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Opinion Analysis: Bargaining in the Shadow of Equitable Apportionment

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Opinion analysis: Bargaining in the shadow of equitable apportionment : SCOTUSbloghttp://www.scotusblog.com/2015/03/opinion-analysis-bargaining-in-the-shadow-of-equitable-apportionment/[3/18/2015 11:20:15 AM]Opinion analysis: Bargaining in the shadow of equitable apportionmentPosted Tue, March 3rd, 2015 9:36 am by Ryke LongestTwo sharply differing views on the Court’s role in handling disputes over interstate waters emerged last week.Justice Elena Kagan’s approach endorsed the power of Court-appointed special masters to fashion equitableremedies in disputes that states cannot resolve on their own. Justice Clarence Thomas’s approach warned theCourt and its appointed special masters of the dangers posed by allowing equitable reformation over politicallycharged technical disputes between sovereign states. Justice Antonin Scalia specifically warned lawyers, judges,and special masters to stop assuming that modern Restatements are describing current law rather thanrevising it.Last Tuesday, the Court announced its opinion in an original jurisdiction dispute between Kansas, Colorado,and Nebraska over flows of a common river: the Republican River. Justice Kagan’s majority opinionunderscores the basis for the Court’s power to apportion interstate waters under equitable principles and todecide disputes between states over interstate compacts. The majority partially sided with Kansas by holdingthat Nebraska should be penalized under disgorgement for taking more than its share of water in 2006 andpartially sided with Nebraska in revising the water accounting procedures to credit imported water. JusticeThomas’s dissent asserts that the majority was illegally revising the compact to suit its preferences andsubjective perceptions of fairness. Chief Justice John Roberts joined with the majority to order disgorgementbut sided with the dissent on the question of reforming water accounting procedures.Parties to interstate compacts can draw different lessons from the decision. Clearly, the Court’s opinionendorses expansive powers for Court-appointed special masters to resolve disputes. Warring states are thuswell-advised to do their best to win their case before special masters. Chief Justice Roberts’ endorsement ofthe dissent’s view on reformation should also guide states towards arguing around or under the language ofexisting technical documents rather than asking for reformation.The history of the Republican River disputeKansas, Colorado, and Nebraska had allocated the Republican River’s flows on a percentage basis through aninterstate compact in 1943, but they litigated the compact’s application to groundwater pumping byNebraskans in the 1990s. In 2000, Kansas successfully argued before the Court that groundwater pumping byNebraska was diminishing surface flows in the Republican River. Further proceedings from the 2000 case ledto a 2003 settlement stipulation. Kansas brought the current dispute to the Court over the terms of the 2003settlement, seeking monetary and equitable relief upon an alleged excessive withdrawal by Nebraska. Nebraskacountered that the water supply models used to calculate its share were wrong and sought to change theformulas so that imported water did not get charged to it. The Court appointed Judge William J. Kayatta, Jr.,of the U.S. Court of Appeals for the First Circuit to serve as special master over the dispute. Judge Kayatta’sreport drew exceptions from Kansas and Colorado. The United States supported the report’srecommendations.The Court’ s endorsement of the special master’s reportOpinion analysis: Bargaining in the shadow of equitable apportionment : SCOTUSbloghttp://www.scotusblog.com/2015/03/opinion-analysis-bargaining-in-the-shadow-of-equitable-apportionment/[3/18/2015 11:20:15 AM]Justice Kagan’s opinion for the Court canvasses the history of equitable apportionment cases, explaining theneed for states to use the original jurisdiction of the Supreme Court to settle disputes between them. TheCourt’s opinion cites extensively from the prior interstate water compact dispute case between Texas and NewMexico. The Court emphasizes that compacts to resolve interstate water allocations are bargains struck “in theshadow of our equitable apportionment power—that is, our capacity to prevent one State from takingadvantage of another.” The Court reasons that it is difficult to conceive that a downstream state would tradeaway its right to the Court’s equitable apportionment jurisdiction under a compact which would deprive thecourt of equitable powers over the dispute.The Court explains:“And that remedial authority gains still greater force because the Compact, having received Congress’sblessing, counts as federal law. See Cuyler v. Adams, 449 U. S. 433, 438 (1981) (“[C]ongressional consenttransforms an interstate compact . . . into a law of the United States”). Of course, that legal