S056275, Opinion — Klamath Irrigation District v. United States

638
On certified questions from the United States Court of Appeals for the Federal
Circuit; certification order dated July 16, 2008; considered and under advisement
January 6, certified questions accepted .January 29, 2009
KLAMATH IRRIGATION DISTRICT,
Tulelake Irrigation District,
Klamath Drainage District,
Poe Valley Improvement District,
Sunnyside Irrigation District,
Klamath Basin Improvement District,
Klamath Hills District Improvement Co.,
Midland District Improvement Co.,
Malin Irrigation District,
Enterprise Irrigation District,
Pine Grove Irrigation District,
Westside Improvement District No. 4,
Shasta View Irrigation District,
Van Brimmer Ditch Co.,
Fred A. Robison, Albert J. Robison,
Lonny E. Baley, Mark R. Trotman,
Baley Trotman Farms,
James L. Moore, Cheryl L. Moore,
Daniel G. Chin, Deloris D. Chin,
Wong Potatoes, Inc.,
Michael J. Byrne, Daniel W. Byrne,
and Byrne Brothers,
Plaintiffs,
v.
UNITED STATES OF AMERICA
and Pacific Coast Federation of Fishermen's Associations,
Defendants.
(Federal CC No. 2007-5115; SC S056275)
202202 P1593d 159

Cite as 345 Or 638 (2009) 	639
CJS, Federal Courts § 180.
Michael H. Simon, of Perkins Coie LLP, Portland, filed the
response 	for 	plaintiffs 	Klamath 	Irrigation 	District,
Tulelake Irrigation District, Klamath Drainage District,
Poe 	Valley 	Improvement 	District, 	Sunnyside 	Irrigation
District, Klamath Basin Improvement District, Klamath Hills
District Improvement Co., Midland District Improvement
Co., Malin Irrigation District, Enterprise Irrigation District,
Pine 	Grove 	Irrigation 	District, 	Westside 	Improvement
District No. 4, Shasta View Irrigation District, Van Brimmer
Ditch Co., Fred A. Robison, Albert J. Robison, Lonny E.
Baley, Mark R. Trotman, Baley Trotman Farms, James L.
Moore, Cheryl L. Moore, Daniel G. Chin, Deloris D. Chin,
Wong Potatoes, Inc., Michael J. Byrne, Daniel W. Byrne, and
Byrne Brothers to the memoranda of amicus curiae Oregon
Water Resources Department, and defendants the United
States 	and 	Pacific 	Coast 	Federation 	of 	Fishermen's
Associations.
Stephanie M. Parent, Portland, filed the memorandum of
law for defendant Pacific Coast Federation of Fishermen's
Associations 	and 	amici 	curiae 	Institute 	for 	Fisheries
Resources, the Wilderness Society, Klamath Forest Alliance,

640 	Klamath Irrigation District v. United States
Oregon Wild, WaterWatch of Oregon, Northcoast Environ-
mental Center, Sierra Club, and Natural Resources Defense
Council.
Suzanne 	Bratis, 	Assistant 	U. 	S. 	Attorney, 	filed 	the
response of defendant the United States to the memorandum
of law of amicus curiae Oregon Water Resources Depart-
ment.
Denise G. Fjordbeck, Attorney-in-Charge, Salem, filed the
memorandum 	of law 	for 	amicus 	curiae 	Oregon 	Water
Resources Department. With her on the memorandum were
Hardy Myers, Attorney General, and Mary H. Williams,
Solicitor General.
PERCURIAM
The certified questions are accepted.

