Mohave Valley Irrigation and Drainage District v. HCJM Incorporated et al

Filing 17

ORDER denying Defendants' 6 MOTION to Dismiss on the condition that plaintiff file an amended complaint naming the Trusts as defendants. If plaintiff does not file an amended complaint naming the Trusts as defendants by March 27, 2014, plaintiff's complaint will be dismissed. (See document for full details). Signed by Judge H Russel Holland on 3/13/14. (LAD)

WO

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

MOHAVE VALLEY IRRIGATION AND
DRAINAGE DISTRICT,

)
)
)
Plaintiff,
)
)
vs.
)
)
HCJM, INC., et al.,
)
)
Defendants.
)
__________________________________________)

No. 3:13-cv-8269-HRH
(Prescott Division)

ORDER
Motion to Dismiss
Defendants move to dismiss plaintiff’s complaint for failure to join indispensable
parties, or, alternatively, to join indispensable parties.1 This motion is opposed.2 Oral
argument has been requested but is not deemed necessary.

1

Docket No. 6.

2

Docket No. 15.
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Background
Plaintiff is the Mohave Valley Irrigation and Drainage District. Defendants are
HCJM, Inc.; El Rio Recreational, LLC; and El Rio Holdings, LLC.
“As a result of the works accomplished under the federal reclamation laws,
including the Boulder Canyon Project Act..., a system was created to tame, capture, store
and control the waters of the Colorado River....”3 “The Project Act recognizes water rights
perfected under state law as of the date of the Project Act.”4 “Colorado River waters
include water from the mainstream of the Colorado River, its tributaries, surface flows,
subsurface flows, and waters pumped from wells that are recharged or replenished by the
waters of the Colorado River.” 5 “The Project Act mandates that Colorado River water be
available for consumptive use in Arizona only if a contract has been made by, through or
on behalf of the Secretary of the Interior ... for that use.”6
Plaintiff alleges that it has a contract (the MVIDD Contract) with the Secretary of
Interior “for the delivery of Colorado River waters....”7 “The MVIDD Contract presently
allocates 41,000 acre feet of Colorado River waters annually from the Arizona apportion3

Complaint at 2, ¶ 6, attached to Notice of Removal, Docket No. 1.

4

Id. at ¶ 7.

5

Id. at ¶ 9.

6

Id. at ¶ 11.

7

Id. at 3, ¶ 12.
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ment to [plaintiff] for use within [plaintiff’s] service area....”8 Plaintiff’s allocation includes
the water used by holders of present perfected rights (PPRs). Mohave Valley Irrigation &
Drainage Dist. v. Norton, 244 F.3d 1164, 1165-66 (9th Cir. 2001). If the holders of PPRs do
not use their water, the water “revert[s] to [plaintiff] for allocation as 4th priority water.”9
Plaintiff alleges that defendants own and/or operate the El Rio Golf Course, which
is located within Section 11 of Mohave County, which is within plaintiff’s service area.10
Plaintiff alleges that the El Rio Golf Course diverted 561 acre feet of Colorado River water
in 2009, 542 acre feet in 2010, 340 acre feet in 2011, 634 acre feet in 2012, and 334 acre feet
from January 1, 2013 through June 30, 2013.11
Plaintiff alleges that “[w]ithin Section 11, Colorado River waters may only be
diverted, withdrawn or otherwise used pursuant to a subcontract with [plaintiff], pursuant
to the MVIDD Contract with the Secretary, with the possible exception relating to present
perfected rights[.]”12 Plaintiff alleges that defendants do not have a “contract with

8

Id. at ¶ 14 (footnotes omitted).

9

Id. at 5, ¶ 32.

10

Id. at 4-6, ¶¶ 19-23 & 34-35.

11

Id. at 6-7, ¶ 39.

