United States: 545 U.S. 596

¶ … United States: 545 U.S. 596 (2005)

Was the United States in breach of its 1963 contract with Westlands Water District and liable for money damages by reducing the delivery of water?

Were the Petitioners intended third-party beneficiaries of the 1963 contract?

Did the Reclamation Reform Act of 1982 waive the United States' sovereign immunity from breach of contract suits?

Rules

Reclamation Reform Act (1982): Section 390uu of the Act which waives the United States' sovereign immunity for certain purposes.

H.F. Allen Orchards v. U.S. (1984)- a case in which the Federal Circuit held that farmers were "true parties in interest" to the irrigation district's water contract with the Reclamation Bureau since the district has no real stake in the water contract as opposed to the farmers, who actually use and pay for the water.

Klamath Water Users Protective Assn. v. Patterson (1999): A 9th Circuit ruling that members of the public who benefit from a government contract are "generally assumed" to be incidental rather than intended beneficiaries.

Terms of the 1963 Contract between Westlands Water District and the U.S. Bureau of Reclamation

Analysis

The case involves a 1963 Contract between Westlands Water District and the U.S. Bureau of Reclamation for supply of water to the District. When the Bureau restricted water supplies in 1993, the action was challenged in a suit by the District that was joined by Californian farmers (end-users of the water) as plaintiffs. Even though the District eventually withdrew its suit, the farmers persisted with their claims.

The District Court heard the case in 2000, in which the plaintiffs cited the Federal Circuit court's ruling in H.F. Allen v U.S. (1984) that farmers were "true parties in interest" to the irrigation district's water contract with the Reclamation Bureau. However, the District Court ruled that sovereign immunity bars the farmers' claims because they had no "direct right to sue" or "enforcement rights" in the 1963 contract, and that the farmers were "incidental third party-beneficiaries" rather than "intended third-party beneficiaries." (Siegle)

During hearing of the Appeal, the 9th Circuit Court, while acknowledging that the 1963 contract was entered into with the farmer's interests in mind, found that the contract language was not clear enough to support an "intended third-party beneficiary" who could sue for a breach of contract. it, therefore, affirmed (Ibid.)

In their rulings, the District as well as the Appeals Court relied on the 9th Circuit decision in Klamath (1999) in which the Court had denied "third party" status to the appellants. While affirming, the 9th Circuit also recognized that it "may be at odds" with the Allen (1984) decision.