KLAMATH WATER USERS PROTECTIVE ASSOCIATION, et al. v. ROGER PATTERSON, et al.

U.S. Court of Appeals for the Ninth Circuit
204 F.3d 1206 (2000)

ELI5:

Rule of Law:

Parties who benefit from a government contract are generally considered incidental beneficiaries and may not enforce the contract unless the contract's language demonstrates a clear and express intention by the signatories to confer enforceable rights upon that third party.

Facts:

In 1905, the United States appropriated water rights in the Klamath River Basin to establish the Klamath Project under the Reclamation Act.
In 1917, the United States contracted with the California Oregon Power Company (Copco) for Copco to build and operate the Link River Dam.
This contract was renewed in 1956 for another 50 years. PacifiCorp is the successor in interest to Copco.
The dam's operation was intended to serve multiple federal purposes, including providing water to irrigators in the project, supplying water to wildlife refuges, and controlling flow for Copco's hydroelectric facilities.
The Klamath Basin contains fish species listed under the Endangered Species Act (ESA) and is subject to senior water and fishing treaty rights of several Native American tribes.
In 1997, the Bureau of Reclamation (Reclamation) developed an interim operating plan for the dam to accommodate its obligations under the ESA and to the tribes.
Reclamation and PacifiCorp agreed to a modification of the contract to implement the 1997 plan. The Klamath Water Users Protective Association (Irrigators) were not parties to this negotiation.

Procedural Posture:

The Klamath Water Users Protective Association (Irrigators) sued the U.S. Bureau of Reclamation and PacifiCorp in the U.S. District Court for the District of Oregon, alleging breach of contract.
PacifiCorp filed a counterclaim seeking a declaratory judgment on the Irrigators' rights under the 1956 contract.
The parties filed cross-motions for summary judgment.
The district court denied the Irrigators' motion and granted summary judgment to Reclamation and PacifiCorp, holding that the Irrigators were not third-party beneficiaries.
The Irrigators, as appellants, appealed the district court's judgment to the U.S. Court of Appeals for the Ninth Circuit.

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Issue:

Does a contract between the United States Bureau of Reclamation and a power company, which governs the operation of a dam and references the needs of irrigators, make those irrigators intended third-party beneficiaries with standing to enforce the contract's terms?

Opinions:

Majority - Tashima

No. The contract does not make the Irrigators intended third-party beneficiaries with enforceable rights. To sue as a third-party beneficiary of a government contract, a party must show that the contract reflects an express or implied intention of the signatories to confer a direct benefit and an enforceable right upon them. Parties who benefit from a government contract are generally presumed to be incidental beneficiaries. Here, the plain language of the contract does not show such intent. Articles 2 and 6, which mention irrigation needs, merely reserve the United States' ultimate control over dam operations rather than granting rights to the Irrigators. Furthermore, Article 15 explicitly states the contract benefits only the parties and their successors, reinforcing the exclusion of third parties. The court also affirmed that Reclamation's superior obligations under the Endangered Species Act and its trust responsibilities to Native American tribes with senior water rights take precedence over the Irrigators' claimed contractual water interests.

Analysis:

This decision reinforces the high threshold required for a third party to establish enforceable rights under a government contract, solidifying the presumption that such beneficiaries are merely incidental. It clarifies that simply being the subject of a contract's purpose is insufficient; the contract must manifest a clear intent to grant legally enforceable rights. The case is also significant for affirming the hierarchy of federal obligations in water management, establishing that statutory duties like the Endangered Species Act and federal trust responsibilities to tribes can override derivative, contractual water interests of users like irrigators.

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