NORTHERN CALIFORNIA POWER AGENCY et al v. USA

Filing 168

REPORTED OPINION granting 152 MOTION for Summary Judgment filed by CITY OF SANTA CLARA, CALIFORNIA, CITY OF REDDING, CALIFORNIA, NORTHERN CALIFORNIA POWER AGENCY, CITY OF ROSEVILLE, CALIFORNIA; denying 153 MOTION for Summary Judgment filed by USA. Status Report due by 9/20/2022. Signed by Judge David A. Tapp. (emc) Service on parties made.

In the United States Court of Federal Claims
No. 14-817C
Filed: August 18, 2022

NORTHERN CALIFORNIA
POWER AGENCY, et al.,
Plaintiffs,
v.
THE UNITED STATES,
Defendant.
Lisa Dowden and Jeffrey A. Schwarz, Spiegel & McDiarmid LLP, Washington, D.C., for
Plaintiffs.
P. Davis Oliver, Senior Trial Attorney, Franklin E. White, Assistant Director, Patricia M.
McCarthy, Director, Commercial Litigation Branch, Brian M. Boynton, Acting Assistant
Attorney General, Civil Division, U.S. Department of Justice, Washington, D.C., for Defendant.
MEMORANDUM OPINION AND ORDER
TAPP, Judge.
Liability is established in this illegal exaction case. Northern California Power Agency
and the Cities of Redding, Roseville, and Santa Clara, California (referred to collectively as
“NCPA”) purchase hydroelectric power from the United States. They brought this action to
recover overpayments they believed were assessed in violation of the Central Valley Project
Improvement Act (“CVPIA”). The United States collected these overpayments under a revenuemaximizing payment scheme that assessed disproportionate payments to power customers as
opposed to water customers. At trial in 2018, the Court 1 found the United States correctly
interpreted the statute and that no overpayments existed. The Federal Circuit reversed, finding
that the United States’ practice to reach its collection target was, in fact, a violation of the
CVPIA. N. Cal. Power Agency v. United States, 942 F.3d 1091 (Fed. Cir. 2019). The only
question remaining before this Court queries the proper methodology to calculate damages.
That question is purely legal. Before the Court are Cross-Motions for Summary
Judgment. (Pls.’ Mot. Summ. J, ECF No. 152; Def.’s Mot. Summ. J., ECF No. 153). Assessing
specific damage calculation for illegal exactions generates more questions than answers. The
1

N. Cal. Power Agency v. United States, 139 Fed. Cl. 74 (2018) (Wheeler, J.). Following
remand, this case was transferred to the undersigned on December 3, 2019. (ECF No. 116).

parties agree that damages are the difference between what the United States actually charged
and the proportional charges authorized by the CVPIA. (Nov. 1, 2021 Status Report at 6, ECF
No. 146). Where their rationales diverge is how proportionality should be calculated. (Id. at 7).
In the limbo between liability determination and this stage of litigation, the United States
developed a new allocation methodology for calculating the types of payments overpaid by
NCPA—one that ultimately reduces the United States’ exposure. In fashioning this new
allocation approach, the United States departed from the practice it utilized for decades, now
maintaining that its longstanding approach is wrought with error. NCPA urges the Court to order
the United States to make payments utilizing elements of the prior formula. After considering the
relevant legislation and the basic principles of damages, the Court agrees with NCPA’s proposed
methodology. Therefore, NCPA’s Motion for Summary Judgment is GRANTED and the United
States’ Motion for Summary Judgment is DENIED.
I.

Background

The remaining issue is narrow. However, the Court recounts some history of the aquatic
plight of California’s Central Valley and the relevant legislation to provide context. In 1935,
Congress created the Central Valley
Project (“CVP”) to supply water to
California farms and communities for
agricultural, municipal, and industrial
uses due to scarce water resources.
Emergency Relief Appropriation Act of
1935, ch. 48, 49 Stat. 115, § 4.
Extending 400 miles through central
California, the CVP is an intricate, multipurpose network of dams, reservoirs,
canals, hydroelectric powerplants, and
other facilities used to supply water and
electrical power to the Greater
Sacramento and San Francisco Bay
areas. Central Valley Project, BUREAU
OF RECLAMATION,
https://www.usbr.gov/mp/cvp/index.html
(last visited August 10, 2022).
In addition, the CVP provides
water to restore and protect fish and
wildlife, as well as to enhance water
quality. Id. The Central Valley’s need for
water is significant—by some estimates,
the region supplies eight percent of the
United States’ total agricultural output
and one-quarter of the nation’s food—
but annual rainfall does not provide a
reliable source of water for Central Valley
farmers. California’s Central Valley,

Northern California Power Agency, et al., v. United States, Case
No. 14-817, Pls.’ Mot. for Summ. J., A400, ECF No. 152-1
(colorized).

