California Eminent Domain Report

On February 27, 2013, the U.S. Court of Appeals for the Federal Circuit affirmed (pdf) the dismissal of a Fifth Amendment takings claim based on the finding that the claim was "not ripe."  The claim is unusual because it arose in the context of the federal Endangered Species Act (ESA).

Casitas Municipal Water District (Casitas) has a contract with the federal Bureau of Reclamation and a license with the State of California authorizing it to divert water for the Ventura River Project (Project).  The contract with the Bureau of Reclamation states that Casitas "shall have the perpetual right to use all water that becomes available through the construction and operation of the Project."  The license with the State of California provides that Casitas may divert up to 107,800 acre-feet of water per year from the Ventura River and other tributaries and to put up to 28,500 acre-feet of water per year to beneficial use for the Project.  

After the West Coast steelhead trout (Oncorhynchus mykiss) was listed as an endangered species, and in order to avoid potential liability under section 9 of the ESA , the Bureau of Reclamation consulted with the National Marine Fisheries Service.  The consultation ended when the National Marine Fisheries Service issued a biological opinion for the Project.  To avoid liability under the ESA, the biological opinion provided, among other things, that a fish ladder be constructed and that a flow regime be implemented to increase the amount of water running through the fish ladder during the steelhead migration period.  

In 2005, Casitas filed an action against the United States in the U.S. Court of Federal Claims alleging that it had lost water as a result of the conditions imposed on the operation of the Project, and therefore the United States had taken its property without just compensation.  While the Court of Federal Claims initially dismissed the claim, the Federal Circuit reversed and remanded the matter so that the lower court could analyze the claim under the "physical takings rubric." 

On remand, Casitas asserted at trial that operation of the fish ladder deprived it of 3,942 acre-feet of water on an annual basis.  Casitas did not demonstrate, however, that this foregone water would have otherwise been put to a beneficial use.  Specifically, the Court of Federal Claims found that Casitas failed to demonstrate that its customers (whether actual or potential) received less water as a result of the operating criteria.  Therefore, the Court of Federal Claims held that the takings claim was not ripe, and dismissed the complaint without prejudice. 

On appeal, now for the second time, the Federal Circuit affirmed the decision of the lower court.  On appeal, both Casitas and the United States conceded that the property right involved was limited to "beneficial use."  Casitas, asserted, however, that beneficial use included the mere storage of water or diversion to storage of water.  Relying on California precedent, the Federal Circuit disagreed.  

While the Federal Circuit affirmed the decision of the lower court, this story is not necessarily over.  As held by the lower court and the Federal Circuit, a takings claim will be ripe if the operating criteria impinge on Casitas' right to beneficial use.  The Federal Circuit also explained that because the taking would be analyzed as a physical taking, the statute of limitations with respect to the taking will not begin to accrue until there has been a reduction in Casitas' right to beneficial use.  Therefore, there is still the distinct possibility that a federal court will find that implementation of a biological opinion can result in a compensable taking under the Fifth Amendment.