SUPREME COURT:

Obama admin declines to appeal key water-rights case

The Obama administration will not ask the Supreme Court to review a high-profile takings case with potential implications for water rights and the Endangered Species Act, despite a bevy of requests from environmental groups and the state of California.

In the case, Casitas Municipal Water District v. United States, a lower court required the federal government to pay a California water district for diverting some water to protect endangered steelhead trout. Since Solicitor General Elena Kagan declined to petition for review, the case will be remanded to the trial court.

While expressing disappointment, court watchers say the decision may be part of a broader strategy by the Obama administration to avoid bringing cases before a Supreme Court viewed as hostile to environmental interests.

"The decision not to file a petition for certiorari is disappointing from an environmental standpoint, but [Kagan] apparently concluded that this was not the ideal case in which to now ask the Supreme Court to definitely resolve this takings issue," said John Echeverria, director of Georgetown's Environmental Law & Policy Institute. "Unfortunately, this decision means that confusion will continue to reign about how the takings clause applies to the regulation of water."

In the case at hand, the Casitas Municipal Water District entered an agreement with the Bureau of Reclamation in 1956 that calls for the district to pay the initial costs of building the Ventura River Project, which provides water to Ventura County in exchange for "the perpetual right to use all water" made available through the project. The contract also gave Casitas authority over future operation and maintenance, although California state law ultimately governs the water flowing through the system.

In 1997, the National Marine Fisheries Service listed the West Coast steelhead trout, which lives in the Ventura River, as an endangered species. After seeking a biological opinion from the service as required by the Endangered Species Act, Reclamation in 2003 advised Casitas to release some water for a fish ladder that would allow the migration of trout to spawning grounds.

Casitas built the fish passage facility but simultaneously sued the United States in the Court of Federal Claims, seeking damages for breach of contract and just compensation for a taking of its property in violation of the Fifth Amendment.

The trial court found for the government on all claims, but a three-judge panel on the U.S. Court of Appeals for the Federal Circuit reversed.

"Casitas will never, at the end of any period of time, be able to get the water back," Judge Kimberly Moore wrote. "The character of the government action was a physical diversion for public use -- the protection of an endangered species."

In a partial dissent, Judge Haldane Robert Mayer argued the court should never have reached the takings conclusion without first determining Casitas' water rights under California law. The majority, he claimed, also ignored the "careful" line drawn by the Supreme Court between physical and regulatory takings. "For this to be a physical taking," he said, "requires expanding the definition to the point of erasing the line between physical and regulatory takings."

Defenders of Wildlife, the Environmental Defense Center, California Trout, the Sierra Club and others filed friend-of-the-court briefs, asking the full circuit to rehear the case for fear it could weaken the endangered-species law.

In February, a divided appeals court denied a petition for an en banc hearing, meaning a hearing by the entire 12-judge panel on the Federal Circuit. Four judges dissented, including three who joined in an opinion, stating: "The panel majority's opinion suggests that a government action can be construed to be a physical taking even if no physical proprietary interest has actually been taken by the United States."

"Accepting this analysis of the panel majority eliminates the fine distinction and balance that has been established by the Supreme Court between physical and regulatory takings," the judges wrote. They added, "Moreover, it eliminates the ability of the legislature to provide for limited and parsimonious legislation protecting endangered species."

A larger strategy?

The solicitor general's office does not reveal the reasoning behind which cases it petitions for Supreme Court review, leaving room for speculation among court watchers.

"I'm sort of surprised, just because it is an adverse precedent and the government had been successful to date in avoiding these taking claims relating to the ESA -- especially on the Federal Circuit, which deals with so many of these cases," said John Nagle, an environmental law professor at the University of Notre Dame's law school.

"The narrowly framed facts of the case made it a little less surprising, but if they lose more of these cases, they'll have to take something up," Nagle said. "I think they may be hoping this case is an aberration on its facts or on the law."

Roger Marzulla, a Washington-based attorney who represented the water district, praised the decision not to seek review of the case.

"The solicitor general's office made the right decision," he said. "This case is very fact-specific, and therefore does not present the kind of constitutional issues of broad application that merit Supreme Court review."

Meanwhile, the solicitor general could also have concluded that returning the case to the lower court would result in a more favorable outcome.

"I assumed they'd file and then I thought the real question would be whether the Supreme Court decided to grant review," Case Western Reserve University law professor Jonathan Adler said. "But the way the specific question was framed to the Federal Circuit, it assumed some things that my guess is the government may be able to challenge in the lower courts."

He added, "I could certainly see the solicitor general's office making the strategic decision that they might have another shot with this case both at the appeals court and even beyond that if things don't go well below."

The solicitor general may also want to wait and see how a separate takings case turns out before asking the high court to rule on a similar issue, Adler said.

"I can certainly understand, given that [Chief Justice John] Roberts and [Justice Samuel] Alito have not ruled directly on takings cases, they don't really know what their opinions will be," Adler said. "This court has taken a lot of environmental cases in the last couple of years that people didn't expect it to take."

On the fall docket, the court will hear one such case that fell below the radar.

In Stop the Beach Renourishment v. Florida, the justices agreed to consider whether Florida's Supreme Court violated the Constitution's takings clause when it upheld a plan to create a state-owned public beach between private waterfront land and the Gulf of Mexico.

This will be the first taking case to come before Roberts, Alito and Supreme Court nominee Sonia Sotomayor, if she wins Senate confirmation.

"I think they'd want to be pretty confident and comfortable with the way a case develops both on the facts and on the law prior to raising this issue before three justices who haven't really spoken to it," Nagle said.