IID-San Diego Transfer/QSA Opponents Strike Dry Hole in CA Litigation Lottery

On June 4th, Superior Court Judge Lloyd G. Connelly in California declared the “payout” on the decade-old litigation challenging the historic Imperial Irrigation District-San Diego County Water Authority water conservation and transfer agreement and related agreements including the Quantification Settlement Agreement (“QSA”).

Judicial scoring: transfer/QSA proponents, 100; transfer/QSA opponents, 0 

The decision represents the latest milepost on a long and tortuous litigation journey.  Judge Connelly acted on a 2011 remand from the Court of Appeals overturning an earlier superior court decision (that otherwise ruled in favor of the transfers/QSA) striking down the transfers/QSA due to the unconstitutionality of a Joint Powers Agreement among Imperial, Coachella Valley Water District, San Diego and the California Department of Fish and Game.  The decision was stayed pending appellate review.  The Appellate Court held that the JPA agreement was constitutional (as well as for the other issues in favor of transfers/QSA) and remanded to the Superior Court to clean up outstanding issues from the decade-long litigation, most prominently environmental review challenges.

The Connelly decision provides a primer on IID’s authority, delegation to General Managers and Legal Counsel, obligations under the Brown Act, and California Environmental Quality Act issues (definition of environmental baselines, project alternatives, no project alternatives, growth-inducement, co-agencies, and use of addendum).  Going argument by argument advanced by transfer/QSA opponents, Judge Connelly found that “the evidence in the administrative record and legal argument herein supports and demonstrates the validity of IID’s actions.”

In the end, legal theories and interpretations crafted by transfer opponents did not carry the day.  Two old adages of litigation—throw the “kitchen sink” at the wall and see what sticks, and construe if not misconstrue language to maximize advocacy benefits—were casualties (although one should not expect them leaving the practice of law anytime soon).  For those who find this judgment harsh, read Judge Connelly’s opinion.

“Back-benching” and “second-guessing” transfers is certainly part of the “water culture.”  The take away here is that the political process may be a better venue than the courtroom.  From this perspective, the environmental interests who participated in negotiations in the early 2000’s memorialized in legislation to close the agreements will have the lasting-input of the environmental perspective on the nexus of agreements.

Based on my unscientific sampling of California water professionals, the one-sided victory was not anticipated.  In my personal experience working with lawyers, no lawyer predicts more than 75% chance of winning on any issue—after all, litigation is not an exact science.   Some will not go further than predict a 67% chance of victory on an issue.

The ability of the QSA team to run the table must have looked remote.  Over the past decade, the QSA litigation has addressed dozens of potential issues (district authority, constitutional issues, fiduciary duty, political fair practices, CEQA, Brown Act, water rights ownership, etc), each with more than one formulation.  Even if these arguments could be collapsed into 5 to 10 fundamental issues that drive the resolutions of the dozens of formulated arguments, the “75% outcome predictor” of each fundamental issue would say the odds of running the table on the issues would be about a “one-in-four” chance (for 5 fundamental issues) to a scant “one-in-twenty-five” chance (for 10 fundamental issues).  If there were 20 fundamental issues, one is better off predicting that the 100-year flood will arrive next year than believe that pro-transfer/QSA parties would run the table in the litigation.

Was the “pro-QSA” team of lawyers that much better than the “anti-QSA” lawyers?  Or, were pro-QSA lawyers just dealt a much better hand?  Or, did they simply get a few more lucky bounces along the way?  Given the diversity of perspectives in the water industry, I sure that the industry will lack a consensus on these questions.  I have my private views, but those are not relevant here.

Has the QSA litigation lottery run its course?  We will not know until the last deadline to file an appeal is in the rearview mirror.  After a decade without a lasting victory (their only success was the initial superior court decision finding the JPA unconstitutional was later overturned on appeal), when will a risk assessment of appeals conclude, “enough is enough.”  Where beliefs and emotions run deep, behavioral economists caution the use of simple, “dispassionate” models of decision-making.

Addendum:  While a long-term economic advisor who represented the Imperial Irrigation District in negotiations of the IID-San Diego transfer and QSA, proceedings before the State Water Resources Board in 2002, and in early implementation post 2003, I had no role in the QSA litigation on behalf of IID.  As with any post, the views expressed here are solely my own and not the perspective of any past or current (or, for that matter, any future) client of Stratecon Inc.


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About Rodney T. Smith

Rodney T. Smith, Ph.D., President of Stratecon Inc.—an economics and strategic planning consulting firm—advises public and private sector water users on the acquisition, sale and leasing of water rights and water supplies in the western U.S. He is routinely involved in economic valuation of water rights, water investments, and negotiation of water acquisition and transportation agreements and has served as an expert witness in the economic valuation of groundwater resources, disputes over the economic interpretation of water contracts, economics of water conservation and water use practices, and the socio-economic impacts of land fallowing. For more information, see www.stratwater.com.