[00:00:00] Speaker 04:
Next case for argument, 22-1994, city of Fresno versus the United States.

[00:00:07] Speaker 04:
Mr. Marzullo, please proceed.

[00:00:10] Speaker 03:
Thank you, Your Honor, and good morning.

[00:00:12] Speaker 03:
I'm Roger Marzullo, appearing on behalf of plaintiffs appellants.

[00:00:18] Speaker 03:
In May of 2014, there were 279,000 acre feet of San Joaquin River water stored in Klamath Reservoir.

[00:00:30] Speaker 03:
And yet, the bearer of reclamation gave the friant contractors a zero allocation.

[00:00:36] Speaker 03:
No water at all that summer for the city of Fresno or for the 17 water districts that depend on this water supply.

[00:00:45] Speaker 03:
The trial court ordered in finding that this was not a breach of contract and in finding that the irrigators, the people who apply this water to their farms and fields to produce crops, did not suffer a taking under the Fifth Amendment.

[00:01:01] Speaker 04:
Council, it's my understanding that under the contract that the Friant contract, they received water

[00:01:10] Speaker 04:
only when it was left over, i.e.

[00:01:13] Speaker 04:
not when the other requirements that the government had to deliver water were already met.

[00:01:19] Speaker 04:
Is that fair?

[00:01:21] Speaker 03:
No, Your Honor.

[00:01:22] Speaker 03:
That is a fair characterization of the erroneous interpretation given the contract by the trial court.

[00:01:31] Speaker 03:
In point of fact, the trial court badly misconstrued

[00:01:37] Speaker 03:
the terms of both the Friant and the exchange contract.

[00:01:41] Speaker 03:
The interpretation that the Court has just stated relies on paragraph 3n of the Friant contract, which indeed states that the terms of the Friant contract are subject to

[00:01:58] Speaker 03:
the terms of the exchange contract.

[00:02:00] Speaker 03:
Not subordinate to, by the way.

[00:02:03] Speaker 03:
But the second sentence of that paragraph, which the trial court gave no effect to, says that reclamation shall not deliver to the exchange contractors the waters of the San Joaquin River unless and until required to do so by the terms of the exchange contract.

[00:02:26] Speaker 03:
Now, the problem is that the trial judge left to the conclusion, which he characterized, Your Honor, as saying that at all times, the exchange contractors were entitled to a superior right to the water.

[00:02:42] Speaker 04:
Well, under A 368, doesn't it say the Bryant contract is subject to the government's other obligations?

[00:02:50] Speaker 03:
Indeed, it does, Your Honor.

[00:02:52] Speaker 03:
And that's really duplicative, then,

[00:02:56] Speaker 03:
paragraph 3n provision, which says that reclamation shall not deliver the water unless it is required to do so by the exchange contract.

[00:03:09] Speaker 03:
So you have to look at the exchange contract to determine under what circumstances is reclamation required to deliver the waters of the San Joaquin River to the exchange contractors.

[00:03:22] Speaker 03:
Well, that's found in Article 4 of the exchange contract, which the trial court fundamentally ignored.

[00:03:31] Speaker 03:
Article 4A states that so long as reclamation is delivering substitute water in accordance with the contract,

[00:03:44] Speaker 03:
that it is the United States that has the right to divert, store, and use the reserved waters of the San Joaquin River for the benefit of others than the exchange contractors.

[00:04:02] Speaker 04:
So just to be clear, I have to agree with your argument that under the exchange contract, the government was not required to deliver the waters to the exchange contractors in order for you to prevail.

[00:04:15] Speaker 03:
Yes, that is correct.

[00:04:18] Speaker 03:
So under 4A, so long as reclamation is delivering substitute water.

[00:04:24] Speaker 04:
OK, let me just double check.

[00:04:28] Speaker 04:
If I interpret the San Joaquin water as substitute water, then it was required to deliver that to the exchange contractors.

[00:04:39] Speaker 04:
Is that correct?

[00:04:40] Speaker 03:
Not exactly, Your Honor, if I may.

[00:04:44] Speaker 03:
Because 4A says, so long as reclamation is delivering substitute water, then reclamation has the right to use the San Joaquin water.

[00:04:58] Speaker 03:
So it doesn't make much sense to say, well, the sidewalking water is substitute water.

[00:05:03] Speaker 04:
Can you say that again?

[00:05:05] Speaker 04:
I didn't get it.

[00:05:05] Speaker 04:
It's a little confusing for me.