Cite as 345 Or 638 (2009) 	641
PERCURIAM
The United States Court of Appeals for the Federal
Circuit has certified three state law questions to this court.
The parties in the underlying federal litigation and the
Oregon Water Resources 	Department, 	appearing 	as 	an
amicus curiae in this court, have filed extensive memoranda
variously opposing and supporting this court's acceptance of
those questions. See ORS 28.200 (authorizing Supreme Court
to 	accept 	certified 	questions 	under 	certain 	conditions);
Western Helicopter Services v. Rogerson Aircraft, 311Or361,
364-71, 811 P2d 627 (1991) (explaining bases for accepting or
declining to accept certified questions). After considering the
parties' arguments, we conclude that it is appropriate to
accept the certified questions.
Before turning to the parties' arguments, we first
put the three questions that the Federal Circuit has asked in
context. The Federal Bureau of Reclamation (the Bureau)
manages the Klamath Project, which stores and supplies
water to farmers, irrigation districts, and federal wildlife ref-
uges in the Klamath River basin. 1 The plaintiffs in the under-
lying federal litigation are farmers and irrigation districts
that use water from the Klamath Project for irrigation and
other agricultural purposes. As a result of drought conditions
in 2001, the Bureau terminated the delivery of water to
plaintiffs in order to make water available for three species of
endangered fish. 2
Claiming a property right in the water, plaintiffs
brought an action in the Court of Federal Claims alleging
that the United States had unconstitutionally taken their
property. Relying on an Oregon statute, the Court of Federal
Claims ruled that plaintiffs had no equitable right in the
water that they used to irrigate their land. See Klamath
Irrigation District v. United States (Klamath I), 67 Fed Cl
504, 526-27 (2005) (holding that, under a 1905 Oregon law,
the United States "obtained rights to the unappropriated
water of the Klamath Basin"). It followed, the Court of
1 We take the facts from the parties' statement of agreed facts.
2 The Bureau was able to make some water (approximately 70,000 acre feet)
available in July 2001.

642 	Klamath 	District v. United States
Federal Claims concluded, that plaintiffs' takings claim
based on the existence of an equitable interest in the water
necessarily failed. See id. at 540 (so concluding). 3
Plaintiffs appealed to the Federal Circuit. As the
parties framed the issues in the Federal Circuit, the primary
issue arose out of an intersection offederal and state law. We
begin by briefly describing the federal statute, which pro-
vides the context for the state law issue. Congress passed the
Reclamation Act of 1902 to provide for the "construction and
maintenance of irrigation works * * * for the reclamation of
arid and semiarid lands" in the western states and territo-
ries. Reclamation Act of 1902, ch 1093, § 1, 32 Stat 388. The
Act contemplates that, subject to certain conditions, the
Secretary of the Interior will make public lands, irrigated
pursuant to the Act, available to settlers and also will make
water from the irrigation projects available for privately held
land. Id. §§ 3-4, 32 Stat 389. Section 8 of the Act provides that
the Act does not affect state laws "relating to the control,
appropriation, use, or distribution of water used in irrigation,
or any vested right thereunder, and the Secretary of the
Interior, in carrying out the provisions of this Act, shall pro-
ceed in conformity with such laws." Id. § 8, 32 Stat 390. Sec-
tion 8 then adds the following proviso: "[T]he right to the use
of water acquired under the provisions of this Act shall be
appurtenant to the land irrigated, and beneficial use shall be
the basis, the measure, and the limit of the right." Id.
In their briefs to the Federal Circuit, both plaintiffs
and the United States explained that section 8 posed a prob-
lem for the Secretary in implementing the Act. In most west-
ern states, a person may not appropriate water without first
putting it to beneficial use. However, the size of many of the
federal reclamation projects and the amount of time required
The Court of Federal Claims concluded that plaintiffs' interests in the water
were either contractual or, to the extent that some plaintiffs acquired water rights
as a result of patents issued by the United States or permits issued by Oregon,
those rights were junior to the rights that the United States and certain tribes
held. Klamath l, 67 Fed Cl at 531-40. The court granted summary judgment for the
United States on plaintiffs' claim that they had a property interest in the water,
which the Government took. In a later order, the court focused on plaintiffs' con-
tractual rights to receive water and held that the sovereign acts doctrine was a
defense to plaintiffs' breach of contract claim. Klamath lrrigation District v. United
States (Klamath Tl), 75 Fed Cl 677, 695 (2007).