12

Id. at 4,, ¶ 24.
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[plaintiff] or the Secretary for use of Colorado River water on or within the El Rio Golf
Course.”13
Plaintiff alleges that “[t]he only present perfected rights applicable to Section 11 are
those referred to as the Hurschler PPRs[.]”14 Plaintiff further alleges that “[a] contract
providing for satisfaction of the Hurschler PPRs was entered into on March 20, 1984 by the
Hurschlers with, or on behalf of, the Secretary ... (‘the Hurschler Contract’).”15 “The
Hurschler Contract is currently held by First American Title Insurance Agency of Mohave,
Inc. as Trustee of Trusts 4895 and 9177.”16 Plaintiff alleges that “[n]o water has been
ordered or reported as used under the Hurschler Contract” and that “[w]atering a golf
course is not an accepted or permitted use of Colorado River water under the Hurschler
PPRs.”17 Thus, plaintiff alleges that the Colorado River water that defendants have
diverted to use at the El Rio Golf Course has not been “properly consumed or otherwise
used under a present perfected right, including the Hurschler PPRs.”18

13

Id. at 5, ¶ 33.

14

Id. at 4-5, ¶ 26.

15

Id. at 5, ¶ 27.

16

Id. at ¶ 28.

17

Id. at ¶¶ 30-31.

18

Id. at 7, ¶ 40.
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John Hoover, “the controlling manager of [d]efendants El Rio Recreational, LLC and
El Rio Holdings, LLC”, avers that the Hurschler Contract was “assigned ... to the El Rio
[d]efendants’ immediate predecessors-in-interest when those predecessors purchased the
associated real estate in two transactions in 2000 and 2006.”19 Hoover further avers that
“[t]hose predecessors-in-interest are related and commonly owned with the El Rio
[d]efendants, and are managed under my common control.”20 Hoover avers that “[i]n or
about 2000 and 2006, I caused [d]efendants’ immediate predecessors-in-interest to assign
the land and associated PPRs to First American Title Company, as trustee of two trusts,
Nos. 4895 and 9177, which were established to hold the land and water rights now in
question....”21 Hoover avers that “[t]he assignment of the [Hurschler] Contract was
approved by the Department of the Interior.”22 And, Hoover avers that “[d]efendant
HCJM, Inc. subsequently purchased a partial tenancy-in-common interest in a portion of
the property at issue. No assignment of water rights was included in that purchase.”23

19

Affidavit of John Hoover at 2, ¶¶ 2 & 4, appended to Defendants’ Motion to
Dismiss [etc.], Docket No. 6.
20

Id. at ¶ 4.

21

Id. at ¶ 5.

22

Id. at ¶ 6.

23

Id. at ¶ 7.
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On October 8, 2013, plaintiff commenced this action in state court. In its complaint,
plaintiff asserts claims for misappropriation/conversion and unjust enrichment/quantum
meruit. Plaintiff alleges that defendants owe it $46,356.00 for the water they have diverted
from 2009 through June 30, 2013.24 Plaintiff also seeks to enjoin defendants from diverting
Colorado River water for use on the El Rio Golf Course, “except that portion of the Golf
Course lying within the Southwest Quarter of Section 11[.]”25
On November 13, 2013, defendants removed the matter to this court, alleging federal
question jurisdiction.
On November 20, 2013, defendants filed the instant motion to dismiss, in which they
argue that the Secretary of the Interior and the First American Title Company, as trustee
for the two Trusts, are indispensable parties.
On December 2, 2013, the parties filed a stipulation for an extension of time for
plaintiff to respond to the motion to dismiss and the notice of removal.26 In the stipulation,
the parties “request[ed] that the [c]ourt grant an extension of sixty (60) days from
December 4, 2013 within which the [p]laintiff will file an amended complaint adding
certain federal officials and possibly other parties as defendants or real parties in interest

24

Complaint at 10, ¶ 67, attached to Notice of Removal, Docket No. 1.

25

Id, at 12-13, ¶¶ 80 & 85.

26

Docket No. 9.
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and addressing issues raised by [d]efendants’ Motion to Dismiss and Notice of Removal.”27
The stipulation provided that
[i]t is the intent of counsel for the [p]laintiff and [d]efendants
to consult with each other and relevant federal officials during
this period in order to clarify the federal issues that this
controversy presents and to clarify complex factual issues in
this controversy concerning land ownership. It is the intent of
counsel that the [c]ourt be presented with a clear and concise
articulation of the issues and facts relevant to the controversy
in an amended complaint that will likewise bring before the
[c]ourt the necessary parties for resolution of the matter.[28]
On February 7, 2014, plaintiff, rather than filing an amended complaint, filed a
response to defendants’ motion to dismiss.29

Defendants have filed a reply,30 and

defendants’ motion to dismiss is now ready for disposition.
Discussion
Defendants move to dismiss plaintiff’s complaint pursuant to Rule 12(b)(7), Federal
Rules of Civil Procedure. Rule 12(b)(7) provides that a party may move to dismiss for
“failure to join a party under Rule 19.” Rule 19 governs the joinder of required parties.31

27

Id. at 1-2.