[00:05:06] Speaker 04:
Try it.

[00:05:07] Speaker 04:
Try it one more time.

[00:05:07] Speaker 03:
Yes.

[00:05:08] Speaker 03:
Well, and I would defer the court to the Wilson of the United States.

[00:05:13] Speaker 03:
Which kind of explains the whole history of this contract.

[00:05:17] Speaker 03:
It's this very contract.

[00:05:18] Speaker 04:
Well, you're saying the San Joaquin water is not substitute water, right?

[00:05:21] Speaker 04:
That's what you're saying?

[00:05:22] Speaker 03:
Yes.

[00:05:22] Speaker 04:
But why?

[00:05:24] Speaker 03:
Because the nature of this transaction, which it bears the title, contract for the exchange of waters.

[00:05:32] Speaker 03:
The exchange was that the exchange contractors exchanged the use of

[00:05:37] Speaker 03:
their rights in the San Joaquin in return for a substitute water supply from the Sacramento.

[00:05:44] Speaker 03:
And 4A says, well, so long as Reclamation is delivering that substitute water from the Sacramento, then Reclamation has the right to use the San Joaquin River rights for the Friant project.

[00:05:58] Speaker 03:
That's what this whole transaction was about.

[00:06:01] Speaker 02:
Now, 4B... It doesn't say that, Your Honor.

[00:06:12] Speaker 02:
It...

[00:06:20] Speaker 03:
It does, indeed, under certain circumstances, and in certain quantities.

[00:06:28] Speaker 03:
It says whenever the United States is unable for any reason or any cause.

[00:06:35] Speaker 02:
To my point, Mr. Marzullo, I think you're arguing that San Joaquin River water can be substitute water under 4B, but not at any other time.

[00:06:46] Speaker 03:
Actually, let's get to this.

[00:06:49] Speaker 03:
I think it is a red herring.

[00:06:51] Speaker 02:
You see what's troubling me about this?

[00:06:52] Speaker 02:
Yes, I certainly do, Your Honor.

[00:06:54] Speaker 02:
Clearly, the parties contemplated that if there was an interruption, and I think Webster says interruption means stop, then sand or cane water is going to be delivered to the case contractors.

[00:07:11] Speaker 03:
Yes, and under any circumstances, and the trial court pointed this out, there is a definition of the term substitute water.

[00:07:22] Speaker 02:
Regardless of source.

[00:07:28] Speaker 03:
Yes, but we missed the verb.

[00:07:31] Speaker 03:
Any water delivered

[00:07:33] Speaker 03:
regardless of source.

[00:07:35] Speaker 03:
So what Article 3 is saying is, yes, the exchange contractors are entitled to certain quantities of substitute water.

[00:07:47] Speaker 03:
And any water that's delivered to them, whether it came from the Sacramento or whether it came from the San Joaquin, once it arrives, it is substitute water.

[00:07:58] Speaker 03:
But that doesn't help us determine

[00:08:00] Speaker 03:
what water the exchange contractors were entitled to from the San Joaquin.

[00:08:05] Speaker 04:
Well, why aren't they entitled to any water that is necessary to meet their contract?

[00:08:10] Speaker 04:
And regardless of source, then it has to be delivered to them.

[00:08:13] Speaker 03:
Because Article 4A says that the United States has the right to use the waters of the San Joaquin, so long as it is delivering substitute water.

[00:08:26] Speaker 03:
And then Article 4B says, if

[00:08:28] Speaker 03:
the United States is not delivering substitute waters, unable to do so, then the exchange contractors are entitled to certain

[00:08:38] Speaker 03:
Quantities of water not all the water certain quantities.

[00:08:42] Speaker 00:
I just don't understand how that's responsive to the chief judges Question what could you try that again because I'm somehow losing the it just seems logical if substitute waters can be from any source Then that must include this Samuel Queen River because that is a source, correct?

[00:09:01] Speaker 03:
Yes, your honor once it is delivered

[00:09:05] Speaker 00:
It may come from the San Joaquin River or from the Sacramento River.

[00:09:09] Speaker 03:
It counts toward the total amount of water exchange contractors get.

[00:09:15] Speaker 03:
In short, if they get under 4B water from the San Joaquin in a particular year, as they did in this year, that counts towards their total.

[00:09:27] Speaker 03:
That doesn't tell you under what circumstances is reclamation

[00:09:32] Speaker 03:
required to deliver that water to them.

