Brady v. Abbott Laboratories Inc.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ERNEST EUGENE BRADY, husband; 
MARRITTA KAY BRADY, wife; JAMES
DEAN BRADY, husband; FLOSSIE
MARIE BRADY, wife,
Plaintiffs-Appellees,
v.
ABBOTT LABORATORIES, an Illinois No. 04-15257
corporation (including Ross
Products Division of Abbor  D.C. No.
CV 01-00886 JAT
Laboratories, improperly named),
Defendant-Appellant, OPINION
and
ABC ENTITIES, I-X; JOHN/JANE
DOES, I-X; ROSS PRODUCTS, a
Division of Abbott Laboratories,
Inc.,
Defendants.

Appeal from the United States District Court
for the District of Arizona
James A. Teilborg, District Judge, Presiding
Argued and Submitted
November 15, 2005—San Francisco, California
Filed December 29, 2005
Before: Jerome Farris, A. Wallace Tashima, and
Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Tashima;
Concurrence by Judge Farris
16813
BRADY v. ABBOTT LABORATORIES 16815
COUNSEL
John C. Lemaster, Ryley Carlock & Applewhite, Phoenix,
Arizona, for the defendant-appellant.
Brad K. Keogh, Phoenix, Arizona, for the plaintiffs-appellees.
OPINION
TASHIMA, Circuit Judge:
This is a diversity action arising under Arizona law and
stems from Abbott Laboratories’ (“Abbott”) construction of a
16816 BRADY v. ABBOTT LABORATORIES
basement beneath its manufacturing facility. After a bench
trial, the district court awarded judgment in favor of plaintiffs,
Ernest Eugene Brady, Marritta Kay Brady, James Dean
Brady, and Flossie Marie Brady (collectively, the “Bradys”)
for the illegal removal of groundwater, causing the water table
below the Bradys’ adjacent property to become permanently
suppressed, resulting in the destruction of the Bradys’ pecan
orchards.
Abbott appeals, contending that the district court erred in:
(1) concluding that Abbott owed the Bradys a duty under the
common law doctrine of reasonable use; (2) finding that the
applicable statute of limitations did not bar the Bradys’
claims; (3) finding that the Bradys had proven their damages
with sufficient certainty; and (4) awarding the Bradys punitive
damages. We have jurisdiction under 28 U.S.C. § 1291.
Because we hold that Abbott owed the Bradys no duty under
the common law doctrine of reasonable use, we reverse. We
do not reach Abbott’s other contentions.
Background
Abbott and the Bradys are neighboring landowners in Casa
Grande, Arizona. Abbott operates a manufacturing facility,
while the Bradys are pecan farmers. In the fall of 1997,
Abbott sought to expand its manufacturing facilities and
began excavating its property in order to build a large under-
ground storage structure. In connection with the project,
Abbott applied for and received an emergency de-watering
permit from the Arizona Department of Water Resources
(“ADWR”). In its permit application, Abbott sought approval
to remove a total of 2.07 acre-feet of groundwater from the
aquifer underneath its property. The permit specified that
Abbott was to pump the groundwater into an on-site retention
basin where it could eventually re-absorb into the aquifer. The
ADWR also required Abbott to report its de-watering activity
on an annual basis.
BRADY v. ABBOTT LABORATORIES 16817
Once work began, Abbott quickly encountered more water
than expected. Abbott expanded its pumping activity in order
to keep the excavation free from water during construction,
but failed to seek a permit to extract additional groundwater.
As a result of Abbott’s additional pumping, Abbott’s on-site
retention basins filled to capacity and Abbott then channelled
the excess groundwater into a ditch that ran off the property.
While there is some dispute regarding how much water was
discharged into the ditch, it is undisputed that Abbott did not
transport any of the groundwater off its property for use on
other land. Abbott’s pumping ended around March, 1998, at
which point Abbott had extracted in excess of 122 acre-feet
of groundwater.
Abbott acknowledges that it violated the scope of its de-
watering permit by removing approximately 122 acre-feet of
groundwater. Abbott also admits that it incorrectly reported
its de-watering activity to the ADWR by listing no de-
watering activity in 1997 or 1998, and failing to file a report
in 1999. In order to settle its violations with the ADWR,
Abbott agreed to pay a fine of $6,508.50 to the ADWR.
The district court properly found that prior to Abbott’s de-
watering, the water table below the Bradys’ property was at
16 feet below ground level. Following Abbott’s de-watering,
the water table below the Bradys’ property became perma-
nently suppressed to 32 feet, which is the depth of the base-
ment on the Abbott property. The Bradys’ pecan trees drew
water through feeder roots that were dependent on the rela-
tively shallow water table (as opposed to being irrigated).
Abbott’s de-watering activity lowered the water table, depriv-
ing the Bradys’ orchard of water, and ultimately killed the
pecan trees.
Once they learned of Abbott’s de-watering activity, the
Bradys commenced this action for negligence and nuisance.
Following a four-day bench trial, the court entered judgment
in favor of the Bradys on both claims. It found that Abbott
16818 BRADY v. ABBOTT LABORATORIES
had breached its duty in tort under the common law doctrine
of reasonable use. The court awarded the Bradys $618,766 in
compensatory damages and $618,766 in punitive damages,
for a total recovery of $1,237,532. On appeal, Abbott argues
that the district court erred because the common law doctrine
of reasonable use permitted Abbott to withdraw percolating
groundwater, without incurring liability to the Bradys, so long
as it was taken for the reasonable use of Abbott’s property.1
Discussion
[1] The common law doctrine of reasonable use governs
the use of percolating groundwater in Arizona. Bristor v.
