Filed 12/9/20

CERTIFIED FOR PARTIAL PUBLICATION*

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

ANTELOPE VALLEY GROUNDWATER CASES†

PHELAN PIÑON HILLS COMMUNITY 

SERVICES DISTRICT,

Cross-complainant and Appellant,

v.

CALIFORNIA WATER SERVICE COMPANY et 

al.,

Cross-defendants and Respondents.

F082094

(JCCP No. 4408)

OPINION

APPEAL from a judgment of the Superior Court of Los Angeles County. Jack 

Komar,‡Judge.

*Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is 

certified for publication with the exception of parts I., III., and IV. of the Discussion.

†Los Angeles County Waterworks District No. 40 v. Diamond Farming Co. (Super. Ct. 

Los Angeles County, No. BC325201); Los Angeles County Waterworks District No. 40 v. 

Diamond Farming Co. (Super. Ct. Kern County, No. S-1500-CV254348); Wm. Bolthouse 

Farms, Inc. v. City of Lancaster (Super. Ct. Riverside County, No. RIC353840); Diamond 

Farming Co. v. City of Lancaster (Super. Ct. Riverside County, No. RIC344436); Diamond 

Farming Co. v. Palmdale Water Dist. (Super. Ct. Riverside County, No. RIC344668); Willis v. 

Los Angeles County Waterworks District No. 40 (Super. Ct. Los Angeles County, 

No. BC364553); Wood v. Los Angeles County Waterworks District No. 40 (Super. Ct. Los

Angeles County, No. BC391869).

‡Retired judge of the Santa Clara Superior Court, assigned by the Chief Justice pursuant 

to article VI, section 6 of the California Constitution.
2.

Aleshire & Wynder, June S. Ailin and Nicolas D. Papajohn for Cross-complainant 

and Appellant.

Lagerlof, Senecal, Gosney & Kruse and Thomas S. Bunn III for Cross-defendant 

and Respondent Palmdale Water District.

Murphy & Evertz and Douglas J. Evertz for Cross-defendants and Respondents 

City of Lancaster and Rosamond Community Services District.

Olivarez Madruga Lemieux O’Neill and W. Keith Lemieux for Cross-defendants 

and Respondents Littlerock Creek Irrigation District, Palm Ranch Irrigation District, 

Desert Lake Community Services District, North Edwards Water District, Llano Del Rio 

Water Company, Llano Mutual Water Company, Big Rock Mutual Water Company and 

Quartz Hill Water District.

Mary Wickham, County Counsel, Warren R. Wellen, Deputy County Counsel; 

Best Best & Krieger, Eric L. Garner, Jeffrey V. Dunn, and Wendy Y. Wang for Crossdefendant and Respondent Los Angeles County Waterworks District No. 40.

Kuhs & Parker and Robert G. Kuhs for Cross-defendants and Respondents Tejon 

Ranchcorp, Tejon Ranch Company and Granite Construction Company.

Law Offices of LeBeau Thelen, and Bob H. Joyce for Cross-defendants and 

Respondents Diamond Farming Company, Crystal Organic Farms, Grimmway 

Enterprises, Inc., and Lapis Land Company, LLC.

Michael N. Feuer, City Attorney; Kronick, Moskovitz, Tiedemann & Girard and 

Eric N. Robinson for Cross-defendants and Respondents City of Los Angeles and Los 

Angeles World Airports.

Venable and William M. Sloan for Cross-defendant and Respondent U.S. Borax, 

Inc.

Richards, Watson & Gershon and James L. Markman for Cross-defendant and 

Respondent Antelope Valley–East Kern Water District.
3.

Ellison, Schneider, Harris & Donlan and Christopher M. Sanders for Crossdefendants and Respondents Los Angeles County Sanitation Districts Nos. 14 and 20.

Zimmer & Melson and Richard Zimmer for Cross-defendants and Respondents 

Wm. Bolthouse Farms and Bolthouse Properties, LLC.

-ooOooOver 20 years ago, the first lawsuits were filed that ultimately evolved into this 

proceeding known as the Antelope Valley Groundwater Cases (AVGC). The AVGC 

proceeding litigated whether the water supply from natural and imported sources, which 

replenishes an alluvial basin from which numerous parties pumped water, was inadequate 

to meet the competing annual demands of those water producers, thereby creating an 

“overdraft” condition. Numerous parties asserted that, without a comprehensive 

adjudication of all competing parties’ rights to produce water from and a physical 

solution for the aquifer, this continuing overdraft would negatively impact the health of 

the aquifer. Phelan Piñon Hills Community Services District (Phelan) ultimately became 

involved in the litigation as one of the thousands of entities and people who asserted they 

were entitled to draw water from the aquifer.