28

Id. at 2.

29

Docket No. 15.

30

Docket No. 16.

31

The current version of Rule 19 uses the term “required” rather than “indispens-

able.”
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As an initial matter, in their reply brief, defendants argue that plaintiff stipulated
that the Secretary and the Trusts were required parties and thus plaintiff should either join
them or this action should be dismissed. The court “has the discretion to consider an
argument first raised n a reply brief.” Lane v. Dep’t of Interior, 523 F.3d 1128, 1140 (9th Cir.
2008).

The court will consider this argument because the parties entered into the

stipulation in question after defendants filed their motion to dismiss. Defendants could not
have raised this argument in their opening brief.
Stipulations freely and voluntarily entered into are binding. United States v. Molina,
596 F.3d 1166, 1169 (9th Cir. 2010). “‘[S]tipulations serve both judicial economy and the
convenience of the parties, [and] courts will enforce them absent indications of involuntary
or uninformed consent.’” Id. (quoting CDN Inc. v. Kapes, 197 F.3d 1256, 1258 (9th Cir.
1999)).
Defendants argue that in the parties’ December 2, 2013 stipulation, plaintiff agreed
that the Secretary and the Trusts were required parties. Defendants emphasize that the
stipulation provided that “[p]laintiff will file an amended complaint adding certain federal
officials and possibly other parties as defendants or real parties in interest” and that it was
“anticipat[ed] that the amended complaint w[ould] render ... responses” to the instant
motion to dismiss “unnecessary.”32 Thus, defendants argue that plaintiff’s complaint

32

Stipulation at 1-2, Docket No. 9.
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should now be dismissed because plaintiff did not file an amended complaint as it had
agreed to do. Alternatively, defendants argue that the court should not consider plaintiff’s
response to the instant motion because plaintiff either waived its right to argue that the
Secretary and the Trusts are not required parties or plaintiff should be estopped from
making such an argument.
In the stipulation, plaintiff did not agree to file an amended complaint adding the
Secretary and the Trusts as defendants. Rather, the stipulation expressed plaintiff’s and
defendants’ then present intent to consult with federal officials to clarify issues and to
present the court with “a clear and concise articulation of the issues and facts relevant to
this controversy in an amended complaint that will likewise bring before the [c]ourt the
necessary parties for resolution of the matter.”33 In short, the stipulation provided that
plaintiff intended to file an amended complaint, not that plaintiff had unequivocally agreed
to file an amended complaint. Plaintiff was not bound by the stipulation to file an
amended complaint. Because the stipulation was not a binding agreement to file an
amended complaint, plaintiff has not waived its right to argue that the Secretary and the
Trusts are not required parties nor is plaintiff estopped from making such an argument.
Turning then to the merits of defendants’ motion to dismiss, the court must “[f]irst,
guided by the provisions of Rule 19(a), ... decide whether it is ‘desirable in the interests of

33

Id. at 2.
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just adjudication’ to join” the Secretary of Interior and the two subject Trusts.
Paiute-Shoshone Indians of Bishop Community of Bishop Colony, Cal. v. City of Los
Angeles, 637 F.3d 993, 997 (9th Cir. 2011) (quoting EEOC v. Peabody W. Coal Co., 400 F.3d
774, 779 (9th Cir. 2005)). “If so, [the court] must determine next whether [it] feasibly could
order that” the Secretary and the two Trusts be joined. Id. “Finally, if [the] court cannot
so order, then, guided by the provisions of Rule 19(b), [it] must decide whether ‘in equity
and good conscience’ the case may proceed in the absence of the” Secretary and the Trusts.
Id. (quoting Peabody, 400 F.3d at 779-80).
Rule 19(a) “provide[s] for a two-part analysis.” Id. The court “first examine[s]
whether [it] could award complete relief to the parties present without joining the
non-party.” Id. “Alternatively, [the court] ask[s] whether the non-party has a ‘legally
protected interest’ in this action that would be ‘impaired or impeded’ by adjudicating the
case without it.” Id. (quoting Yellowstone County v. Pease, 96 F.3d 1169, 1172-73 (9th Cir.
1996)). “If [the court] answer[s] either of those questions in the affirmative, then the [nonparty in question] is a ‘required party’ under Rule 19(a).” Id. (quoting Pease, 96 F.3d at
1172-73).
Defendants argue that complete relief could not be awarded if the Secretary and the
Trusts are not joined. The court’s inquiry here is “concerned only with ‘relief as between
the persons already parties, not as between a party and the absent person whose joinder

