Exception — Kansas v. Colorado

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Text

No. 105, Original

Ju the Supreme Court of the Gnited States—

STATE OF KANSAS, PLAINTIFF

Vv.

STATE OF COLORADO

ON EXCEPTIONS TO THE THIRD REPORT

OF THE SPECIAL MASTER

BRIEF FOR THE UNITED STATES IN OPPOSITION

TO THE EXCEPTIONS OF KANSAS AND COLORADO

SETH P. WAXMAN

Solicitor General

Counsel of Record

Lots J. SCHIFFER

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

JEFFREY P. MINEAR

Assistant to the Solicitor

General

PATRICIA WEISS

AIMEE BEVAN

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

a ne ee

QUESTIONS PRESENTED

The United States will address the following

questions:

1. Whether a money damages remedy based, in

part, on the aggregate losses incurred by past, present,

and future Kansas water users due to Colorado’s deple-

tion of stateline flows of the Arkansas River violates

the Eleventh Amendment. (Colorado Exception No. 1).

2. Whether the Special Master erred in recom-

mending that a money damages remedy include pre-

judgment interest beginning in 1969. (Colorado Excep-

tions Nos. 2 & 3; Kansas Exception).

(1)

TABLE OF CONTENTS

Page

SPISTINIINID \chdiisishletihisinchiniiegbintiladinanctasathiabinchisbeiipcousininsbasedcestuabeasioat 1

1. The Arkansas River Basin ..........c.sccscsscssccscssescsosscsrsee 2

2. The Arkansas River Compact .......cccssscscsecsssessecersscess 3

Be. CPU POI casrescinnsttisvensestcansessnnniniiessniaale 7

Introduction and summary of argument .........ccceccecseccessesseseseees 10

Argument:

I. The calculation of damages for injuries to

Kansas’s quasi-sovereign interest in the econo-

mic health and welfare of its residents in part

on the basis of injuries suffered by past, pre-

sent, and future Kansas water users does not

violate the Eleventh Amendment .........c:ecccssseceeseeees 13

II. It is within the Court’s sound discretion to

award prejudgment interest in an original

TNT Aisellchlslhisindaciceiceheioesisietheslbsaiekechiniihinactisetnineaniiian 22

I ia Aha dic spaced intaieindnecaelapinssicetedciidnins 28

TABLE OF AUTHORITIES

Cases:

Alden vy. Maine, 527 U.S. 706 (1999) ....cccsssssssssssscsesssescnseese 21

Alfred L. Snapp & Son, Inc. v. Puerto Rico,

a REESE ae rs ea ee 17, 18

Board of County Comm’rs v. United States, 308

SESE SEN Se 25, 26

City of Milwaukee v. Cement Div., Nat'l Gypsum Co.,

NI elt dchccccrntnnbnoiemsodgnnescetsionnes 23, 24, 25

Colorado v. Kansas, 320 U.S. 383 (1943) cecccccccccccsssesossosecee 4

Duplate Corp. v. Triplex Safety Glass Co., 298

REE TE EO Re eR 23

Funkhouser v. J.B. Preston Co., 290 U.S. 163

I teen Racal dca chonihaisicbseanieeconiamoninameniane 24

(ITT)

Cases—Continued: Page

Georgia v. Tennessee Copper Co., 206 U.S. 230

QPIPT D <rcstoneanminbsenpadiaditiiiaaipibibnaacietaa ca ee te Se 17, 18

General Motors Corp. v. Devew Corp., 461 USS.

i rN NF OE CM OPT Say en Osea 23, 24, 25

General Tel. Co. v. EEOC, 446 U.S. 318 (1980) ............... 21

Hawaii v. Standard Oil Co., 405 U.S. 251 (1972) ............. 14,15

Kansas v. Colorado, 206 U.S. 46 (1907) ccccccccccccecccosccecoeecee. 4,18

Library of Congress v. Shaw, 478 U.S. 310 (1986) ........... 23

Maryland v. Louisiana, 451 U.S. 725 (1981) cccccsessoeccs-.... 15,17

New Hampshire vy. Louisiana, 108 U.S. 76

IPOD wesiniiaicrinecieiiatoblealaia ata a aia aa 14, 16, 17

North Dakota v. Minnesota, 263 U.S 365 (1923) ......00. 14, 15,

16, 20

Oklahoma ex rel. Johnson v. Cook, 394 U.S. 387

ee IRN ORSON CN Tee SOF uy hy ey ee 17, 18

Pierce v. United States, 255 U.S. 398 (1921) cecccococcooscoo-s., 25

South Dakota vy. North Carolina, 192 U.S. 286

IDOE ssicicctitinilionsevticsiatictasapieaiadeiseialde ene eee ce a A 13,17

Texas v. New Me.ico:

GS TI. BG CUDIT) easincccsssistnesnsnninenetansenar 11, 13, 18, 21, 25, 27

Pe SP: RERMII Wisiiieamicsapnioniliia tree 13

Tilghman v. Proctor, 125 U.S. 136 (1888) cocsccssseseccecsoesoee.. 23

United States v. Michigan, 190 U.S. 379 (1903) ........... 13

United States v. New York Rayon I mporting Co.,

Oe AN I LIED canininnaschbiininiiialiabieliiiiiiiase ee 23

United States v. Teas, 507 U.S. 529 (1998) cocccccccsccossooe-.. 25

Virginia v. West Virginia, 246 U.S. 565 (1918) ccc... 13

West Virginia v. United States, 479 U.S. 305

SPIED sabieniniasciosteeeenctaipidstiadlasceNnitlshibtiiat ts a Se ce 21

Constitution and statutes:

ie | : Re SASL Os SRN passim

Arkansas River Compact, Act of May 31, 1949, ch.

