449 U.S. 433, 438, the Court may, consistent with
the Compact’s express terms, exercise its full authority to remedy
violations of, and promote compliance with, the agreement, see Porter
v. Warner Holding Co., 328 U.S. 395, 398. Pp. 6–9.
2. The Special Master’s determination that Nebraska “knowingly
failed” to comply with its Settlement obligations, his recommendation
that Nebraska pay Kansas an additional $1.8 million in disgorge-
ment, and his recommendation that Kansas’s request for injunctive
relief be denied are all adopted. The parties’ exceptions are over-
ruled. Pp. 9–20.
(a) Nebraska “knowingly failed” to comply with its Settlement
obligations, and disgorgement is an appropriate remedy for Nebras-
ka’s breach. Pp. 10–17.
(i) As the Special Master found, Nebraska failed to put ade-
quate compliance mechanisms in place in the face of a known sub-
stantial risk that it would violate Kansas’s rights. Nebraska’s argu-
ment that it could not have anticipated unprecedented drought
conditions fails, because its efforts to comply would have been inade-
quate absent the luckiest of circumstances. Nor can the State find
refuge in the Compact’s retrospective compliance calculation meth-
ods, because it had been warned each year leading up to the final
compliance check that it had exceeded its allotment. The Court
therefore agrees with the Master that Nebraska “knowingly exposed
Kansas to a substantial risk” of receiving less water than it was enti-
tled to under the Compact. Report 130. In other words, Nebraska
recklessly gambled with Kansas’s rights. Pp. 10–14.
(ii) Because Nebraska’s benefit from its breach exceeded the
$3.7 million loss Kansas suffered, the Special Master recommended
that Nebraska disgorge part of its additional gain. Nebraska con-
tends that disgorgement is improper because it did not act “deliber-
ately,” which it argues is required for disgorgement in a private con-
tract suit. But disgorgement is appropriate where one State has
recklessly gambled with another State’s rights to a scarce natural re-
source. This Court has said that awarding actual damages in a com-
Cite as: 574 U. S. ____ (2015) 3
Syllabus
pact case may be inadequate to deter an upstream State from ignor-
ing its obligations where it is advantageous to do so. Texas v. New
Mexico, 482 U.S., at 132. Here, Nebraska took full advantage of its
favorable geographic position. And because of the higher value of wa-
ter on Nebraska’s farmland than on Kansas’s, Nebraska could take
Kansas’s water, pay damages, and still benefit. This Court’s remedial
authority extends to providing a remedy capable of stabilizing the
Compact and deterring future breaches, and a disgorgement award
appropriately does so here. Pp. 14–17.
(b) Contrary to Kansas’s contentions, the Master’s partial dis-
gorgement award is sufficient to achieve those goals. The “flexibility
inherent in equitable remedies,” Brown v. Plata, 563 U. S. ___, ___,
allows the Court to order partial disgorgement if appropriate to the
facts of the particular case, cf. Kansas v. Colorado, 533 U.S. 1, 14.
The Special Master properly took into account Nebraska’s incentives,
past behavior, and especially its more recent successful compliance
efforts to determine that a small disgorgement award suffices. For
related reasons, Kansas has failed to demonstrate a “cognizable dan-
ger of recurrent violation” necessary to obtain an injunction. United
States v. W. T. Grant Co., 345 U.S. 629, 633. Pp. 17–20.
3. The Special Master’s recommendation to amend the Accounting
Procedures so that they no longer charge Nebraska for imported wa-
ter is adopted, and Kansas’s exception is overruled. As the Special
Master found, in dry conditions, the Accounting Procedures improp-
erly treat Nebraska’s use of imported water as if it were use of Basin
water. Nothing suggests that anyone seriously thought the Account-
ing Procedures would systematically err in this way. Rather, the
Procedures’ designers assumed that they had succeeded in their goal
to implement a strict demarcation between virgin and imported wa-
ter.
Kansas argues that in spite of these failures, the States must be
held to the bargain they struck. That is the ordinary rule. But two
special considerations warrant conforming the Accounting Proce-
dures to the Compact and the Settlement. First, the remedy is nec-
essary to prevent serious inaccuracies from distorting the States’ in-
tended apportionment of interstate waters, as reflected in those
documents. Doing so is consistent with past instances where this
Court opted to modify a technical agreement to correct material er-
rors in the way it operates and thus align it with the compacting
States’ intended apportionment. Second, this remedy is required to
avert an outright breach of the Compact—and so a violation of feder-
al law. As written, the Accounting Procedures go beyond the Com-
pact’s boundaries and deprive Nebraska of its compact rights. The
Master’s proposed “5-run formula” solves this problem by excluding
4 KANSAS v. NEBRASKA
Syllabus
imported water from the calculation of each State’s consumption.
Given Kansas’s failure despite ample opportunity to devise another
solution or to demonstrate flaws in this one, as well the long and con-
tentious history of this case that casts doubt on the States’ ability to
come to an agreement themselves, the Court adopts the Master’s so-
lution. Pp. 20–28.
Exceptions to Special Master’s Report overruled, and Master’s recom-
mendations adopted.
KAGAN, J., delivered the opinion of the Court, in which KENNEDY,
GINSBURG, BREYER, and SOTOMAYOR, JJ., joined, and in which ROBERTS,
C. J., joined as to Parts I and III. ROBERTS, C. J., and SCALIA, J., filed
opinions concurring in part and dissenting in part. THOMAS, J., filed an
opinion concurring in part and dissenting in part, in which SCALIA and
ALITO, JJ., joined, and in which ROBERTS, C. J., joined as to Part III.
Cite as: 574 U. S. ____ (2015) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash­
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 126, Orig.
_________________
STATE OF KANSAS, PLAINTIFF v. STATES OF
NEBRASKA AND COLORADO
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
[February 24, 2015]
JUSTICE KAGAN delivered the opinion of the Court.
For the second time in little more than a decade, Kansas
and Nebraska ask this Court to settle a dispute over the
States’ rights to the waters of the Republican River Basin,
as set out in an interstate compact. The first round of
litigation ended with a settlement agreement designed to
elaborate on, and promote future compliance with, the
Compact’s terms. The States now bring new claims
against each other arising from the implementation of
that settlement. Kansas seeks exceptional relief—both
partial disgorgement of gains and an injunction—for
Nebraska’s conceded overconsumption of water. For its
part, Nebraska requests amendment of a technical appen­
dix to the settlement, so that allocations of water will
faithfully reflect the parties’ intent as expressed in both
the body of that agreement and the Compact itself. We
referred the case to a Special Master and now accept his
recommendations as to appropriate equitable remedies: for
Kansas, partial disgorgement but no injunction; and for
Nebraska, reform of the appendix.
I
The Republican River originates in Colorado; crosses the
2 KANSAS v. NEBRASKA
Opinion of the Court
northwestern corner of Kansas into Nebraska; flows
through much of southwestern Nebraska; and finally cuts
back into northern Kansas. Along with its many tributar­
ies, the river drains a 24,900-square-mile watershed,
called the Republican River Basin. The Basin contains
substantial farmland, producing (among other things)
wheat and corn.
During the Dust Bowl of the 1930’s, the Republican
River Basin experienced an extended drought, interrupted
once by a deadly flood. In response, the Federal Govern­
ment proposed constructing reservoirs in the Basin to
control flooding, as well as undertaking an array of irriga­
tion projects to disperse the stored water. But the Gov­
ernment insisted that the three States of the Basin first
agree to an allocation of its water resources. As a result of
that prodding, the States negotiated and ratified the
Republican River Compact; and in 1943, as required under
the Constitution, Art. I, §10, cl. 3, Congress approved that
agreement. By act of Congress, the Compact thus became
federal law. See Act of May 26, 1943, ch. 104, 57 Stat. 86.
The Compact apportions among the three States the
“virgin water supply originating in”—and, as we will later
discuss, originating only in—the Republican River Basin.
Compact Art. III; see infra, at 20–28. “Virgin water sup­
ply,” as used in the Compact, means “the water supply
within the Basin,” in both the River and its tributaries,
“undepleted by the activities of man.” Compact Art. II.
The Compact gives each State a set share of that supply—
roughly, 49% to Nebraska, 40% to Kansas, and 11% to
Colorado—for any “beneficial consumptive use.” Id.,
Art. IV; see Art. II (defining that term to mean “that use
by which the water supply of the Basin is consumed
through the activities of man”). In addition, the Compact
charges the chief water official of each State with respon­
sibility to jointly administer the agreement. See id.,
Art. IX. Pursuant to that provision, the States created the
Cite as: 574 U. S. ____ (2015) 3
Opinion of the Court
Republican River Compact Administration (RRCA). The
RRCA’s chief task is to calculate the Basin’s annual virgin
water supply by measuring stream flow throughout the
area, and to determine (retrospectively) whether each
State’s use of that water has stayed within its allocation.
All was smooth sailing for decades, until Kansas com­
plained to this Court about Nebraska’s increased pumping
of groundwater, resulting from that State’s construction of
“thousands of wells hydraulically connected to the Repub­
lican River and its tributaries.” Bill of Complaint, O. T.
1997, No. 126, Orig., p. 5 (May 26, 1998). Kansas con­
tended that such activity was subject to the Compact: To
the extent groundwater pumping depleted stream flow in
the Basin, it counted against the pumping State’s annual
allotment of water.1 Nebraska maintained, to the con­
trary, that groundwater pumping fell outside the Com­
pact’s scope, even if that activity diminished stream flow
in the area. A Special Master we appointed favored Kan­
sas’s interpretation of the Compact; we summarily agreed,
and recommitted the case to him for further proceedings.
See Kansas v. Nebraska, 530 U.S. 1272 (2000). The
States then entered into negotiations, aimed primarily at
determining how best to measure, and reflect in Compact
accounting, the depletion of the Basin’s stream flow due to
groundwater pumping. During those discussions, the
States also addressed a range of other matters affecting
Compact administration. The talks bore fruit in 2002,
when the States signed the Final Settlement Stipulation
(Settlement).
The Settlement established detailed mechanisms to
promote compliance with the Compact’s terms. The States
——————
1 As we will later discuss, groundwater pumping does not diminish
stream flow (and thus the Basin’s “virgin water supply”) at a 1-to-1
ratio. See Report of Special Master 19 (Report); infra, at 21–22. In
other words, a State can pump a bucketful of groundwater without
reducing stream flow by the same amount.
4 KANSAS v. NEBRASKA
Opinion of the Court
agreed that the Settlement was not “intended to, nor could
[it], change [their] respective rights and obligations under
the Compact.” Settlement §I(D). Rather, the agreement
aimed to accurately measure the supply and use of the
Basin’s water, and to assist the States in staying within
their prescribed limits. To smooth out year-to-year fluctu­
ations and otherwise facilitate compliance, the Settlement
based all Compact accounting on 5-year running averages,
reduced to 2-year averages in “water-short” periods. Id.,
§§IV(D), V(B). That change gave each State a chance to
compensate for one (or more) year’s overuse with another
(or more) year’s underuse before exceeding its allocation.