After the Judicial Council ordered all then-pending lawsuits consolidated into this 

single adjudication proceeding, the trial court embarked on an 11-year process in which 

it, seriatim, defined the geographical boundaries for the Antelope Valley Adjudication 

Area (AVAA) to determine which parties would be necessary parties to any global 

adjudication of water rights, and then determined that the aquifer encompassed within the 

AVAA boundaries (the AVAA basin) had sufficient hydrologic interconnectivity and 

conductivity to be defined as a single aquifer for purposes of adjudicating the competing 

groundwater rights claims. Its next phase found the AVAA basin was in a state of 

chronic overdraft because extractions exceeded the basin-wide annual “safe yield” of 

110,000 acre-feet per year (afy) by a considerable margin. The next phase quantified 

how much water was currently being pumped by each of the major competing water 
4.

rights claimants; these annual extractions (even without considering the amounts 

extracted by a large class of overlying right holders known as the “Small Pumper Class”) 

were in excess of the safe yield for the AVAA basin. The next phase, which 

contemplated trial of the issues of federal reserved water rights and imported water return 

flow rights, was interrupted by settlement discussions, which ultimately produced an 

agreement among the vast majority of parties in which they settled their respective 

groundwater rights claims and agreed to support the contours of a proposed plan (the 

Physical Solution) designed to bring the AVAA basin into hydrological balance.

Phelan was not among the settling parties. Accordingly, before considering 

whether to approve the proposed global water allocations and Physical Solution for the 

AVAA basin, the court first conducted separate trials at which Phelan’s claims were 

litigated and resolved. Thereafter, the court held a trial on the rationale for and efficacy 

of the proposed Physical Solution. After finding the proposed Physical Solution was 

reasonable, fair and beneficial as to all parties, and served the public interest, the court

approved the Physical Solution.

Phelan, which provides water to its customers who are located outside the AVAA 

boundaries, became subject to the AVGC litigation because a significant source of its 

water is pumping from a well (Well 14) located in the AVAA basin. The court’s 

judgment and adopted Physical Solution concluded that, while Phelan held no water 

rights in the AVAA basin (either as an appropriator of a surplus or by prescription),

Phelan could continue operating Well 14 to draw up to 1,200 afy to distribute to its 

customers outside the AVAA, on condition that Phelan’s pumping causes no material 

harm to the AVAA basin and that Phelan pays a “Replacement Water Assessment” for 

any water it pumped for use outside the AVAA.

Phelan challenges the judgment, raising four claims of error. First, Phelan asserts 

there is no substantial evidence to support the trial court’s conclusion the Physical 

Solution will bring the AVAA basin into hydrological balance. Second, it argues the trial 
5.

court erred when it rejected Phelan’s claim that, even assuming the AVAA basin was in 

overdraft, Phelan was entitled to water rights in the AVAA basin as an “appropriator for 

municipal public use” under Water Code sections 106 and 106.5. Third, Phelan asserts 

that, assuming the existence of a “surplus” in the AVAA basin was a condition precedent 

to Phelan’s acquisition of water rights as an appropriator, the phasing of the various trials 

denied Phelan its due process rights to establish the AVAA basin did have a surplus at the 

time Phelan began operating Well 14. Finally, Phelan contends the trial court erred when 

it rejected its claim that it was entitled to credit for “return flows” and erred by imposing 

a Replacement Assessment Fee based on the gross amount of water extracted by Well 14.

We conclude substantial evidence supports the judgment as to Phelan, that the 

court correctly rejected Phelan’s claim it had cognizable water rights as an appropriator 

for municipal purposes, that Phelan was not deprived of its due process rights to present 

its claims, and that the court did not err in rejecting Phelan’s claim to return flows from 

native water it pumped from the AVAA basin. Accordingly, we will affirm the judgment 

as to Phelan.

FACTUAL AND PROCEDURAL HISTORY

Factual Setting

There is a single aquifer, consisting of several hydrologically interconnected 

subbasins, underlying the AVAA. That aquifer was in a state of overdraft—meaning that 

long-term extractions from the aquifer have exceeded the amount of water replenishing 

that aquifer by “significant margins”—and had been in overdraft for decades before the 

current litigation commenced in 1999. While localized conditions led to variable impacts 

from this overdraft within specific subportions of the AVAA, the overall water levels 

within the AVAA basin were declining, and the declining water levels have caused 

significant long-term damage, including subsidence and lost aquifer storage capacity. 