A ey BU ettiscieinitiensibiiahcaninacesaniabthcii ca cite: 1,4

oe i RIES SRE NCAA Sits Se ON 5

UPR Tn Mec 5

Statutes—Continued: Page

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Hurt. FOB iat. MOTB isccenissisinasicdie. so ee 6

Ait. VEEL, CB BUM. MO RBE cicccsiscniciciiidee aie 6

Xt, VIRIG, CB UM, BOD ssssiissecisinssiccciantcenhe ea aa 6

Art, VEEEC, GR teh. BOD saci issdocseet a cone 6

Wart, VETI-EE, GR ING. BEE accssisisciienrsdniinsaasnte es 6,7

PUG. SURO srcimerscitissssupisitneaetinniinae an ae 21

In the Supreme Court of the Anited States

No. 105, Original

STATE OF KANSAS, PLAINTIFF

Vv.

STATE OF COLORADO

ON EXCEPTIONS TO THE THIRD REPORT

OF THE SPECIAL MASTER .

BRIEF FOR THE UNITED STATES IN OPPOSITION

TO THE EXCEPTIONS OF KANSAS AND COLORADO 4

STATEMENT

The State of Kansas brought this original action

against the State of Colorado to resolve disputes under

the Arkansas River Compact (Compact), Act of May 31,

1949, ch. 155, 63 Stat. 145. This Court granted Kansas

leave to file its complaint, Kansas v. Colorado, 475 U.S.

1079 (1986), and the Court appointed the Honorable

Wade H. McCree, Jr., to serve as the Special Master.

478 U.S. 1018 (1986). Upon Judge McCree’s death, the

Court appointed Arthur L. Littleworth as the Special

Master, 484 U.S. 910 (1987). Special Master Little-

worth granted the United States’ unopposed motion

for leave to intervene in the action, conducted a trial

limited to questions of liability, and submitted a report,

which recommended that the Court find Colorado had

violated the Compact in certain respects. 513 U.S. 803

(1)

(1994). This Court overruled the exceptions of both

Kansas and Colorado to the Master’s First Report. 514

U.S. 673 (1995).

The Master subsequently submitted a Second Re-

port that addressed preliminary issues respecting a

remedy, and the Court invited the parties to file

exceptions. 522 U.S. 803 (1997). Colorado filed two

exceptions, which were overruled without prejudice to

Colorado’s right to renew those exceptions at the

conclusion of the remedy phase of the case. 522 U.S.

1073 (1998).

After further proceedings, including a trial on the

appropriate remedy for Colorado’s violations of the

Compact, the Master issued a Third Report, dated

August 2000, containing his recommended remedy for

Colorado’s violations of the Compact. 121 S. Ct. 294.

Both Kansas and Colorado have filed exceptions to the

recommended remedy. The United States files this

brief to provide the Court with the federal govern-

ment’s perspective on the parties’ exceptions to the

Master’s Third Report.

1. The Arkansas River Basin

The Arkansas River originates on the east slope of

the Rocky Mountains in central Colorado and flows

south and then east across Colorado and into Kansas.

It receives significant in-flows from the Purgatoire

River, its major tributary in Colorado, which originates

in the Sangre de Cristo mountains in southern Colorado

near the New Mexico border. The Purgatoire River

flows in a notheasterly direction to join the Arkansas

River about 60 miles west of the Kansas border, at Las

Animas, Colorado. See Kansas v. Colorado, 514 US.

673, 675-676 (1995).

The United States has constructed three water

storage projects on this river system. The John Martin

Reservoir, located immediately east of the juncture of

the Purgatoire and Arkansas Rivers in Colorado, is

operated by the Army Corps of Engineers to control

floods and to provide storage water in accordance with

the Arkansas River Compact. It has a storage capacity

of approximately 700,000 acre-feet. 514 U.S. at 677.

The Pueblo Reservoir, located on the Arkansas River

about 150 miles upstream of the Kansas border near

Pueblo, Colorado, is managed by the Department of the

Interior’s Bureau of Reclamation as part of the

Fryingpan-Arkansas Project. It has a storage capacity

of approximately 357,000 acre-feet. Ibid. The Trinidad

Reservoir, located on the Purgatoire River near

Trinidad, Colorado, is jointly managed by the Army

Corps of Engineers and the Bureau of Reclamation to

control floods and to provide storage water for use by

the Bureau of Reclamation’s Trinidad Project. It has a

storage capacity of approximately 114,000 acre-feet.

Ibid.

Twenty-three canal systems in Colorado divert

water from the Arkansas River for irrigation. Four-

teen of those systems are located upstream from John

Martin Reservoir, and four of those systems have

associated privately-owned, off-channel water storage

facilities. Six canal systems in Kansas operate between

the Colorado border and Garden City. See 514 USS. at

677.

2. The Arkansas River Compact

The Arkansas River Compact apportions the Arkan-

sas River between the States of Kansas and Colorado.

The Compact was an outgrowth of two original actions

that the States had filed in this Court disputing their

respective entitlements to use of the Arkansas River.

See 514 U.S. at 678. In each of those cases, the Court

denied Kansas’s request for an equitable apportion-

ment. See Kansas v. Colorado, 206 U.S. 46, 114-117

(1907); Colorado v. Kansas, 320 U.S. 383, 391-392

(1943).

In the first suit, Kansas sought to enjoin water

diversions in Colorado, but the Court denied relief on

the ground that Colorado’s depletions of the Arkansas

River were insufficient at that time to warrant

injunctive relief. Kansas v. Colorado, 206 U.S. at 114-

117. In the second suit, Colorado sought to enjoin lower

court litigation brought by Kansas water users against

Colorado water users, while Kansas sought an equitable

apportionment of the Arkansas River. The Court con-

cluded that Colorado was entitled to the injunction it

sought, but the Court concluded once again that Kansas

had failed to show sufficient injury to warrant an equit-

able apportionment of the Arkansas River. Colorado v.

Kansas, 320 U.S. at 391-392; see Kansas v. Colorado,

= 514 USS. at 678. |

In denying Kansas’s second request for judicial re-

lief, the Court suggested that a dispute such as the one

between Kansas and Colorado calls for “expert admini-

stration rather than judicial imposition of a hard and

fast rule,” and that the controversy “may appropriately

be composed by negotiation and agreement, pursuant

to the compact clause of the federal Constitution.”

