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State Board to Pay Lawsuit Fees November 18, 2022

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By Don A. Wright

There is a new development in the court case against the State Water Resources Control Board by districts with pre-1914 water rights. The State Board tried to curtail diversions of San Joaquin River water and presented itself as having authority over pre-1914 rights. The year 1914 is a major date in California water law as that was when the Water Commission Act established the permitting process. Rights held before then were grandfathered in.

The court ruled – no, the State Board does not have authority over these rights, more or less. California’s Sixth District Court of Appeals also ruled the State Board owes attorney fees to: Byron-Bethany Irrigation District, Central Delta Water Agency, South Delta WA, San Joaquin Tributaries Authority, Oakdale Id and South San Joaquin ID – the plaintiffs involved.

This is a very significant development. The State Board doesn’t pay for its own litigation expense. The Office of California’s Attorneys General bankrolls it and from the State Board’s budget  perspective it has carte blanche to spin the lawsuit wheel. When an individual, company or smaller state agency goes up against the State Board it goes up against an entity backed by a state budget of $300 billion in 2022 alone, that doesn’t have to pay its own legal bills.

The Decision

According to the decision, “Section 1021.5 of the California Water Code did not always permit a public entity to seek recovery of its attorney fees from another public entity. In 1993, the Legislature amended section 1021.5 to include public entities within its purview.  ‘[T]he Legislature essentially recognized that sometimes there may be a need for one public entity to engage in public interest litigation against another public entity under circumstances that make a fee award under section 1021.5 appropriate.  . . .  [T]he amendment was aimed (at least in part) at ‘enabl[ing] small public entities to resist large, well-financed public entities, who, in the absence of [the amendment], [would] simply bludgeon the former into legal submission.’” Emphasis added.

On April 23, 2015, the Board sent out curtailment notices to a group of water right holders that told “all holders of post-1914 appropriative water rights within the San Joaquin River watershed . . . to immediately stop diverting under their post-1914 water rights.”  The notices also “advised that, if you continue to divert under a claim of pre-1914 right, most or all pre-1914 rights in the San Joaquin River watershed are likely to be curtailed later this year due to the extreme dry conditions.”  On May 1, 2015, the Board sent nearly identical notices to water right holders within the Sacramento River watershed.

In June 2015, the Board sent curtailment notices to water right holders, including the Districts, with “pre-1914 claims of right, with a priority date of 1903 and later for the Sacramento-San Joaquin watersheds and the Delta” telling them “that, due to ongoing drought conditions, there is insufficient water in the system to service their claims of right.” The notices told the recipients “to immediately stop diverting water . . . until water conditions improve.”

The Enforcers

The June 2015 notices expressly stated, under the heading “Potential Enforcement”:  “If the State Water Board finds following an adjudicative proceeding that a person or entity has diverted or used water [] unlawfully, the State Water Board may assess penalties of $1,000 per day of violation and $2,500 for each acre-foot diverted or used in excess of a valid water right.  (See Water Code, §§ 1052, 1055.)  Additionally, if the State Water Board issues a Cease and Desist Order against an unauthorized diversion, violation of any such order can result in a fine of $10,000 per day.  In all, the Board’s 2015 curtailments applied to “9,218 water rights” whether pre or post 1914.

The districts filed court mandate actions challenging the curtailment notices on due process and jurisdictional grounds asserting the Board had violated their due process rights by issuing the curtailment notices without providing them with a pre-deprivation hearing. They also stated the Board had exceeded its jurisdiction in curtailing their water rights because it lacked the authority to regulate pre-1914 appropriative water rights.

They had good reason to file. Byron-Bethany ID stated the State Board’s actions would cause the loss of more than $65 million in crops. The petition filed by WSID, CDWA, and SDWA alleged that if they continued diverting in defiance of the Board’s curtailment notice for one month, they would incur over $12 million in penalties. SJTA, whose constituent districts cover a territory exceeding 72,000 acres, alleged in its petition that a single 200-acre farm would incur a penalty of over $1.5 million in 20 days if it defied the curtailment notice. West Side ID asserted that injunctive relief was necessary because curtailment of water would result in approximately $25 million in crop losses within its district.

Restraints Applied

The court granted “a temporary restraining order and an order to show cause as to why a preliminary injunction should not issue requiring the Board to issue a revised letter/notice that is informational in nature.”