Cite as 345 Or 638 	643
to construct those projects prevented the water that those
projects were supposed to deliver from being put to beneficial
use for many years. The Secretary thus ran the risk that
other users would appropriate the water before the Secretary
completed the irrigation projects.
The Oregon legislature responded to that problem in
1905. It enacted a law that provides, in part, that, when an
officer of the United States, "authorized by law to construct
works for the utilization of water within this State," files with
the state engineer "a written notice that the United States
intends to utilize certain [unappropriated] waters," those
waters "shall not be subject to further appropriation under
the laws of this State, but shall be deemed to have been
appropriated by the United States," provided certain condi-
tions are met. Or Laws 1905, ch 228, § 2. The 1905 Act then
added,
"No adverse claims to the use of the water required in con-
nection with such plans shall be acquired under the laws of
this State except as for such amount of said waters
described in said notice as may be formally released in writ-
ing by an officer of the United States thereunto duly
authorized."
In 1905, an official with the United States Geological
Survey posted a notice claiming "all the unappropriated
waters of the Klamath River * * * to be used for irrigation,
domestic, power, mechanical, and other beneficial uses" and
stating that the waters "hereby appropriated [are] to be
stored by means of a dam located * * * across the Klamath
River." Later that year, the Bureau of Reclamation filed a
notice with the state engineer stating that "'the United
States intends to utilize * * * [a]ll of the waters of the
Klamath Basin in Oregon * * *'for purposes of 'the operation
of works for the utilization of water * * * under the provisions
of the * * * Reclamation Act.' " The Bureau later filed plans
for the proposed works and proof of authorization of the
Klamath Project.
With that statutory background in mind, we turn to
the arguments that plaintiffs and the United States raised in
the 	Federal 	Circuit. 4 	In 	their 	opening 	brief, 	plaintiffs
4 We summarize the parties' arguments only to put the Federal Circuit's ques-
tions in context. We express no opinion on the merits of those arguments.

644 	Klamath Irrigation District v. United States
assumed that the United States acquired rights to water for
use in the Klamath Project when it filed notices with the
state in 1905 in compliance with state law. Plaintiffs argued,
however, that whatever rights the United States acquired in
the water from the Klamath River as a result of its compli-
ance with the 1905 state law, the United States did not hold
the exclusive right to use the water. Rather, relying on three
United States Supreme Court cases, plaintiffs contended
that the farmers and irrigators to whom the United States
delivered the water obtained, at a minimum, an equitable
interest in the water when they put it to beneficial use. See
Nevada v. United States, 463 US 110, 126, 103 S Ct 2906, 77
L Ed 2d 509 (1983) (explaining that "the beneficial interest in
the [water] rights confirmed to the Government resided in
the owners of the land within the [reclamation] Project to
which these waters became appurtenant upon the applica-
tion of Project water to the land"); Nebraska v. Wyoming, 325
US 589, 613-14, 65 S Ct 1332, 89 L Ed 1815 (1945) (discuss-
ing the United States' and landowners' respective rights to
use water from reclamation projects); Ickes v. Fox, 300 US 82,
94-96, 57 S Ct 412, 81LEd525 (1937) (same).
Plaintiffs also addressed a state law defense that the
United States had asserted (and that the Court of Federal
Claims had accepted) to their claimed equitable interest.
Plaintiffs noted that the Court of Federal Claims had inter-
preted the 1905 Oregon statute as barring their claimed
interest, but they contended that the federal court had read
that statute too broadly. In their view, the 1905 Oregon stat-
ute did not preclude persons who received water from a
Reclamation Act project from obtaining a property interest in
the water. 5
In its answering brief, the United States argued that
state law provided a complete answer to plaintiffs' claimed
property right. It emphasized that, under section 8 of the
Reclamation Act, state law controls the question of how
water for federal irrigation projects will be appropriated and
5 Plaintiffs also argued, in their reply brief, that to the extent Oregon law dif-
fered, the proviso to section 8 of the Reclamation Act conflicted with that law and
controlled. The United States, in its answering brief, anticipated that argument
and asserted that the proviso was narrower than plaintiffs contended.