2

UNITED STATES GEOLOGICAL SURVEY, https://ca.water.usgs.gov/projects/central-valley/deltaeastside-streams.html (last visited August 10, 2022). Today, the CVP is the nation’s largest
federal water management project. N. Cal. Power Agency, 942 F.3d at 1092.
Congress passed the CVPIA in 1992 to “achieve a reasonable balance among competing
demands for use of Central Valley Project water, including the requirements of fish and wildlife,
agricultural, municipal and industrial and power contractors.” Central Valley Project
Improvement Act (CVPIA), Pub. L. No. 102–575, § 3402, 106 Stat. 4600, 4706 (1992). Despite
its solicitous intent, the CVP struggled with concerns about the project’s costs and private
benefits. Congress intended for the CVPIA to address the environmental impact of the CVP and
allow changes in water policies, pricing, and distribution. Central Valley Project Improvement
Act, WATER EDUCATION FOUNDATION, https://www.watereducation.org/aquapedia/centralvalley-project-improvement-act (last visited July 14, 2022). The CVPIA mandates balancing
competing demands for a limited supply of water, a balance that included meeting multi-purpose
public requirements. Id.
Within the United States Department of Interior (“DOI”), the Bureau of Reclamation
(“Reclamation”) manages the CVP. See Reclamation Projects Authorization and Adjustment Act
of 1992, Pub. L. 102–575, 106 Stat 4600 (1992). Along with distributing water to water
customers, the CVP also generates hydroelectric power through dams and power plants built as
part of the project. N. Cal. Power Agency, 942 F.3d at 1092. Through an agent, the CVP in turn
sells that power to cities and other purchasers (“power customers”). Id. Plaintiffs here are
governmental entities that purchase hydroelectric power produced by the CVP. (Am. Compl. at
6–8, ECF No. 35). In addition to paying for the water and power they receive, the rates charged
to water and power customers reimburse Reclamation for the proportionally allocated costs of
building, operating, and maintaining the CVP. N. Cal. Power Agency, 942 F.3d at 1092. Water
customers are responsible for roughly seventy-five percent of those costs and power customers
are responsible for the remaining quarter. Id. Those allocations are intended to reflect relative
benefits that customers derive from the CVP, a water-focused operation. Id.
The CVPIA established a “Restoration Fund” to pay for fish and wildlife habitat
restoration, among other things, and authorized up to $50 million per year to be dedicated to
restoration goals. CVPIA § 3407(b). To replenish the money in the Restoration Fund, the CVPIA
requires the United States to collect certain payments from purchasers of CVP water and
purchasers of hydroelectric power, such as NCPA. § 3407(c)(2). The payments—called
Mitigation and Restoration (“M&R”) payments—help fund efforts to mitigate the CVP’s
environmental impact. N. Cal. Power Agency, 942 F.3d at 1093. M&R payments are distinct
from water and power contractors’ obligations to reimburse the United States for a portion of
CVP’s capital costs and operations and maintenance expenses. Id.
Reclamation is subject to five limitations for fund collection. First, the CVPIA limits
M&R payments the United States may collect to $30 million on a three-year rolling average.
CVPIA § 3407(d)(2)(A). Second, payments assessed against CVP water customers cannot
exceed $6.00 per acre-foot, adjusted for inflation, for agricultural water and $12.00 per acre-foot,
adjusted for inflation, for municipal and industrial water. § 3407(d)(2)(A). Third, Reclamation is
required to reduce the additional annual M&R payments imposed on CVP customers who use the
water for agricultural purposes by accounting for their ability to pay for such charges. §
3

3407(d)(2)(A). Fourth, Reclamation is required to reduce the annual ceiling for additional annual
M&R payments to $15 million once it completes the fish, wildlife, and habitation mitigation and
restoration actions specified in Section 3406 of the Act. § 3407(d)(2)(A). Finally, the CVPIA
requires Reclamation to consider proportionality between water and power customers, stating:
“[t]he amount of the [M&R] payment made by [CVP] water and power users, taking into account
all funds collected under this title, shall, to the greatest degree practicable, be assessed in the
same proportion, measured over a ten-year rolling average, as water and power users’ respective
allocations for repayment of the [CVP].” § 3407(d)(2)(A). It is the final provision that was at
issue at the liability stage of this case.
Through its collection attempts since the CVPIA’s enactment, Reclamation sought to
maximize revenue from the annual M&R payments by seeking to collect the statutory cap of $30
million from both water and power users. Reclamation did not consider the proportionality
requirement in assessing costs to NCPA, instead calculating the difference between what it
expected to receive from water customers and the $30 million cap, and then charging NCPA for
the anticipated shortfall. N. Cal. Power Agency, 942 F.3d at 1095. With California’s severe
drought and dwindling water deliveries, Reclamation required power customers to pay
approximately 40.5 percent of the $30 million M&R cap. (Am. Compl. at 5). This is
significantly more than their proportional benefit, thereby imposing a financial burden more than
50% higher than the Congressionally-mandated “fair share” attributable to CVP power
customers. (Id.). NCPA brought this suit for reimbursement of M&R payments assessed in
violation of the Section 3407(d) proportionality provision.
At trial, the Court found that the “proportionality” requirement was not a “limitation”
within the meaning of Section 3407(c)(2) and thus could not take precedence over the
Restoration Fund’s $50 million annual collection goal outlined in Section 3407(c)(2). N. Cal.
Power Agency, 139 Fed. Cl. at 76. The Federal Circuit reversed, adhering to the plain meaning of
the statute. The Circuit found that the requirement that Section 3407(d) M&R payments “shall, to
the greatest degree practicable, be assessed in the same proportion . . . as water and power users’
respective allocations for repayment” was in fact a “limitation” and, when unfollowed, resulted
in overpayments. N. Cal. Power Agency, 942 F.3d at 1098–99. Accordingly, NCPA is entitled to
reimbursement of M&R payments improperly assessed and collected by Reclamation in
violation of the Section 3407(d) proportionality provision.
II.