The Settlement further provided, in line with this Court’s
decision, that groundwater pumping would count as part
of a State’s consumption to the extent it depleted the
Basin’s stream flow. An appendix to the agreement called
the “Accounting Procedures” described how a later-
developed “Groundwater Model” (essentially, a mass of
computer code) would perform those computations. Id.,
App. C; id., App. J1. And finally, the Settlement made
clear, in accordance with the Compact, that a State’s use
of “imported water”—that is, water farmers bring into the
area (usually for irrigation) that eventually seeps into the
Republican River—would not count toward the State’s
allocation, because it did not originate in the Basin. Id.,
§§II, IV(F). Once again, the Settlement identified the
Accounting Procedures and Groundwater Model as the
tools to calculate (so as to exclude) that consumption.
But there were more rapids ahead: By 2007, Kansas and
Nebraska each had complaints about how the Settlement
was working. Kansas protested that in the 2005–2006
accounting period—the first for which the Settlement held
States responsible—Nebraska had substantially exceeded
its allocation of water. Nebraska, for its part, maintained
that the Accounting Procedures and Groundwater Model
were charging the State for use of imported water—
Cite as: 574 U. S. ____ (2015) 5
Opinion of the Court
specifically, for water originating in the Platte River Ba­
sin. The States brought those disputes to the RRCA and
then to non-binding arbitration, in accordance with the
Settlement’s dispute resolution provisions. After failing to
resolve the disagreements in those forums, Kansas sought
redress in this Court, petitioning for both monetary and
injunctive relief. We referred the case to a Special Master
to consider Kansas’s claims. See 563 U. S. ___ (2011). In
that proceeding, Nebraska asserted a counterclaim re­
questing a modification of the Accounting Procedures to
ensure that its use of Platte River water would not count
toward its Compact allocation.
After two years of conducting hearings, receiving evi­
dence, and entertaining legal arguments, the Special
Master issued his report and recommendations. The
Master concluded that Nebraska had “knowingly failed” to
comply with the Compact in the 2005–2006 accounting
period, by consuming 70,869 acre-feet of water in excess of
its prescribed share.2 Report 112. To remedy that breach,
the Master proposed awarding Kansas $3.7 million for its
loss, and another $1.8 million in partial disgorgement of
Nebraska’s still greater gains. The Master, however,
thought that an injunction against Nebraska was not
warranted. In addition, the Master recommended reform­
ing the Accounting Procedures in line with Nebraska’s
request, to ensure that the State would not be charged
with using Platte River water.
Kansas and Nebraska each filed exceptions in this Court
to parts of the Special Master’s report.3 Nebraska objects
——————
2 An acre-foot of water is pretty much what it sounds like. If you took
an acre of land and covered it evenly with water one foot deep, you
would have an acre-foot of water.
3 Colorado has also played a minor part in this dispute, and in this
Court it filed a brief reiterating one of Nebraska’s exceptions. Because
Kansas and Nebraska are the primary antagonists here, we will refer
to that claim only as Nebraska’s. From here on in, Colorado drops off
6 KANSAS v. NEBRASKA
Opinion of the Court
to the Master’s finding of a “knowing” breach and his call
for partial disgorgement of its gains. Kansas asserts that
the Master should have recommended both a larger dis­
gorgement award and injunctive relief; the State also
objects to his proposed change to the Accounting Proce­
dures. In reviewing those claims, this Court gives the
Special Master’s factual findings “respect and a tacit
presumption of correctness.” Colorado v. New Mexico, 467
U.S. 310, 317 (1984). But we conduct an “independent
review of the record,” and assume “the ultimate responsi­
bility for deciding” all matters. Ibid. Having carried out
that careful review, we now overrule all exceptions and
adopt the Master’s recommendations.
II
The Constitution gives this Court original jurisdiction to
hear suits between the States. See Art. III, §2. Proceed­
ings under that grant of jurisdiction are “basically equi­
table in nature.” Ohio v. Kentucky, 410 U.S. 641, 648
(1973). When the Court exercises its original jurisdiction
over a controversy between two States, it serves “as a
substitute for the diplomatic settlement of controversies
between sovereigns and a possible resort to force.” North
Dakota v. Minnesota, 263 U.S. 365, 372–373 (1923). That
role significantly “differ[s] from” the one the Court under­
takes “in suits between private parties.” Id., at 372; see
Frankfurter & Landis, The Compact Clause of the Consti­
tution—A Study in Interstate Adjustments, 34 Yale L. J.
685, 705 (1925) (When a “controversy concerns two States
we are at once in a world wholly different from that of a
law-suit between John Doe and Richard Roe over the
metes and bounds of Blackacre”). In this singular sphere,
“the court may regulate and mould the process it uses in
such a manner as in its judgment will best promote the
——————
the map (so to speak).
Cite as: 574 U. S. ____ (2015) 7
Opinion of the Court
purposes of justice.” Kentucky v. Dennison, 24 How. 66, 98
(1861).
Two particular features of this interstate controversy
further distinguish it from a run-of-the-mill private suit
and highlight the essentially equitable character of our
charge. The first relates to the subject matter of the Com­
pact and Settlement: rights to an interstate waterway.
The second concerns the Compact’s status as not just an
agreement, but a federal law. Before proceeding to the
merits of this dispute, we say a few words about each.
This Court has recognized for more than a century its
inherent authority, as part of the Constitution’s grant of
original jurisdiction, to equitably apportion interstate
streams between States. In Kansas v. Colorado, 185 U.S.
125, 145 (1902), we confronted a simple consequence of
geography: An upstream State can appropriate all water
from a river, thus “wholly depriv[ing]” a downstream State
“of the benefit of water” that “by nature” would flow into
its territory. In such a circumstance, the downstream
State lacks the sovereign’s usual power to respond—the
capacity to “make war[,] . . . grant letters of marque and
reprisal,” or even enter into agreements without the con­
sent of Congress. Id., at 143 (internal quotation marks
omitted). “Bound hand and foot by the prohibitions of the
Constitution, . . . a resort to the judicial power is the only
means left” for stopping an inequitable taking of water.
Id., at 144 (quoting Rhode Island v. Massachusetts, 12 Pet.
657, 726 (1838)).
This Court’s authority to apportion interstate streams
encourages States to enter into compacts with each other.
When the division of water is not “left to the pleasure” of
the upstream State, but States instead “know[ ] that some
tribunal can decide on the right,” then “controversies will
[probably] be settled by compact.” Kansas v. Colorado,
185 U.S., at 144. And that, of course, is what happened
here: Kansas and Nebraska negotiated a compact to divide
8 KANSAS v. NEBRASKA
Opinion of the Court
the waters of the Republican River and its tributaries.
Our role thus shifts: It is now to declare rights under the
Compact and enforce its terms. See Texas v. New Mexico,
462 U.S. 554, 567 (1983).
But in doing so, we remain aware that the States bar­
gained for those rights in the shadow of our equitable
apportionment power—that is, our capacity to prevent one
State from taking advantage of another. Each State’s
“right to invoke the original jurisdiction of this Court [is]
an important part of the context” in which any compact is
made. Id., at 569. And it is “difficult to conceive” that a
downstream State “would trade away its right” to our
equitable apportionment if, under such an agreement, an
upstream State could avoid its obligations or otherwise
continue overreaching. Ibid. Accordingly, our enforce­
ment authority includes the ability to provide the reme­
dies necessary to prevent abuse. We may invoke equitable
principles, so long as consistent with the compact itself, to
devise “fair . . . solution[s]” to the state-parties’ disputes
and provide effective relief for their violations. Texas v.
New Mexico, 482 U.S. 124, 134 (1987) (supplying an “ad­
ditional enforcement mechanism” to ensure an upstream
State’s compliance with a compact).4
And that remedial authority gains still greater force
because the Compact, having received Congress’s blessing,
counts as federal law. See Cuyler v. Adams, 449 U.S. 433,
438 (1981) (“[C]ongressional consent transforms an inter­
state compact . . . into a law of the United States”). Of
course, that legal status underscores a limit on our en­
forcement power: We may not “order relief inconsistent
with [a compact’s] express terms.” Texas v. New Mexico,
——————
4 JUSTICE THOMAS misdescribes this aspect of our decision. See post,
at 3, 15 (opinion concurring in part and dissenting in part) (hereinafter
the dissent). Far from claiming the power to alter a compact to fit our
own views of fairness, we insist only upon broad remedial authority to
enforce the Compact’s terms and deter future violations.
Cite as: 574 U. S. ____ (2015) 9
Opinion of the Court
462 U.S., at 564. But within those limits, the Court may
exercise its full authority to remedy violations of and
promote compliance with the agreement, so as to give
complete effect to public law. As we have previously put
the point: When federal law is at issue and “the public
interest is involved,” a federal court’s “equitable powers
assume an even broader and more flexible character than
when only a private controversy is at stake.” Porter v.
Warner Holding Co., 328 U.S. 395, 398 (1946); see Virgin-
ian R. Co. v. Railway Employees, 300 U.S. 515, 552 (1937)
(“Courts of equity may, and frequently do, go much far­
ther” to give “relief in furtherance of the public interest
than they are accustomed to go when only private inter­
ests are involved”).5 In exercising our jurisdiction, we may
“mould each decree to the necessities of the particular
case” and “accord full justice” to all parties. Porter, 328
U.S., at 398 (internal quotation marks omitted); see Ken-
tucky v. Dennison, 65 U.S., at 98. These principles inform
our consideration of the dispute before us.
III
We first address Nebraska’s breach of the Compact and
Settlement and the remedies appropriate to that violation.
Both parties assent to the Special Master’s finding that in
——————
5 The dissent objects that these precedents do not apply to “water
disputes between States” because such clashes involve “sovereign
rights.” See post, at 4–5. But in making that claim, the dissent ignores
the effect of the Constitution: By insisting that Congress approve a
compact like this one, the Constitution turns the agreement into a
federal law like any other. See Cuyler v. Adams, 449 U.S. 433, 439–
440 (1981) (“By vesting in Congress the power to grant or withhold
consent, . . . the Framers sought to ensure that Congress would main­
tain ultimate supervisory power over cooperative state action that
might otherwise interfere with the full and free exercise of federal
authority”). That constitutional choice means that the judicial authority
we have recognized to give effect to, and remedy violations of, federal
law fully attends a compact.
10 KANSAS v. NEBRASKA
Opinion of the Court
2005–2006 Nebraska exceeded its allocation of water by
70,869 acre-feet—about 17% more than its proper share.
See Report 88–89; App. B to Reply Brief for Kansas. They
similarly agree that this overconsumption resulted in a
$3.7 million loss to Kansas; and Nebraska has agreed to
pay those damages. See Reply Brief for Kansas 9, 55;
Brief for Nebraska 7. But the parties dispute whether
Nebraska’s conduct warrants additional relief. The Mas­
ter determined that Nebraska “knowingly exposed Kansas
to a substantial risk” of breach, and so “knowingly failed”
to comply with the Compact. Report 130, 112; see supra,
at 5. Based in part on that finding, he recommended
disgorgement of $1.8 million, which he described as “a
small portion of the amount by which Nebraska’s gain
exceeds Kansas’s loss.” Report 179. But he declined to
grant Kansas’s request for injunctive relief against Ne­
braska. See id., at 180–186. As noted previously, see
supra, at 5–6, each party finds something to dislike in the
Master’s handling of this issue: Nebraska contests his
finding of a “knowing” Compact violation and his view that
disgorgement is appropriate; Kansas wants a larger dis­
gorgement award and an injunction regulating Nebraska’s
future conduct. We address those exceptions in turn.
