Appeal from the United States District Court for the Eastern District of California. D.C. No. CV-92-05212-OWW. Oliver W. Wanger, District Judge, Presiding.
Before: Thomas M. Reavley,*fn* Harry Pregerson and Ferdinand F. Fernandez, Circuit Judges. Opinion by Judge Reavley.
Westlands Water District (Westlands) and San Benito County Water District (San Benito) appeal a district court order dismissing their claims against the Department of Interior's Bureau of Reclamation (Bureau), arising out of water allocations made by the Bureau during the 1992 California drought. While we do not find ourselves in complete agreement with all of the district court's analysis, we affirm the judgment.
The Central Valley Project (CVP) is a massive water reclamation project authorized by various acts of Congress, and serving the needs of central California. Prior to the construction of the Friant Dam across the San Joaquin River, an early CVP project, the Bureau entered into contracts with holders of downstream water rights. The first such contract, known as the Exchange Contract, was signed in 1939. The currently effective second amended Exchange Contract was executed in 1968, by the Bureau and four Exchange contractors,*fn1 all of whom are parties or successors in interest to the original Exchange Contract. Under the terms of the Exchange Contract, the Exchange contractors gave up their rights to San Joaquin waters in exchange for the agreement of the Bureau to provide "substitute water." Article 5 of the Exchange Contract "anticipated that most if not all of the substitute water provided the [Exchange contractors] will be delivered to them via the [ ] Delta-Mendota Canal." The Delta-Mendota canal carries water from the Sacramento-San Joaquin River Delta (the Delta). Article 4 of the Exchange Contract obliged the Bureau to release water from Millerton Lake, the lake created behind Friant Dam, in the event of temporary or permanent interruptions in the delivery of substitute water to the Exchange contractors.
The CVP is divided into a number of units. The San Luis Unit was authorized by the San Luis Act of 1960, Pub. L. No. 86- 488, 74 Stat. 156 (1960) (the Act). The San Luis Unit consists of the San Luis Dam and the San Luis Reservoir (the Reservoir), together with a number of smaller facilities. The Reservoir stores surplus water from the Delta, which is pumped into the Reservoir from the Delta-Mendota Canal. The Reservoir was constructed to provide irrigation water for Merced, Fresno and Kings Counties. Id. at § 1(a). The Act further contemplated additional construction projects to provide CVP water to Santa Clara, San Benito, Santa Cruz and Monterey Counties. Id. at § 6. The San Felipe Division of the CVP was later created to serve these counties. To implement the Act, the Bureau entered into contracts with water service providers, including appellants Westlands and San Benito (collectively the San Luis Contractors). The Westlands contract was executed in 1963, and the San Benito contract was executed in 1978.
On February 14, 1992, after several years of serious drought, the Bureau issued a declaration of available CVP water supplies for water year 1992. The declaration stated the Bureau's intent to provide no CVP water to certain agricultural contractors, including the San Luis Contractors, while the Exchange contractors were to receive 75 percent of their normal supply of water. The declaration was revised to allow for 15 and then 25 percent of normal allocations to the San Luis Contractors. The Bureau planned to divert Reservoir water to meet its contractual obligations to the Exchange contractors.
On March 20, 1992, the San Luis Contractors, believing that they are entitled to preferential access to water from the San Luis Reservoir, sued the Bureau and its regional director. The San Luis Contractors alleged in their complaint that the Bureau's intended diversion of Reservoir water to serve the needs of the Exchange contractors was contrary to the obligation in the Exchange Contract to release water from Millerton Lake in the event of an inability to provide substitute water. They further alleged that the intended diversion of Reservoir water to the Exchange contractors violated the Act and the Westlands and San Benito contracts. Relief was sought under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701-706, and federal reclamation law. The San Luis Contractors prayed for an injunction "prohibiting the Bureau from rediverting water stored in San Luis Reservoir to satisfy its contractual obligations to the Exchange contractors," and "a declaration that Plaintiffs have prior rights to the water stored in the San Luis Reservoir pursuant to the terms of the San Luis Act and contracts entered into thereunder and that the Bureau may not satisfy its obligations to the Exchange contractors through rediversion of project water from storage in San Luis Reservoir."
The Exchange contractors and several users of water from Millerton Lake intervened in support of the Bureau. The Bureau filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6). The intervenors moved for judgment on the pleadings under Fed. R. Civ. P. 12(c). The district court considered the motions together, granted them, and dismissed the suit without leave to amend. Westlands Water Dist. v. Dept. of Interior, 805 F. Supp. 1503 (E.D Cal. 1992).
We review de novo rulings on Rule 12(b) motions to dismiss for failure to state a claim and Rule 12(c) motions for judgment on the pleadings. Assiniboine and Sioux Tribes v. Bd. of Oil and Gas Conservation, 792 F.2d 782, 794 (9th Cir. 1986) (motion to dismiss); 3550 Stevens Creek Assoc. v. Barclays Bank, 915 F.2d 1355, 1357 (9th Cir. 1990), cert. denied, 114 L. Ed. 2d 101, 111 S. Ct. 2014 (1991) (motion for judgment on the pleadings). In deciding a motion to dismiss, the district court must accept as true all material allegations in the complaint and construe them in the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). Similarly, a judgment on the pleadings is appropriate when, even if all allegations in the complaint are true, the moving party is entitled to judgment as a matter of law. Hal Roach Studios v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1990).
The APA provides a remedy for agency action found to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," or found to be "in excess of statutory jurisdiction, authority, or limitations, or short of statutory right. . . ." 5 U.S.C. § 706. The San Luis Contractors contend that diverting Reservoir water to serve the needs of the Exchange contractors is remediable under the APA since such action violates the San Luis Act. Specifically, they claim that such action would violate § 1(a) of the Act, which provides:
For the principal purpose of furnishing water for the irrigation of approximately five hundred thousand acres of land in Merced, Fresno, and Kings Counties, California, hereinafter referred to as the Federal San Luis unit service area, and as incidents thereto of furnishing water for municipal and domestic use and providing recreation and fish and wildlife benefits, the Secretary of the Interior . . . is authorized to construct, operate, and maintain the San Luis unit as an integral part of the Central Valley project.
The San Luis Contractors contend that, inasmuch as the Act's "principal purpose" is to furnish water for the San Luis Unit's service area, the Bureau cannot allocate water from the Reservoir to those outside the service area (such as the Exchange contractors) if such a diversion is to the exclusion or detriment of those contractors within the original service area (such as Westlands) or those within the counties targeted in the Act for future CVP service (such as San Benito). The Bureau and intervenors, of course, point to the language of § 1(a) providing that the San Luis Unit shall be operated and maintained "as an integral part of the Central Valley project."
We agree with the district court that § 1(a) of the Act does not compel the Bureau to satisfy the water needs of the San Luis Contractors before diverting water to the Exchange contractors. At the outset we note that the "principal purpose" language of § 1(a), standing alone, does not apply to San Benito, since San Benito is not within ...