Discussion

Based on the Federal Circuit’s finding, there is no dispute that Reclamation imposed
disproportionate charges on NCPA constituting an illegal exaction for which the United States
must pay damages. The trial court held that “[i]f the Government violated the proportionality
requirement in Section 3407(d), by necessary implication, the remedy would be a return of the
illegal and disproportionate payments that it assessed upon Plaintiffs.” N. Cal. Power Agency,
122 Fed. Cl. 74, 113 (2018). That holding remains undisturbed. The lingering issue is the
computation of that reimbursement. NCPA and the United States both move for summary
judgment arguing that their methodology is the correct one. Based on the reasoning outlined
below, the Court agrees with NCPA.

4

A. Motions for Summary Judgment
Before analyzing the divergence of formulas, the Court notes the parties’ agreement on
various points of calculation, including the arithmetic and basic spreadsheet formulas that should
be used. (Def.’s Mot. Summ. J. A160). Both parties first compute the proportional charges for all
power contractors, compare those amounts to the actual amounts paid by all power contractors,
and then compute the NCPA’s shares of the totals. (Nov. 1, 2021 Status Report at 6). To that
end, the amount of NCPA’s proportional M&R payment responsibility is computed according to
the following formula:
Power M&R = (Water CVPIA Receipts / Water CVP Repayment %) x Power CVP Repayment %

(Id.). 2 The Court accepts this jointly proposed formula. In it, the “Power M&R” and “Water
CVPIA Receipts” terms are annual amounts corresponding to a single fiscal year. (Id.). The
terms “Water CVP Repayment %” and “Power CVP Repayment %” reflect each group’s average
share of CVP repayment allocation measured over rolling ten-year periods. (Id.). The
percentages reflect the power and water users’ respective allocation for repayment of CVP
capital costs, exclusive of operations and maintenance expenses. (Id.). However, despite various
points of agreement on how those numbers should be interpreted, the parties’ damages
calculations use different CVP repayment percentages. 3 (Id.).
The dispute is narrow: what proportionality ratio should Reclamation use to determine
charges during 2008–2020? Resolution depends on whether damages should be calculated using
the cost allocations and practices that were in effect during the damages period as NCPA
contends or based on retroactive changes made, as the United States believes, in attempt to
comply with the CVPIA. 4

2

In this formula, “Plaintiffs do not dispute the amounts of “Water CVPIA Receipts” that the
Government says were collected in each fiscal year.” (Nov. 1, 2021 Status Report at 7).

3

There is some question as to whether the calculation should be staggered by two years. The
United States proposes to calculate damages by implementing this formula on a lagged basis so
that power contractors’ M&R payments for a given year are proportional to water users’ CVPIA
payments two years earlier. (Nov. 1, 2021 Status Report at 8). NCPA calculates damages by
applying this formula on a current-year basis so that power contractors’ payments are
proportional to water users’ payments for the same fiscal year. (Id.). NCPA admits that
calculations using the two-year lag actually results in a higher computation of damages; that said,
the Court reserves ruling on whether the two-year lag is appropriate. The Court notes that NCPA
advocates for calculation on a current-year basis and acknowledged that, by calculating damages
on a current-year basis, they forfeit the higher amount in damages. (Tr. of Oral Arg. at 63:15–17,
ECF No. 167).
4