A
1
When they entered into the Settlement in 2002, the
States understood that Nebraska would have to signifi­
cantly reduce its consumption of Republican River water.
See Report 106. The Settlement, after all, charged Ne­
braska for its depletion of the Basin’s stream flow due to
groundwater pumping—an amount the State had not
previously counted toward its allotment. See supra, at 3.
Nebraska did not have to achieve all that reduction in the
next year: The Settlement’s adoption of multi-year averages
to measure consumption allowed the State some time—
Cite as: 574 U. S. ____ (2015) 11
Opinion of the Court
how much depended on whether and when “water-short”
conditions existed—to come into compliance. See Settle­
ment §§IV(D), V(B)(2)(e)(i), App. B; supra, at 4. As it
turned out, the area experienced a drought in 2006; ac­
cordingly, Nebraska first needed to demonstrate compli­
ance in that year, based on the State’s average consump­
tion of water in 2005 and 2006.6 And at that initial
compliance check, despite having enjoyed several years to
prepare, Nebraska came up markedly short.
Nebraska contends, contrary to the Master’s finding,
that it could not have anticipated breaching the Compact
in those years. By its account, the State took “persistent
and earnest”—indeed, “extraordinary”—steps to comply
with the agreement, including amending its water law to
reduce groundwater pumping. Brief for Nebraska 9, 17.
And Nebraska could not have foreseen (or so it claims)
that those measures would prove inadequate. First, Ne­
braska avers, drought conditions between 2002 and 2006
reduced the State’s yearly allotments to historically low
levels; the Master was thus “unfair to suggest Nebraska
should have anticipated what never before was known.”
Id., at 17. And second, Nebraska stresses, the RRCA
determines each State’s use of water only retrospectively,
calculating each spring what a State consumed the year
before; hence, Nebraska “could not have known” that it
was out of compliance in 2006 “until early 2007—when it
was already too late.” Id., at 18; see supra, at 3.
But that argument does not hold water: Rather, as the
Special Master found, Nebraska failed to put in place
adequate mechanisms for staying within its allotment in
the face of a known substantial risk that it would other­
wise violate Kansas’s rights. See Report 105–112, 130. As
an initial matter, the State’s efforts to reduce its use of
——————
6 Had rainfall been more plentiful, Nebraska would have had to show
compliance in 2007, based on its average use from 2003 onward.
12 KANSAS v. NEBRASKA
Opinion of the Court
Republican River water came at a snail-like pace. The
Nebraska Legislature waited a year and a half after sign­
ing the Settlement to amend the State’s water law. See
§55, 2004 Neb. Laws p. 352, codified at Neb. Rev. Stat. 46–
715. And the fix the legislature adopted—the develop­
ment of regional water management plans meant to de­
crease groundwater pumping—did not go into effect for
still another year. Nebraska thus wasted the time follow­
ing the Settlement—a crucial period to begin bringing
down the State’s consumption. Indeed, the State’s overuse
of Republican River water actually rose significantly from
2003 through 2005, making compliance at the eventual
day of reckoning ever more difficult to achieve. See Report
108–109.7 And to make matters worse, Nebraska knew
that decreasing pumping does not instantly boost stream
flow: A time lag, of as much as a year, exists between the
one and the other. See id., at 106. So Nebraska’s several-
year delay in taking any corrective action foreseeably
raised the risk that the State would breach the Compact.
Still more important, what was too late was also too
little. The water management plans finally adopted in
2005 called for only a 5% reduction in groundwater pump­
ing, although no evidence suggested that would suffice.
The testimony presented to the Special Master gave not a
hint that the state and local officials charged with formu­
lating those plans had conducted a serious appraisal of
how much change would be necessary. See id., at 107–
108. And the State had created no way to enforce even the
paltry goal the plans set. The Nebraska Legislature chose
to leave operational control of water use in the hands of
district boards consisting primarily of irrigators, who are
——————
7 Had 2006 not been a “water-short” year, all those overages would
have gone into Nebraska’s 5-year average; as it was, the dry conditions
triggered the alternative 2-year period, so the 2003 and 2004 overages
dropped out of the RRCA’s calculations.
Cite as: 574 U. S. ____ (2015) 13
Opinion of the Court
among the immediate beneficiaries of pumping. No sanc­
tions or other mechanisms held those local bodies to ac­
count if they failed to meet the plans’ benchmark. They
bore no legal responsibility for complying with the Com­
pact, and assumed no share of the penalties the State
would pay for violations. See id., at 110–111. Given such
a dearth of tools or incentives to achieve compliance, the
wonder is only that Nebraska did not still further exceed
its allotment.
Nor do Nebraska’s excuses change our view of its mis­
behavior. True enough, the years following the Settlement
were exceptionally arid. But the Compact and Settlement
(unsurprisingly) contemplate wet and dry years alike. By
contrast, Nebraska’s plans could have brought it into
compliance only if the Basin had received a stretch of
copious rainfall. See id., at 109–110. And Nebraska
cannot take refuge in the timing of the RRCA’s calcula­
tions. By the time the compliance check of 2006 loomed,
Nebraska knew that it had exceeded its allotment (by an
ever greater margin) in each of the three previous years.
As Nebraska’s own witnesses informed the Special Master,
they “could clearly see” by the beginning of 2006 “that [the
State] had not done enough” to come into compliance. Id.,
at 109 (quoting Tr. 1333 (Aug. 21, 2012)). Indeed, in that
year, Nebraska began purchasing its farmers’ rights to
surface water in order to mitigate its anticipated breach.
But that last-minute effort, in the Master’s words, “fell
woefully short”—as at that point could only have been
expected. Report 109. From the outset of the Settlement
through 2006, Nebraska headed—absent the luckiest of
circumstances—straight toward a Compact violation.
For these reasons, we agree with the Master’s conclu­
sion that Nebraska “knowingly exposed Kansas to a sub­
stantial risk” of receiving less water than the Compact
provided, and so “knowingly failed” to comply with the
obligations that agreement imposed. Id., at 130, 112. In
14 KANSAS v. NEBRASKA
Opinion of the Court
the early years of the Settlement, as the Master explained,
Nebraska’s compliance efforts were not only inadequate,
but also “reluctant,” showing a disinclination “to take [the]
firm action” necessary “to meet the challenges of foresee-
ably varying conditions in the Basin.” Id., at 105. Or said
another way, Nebraska recklessly gambled with Kansas’s
rights, consciously disregarding a substantial probability
that its actions would deprive Kansas of the water to
which it was entitled. See Tr. 1870 (Aug. 23, 2012) (Mas­
ter’s statement that Nebraska showed “reckless indiffer­
ence as to compliance back in ’05 and ’06”).
2
After determining that Kansas lost $3.7 million from
Nebraska’s breach, the Special Master considered the case
for an additional monetary award. Based on detailed
evidence, not contested here, he concluded that an acre-
foot of water is substantially more valuable on farmland in
Nebraska than in Kansas. That meant Nebraska’s reward
for breaching the Compact was “much larger than Kansas’
loss, likely by more than several multiples.” Report 178.
Given the circumstances, the Master thought that Ne­
braska should have to disgorge part of that additional
gain, to the tune of $1.8 million. In making that recom­
mendation, he relied on his finding—which we have just
affirmed—of Nebraska’s culpability. See id., at 130. He
also highlighted this Court’s broad remedial powers in
compact litigation, noting that such cases involve not
private parties’ private quarrels, but States’ clashes over
federal law. See id., at 131, 135; supra, at 6–9.
Nebraska (along with the dissent) opposes the Special
Master’s disgorgement proposal on the ground that the
State did not “deliberately act[ ]” to violate the Compact.
Reply Brief for Nebraska 33; see post, at 6–7. Relying on
private contract law, Nebraska cites a Restatement provi­
sion declaring that a court may award disgorgement in
Cite as: 574 U. S. ____ (2015) 15
Opinion of the Court
certain cases in which “a deliberate breach of contract
results in profit to the defaulting promisor.” Restatement
(Third) of Restitution and Unjust Enrichment §39(1)
(2010) (Restatement); see Reply Brief for Nebraska 32.
Nebraska then points out that the Master, even though
finding a “knowing” exposure of Kansas to significant risk,
rejected the idea that “Nebraska officials [had] deliber­
ately set out to violate the Compact.” Brief for Nebraska 16
(quoting Report 111). Accordingly, Nebraska concludes,
no disgorgement is warranted.
But that argument fails to come to terms with what the
Master properly understood as the wrongful nature of
Nebraska’s conduct. True enough, as the Master said,
that Nebraska did not purposefully set out to breach the
Compact. But still, as he also found, the State “knowingly
exposed Kansas to a substantial risk” of breach, and
blithely proceeded. Report 130. In some areas of the law
and for certain purposes, the distinction between purpose­
fully invading and recklessly disregarding another’s rights
makes no difference. See Bullock v. BankChampaign,
N. A., 569 U. S. ___, ___ (2013) (slip op., at 6) (“We include
as intentional . . . reckless conduct” of the kind that the
law “often treats as the equivalent”); Ernst & Ernst v.
Hochfelder, 425 U.S. 185, 193–194, n. 12 (1976)
(“[R]ecklessness is [sometimes] considered to be a form of
intentional conduct for purposes of imposing liability”).
And indeed, the very Restatement Nebraska relies on
treats the two similarly. It assimilates “deliberate[ness]”
to “conscious wrongdoing,” which it defines as acting (as
Nebraska did) “despite a known risk that the conduct . . .
violates [another’s] rights.” Restatement §39, Comment f;
id., §51(3). Conversely, the Restatement distinguishes
“deliberate[ness]” from behavior (not akin to Nebraska’s)
amounting to mere “inadvertence, negligence, or unsuc­
cessful attempt at performance.” Id., §39, Comment f.
And whatever is true of a private contract action, the
16 KANSAS v. NEBRASKA
Opinion of the Court
case for disgorgement becomes still stronger when one
State gambles with another State’s rights to a scarce
natural resource. From the time this Court began to
apportion interstate rivers, it has recognized part of its
role as guarding against upstream States’ inequitable
takings of water. And as we have noted, that concern
persists even after States enter into a compact: This Court
may then exercise remedial authority to ensure compli­
ance with the compact’s terms—thus preventing a geo­
graphically favored State from appropriating more than
its share of a river. See supra, at 8. Indeed, the formation
of such a compact provides this Court with enhanced
remedial power because, as we have described, the agree­
ment is also an Act of Congress, and its breach a violation
of federal law. See supra, at 8–9; Porter, 328 U.S. 395
(exercising equitable power to disgorge profits gained from
violating a federal statute). Consistent with those princi­
ples, we have stated that awarding actual damages for a
compact’s infringement may be inadequate, because that
remedy alone “would permit [an upstream State] to ignore
its obligation to deliver water as long as it is willing” to
pay that amount. Texas v. New Mexico, 482 U.S., at 132.
And as the Solicitor General noted in argument here, “[i]t
is important that water flows down the river, not just
money.” Tr. of Oral Arg. 24. Accordingly, this Court may
order disgorgement of gains, if needed to stabilize a com­
pact and deter future breaches, when a State has demon­
strated reckless disregard of another, more vulnerable
State’s rights under that instrument.
