Stockton East Water District v. United States
2014 U.S. App. LEXIS 14764
| Fed. Cir. | 2014Background
- Central San Joaquin Water Conservation District contracted in 1983 with the Bureau of Reclamation for up to 80,000 acre-feet (minimum 56,000 acre-feet after year 10) per year from New Melones to serve agriculture; Central planned infrastructure and bonds based on projected demand studies.
- After the CVPIA (1992) Reclamation announced in 1993 it could not meet contractual minimums; deliveries 1988–1998 were intermittent and often below contract amounts.
- This litigation began in 1993; liability for breach was earlier found on appeal for 1999–2004 (Stockton E. Water Dist. decisions), and the case was remanded to the Court of Federal Claims to determine damages.
- On remand the trial court awarded Central $149,950 in cost-of-cover damages (difference paid to SSJID vs. Reclamation price for 2002–2004) but denied any expectancy damages, reasoning Central failed to prove what it would have requested or sold in a non-breach world.
- On this appeal Central challenges denial of expectancy damages; the Court of Appeals affirms the cost-of-cover award (Government waived challenge by not cross-appealing) but vacates and remands the denial of expectancy damages because the trial court wrongly excluded the effects of Reclamation’s 1993 announcements when construing the hypothetical non-breach world.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Nature of breach — whether Reclamation was obligated to "deliver" or to "make available" minimum quantities | Central: Article 3(c) obligated Reclamation to provide and Central to pay for at least 56,000 af/year regardless of requests; take-or-pay should be enforceable | Government: Contract requires Reclamation to "make available" water; deliveries follow Central's schedule; no obligation to deliver absent a schedule/request | Court: Agreed with trial court that obligation is to "make available," not automatic physical delivery; take-or-pay would not have been enforced given the contractual structure and facts. |
| Expectancy damages — proper characterization of the non-breach "but-for" world | Central: Trial court should consider Reclamation's 1993 announcement and subsequent conduct when determining what Central and farmers would have requested; pre-1999 evidence (CH2M Hill study, farmer intent) is relevant to show demand suppressed by announced non-performance | Government: Central must show what would have happened in the hypothetical non-breach world; mere assertion that more water would have been requested is insufficient; trial court correctly focused on observed requests during breach years | Court: Trial court erred by ignoring effect of 1993 announcements on later requests; remanded for damages determination that includes evidence from 1993 onward to model the but-for world. |
| Cost-of-cover damages and evidentiary challenge by Government | Central: Trial court correctly relied on Central's testimony and records showing payments to SSJID; Government waived challenge by not cross-appealing | Government: Trial court erred; audited financials conflict with testimony and Central should not be compensated for failing to take available Reclamation water | Court: Government waived its attack by not cross-appealing; affirmed trial court award of $149,950 in cost-of-cover damages. |
Key Cases Cited
- Dairyland Power Co-op v. United States, 645 F.3d 1363 (Fed. Cir.) (standard of review for Court of Federal Claims decisions)
- Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir.) (clear error standard for factual findings)
- Home Savings of America v. United States, 399 F.3d 1341 (Fed. Cir.) (review of damages determinations)
- Hi–Shear Tech. Corp. v. United States, 356 F.3d 1372 (Fed. Cir.) (trial court discretion on damages quantum)
- Sevenson Envtl. Servs., Inc. v. Shaw Envtl., Inc., 477 F.3d 1361 (Fed. Cir.) (contract interpretation is legal question reviewed de novo)
- Slattery v. United States, 583 F.3d 800 (Fed. Cir.) (expectancy damages and but-for analysis)
- Bluebonnet Sav. Bank, FSB v. United States, 266 F.3d 1348 (Fed. Cir.) (but-for performance inquiry)
- Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374 (Fed. Cir.) (expectancy damages principles)
- Lazare Kaplan Int’l, Inc. v. Photoscribe Technologies, Inc., 714 F.3d 1289 (Fed. Cir.) (cross-appeal requirement)
- El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473 (U.S.) (cross-appeal principles)
- Stockton E. Water Dist. v. United States, 583 F.3d 1344 (Fed. Cir.) (prior appeal addressing liability)
- Stockton E. Water Dist. v. United States, 638 F.3d 781 (Fed. Cir.) (subsequent en banc/affirmance on liability)