The Court acknowledges that this methodology must be new because proportionality was not
being calculated prior to the Federal Circuit’s 2019 decision. Thus, “practices in effect” during
the damages period refers to the same factors in cost allocation, not necessarily the same
formula.
5

i. United States’ Position
For decades, Reclamation improperly “prioritized” the collection of $50 million over the
statutory directive that CVP water and power users pay in proportion to their respective
repayment allocations. (Def.’s Mot. Summ. J. at 9). The United States has unilaterally
determined that defiance of the proportionality requirement was not its only error in collection.
After internal analysis, Reclamation now “takes a different position with respect to whether
certain [underlying] costs should be included or excluded from the proportionality calculation.”
(Id. A0167). Originally, Reclamation included costs of water distribution systems in CVP
repayment. The Court determined the United States was liable to NCPA in November 2019. In
January of 2020, 5 the United States determined that inclusion of distribution costs was in error
because they are “non-CVP” costs, reasoning that water distribution system costs relate only to
single contracting entities and are not shared by CVP beneficiaries. (Id. at 5). The United States
claims that because the CVPIA does not authorize inclusion of non-CVP costs in calculating the
proportionality assessment, water distribution system costs may not be included in calculating
damages owed in this case. (Id.).
In support of excluding costs that are not shared by all CVP beneficiaries, the United
States cites the position advocated by the “Commissioner of Reclamation” 6 in 1946—more than
seventy years prior to its January 2020 implementation. At that point, the Acting Secretary of
Interior authored a letter to Congress regarding the proper allocation of CVP costs, that
distinguished “between the central features of the project[,] which will provide common services,
and the irrigation water distribution systems [that] serve a single contracting unit.” 7 (Def.’s Mot.
Summ. J. A543). The letter emphasized that “[w]hatever supplementary distribution systems for
irrigation water are necessary or desirable under the requirements of the reclamation law will be
the subject of individual and separate repayment contracts . . . and will have no direct
relationship to the central operation, control, and financial accounting of the [CVP].” (Id.). By
contrast, “[t]he contractual terms under which project water is furnished will both reflect and
form a part of the financial structure and operational arrangements of the central group of
common features [that] provide the project supply of water (and power).” (Id.).
Despite the 1946 letter, not only did Congress refuse to formally adopt that approach, but
Reclamation’s policy continued to include water distribution costs in its interim CVP cost
allocation until 2020. 8 For the entire damages period in this case, cost allocations were governed

5

The United States asserts that this decision was the result of a cost allocation study that began
in 2010. (Tr. of Oral Arg. at 31:22, ECF No. 167).

6

The author of this letter is misidentified in the United States’ briefing—it is from Oscar
Chapman, Acting Secretary of Interior in 1947. (Def.’s Mot. Summ. J. A534).
7

Whether that letter was ever actually provided to Congress is not apparent from the record. The
Court will assume for purposes of this Opinion that it was received.

8

The United States asserts that this practice was followed in the 50’s and 60’s, but there is no
evidence of that in the record. (See Tr. of Oral Arg. 47:9–21).
6

by a study issued by Reclamation in 1970 and updated in 1975. (See Pl.’s Mot. Summ. J.
A0273). Those analyses perpetuated inclusion of water distribution costs despite the decades old
letter.
In 1986, Congress directed Reclamation to prepare a new cost allocation study (“CAS”)
by 1988; it failed to do so. (Pl.’s Mot. Summ. J. A0267 (observing that “[n]o major reallocation
of CVP costs has been completed since 1975.”)). Had Reclamation wanted, it could have
differentiated between cost allocations for central features of the CVP and water distribution
system costs relating only to a single contracting entity not shared by CVP beneficiaries. By
ignoring Congress, Reclamation again failed to draw the distinction that the United States
presses the Court to draw now. No final CAS was completed until 2020, (Tr. of Oral Arg. 22:14–
16), thereby denying Congress the chance to review the practical effects of the CVPIA. In 1993,
Reclamation issued “revised interim guidelines interpreting the statutory obligations under the
CVPIA,” which apparently excludes water distribution system costs, but that was not
implemented on the ground. (Def.’s Mot. Summ. J. A0063).
Again in 2001, Reclamation considered and rejected proposed changes to the existing
allocations which lumped all water distribution customers together. (Pl.’s Mot. Summ. J. A0296,
A0300, A0334). The 2001 report “examined various cost allocation methods” and decided that
“the existing methodology would remain in place.” (Id. A0414). It was not until January 6, 2020,
almost two months after the Federal Circuit decided liability, that Reclamation issued a Final
CAS explaining a new methodology and establishing the final cost allocation factors. (Def.’s
Mot. Summ. J. at 5; Pl.’s Mot. Summ. J. A0387–88; Tr. of Oral Arg. 31:5). This stratagem
conveniently reduces the damages owed to NCPA by several million dollars.
Simply put, the United States calculates these charges differently now than it would have
calculated them had it treated proportionality as binding during the relevant time frame. The
United States’ Motion is premised on the notion that it should not be forced to repeat its longcommitted error. Based on these revelations, the United States asks the Court to adopt the
damage calculation excluding water distribution system costs (like those in San Felipe), which it
believes is consistent with Section 3407(d) of the CVPIA by “exclud[ing] costs that are not
allocated for repayment of the CVP.” (Def.’s Mot. Summ. J. at 1–2). Implementing this
calculation would award NCPA $68,154,911. (Id. at 13).
ii. NCPA’s Position
NCPA disagrees with the United States’ approach and ask that the Court implement the
decades-long allocation calculation utilized by Reclamation. NCPA contends that the disconnect
is that the United States’ damage calculation modifies cost allocations “retroactively,” thereby
increasing by roughly 25 percent the Government’s estimate of what NCPA should have paid.
(Pl.’s Mot. Summ. J. at 4). NCPA believes that applying a retroactive change contravenes the
proper methodology of damages in illegal exaction cases.
NCPA cites reliance on the United States’ litigation position at the liability stage. During
the 2018 trial, the parties introduced a joint exhibit comparing, on a ten-year rolling average
basis, power and water users’ relative M&R payments and respective allocations for CVP
repayment. (Pls.’ Mot. Summ. J. A0027 (“Joint Ex. 2”)). At trial, a witness for the United States

