Stockton East Water District v. United States
133 Fed. Cl. 204
| Fed. Cl. | 2017Background
- Central San Joaquin Water Conservation District contracted (1983) with Reclamation for New Melones/CVP surface water: contract "make available" maximum 80,000 and minimum 56,000 acre-feet after build-up.
- Congress enacted the Central Valley Project Improvement Act (CVPIA) in 1992, and beginning in 1993 Reclamation announced it could not meet contractual minimums due to CVPIA allocations to fish and wildlife.
- Central sued; after multi‑stage litigation the Federal Circuit found breaches for 1999–2004 and remanded the expectancy-damages issue to the Court of Federal Claims, instructing the court to consider how the 1993–1999 announcements affected farmer demand in 1999–2004 (Stockton East IV).
- On remand Central submitted new evidence: farmers’ testimony, 1991 letters of intent, and an expert forecast (Dr. Smith) estimating much higher but‑for demand; the government rebutted with an expert (Dr. Sunding) criticizing methodology and causal attribution to the announcements.
- The court found the letters of intent and Dr. Smith’s projections unreliable to quantify pre‑announcement demand or to isolate the announcements’ incremental effect; many other factors (infrastructure costs, capital, leases, drought risk, crop prices, connection feasibility) plausibly explained low observed demand.
- Conclusion: Central failed to prove a non‑speculative but‑for demand level caused by Reclamation’s announcements; expectancy damages denied and final judgment entered.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entitlement to expectancy damages for 1999–2004 | Central argued contract minimums and evidence (letters, surveys, expert) show farmer demand would have met ≥56,000 acre‑ft/year in the but‑for world | Gov argued (and earlier court found) contract required only "make available," not enforced "take or pay"; actual requests/deliveries in breach years show no unmet demand | Denied — plaintiff failed to prove a reliable non‑breach demand to support expectancy damages |
| Proper but‑for baseline: effect of 1993 announcements | Central argued Federal Circuit requires analysis of a world where Reclamation never announced inability to supply; Central presented projections showing much higher demand absent announcements | Gov argued Central failed to isolate announcements’ incremental effect from other factors reducing demand | Held that court must consider announcements but Central failed to quantify their marginal effect on 1999–2004 demand |
| Reliability of pre‑1993 evidence (letters of intent, CH2M surveys) | Central: letters and surveys reveal revealed preference and genuine farmer intent to take large quantities | Gov: letters were non‑binding, no deposits, likely overstate demand; farmers often did not perform cost/feasibility analysis | Court found letters/surveys unpersuasive as revealed preference and insufficiently probative of actual demand |
| Reliability of expert forecast/modeling (Dr. Smith) | Central’s expert modeled investment/price incentives and projected ramp‑up to ~90,360 acre‑ft/year by 2001 | Gov’s expert identified methodological flaws and omitted variables (capital constraints, landlord consent, connection feasibility, drought risk); argued projections overstate demand and fail to attribute shortfall to announcements | Court credited defects in Smith’s model and Sunding’s critiques; Smith did not isolate announcement effect, so projections unreliable |
Key Cases Cited
- Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374 (Fed. Cir. 2001) (expectancy damages aim to make non‑breaching party whole)
- Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002) (standards for contract damages)
- Yankee Atomic Elec. Co. v. United States, 536 F.3d 1268 (Fed. Cir. 2008) (plaintiff bears burden to prove plausible but‑for world for expectancy damages)
- S. Nuclear Operating Co. v. United States, 637 F.3d 1297 (Fed. Cir. 2011) (burden to establish non‑breach world rests with plaintiff)
- Energy Nw. v. United States, 641 F.3d 1300 (Fed. Cir. 2011) (plaintiff must prove non‑breach world for damages calculation)
- Kan. Gas & Elec. Co. v. United States, 685 F.3d 1361 (Fed. Cir. 2012) (court needs record evidence to compare breach and non‑breach worlds)
- Stockton E. Water Dist. v. United States, 761 F.3d 1344 (Fed. Cir. 2014) (remand: analyze effect of 1993–1999 announcements on later demand)
- Stockton E. Water Dist. v. United States, 583 F.3d 1344 (Fed. Cir. 2009) (earlier appellate rulings clarifying contract and takings issues)
- Stockton E. Water Dist. v. United States, 109 Fed. Cl. 460 (Fed. Cl. 2013) (prior damages opinion rejecting Central’s evidence and expert projections)