Assessed in this light, a disgorgement order constitutes
a “fair and equitable” remedy for Nebraska’s breach.
Texas v. New Mexico, 482 U.S., at 134. “Possessing the
privilege of being upstream,” Nebraska can (physically,
though not legally) drain all the water it wants from the
Republican River. Report 130. And the higher value of
water on Nebraska’s farmland than on Kansas’s means
Cite as: 574 U. S. ____ (2015) 17
Opinion of the Court
that Nebraska can take water that under the Compact
should go to Kansas, pay Kansas actual damages, and still
come out ahead. That is nearly a recipe for breach—for an
upstream State to refuse to deliver to its downstream
neighbor the water to which the latter is entitled. And
through 2006, Nebraska took full advantage of its favor­
able position, eschewing steps that would effectively control
groundwater pumping and thus exceeding its allotment.
In such circumstances, a disgorgement award appropri­
ately reminds Nebraska of its legal obligations, deters future
violations, and promotes the Compact’s successful admin­
istration. See Porter, 328 U.S., at 400 (“Future compli­
ance may be more definitely assured if one is compelled to
restore one’s illegal gains”).8 We thus reject Nebraska’s
exception to the Master’s proposed remedy.
B
Kansas assails the Special Master’s recommended dis­
gorgement award from the other direction, claiming that it
is too low to ensure Nebraska’s future compliance. See
Brief for Kansas 55–59. Notably, Kansas does not insist
on all of Nebraska’s gain. It recognizes the difficulty of
ascertaining that figure, given the evidence the parties
presented. See id., at 56; see also Report 177–178. And
still more important, it “agrees” with the Master’s view
that the Court should select a “fair point on th[e] spec­
trum” between no profits and full profits, based on the
——————
8 An award of specific performance may accomplish much the same
objectives, as the dissent notes. See post, at 10–11. But for various
reasons, a remedy in the form of water is not always feasible. See
Texas v. New Mexico, 482 U.S. 124, 132 (1987). Here, both States
concurred that using water as the remedial currency would lead to
difficult questions about the proper timing and location of delivery. See
Report 129–130. (That agreement is especially notable given the
overall contentiousness of this litigation.) In such circumstances,
the Master appropriately found another way of preventing knowing
misbehavior.
18 KANSAS v. NEBRASKA
Opinion of the Court
totality of facts and interests in the case. Brief for Kansas
57 (quoting Report 135); see Sur-Reply Brief for Kansas 5.
In setting that point, however, Kansas comes up with a
higher number—or actually, a trio of them. The State
first asks us to award “treble damages of $11.1 million,”
then suggests that we can go “up to roughly $25 million,”
and finally proposes a “1:1 loss-to-disgorgement ratio,”
which means $3.7 million of Nebraska’s gains. Brief for
Kansas 57; Sur-Reply Brief for Kansas 5, 7.
We prefer to stick with the Master’s single number. As
an initial matter, we agree with both the Master and
Kansas that disgorgement need not be all or nothing. See,
e.g., 1 D. Dobbs, Law of Remedies §2.4(1), p. 92 (2d ed.
1993) (“Balancing of equities and hardships may lead the
court to grant some equitable relief but not” the full meas­
ure requested); Restatement §39, Comment i; id., §50,
Comment a; National Security Systems, Inc. v. Iola, 700
F.3d 65, 80–81, 101–102 (CA3 2012). In exercising our
original jurisdiction, this Court recognizes that “flexibility
[is] inherent in equitable remedies,” Brown v. Plata, 563
U. S. ___, ___ (2011) (slip op., at 41) (quoting Hutto v.
Finney, 437 U.S. 678, 687, n. 9 (1978)), and awards them
“with reference to the facts of the particular case,” Texas v.
New Mexico, 482 U.S., at 131 (quoting Haffner v. Dobrin-
ski, 215 U.S. 446, 450 (1910)). So if partial disgorgement
will serve to stabilize a compact by conveying an effective
message to the breaching party that it must work hard to
meet its future obligations, then the Court has discretion
to order only that much. Cf. Kansas v. Colorado, 533 U.S.
1, 14 (2001) (concluding that a master “acted properly in
carefully analyzing the facts of the case and in only award­
ing as much prejudgment interest as was required by a
balancing of the equities”).
And we agree with the Master’s judgment that a rela­
tively small disgorgement award suffices here. That is
because, as the Master detailed, Nebraska altered its
Cite as: 574 U. S. ____ (2015) 19
Opinion of the Court
conduct after the 2006 breach, and has complied with the
Compact ever since. See Report 112–118, 180. In 2007,
Nebraska enacted new legislation establishing a mecha­
nism to accurately forecast the State’s annual allotment of
Republican River water. §23, 2007 Neb. Laws p. 1600,
codified at Neb. Rev. Stat. 46–715(6). Further, a new
round of water management plans called for localities to
reduce groundwater pumping by five times as much as the
old (5%) target. And most important, those plans imple­
mented a system for the State, in dry years, to force dis­
tricts to curtail both surface water use and groundwater
pumping. That “regulatory back-stop,” as Nebraska calls
it, corrects the State’s original error of leaving all control
of water use to unaccountable local actors. Report 113
(quoting Direct Testimony of Brian Dunnigan, Director,
Nebraska Department of Resources ¶43 (July 25, 2012));
see supra, at 12–13. Testimony before the Master showed
that if the scheme had been in effect between 2002 and
2006, Nebraska would have lived within its allocation
throughout that period. See Report 117. The Master thus
reasonably concluded that the current water management
plans, if implemented in good faith, “will be effective to
maintain compliance even in extraordinarily dry years.”
See id., at 118. And so the Master had good cause to
recommend the modest award he did, which serves as an
ever-present reminder to Nebraska, but does not assume
its continuing misconduct.
Truth be told, we cannot be sure why the Master selected
the exact number he did—why, that is, he arrived at
$1.8 million, rather than a little more or a little less. The
Master’s Report, in this single respect, contains less ex­
planation than we might like. But then again, any hard
number reflecting a balance of equities can seem random
in a certain light—as Kansas’s own briefs, with their ever-
fluctuating ideas for a disgorgement award, amply attest.
What matters is that the Master took into account the
20 KANSAS v. NEBRASKA
Opinion of the Court
appropriate considerations—weighing Nebraska’s incen­
tives, past behavior, and more recent compliance efforts—
in determining the kind of signal necessary to prevent
another breach. We are thus confident that in approving
the Master’s recommendation for about half again Kan­
sas’s actual damages, we award a fair and equitable remedy
suited to the circumstances.
For related reasons, we also reject Kansas’s request for
an injunction ordering Nebraska to comply with the Com­
pact and Settlement. Kansas wants such an order so that
it can seek contempt sanctions against Nebraska for any
future breach. See Brief for Kansas 36–44. But we agree
with the Master that Kansas has failed to show, as it must
to obtain an injunction, a “cognizable danger of recurrent
violation.” United States v. W. T. Grant Co., 345 U.S. 629,
633 (1953). As just discussed, Nebraska’s new compliance
measures, so long as followed, are up to the task of keep­
ing the State within its allotment. And Nebraska is now
on notice that if it relapses, it may again be subject to
disgorgement of gains—either in part or in full, as the
equities warrant. That, we trust, will adequately guard
against Nebraska’s repeating its former practices.
IV
The final question before us concerns the Special Mas­
ter’s handling of Nebraska’s counterclaim. As we have
noted, Nebraska contended that the Settlement’s Account­
ing Procedures inadvertently charge the State for using
“imported water”—specifically, water from the Platte
River—in conflict with the parties’ intent in both the
Compact and the Settlement. See supra, at 4–5. The
Master agreed, and recommended modifying the Proce­
dures by adopting an approach that the parties call the “5­
run formula,” to ensure that Nebraska’s consumption of
Platte River water will not count toward its Compact
allotment. Kansas now objects to that proposed remedy.
Cite as: 574 U. S. ____ (2015) 21
Opinion of the Court
The Compact, recall, apportions the virgin water supply
of the Republican River and its tributaries—nothing less,
but also nothing more. See Compact Art. III; supra, at 2.
One complexity of that project arises from water’s . . . well,
fluid quality. Nebraska imports water from the Platte
River, outside the Republican River Basin and thus out­
side the Compact’s scope, to irrigate farmland. And that
imported water simply will not stay still: Some of it seeps
through the ground and raises stream flow in the Republi­
can River and its tributaries. See Second Report of Spe­
cial Master, O. T. 1999, No. 126, Orig., pp. 62–63 (Second
Report). In negotiating the Settlement, the States under­
took—as part of their effort to accurately apportion the
Basin’s water—to exclude all such imported water from
their calculations. Reflecting the Compact’s own scope,
§IV(F) of the Settlement states, in no uncertain terms,
that “Beneficial Consumptive Use of Imported Water
Supply shall not count as Computed Beneficial Consump­
tive Use” of Republican River Basin water. Which means,
without all that distracting capitalization, that when
Nebraska consumes imported water that has found its
way into the Basin’s streams, that use shall not count
toward its Compact allotment. But that edict of course
requires calculating (in order to exclude) the State’s con­
sumption of imported water. The Settlement’s Accounting
Procedures, in tandem with its Groundwater Model, are
the tools the parties employ to make that computation.
But as the Master found, the Procedures (and Model)
founder in performing that task in dry conditions: They
treat Nebraska’s use of imported water as if it were use of
Basin water. That failure flows from the way the Proce­
dures measure a State’s consumption of water resulting
from groundwater pumping. According to the Settlement,
such pumping is to count against a State’s allotment only
to the extent it reduces stream flow in specified areas—
which it rarely does in a 1-to-1 ratio and sometimes does
22 KANSAS v. NEBRASKA
Opinion of the Court
not do at all. See id., §IV(C)(1); Report 19; n. 1, supra.
Most notable here, pumping cannot deplete an already
wholly dry stream—and in arid conditions, some of the
Basin’s tributaries in fact run dry. As the Master put the
point, stream flow in a given area “fall[s] as groundwater
pumping increases until it hits zero, at which point it falls
no more even as groundwater pumping continues.” Report
34. When that point arrives, Nebraska’s continued pump­
ing should not count as consumption of the Basin’s virgin
water. But—and here lies the rub—imported water (from
the Platte) can create stream flow in what would other­
wise be a dry riverbed. And the Accounting Procedures
(and Model) fail to account for that possibility; accordingly,
they see depletion of the Basin’s stream flow—the sole
measure of the State’s consumption—where they should
not. The result is to count imported water toward the
State’s consumption of Basin water. In 2006, for example,
the Procedures charged Nebraska with using 7,797 acre-
feet of Platte River water, over 4% of the State’s allotment.
By our estimate, just that single year’s miscalculation cost
Nebraska over $1 million. See id., at 37, 176.
The Master specifically determined, and our review of
the relevant testimony confirms, that the parties did not
know the Accounting Procedures would have that effect.