Cheatham, 255 P.2d 173, 178-79 (Ariz. 1953).2 Whether
Abbott owed the Bradys a duty under the common law doc-
trine of reasonable use is a question of law, which we review
de novo. Vollendorff v. United States, 951 F.2d 215, 217 (9th
Cir. 1991).
[2] In Bristor, the Arizona Supreme Court explained that
the doctrine of reasonable use permits the extraction of
groundwater
so long as it is taken in connection with a beneficial
enjoyment of the land from which it is taken. If it is
diverted for the purpose of making reasonable use of
the land from which it is taken, there is no liability
1
We note that the Bradys bring only common law tort claims. At oral
argument, they expressly disclaimed reliance on any statutory claim under
the Arizona Groundwater Code. Thus, the question of whether a private
right of action for negligence per se can be implied under Ariz. Rev. Stat.
§ 45-518(A) is not before us.
2
While the Bradys denominate their claims as claims for negligence and
nuisance, the substance of both claims is the same. Because the common
law doctrine of reasonable use is the controlling legal standard governing
a landowner’s rights to percolating groundwater underneath its property,
see Bristor, 255 P.2d at 178-79, the determinative inquiry is whether
Abbott violated its duty under the doctrine of reasonable use.
BRADY v. ABBOTT LABORATORIES 16819
incurred to an adjoining owner for a resulting dam-
age.
Bristor, 255 P.2d at 180. The court noted that the doctrine
does not “prevent any reasonable development of [one’s] land
by mining or the like, although the underground water of
neighboring proprietors may thus be interfered with or divert-
ed.” Id. (quoting Canada v. City of Shawnee, 64 P.2d 694,
697 (Okla. 1936)). Extracting groundwater and using it for the
benefit of off-site land, however, is not a permitted reasonable
use. Id.This distinction is well illustrated by Evans v. City of Seat-
tle, 47 P.2d 984 (Wash. 1935), cited with approval by the Ari-
zona Supreme Court. Bristor, 255 P.2d at 178. In Evans, the
City of Seattle owned a gravel pit from which it produced
gravel for its roads. Evans, 47 P.2d at 984. The plaintiffs
owned land adjacent to the City’s gravel pit and depended on
spring and stream water for domestic purposes and irrigation.
Id. The City constructed a ditch leading away from its proper-
ties to drain percolating water seeping into the gravel pit so
that the City could extract more gravel from the pit. Id. As a
result of the City’s de-watering, the plaintiffs suffered a total
loss of their water supply. Id. The Washington Supreme Court
denied relief, holding that the “City was making a reasonable
use of its own property, and that the draining of the gravel pit
was for the reasonable and proper purpose of extracting the
gravel for use.” Id. at 988.
By contrast, in Farmers Investment Co. v. Bettwy, 558 P.2d
14 (Ariz. 1976), the defendant mining companies extracted
groundwater near farms owned by plaintiffs and transported
that water to other lands where it was used for mining activi-
ties. Id. at 16. The court, relying on Bristor, recognized that
the reasonable use “rule does not prevent the extracion [sic]
of ground water subjacent to the soil so long as it is taken in
connection with a beneficial enjoyment of the land From
which it is taken.” Id. at 20 (quoting Bristor, 255 P.2d at 180)
16820 BRADY v. ABBOTT LABORATORIES
(emphasis in Bettwy). However, because the water was not
withdrawn to benefit the land from which it was taken, but
was transported to and used on other property, the court con-
cluded that the defendants’ use was not reasonable. Id. at 21.
[3] Here, the district court relied on Bettwy to conclude that
Abbott was not making a reasonable beneficial use of its land
when it extracted the groundwater. That was error. For unlike
the defendants in Bettwy, Abbott did not withdraw groundwa-
ter from its property for use “off the lands from which they
are pumped.” Bettwy, 558 P.2d at 20. Rather, Abbott with-
drew the groundwater for the purpose of expanding its manu-
facturing facilities, which was an improvement of the land
from which the water was withdrawn; therefore, it was a per-
mitted beneficial use under Arizona law. See Bristor, 255
P.2d at 180; see also Evans, 47 P.2d at 987. While some of
the groundwater was channeled off of Abbott’s property, this
is immaterial because Arizona law does not require that the
withdrawn water be “used,” so long as it is extracted for the
reasonable beneficial use of Abbott’s land. See Bristor, 255
P.2d at 180; see also Evans, 47 P.2d at 987.
[4] Accordingly, because we conclude that Abbott’s de-
watering activity was protected by the common law doctrine
of reasonable use, the Bradys’ negligence and nuisance claims
must fail. The judgment of the district court is reversed and
the case is remanded with directions to enter judgment for
Abbott.
REVERSED and REMANDED.
FARRIS, Circuit Judge, concurring:
I agree with Judge Tashima that Bristor v. Cheatham is
controlling. If we were not bound to follow the Arizona
Supreme Court, I would urge that Arizona’s reasonable use
BRADY v. ABBOTT LABORATORIES 16821
doctrine no longer depend solely upon whether the use of the
water benefits the property from which it is extracted.
Accounting for the amount of water used, considering the util-
ity of competing water uses, and acknowledging the rights of
adjacent water users seems especially important in an arid,
rapidly growing state like Arizona.
In authorizing strict water permit restrictions as well as
public notice and the opportunity for administrative hearings
on proposed water permits, the Arizona legislature has indi-
cated that Arizona water users must consider the rights of
adjacent property-holders. Ariz. Rev. Stat. §§ 45-518(A)(4),
45-523 (2005). Unfortunately for the Bradys and other Ari-
zona water plaintiffs, the Arizona legislature has not provided
an express private cause of action, nor has the Arizona
Supreme Court had occasion to imply one, against those who,
for the benefit of their own property, unreasonably and ille-
gally interfere with the water rights of their neighbors.
I therefore concur in the majority opinion.