Colorado v. Kansas, 320 U.S. at 392. Shortly

thereafter, the States approved, and Congress ratified,

the Arkansas River Compact, Act of May 31, 1949, ch.

155, 63 Stat. 145. The Compact was intended to

“[s]ettle existing disputes and remove causes of future

controversy” between the States and their citizens over

the use of the Arkansas River. To that end, the Com-

pact was designed to

[e]quitably divide and apportion between the States

of Colorado and Kansas the waters of the Arkansas

River and their utilization as well as the benefits

arising from the construction, operation and main-

tenance by the United States of John Martin Re-

servoir Project for water conservation purposes.

Compact Art. I, 63 Stat. 145. The Compact accom-

plishes those goals through two basic mechanisms.

First, the Compact protects the States’ respective

rights to continued use of the Arkansas River through a

limitation on new depletions. Article IV-D of the Com-

pact allows new development in the form of dams, re-

servoirs, and other water-utilization works in Colorado

and Kansas, provided that the “waters of the Arkansas

River” are not thereby “materially depleted in usable

quantity or availability for use to the water users in

Colorado and Kansas under this Compact.” 63 Stat.

147. The Compact defines the term “waters of the

Arkansas River,” Art. III-B, 63 Stat. 146, but it does

not expressly define what constitutes a “material”

depletion or a “usable” quantity.'

! The full text of Article IV-D states as follows:

This Compact is not intended to impede or prevent future

beneficial development of the Arkansas River basin in

Colorado and Kansas by Federal or State agencies, by private

enterprise, or by combinatiuns thereof, which may involve

construction of dams, reservoir, and other works for the pur-

poses of water utilization and control, as well as the improved

or prolonged functioning of existing works: Provided, that the

waters of the Arkansas River, as defined in Article III, shall

not be materially depleted in usable quantity or availability

Second, the Compact regulates the storage of water

at John Martin Reservoir and specifies the criteria

under which each State is entitled to call for water

releases. Article V of the Compact, which provides the

“basis of apportionment of the waters of the Arkansas

River,” prescribes the timing of storage at the reser-

voir and the release criteria. 63 Stat. 147-149.

Basically, between November 1 and March 31, in-flows

to the John Martin Reservoir are stored, subject to

Colorado’s right to demand a limited amount of water.

Between April 1 and October 31, the storage of water is

largely curtailed, and either State may call for releases

at any time in accordance with the flow rates set out in

the Compact. Ibid.

The Compact creates an interstate agency, the

Arkansas River Compact Administration, to administer

the Compact. Art. VIII, 63 Stat. 149-151. The Compact

Administration consists of a non-voting presiding

officer designated by the President of the United States

and three voting representatives from each State. It is

empowered to adopt by-laws, rules, and regulations,

prescribe procedures for the administration of the Com-

pact, and perform functions to implement the Compact.

See Arts. VIII-B, VIII-C, 63 Stat. 149, 150. Article

VIII-H of the Compact directs that the Administration

shall “promptly investigate[]” violations of the Compact

and report its findings and recommendations to the

appropriate state official. 63 Stat. 151. That Article

further states that it is “the intent of this Compact that

enforcement of its terms shall be accomplished in

for use to the water users in Colorado and Kansas under this

Compact by such future development or construction.

63 Stat. 147.

general through the State _agencies and officials

charged with the administration of water rights.” Ibid.

3. The Current Proceedings

Kansas brought this action in 1985 to enforce the

provisions of the Arkansas River Compact. Special

Master Littleworth filed his initial report with the

Court in July 1994 addressing issues of liability. He

recommended that the Court find that post-Compact

well pumping in Colorado had violated Article IV-D of

the Compact and that Colorado be held liable for that

violation. The Master also recommended that the

Court find no violation of the Compact with respect to

Kansas’s claims arising from the operation of the

Trinidad Reservoir and the Winter Water Storage

Program that utilizes excess storage capacity at the

Pueblo Reservoir. The Court adopted all of the

Master’s recommendations and remanded for deter-

mination of the unresolved issues—primarily relating to

what remedy, if any, Kansas was entitled to as a result

of Colorado’s breach—in a manner not inconsistent with

the Court’s opinion. Kansas v. Coiorado, 514 U.S. at

694.

On remand, the Master conducted further pro-

ceedings and issued a Second Report providing his pre-

liminary recommendations on the issues of: (a) quantify-

ing the depletions in flows of the Arkansas River at the

Colorado-Kansas border (stateline flows) for the period

1950-1985; (b) quantifying depletions for the period

subsequent to 1985; (c) bringing Colorado into current

compliance with the provision of the Compact; and (d) a

remedy for past depletions. See Second Report 2, 112.

The Court invited the parties to file exceptions to the

recommendations contained in the Master’s Second

Report. See 522 U.S. 803 (1997). Kansas and the United

States did not file any exceptions. Colorado challenged

the Master’s conclusions that (1) if the remedy includes

money damages, the Eleventh Amendment of the

United States Constitution does not bar an award of

money damages based, in part, on losses incurred by

Kansas’s water users; and 2) the unliquidated nature of

Kansas’s claim for damages does not, in and of itself,

bar the award of prejudgment interest. The Court

overruled Colorado’s exceptions without prejudice to

Colorado’s right to renew those exceptions at the

conclusion of the remedy phase of the case. 522 U.S.

1073 (1998).