See id., at 23–32. The States intended the Procedures (as
per the Compact and Settlement) to count only consump­
tion of the Basin’s own water supply—and correlatively, to
exclude use of water from the Platte. See id., at 23–25;
see also Second Report 37, 64 (same conclusion reached by
the Special Master approving the Settlement). There is no
evidence that anyone seriously thought, much less dis­
cussed, that the Accounting Procedures might systemati­
cally err in accomplishing those computations. See Report
26–27.9 And because no one knew of the fault in the Pro­
——————
9 Kansas argues otherwise, see Brief for Kansas 28–29, but the part of
Cite as: 574 U. S. ____ (2015) 23
Opinion of the Court
cedures, no one could possibly trade it off for other items
during the parties’ negotiations. Thus, as the Master
found, Nebraska did not receive anything, nor did Kansas
give up anything, in exchange for the (unknown) error.
See id., at 28–31. To the contrary, as all witnesses ex­
plained, the designers of the Procedures worked single­
mindedly to implement the Compact’s and Settlement’s
strict demarcation between virgin and imported water—
and assumed they had succeeded. See id., at 31–32.
But even if all that is so, Kansas argues (along with the
dissent) that a deal is a deal is a deal—and this deal did
not include the 5-run formula the Master now proposes.
See Brief for Kansas 31–34; post, at 15–19. On that view,
the parties’ clear intent to exclude imported water does
not matter; nor does their failure to appreciate that the
Procedures, in opposition to that goal, would count such
water in material amounts. According to Kansas, so long
as the parties bargained (as they did) for the Procedures
they got, that is the end of the matter: No one should now
be heard to say that there is a better mode of accounting.
See Tr. of Oral Arg. 54–55.
That argument, however, does not pass muster. Of
course, courts generally hold parties to the deals they
make; and of course, courts should hesitate, and then
hesitate some more, before modifying a contract, even to
remove an inadvertent flaw. But in this Compact case,
two special (and linked) considerations warrant reforming
the Accounting Procedures as the Master has proposed—
or better phrased, warrant conforming those Procedures to
the parties’ underlying agreements. First, that remedy is
——————
the record it cites further proves our point. There, Colorado’s expert
testified that during development of the Groundwater Model—months
after adoption of the Accounting Procedures—he “intellectually under­
stood” that the imported-water problem could occur, but “didn’t think
that it would” and didn’t recall the issue ever coming up in discussions.
Report 26 (quoting Tr. 676 (Aug. 13, 2012)); id., at 727–728.
24 KANSAS v. NEBRASKA
Opinion of the Court
necessary to prevent serious inaccuracies from distorting
the States’ intended apportionment of interstate waters,
as reflected in both the Compact and the Settlement. And
second, it is required to avert an outright breach of the
Compact—and so a violation of federal law. We address
each point in turn.
In resolving water disputes, this Court has opted to
correct subsidiary technical agreements to promote accu­
racy in apportioning waters under a compact. In Texas v.
New Mexico, for example, the parties entered into a com­
pact that based division of the Pecos River on certain
conditions existing in 1947. The States further agreed
that those conditions were described and defined in a
particular engineering report. But that report turned out
to contain material errors. Notwithstanding Texas’s
objection that the parties had assented to its use, we set
aside the flawed study and adopted a new technical docu­
ment that more accurately depicted the real-world condi­
tions of the compact’s specified baseline year. See 446
U.S. 540 (1980) (per curiam) (setting aside the old docu­
ment); 462 U.S., at 562–563 (describing the litigation);
467 U.S. 1238 (1984) (approving the new document); 482
U.S., at 127 (describing that approval).
Similarly, in Kansas v. Colorado, 543 U.S. 86 (2004), we
modified an agreement to ensure that it would correctly
measure Colorado’s compliance with the Arkansas River
Compact. The parties had consented to use a computer
model on a year-by-year basis to gauge their consumption
of water. See id., at 102 (“[B]oth [States] agreed to the
use of annual measurement”). But after a time, a special
master determined that annual accounting produced
serious errors, whereas employing a 10-year measuring
period accurately determined compact compliance. Over
Kansas’s protest, we accordingly approved the Master’s
alteration of the parties’ agreement to assess compliance
each year. And in countering Kansas’s objection to the
Cite as: 574 U. S. ____ (2015) 25
Opinion of the Court
introduction of a 10-year measuring period, we posited
that the compact’s drafters, albeit unaware of “complex
computer modeling[,] . . . would have preferred accurate
measurement.” Ibid.10
The teaching of those cases applies as well to this one:
In each, this Court’s authority to devise “fair and equitable
solutions” to interstate water disputes encompasses modi­
fying a technical agreement to correct material errors in
the way it operates and thus align it with the compacting
States’ intended apportionment. Texas v. New Mexico, 482
U.S., at 134; cf. Kansas v. Colorado, 543 U.S., at 102
(“After all, a ‘credit’ for surplus water that rests upon
inaccurate measurement is not really a credit at all”).
Much as in Texas v. New Mexico and Kansas v. Colorado,
the subsidiary Accounting Procedures here failed to accu­
rately measure what they were supposed to. Modifying
those Procedures does no more than make them consonant
with the Compact and Settlement, ensuring that they help
——————
10 The dissent misunderstands the meaning and relevance of these
decisions. It is of course true, as the dissent says, that in neither case
did the Court reform a compact. See post, at 16–17. What the Court
did do, contrary to the dissent’s protestations, was what we do here:
modify an ancillary agreement to make sure it accurately implemented
a compact’s apportionment. In Texas v. New Mexico, we interpreted a
compact term, as the dissent says, see post, at 16; but we additionally
threw out a technical report that the parties agreed would effectuate
that term when it later proved erroneous. And similarly in Kansas v.
Colorado, we altered an ancillary agreement to measure water usage
year by year. The dissent contends that the States in that case had no
such agreement, though acknowledging that they had one to calculate
damages on an annual basis. See post, at 17. But the two were one and
the same. Damages arise from violations, and violations occur when a
State consumes too much water. In calling for year-by-year measure­
ment of damages, the agreement also called for year-by-year assess­
ment of consumption. And nothing supports the dissent’s claim that
this agreement applied only retrospectively, rather than to assess both
usage and damages on an ongoing basis. So to impose a 10-year meas­
uring period, consistent with accurate apportionment under the Com­
pact, we had to alter the agreement.
26 KANSAS v. NEBRASKA
Opinion of the Court
to realize, rather than frustrate, the agreed-upon division
of water.
Indeed, the case for modification is still stronger here,
because (as we explain below) the Accounting Procedures
as written affirmatively violate the Compact. That accord
is the supreme law in this case: As the States explicitly
recognized, they could not change the Compact’s terms
even if they tried. See Settlement §I(D) (“[T]his Stipula­
tion and the Proposed Consent Judgment are not intended
to, nor could they, change the States’ respective rights and
obligations under the Compact”). That is a function of the
Compact’s status as federal law, which binds the States
unless and until Congress says otherwise. And Congress,
of course, has not said otherwise here. To enter into a
settlement contrary to the Compact is to violate a federal
statute. See Vermont v. New York, 417 U.S. 270, 278
(1974) (per curiam). And as we have discussed, our equi­
table authority to grant remedies is at its apex when
public rights and obligations are thus implicated. See
Porter, 328 U.S., at 398; supra, at 8–9.
The Accounting Procedures’ treatment of imported
water first conflicts with the Compact by going beyond its
boundaries—in essence, by regulating water ultra vires.
According to its terms, the Compact pertains, and pertains
only, to “virgin water supply originating in” the Republi­
can River Basin. Compact Art. III; see supra, at 2, 21.
The agreement’s very first Article drives that point home:
“The physical and other conditions peculiar to the Basin
constitute the basis for this compact,” and nothing in it
relates to any other waterway. To divide or otherwise
regulate streams outside the Basin, the States would have
to enter into a separate agreement and gain congressional
approval. (The reason no one thought the Settlement
needed such consent is precisely because it purported to
stay within the Compact’s limits. See Settlement §I(D))
And yet, the Accounting Procedures have the effect of
Cite as: 574 U. S. ____ (2015) 27
Opinion of the Court
including such outside water within the Compact’s appor­
tionment scheme (by counting its use against a State’s
allotment). The Procedures make water from the Platte
subject to the Compact, in contravention of its scope; or
conversely stated, they expand the Compact’s prescribed
scope to cover water from the Platte. That is not within
the States’ authority.
What is more, the Procedures’ treatment of imported
water deprives Nebraska of its rights under the Compact
to the Basin’s own water supply. That is because the
inescapable effect of charging Nebraska for the use of
imported water, as the Procedures do, is to reduce the
amount of Republican River water the State may con­
sume. Suppose the Compact grants 100 units of Republi­
can River water to Nebraska and Kansas alike; and fur­
ther assume that the Accounting Procedures count 10
units of Platte River water toward Nebraska’s allotment.
That means Nebraska may now consume only 90 units of
Republican River water (or else pay Kansas damages).
The Procedures thus change the States’ shares of Basin
water, to Nebraska’s detriment: Nebraska now has less,
and Kansas relatively more, than the Compact allows.
That, too, lies outside what the States can do.
In light of all the above, we think the Master’s proposed
solution the best one possible. The 5-run formula that he
recommends conforms the Procedures to both the Compact
and the Settlement by excluding imported water from the
calculation of each State’s consumption. See Report 55–
56; id., at App. F. Kansas has not provided any workable
alternative to align the Accounting Procedures with the
Compact and Settlement. Nor has Kansas credibly shown
that this simple change will introduce any other inaccu­
racy into Compact accounting. See id., at 58–68. The
amendment will damage Kansas in no way other than by
taking away something to which it is not entitled. In
another case, with another history, we might prefer to
28 KANSAS v. NEBRASKA
Opinion of the Court
instruct the parties to figure out for themselves how to
bring the Accounting Procedures into line with the Com­
pact. See New York v. New Jersey, 256 U.S. 296, 313
(1921) (noting that negotiation is usually the best way to
solve interstate disputes). But we doubt that further
discussion about this issue will prove productive. Arbitra­
tion has already failed to produce agreement about how to
correct the Procedures. See supra, at 5. And before the
Special Master, both parties indicated that further “dis­
pute resolution proceedings before the RRCA or an arbi­
trator” would be “futile.” Report 69 (quoting Case Man­
agement Order No. 9 ¶5 (Jan. 25, 2013)). We accordingly
adopt the Master’s recommendation to amend the Ac­
counting Procedures so that they no longer charge Ne­
braska for imported water.
V
Nebraska argues here for a cramped view of our author­
ity to order disgorgement. Kansas argues for a similarly
restrictive idea of our power to modify a technical docu­
ment. We think each has too narrow an understanding of
this Court’s role in disputes arising from compacts appor­
tioning interstate streams. The Court has broad remedial
authority in such cases to enforce the compact’s terms.
Here, compelling Nebraska to disgorge profits deters it
from taking advantage of its upstream position to appro­
priate more water than the Compact allows. And amend­
ing the Accounting Procedures ensures that the Compact’s
provisions will govern the division of the Republican River
Basin’s (and only that Basin’s) water supply. Both reme­
dies safeguard the Compact; both insist that States live
within its law. Accordingly, we adopt all of the Special
Master’s recommendations.
It is so ordered.
Cite as: 574 U. S. ____ (2015) 1
Opinion of ROBERTS, C. J.
SUPREME COURT OF THE UNITED STATES
_________________
No. 126, Orig.