The estimated average annual safe yield from all sources of recharge (natural sources 

such as precipitation, external sources such as imported water, and return flows) was 
6.

110,000 afy for the AVAA basin, but the numerous parties who pumped water from that 

basin were annually extracting between 130,000 and 150,000 afy.

Phelan owns a parcel within the boundaries of the AVAA on which it operates 

Well 14. In late 2005, it started operating Well 14 and extracting water from the AVAA 

basin, and it first delivered water from Well 14 to its customers in 2006. Phelan is a

public agency organized as a community services district supplying water to over 21,000 

residents, nearly all of whom use it for domestic uses, and Phelan’s source for the water it 

distributes is from groundwater pumped from its various wells. Phelan’s entire service 

district is outside the AVAA, although a portion of its service district and some of its 

customers overlay a portion of the alluvial basin defined by the California Department of 

Water Resources’ Bulletin 118 as the “Antelope Valley Groundwater Basin” (AVGB).

The Litigation Commences

Between late 1999 and early 2000, the first lawsuits (which ultimately evolved 

into the AVGC) were filed by Diamond Farming Company and Wm. Bolthouse Farms, 

Inc., concerning competing water rights in the aquifer. These actions, styled as quiet title 

actions against various public water suppliers, sought a determination of the various 

rights and priorities of overlying landowners and others claiming rights to extract water 

from the AVAA basin. Over the next several years, additional complaints and crosscomplaints were filed, which evolved into the AVGC and which sought a comprehensive 

determination of the water rights of thousands of persons, companies, public water 

suppliers, and the federal government, as well as a physical solution to alleviate the 

alleged overdraft conditions in the AVAA and to protect the AVAA basin.

Phase 1: Determining the Geographic Boundaries of the AVAA

The trial court segmented the various issues raised by the actions and held trials on 

these issues in phased proceedings. In October 2006, the court conducted trial to 

establish the jurisdictional boundaries for the AVAA. Establishing the boundaries was 

essential in order to determine what parties and entities with claims to the groundwater 
7.

would be necessary parties in the litigation, as either overlying owners with usufructuary 

rights or as appropriators producing water from the aquifer, so that a comprehensive 

adjudication of all claims could be made in later proceedings. After hearing expert 

testimony, the court determined the boundaries of the alluvial basin as defined by the 

California Department of Water Resources’ Bulletin 118 should be the “basic” 

jurisdictional boundaries for the AVAA, although it set the easternmost boundary for the 

AVAA at the jurisdictional line that had been previously established as the westernmost 

boundary in the “Mojave litigation.” The court left open the possibility that areas 

presently encompassed within the AVAA might be excluded (if shown to lack any real 

connection to the AVAA aquifer), or other areas might be included, as might be 

warranted by further evidence.

Phase 2: Determining Hydraulic Connectivity Within the AVAA Boundaries

In the second phase, the court heard evidence to assess the hydrologic nature of 

the aquifer within the geographical boundaries set for the AVAA. The court specifically 

evaluated whether there were any distinct subbasins within the AVAA basin that lacked 

any hydrologic connection such that they should be treated as separate, unconnected 

basins for purposes of adjudication. The court concluded there was enough hydraulic 

connectivity within the AVAA basin as a whole to obviate any claim that certain sections 

should be treated as separate basins.

Phelan Intervenes

In late 2008, Phelan filed its cross-complaint alleging seven causes of action. 

Among its claims were (1) Phelan had an appropriative right to pump water from the 

AVAA because there was surplus water in that the basin’s safe yield exceeds the volume 

pumped from the basin; (2) Phelan had “municipal priority” rights under California law 

“both as a result of the priority and extent of its appropriative and prescriptive rights, and 

as a matter of law and public policy” under statutory law; (3) Phelan had the right to the 

“recapture of return flows”; and (4) that some parties’ use of water was unreasonable and 
8.

constituted “waste, unreasonable use or an unreasonable method of diversion or use,” and 

such parties’ water rights should be determined and limited to reasonable uses rather than 

actual uses.

Phase 3: Determining Safe Yield and Overdraft

In the Phase 3 trial, the parties litigated the safe yield for the AVAA basin and 

whether the area encompassed within the AVAA was in overdraft.1 The Public Water 

Suppliers2(PWS), along with numerous other parties, contended the average annual 

extractions from the AVAA basin exceeded the relevant safe yields and that it was in 

overdraft. It proffered extensive testimony on average annual recharge, annual 

extractions, and the deleterious impacts from the chronic overdraft of the AVAA basin.