[00:09:36] Speaker 03:
The circumstances are shown in Article IVB, which says that after seven days, the quantities that the exchange contractors are entitled to receive are those that they reserved when they sold the rest of their water rights to the United States.

[00:09:58] Speaker 03:
I'm sorry, Your Honor.

[00:09:59] Speaker 02:
It goes back to the original flow.

[00:10:01] Speaker 04:
the purged at the purchase on the record that is exactly right so where's the uh... you you say that this should be under four b and not four a but the government's argument if I remember it correctly is that they don't even get to four b because they were able under four a through a combination of San Joaquin River water and non-San Joaquin

[00:10:30] Speaker 04:
Sorry.

[00:10:32] Speaker 04:
To deliver it.

[00:10:35] Speaker 04:
And so there wasn't an interruption of delivery because they were able to fulfill it through a combination of water sources.

[00:10:41] Speaker 04:
I think, can you tell me, first, am I correctly articulated what you understand the government position?

[00:10:48] Speaker 03:
Yes.

[00:10:48] Speaker 03:
That is my understanding of the United States position.

[00:10:50] Speaker 04:
Tell me why that's not correct.

[00:10:51] Speaker 03:
Well, because it fails to give effect to Article IVB.

[00:10:56] Speaker 03:
That is, it becomes circular because Article 4A says, so long as reclamation is delivering substitute water, then reclamation, not the exchange contractors, are entitled to the waters of the San Joaquin.

[00:11:13] Speaker 03:
So if the government is correct, there is no point in time at which the United States didn't have the right to divert and store the waters of the San Joaquin, and no point at which the exchange contractors did have the right to that water.

[00:11:31] Speaker 03:
That is, the government can't dip into a water source that it is not entitled to use

[00:11:39] Speaker 03:
and then say, we're now changing that into water that we're required to deliver.

[00:11:48] Speaker 03:
The required to deliver is the key phrase here.

[00:11:52] Speaker 03:
And I think that's where we run into problems with the government's interpretation.

[00:11:57] Speaker 03:
In addition, the trial court failed to recognize that even under the government's interpretation,

[00:12:03] Speaker 03:
There was a breach of contract here.

[00:12:06] Speaker 03:
In May of 2014, as I said, there were 279,000 acre feet of water that had been already stored and was ready for delivery to the Friant contractors.

[00:12:19] Speaker 03:
Under

[00:12:20] Speaker 03:
the government's interpretation, Article 8 applied, right, of the exchange contract.

[00:12:26] Speaker 03:
And that entitled the exchange contractors to only $99,000 of the $279,000 they were paid.

[00:12:32] Speaker 03:
What the United States said to the front contractors is, well, we're not going to give you any allocation anyway, because we're going to store that in case we need it later for the exchange contractors.

[00:12:45] Speaker 04:
Now, Mr. Mazzola, you're in your rebuttal time.

[00:12:47] Speaker 04:
Do you want to take your major?

[00:12:49] Speaker 04:
If you have a point, another point you need to make.

[00:12:53] Speaker 03:
Well, I'd like to just finish this point, Your Honor, which is 4B states that explicitly reclamation is not required to store water for later delivery to the exchange contractors.

[00:13:09] Speaker 03:
So reclamation was not required

[00:13:12] Speaker 03:
to store the water.

[00:13:13] Speaker 03:
It voluntarily chose to do so, which violates Article 3N because it was a lack of requirements.

[00:13:20] Speaker 04:
OK, actually, I'm going to give you an extra minute.

[00:13:21] Speaker 04:
I'm not counting it against you, but I'd like you to.

[00:13:23] Speaker 04:
I always enjoyed listening to you on takings.

[00:13:25] Speaker 04:
So please take a minute and pivot to the takings case.

[00:13:28] Speaker 03:
All right, Your Honor.

[00:13:30] Speaker 03:
Under 43 USC 372, the Recreation Act, water is to be distributed in accordance with state law.

[00:13:41] Speaker 03:
Then there is a provisor, provided that the right to the use of water shall be appurtenant to the land irrigated.

[00:13:51] Speaker 03:
This court in climate irrigation district versus United States held that that very right in connection with the climate reclamation project in Oregon was a property right.

[00:14:05] Speaker 03:
And contrary to the government's argument here, climate did not remand for determination whether there was a property right.

[00:14:14] Speaker 03:
This court held there was.

[00:14:15] Speaker 03:
Klamath remanded only for determination of whether there was a contract arrangement under which that property right has been modified.