_________________
STATE OF KANSAS, PLAINTIFF v. STATES OF
NEBRASKA AND COLORADO
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
[February 24, 2015]
CHIEF JUSTICE ROBERTS, concurring in part and dissent-
ing in part.
I join Parts I and III of the Court’s opinion. I am in
general agreement with the discussion in Part II, but I do
not believe our equitable power, though sufficient to order
a remedy of partial disgorgement, permits us to alter the
Accounting Procedures to which the States agreed. I
therefore join Part III of JUSTICE THOMAS’s opinion.
Cite as: 574 U. S. ____ (2015) 1
Opinion of SCALIA, J.
SUPREME COURT OF THE UNITED STATES
_________________
No. 126, Orig.
_________________
STATE OF KANSAS, PLAINTIFF v. STATES OF
NEBRASKA AND COLORADO
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
[February 24, 2015]
JUSTICE SCALIA, concurring in part and dissenting in
part.
I join JUSTICE THOMAS’s opinion. I write separately to
note that modern Restatements—such as the Restatement
(Third) of Restitution and Unjust Enrichment (2010),
which both opinions address in their discussions of the
disgorgement remedy—are of questionable value, and
must be used with caution. The object of the original
Restatements was “to present an orderly statement of the
general common law.” Restatement of Conflict of Laws,
Introduction, p. viii (1934). Over time, the Restatements’
authors have abandoned the mission of describing the law,
and have chosen instead to set forth their aspirations for
what the law ought to be. Keyes, The Restatement (Sec-
ond): Its Misleading Quality and a Proposal for Its Amelio-
ration, 13 Pepp. L. Rev. 23, 24–25 (1985). Section 39 of
the Third Restatement of Restitution and Unjust Enrich-
ment is illustrative; as JUSTICE THOMAS notes, post, at 8
(opinion concurring in part and dissenting in part), it
constitutes a “ ‘novel extension’ ” of the law that finds little
if any support in case law. Restatement sections such as
that should be given no weight whatever as to the current
state of the law, and no more weight regarding what the
law ought to be than the recommendations of any respected
lawyer or scholar. And it cannot safely be assumed, with-
out further inquiry, that a Restatement provision de-
scribes rather than revises current law.
Cite as: 574 U. S. ____ (2015)
Opinion of THOMAS, J.
SUPREME COURT OF THE UNITED STATES
_________________
No. 126, Orig.
_________________
STATE OF KANSAS, PLAINTIFF v. STATES OF
NEBRASKA AND COLORADO
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
[February 24, 2015]
JUSTICE THOMAS, with whom JUSTICE SCALIA and
JUSTICE ALITO join, and with whom THE CHIEF JUSTICE
joins as to Part III, concurring in part and dissenting in
part.
Kansas, Nebraska, and Colorado have presented us with
what is, in essence, a contract dispute. In exercising our
original jurisdiction in this case, we have a responsibility
to act in accordance with the rule of law and with appro­
priate consideration for the sovereign interests of the
States before us. I agree with the Court’s conclusion that
Nebraska knowingly, but not deliberately, breached the
Republican River Compact, and I agree that there is no
need to enter an injunction ordering Nebraska to comply
with the Compact. But that is where my agreement ends.
Applying ordinary principles of contract law to this dis­
pute, I would neither order disgorgement nor reform the
States’ settlement agreement.
This Court once understood that “the hardship of the
case . . . is not sufficient to justify a court of equity to
depart from all precedent and assume an unregulated
power of administering abstract justice at the expense of
well-settled principles.” Heine v. Levee Comm’rs, 19 Wall.
655, 658 (1874). Today, however, the majority disregards
these limits. Invoking equitable powers, without equitable
principles, the majority ignores the principles of contract
law that we have traditionally applied to compact disputes
2 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
between sovereign States. It authorizes an arbitrary
award of disgorgement for breach of that contract. And, it
invents a new theory of contract reformation to rewrite the
agreed-upon terms of that contract. I respectfully dissent
from these holdings.
I
A
The States in this action disagree about their rights and
responsibilities under the Republican River Compact and
their 2002 Final Settlement Stipulation (Settlement), and
have asked this Court to resolve what is, in essence, a
contract dispute. “An interstate compact, though provided
for in the Constitution, and ratified by Congress, is none­
theless essentially a contract between the signatory
States.” Oklahoma v. New Mexico, 501 U.S. 221, 242
(1991) (Rehnquist, C. J., concurring in part and dissenting
in part). Likewise, a legal settlement agreement is a
contract. Kokkonen v. Guardian Life Ins. Co. of America,
511 U.S. 375, 381–382 (1994).
The Court should therefore interpret the agreements at
issue according to “the principles of contract law.” Tarrant
Regional Water Dist. v. Herrmann, 569 U. S. ___, ___
(2013) (slip op., at 11). Under these principles, the Com­
pact and Settlement are “legal document[s] that must be
construed and applied in accordance with [their] terms.”
Texas v. New Mexico, 482 U.S. 124, 128 (1987) (Texas III);
see also Kaktovik v. Watt, 689 F.2d 222, 230 (CADC 1982)
(applying “familiar principles of contract law” to a settle­
ment agreement”).
That command is even stronger in the context of inter­
state compacts, which must be approved by Congress
under the Compact Clause of the Constitution. Art. I, §10,
cl. 3; Alabama v. North Carolina, 560 U.S. 330, 351–352
(2010). Because these compacts are both contracts and
federal law, we must be more careful to adhere to their
Cite as: 574 U. S. ____ (2015) 3
Opinion of THOMAS, J.
express terms, not less so. Ibid. If judges had the power
to apply their own notions of fairness “to the implementa­
tion of federal statutes, [they] would be potent lawmakers
indeed.” Id., at 352. Thus, to the extent that we have
departed from contract law principles when adjudicating
disputes over water compacts, it has been to reject loose
equitable powers of the sort the majority now invokes.
See, e.g., id., at 351–353 (rejecting an implied duty of good
faith and fair dealing in interstate compacts). We have
repeatedly said that “we will not order relief inconsistent
with the express terms of a compact, no matter what the
equities of the circumstances might otherwise invite.” Id.,
at 352 (internal quotation marks and alterations omitted).
B
Rather than apply “the principles of contract law,”
Tarrant Regional Water Dist., supra, at ___ (slip op., at
11), the majority calls upon broad equitable power. Ante,
at 6–9. It evidently draws this power from its “inherent
authority” to apportion interstate streams in the absence
of an interstate water compact. Ante, at 7. In the major­
ity’s view, States bargain for water rights “in the shadow of
our equitable apportionment power,” and thus we “may
invoke equitable principles” to “devise fair . . . solutions” to
disputes between States about the bargains they struck.
Ante, at 8 (internal quotation marks and alteration
omitted).
That conclusion gets things backwards: As we have
explained, once a compact is formed, “courts have no
power to substitute their own notions of an equitable
apportionment for the apportionment chosen by Congress”
and the States. Texas v. New Mexico, 462 U.S. 554, 568
(1983) (Texas II ) (internal quotation marks omitted).
The majority next asserts “still greater” equitable power
by equating contract disputes between sovereign States
with cases involving federal law and the public interest.
4 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
Ante, at 8–9. Although the majority recognizes that it
“may not order relief inconsistent with a compact’s express
terms,” it claims enlarged powers “within those limits.”
Ante, at 9 (internal quotation marks and alterations omit­
ted). “When federal law is at issue and the public interest
is involved,” the majority says, the Court’s equitable pow­
ers are “even broader and more flexible” than when it
resolves a private-law dispute. Ibid. (internal quotation
marks omitted).
But the precedents on which the majority relies to jus-
tify this power have nothing to do with water disputes
between States. The majority cites Porter v. Warner Hold-
ing Co., 328 U.S. 395 (1946), which involved a suit by the
Administrator of the Office of Price Administration for an
injunction against a landlord who had charged too much
rent in violation of the Emergency Price Control Act of
1942. In that case, the Court recognized a public interest
in the Administrator’s effort to “enforce compliance” with
the Act, and “to give effect to its purposes.” Id., at 398,
400. The Court reasoned that, “since the public interest is
involved in a proceeding of this nature, [a district court’s]
equitable powers assume an even broader and more flexi­
ble character than when only a private controversy is at
stake.” Id., at 398. The authority Porter cited for this
point was Virginian R. Co. v. Railway Employees, 300
U.S. 515 (1937), a case on which the majority likewise
relies. Ante, at 9. But that case, like Porter, did not in­
volve a state party or an interstate water dispute; instead,
it concerned a dispute between private parties—a railroad
and its employees’ union—arising under the Railway
Labor Act. Virginian R. Co., supra, at 538. As in Porter,
the Court recognized a public interest in the enforcement
of a federal administrative scheme, explaining that Con­
gress had made a “declaration of public interest and policy
which should be persuasive in inducing courts to give
relief.” 300 U.S., at 552.
Cite as: 574 U. S. ____ (2015) 5
Opinion of THOMAS, J.
This case, by contrast, involves the inherent authority of
sovereign States to regulate the use of water. The States’
“power to control navigation, fishing, and other public uses
of water” is not a function of a federal regulatory program;
it “is an essential attribute of [state] sovereignty.” Tar-
rant Regional Water Dist., 569 U. S., at ___ (slip op., at 15)
(internal quotation marks omitted). Thus, when the Court
resolves an interstate water dispute, it deals not with
public policies created by federal statutes, but pre-existing
sovereign rights, allocated according to the mutual agree­
ment of the parties with the consent of Congress. Al­
though the consent of Congress makes statutes of com­
pacts, our flexibility in overseeing a federal statute that
pertains to the exercise of these sovereign powers is not
the same as the flexibility Porter claimed for courts en­
gaged in supervising the administration of a federal regu­
latory program. Authority over water is a core attribute of
state sovereignty, and “[f ]ederal courts should pause
before using their inherent equitable powers to intrude
into the proper sphere of the States.” Missouri v. Jenkins,
515 U.S. 70, 131 (1995) (THOMAS, J., concurring).
Moreover, even if the involvement of “public interests”
might augment the Court’s equitable powers in the con­
text of disputes involving regulated parties and their
regulators, it does not have the same effect in a dispute
between States. States—unlike common carriers and
landlords—“possess sovereignty concurrent with that of
the Federal Government.” Gregory v. Ashcroft, 501 U.S.
452, 457 (1991) (internal quotation marks omitted).
States thus come before this Court as sovereigns, seeking
our assistance in resolving disputes “of such seriousness
that it would [otherwise] amount to a casus belli.” Ne-
braska v. Wyoming, 515 U.S. 1, 8 (1995) (internal quota­
tion marks omitted). The Federalist Papers emphasized
that this Court’s role in resolving interstate disputes
“[would] not change the principle” of state sovereignty,
6 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
and they gave assurances that the Court would take “all
the usual and most effectual precautions” necessary for
impartial and principled adjudication. The Federalist No.
39, pp. 245–246 (C. Rossiter ed. 1961) (J. Madison).