statusunderscores a limit on our enforcement power: We may not “order relief inconsistent with [a compact’s]express terms. Texas v.New Mexico, 462 U. S., at 564. But within those limits, the Court may exercise itsfull authority to remedy violations of and promote compliance with the agreement, so as to give completeeffect to public law. ”The Court then analyzes Nebraska’s conduct and agrees with both Kansas and Judge Kayatta that Nebraska’sconduct in 2006 constituted intentional breach and that disgorgement is an appropriate remedy. The majorityendorses the special master’s figure for the disgorgement award while noting that: “Truth be told, we cannotbe sure why the Master selected the exact number he did—why, that is, he arrived at $1.8 million, rather thana little more or a little less.” The Court notes that Nebraska has come into compliance since 2006 and rejectsKansas’s request for an injunctive order so as to tee up Nebraska for contempt proceedings in the event offuture violations.Lastly, the Court reviews Nebraska’s contentions regarding the problem posed by counting water importedfrom the Platte River basin into the Republican River being counted against Nebraska’s share of theRepublican.   The correction for this problem proposed by the special master as advocated by Nebraskainvolves changing the water accounting procedures of the 2003 Settlement Stipulation to include a new “fiverun formula. The Court notes the difficulties in accounting for such a fugitive resource. Adding one more punto an opinion already brimming with them, the Court observes, ” One complexity of that project arises fromwater’s . . . well, fluid quality.” The Court goes on to adopt a change in the accounting procedures to correctthe inaccuracy. In so doing, it maintains that it is not reforming the 1943 compact, but instead an ancillaryagreement to make sure it accurately implemented the 1943 compact’s apportionment.The dissent argues that states are sovereigns over their watersJustice Thomas’s dissent lambasted the majority for its failure to adhere to precedent and for allowing thehardship of the case as it invoked equitable powers without using equitable principles applicable. JusticeThomas argues that this dispute is essentially a contract question, but that the majority has authorized anarbitrary award of disgorgement and invented a new theory of contract reformation. Justices Scalia and Alitojoined this dissent in full, with the Chief Justice joining Part III of the dissenting opinion. Justice Scalia wroteseparately to take a swipe at the role of “modern Restatement,” which in his view are of questionable value.Justice Thomas argues forcefully that the majority got it backwards to argue that its equitable powers grow inthe shadow of equitable apportionment. Justice Thomas invokes state sovereignty over water to support hisargument, writing:Opinion analysis: Bargaining in the shadow of equitable apportionment : SCOTUSbloghttp://www.scotusblog.com/2015/03/opinion-analysis-bargaining-in-the-shadow-of-equitable-apportionment/[3/18/2015 11:20:15 AM]“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 afederal regulatory program; it “is an essential attribute of [state] sovereignty.” Tarrant Regional WaterDist., 569 U. S., at ___ (slip op., at 15) (internal quotation marks omitted). Thus, when the Courtresolves an interstate water dispute, it deals not with public policies created by federal statutes, but pre-existing sovereign rights, allocated according to the mutual agreement of the parties with the consent ofCongress. Although the consent of Congress makes statutes of compacts, our flexibility in overseeing afederal statute that pertains to the exercise of these sovereign powers is not the same as the flexibilityPorter claimed for courts engaged in supervising the administration of a federal regulatory program.Authority over water is a core attribute of state sovereignty, and “[f ]ederal courts should pause beforeusing 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).”The dissent goes on to emphasize that the Court’s approval of disgorgement is not justified under the factsfound and that the disgorgement award itself is arbitrary. Queuing up Scalia’s swipe at modern restatementsnicely, Justice Thomas argues that the Court has never endorsed the disgorgement approach offered up inThird Restatement of Restitution and Unjust Enrichment published in 2010. The dissent argues thatdisgorgement is strong medicine and should be used sparingly, and not under the facts presented whereinNebraska acted knowingly, but did not violate the compact deliberately. Lastly the dissent argued against the“five run solution” proposal. The dissent reasoned that the existing accounting procedure is imperfect, but notso flawed as to support equitable reformation. Share:    © 2015 SCOTUSblog (click for license)Switch to desktop site

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Opinion Analysis: Bargaining in the Shadow of Equitable Apportionment

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