[00:14:26] Speaker 03:
So I guess that's as far as we need to go.

[00:14:29] Speaker 03:
The binding authority at this point is Klamath Irrigation District.

[00:14:35] Speaker 03:
Thank you for the extra minute.

[00:14:36] Speaker 04:
I'll restore your rebuttal time.

[00:14:38] Speaker 04:
Thank you, Your Honor.

[00:15:00] Speaker 04:
Please proceed.

[00:15:02] Speaker 05:
May it please the court.

[00:15:03] Speaker 05:
The trial court correctly granted summary judgment on a plaintiff's contract claim and dismissed their takings claim.

[00:15:08] Speaker 05:
The trial court's judgment should be affirmed.

[00:15:10] Speaker 05:
I'll begin with the contract claims.

[00:15:12] Speaker 05:
And I'll begin in particular with Article 4A, which Mr. Marzi will focus on.

[00:15:17] Speaker 05:
So I think the important point on 4A is that that is the essence of the bargain between the United States and the exchange contractors.

[00:15:27] Speaker 05:
And the bargain was that the United States, to get access to San Joaquin River water, needed to deliver substitute water in conformity with the contract.

[00:15:36] Speaker 05:
The only way the United States could do that under the circumstances of this terrible drought in 2014 was to deliver San Joaquin River water to the exchange contractors, in addition to Delta Source water, thereby complying with the requirement under Article 8 of the exchange contractor, except for specific quantities.

[00:15:57] Speaker 02:
So you're saying this one's for essential compromises?

[00:16:01] Speaker 02:
Exchange contractors first, anybody else second?

[00:16:04] Speaker 05:
Yes, so first, at least as compared to these, certainly compared to these plaintiffs, the exchange contractors get their substitute water rights satisfied before these plaintiffs.

[00:16:18] Speaker 02:
So that's what establishes the privacy, which is reflected in the client contracts, and the client contracts say these are subject to the rights that they change contractors have.

[00:16:27] Speaker 05:
Exactly right, Judge Coltinger, yes.

[00:16:30] Speaker 02:
So that's the primacy point.

[00:16:32] Speaker 02:
The other two points that Mr. Merger was leaning on are what constitutes substitute law.

[00:16:38] Speaker 05:
Right.

[00:16:38] Speaker 02:
Because if he wins on that, he's got it.

[00:16:41] Speaker 02:
And the other is whether form B applies.

[00:16:43] Speaker 02:
If it applies, he wins on that.

[00:16:45] Speaker 05:
That's right.

[00:16:46] Speaker 05:
Well, if either of those applies, then it goes back to the trial court.

[00:16:50] Speaker 05:
That's right.

[00:16:50] Speaker 05:
So on substitute water, the contract language, Article 3 of the exchange contract, is unambiguous.

[00:17:01] Speaker 05:
Any source, as the court's already noted in its questionings, the analysis can stop there.

[00:17:07] Speaker 05:
We also make a more general argument.

[00:17:10] Speaker 02:
Does it help in your argument that at the time the exchange contracts were being made, the contemplation of Millerton, Vannes, and the late Head Nines, and Bill Genbyville

[00:17:19] Speaker 02:
and it was going to dam up San Joaquin River water, right?

[00:17:23] Speaker 02:
Yes.

[00:17:23] Speaker 02:
They knew about that.

[00:17:25] Speaker 02:
Yes, I mean there were several... And then they wrote a contract in which they completed the very real possibility that at some stage in the game the exchange contractors might be getting holy water, holy water from the San Joaquin River, not on those.

[00:17:42] Speaker 02:
to include all the water from the dam and from the river?

[00:17:47] Speaker 05:
Yes.

[00:17:47] Speaker 05:
So the exchange contractors negotiated that protection, a broad definition of substitute water.

[00:17:52] Speaker 05:
Now, to be clear, there was a reason for the United States to negotiate that as well.

[00:17:57] Speaker 05:
It gave the United States discretion.

[00:17:59] Speaker 05:
The United States can pick the source of the water.

[00:18:01] Speaker 05:
So it benefits both sides.

[00:18:04] Speaker 05:
But yes, I think our argument is consistent with the history here on Article III.

[00:18:11] Speaker 02:
Does the Sacramento River dump into the San Joaquin River at some point?

[00:18:15] Speaker 05:
No, the Sacramento River goes from Chassa Dam up in the north into the Delta, and then the Delta comes down into the Delta-Mendota Canal.

