www.klamathbasincrisis.org/kid/2021/KIDlettertoBOR051421.pdf

Letter from KID to Bureau of Reclamation

RIETMANN LAW, P.C.

Mr. Bottcher:

   The Klamath Irrigation District (“KID”) is in receipt of Reclamation’s April 2, 2021

letter effectively asserting that any diversion of water by KID contrary to BOR directives

is a violation of KID’s 1954 contract. We are also in receipt of Reclamation’s May 12,

2021 letter informing KID that Reclamation is unilaterally reinstalling the bulkheads on

the A-Canal.

   Reclamation maintains that KID’s delivery of water contrary to Reclamation’s

directives would violate Article 13(b) and 13(f) of that contract captioned “Amendatory

Contract Between the United States of America and the Klamath Irrigation District,” dated

November 29, 1954 (hereafter, the “1954 Contract”). Article 13(b) of the 1954 Contract

provides that KID will assume Reclamation’s water delivery obligations under certain

contracts with third parties listed in Exhibit A and will “carry out . . . to the satisfaction of

the Secretary, all the obligations imposed upon the United States” by those contracts.

Article 13(f) provides that KID will “make no water deliveries under contracts mentioned

in this article at times when notified by the Secretary that the contracting parties are not

entitled to delivery of irrigation water because of nonpayment of charges due the United

States, or for other reasons.”

   1. These Contractual Provisions are Irrelevant to KID’s Landowners

Neither Article 13(b) nor 13(f) is in any way relevant to KID’s delivery of water to

its own landowners. Articles 13(b) and 13(f) solely relate to KID’s assumption and

discharge of the United States’ obligations to deliver water to other Reclamation

contractors. See Article 13(b)(“The District hereby assumes and agrees to carry out…to the

satisfaction of the Secretary, all the obligations imposed upon the United States by the

contracts listed on Exhibit A.”); Article 13(f) (“The District agrees that it will make no

water deliveries under contracts mentioned in this article at times when notified by the

Secretary that the contracting parties are not entitled to the delivery of irrigation water

because of nonpayment of charges due the United States, or for other reasons).

   Exhibit A to the 1954 Contract lists 110 separate Reclamation contracts of which

KID assumed the United States’ responsibilities. None of these contracts are the contracts

by which water is supplied to KID. KID’s 1905 contract is simply not mentioned in Article

13. Reclamation plainly cannot direct KID to curtail water deliveries to its own landowners

based on these provisions of KID’s contract, which pertain solely to KID’s performance of

its water delivery obligations to third-party contractors.

   2. The 1954 Contract Does Not Grant Reclamation Total Discretion to Curtail

Diversions

   Article 13(f) of the 1954 Contract states: “The District agrees that it will make no

water deliveries under contracts mentioned in this article at times when notified by the

Secretary that the contracting parties are not entitled to the delivery of irrigation water

because of nonpayment of charges due the United States, or for other reasons.” It

appears Reclamation is arguing that the final clause of this sentence provides virtually

unlimited authority for it to direct KID to cease water deliveries. In particular, Reclamation

asserts it may direct KID to cease water deliveries so that Reclamation may meet its

obligations under the Endangered Species Act. This is simply not the meaning of the

contract under any reasonable interpretation.

   Federal law governs the interpretation of contracts entered into pursuant to federal

law and to which the government is a party. Smith v. Cent. Ariz. Water Cons. Dist., 418

F3d 1028, 1034 (9th Cir. 2005). For guidance, courts look to general principles of contract

interpretation in understanding a particular provision or clause. See Kennewick Irr. Dist. v.

United States, 880 F.2d 1018, 1032 (9th Cir.1989). “A written contract must be read as a

whole and every part interpreted with reference to the whole.” Shakey’s Inc. v. Covalt, 704

F.2d 426, 434 (9th Cir. 1983). “Preference must be given to reasonable interpretations as

opposed to those that are unreasonable, or that would make the contract illusory.”

Kennewick at 1032.

   Particularly applicable here are the related principles of interpretation known as

ejusdem generis and noscitur a sociis. Noscitur a sociis—meaning “a word is known by

the company it keeps”—has been specifically used by the Supreme Court to “avoid

ascribing to one word a meaning so broad that it is inconsistent with its accompanying

words.” Yates v. United States, 574 U.S. 528, 543 (2015) (quoting Gustafson v. Alloyd

Co., 513 U.S. 561, 575 (1995)); see also Wayne Land and Mineral Grp. LLC v. Delaware

River Basin Comm’n, 894 F.3d 509, 532 (3d Cir. 2018) (“[R]ules of contract interpretation

advise us to interpret the meaning of a word by considering the words associated with it.”);

Alice F. v. Health Care Serv. Corp., 367 F. Supp. 3d 817, 825 (N.D. Ill. 2019) (describing

ejusdem generis and noscitur a sociis as “principles of contract interpretation”); Williston

on Contracts, Section 32:6 and 32:10.