7

agreed that this exhibit represented “the ten-year rolling average assessment of collections and
repayment allocation[s],” and iterated “that’s what the restoration fund says in terms of how the
repayment allocation should be measured for proportionality if they’re on the ten-year rolling
average basis.” (Id. A0032–33). Joint Exhibit 2 included allocations and percentages through
fiscal year 2015. (Joint Ex. 2).
NCPA contends that the calculation of its proportional share of CVP payments should be
based on the cost allocations in effect when the disproportionate charges were rendered. (See Tr.
Oral Arg. 8:23–9:4 (Counsel for NCPA: “It’s undisputed that Joint Exhibit 2 reflected the
historical allocations and included the distribution systems in the San Felipe facilities. The
government consented to the admission into evidence of Joint Exhibit 2 without qualification or
limitation, and under this Court’s precedent, such a joint submission is a binding admission of
the facts set forth therein.”)). Those allocations are shown in Joint Exhibit 2 and Defendant’s
response to NCPA’s Interrogatory 25. (Pl.’s Mot. Summ. J. at 13; see also id. A0028). NCPA’s
expert relied on those historical allocations and percentages to project what the United States
would have charged during the damages period but for its failure to treat proportionality as
binding. (Id. A0047–48, A0050).
Based on these arguments, NCPA asks the Court to rule that damages in this case are
equal to the difference between the charges imposed on NCPA for fiscal years 2008 through
2020 and the charges Reclamation should have imposed but for its illegal exactions, measured as
of the time of the exactions using the CVP cost allocations and methods then in place. (Pls.’ Mot.
Summ. J. at 5, 24). This calculation results in a damage award of $81,872,385. (Id. at 5 n.1).
B. NCPA’s methodology is correct under basic premise of “damages.”
An illegal exaction claim under the Tucker Act is “a non-tortious, non-contractual claim
for money damages.” Perry v. United States, 149 Fed. Cl. 1, 25 (2020) (quoting Auto Club Ins.
Ass’n v. United States, 103 Fed. Cl. 268, 273–74 (2012)). The parties agree that damages in this
case are the difference between what the United States actually charged NCPA and the
proportional amount of M&R payments for the damages period during fiscal years 2008–2020.
Theoretically, damage calculation should be simple. For illegal exactions, however, there is no
clear-cut methodology. “Once an illegal exaction is established, almost no cases discuss how to
calculate damages.” Renee Burbank, Illegal Exactions 87 Ten. L. Rev. 315, 343 (2020). This is
largely because illegal exactions of money result in a certain and identifiable sum that must be
returned. However, this case presents an atypical scenario: the United States attempts to redefine
the formula post-exaction, akin to switching a basketball for a volleyball in the fourth quarter.
The United States posits that Reclamation’s prior long-standing practice was flawed and
urges the Court to adopt a process considered, but not adopted, by Reclamation more than 70
years ago, and only now reinvigorated. NCPA argues that measuring economic damages requires
asking what financial position a plaintiff would have been in “but for” the unlawful government
action. (Tr. Oral. Arg. at 18:31–20); A&D Auto Sales, Inc. v. United States, 748 F.3d 1142, 1157
(Fed. Cir. 2014). The “but-for scenario” is “the standard general approach to damages
quantification.” Mark A. Allen, et al., Reference Guide on Economic Damages, in Reference
Manual on Scientific Evidence, 425, 429 (Fed. Judicial Ctr., 3d ed. 2011). Balancing a “but-for”
analysis with the facts of this case, the Court must decide if the correct calculation should
8