[00:18:25] Speaker 02:
Separately, you have the San Joaquin River.

[00:18:31] Speaker 05:
That was the basic premise, yes.

[00:18:35] Speaker 05:
But the definition is broad enough to encompass situations like 2014 where there wasn't enough water in the canal to meet the exchange contractor's needs.

[00:18:46] Speaker 05:
So that's Article 3.

[00:18:48] Speaker 05:
Article 4b, as Chief Judge Moore suggested, the heart of our argument is that the United States did deliver substitute water from the Delta throughout 2014.

[00:19:02] Speaker 05:
That's an undisputed fact to the exchange contractors.

[00:19:07] Speaker 05:
So in that case, Article 4b isn't triggered.

[00:19:10] Speaker 05:
What's triggered is a separate provision of the contract, Article 19,

[00:19:14] Speaker 05:
which says, essentially, if either party can't meet its obligations under the contract completely, their obligations are suspended, except that they still have to do their due diligence to comply with those obligations.

[00:19:29] Speaker 05:
So that's what happened here.

[00:19:31] Speaker 05:
Ultimately, the United States was not able to meet the full Article 8 quantities, the critical year Article 8 quantities for the exchange contractors.

[00:19:39] Speaker 05:
But to do its due diligence to meet those requirements, it needed to deliver both

[00:19:44] Speaker 05:
San Joaquin River water and Delta source water.

[00:19:49] Speaker 05:
More generally, and I think one of Judge Clevenger's questions suggested this earlier, 4B can be thought of as a deal temporarily suspended in case of a complete inability to deliver water down the Delta.

[00:20:05] Speaker 05:
And the exchange contractors are going back to their pre-1939

[00:20:09] Speaker 05:
reserved water rights in that case, temporarily.

[00:20:12] Speaker 05:
But that's not what happened here.

[00:20:14] Speaker 05:
The deal wasn't suspended.

[00:20:15] Speaker 05:
The United States was doing its due diligence to meet its requirements under our agreement.

[00:20:21] Speaker 04:
I have what might really be a dumb contract question about 4B, but I nonetheless have it.

[00:20:27] Speaker 04:
It says, so 4B kicks in when the US is temporarily unable, for any reason,

[00:20:34] Speaker 04:
to use substitute water from the Delta or other sources.

[00:20:38] Speaker 04:
But the other sources can't be the San Joaquin River, right?

[00:20:40] Speaker 04:
Because the rest of this is directed to when you will or how you will distribute the San Joaquin River.

[00:20:46] Speaker 04:
So it has to be that the U.S.

[00:20:49] Speaker 04:
is unable to deliver water from either the Delta or sources other than San Joaquin.

[00:20:54] Speaker 04:
Now I understand from the government that throughout 2014

[00:20:57] Speaker 04:
you were able to, through a combination of non-San Joaquin sources and San Joaquin sources, deliver water.

[00:21:04] Speaker 04:
But my question is, was there a temporary interruption putting aside what you were able to deliver that came from the San Joaquin?

[00:21:12] Speaker 04:
Was there an interruption?

[00:21:14] Speaker 04:
Was there any point in 2014 when you weren't able to be delivering water from the Delta or some source, not the San Joaquin?

[00:21:21] Speaker 05:
If there was an interruption, meaning a complete cessation of delivery from the Delta, then that would trigger 4B.

[00:21:34] Speaker 05:
And there would be seven days of the Arctic Lake quantities continuing to troll.

[00:21:39] Speaker 04:
There was at no point in 2014 was there a 7 day period where there wasn't water being delivered from the Delta.

[00:21:46] Speaker 05:
In the period during which Reclamation was delivering water, that's right.

[00:21:50] Speaker 05:
What does that mean?

[00:21:53] Speaker 05:
To the extent relevant to the plaintiff's claims, there might have been times when Reclamation was delivering water to nobody, but I don't think the plaintiffs are challenging that.

[00:22:01] Speaker 02:
How hard did they leave the decision to shut off the front contractors from getting any water?

[00:22:05] Speaker 05:
early in 2014.

[00:22:06] Speaker 02:
That was up front?

[00:22:07] Speaker 02:
Yes.

[00:22:09] Speaker 02:
So you were making a prediction, right?

[00:22:11] Speaker 02:
Right.

[00:22:12] Speaker 02:
That there would be at least a trickle of water down the canal, or from another source.

[00:22:17] Speaker 05:
So that's right.

[00:22:18] Speaker 05:
And I just want to be precise.