The court found that the curtailment notices were “coercive in nature,” they would cause irreparable harm, and the districts were likely to prevail on the merits. The court reasoned that the language of the notices expressed that the Board had already determined without a hearing that these districts were no longer permitted to divert water, which violated their due process rights.

On July 15, 2015, the Board issued a “partial rescission” and “clarification” of the April, May, and June 2015 notices. The partial rescission and clarification told the recipients, including the districts, that the Board was “rescind[ing] the ‘curtailment’ portions of the unavailability notices you received. To the extent that [those] notices . . . contain language that may be construed as an order requiring you to stop diversions under your affected water right, that language is hereby rescinded.”

On July 30, 2015, the court discharged the order to show cause after it found that the Board’s July 2015 partial rescission and clarification complied with its order. The Board began lifting the curtailment notices in September 2015 and had lifted all of them by November 2015.

While the 2015 curtailment notices were still in effect, the Board initiated administrative enforcement proceedings against BBID and WSID alleging unauthorized diversions. SDWA, CDWA, and SJTA notified the Board that they would appear and participate in the administrative enforcement proceedings, including by presenting expert witness and other testimony and by cross-examining witnesses. In June 2016, the Board dismissed the administrative enforcement proceedings after an administrative hearing demonstrated that the Board’s prosecution team could not satisfy its burden of proof.

Although the Board dismissed the enforcement proceedings, the Board’s dismissal order expressly rejected the districts’ claims that the Board lacked jurisdiction over pre-1914 appropriative water right holders under California Water Code 1052(a).  After the dismissal of the administrative enforcement proceedings, the districts filed three additional mandate petitions in court challenging the Board’s dismissal order on the ground that the Board lacked jurisdiction over pre-1914 water rights.

Justice Isn’t Cheap

The districts incurred substantial attorney fees, costs, expert witness fees, exhibit expenses, and deposition costs in connection with the administrative enforcement proceedings. In the administrative proceedings, they asked the Board to award them more than $1.1 million in costs. The Board rejected this request, concluding that section 1032 did not apply to administrative proceedings, and no other statutory authority provided for an award by the Board of costs incurred in an administrative enforcement proceeding.

The court issued a lengthy written order in December 2019 addressing the motions for attorney fees and costs. The court acknowledged that it was undisputed that the districts had:

  • Prevailed and had enforced an important right affecting the public interest,
  • The districts had “conferred a significant benefit” on a large group of people other than themselves as a result of the court proceedings,
  • But – not as a result of the administrative proceedings.

The court found that the districts faced “enormous financial penalties” if they failed to comply with the curtailment notices, and “enormous” “economic damage from lost crops,” which in BBID’s case alone would have exceeded “$65 million,” if they complied with the curtailment notices. The court found that these financial incentives dwarfed the attorney fees that the districts ultimately devoted to the litigation. “Thus, it is clear that the petitioners had ample financial incentive to file the five original actions herein, far outweighing the attorney fees they request now.”

The court identified a second decision point as the districts’ opposition to the enforcement actions that were initiated in July 2015. The court recognized that fees incurred in administrative proceedings were recoverable under section Code of Civil Procedure section 1021.5 if “ ‘ “useful and necessary” ’ ” to the court litigation. The court found that the enforcement actions sought $10,000 per day in fines against WSID and $1.5 million in penalties against BBID. Because the enforcement actions were intended to establish a “ ‘precedent,’ ” the court found that all of the districts had a financial incentive to oppose the enforcement actions and that the burden they bore was not out of proportion to their personal stake in the litigation.

The court felt that winning the decisions against enforcement actions was in a manner compensation – the district’s water supplies are more secure and that is worth money. Kind of like how the IRA treats debt relieve as income. That’s why it didn’t award fees.

The Almost Final Verdict

The Sixth Appellate Court disagreed and said the districts didn’t “recover monetary relief” and ordered the trial court to enter a new order granting the districts their attorney fees. The decision from the appellate court lists more than $1.15 million in fees. There is some consideration in the legal community this amount could approach $3.5 million when all is said and done.

The above is a summation of a 37-page densely packed legal document. It is hoped the people of California realize this is how unaccountable agencies spend their taxes. The unstated takeaway could be, “The state pays millions of dollars for abusing the rights of its citizens. The state is held accountable for that abuse, priceless.”

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