Cite as 345 Or 638 	645
who holds the water right. The United States did not dispute
that the three cases on which plaintiffs relied recognized that
the landowners who had used water from federal reclamation
projects had acquired a property interest in it. The United
States argued, however, that those cases did not announce a
general rule of law applicable to all western states. In the
government's view, each of those cases turned on and was
limited to the specific facts and state laws at issue in those
cases.
The United States then turned to Oregon's 1905 law.
It contended that, under that law, it had acquired the right to
all unappropriated waters in the Klamath River when it filed
its notice of intent with the state engineer and later met the
other requirements of that law. The United States further
argued that, under the 1905 Oregon law, the United States'
formal written release was necessary before plaintiffs could
acquire any interest, equitable or otherwise, in the water
rights it had acquired. It followed, the United States con-
cluded, that without a written release of the water rights it
held, plaintiffs had no equitable interest in the water.
Given that debate, the Federal Circuit certified the
following three questions to this court:
"1. 	Assuming that Klamath Basin water for the Klamath
Reclamation Project 'may be deemed to have been appropri-
ated by the United States' pursuant to Oregon General
Laws, Chapter 228, § 2 (1905), does that statute preclude
irrigation districts and landowners from acquiring a bene-
ficial or equitable property interest in the water right
acquired by the United States?
"2. 	In light of the statute, do the landowners who receive
water from the Klamath Basin Reclamation Project and put
the water to beneficial use have a beneficial or equitable
property interest appurtenant to their land in the water
right acquired by the United States, and do the irrigation
districts that receive water from 	the Klamath Basin
Reclamation Project have a beneficial or equitable interest
in the water right acquired by the United States?
"3. 	With respect to surface water rights where appropria-
tion was initiated under Oregon law prior to February 24,
1909, and where such rights are not within any previously
adjudicated area of the Klamath Basin, does Oregon State

646 	Klamath Irrigation District v. United States
law recognize any property interest, whether legal or equi-
table, in the use of the Klamath Basin water that is not sub-
ject to adjudication in the Klamath Basin Adjudication?"
Klamath Irrigation Dist. v. United States (Klamath Ill), 532
F3d 1376, 1377-78 (Fed Cir 2008).
As we understand the first two certified questions,
they go to the state law defense that the United States raised
in its answering brief. The first question seeks to determine
whether, assuming that the United States appropriated
water rights for the Klamath Project pursuant to the 1905
Oregon statute, that statute precludes other persons from
obtaining a beneficial or equitable interest in those rights.
The second question depends on the answer to the first. That
is, assuming that the United States appropriated water
pursuant to the 1905 statute and assuming that the 1905
statute is not an absolute bar to obtaining an equitable
interest in those water rights, the next question is whether,
under Oregon law, beneficial use by the person who receives
the water from the Klamath Project is sufficient to give that
person 	a 	beneficial 	or equitable interest in the 	water.
The third question addresses a different issue that arises
because of an ongoing, separate state adjudication of the
rights to the surface water in the Klamath River basin. As we
understand that question, it asks whether, under Oregon
law, 	anyone may assert either a 	legal or an equitable
property interest in water from the Klamath Project without
first having gone through the pending state water rights
adjudication.
All three questions present issues of state law that
are both preliminary to and potentially dispositive of plain-
tiffs' federal takings claim. If, for instance, the United States
is correct that the 1905 Act precludes plaintiffs from obtain-
ing an equitable interest in any water right that the United
States acquired under that statute, then that could resolve
plaintiffs' takings claim, at least as plaintiffs reportedly have
litigated that claim in federal court. Similarly, whether ben-
eficial use by the landowners is sufficient to create an equi-
table interest under state law is also potentially dispositive.
Finally, if the equitable interest that plaintiffs assert in the
water right may or must be litigated in the pending state