Phelan did not contest the contentions of the PWS in Phase 3 that the AVAA basin 

was in overdraft. Instead, Phelan sought to proffer evidence from its expert, Thomas 

Harder, concerning his study of the conditions in an area that encompassed both a 

southeast corner of the AVAA basin as well as land outside the boundaries of the AVAA. 

1

In the context of an alluvial basin, “safe yield” is defined as “‘the maximum quantity of 

water which can be withdrawn annually from a ground water supply under a given set of 

conditions without causing an undesirable result.’ The phrase ‘undesirable result’ is understood 

to refer to a gradual lowering of the ground water levels resulting eventually in depletion of the 

supply.” (City of Los Angeles v. City of San Fernando (1975) 14 Cal.3d 199, 278, disapproved 

on other grounds in City of Barstow v. Mojave Water Agency (2000) 23 Cal.4th 1224, 1248.) In 

essence, “safe yield” examines the available groundwater recharge from replenishing sources 

such as native precipitation and associated runoff, along with return flows from such sources, 

less losses incurred through natural groundwater depletions such as subsurface outflow or 

evaporative losses. (City of Los Angeles, supra, at pp. 278–279; see Tehachapi–Cummings 

County Water Dist. v. Armstrong (1975) 49 Cal.App.3d 992, 996, fn. 3 [“Natural ‘safe yield’ is 

the maximum quantity of ground water, not in excess of the long-term, average, natural 

replenishment (e.g., rainfall and runoff), which may be extracted annually without eventual 

depletion of the basin”].) “Overdraft” examines whether the average annual withdrawals or 

diversions exceed the safe yield of a groundwater supply and would lead to ultimate depletion of 

the available supply. (Jordan v. City of Santa Barbara (1996) 46 Cal.App.4th 1245, 1272.)

2Consisting of cross-defendants California Water Service Company, City of Lancaster, 

City of Palmdale, Littlerock Creek Irrigation District, Los Angeles County Waterworks District 

No. 40, Palmdale Water District, Rosamond Community Services District, Palm Ranch Irrigation 

District, and Quartz Hill Water District.
9.

Phelan contended (consistent with the PWS position) Mr. Harder would confirm that the 

area he studied showed pumping by Phelan and others has resulted in declining water 

levels in the southeast portion of the AVAA, and that “overdraft exists in the Southeast 

area of the [AVAA], or will exist in the near future, if groundwater pumping in this area 

continues at current rates or increases.”3

The court found the AVAA basin was in a state of overdraft, and that average 

extractions had significantly exceeded average recharge for decades, causing a steady 

lowering of water levels and accompanying subsidence since 1951. The court concluded 

the average total safe yield from all sources4 was 110,000 afy for the AVAA as a whole,

while current actual extractions from the AVAA as a whole (ranging between 130,000 

and 150,000 afy) exceeded average annual recharge. Accordingly, the court found (1) the 

AVAA was in overdraft and (2) the annual safe yield was a total of 110,000 afy.

Phase 4: Determining Actual Groundwater Production by Claimants

In the next phase, the court ultimately determined it would limit trial to 

individualized determinations of how much water the various claimants actually pumped 

3The court ultimately ruled that, while Harder could testify about impacts of pumping 

from Well 14 because it was sited within the AVAA jurisdictional boundaries, the bulk of 

Harder’s proffered testimony would be excluded from the Phase 3 trial because Harder’s 

testimony was principally focused on pumping and return flows in areas outside the boundaries 

of the AVAA.

4

It appears the total annual safe yield ultimately set by the court as the appropriate 

“quantity of pumping from the basin [that] will maintain equilibrium in the aquifer” was an 

amalgamation of two different components: amounts attributable to “native” water and amounts 

attributable to “imported” water. Various experts testified that native water additions (i.e., water 

coming into the basin from precipitation and runoff) provided new water to the AVAA basin 

ranging between 55,000 to 68,000 afy. When “return flows” from that new water were 

calculated, the PWS contended the native safe yield should be set at approximately 82,300 afy

for the AVAA basin as a whole. However, various entities also imported additional water into 

the AVAA, and when that imported water (along with its return flows) was added to the native 

supply, the total safe yield for the AVAA basin was determined by the court to be 110,000 afy.
10.

from the AVAA basin during the years 2011 and 2012.5 Based on the stipulations and 

evidence presented by numerous parties about the amounts pumped during the relevant 

time frames, including Phelan’s evidence that it pumped 1,053.14 acre-feet in 2011 and 

1,035.26 acre-feet in 2012 from the AVAA basin, the court determined how much water 

the various major stakeholders actually pumped from the AVAA basin in the relevant 

years. The amounts actually pumped during those sample years exceeded the previously 

determined safe yield.