include costs actually used during the relevant time frame or if it should implement the formula
Reclamation now claims it “should have” used. The difficulty in doing so arises from historical
inconsistencies in Reclamation’s approach to cost allocation. Reclamation had years—decades,
even—to implement this new approach or to invite congressional input on the matter but chose
not to do so until after the Circuit ascribed liability.
The initial allocation occurred at the start of the CVP in 1946. The 1970 and 1975 studies
support NCPA’s current argument for damages as including water distribution systems, like
those in San Felipe, in reimbursable costs subject to repayment by beneficiaries of the CVP. In
1988, Congress directed Reclamation to conduct a new CAS. Again, Reclamation failed to do so
until over 30 years later and following the Circuit’s decision imposing liability on Reclamation
for overcharging NCPA. In the interim, between the 1988 Congressional directive and
Reclamation’s 2020 Final CAS, Reclamation perpetuated the existing cost allocation
methodology reflected in the 1970 and 1975 studies. A multi-decade practice makes for a
vehement endorsement. The result: for over seventy years, Reclamation utilized a methodology
that NCPA urges the Court to adopt as the measure of damages. An agency's interpretation of a
statute or regulation that conflicts with a prior interpretation is entitled to considerably less
deference than a consistently held agency view. INS v. Cardoza–Fonseca, 480 U.S. 421, 446
n.30, (1987); see also Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 515 (1994). Here,
Reclamation’s actions over seven decades more than compellingly demonstrates a “consistently
held agency view” which NCPA and the Court are entitled to rely on.
The United States is unswayed by NCPA’s reliance on Joint Exhibit 2. It argues that this
exhibit repeats the 1975 study’s error which has now been corrected, thus it does not represent
the “allocated” costs of repayment of the CVP, nor does it apply the specific policy guidance in
place at the time—the 1993 Revised Interim Guidelines. (Def.’s Mot. Summ. J. A63). But the
trouble with that contention is that Joint Exhibit 2 is based on the publicly available cost
allocations relied on by customers and Reclamation for decades. Further, it accurately reflects
the United States’ trial position. In now straying from the approach outlined in Joint Exhibit 2,
the United States has changed its litigation position at the eleventh hour.
The United States maintains that the Court should overlook Reclamation’s pivot because
“the trial was only about liability.” (Tr. Oral. Arg. 23:24–25). While the Court understands the
implications of bifurcation, the Federal Circuit has upheld an order precluding discovery related
to damages in an illegal exaction case because prior audits by the Government properly served as
the basis for the damages calculation and where it had not raised a counterclaim or setoff
defense. Am. Airlines, Inc. v. United States, 551 F.3d 1294, 1307 (Fed. Cir. 2008) (rejecting
government claim it should not be bound by prior audits absent showing it possesses concrete
evidence, as opposed to theoretical argument, that adjustment in government’s favor would
result); see also Sara Lee Corp. v. United States, 29 Fed. Cl. 330, 338 (1993); Missouri Pac. R.R.
v. United States, 168 Ct. Cl. 86 (1964). This Court finds that Reclamation’s change in position is
not a basis for the United States to modify damage calculation when it had the opportunity to
raise these concerns for years before.
Historical allocations, as well as CVP repayment rates and charges based on those tenyear allocations, included the relevant costs. No United States’ expert contends that, had
Reclamation implemented proportionality during the damages period, it would have done so as
9

