By Derek R. Hoffman

In a years-long dispute over water allocations among irrigation district water users in the Imperial Valley, the California Fourth District Court of Appeal recently issued an opinion in Abatti v. Imperial Irrigation District addressing the limited nature of Imperial Irrigation District (IID) landowner rights to receive water service and the parameters within which IID may adopt programs allocating limited water supplies while recognizing statutory priorities and conservation mandates. [Abatti v. Imperial Irrigation District, 52 Cal.App.5th 236 (4th Dist. 2020), as modified on denial of reh’g (Aug. 5, 2020), review filed (Aug. 24, 2020).]

Background

As summarized in the Opinion, IID is the sole source of fresh water for the Imperial Valley in southern California, all of which comes from the Colorado River. Approximately 97 percent water distributed by IID is used for agricultural purposes. IID is a party to various judgments, settlement agreements and related agreements—some dating back many decades—governing allocation of Colorado River water supplies. Under one such agreement—the 2003 Quantification Settlement Agreement (QSA)—IID’s entitlement to Colorado River supplies was capped at 3.1 million acre-feet, subject to an overrun policy requiring conservation and net returns to the water system in event of overuse.

As part of implementing the QSA, IID imposed land fallowing and water use efficiency conservation measures and developed programs to allocate its water resources during shortage conditions. In 2013, the IID board of directors (IID Board) adopted an “equitable distribution plan” (EDP), which unlike previous plans, provided for an annual apportionment that would not require the presence of a water shortage as a precondition and was intended to be permanent. Under the EDP and related IID Board actions, water would be allocated first to non-agricultural users, with remaining amounts allocated among farmers. Agricultural allocations would be made according to a combination of farmers’ historical use and a distributed allocation of total water on a per-acre basis. Farmers would also be able to share, buy and sell water through a clearinghouse.

Plaintiff and appellant Abatti and his family have  been farming in the Imperial Valley for more than a century. As a recipient and user of IID water, Abatti filed a petition for writ of mandate and related claims in the Imperial County Superior Court challenging the EDP and related IID actions. Abatti objected to EDP allocation prioritization and asserted claims for declaratory relief, an uncompensated taking of Abatti’s claimed water rights, and a breach of fiduciary duty. Abatti asserted that the farmers possess water rights entitling them to receive water from IID sufficient to meet their reasonable irrigation needs and that such water rights derive from amounts historically used to irrigate their crops. IID contended that while agricultural users possess a right to water service, that right is not quantified and is also not a water right in the traditional common law sense. IID further asserted that the EDP was consistent with IID’s obligation to distribute water equitably to all of its while fulfilling its other obligations such as conservation and operating within its Colorado River entitlement.

Trial Court Proceedings

The trial court struck Abatti’s breach of fiduciary duty and taking claims, and allowed the remaining claims to proceed. In 2017, the trial court issued a writ of mandate directing IID to repeal the EDP. In its statement of decision, the trial court determined the parties’ water rights, including finding that, based on historical use, farmers own the equitable and beneficial interest in the district’s water rights, which are appurtenant to their lands and is a constitutionally protected property right. It found that IID abused its discretion by prioritizing non-agricultural water users ahead of agricultural users, by violating both “no injury” rules applicable to water transfers and appurtenancy rules, and by the methodology IID selected to apportion agricultural water among farmers.

The trial court also determined ruled that Abatti’s claims were not time barred or estopped by a prior validation action. Finally, the judgment entering declaratory relief also expressly prohibited IID from prioritizing any non-domestic water users over farmers, from apportioning agricultural water without consideration for historical use, and from entering into contracts that guarantee water to any non-domestic or non-agricultural water users during shortage conditions.

IID appealed from the judgment and writ of mandate, and Abatti appealed from the dismissal of his breach of fiduciary duty and taking claims. Many amicus briefs were filed in support of both parties.

The Court of Appeal’s Decision

In the lengthy Opinion, the court first explained in significant detail the complex geographical, historical and legal context pertaining to the management and regulation of the Colorado River water system, often referred to as the Law of River. The court explained that, as an irrigation district, IID holds its various water rights in trust for the benefit of its users, and is responsible for managing its water supply not only for irrigation but also for other beneficial uses.

The court observed that IID obligations included managing water resources in accordance with many complex and in some ways competing principles, including requirements that water be used reasonably and beneficially, that it must be conserved and that IID must comply with obligations imposed under the Law of the River including historic drought and water shortage conditions.

The Court of Appeal rejected Abatti’s contentions and the trial court’s findings regarding the nature of the farmers’ water rights. The court held that farmers within the district:

. . .possess an equitable and beneficial interest in [IID’s] water rights, which is appurtenant to their lands, and that this interest consists of a right to water service. (emphasis added).

The court found that IID allocation programs did not comprise water “transfers” and did not therefore implicate no injury rules.

The court observed that in accordance with statutory law and applicable case law, IID retains discretion to modify water service consistent with its duties to manage and distribute water equitably for all categories of IID water users. The court concluded that the trial court correctly found that IID abused its discretion in the way it prioritized water users in the EDP, but that the trail court erred to the extent that it found any other abuse of discretion by IID in its adoption of the EDP. The Court of Appeal found that the trial court erred and overreached in granting declaratory relief by prescribing specific methodologies to prioritize allocations, which the court deemed a usurpation IID’s authority and discretion.

Breach of Duty and ‘Takings’ Claims

Finally, the Court of Appeal found that the trial court properly dismissed Abatti’s breach of fiduciary duty and taking claims, largely on the basis that Abatti failed to demonstrate elements of damages and the existence of a water right being taken without compensation. Specifically, as to the breach of fiduciary duty, the Court of Appeal stated:

The superior court determined that Abatti failed to allege facts establishing damages that would support his claims. We construe this as a finding that Abatti did not sufficiently plead damages for purposes of his breach of fiduciary duty claim. Even assuming that the District had a fiduciary duty to Abatti and that the EDP somehow breached that duty, we conclude that Abatti’s failure to adequately plead damages is a sufficient basis to sustain the demurrer.

As to the takings claim specifically, the Court of Appeal stated:

As we have determined, ante, Abatti possesses a right to service, and changes to service do not necessarily impede or diminish that right. Assuming that injuries from such changes could support a claim for damages, one would still have to sufficiently allege them. Abatti simply speculates that the 2013 EDP could harm farmers. . . .Even in alleging that the 2013 EDP has the effect of taking water from him, Abatti does not assert that he has actually been denied any water. Neither potential harms, nor counsel’s hypothetical arguments, suffice to establish compensable damages.

A ‘Limited’ Opinion

The court emphasized the limited scope of its conclusions and their applicability to the parties, facts and issues before the court. The court affirmed the judgment as to the ruling that IID abused its discretion in how it apportioned water in the EDP, and as to the dismissal of Abatti’s breach of fiduciary duty and taking claims.

The court otherwise reversed the trial court judgment and directed the Superior Court to enter a new and different judgment granting Abatti’s petition on the sole ground that IID’s failure to provide for equitable apportionment among categories of water users constituted an abuse of discretion and denying the petition on all other grounds, including as to declaratory relief.

Conclusion and Implications

The Abatti case demonstrates the complex and multi-layered regulatory regime within which IID operates in managing and allocating its water resources. Water providers throughout California face similar challenges and complexities, particularly in times of drought and in response to new and ever-increasing regulations and mandates. Though the Fourth District Court of Appeal emphasized the narrow scope of its findings, the published Opinion addresses many interesting issues that have broader relevance for California water law and policy. The court’s original and modified opinions are available online at: https://www.courts.ca.gov/opinions/documents/D072850M.PDF