After conducting further proceedings, including a

trial on the appropriate remedy for Colorado’s vio-

lations of the Compact, the Master issued his Third

Report, dated August 2000, containing his recom-

mended remedy. The Master’s Third Report recom-

mends, in essence, that:

(1) depletions of usable stateline flow for the

1995-1996 period be determined to be 7935 acre-

feet, bringing the total depletions for 1950-1996 to

428,005 acre-feet;

(2) the Court confirm the Master’s deter-

mination that if a suitable remedy includes money

damages, those damages should be based upon

Kansas’s loss rather than upon any gain to

Colorado;

(3) the Court confirm the Master’s conclusion

that if a remedy includes money damages, the

Eleventh Amendment does not preclude damages

awarded to Kansas from being based, in part, upon

losses incurred by its water users;

(4) the Court confirm the Master’s ruling that

the unliquidated nature of Kansas’s claim for

damages does not bar the award of prejudgment

interest;

(5) the remedy be money damages, rather than

repayment of the historical shortage by additional

water deliveries in the future;

(6) the amount of Kansas’s damages be deter-

mined on the basis of the analyses used by Kansas’s

experts;

(7) the categories of Kansas’s damages be calcu-

lated as provided in the Third Report;

(8) Kansas’s damages include prejudgment in-

terest as provided in Section XI of the Third

Report;

(9) the Master’s March 22, 2000, order regard-

ing mitigation of damages be confirmed; and

(10) the Master’s May 1, 2000, order regarding

Colorado’s objection to expert testimony on secon-

dary economic damages be confirmed.

Third Report 119-120.

As relevant here, the core of the Master’s recom-

mendation is that money damages be awarded to

Kansas for water losses beginning in 1950, with

prejudgment interest awarded for the period from 1969

to the present. Kansas has filed an exception to the

Master’s determination that prejudgment interest

should be awarded only from 1969 forward. Colorado

has filed a number of exceptions, including a renewal of

its exceptions to include the losses of Kansas’s water

users in the calculation of damages, and to any award of

prejudgment interest.

INTRODUCTION AND SUMMARY OF ARGUMENT

The State of Kansas brought this action to enforce

its rights under the Arkansas River Compact, which

apportions the flow of the Arkansas River between

Kansas and Colorado. This Court resolved the issues of

liability in its earlier decision in Kansas v. Colorado,

514 U.S. 673 (1995), which accepted the Master’s recom-

mendation that Colorado be held liable for violations of

Article IV-D of the Compact resulting from post-Com-

pact well pumping in Colorado. On remand, the Master

heard evidence and prepared a thorough report ad-

dressing a number of issues, including what potential

remedies might be available for Colorado’s breach. The

Court overruled Colorado’s exceptions to that report

without prejudice and remanded the case to the Master

for further proceedings. 522 U.S. 1073 (1998). Follow-

ing resolution of a number of other issues related to

Compact compliance and modeling, the Master con-

ducted a trial on the appropriate remedy for Colorado’s

past violations of the Compact. Following that trial, the

Master submitted his Third Report documenting his

ultimate recommendations with respect to the ap-

propriate remedy for Colorado’s violations of the

Compact.

The Master recommended that Kansas be awarded

money damages for all losses that have occurred as a

result of Compact violations, including the aggregate

losses to past and future Kansas water users, and that

prejudgment interest be awarded on damages from

1969 to the present. The Master’s proposed remedy

raises two questions of first impression in this Court:

(1) how to calculate an award of money damages against

a State as a remedy for a violation of a compact

apportioning the waters of an interstate river; and (2)

aaa

the availability of prejudgment interest on such an

award. The United States submits that, under the

circumstances of this case, the Master’s recommended

remedy falls within the Court’s broad discretion to

fashion a fair and equitable remedy for Colorado’s

violation of the Arkansas River Compact.

I. Colorado contends that the Eleventh Amendment

bars an award of money damages that is calculated, in

part, based on injuries to individual water users in

Kansas that resulted from groundwater pumping in

Colorado. Under this Court’s cases, however, the

Eleventh Amendment bars a suit by a State only if it is

appearing as a nominal party for purposes of advancing

the private claims of individual citizens of the State

against another State. Here, Kansas sued to protect its

sovereign interests as a party to an interstate compact

and its quasi-sovereign interests in the health and

economic well-being of its citizens. This Court held in

Texas v. New Mewico, 482 U.S. 124, 130-132 & n.7

(1987), that an award of money damages can be an

appropriate remedy in such a case and is not barred by

the Eleventh Amendment. Nothing in the Eleventh

Amendment bars the Court from calculating the

amount of those damages by reference to the injuries

sustained by the individual water users who comprise

the general population that Kansas has a legitimate

quasi-sovereign interest in protecting.

II. The Master recommends that prejudgment

interest be awarded for the period from 1968 to the

present. Colorado objects to that award, urging the

Court to adopt a categorical rule barring an award of

prejudgment interest for violation of an interstate com-

pact apportioning the flows of an interstate river.

Colorado relies on the traditional rule at common law

that prejudgment interest is not owed where damages

are unliquidated. In cases within its original juris-

diction, however, the Court has broad discretion to

fashion appropriate principles of decision, and it has not

been bound by statutory or common law rules that may

be applicable in other settings. Here, the Master iden-

tified sound reasons for not adopting the categorical

rule that Colorado proposes. In the first place, the

common rule was never absolute, and it is no longer

followed in a number of jurisdictions. Moreover, this

Court has repeatedly observed that the distinction

between liquidated and unliquidated damages for these

purposes is inconsistent with the goal of affording

adequate compensation, and that a strict rule barring

prejudgment interest where damages are unliquidated

has been subject to substantial criticism for that reason.

We therefore support the Master’s recommendation

that the common law rule generally barring an award of

prejudgment interest on unliquidated damages not be

imported into the jurisprudence of suits between States

within this Court’s original jurisdiction.

After rejecting a categorical rule barring the award

of prejudgment interest, the Master carefully evaluated

all of the circumstances of the case and the respective

equities of the two States that bear on the appropriate-

ness of an award of prejudgment interest, and con-

cluded that such an award is proper but only from 1968

forward. Kansas has filed an objection, contending that

prejudgment interest should be awarded all the way

back to 1950. Colorado, on the other hand, contends

that if prejudgment interest is not altogether fore-

closed, it should be awarded only beginning in 1985,

when Kansas first filed a formal complaint concerning

the groundwater pumping. In our view, however, the

Master reasonably balanced the relevant factors in

awarding prejudgment interest beginning in 1969,

when, the Master found, Colorado first knew or should

have known that groundwater pumping in that State

was depleting stateline flows of the Arkansas River.