   Here, the phrase “other reasons” does not mean literally any reason, and is

necessarily limited by the preceding phrase “nonpayment of charges due the United

States.” Even a very generous and broad interpretation of the “other reasons” clause would

suggest it only applies when a District for which KID is discharging the United States’

delivery obligations breaches that contract. Because the goal of contract interpretation is

“to discern and enforce the parties’ mutual intent at the time the contract was formed,”

Thor Seafood Corp. v. Supply Mgmt. Servs., 352 F. Supp. 2d 1128, 1131 (C.D. Cal. 2005),

“other reasons” obviously could not refer to obligations of the United States under the

Endangered Species Act. The 1954 Contract predates the Endangered Species Act, which

was passed in 1973, by almost two decades.

   Additionally, Reclamation’s contention that it may deprive third-party contractors

of water they are entitled to under their water rights, and then use the water to meet its ESA

obligations, would render Reclamation’s water delivery obligations to the third-party

contractors entirely illusory. See Kennewick, 880 F.2d at 1032.

   This interpretation would also suggest that Reclamation and KID were empowered

to modify or amend the terms of other District’s contracts. Reclamation has presented no

authority suggesting that was either the intended effect of the “or for other reasons” clause

or that it would be legally permissible for other contracts to be amended without the consent

or knowledge of the parties thereto. This interpretation flies in the face of both basic

contract law and common sense.

   The third-party contractors KID is being directed to curtail own private water rights

entitling them to make beneficial use of live flow and/or stored water in Upper Klamath

Lake reservoir (“UKL”). These contractors have entered into contracts with Reclamation

for delivery of the water they own the rights to beneficially use. Whether the “other

reasons” provision of KID’s contract authorizes KID to curtail water deliveries to thirdparty

contractors therefore depends on the terms of the contract between the third-party

contractors and Reclamation, which KID has assumed.

   KID’s obligation to deliver water to third parties is identical to the obligations KID

assumed under Reclamation’s contracts. Therefore, whether “other reasons” exist for

Reclamation to direct KID not to deliver water to third parties is dictated by the terms of

those incorporated contracts between Reclamation and the various third parties. As

Reclamation has previously acknowledged, at least some of these third-party contracts

leave Reclamation with no authority to deny water deliveries. For example, Reclamation

has previously admitted:

The recognition by the United States of Van Brimmer’s right to the

perpetual use of 50 second-feet of water in Article 15 (of Van

Brimmer’s contract) prevents Reclamation from curtailing water

deliveries below that amount. Article 20 provides further evidence of

the understanding that the United States is obligated to deliver 50

second-feet of water by stating that the United States is not obligated

to deliver more than that amount of water. The specific

acknowledgement by the United States of Van Brimmer’s right to 50-

second-feet in Article 15 provides no discretion for Reclamation to

reduce the amount of water which Reclamation must deliver.

   What is more important than Reclamation’s prior admissions, however, is the fact

that none of these contracts comprehend Reclamation’s ability to curtail water deliveries

to meet separate obligations it might one day have under the Endangered Species Act. The

majority of these contracts predate the existence of that Act by decades, and only delivery

obligations that the United States has assumed since 1973 may have contemplated a carveout

for such purposes.

   Aside from the reasons set forth above, Reclamation’s proposal that the “for other

reasons” language of KID’s contract is really an “any reasons” clause that provides

Reclamation carte blanche to curtail deliveries is contrary to other basic principles of

contract interpretation. For example:

   • A written contract must be read as a whole and every part interpreted with

reference to the whole. Reclamation’s current interpretation of KID’s water

delivery obligations to other contractors ignores the provisions of KID’s contract

providing that “[f]or lands outside the District boundaries…water shall be

delivered in the quantities, at the times and at the points of diversion…as

required from time to time by contractors that have executed contracts with the

United States in such manner as to meet obligations which the United States has

assumed under said contracts.” Reclamation’s interpretation also ignores all the

provisions of the various third-party contractual obligations KID has assumed,

which plainly impose nondiscretionary water delivery obligations.