[00:22:19] Speaker 05:
So we cite at page 36 of our brief, to address your question, Chief Judge Moore, Appendix 1892.

[00:22:27] Speaker 05:
and Appendix 2114.

[00:22:28] Speaker 05:
2114 is Plaintiff's own expert deposition testimony to support the point that I just made.

[00:22:40] Speaker 04:
Do you want to spend a minute on the takings case?

[00:22:43] Speaker 05:
Sure, Your Honor.

[00:22:45] Speaker 05:
So our first point is that there's no right under California law, water right under California law.

[00:22:50] Speaker 04:
Well, why do you think there's no standing, right?

[00:22:54] Speaker 04:
Isn't part of the standing?

[00:22:55] Speaker 05:
Well, I mean, our argument is focused on the lack of a water right, so a lack of a property interest.

[00:23:02] Speaker 02:
Mr. Marzullo is basically saying, he says there's a federal right.

[00:23:06] Speaker 02:
He's admitting there's no state right.

[00:23:10] Speaker 02:
He says that in Section 372, there's a proviso that creates a federal appurtenant property right.

[00:23:18] Speaker 02:
What's your answer to that?

[00:23:20] Speaker 05:
First, that would be a really dramatic holding that would be contrary to the Supreme Court's precedent in California versus the United States.

[00:23:35] Speaker 05:
So what the Supreme Court said in California and the United States is that the Reclamation Act was not intending to create two systems of water rights, one federal and one state.

[00:23:49] Speaker 05:
It was intending for the Reclamation Act to be consistent with state water rights.

[00:23:53] Speaker 05:
And it would be a really problematic

[00:23:57] Speaker 05:
holding with major implications, if suddenly there's these federal water rights that hadn't been previously recognized, that come out over on top of state water rights.

[00:24:06] Speaker 02:
So you're saying Mr. Marzullo is just wrong.

[00:24:08] Speaker 05:
Yes, yes.

[00:24:09] Speaker 05:
So we definitely disagree with the argument that the Reclamation Act creates some right that comes over on top of state water rights.

[00:24:17] Speaker 05:
I would note, too, there's been a lot of focus on the word pertinency.

[00:24:21] Speaker 05:
That word has a different meaning under California law.

[00:24:23] Speaker 05:
I would refer the court to the appendix

[00:24:26] Speaker 05:
the part of the appendix that deals with the State Water Board's decision around Appendix 2500, which talks about some of the issues related to appurtency in California.

[00:24:37] Speaker 05:
Essentially, California has decided that it would be highly impractical to have two million NU users all with property interests in Central Valley Project law.

[00:24:47] Speaker 05:
And the State Water Board has come out against the argument that Mr. Marzullo is advancing here today.

[00:24:54] Speaker 05:
Finally, we also argue that if Mr. Marzullo is right, then the irrigators would have property interests that go beyond the contractual rights of the water districts.

[00:25:10] Speaker 04:
So you can't exceed the rights created by the fire company.

[00:25:13] Speaker 05:
Exactly.

[00:25:13] Speaker 05:
Yes, got it.

[00:25:15] Speaker 05:
OK.

[00:25:15] Speaker 05:
The court doesn't have any further questions.

[00:25:17] Speaker 05:
We ask the question.

[00:25:18] Speaker 05:
Affirm.

[00:25:18] Speaker 05:
Thank you.

[00:25:31] Speaker 01:
Good morning, Your Honors.

[00:25:32] Speaker 01:
May it please the Court, Daniel O'Hanlon appearing on behalf of the Defendant-Intervener Group of Appellees.

[00:25:40] Speaker 01:
I'll focus my brief remarks this morning on the takings issue that was just discussed.

[00:25:46] Speaker 01:
I agree with the U.S.

[00:25:48] Speaker 01:
Council on the correct interpretation of the exchange contract and the Friant contract.

[00:25:54] Speaker 01:
I agree with Judge Clevenger that we just heard an argument suggesting that plaintiffs were arguing here for a federal right, but that's not what they said in their brief.

[00:26:07] Speaker 01:
At pages 48 to 49, they say, quote, state law, not federal law, creates and defines water rights in a federal reclamation project per ends unless inconsistent with a specific congressional directive.

[00:26:21] Speaker 01:
And of course, that is consistent with California, the United States.

[00:26:25] Speaker 01:
Water rights are determined in accordance with state law.

[00:26:28] Speaker 01:
The irrigators here do not hold water rights under California law.