ARGUMENT

I. THE CALCULATION OF DAMAGES FOR

INJURIES TO KANSAS’S QUASI-SOVEREIGN

INTEREST IN THE ECONOMIC HEALTH AND

WELFARE OF ITS RESIDENTS IN PART ON

THE BASIS OF INJURIES SUFFERED BY

PAST, PRESENT, AND FUTURE. KANSAS

WATER USERS DOES NOT VIOLATE THE

ELEVENTH AMENDMENT

The Court has previously held, in Texas v. New

Mexico, 482 U.S. 124, 130-132 (1987), that money dam-

ages may be awarded against a State as a remedy for

its violation of an interstate compact that apportions

the flow of a river between two States, and it sub-

sequently entered a stipulated judgment in that case

ordering New Mexico to pay $14 million to Texas. See

494 U.S. 111 (1990). See also Virginia v. West Virginia,

246 U.S. 565 (1918) (enforcement of judgment for

money damages for violation of interstate compact to

assume debt); South Dakota v. North Carolina, 192

U.S. 286 (1904) (suit to recover on bonds); United States

v. Michigan, 190 U.S. 379 (1903) (suit to require Michi-

gan to account for surplus moneys from saie of land to

fund construction of canal).

Because the parties reached a settlement regarding

the amount of damages to be paid in Texas v. New

Mexico, this case presents the first occasion for the

Court to determine the appropriate amount of a

monetary remedy for a violation of an interstate com-

-pact apportioning the flow of an interstate stream. The

Master, in a thorough report detailing his analysis of

the applicable law and exploring the potential remedies

Kansas may obtain as a result of Colorado’s breach of

the Compact, recommended a monetary award based,

in part, on evidence of the injuries to Kansas’s water

users as a result of Colorado’s breach. Colorado con-

tends that the Eleventh Amendment bars a State,

acting in its parens patriae capacity, from recovering

money damages based on losses to individual water

users that occurred as a result of a violation of an

interstate compact. See Colo. Exep. Br. 10-25. We

disagree.

The Eleventh Amendment provides, in relevant

part, that “(t]he Judicial power of the United States

shall not be construed to extend to any suit in law or

equity, commenced or prosecuted against one of the

United States by Citizens of another State.” U.S.

Const. Amend. XI. The Eleventh Amendment pre-

vents a State from suing another State where it is

essentially a nominal party and appears as a “trustee”

seeking to enforce only the personal rights or claims of

individual citizens who could not themselves sue the

defendant State. See New Hampshire v. Louisiana,

108 U.S. 76 (1883); North Dakota v. Minnesota, 263

U.S. 365 (1923). The Eleventh Amendment does not,

however, bar a suit brought by a State acting as parens

patriae to its citizens “to prevent or repair harm to its

‘quasi-sovereign’ interests.” Hawaii v. Standard Oil

Co., 405 U.S. 251, 258 (1972). As the Court stated in

North Dakota:

The right of a State as parens patriae to bring suit

to protect the general comfort, health, or property

rights of its inhabitants threatened by the proposed

or continued action of another State, by prayer for

injunction, is to be differentiated from its lost power

as a sovereign to present and enforce individual

claims of its citizens as their trustee against a sister

State.

263 U.S. at 375-376; see also Maryland v. Louisiana,

451 U.S. 725, 745 n.21 (1981) (“[A]Jn original action be-

tween two States only violates the Eleventh Amend-

ment if the plaintiff State is actually suing to recover

for injuries to specific individuals.”); Hawaii v. Stan-

dard Oil Co., 405 U.S. at 259 n.12 (“An action brought

by one State against another violates the Eleventh

Amendment if the plaintiff State is actually suing to

recover for injuries to designated individuals.”).

The New Hampshire and North Dakota decisions

illustrate the circumstances in which a suit by a State is

barred by the Eleventh Amendment because the State

appears only as a nominal party in presenting personal

claims of its citizens, and not as parens patriae seeking

to protect the general interests of the State and its

inhabitants. In New Hampshire, citizens of New

Hampshire and New York held bonds issued by the

State of Louisiana, payment of which was in default.

The individual holders assigned the bends to their

respective States, which brought an original action in

this Court to recover the amount due on the bonds.

The Court concluded that the States’ action was barred

by the Eleventh Amendment because it was a mere

subterfuge for recovery on behalf of the individual

bondholders. The States, according to the Court, were

“nothing more nor less than * * * mere collecting

agent[s] of the owners of the bonds and coupons, and

while the suits are in the names of the States, they are

under the actual control of individual citizens, and are

prosecuted and carried on altogether by and for them.”

New Hampshire, 108 U.S. at 89.°

In North Dakota, the Court ruled that the Eleventh

Amendment barred North Dakota from bringing a

damages claim against Minnesota seeking $1 million

“for its inhabitants whose farms were injured and

whose crops were lost” as a result of flooding allegedly

caused by Minnesota’s use of the Mustinka River. 263

U.S. at 374. The Court observed:

The evidence discloses that nearly all the Dakota

farm owners whose crops, lands and property were

injured in these floods, contributed to a fund which

has been used to aid the preparation and prose-

cution of this cause. It further appears that each

contributor expects to share in the benefit of the

decree for damages here sought, in proportion to the

amount of his loss. Indeed it is inconceivable that

North Dakota is prosecuting this damage feature of

its suit without intending to pay over what it thus

recovers to those entitled.

Id. at 375. Relying on its decision in New Hampshire v.