Reclamation does now, subtracting the distribution system and out-of-basin costs. Further,
Reclamation has not attempted to formally revise those allocations and rates retroactively for any
purpose other than its damages calculations here. (Pl.’s Mot. Summ. J. A579–580; see also Tr.
Oral Arg. 54:19–55:1 (“Yes, there’s no question that there are other entities that would have
forced exactions pursuant to this old formula for calculating mitigation and restoration charges,
including water contractors who actually weren’t a part of the suit[.]”), 57:21–23 (“I’m not aware
of Reclamation reaching out to non-plaintiffs regarding the issues in this case.”)). In other words,
except for the named plaintiffs here, Reclamation does not intend to return improperly exacted
funds to its other customers. The resulting manifest unfairness is palpable.
The United States is a litigious country. When a wrong has been committed, whether it be
contractual or through illegal exaction, the basic principle underlying damages is compensation
for losses sustained and no more. Damages are not recoverable for losses beyond an amount the
evidence establishes with reasonable certainty. See Phillips & Jordan, Inc. v. United States, 158
Fed. Cl. 313, 332 (2022) (holding that damages must be shown with reasonable certainty or
approximation). If the goalposts are constantly moving—i.e., calculations changing
retroactively—it would be inequitable to require plaintiffs to show damages with any degree of
certainty. How could they? How could courts? The Court therefore finds that the revisionist
scheme advocated by the United States in this case violates the basic canons of damage
calculation. NCPA’s reliance on the CVP cost allocation amounts and percentages shown in
Joint Exhibit 2 and the United States’ discovery responses is sufficient to carry their burden to
compute but-for charges and damages with reasonable certainty. NCPA’s proposed methodology
follows the but-for causation necessary in illegal exaction cases and is the proper calculation for
that reason. The Court turns to whether exclusion of these costs is mandated by the CVPIA.
C. NCPA’s methodology is correct under the plain meaning of the statute.
Putting aside principles of damage calculation, the Court finds that the plain language of
the CVPIA does not classify water distribution systems and out-of-basin expenditures as nonCVP costs. Likewise, it does not explicitly mandate exclusion of those costs for purposes of the
Restoration Fund. The agency is free to interpret it that way and make that change going
forward, but retroactive application is certainly not mandated by the statute.
The United States urges the Court to “view this issue through the lens of what does that
statutory provision mean.” (Tr. Oral. Arg. 49:8–9). The starting point for interpreting a statute is
the language of the statute itself. Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447
U.S. 102, 108 (1980). “Absent a clearly expressed legislative intention to the contrary, that
language must ordinarily be regarded as conclusive.” Id. “To ascertain whether Congress had an
intention on the precise question at issue, [courts] employ the ‘traditional tools of statutory
construction.’” Timex V.I., Inc. v. United States, 157 F.3d 879, 882 (Fed. Cir. 1998). The Court
does not interpret the statute in a vacuum and “must consider not only the bare meaning of each
word but also the placement and purpose of the language within the statutory scheme.” Barela v.
Shinseki, 584 F.3d 1379, 1383 (Fed. Cir. 2009) (citation omitted). A statute’s meaning,
regardless of whether the language is plain or not, depends on the context. Id. (citation omitted).
While the Court may look to context to understand the meaning of a statute, it does not look
beyond “the language and design of the statute as a whole.” K Mart Corp. v. Cartier, Inc., 486
U.S. 281, 291 (1988). The question is not, as the United States suggests, “whose interpretation is
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more reasonable and who has a more robust interpretation.” (Tr. Oral Arg. 27:6–8). Instead, the
question is what the statute explicitly states.
The language of Section 3407(d) is plain. The relevant portion of Section
3407(d)(2)(A)—i.e., the provision to which the Federal Circuit directed this Court to adhere—
states: “[t]he amount of the mitigation and restoration payment made by Central Valley Project
water and power users, taking into account all funds collected under this title, shall, to the
greatest degree practicable, be assessed in the same proportion, measured over a ten-year rolling
average, as water and power users’ respective allocations for repayment of the Central Valley
Project.” CVPIA § 3407(d)(2)(A) (emphasis added). On a very basic level, this controlling
language places importance on the proportional payments being an average measured for the
same period of time. Thus, changing what constitutes CVP costs at this juncture would
necessarily alter the measuring stick in direct contravention of the statute.
Further, Congress directed Reclamation to allocate M&R payments by accounting for
“all” funds collected pursuant to the CVP. Congress made no distinctions, operationally or
financially, between the types of projects within the CVP. See CVPIA § 3403(d) (defining the
CVP as including all reclamation projects located within or diverting water from Sacramento and
San Joaquin river watersheds). The United States recites the proposition that the “CVP’s defining
feature is the fact that it is a financially and operationally integrated multipurpose water project.”
(Def.’s Mot. Summ. J. at 16 (internal citations omitted)). Despite the integrated nature of the
CVP, Reclamation seeks to distinguish between the integration of the CVP for the central
feature. (Def.’s Mot. Summ. J. at 17). This distinction arises from differences in operational
structure and financial integration. (Id. at 17–18).
The responsibilities of the integrated components of the CVP are reflected in written
agreements outlining each component’s “obligations, goals, and expectations.” (Id. at 17). By
contrast, Reclamation claims, the operation of water distribution systems is the responsibility of
each water distribution system customer pursuant to a separate contract. (Id.). In other words,
water distribution systems serve only a single customer, while the integrated components of the
CVP benefit the entire project. Reclamation highlights a provision of a 1988 rate-setting
document which provides: “[t]he costs of isolated or out-of-basin facilities are the direct