[00:26:34] Speaker 01:
And the key reason they do not is that the irrigators receive water from districts.

[00:26:40] Speaker 01:
And the California statutes governing the operation and creation of districts provide that the users of the water supplied by the district do not acquire a property right in the water supplied to them by the district.

[00:26:55] Speaker 01:
And those statutes are cited at pages 52 and 53 of our brief.

[00:27:01] Speaker 01:
What they do have is a right to water service from the district.

[00:27:07] Speaker 01:
And that's explained in the Abadi versus Imperial Irrigation District case, the California case, 52 cal at 5th, 236 at pages 260 to 266.

[00:27:18] Speaker 02:
What's the difference between water and water service?

[00:27:21] Speaker 01:
It's a right to a equitable allocation of the supply available to the district.

[00:27:28] Speaker 01:
And in these cases... Is there a certain number of ballots?

[00:27:30] Speaker 01:
No, it is not a defined quantity.

[00:27:32] Speaker 01:
It depends on how much water the district is able to provide.

[00:27:37] Speaker 01:
Typically, it might be allocated based on, for example, the number of acres that a landowner owns within the district.

[00:27:43] Speaker 01:
But it would be a share of whatever supply is available to the district.

[00:27:46] Speaker 02:
But it's referring to your water, the amount of water.

[00:27:49] Speaker 01:
Yes.

[00:27:50] Speaker 01:
Well, it's some portion of the supply available to the district, but it's not defined in terms of acre feet.

[00:27:59] Speaker 02:
But it doesn't just mean physically getting it delivered to us by opening the locks and closing the locks once the water flows.

[00:28:06] Speaker 01:
Well, it was a service.

[00:28:08] Speaker 02:
I didn't quite know what that meant.

[00:28:09] Speaker 01:
Yes, OK.

[00:28:11] Speaker 01:
The district, in this case, their friant contractors received water from the Central Valley Project.

[00:28:20] Speaker 01:
How much water they receive each year would vary, depending on conditions such as drought.

[00:28:25] Speaker 01:
In 2014, it was a very severe drought.

[00:28:28] Speaker 01:
And whatever that supply is that's available to the district each year, and it would vary by year, the district would then allocate that to the individual water users.

[00:28:38] Speaker 01:
How much water each?

[00:28:41] Speaker 01:
How much water each?

[00:28:42] Speaker 01:
Yes.

[00:28:42] Speaker 01:
In a particular year, yes.

[00:28:45] Speaker 02:
But your basic argument is if that's not a property right, it's basically a gift.

[00:28:53] Speaker 02:
The water district, by contract, arranges with the United States government to get a certain amount of water.

[00:29:00] Speaker 02:
And how it gets parceled out is not a matter of right of the irrigator or the farmer to get it because it's something that's being given away.

[00:29:10] Speaker 01:
Well, they don't have a right to a specific amount each year.

[00:29:16] Speaker 01:
The amount varies.

[00:29:18] Speaker 01:
They do have a right to a equitable share of the entire supply available to the district as landowners in the district.

[00:29:25] Speaker 01:
But that is a matter of California law and the governance of irrigation districts.

[00:29:30] Speaker 01:
appropriate is not a water right and and the Abadi case says that directly and specifically they own this this ability to have the district these rights here are by contract yes the Bryant rights are by our contract okay counsel we've exceeded your time thank you very much thank you your honor

[00:30:04] Speaker 03:
Thank you, Your Honor.

[00:30:05] Speaker 03:
And I will just touch on the two points, contract and taking.

[00:30:09] Speaker 03:
First, as to the contract, I simply find that the government's interpretation here is utterly inconsistent with the whole purpose of the exchange, which was there was Sacramento River water available that could be given to the so-called exchange contractors in return

[00:30:32] Speaker 03:
they gave over the use of their water rights in the San Joaquin to the United States for distribution to the 800,000 acres that constitutes the Friant project.

[00:30:45] Speaker 03:
There is no meaning to Article 4A

[00:30:50] Speaker 03:
and 4B, there's no reason to say whenever the United States is unable to deliver substitute water, then it can deliver San Joaquin River water, if San Joaquin River water can always be delivered as part of the substitute water quantities.

[00:31:09] Speaker 03:
utterly disregards the quantities that are stated in Article IVB.

[00:31:14] Speaker 03:
Article IVB is right out of the contract improperly.