   • Articles 26 and 27 of the 1954 Contract state the United States will “use all

reasonable means to guard against” a shortage in the quantity of water, and that

both parties must “exercise due diligence to remove” their inability to fulfill a

contractual obligation due to an “uncontrollable force.” While the United States

does not have any control over how much precipitation falls in the Klamath

Basin, the United States has many reasonable means to guard against shortfalls

in water, including not flushing stored water down the Klamath River without

first acquiring water rights permitting such a release. Put differently, while the

United States may not be able to increase the overall quantity of water available,

it can control whether there is a “shortage” of needed water under the contracts,

by either acquiring water rights or compensating farmers for the agreement not

to exercise their rights. This would prevent there from being a shortage in a

given year. Where the United States elects not to do this, and to simply flush

stored water down the Klamath River, it is in fact creating a shortage of Project

water in violation of the 1954 Contract.

   3. Section 9 of ESA does not authorize Reclamation to preemptively curtail

KID diversions

   Section 9 of the Endangered Species Act also does not provide Reclamation with

the ability to act pre-emptively. Instead, “the Government cannot enforce the § 9

prohibition until an animal has actually been killed or injured.” Babbitt v. Sweet Home

Chapter of Comm. for a Great Oregon, 515 U.S. 687, 703 (1995). “The § 7 directive

applies only to the Federal Government, whereas the § 9 prohibition applies to ‘any

person.’ Section 7 imposes a broad, affirmative duty to avoid adverse habitat modifications

that § 9 does not replicate, and § 7 does not limit its admonition to habitat modification that

‘actually kills or injures wildlife.’” Id.; see also Defenders of Wildlife v. Martin, 454 F.

Supp. 2d 1085, 1095 (E.D. Wash. 2006) (“This ‘after-the-fact enforcement’ does not

prevent threats to listed species; that task is accomplished through § 7.”). Whatever Section

9 liability might arise from water rights holders exercising their water rights and requiring

KID to perform its non-discretionary water delivery obligations, it does not provide a

lawful basis for KID—or Reclamation—to refuse to fulfill its contractual obligations. The

existence or non-existence of Section 9 liability is inherently an after-the-fact question

which neither KID nor Reclamation has a contractual right to pre-judge.

   There are obvious reasons why this must be true: particularly, it is well-established

that take liability under Section 9 incorporates principles of proximate cause. See Babbitt

v. Sweet Home Chapter of Comms. For a Great Oregon, 515 U.S. 687, 700 n.13 (1995)

(noting take liability is subject to the “ordinary requirements of proximate causation and

foreseeability”); Natural Res. Def. Council v. Zinke, 347 F. Supp. 3d 465, 487 (E.D. Cal.

2018) (“It is well established that principles of proximate cause apply to Section 9

claims.”); Cascadia Wildlands v. Kitzhaber, 911 F. Supp. 2d 1075, 1084 (D. Or. 2012) (“It

is well accepted that proximate cause is an element of ESA Section 9 claims.”). Proximate

cause is not an easy determination to make, particularly in the ESA context: “The idea of

proximate cause, as distinct from actual cause or cause in fact, defies easy summary. . . .

Proximate cause is often explicated in terms of foreseeability or the scope of the risk

created by the predicate conduct.” Nat. Res. Def. Council, 347 F. Supp. 3d at 486–87. The

determination of proximate cause is a legal conclusion that a court must make upon

weighing the particular facts of a case. See Hemi Grp., LLC v. City of New York, 559 U.S.

1 at 13–14 (2010) (noting an allegation that something “directly caused” harm is a “legal

conclusion about proximate cause”); AXIS Surplus Ins. Co. v. Intracorp Real Estate, LLC,

No. C08-1278-JCC, 2009 WL 10676292, at *6 (W.D. Wash. Nov. 19, 2009) (“The

determination of what was the efficient proximate cause of the loss is a legal conclusion,

based on factual assessment.”). There is no way for KID or Reclamation to conclude, in

advance, both that a particular diversion of water will in fact cause a specified instance of

take prohibited by Section 9, and that that instance of take was proximately caused by that

particular diversion.

   This is especially true where, as here, Reclamation is currently diverting massive

quantities of live flow in UKL through the Link River Dam. These massive discretionary

diversions, which have been occurring for some time, are the proximate cause of UKL

being below the boundary conditions of the 2020 BiOp. What is more, if KID performs its

nondiscretionary water delivery obligations and delivers live flow to its landowners or

third-party contracts, this will only impact the elevation of UKL if Reclamation chooses to

unlawfully divert stored water in UKL to the Klamath River. In such scenario, Reclamation

would be the proximate cause of any drop in UKL lake elevation – not KID.