6

Commencement of Phase 5: Federal Reserve Rights and Imported Water Return Flow 

Rights

The Phase 5 trial bifurcated two issues for the next trial phase: (1) federal 

reserved water rights, and (2) any claimed rights to recapture and use any return flows 

from water imported into the AVAA. However, during the evidentiary presentations on 

the federal reserved water rights, the parties requested a recess of pending proceedings to 

5

Initially, the case management order (CMO) for the Phase 4 trial contemplated it would 

encompass a vast array of issues, including the issue ultimately tried (current groundwater 

production for the two-year period which preceded the Phase 4 trial), but it also contemplated the 

trial would litigate each pumper’s claimed reasonable and beneficial use of water the water 

pumped, as well as claimed return flows from imported water and federal reserved rights. 

However, that CMO subsequently evolved to narrow the issue tried in Phase 4 and provided that 

“proof of claimed reasonable and beneficial use of the water for each parcel to be adjudicated” 

would only encompass “the amount of water used by each party and the identification of the 

beneficial use to which that amount was applied, but will not include any determination as to the 

reasonableness of that type of use [or] of the manner in which the party applied water to that 

use ....” The fifth amended CMO ultimately provided the “Phase [4] Trial is only for the 

purpose of determining groundwater pumping during 2011 and 2012. The Phase [4] Trial shall 

not result in any determination of any water right, or the reasonableness of any party’s water use 

or manner of applying water to the use. The Phase [4] Trial will not preclude any party from 

introducing in a later trial phase evidence to support its claimed water rights .... All parties 

reserve their rights to produce any evidence to support their claimed water rights and make any 

related legal arguments including, without limitation, arguments based on any applicable 

constitutional, statutory, or decisional authority.”

6The court found that, during the sampled years, the parties cumulatively pumped in 

excess of 120,000 afy even before consideration of the amounts pumped by the “Wood Class,” 

and apparently without consideration of the amount that would be subject to any federal reserved

right.
11.

permit further settlement discussions. The parties then met and conducted settlement 

discussions, and in April 2014, the parties informed the court that the vast majority of the 

parties had reached a proposed global settlement of their respective groundwater claims. 

The settlement included agreement on the contours of a basin-wide groundwater 

management plan to implement a Physical Solution to the AVAA basin’s overdraft 

conditions that accommodated the groundwater rights of the parties to the global 

settlement.

Although Phelan participated in the settlement negotiations, the parties were 

unable to reach agreement settling Phelan’s claims to water from the AVAA basin.

Trial of Phelan’s Preserved Claims

Because the parties were unable to reach a satisfactory agreement to accommodate 

Phelan’s claims to pump water from the AVAA basin for use outside the AVAA, the 

court set a series of trials in which to litigate and resolve Phelan’s claims for relief.

“Stage One”: Trial on Phelan’s Preserved Claims for Appropriative and Return 

Flow Rights

The court held hearings and conferences to delineate which of the claims raised by 

Phelan’s cross-complaint should be tried next.7 The court opined the appropriate scope 

7

In its case management statements, Phelan indicated it had abandoned its claim of a 

prescriptive water right, but had seven remaining causes of action. Phelan identified three key 

issues that should be litigated in the next stage. First, Phelan asserted it had obtained an 

appropriative water right to pump from Well 14 as an appropriator of surplus water; it asserted 

there was a “local area” surplus in the portion of the AVAA where its Well 14 was sited because 

groundwater levels in the Buttes and Pearland subbasins had not changed significantly since 

1951, which it contended showed a lack of overdraft in those two subbasins. Phelan

alternatively asserted it was an appropriator for public use of nonsurplus water. Phelan also 

asserted a form of return flow “rights,” arguing that the evidence would show that some of the 

water drawn from the AVAA basin by Well 14 returned to the AVAA basin, and that 

consideration of this return flow should be factored into “the overall water balance with [Phelan] 

receiving an offset against potentially future assessments or liabilities, anti-export provisions, or 

otherwise arising from the anticipated physical solution to be fashioned by the Court.” (Italics 

omitted.) Finally, Phelan argued that although the jurisdictional boundaries established for the 

AVAA excluded Phelan’s service area, the hydrogeologic reality was that the aquifer extended 

eastward (crossing over the AVAA boundaries) to encompass part of Phelan’s service area, and 
12.

of issues to be tried in the first stage should include (1) whether Phelan could show it had 

acquired an appropriative water right by showing there was a surplus in the AVAA 

basin,

8 and (2) whether Phelan could establish a return flow right from native waters that 

provided some support for Phelan’s claims.