For that reason, when the parties before this Court are
States, the Court should be more circumspect in its use of
equitable remedies, not less. We have explained, for
example, that “[w]e are especially reluctant to read absent
terms into an interstate compact given the federalism and
separation-of-powers concerns that would arise were we to
rewrite an agreement among sovereign States, to which
the political branches consented.” Alabama, 560 U.S., at
352. The use of unbounded equitable power against
States similarly threatens “to violate principles of state
sovereignty and of the separation of powers,” Jenkins, 515
U.S., at 130 (THOMAS, J., concurring). In controversies
among States, the Court should therefore “exercise the
power to impose equitable remedies only sparingly, subject
to clear rules guiding its use.” Id., at 131.
II
Applying ordinary contract principles, I would reject the
Special Master’s recommendation to order disgorgement of
Nebraska’s profits for breach of a compact. That remedy
is not available for a nondeliberate breach of a contract.
And even if it were, such an award must be based on
Nebraska’s profits, not the arbitrary number the Master
selected.
A
1
Although our precedents have not foreclosed disgorge­
ment of profits as a remedy for breach of a water compact,
they have suggested that disgorgement would be avail-
able, if at all, only for the most culpable breaches: those
that are “deliberate.” Texas III, 482 U.S., at 132. The
Cite as: 574 U. S. ____ (2015) 7
Opinion of THOMAS, J.
traditional remedy for breach of a water compact has been
performance through delivery of water. See Kansas v.
Colorado, 533 U.S. 1, 23 (2001) (O’Connor, J., concurring
in part and dissenting in part). Although we deviated
from that traditional remedy in Texas III, when we au­
thorized money damages, 482 U.S., at 132, the majority
cites no case in which we have ever awarded disgorge­
ment. The lone reference to that remedy in our precedents
is dictum in Texas III asserting that the money damages
award in that case would not encourage efficient breaches
of water compacts “in light of the authority to order . . .
whatever additional sanction might be thought necessary
for deliberate failure to perform . . . .” Ibid.
The lack of support for disgorgement in our compact
cases comports with the general law of remedies. The
usual remedy for breach of a contract is damages based on
the injured party’s “actual loss caused by the breach.”
Restatement (Second) of Contracts §347, Comment e, p.
116 (1979). Disgorgement, by contrast, is an extraordi­
nary remedy that goes beyond a plaintiff ’s damages,
requiring the breaching party to refund additional profits
gained in the breach. See 3 D. Dobbs, Law of Remedies
§12.7(3), pp. 166–167 (2d ed. 1993). In American law,
disgorgement of profits is not generally an available rem-
edy for breach of contract. Id., §12.7(4), at 171.
Even if Texas III supported a narrow exception for cases
involving deliberate breach of a water compact, that ex­
ception would not apply here. Although it is uncontested
that Nebraska breached the Compact and that Kansas lost
$3.7 million as a result, ante, at 9–10, the Master expressly
found that there is no evidence that Nebraska deliber-
ately breached the Compact. Report of Special Master
111, 130 (Report). In fact, Nebraska’s efforts “were ear­
nest and substantial enough to preclude a finding that this
was a consciously opportunistic breach.” Id., at 131. And
although the majority adopts the finding that Nebraska
8 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
“knowingly failed” to comply with the Compact, ante, at 13
(internal quotation marks omitted), a finding that I do not
dispute, neither the parties nor the majority disagrees
with the Master’s conclusion that Nebraska did not inten­
tionally or deliberately breach the Compact, ante, at 10–
14. Under such circumstances, disgorgement is not an
available remedy.
2
The Special Master nevertheless recommended dis­
gorgement because Nebraska “knowingly exposed Kansas
to a substantial risk” of noncompliance. Report 130. He
rested this recommendation on the Restatement (Third) of
Restitution and Unjust Enrichment §39 (2010). See Re­
port 130–134. That section proposes awarding disgorge­
ment when a party’s profits from its breach are greater
than the loss to the other party. The remedy is thought
necessary because one party may “exploit the shortcom­
ings” of traditional damages remedies by breaching con­
tracts when its expected profits exceed the damages it
would be required to pay to the other party. Restatement
(Third) of Restitution §39, Comment b, at 649. In other
words, the remedy “condemns a form of conscious
advantage-taking” and seeks to thwart an “opportunistic
calculation” that breaching is better than performing.
Ibid.
This Court, however, has never before relied on §39 nor
adopted its proposed theory of disgorgement. And for good
reason: It lacks support in the law. One reviewer of §39
has described it as a “novel extension” of restitution prin­
ciples that “will alter the doctrinal landscape of contract
law.” Roberts, Restitutionary Disgorgement for Opportun­
istic Breach of Contract and Mitigation of Damages, 42
Loyola (LA) L. Rev. 131, 134 (2008). And few courts have
ever relied on §39. The sheer novelty of this proposed
remedy counsels against applying it here.
Cite as: 574 U. S. ____ (2015) 9
Opinion of THOMAS, J.
In any event, §39 opines that disgorgement should be
available only when a party deliberately breaches a con­
tract. This makes sense. If disgorgement is an antidote
for “efficient breach,” then it need only be administered
when “conscious advantage-taking” and “opportunistic
calculation” are present. But as noted above, the Master
expressly found that no deliberate breach occurred. Re­
port 130. The Master’s reliance on §39 was accordingly
misplaced.
3
Perhaps recognizing the weakness in the Master’s rec­
ommendation, the majority takes a different approach,
fashioning a new remedy of disgorgement for reckless
breach. According to the majority, Nebraska’s conduct
was essentially reckless, ante, at 14, and the Court may
order disgorgement “when a State has demonstrated
reckless disregard” for another State’s contractual rights,
ante, at 16. As with the Restatement’s proposed theory,
there is no basis for that proposition in our cases.
Because disgorgement is available, if at all, only in cases
of deliberate breach, the majority asserts that, “[i]n some
areas of the law,” the line between intent and reckless
disregard “makes no difference.” Ante, at 15. Accepting
the truth of that proposition in some circumstances, the
majority’s caveat acknowledges that it is not true in oth­
ers. Indeed, the law often places significant weight on the
distinction between intentional and reckless conduct. See,
e.g., Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998) (dis­
cussing “ ‘willful,’ ” “deliberate,” and “intentional” conduct,
and distinguishing those terms from “reckless” conduct);
see also Global-Tech Appliances, Inc. v. SEB S. A., 563
U. S. ___, ___–___ (2011) (slip op., at 13–14) (distinguish­
ing “willful blindness” from “recklessness”).
The majority provides scant support for its conclusion
that breach of an interstate water compact is an area in
10 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
which the line between intent and recklessness is practi­
cally irrelevant. It first relies on Bullock v. BankCham-
paign, N. A., 569 U. S. ___, ___ (2013) (slip op., at 1), in
which the Court determined the mental state necessary
for “ ‘defalcation while acting in a fiduciary capacity,’ ” as
used in the Bankruptcy Code. Ante, at 15. In the absence
of a fiduciary relationship, however, Bullock has little
relevance. Cf. Harris Trust and Sav. Bank v. Salomon
Smith Barney Inc., 530 U.S. 238, 250 (2000) (noting the
special disgorgement rules that apply “when a trustee in
breach of his fiduciary duty to the beneficiaries transfers
trust property to a third person”).
The majority next relies on Ernst & Ernst v. Hochfelder,
425 U.S. 185 (1976), which addressed “scienter” under
§10(b) of the Securities Act of 1933. Ante, at 15 (citing 425
U.S., at 193–194, n. 12). The Court noted that it used the
term “scienter” to mean “intent to deceive, manipulate, or
defraud.” Id., at 194, n. 12. It then asserted—in dictum
and without support—that recklessness is considered to be
a form of intentional conduct in some areas of the law, but
it declined to address whether reckless conduct could be
sufficient for §10(b) liability. Ibid. That dictum is hardly
sufficient grounds for claiming that recklessness and
intent are equivalent mental states in compact disputes
between States.
If anything, the reverse is true. Disgorgement is strong
medicine, and as with other forms of equitable power, we
should impose it against the States “only sparingly.”
Jenkins, 515 U.S., at 131 (THOMAS, J., concurring). The
majority insists that the justification for disgorgement is
enhanced “when one State gambles with another State’s
rights to a scarce natural resource.” Ante, at 16. But the
way this Court has always discouraged gambling with this
scarce resource is to require delivery of water, not money.
Prior to 1987, “we had never even suggested that mone­
tary damages could be recovered from a State as a remedy
Cite as: 574 U. S. ____ (2015) 11
Opinion of THOMAS, J.
for its violation of an interstate compact apportioning the
flow of an interstate stream.” Kansas v. Colorado, 533
U.S., at 23 (O’Connor, J., concurring in part and dissent­
ing in part). If a State’s right to the “scarce natural re­
source” of water is the problem, then perhaps the Court
ought to follow its usual practice of ordering specific per­
formance rather than improvising a new remedy of “reck­
less disgorgement.”
B
The majority compounds its errors by authorizing an
arbitrary amount of disgorgement. As explained above,
the measure of the disgorgement award should be the
profits derived from a deliberate breach. Yet the Special
Master acknowledged that its $1.8 million award was not
based on any measure of Nebraska’s profits from breach­
ing the Compact. Report 179–180. The Master gave no
dollar estimate of Nebraska’s profits and said only that its
gain was “very much larger than Kansas’ loss” of $3.7
million, “likely by more than several multiples.” Id., at
178. Despite producing no estimate more precise than
“very much larger,” the Master ordered a disgorgement
award of $1.8 million. Id., at 178–179.
The majority explains that “we cannot be sure why the
Master selected the exact number he did.” Ante, at 19.
Indeed. Neither the majority nor the Special Master nor I
can identify a justifiable basis for this amount. It appears
that $1.8 million just feels like not too much, but not too
little.
We should hold ourselves to a higher standard. In other
contexts, we have demanded that district courts “provide
proper justification” for a monetary award rather than
divining an amount that appears to be “essentially arbi­
trary.” Perdue v. Kenny A., 559 U.S. 542, 557 (2010). We
should do the same ourselves if we are going to award
disgorgement here. As with ordinary damages, disgorge­
12 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
ment should not be awarded “beyond an amount that the
evidence permits to be established with reasonable cer­
tainty.” Restatement (Second) of Contracts §352. And a
disgorgement award ought to be calculated based on some­
thing more than the Special Master’s intuitions.
The majority claims that the Master “took into account
the appropriate considerations,” including “Nebraska’s
incentives, past behavior, and more recent compliance
efforts” in reaching the award. Ante, at 19. But it makes
no difference that he took those factors into account if he
arrived at a number that has no articulable relationship to
Nebraska’s profits. Equitable disgorgement is not an
arbitrary penalty designed to compel compliance, nor
should it become one.
What is more, the Master considered factors beyond
those relevant to the calculation of a disgorgement award.
In his view, $1.8 million “moves substantially towards
turning the actual recovery by Kansas, net of reasonable
transaction costs, into an amount that approximates a full
recovery for the harm suffered.” Report 179. In other
words, $1.8 million makes Kansas whole because it is a
reasonable estimate of Kansas’ “transaction costs”—which
presumably means the State’s attorney’s fees and litiga­
tion costs. But, under the “American Rule,” we generally
do not award attorney’s fees “to a prevailing party absent
explicit statutory authority.” Buckhannon Board & Care
Home, Inc. v. West Virginia Dept. of Health and Human
Resources, 532 U.S. 598, 602 (2001) (internal quotation
marks omitted). And neither the majority, nor Kansas,
nor the Special Master offers any support for the proposi­
tion that a disgorgement award can smuggle in an award
of attorney’s fees. If disgorgement were an appropriate
remedy in this case, then the Court should require a calcu­
lation based on Nebraska’s profits rather than Kansas’
“transaction costs.”