Louisiana, the Court ruled that North Dakota was

- Among other things, the individual owners were required to

fund all costs and expenses of the litigation, and state law required

that all moneys collected be kept by the State’s attorney general,

as special trustee, in a separate account. Those moneys were to be

paid over to the owners of the bonds after the litigation costs were

deducted. New Hampshire, 108 U.S. at 89. In the case of New

Hampshire, the individual bendholders also had the right to choose

their own counsel to pursue the claims, and their consent was

required before the claims could be settled. bid. Based on those

facts, the Court declared that “[nJo one can look at the pleadings

and testimony in these cases without being satisfied, beyond all

doubt, that they were in legal effect commenced, and are now

prosecuted, solely by the owners of the bonds and coupons.” [bid.

acting, not as parens patriae, but as a trustee, seeking

to present and enforce private claims of its individual

citizens. Ibid. See also Alfred L. Snapp & Son, Ine. v.

Puerto Rico, 458 U.S. 592, 600 (1982) (“if the State is

only a nominal party without a real interest of its

own—then it will not have standing under the parens

patriae doctrine’”)."

The rule that emerges from this Court’s cases, then,

is that while a State is not “permitted to enter a

controversy as a nominal party in order to forward the

claims of individual citizens,” a State may “act as the

representative of its citizens in original actions where

the injury alleged affects the general population of a

State in a substantial way.” Maryland v. Louisiana,

451 U.S. at 737. The interests of a State that may be

vindicated in an original action against another State

“embrace its ‘quasi-sovereign’ interests which are

‘independent of and behind the titles of its citizens, in

all the earth and air within its domain.’” Oklahoma ex

rel. Johnson v. Cook, 304 U.S. 387, 393 (1938) (quoting

Georgia v. Tennessee Copper Co., 206 U.S. 230, 237

(1907)). And, as the Court held in Texas v. New

* In South Dakota v. North Carolina, 192 U.S. 286 (1904), by

contrast, a private bond holder donated his bonds outright to the

State of South Dakota. The Court observed that there could be no

“question respecting the title of South Dakota to these bonds,”

since “[t]hey [we]re not held by the State as representative of

individual owners, * * * for they were given outright and

absolutely to the State.” Jd. at 310 (citing and distinguishing New

Hampshire v. Louisiana, supra). The Court concluded on that

basis that the suit was properly regarded as “an action brought by

one State against another to enforce a property right” and was

therefore permitted to go forward. Id. at 318; see Oklahoma ex

rel. Johnson v. Cook, 304 U.S. 387, 392-393 (1938) (discussing New

Hampshire and South Dakota).

Mexico, the Court may properly award money damages

as a remedy for injury to those interests. See 482 U.S.

at 130, 182 n.7.

The Court, in accepting this case as a proper

exercise of its original jurisdiction, determined that

Kansas had appropriately commenced the current

action to protect its sovereign and quasi-sovereign

interests under the Arkansas River Compact, and was

not acting simply as a trustee for individual Kansas

citizens. Indeed, in Oklahoma ex rel. Johnson v. Cook,

supra, this Court specifically pointed to Kansas’s prior

suit against Colorado to prevent diversions of water

from the Arkansas River as an example of a proper suit

to protect a State’s “qwasi-sovereign” interests. See

304 U.S. at 393-394 (citing Kansas v. Colorado, 206 U.S.

at 95, 96.).. And in this case, unlike in its earlier suit

against Colorado, Kansas’s suit also advances its sover-

eign interests as a formal party to an interstate

compact with Colorado. See Alfred L. Snapp & Son,

Inc., 458 U.S. at 601.

The Master concluded, and Colorado does not

dispute, that Kansas is seeking recovery for injuries to

its legitimate quasi-sovereign interest in the general

economic well-being and property of its citizens,

interests which are “independent of and behind the

titles of its citizens.” Georgia v. Tennessee Copper Co.,

206 U.S. at 237. Accordingly, Colorado’s Eleventh

Amendment challenge does not question whether Kan-

sas is properly acting as parens patriae in bringing

this suit; rather, Colorado asserts that the Eleventh

Amendment bars a State properly acting as parens

patriae from being awarded damages that are based, in

part, on the aggregate losses suffered by the State’s

residents. The applicability of the Eleventh Amend-

ment, however, depends on the nature and origin of the

claim, and not on the measure of damages in an

otherwise proper monetary award. If the Court deter-

mines that a complaint presents a proper action by a

State to protect its sovereign and quasi-sovereign

interest in the general health and welfare of its res-

idents, the calculation of the amount of money damages

to be paid as a remedy for the injury to the general

population of the State cannot convert a proper action

between two States into an impermissible action by

citizens of one State against another State in violation

of the Eleventh Amendment.

The Master found that a large area of southwestern

Kansas (almost 800,000 acres) suffered from Colorado’s

violations of the Compact, that the groundwater re-

sources of Kansas have been permanently damaged,

and that increased costs and lost farm income in the

region have caused secondary economic impacts

throughout the State. Third Report 12. The Master,

defining the injuries to the general economic well-being

of Kansas’s residents as including the regional increases

in farm costs and reduced crop yields, recommended a

damages remedy consisting of the sum of 1) the

additional pumping costs required to replace depletions

of usable stateline flow from the Arkansas River; 2) the

historic and projected future cost increases due to the

-_permanent damage to groundwater resources; 3) the

historic crop production losses due to surface water

depletions; 4) the historic and projected future secon-

dary economic damages to the State as a whole; and 5)

the state income taxes that would have been paid on

increased farm income absent depletions. Jd. at 17-86.

The recommended damages award was reduced by the

amount of federal iucome taxes that would have been

paid on the lost farm net income due to depletions. /d.

at 35-36.

Colorado argues that the inclusion of the aggregate

of individual damages in the recommended monetary

award allows the State to “recover damages for the

benefit of individuals” in violation of the Eleventh

Amendment. Colo. Exep. Br. 19. Colorado miscon-

strues the Master’s reference to injuries sustained by

farmers in calculating the recommended monetary

award to Kansas. The Master did not recommend that

a money damages award include a recovery for any

personal claims individual farmers may have in their

own right based on upstream diversions of water, with

the proceeds to be paid directly to those farmers. If

Kansas were appearing only as a nominal party in

presenting such private claims, those claims would be

essentially the same as those the Court found to be

barred in North Dakota v. Minnesota, supra.