Trial on these aspects of Phelan’s preserved claims occurred in late 2014. The 

parties agreed on a set of stipulated facts and exhibits. Phelan also introduced the 

testimony of two witnesses, including its expert hydrogeologist, Mr. Harder. The court 

then heard argument on and ultimately granted cross-defendants’ motions for judgment. 

It issued a partial statement of decision on the stage one issues, which found Phelan had 

no appropriative right to pump from the AVAA basin because Phelan had not satisfied its 

burden of proof to show there was surplus water available for an appropriative use. The 

court specifically found the Butte subbasin (where Phelan’s Well 14 is located) was 

adjacent to and hydrologically connected with other parts of the AVAA basin and served 

as a source of water recharge for the overall AVAA basin. It further found that localized 

this fact should be accounted for in determining (1) whether Phelan’s use of Well 14 water 

within its service area was subject to any anti-export prohibition and (2) whether Phelan could be 

credited for recaptured return flows. Thus, it appears Phelan sought trial on its second cause of 

action (appropriative rights to surplus water), its fourth cause of action (municipal priority to 

water use as against all nonmunicipal users), its sixth cause of action (declaratory relief 

regarding return flows from water extracted and distributed by Phelan in its service area), and 

elements embedded in its eighth cause of action (declaratory relief on the boundaries of the 

basin).

8The parties discussed the relevance of testimony concerning water levels in the Butte 

subbasin. Specifically, the parties sought to determine whether, in light of the court’s decisions 

in Phase 2 (that there was sufficient hydraulic connectivity within the AVAA aquifer as a whole 

to obviate the claims that certain sections should be treated as separate basins) and Phase 3 (that 

the AVAA basin as a whole was in overdraft), Phelan’s evidence concerning water levels in one 

portion of the AVAA (the Butte subbasin where Well 14 is located) was germane to Phelan’s 

attempt to show a surplus existed in the AVAA as whole when it brought Well 14 online. The 

court observed that Phelan had not previously proffered evidence that the Butte subbasin was a 

totally separate basin lacking hydrologic connectivity to the overall AVAA basin, and therefore 

opined that demonstrating surplus for the AVAA as a whole (rather than in a particular section) 

would be required, but recognized Phelan “may have other evidence [or] may be able to 

demonstrate, as a matter of law, that it doesn’t matter.”
13.

variations in groundwater levels within portions of the basin were insufficient to 

demonstrate there was surplus water in the overall AVAA basin upon which Phelan could 

acquire an appropriative right to water from the basin. The court also rejected Phelan’s 

sixth cause of action, ruling Phelan had no cognizable right to pump return flows 

attributable to native waters that recharged the AVAA basin.

Stage Two: Trial of Phelan’s Remaining Preserved Claims

The court then scheduled a trial for Phelan’s remaining claims for August 2015.9 

Phelan delineated those remaining claims as seeking declarations (1) as to its alleged 

appropriative rights as a municipal water provider (fourth cause of action), (2) as to its 

“storage” rights for imported water (fifth cause of action), and (3) as to the alleged 

unreasonable use of water by other cross-defendants (seventh cause of action). Phelan 

also sought a determination, on its third cause of action for a Physical Solution, that any 

Physical Solution should allow Phelan to pump up to 1,200 afy without payment of any 

Replacement Assessment Fee.

10

 Prior to this Stage Two trial, Phelan “reserved” its right 

to present evidence on its “unreasonable use of water” claim and indicated it would 

present that evidence at the pending “prove-up” hearings on the proposed Physical 

Solution. Accordingly, Phelan framed the issues for the Stage Two trial to be limited to 

whether Phelan had appropriative rights as a municipal water provider and whether any 

Physical Solution should allocate certain amounts of pumping to Phelan free of any 

replacement assessment.

9The court’s scheduling order also set an evidentiary hearing on a proposed Physical 

Solution for the fall of 2015.

10Although Phelan also indicated (prior to the Stage Two trial) that it intended to pursue 

its eighth cause of action for a declaration of the boundaries of the AVGB, it later expressly 

stated this cause of action did not seek to revise the AVAA boundaries established in Phase 1, 

but was instead limited to seeking a determination that it was not an “exporter” of the water it 

drew from Well 14.
14.

At this Stage Two trial, Phelan made a brief evidentiary presentation from its 

expert hydrologist on the claims set for hearing.