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is sought.’” Eldredge v. Carpenters 46 N. Calif. Counties Joint Apprenticeship and
Training Comm., 662 F.2d 534, 537 (9th Cir. 1981) (quoting 3A Moore’s Federal Practice P
19.07-1[1], at 19-128 (2d ed. 1980)).
Defendants contend that all parties to the two contracts need to be part of this case
because the present action will not only determine their right to continued use of the
Hurschler PPRs under the Hurschler Contract, but will also determine the amount of water
available under plaintiff’s contract with the Secretary. Thus, defendants argue that joinder
of the Secretary and the Trusts is required so that all the parties to the contracts at issue are
present in the case.
There is no blanket requirement that all parties to a contract must be present in order
for a court to award complete relief, which is basically what defendants are arguing here.
The court could award plaintiff all the relief it is seeking without the Trusts or the Secretary
being parties. Awarding plaintiff the relief it seeks would require making a determination
that defendants cannot divert water for the El Rio Golf Course under the Hurschler
Contract. If the court makes that determination, it could require defendants to pay for the
Colorado River water they have used since 2009 and it could enjoin defendants from
diverting Colorado River water under the Hurschler Contract, without the Trusts or the
Secretary being parties.

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Defendants also argue that the Secretary and the Trusts have legally protected
interests in this action which would be impaired or impeded if this case were adjudicated
without them. A legally protected interest may include rights created through being “a
party to a relevant commercial agreement, lease, trust, or treaty with one of the parties to
the lawsuit.” Pease, 96 F.3d at 1173. Defendants argue that the Secretary and the Trusts
have legally protected interests in the action because they are parties to the Colorado River
water contracts that are at issue in this litigation. Defendants contend that plaintiff’s claims
for relief will require interpretation of the Hurschler Contract as well as the MVIDD
Contract and that the Secretary’s and the Trusts’ interests could be impaired or impeded
by the interpretation of these contracts. Defendants also point out that the Secretary must
approve any modifications to either contract.
The Secretary does not have a legally protected interest that could be impeded or
impaired by adjudication of this case. If this case were about diverting more water from
the Colorado River than is currently allowed, then the Secretary’s interests might be
impacted. But, that is not what this case is about. It is about whether defendants can divert
water under the Hurschler PPRs or whether it must enter into a contract with plaintiff in
order to continue diverting Colorado River water for the El Rio Golf Course. Adjudication
of plaintiff’s claims will not affect the Secretary’s duties and obligations under either the
MVIDD Contract or the Hurschler Contract. The Secretary is not a required party.

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The Trusts, however, do have legally protected interests that might be impeded or
impaired. The Trusts, as parties to the Hurschler Contract, have a legally protected interest
in the use of Colorado River water pursuant to that contract. Plaintiff’s claims are based
on the contention that defendants are not entitled to use water under the Hurschler
Contract to water a golf course. If plaintiff’s contention is correct, the Trusts’ right to use
water under the Hurschler Contract would be impaired or impeded. Because adjudication
of plaintiff’s claims could affect the Trusts’ right to use water under the Hurschler Contract,
the Trusts are required parties.
Neither party has argued that it would not be feasible to join the Trusts. Thus,
plaintiff must join the Trusts as defendants in this action.
Conclusion
Defendants’ motion to dismiss34 is denied on the condition that plaintiff file an
amended complaint naming the Trusts as defendants. If plaintiff does not file an amended
complaint naming the Trusts as defendants by March 27, 2014, plaintiff’s complaint will be
dismissed.
DATED at Anchorage, Alaska, this 13th day of March, 2014.
/s/ H. Russel Holland
United States District Judge

34

Docket No. 6.
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