Cite as 345 Or 638 (2009) 	647
water rights adjudication and if, as the United States argues,
plaintiffs disclaimed reliance in the federal litigation on any
water right that will be determined in the pending state
water rights adjudication, then our answer to the third ques-
tion also may dispose of plaintiffs' federal takings claim.
At first blush, it appears that the certified questions
satisfy 	the 	five 	statutory factors 	discussed 	in 	Western
Helicopter Services; that is, an appropriate federal court has
certified the questions, the questions presented are legal, the
questions present issues of Oregon law, the answers to those
questions could resolve the federal claim, and the certifying
court has concluded that there is no controlling Oregon prec-
edent. See ORS 28.200; Western Helicopter Services, 311 Or
at 364-65 (listing those factors). 	That conclusion is not
without objection, however. The Oregon Water Resources
Department (the state) has appeared as an amicus in this
court and raised objections to accepting the certified ques-
tions. The United States and the Pacific Coast Federation of
Fishermen's Associations, which intervened as a defendant
in the federal action, have filed memoranda in this court
agreeing in part with the state. Plaintiffs, for their part,
respond that the state and the opposing parties in the federal
action are attempting to relitigate issues that the Federal
Circuit already has decided against them.
As we understand the state's and the parties' mem-
oranda, they raise essentially three issues. First, the state
and others argue that, because of the litigation strategy that
plaintiffs adopted in the Court of Federal Claims, the issues
raised by the Federal Circuit's three questions are not prop-
erly before that court and any answers that we might give to
those questions are irrelevant to the takings claim that plain-
tiffs are pursuing in federal court. We doubt, however, that
the Federal Circuit would have certified the three questions
to us if it had not concluded that the state law issues they
raise are properly before it. Indeed, Judge Gajarsa dissented
from the Federal Circuit's decision to certify those questions
for the very reason that the state now advances. Klamath III,
532 F3d at 13778 (Gajarsa, J., dissenting). The majority,
however, certified the questions over the dissenting judge's
objection.

648 	Klamath Irrigation District v. United States
We are hesitant to second-guess the Federal Circuit
majority's apparent conclusion that the state law issues it
certified to us are properly before it. Beyond that, we ques-
tion the premise of the state's argument. The United States
has asserted that the 1905 Oregon statute provides a com-
plete defense to plaintiffs' claimed property interest. The
Federal Circuit reasonably could conclude that plaintiffs'
reported litigation strategy did not preclude either the
United States from relying on state law as a defense or the
Federal Circuit from addressing that defense. Moreover, the
United States has argued that plaintiffs' reported litigation
strategy makes the third certified question material, a prop-
osition with which we agree. 6 In short, even if we thought
that we had the authority to second-guess the Federal
Circuit's determination of which issues are and are not prop-
erly before it, we see no reason to exercise that authority
here.
The state also argues that the parties have not been
able to agree on all the facts; it notes that the parties have
disagreed regarding one paragraph, paragraph 23, in the
statement of facts that the parties submitted. That para-
graph addresses plaintiffs' litigation strategy and the result-
ing limitation that the Court of Federal Claims order places
on plaintiffs. In certifying the three questions to us, the
Federal Circuit noted the parties' disagreement on that point
but expressed its conclusion that their disagreement would
not preclude us from accepting certification.
Although the Federal Circuit did not explain the
basis for its conclusion, it presumably concluded that plain-
tiffs' litigation strategy did not bar it from considering the
state law issues that the United States had raised as a
defense (and on which the Court of Federal Claims had
relied) to plaintiffs' federal takings claim. As noted above, we
think that the question of which issues are properly before
the Federal Circuit is a procedural issue for that court; it is
6 If, as the United States argues, plaintiffs have disclaimed reliance in the fed-
eral action on any property interest that may be adjudicated in the pending state
water rights adjudication, then the answer to the third question could provide an
alternative basis for resolving plaintiffs' federal action.