11

 At the close of Phelan’s evidence 

phase, a PWS party moved for judgment under Code of Civil Procedure section 631.8,

but the court deferred ruling on the motion until it could hear further evidence scheduled 

to be heard during the Phase 6 trial on the Physical Solution.

Phase 6: The Physical Solution

In the spring of 2015, the settling parties presented a stipulation containing a 

proposed plan, the Physical Solution, for the entire AVAA, which was agreed upon by 

the vast majority of the parties to the consolidated actions. Phelan was not among the 

parties to the stipulation. The proposed judgment contained an allocation of the projected 

safe yield among the numerous parties. Although the proposed judgment did not allocate 

any share of the available native safe yield to Phelan, it did specify Phelan could continue 

to pump up to 1,200 afy from Well 14 for use outside the AVAA as long as such 

pumping did not cause “material injury” to the AVAA and Phelan paid a replacement 

water assessment for the amounts it extracted from Well 14 and distributed outside the 

AVAA.

In the fall of 2015, the court held hearings on the proposed Physical Solution. 

After hearing evidence from a historian on the public notoriety of the overdraft 

conditions in the area,

12 the court heard evidence from four experts concerning the 

11Harder identified six wells used by Phelan to pump water from the AVGB, although 

only one of those wells (Well 14) was within the AVAA. He also described the amounts of 

water Phelan distributed to the portion of their customers who, although outside the AVAA, were 

atop a portion of the alluvial basin as defined by the Department of Water Resources’ Bulletin 

118. He also testified Phelan’s pumping has had no measurable impact on the groundwater 

levels within the Buttes subbasin, and that groundwater levels within the Buttes subbasin has 

remained relatively stable. However, Harder conceded that water pumped from Phelan’s wells 

intercepted water that would otherwise flow as recharge into the AVAA basin.

12Dr. Douglas Littlefield, a forensic historian, testified to a long history of published 

articles and technical studies showing the overdraft of water and resulting diminishing water 
15.

proposed Physical Solution. Dr. Dennis Williams, an expert with extensive experience 

with groundwater hydrology, opined the proposed Physical Solution would bring the 

AVAA basin back into balance because of its component parts: substantial reductions in 

pumping by existing users, importation of supplemental water, and the management and 

monitoring provisions. Charles Binder, a civil engineer who acted as a watermaster for 

another watershed, similarly testified the provisions of the judgment and proposed 

Physical Solution would bring the AVAA basin back into hydrologic balance. Two other 

experts opined the parties who received production rights under the Physical Solution 

were devoting the water they extracted to reasonable and beneficial uses.

Phelan presented no affirmative evidence during the Phase 6 trial. Phelan’s Phase 

6 trial brief did assert that, based on the evidentiary record, the court should make 

numerous modifications to the proposed Physical Solution. Specifically, it argued it 

should be allowed to pump up to 1,200 afy without the replenishment assessment 

contemplated by the Physical Solution or, alternatively, to pump 700 afy without a 

replenishment assessment, based on its historical pumping from all its wells (including its 

wells outside the AVAA boundaries) within the Buttes subbasin and the impacts of its 

pumping upon water levels within that subunit.13 It also asserted the judgment should 

recognize appropriative pumping rights held by Phelan were entitled to be accorded 

municipal priority under sections 106 and 106.5 of the California Water Code.14

levels in the areas encompassed by the AVAA (as well as attendant subsidence problems) were 

well known for decades.

13Phelan’s Phase 6 trial brief also opposed certain language within the proposed Physical 

Solution, including characterizing Phelan as an “exporter” of water, and to the ambiguity created 

by certain “costs” language contained in paragraph 6.4.1.2 of the Physical Solution.

14Phelan apparently presented no evidence in support of its claim there was an 

unreasonable use of water by other cross-defendants and, while Phelan interposed objections to 

the proposed statement of decision, its objections contained no mention of this claim.
16.

The court’s Phase 6 proposed statement of decision concluded, as to Phelan’s 

remaining claims, that Phelan lacked an appropriative right to draw water from the 

AVAA because the longstanding overdraft conditions in the AVAA basin as a whole 

meant there was no surplus water available for Phelan to acquire or enlarge an 

appropriative water right. It further rejected Phelan’s return flow claims because such a 

claim is limited to return flow from imported water, and Phelan never imported water 

into the AVAA.