Rather, Kansas is advancing a claim of its own, in its

sovereign and quasi-sovereign capacities, that is based

on Colorado’s alleged violation of the Compact and is

distinct from any personal claims of individual Kansas

citizens. After this Court held that Colorado had

violated the Compact, the Master determined that

damages should be paid to Kansas based on the injury

to Kansas’s quasi-sovereign interest in the economic

health and welfare of its residents. The Master calcu-

lated those damages as the sum of the damages for

injuries to Kansas’s residents, including the direct

injuries suffered by water users—past, present, and

future—in the southwestern region of Kansas as a

result of Colorado’s violation.

The Eleventh Amendment does not bar a State from

recovering full compensation fer injuries to its quasi-

sovereign interest in the economic health and welfare of

its residents. In this case, the Master calculated those

injuries to Kansas, in part, by aggregating the direct

injuries suffered by past, present, and future water

users in the State. The Master’s recommended award

is consistent with the Court’s broad discretion in formu-

lating a fair and equitable remedy in cases under the

Court’s original jurisdiction and does not violate the

Eleventh Amendment. See Texas v. New Mexico, 482

U.S. at 130 (the Constitution entrusts the Court with

sufficient judicial power to “order[] a suitable remedy,

whether in water or money,” and “the Eleventh

Amendment is no barrier, for by its terms, it applies

only to suits by citizens against a State”). Colorado’s

exception to the Master’s Third Report based on the

Eleventh Amendment should be overruled.’

+ There is no requirement in the Master’s remedy here, just as

there was not in Tewas v. New Me.cico (see 482 U.S. at 131-132 &

n.7), that any money awarded to Kansas be paid over to individual

farmers who were injured by upstream diversions in Colorado.

The United States and its agencies and officers are authorized

to bring suits for violations of federal statutes under which private

individuals are also authorized to sue, and the relief ordered in the

government’s suit includes the payment of monetary relief to

individual victims. In such a suit, the federal government is

advancing its interests, distinct from those of the individuals who

may have personal claims, in enforcing its own laws. See, e.9.,

General Tel. Co. v. EEOC, 446 U.S. 318, 326 (1980) (“When the

EEOC acts, albeit at the behest of and for the benefit of specific

individuals, it acts also to vindicate the public interest in

preventing employment discrimination.”). The Court made clear in

Alden v. Maine, 527 U.S. 706 (1999), that the Eleventh Amend-

ment is no bar to such a suit by the federal government against a

State. See id. at 759 (discussing 29 U.S.C. 216(c), which allows

suits by the Secretary of Labor to compel the payment of unpaid

compensation owed under the Fair Labor Standards Act). See 527

U.S. at 755 (“In ratifying the Constitution, the States consented to

suits brought by other States or by the Federal Government.”):

West Virginia v. United States, 479 U.S. 305, 311 (1987) (“States

have no sovereign immunity as against the Federal Government.”).

Il. IT IS WITHIN THE COURT’S SOUND DISCRE-

TION TO AWARD PREJUDGMENT INTEREST

IN AN ORIGINAL ACTION

In his Third Report, the Master determined that

Kansas was injured as a result of Colorado’s depletion

of an aggregate of 428,005 acre-feet of usable stateline

flows over the years from 1950 to 1996. Third Report 1,

8-9, 12, 120. The Master recommended an award of

money damages to Kansas to compensate for those

injuries. The Master further recommended that pre-

judgment interest be granted on the damages from

1969 to the time of judgment. The Master determined,

however, that, because from 1950 to 1968 neither

Kansas nor Colorado was aware that material deple-

tions of the Arkansas River’s usable stateline flows

were occurring, the damages for that peried should be

adjusted for inflation but should not include an interest

rate adjustment for the lost time value of money.

Kansas has filed an exception to the Master’s denial

of prejudgment interest for the period from 1950 to

1968. Colorado has filed an exception to the award of

any prejudgment interest. Colorado asserts that due to

the complexity of determining depletions to usable

stateline flows and the fact that there is no time

limitation on actions for violation of an interstate

compact, the Court should apply the common law rule,

which generally barred an award of prejudgment

interest on unliquidated claims, absent bad faith or

other exceptional circumstance. Colo. Exep. Br. 28. In

the alternative, Colorado contends that if prejudgment

interest is awarded, interest should begin to run only

from 1985, when Kansas first made a formal complaint.

Id. at 37.

The Court has never directly addressed the issue of

prejudgment interest in the context of interstate

original actions. The United States’ liability for inter-

est in original actions, like its liability in other cases, is

governed by the usual principles respecting federal

sovereign immunity.® The liability of the individual

States, however, remains an open question.

Prejudgment interest is intended to compensate

injured parties for both the time value of lost money

and the effects of inflation. “(P]rejudgment interest is

not awarded as a penalty; it is merely an element of just

compensation.” City of Milwaukee v. Cement Division,

National Gypsum Co., 515 U.S. 189, 197 (1995). None-

theless, under the traditional common law approach,

“prejudgment interest could not be awarded where

damages were unliquidated, absent bad faith or other

exceptional circumstances.” See, e.g., General Motors

Corp. v. Devex Corp., 461 U.S. 648, 653 (1983); see

Duplate Corp. v. Triplex Safety Glass Co., 298 U.S. 448

(1936); Tilghman v. Proctor, 125 U.S. 136 (1888). We do

not believe, however, that the common law approach

supports Colorado’s contention that this Court should

® The Master noted that Colorado agreed that a “fair and equit-

able remedy” would adjust all damages for inflation. Third Report

107. Colorado appears to be challenging only the award of an

adjustment to the damages for the lost time value of money.

6 This Court has held that “in the absence of constitutional re-

quirements, interest can be recovered against the United States

only if express consent to such a recovery has been given by

Congress.” United States v. New York Rayon Importing Co., 329

U.S. 654, 658-659 (1947). See also Library of Congress v. Shaw, 478

U.S. 310 (1986).

adopt a categorical rule prohibiting prejudgment inter-

est in original actions between States.