   Reclamation’s contention that it has authority to predetermine whether any

landowner’s use of water violates Section 9 of the ESA plainly violates the due process

rights of water right holders in the Klamath Project. “The right to the use of water

constitutes a vested property interest which cannot be divested without due process of law.”

Skinner v. Jordan Valley Irr. Dist., 137 Or. 480, 491 (1931), opinion modified on denial of

reh’g, 137 Or. 480 (1931). Reclamation serving as both judge and jury and depriving water

rights holders of their constitutionally protected property interest in their water rights based

on a pre-judgment of Section 9 liability without notice or meaningful opportunity to be

heard before an impartial jury clearly violates the procedural due process rights of

landowners within the Klamath Project.

   Moreover, neither Reclamation nor KID is liable under Section 9 for any “take” that

occurs as part of a non-discretionary legal obligation to deliver water. Federal courts have

held that “that a federal agency that is legally required to take an action pursuant to federal

law, such as by implementing non-discretionary terms in an otherwise valid water delivery

contract, that agency cannot be the proximate cause of Section 9 take by undertaking that

non-discretionary action.” Nat. Res. Def. Council v. Norton, 236 F. Supp. 3d 1198, 1239

(E.D. Cal. 2017). Because, under the 1954 Contract, KID merely stepped into the shoes of

Reclamation in providing these water deliveries, it cannot be more liable than Reclamation

would be for fulfilling the same mandatory delivery obligation.

   4. Reclamation reinstallation of bulkheads violates KID’s 1954 contract

   It is our understanding that Reclamation has physically taken control of the A-Canal

headworks this morning simultaneously with the transmittal of its May 12, 2021

correspondence, by reinstalling the bulkheads in the A-Canal to make delivery of water

physically impossible.1 Reclamation is doing this without having even asked KID to

reinstall the bulkheads itself. This plainly violates KID’s 1954 Contract, irrespective of any

other issue addressed in this letter.

   The fundamental purpose of the 1954 Contract was for KID to “take over operation

and maintenance of certain Project works” from Reclamation, in exchange for which KID

agreed to assume all of Reclamation’s delivery obligations. Although the 1954 Contract

allows Reclamation to “resume operation and maintenance of the transferred works” in

certain circumstances—i.e., for violating the contract and failing to cure the violation for a

period of one year—Reclamation does not even claim KID has violated its contract. See

1954 Contract, Article 21(a).

   Moreover, even if KID had violated its contract and failed to cure it, the 1954

Contract requires specific prior notice be provided to KID:

   Prior to resuming operation and maintenance, the Secretary

shall give the District written notice of his intent to exercise

such option, which notice shall inform the District of the

specific provisions of this contract which have been violated or

the obligations that are in default, shall describe the property

and works to be returned to the custody of the United States

and shall name the date on which return to the United States

shall be effected, which date shall be not less than sixty (60)

days after the date of notice sent to the District.

   See 1954 Contract, Article 21(b).

   Contrary to Article 21(b), Reclamation has: (1) resumed operational control of the

A-Canal without providing sixty (60) day notice, and (2) failed to identify in its “notice”

any specific provision KID has violated or is in default of. Additionally, Reclamation

cannot claim that its resumption of operational control was to make an emergency repair

pursuant to Article 7(d), as that is only permitted “[i]n event of major disaster to, or failure

of, the transferred works, or any part thereof, which results in damage of such severity or

magnitude that immediate repairs to the transferred works are imperative, in the opinion of

the Secretary to protect against substantial hazard to life or property.” Quite plainly, this

is not that circumstance.

1 Note that, to date in 2021, KID has not diverted any water in the A-Canal due to Reclamation’s prior threats to

reappropriate the irrigation works in violation of the parties’ 1954 Contract.

   5. Reclamation is liable for all damages directly or indirectly resulting from

its resumption of operational control of the A-Canal

   Ordinarily, Article 21(g) protects the United States from liability for damages that

directly or indirectly result from Reclamation resuming operational control of Project

works “as provided in this contract.” Here, however, Reclamation has not resumed

operational control of the A-Canal “as provided in [the 1954 Contract].” Therefore, to the

extent litigation is filed against KID due to its inability to deliver water to other contractors,

Reclamation is not indemnified by the 1954 Contract from paying the costs of both defense

and indemnity to KID for any damages sought by these water rights holders.

   6. KID is reassuming operational control and removing bulkheads

   Given all of the above, KID is resuming operational control of the A-Canal and

other irrigation works under the 1954 Contract. This includes removing the bulkheads so

KID may at least fulfill its obligation to deliver the 3,000 acre-feet of water referenced in

Reclamation’s letter when it becomes available.

   Sincerely,

   Nathan R. Rietmann

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