repayment responsibility of the contractor (or group of contractors) who benefit from the
services provided by the facilities.” (Def.’s Mot. Summ. J. A594). Leaving aside whether
“isolated or out-of-basin” is used interchangeably with water distribution systems, this
provision—again, one never formally adopted by Reclamation—does not necessarily mean that
costs borne solely by water distribution system customers pursuant to individual specific
contracts can be properly severed from total costs subject to the proportionality requirement of
Section 3407(d). The CVPIA suggests otherwise.
Indeed, payment for CVP water occurs pursuant to the same statute which sets forth two
methods of repayment by water customers. 43 U.S.C. § 485h. First, a customer may enter into a
repayment contract over a period regardless of the quantity of water delivered. 43 U.S.C. §
485h(d). Second, a customer may enter into contracts with Reclamation for irrigation water
payable in advance each year of the contract. 43 U.S.C. § 485h(e). Importantly, both payment
methods, regardless of the type of customer, are covered under Title 43. (See Tr. Oral Arg. 41:3–
8 (“I generally agree with what plaintiffs’ counsel said that insofar as under 9(c) of the
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Reclamation Act of ’39, . . . the water service contracts provides for the provision of water
service contracts, and under 9(d) of that same statute you have the relevant service contracts.”)).
The United States argues that operationally, water distribution system customers and the
“integrated operations” of the CVP are separate and distinct. (Def.’s Mot. Summ. J. at 17–18).
Integrated CVP operations are prescribed through a “Coordination Operations Agreement”
outlining the project’s obligations, goals, and expectations while the operation of water
distribution systems is controlled by individual contracts. (Id. A003–33). Though fundamental
operational distinctions may exist between the two classes of CVP customers, Congress was
explicit: M&R repayment must account for all funds collected by Reclamation from water and
power customers regardless of operational distinctions. See CVPIA § 3407(d)(2)(A).
Moreover, Congress’s expansive inclusion of “any reclamation or irrigation project,
including incidental features thereof, . . . constructed by the United States pursuant to said laws,
or in connection with which there is a repayment contract” within the meaning of the term
“project” undercuts Reclamation’s contention that water distribution systems are not integrated
within the CVP. Cf. 43 U.S.C. § 485a(c) (defining “project”) and (e) (defining “repayment
contract”). The statutory scheme evidences no Congressional intent to sanction a system of
abstract peculiarities among those customers in order to artificially exclude water distribution
systems from other CVP projects for M&R repayment purposes. Certainly, Reclamation may,
within the agency and after providing due notice to its customers, implement such a distinction.
But it must also take clear agency action that adopts that interpretation. Deeds done are more
meaningful than words said. An agency’s interpretation only receives deference if it is adopted
through procedures with some formality. United States v. Mead Corp., 533 U.S. 218, 229 (2001).
Without this level of formality, agencies could implement policies chaotically, unbeknownst to
consumers, or in the face of litigation in order to shield themselves from additional liability. The
result is impractical and unfavorable.
In its opinion reversing the trial court, the Federal Circuit emphasized the “oft-repeated
warning that the views of a subsequent Congress form a hazardous basis for inferring the intent
of an earlier one.” N. Cal. Power Agency, 942 F.3d at 1098 (quoting Consumer Prod. Safety
Comm’n, 447 U.S. at 117). This observation is equally valid when applied to the context of
agency action. It is an admonition the United States disregards. The Federal Circuit’s 2019
admonition, applied here to an agency rather than Congress, foreshadows the result of this
litigation. See N. Cal. Power Agency, 942 F.3d at 1098. Simply put, the widely dispersed
brackets designated by Reclamation are not compelling. On one end, Reclamation features a
single letter from 1947 describing an intent to treat single-use CVP components differently from
common features of the CVP—an intent never practiced. Reclamation shores up this disused
notion decades later and only post-appeal with a Final CAS, which incidentally decreases
Reclamation’s exposure. Interspersed between these far-flung events, is the reality in which
Reclamation calculated payments by the method now pressed by NCPA. The Court chooses to
value Reclamation’s deeds over mere words.
Reclamation correctly frames the difference between its calculations and those of NCPA
as almost entirely dependent on whether water distribution costs should be included in
determining if NCPA’s M&R payments were proportional to their respective allocations for
repayment of the CVP. (Def.’s Mot. Summ. J. at 12, 15). In seeking to minimize its exposure,
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Reclamation improperly construes the nature of the CVP and the statutory language of the
CVPIA; it ignores Reclamation’s longstanding real-world approach in favor of a belated
distinction not adopted by the agency, and certainly not Congress, until remand following the
determination of liability. NCPA’s proposed methodology, on the other hand, comports with the
statutory language of the CVPIA and the long-implemented practice of Reclamation.
III.

Conclusion

The Court finds that the United States’ post hoc rationalization—that reimbursable
percentages used for CVPIA calculations should not consider individual water contractors—is
improper given Reclamation’s multi-decade reliance on the inclusion of those costs and the
relevant statutory language. Therefore, the Court finds that NCPA’s proposed methodology is
sound and should be implemented to calculate damages here.
NCPA’s Motion for Summary Judgment, (ECF No. 152), is GRANTED and the United
States’ Motion for Summary Judgment, (ECF No. 153), is DENIED. In light of this Opinion, the
parties are directed to meet and confer to complete the relevant calculations. On or before
September 20, 2022 the parties are directed to file a Joint Status Report apprising the Court of
their progress and whether further litigation remains necessary.
IT IS SO ORDERED.
s/
David A. Tapp
DAVID A. TAPP, Judge

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