In the first piace, the common law rule itself was not

absolute; prejudgment interest was allowed in in-

stances of “bad faith or other exceptional circum-

stances.” General Motors, 461 U.S. at 653. Moreover,

courts have not always felt bound to follow even that

formulation. In fact, it appears that a majority of juris-

dictions have now rejected the traditional, restrictive

approach to awarding prejudgment interest. See Third

Report 94; id. App. Exh. 4. This Court, too, has repeat-

edly noted that the distinction between liquidated and

unliquidated damages for these purposes is question-

able, and that the rule against prejudgment interest is

inconsistent with the goal of full compensation. Indeed,

more than 65 years ago, in Funkhouser v. J.B. Preston

Co., 290 U.S. 163 (1933), the Court stated:

It has been recognized that a distinction, in this

respect, simply as between cases of liquidated and

unliquidated damages, is not a sound one. Whether

the case is of the one class or the other, the injured

party has suffered a loss which may be regarded as

not fully compensated if he is confined to the amount

found to be recoverable as of the time of breach and

nothing is added for the delay in obtaining the

award of damages. Because of this fact, the rule

with respect to unliquidated claims has been in

evolution, * * * and in the absence of legislation

the courts have dealt with the question of allowing

interest according to their conception of the de-

mands of justice and practicality.

Id. at 168-169. See City of Milwaukee, 515 U.S. at 197

(“[T]he liquidated/unliquidated distinction has faced

trenchant criticism for a number of years.”); General

Motors Corp., 461 U.S. at 655-656.

In admiralty, where this Court has traditionally felt

free to fashion rules suited to the particular exigencies

in that area, the common law rule has not governed.

Instead, in suits in admiralty, prejudgment interest

historically has been recoverable except in “peculiar” or

“exceptional” circumstances. See City of Milwaukee,

515 U.S. at 195 (collecting cases).’ We think the Court

similarly should not import the common law rule into

the jurisprudence of suits between States, especially

given the criticism of that rule in other settings. This

Court has broad discretion in cases within its original

jurisdiction and is not bound by statutory or common

law rules developed in other contexts. For example, in

Texas v. New Mexico, the Court rejected New Mexico’s

contention that it was precluded from awarding post-

judgment interest in the absence of any statute author-

izing such interest. 482 U.S. at 183 n.8. New Mexico

had relied in part on the Court’s opinion in Pierce v.

United States, 255 U.S. 398, 406 (1921), which, after

noting the common law rule that judgments do not bear

interest, held that post-judgment interest may not be

awarded in the absence of statutory authority.

Emphasizing its broad discretion in original jurisdiction

cases, the Court declared that “we are not bound by

this rule in exercising our original jurisdiction.” 482

U.S. at 133 n.8. What was true of the common law rule

respecting post-judgment interest in Texas v. New

7 We note as well the general rule that prejudgment interest is

due on debts owed to the federal government, including debts

owed by state and local governments. See, e.g., United States v.

Texas, 507 U.S. 529, 533-534 (1993); Board of County Comm’rs v.

United States, 308 U.S. 348, 350-353 (1939).

Mewico is true of the common law rule respecting pre-

judgment interest here.

Based on his review of the applicable law, the

Master concluded that the unliquidated nature of Kan-

sas’s money damages should not, in and of itself, bar an

award of prejudgment interest. Third Report App. 43.

We agree. Because prejudgment interest is awarded

not as a penalty, but as an element of compensation,

application of the traditional common law rule could

result in substantial unfairness to a State that was

unquestionably injured by a violation of an interstate

compact, if the amount of the damages was not readily

ascertainable prior to judgment. A strict rule against

the award of prejudgment interest in such cases could

also result in an unjustified windfall for the offending

State and undermine a potentially important incentive

for States to comply with the requirements of an inter-

state compact.

After rejecting Colorado’s argument for a categori-

cal rule barring an award of prejudgment interest, the

Master proceeded to determine if “considerations of

fairness,” Board of County Comm’rs v. United States,

308 U.S. at 352, suggested that the Court should exer-

cise its discretion to award prejudgment interest under

the circumstances of this case. Following a careful

analysis of all of the equities regarding an award of

prejudgment interest, the Master was convinced that

“prejudgment interest adjusting for inflation and for

the loss of use of funds owed should be included in any

damage award for violation of an interstate water

compact.” Third Report 102.

The Master concluded, however, that an award of

prejudgment interest for the entire period of the vio-

lation in this case would not be fair and just. He relied

principally on the lack of knowledge by both parties in

the early years about pumping in Colorado and its

impacts along the Arkansas River, as well as the diffi-

culty of determining the impact of groundwater pump-

ing on usable stateline flows. Third Report 106

(“Neither state in the early years saw any wrongdoing,

or thought that Kansas was not receiving its compact

share of usable flows of the Arkansas River.”); ibid.

(Depletions during this period were discovered only

“with hindsight and the benefit of sophisticated com-

puter modeling.”). Based on his finding that by 1968

Colorado knew, or should have known, that post-com-

pact wells were causing material depletions of usable

stateline flows, the Master recommended that Kansas

be awarded actual damages for the period from 1950 to

1968, adjusted for inflation only. For the period from

1969 to the date of judgment, the Master recommended

that Kansas be awarded prejudgment interest. Jd. at

103, 106.

The Master’s recommendation concerning an award

of prejudgment interest is based on a thorough evalua-

tion of the relevant considerations of fairness and

justice. The nature of this Court’s original jurisdiction

and its broad discretion in formulating fair and equita-

ble remedies in such cases, see Texas v. New Mevico,

482 U.S. at 130, permits the Court to fashion an appro-

priate remedy, including an award of prejudgment

interest. The United States believes that the Master

has provided a sound basis for an award of prejudgment

interest that reasonably balances the equities of each

State. |

CONCLUSION

The exceptions of Colorado and Kansas to the award

of prejudgment interest and the exception of Colorado

to the calculation of the amount of damages due based

on the Eleventh Amendment should be overruled.

Respectfully submitted.