Cite as 345 Or 638 (2009) 	649
not a disputed fact that would preclude us from accepting the
certified questions.
Finally, the state notes that the parties to the federal
proceeding, as well as other parties who are not before that
court, have invested a substantial amount of time and effort
in the pending state water rights adjudication. The state
water rights adjudication has been ongoing since 1975 and,
when completed, will provide a comprehensive determina-
tion of the right to use the surface water in the Klamath
River basin. See United States v. Oregon, 44 F3d 758 (9th Cir
1994) (describing Klamath Basin adjudication). The state
draws two conclusions from the existence of the pending
state water rights adjudication. First, the state and others
suggest that we should not decide the questions that the
Federal Circuit has asked us until those questions are pre-
sented in the context of the state water rights adjudication.
Second, the state notes that, if we decide the questions that
the Federal Circuit has asked, the United States may with-
draw from participating in the pending state water rights
adjudication on the ground that the adjudication is no longer
comprehensive. See id. at 770 (holding that the Klamath
Basin adjudication was the sort of comprehensive proceeding
to which Congress had waived the United States' sovereign
immunity). 7
We have no wish to interfere with or unnecessarily
anticipate the issues raised in the pending state water rights
adjudication. As we understand the import of the Federal
Circuit's certification order, however, the Federal Circuit has
determined that those state law questions are material to
plaintiffs' federal takings claims. The certification order also
implies that, if we do not accept certification, the Federal
Circuit will go ahead and decide those state law issues in the
7 In United States v. Oregon, the Ninth Circuit rejected the United States'
argument that a prior determination of some individual water rights in the
Klamath Basin through the permit process meant that the pending Klamath Basin
adjudication was not comprehensive within the meaning of the McCarran
Amendment. 44 F3d at 767-68. Given that holding, we do not give great weight to
the concern that the United States may withdraw from the pending state water
rights adjudication; that is, in light of the Ninth Circuit's holding, it is difficult to
see how any issues of state water rights law that we may decide in answering the
Federal Circuit's questions would render the state water rights adjudication not
comprehensive.

650 	Klamath 	District v. United States
course of resolving plaintiffs' federal takings claim. It follows
that the issue posed by the certification order is not whether
those state law issues should be decided; rather, the issue is
which court (this court or the Federal Circuit) should decide
them. The state's and others' concerns, as we understand
them, go to the federal court's refusal to stay its proceedings
pending the completion of the state water rights adjudica-
tion. Whatever the merits of that decision, the decision
whether to stay the federal proceedings is a matter for the
federal courts; it provides no basis for this court to decline to
accept the certified questions.
Having considered the parties' arguments, we con-
clude that it is appropriate to accept the certified questions.
Some of the parties have asked us, if we accept the certified
questions, either to rephrase them or to answer them in a
particular order. The state asks us to rephrase the first and
second questions to make clear that we are not deciding
whether the United States acquired any interest in the water
by complying with the 1905 Oregon law. The United States,
for its part, asserts that the first two questions assume that
proposition; they do not ask us to decide it. The United States
also asks us, if we accept certification, to answer the third
question first because that question would be dispositive.
At this 	stage 	of the 	proceeding, 	we 	decline 	to
rephrase the questions or declare the order in which we will
decide them. Although the parties have filed extensive mem-
oranda regarding whether we should accept the certified
questions, they have not yet filed briefs in this court address-
ing the merits of the state law issues that the Federal
Circuit's questions raise. We are hesitant to limit or rephrase
the questions without having had the benefit of the parties'
briefing on the merits. We think that the questions are suffi-
ciently open-ended and our procedures sufficiently flexible
that we can accommodate the parties' concerns, if they turn
out to be justified, in the course of answering the questions on
the merits. We also note a proposition that perhaps is so obvi-
ous it needs no mention. This court always retains the discre-
tion to decline to provide an answer to a certified question,
limit our answer to a question, or rephrase a question if it
turns out, after full briefing, that it is appropriate to do so.

Cite as 345 Or 638 (2009) 	651
See Western Helicopter Services, 311 Or at 366-71 (recogniz-
ing court's discretion).
The certified questions are accepted.