[00:31:17] Speaker 03:
As to the takings question, my brother, Mr. O'Hanlon, read exactly the right statement, which is that state law controls unless it is inconsistent with federal law.

[00:31:30] Speaker 03:
And that's what the provision at 43 USC 372 states, that water is distributed under state law, semicolon, provided that the right to the use of water is pertinent to the land irrigated.

[00:31:50] Speaker 04:
What do I make out of... I mean, I find your point compelling about... Thank you, Your Honor.

[00:31:58] Speaker 04:
You're welcome.

[00:31:59] Speaker 04:
I mean, three is extremely broad.

[00:32:01] Speaker 04:
It says any source, right?

[00:32:02] Speaker 04:
So theoretically, a general provision like that, it would include San Joaquin.

[00:32:06] Speaker 04:
But then I'm persuaded that statutory interpretation and contract interpretation, when you have a more specific clause, maybe it sort of modifies the general.

[00:32:16] Speaker 04:
And I kind of agree that when does 4B ever kick in if they can use the San Joaquin River as substitute water?

[00:32:26] Speaker 04:
And so I agree, I hear all of your arguments, but on page A1779 of the appendix, the government cites some 1950 memo that says the purpose of 4B is when there are mechanical failures.

[00:32:40] Speaker 04:
So they are trying to give me a purpose for 4B that differs from your general interpretation, which I appreciate.

[00:32:48] Speaker 04:
So can you address that for me?

[00:32:50] Speaker 03:
Sure.

[00:32:51] Speaker 03:
We objected to that memo in the first place, Your Honor, because it's unauthenticated.

[00:32:56] Speaker 03:
We don't know who the author was.

[00:32:57] Speaker 04:
Yes, but that's not an issue in front of me.

[00:32:59] Speaker 04:
I don't remember being.

[00:33:01] Speaker 03:
We made that point in thinking of footnote.

[00:33:04] Speaker 03:
But the fact is.

[00:33:06] Speaker 04:
The Supreme Court says it's because a footnote is not a point.

[00:33:08] Speaker 03:
The fact is we don't know what that memo is.

[00:33:12] Speaker 03:
It is some memo written by someone before the First Amendment

[00:33:18] Speaker 04:
I understand.

[00:33:19] Speaker 04:
Forget about the procedural irregularities of the memo itself.

[00:33:23] Speaker 04:
Wait, I'm not going to cut you off.

[00:33:25] Speaker 04:
I promise you'll get a chance.

[00:33:26] Speaker 04:
But does it nonetheless reconcile a purpose for 4B despite the issue that you raised about the substitute water slash sandwiching, whether or not you use substitute water?

[00:33:39] Speaker 04:
Does it create nonetheless a purpose for 4B that sort of says, OK, look, here is the purpose for 4B?

[00:33:47] Speaker 03:
Well, I'm happy to read it that way.

[00:33:51] Speaker 03:
That's the way I read 4B.

[00:33:54] Speaker 03:
The government reads that memo as saying, well, it allows the government to use San Joaquin River water anytime.

[00:34:02] Speaker 03:
But we read it to mean that when, as in 2014, they run short of Sacramento River water, they are unable to deliver the substitute water, then they augment that with water from the San Joaquin.

[00:34:17] Speaker 03:
And that's what that memo states note, that water may be delivered from both, contrary to what the government argues.

[00:34:28] Speaker 03:
makes sense and in the context of There's an a which says as long as they're getting substitute water the exchange contractors have no use of San Joaquin water when

[00:34:42] Speaker 03:
they are not getting substitute water temporarily, then they get water from the San Joaquin.

[00:34:48] Speaker 03:
In quantities they are stated, which are less, not Article 8 quantities, which is what Reclamation gave them.

[00:34:55] Speaker 03:
And 4C says that if permanently the United States isn't able to deliver substitute water, then the exchange contractors revert to their original rights in the San Joaquin, and the United States has no

[00:35:08] Speaker 03:
use of them.

[00:35:10] Speaker 03:
That makes all kinds of sense, and the government's interpretation does not.

[00:35:15] Speaker 04:
Okay, thank you very much.

[00:35:15] Speaker 04:
Thank you, Your Honor.

[00:35:16] Speaker 04:
I thank you all for your counsel.

[00:35:18] Speaker 04:
You all did an excellent job of providing a lot of information, and very clearly, and I really appreciate your calm demeanor and process of guardian.

[00:35:28] Speaker ?:
All of you.

[00:35:29] Speaker 04:
No, seriously, thank you.