In re the General Adjudication of All Rights to Use Water in the Gila River System & Source (2/19/2010)

March 2, 2010

Arizona Supreme Court Holds That Its 1991 Special Order Governing the Adjudication of Water Rights Is Constitutional and Appropriately Limits the Scope of Review of Settlements Concerning Water Rights.

This case involves ongoing adjudication of water rights in the Gila River System and Source.  In 2006, the Gila River Indian Community (“GRIC”) and a number other parties applied to the adjudication court to approve a settlement in which GRIC would receive a certain amount of water from a number of sources, and in exchange would waive certain claims.  The adjudication court ordered the Arizona Department of Water Resources (“ADWR”) to prepare an assessment of the settlement to aid in reviewing the settlement.  A number of tribes referred to collectively as the “Apache Tribes,” a number of entities referred to as the “Lower Gila Water Users” or “LGWUs”, and ASARCO LLC objected to the settlement.  The settling parties responded to the objections and moved for summary disposition, and the Apache Tribes and ASARCO cross-moved for summary disposition.

The adjudication court limited its inquiry to matters specified in the Arizona Supreme Court’s 1991 Special Procedural Order Providing for the Approval of Federal Water Right Settlements, Including Those of Indian Tribes (“Special Order”), which only allows a claimant to object if (1) approval of the settlement would cause material injury to its water rights, (2) conditions warranting the initiation of special proceedings have not been satisfied, or (3) the settlement agreement provides a tribe water rights more extensive than it could prove at trial.  The adjudication court held (1) the Apache tribes had no valid objections because the settlement did not affect their water rights, and (2) the LGWUs and ASARCO’s objections failed because the water quantity GRIC would receive under the settlement was not more extensive than GRIC could show at trial.  Accordingly, it approved the settlement.  The Apache Tribes, LGWUs, and ASARCO requested interlocutory appeal, which the Arizona Supreme Court Granted.

In a unanimous opinion, the Arizona Supreme Court affirmed.  The Court confirmed that the Special Order applied, and held that it did not unfairly or unconstitutionally prevent the objecting parties from challenging the settlement and instead served important purposes.  The Court noted the size and complexity of this general stream adjudication, and explained that the Special Order benefits both settling and non-settling parties by reducing the claimed water rights below the amount a party could have proven at trial.

Turning to the objecting parties’ specific objections, the Court rejected the Apache Tribes’ contention that the adjudication court had a duty to consider the constitutionality, legality, and fairness of the settlement, explaining that these objections fell outside the Special Order.  The Court further explained that San Carlos Apache Tribe v. Superior Court, 193 Ariz. 195, 972 P.2d 179 (1999), cited by the Apache Tribes, did not apply because there were no separation of powers issues presented by the adjudication court’s application of the Special Order.  The Court next rejected the Apache Tribes’ contention that they would not be materially injured by the settlement, explaining that (1) the settlement expressly preserves their water rights, and (2) does not affect their water rights.  The Court also rejected their claim that ADWR failed to comply with the adjudication court’s order, explaining that ADWR’s assessment properly considered the impact of the settlement on other claimants.  The Court also rejected the Apache Tribes’ claim that the adjudication court did not review the executed version of the settlement.  Finally, the Court rejected their claim that GRIC would receive more water by settlement than it could prove at trial, explaining that the settlement provided for less water than claimed on behalf of GRIC, its current water use, and GRIC’s Globe Equity Decree rights.  The Court further noted that this inquiry is limited to water quantity, not quality, under the Special Order.

The Court next addressed and rejected the LGWUs’ objections.  The Court held that the LGWUs will not be materially injured by the settlement because (1) the water from the Gila River system allocated to GRIC retains its pre-existing attributes, and (2) the LGWUs are not bound by the settlement.  The Court next rejected their contention that the Special Order violates their substantive and procedural due process rights, explaining that there were insufficient reasons for the Court to deviate from the Special Order at this late date.  The Court also rejected their argument that they are bound by the settlement, explaining that they are not settling parties and did not enter into any other ancillary agreements.  The Court also rejected their constitutional and statutory challenges, noting that such challenges fall outside the Special Order’s limited scope of review, and that the settlement’s safe harbor provision is appropriate.  The Court also rejected the LGWUs’ claim that CAP and Blue Ridge stored water should have been included when considering the amount of water provided to GRIC in the settlement.  Finally, the Court rejected the LGWUs’ claim that settlement agreement breached the 1945 Arlington Agreement, explaining that the settlement did not alter the rights given to Arlington in that agreement.

Lastly, the Court rejected ASARCO’s objections.  The Court rejected ASARCO’s claim that the settlement violates a prior 1977 Water Rights Settlement and Exchange Agreement, noting that this contract claim falls outside the scope of review allowed by the Special Order and that any claims involving that 1977 agreement must be brought in federal court.  The Court next held that ASARCO will not be materially injured by the settlement because its rights to the San Pedro River will not be impacted.  The Court also rejected ASARCO’s claim that the settlement’s safe harbor provision denies it equal protection and confers special benefits to GRIC under the Arizona Constitution, explaining that this claim fell outside the purview of the Special Order, and in any event, the settlement did not violate ASARCO’s equal protection rights nor confer special benefits to GRIC.  The Court next rejected ASARCO’s claim that the settlement allows GRIC to select which upstream users will be called to fulfill its water rights, explaining that the Special Order only allows a quantitative, not qualitative review.  Finally, the Court rejected ASARCO’s argument that it would be materially injured by the “rebound call” provision in the settlement, noting that this argument was premature and speculative.

Justice Pelander authored the unanimous opinion.