Cite as: 574 U. S. ____ (2015) 13
Opinion of THOMAS, J.
III
A
I would also reject the Master’s recommendation to
reform the Settlement because that recommendation
conflicts with the equitable doctrine of reformation. The
remedy of reformation is available to correct a contract if,
“owing to mutual mistake, the language used therein did
not fully or accurately express the agreement and inten­
tion of the parties.” Philippine Sugar Estates Development
Co. v. Government of Philippine Islands, 247 U.S. 385,
389 (1918). The well-established rule is that, when a
written contract “fails to express the agreement because of
a mistake of both parties as to the contents or effect of the
writing, the court may at the request of a party reform the
writing to express the agreement.” Restatement (Second)
of Contracts §155, at 406.
Reformation is thus available only when the parties
reach an agreement but then “fail to express it correctly in
the writing.” Id., Comment a, at 406. If “the parties make
a written agreement that they would not otherwise have
made because of a mistake other than one as to expres­
sion, the court will not reform a writing to reflect the
agreement that it thinks they would have made.” Id.,
Comment b, at 408. Because modifying a written agree­
ment is an extraordinary step, a party seeking reformation
must prove the existence of a mutual mistake of expres­
sion by “ ‘clear and convincing evidence.’ ” Id., Comment c,
at 410.
Nebraska cannot meet that burden because the States
made no mistake in reducing their agreement to writing.
Here are the terms the States agreed upon in their bind­
ing Settlement:
“Beneficial Consumptive Use of Imported Water Sup­
ply shall not count as Computed Beneficial Consump­
tive Use or Virgin Water Supply. . . . Determinations
14 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
of Beneficial Consumptive Use from Imported Water
Supply (whether determined expressly or by implica­
tion) . . . shall be calculated in accordance with the
[Republican River Compact Admin. (RRCA)] Account­
ing Procedures and by using the RRCA Groundwater
Model.” Settlement §IV(F), p. 25.
The States thus agreed not to count water imported from
outside the Republican River Basin. But in the very same
provision, they agreed to calculate the use of imported
water using the RRCA Accounting Procedures and the
RRCA Groundwater Model. The terms of the Settlement
are thus crystal clear: The accounting procedures control
determinations of consumptive use of imported water.
And the parties do not contend that they made any draft­
ing mistake in recording the accounting procedures or the
groundwater model.
Instead, the parties’ mistake was their belief that the
accounting procedures and water model they agreed upon
would accurately exclude imported water from the calcula­
tion of Nebraska’s consumptive use. They were wrong
about this. In fact, under dry weather conditions, when
native water flows are depleted, the water model charges
Nebraska for pumping imported water. Report 32–37.
The parties did not realize the magnitude of this error. To
the extent they thought about it at all, they realized the
water model was not perfectly precise, but assumed that
only very small, immaterial amounts of imported water
would make their way into the calculations. See id., at 27.
A key member of the modeling committee testified that he
was “intellectually aware” of the imported-water issue, but
that “we didn’t believe that that was going to be a big
issue.” See Tr. 727 (testimony of Willem Schreüder).
There is no testimony from any source suggesting that
the parties agreed to a different water model. See Report
26–27. Nebraska thus cannot meet its burden to show by
Cite as: 574 U. S. ____ (2015) 15
Opinion of THOMAS, J.
clear and convincing evidence that the parties agreed to
Nebraska’s “ ‘5-run formula,’ ” ante, at 20, but failed to
express that agreement accurately in writing.
If there is any mistake in this Settlement, it is not a
mistake in writing, but in thinking. The parties knew
what the methodology was and they expressly agreed to
that methodology. They simply thought the methodology
would work better than it did. See Tr. 727. Even though
the methodology they agreed upon was imperfect, a writ­
ing may be reformed only to conform with the parties’
actual agreement, not to create a better one.
The appropriate equitable remedy, if any, in these cir­
cumstances would be rescission, not reformation. In gen­
eral, if there is a mutual mistake “as to a basic assumption
on which the contract was made,” the adversely affected
party may seek to avoid the contract. Restatement (Sec­
ond) of Contracts §152, at 385; see also id., §155, Com­
ment b, Illustration 4, at 409 (noting that reformation is
not available to remedy a mistake as to something other
than reducing the agreement to writing). The States have
not asked for rescission, of course, but it is incorrect to
suggest, see ante, at 27, that there is no other solution to
this problem.
B
Realizing that ordinary reformation is not available for
Nebraska, the majority again summons its equitable
power and renegotiates the accounting procedures to
create what it considers a fairer agreement for the States.
In doing so, it announces a new doctrine of reformation: In
resolving water disputes, the Court will “correct subsidi­
ary technical agreements to promote accuracy in appor­
tion[ment].” Ante, at 24. From here on out, the Court will
“modif[y] a technical agreement to correct material errors
in the way it operates and thus align it with the compact­
ing States’ intended apportionment.” Ante, at 25.
16 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
As this case illustrates, adopting this novel remedy is a
mistake. The majority fails in its attempt to conform this
new doctrine of “technical agreement correction” with both
principles of equity and our precedent governing compact
disputes. And after creating an unjustified doctrine, the
majority misapplies it.
1
To begin, the majority’s reliance on equitable power is
misplaced. That a court is exercising equitable power
means only that it must look to established principles of
equity. And reformation is the equitable doctrine that
Nebraska seeks in this case. The Court should thus follow
the rules of reformation, just as it would adhere to the
contours of any other equitable doctrine. Indeed, we have
demanded as much from lower courts when they exercise
their power to grant other forms of equitable relief, such
as a permanent injunction. See eBay Inc. v. Merc-
Exchange, L. L. C., 547 U.S. 388, 392–394 (2006). If a
court fails to apply the proper standard for a permanent
injunction, it is no answer to recite the obvious fact that
the court acted in equity. See id., at 394.
Putting aside the assertion of equitable power, there is
no support in our precedents for the majority’s doctrine of
“technical agreement correction.” The majority first sug­
gests that this Court reformed a “technical document” in
Texas v. New Mexico, 446 U.S. 540 (1980) (per curiam)
(Texas I ). Ante, at 24. But there was no reformation at
issue in that case—either of the compact or an ancillary
technical agreement—only the interpretation of the words
in the Pecos River Compact. Texas I, supra, at 540; see
Report of Special Master on Obligation of New Mexico to
Texas under the Pecos River Compact, O. T. 1975, No. 65,
Orig., pp. 15–16, 34–37 (filed Oct. 15, 1979) (purporting to
interpret the compact).
The majority also claims that in Kansas v. Colorado, 543
Cite as: 574 U. S. ____ (2015) 17
Opinion of THOMAS, J.
U. S. 86 (2004), we “approved the Master’s alteration of
the parties’ agreement . . . .” Ante, at 24. But nothing in
Kansas v. Colorado supports revising the express terms of
a settlement agreement. In that case, the Court adopted a
Special Master’s recommendation to calculate water usage
based on a 10–year average rather than a single year. 543
U.S., at 99–100. There is no suggestion in the Court’s
opinion (nor in the briefs filed in that case) that the States
had previously agreed to use a 1-year method for calculat­
ing water usage or that anyone thought “reformation” of
the compact or any ancillary agreement was needed. To
the contrary, the Court explained that the compact simply
did “not define the length of time over which” the States
must make the relevant measurements. Id., at 100.
There was thus nothing to rewrite, nothing to reform. The
majority suggests that the States in that case had “ ‘agreed
to the use of annual measurement’ ” for calculating future
water usage, ante, at 24 (quoting Kansas v. Colorado,
supra, at 102), but the quoted passage refers to the unre­
lated fact that the States had, earlier in the litigation,
“agreed to the use of annual measurement for purposes of
calculating past damages,” not future water usage, 543
U.S., at 102 (emphasis added). That litigation stipulation
did not apply to the calculation of future water usage or
future damages. Ibid. Even if the majority were correct
that a damages calculation is simply the flip side of a
water usage calculation, ante, at 25, n. 10, that conclusion
plainly would apply only to calculation of past water us­
age. It is thus no surprise that the Court held that any
pre-existing damages agreements did not govern the
method of measuring future compliance. Kansas v. Colo-
rado, supra, at 103. Given that the Court plainly did not
apply any such agreements, it cannot be said to have
altered them.
18 KANSAS v. NEBRASKA
Opinion of THOMAS, J.
2
Having improperly invented the doctrine of “technical
agreement correction,” the majority proceeds to misapply
it. In “correcting” the accounting procedures, the majority
purports to align them with the intent of the compacting
parties. Ante, at 24–25. But we know that the majority’s
reformed contract does not match the “States’ intended
apportionment.” Ante, at 25. We know this because the
Settlement expressly states that, for purposes of appor­
tioning the flow, imported water use would be calculated
using the agreed-upon “Accounting Procedures” and the
“Groundwater Model.” Settlement §IV(F), at 25. The
States never intended to adopt the 5-run formula, and the
Court has simply picked a winner and adopted Nebraska’s
5-run proposal, notwithstanding a binding agreement to
the contrary.
The majority also misapplies its “correction” remedy in
claiming that its fix will prevent the existing accounting
procedures from “affirmatively violat[ing] the Compact.”
Ante, at 26. I cannot see how this is true. First, the exist­
ing procedures do not violate the Compact. We should
favor an interpretation of the Compact that would render
its performance possible, rather than “impossible or mean­
ingless.” 2 S. Williston, Law of Contracts §620, p. 1202
(1920). Read in light of this principle, the phrase “Virgin
Water Supply” must be interpreted to allow for some
imperfection in the groundwater models. After all,
groundwater models are approximations of the physical
world. Tr. 722–726. No accounting procedure can plausi­
bly track every drop of water through the 24,900 square
mile Basin. Id., at 724.
Second, even if the existing accounting procedures
would violate the Compact because they allocate some
imported water, the majority’s “correction” will not solve
the problem. Because water models are always approxi­
mations, even the 5-run formula will be imprecise and will
Cite as: 574 U. S. ____ (2015) 19
Opinion of THOMAS, J.
therefore violate the Compact if it is read to require the
States accurately to account for every drop of imported
water.
* * *
Claiming to draw from a vast reservoir of equitable
power, the Court ignores the limits of its role in resolving
water-compact disputes between States. And in the name
of protecting downstream States from their upstream
neighbors, it diminishes the sovereign status of each of
them.
We owe the parties better. I would apply the same
principles of contract law that we have previously applied
to water disputes between States. Under those principles,
I would sustain Nebraska’s and Colorado’s exceptions to
the Master’s recommendation to order $1.8 million in
disgorgement, and overrule Kansas’ exception to that
recommendation. I would also sustain Kansas’ exception
to the Master’s recommendation to reform the Settlement.
I agree only with the Court’s decisions to overrule Ne­
braska’s exception to the Master’s finding that it know-
ingly failed to comply with the Compact, and Kansas’ ex­
ception to the Master’s recommendation not to issue
an injunction requiring Nebraska to comply with the
Compact.