The Final Judgment and Adoption of the Physical Solution

The court’s final judgment, which incorporated determinations from prior phases, 

found the collective demands by those holding water rights in the AVAA basin exceeded 

the available total safe yield of 110,000 afy (comprising a native safe yield of 82,300 afy

and the balance coming from imported supplemental water supplies) for the entire basin, 

and that a comprehensive adjudication of all of the water rights within the AVAA basin 

and a water resource management plan was required to prevent further depletion of and 

damage to the AVAA basin. The court found (1) the United States had produced 

substantial evidence establishing a federal reserved water right, (2) the PWS had 

produced substantial evidence showing they had acquired a prescriptive right as against 

certain parties who had not joined in the stipulated judgment, and (3) Phelan had not 

shown it had acquired an appropriative water right (or any other right) in the AVAA 

basin’s safe yield. Specifically, the court noted that, while Phelan was an overlying 

landowner in the AVAA basin by virtue of its ownership of the parcel on which it 

operated Well 14, the water it drew from that parcel was not used for that parcel but was 

instead used to service its customers outside the AVAA. Its final judgment approved 

Phelan’s ability, as granted by the approved Physical Solution, to pump up to 1,200 afy

subject to the payment of a replacement assessment, and found Phelan had no right to 

pump water from the AVAA except under the terms of that Physical Solution.
17.

The court further found that the stipulating “Landowner Parties” and “Public 

Overliers” had established they possessed overlying rights to the basin’s native safe 

yields by producing evidence of the amounts of the basin groundwater they actually used, 

that such amounts were reasonable and beneficial uses of such water, and that the total 

amounts so used exceeded the total native safe yield.15 The court also granted final 

approval to a settlement for the “Small Pumper Class,” which allocated certain 

production rights to members of that class.

The court found that, because the native safe yield was well below the amounts 

used for reasonable and beneficial purposes by those with overlying, prescriptive, or 

reserved rights, it was necessary to allocate the native safe yield among these rights 

holders to protect the AVAA basin for existing and future users. The court concluded the 

evidence presented during Phases 4 and 6 supported the conclusion that the Physical 

Solution, which required these rights holders to severely reduce the amount of water they 

used and created an overarching water management plan for the AVAA basin, fairly 

allocated the available water supplies and made the maximum reasonable and beneficial 

use of the native safe yield in a manner which would protect the AVAA basin for existing 

and future users while preserving the ability of existing rights holders to continue using 

the available water.

15The court made similar findings as to a group of nonstipulating landowner parties who 

claimed overlying rights in the basin’s groundwater by proof of their land ownership or other 

interest in the basin. While this group was not signatories to the original settlement, they 

supported the proposed judgment and Physical Solution and agreed to reduce production under 

paragraph 5.1.10 of the Physical Solution to certain specified amounts. The court found these 

parties had shown they had an overlying right to basin water, that they had reasonably and 

beneficially used basin water, and that the amounts they were allocated under the Physical 

Solution was a severe reduction of their historical and current uses and represented amounts they 

applied to reasonable and beneficial uses.
18.

DISCUSSION

I. Substantial Evidence Supports the Conclusion the Physical Solution Will 

Bring the AVAA Basin Into Balance*

A court may impose a physical solution to protect an aquifer from the deleterious 

effects of overdrafting the aquifer. (City of Santa Maria v. Adam (2012) 211 Cal.App.4th 

266, 288.) “A physical solution is an equitable remedy designed to alleviate overdrafts 

and the consequential depletion of water resources in a particular area, consistent with the 

constitutional mandate to prevent waste and unreasonable water use and to maximize the 

beneficial use of this state’s limited resource.” (California American Water v. City of 

Seaside (2010) 183 Cal.App.4th 471, 480.) A court’s physical solution can reasonably 

regulate the use of the water by the respective rights-holders provided its provisions are 

“adequate to protect the one having the paramount right in the substantial enjoyment 

thereof and to prevent its ultimate destruction ....” (Peabody v. City of Vallejo (1935) 2 

Cal.2d 351, 383 (Peabody).) A physical solution must consider the rights and priorities 

of the vested rights holders in light of the constitutional principle requiring that available 

water be put to beneficial use to the fullest extent possible. (City of Barstow v. Mojave 

Water Agency (2000) 23 Cal.4th 1224, 1250 [“although it is clear that a trial court may 

impose a physical solution to achieve a practical allocation of water to competing 

interests, the solution’s general purpose cannot simply ignore the priority rights of the 

parties asserting them. [Citation.] In ordering a physical solution, therefore, a court may 

neither change priorities among the water rights holders nor eliminate vested rights in 

applying the solution without first considering them in relation to the reasonable use 

doctrine”].)

Phelan argues on appeal there is no substantial evidence to support the trial court’s 

finding that the adopted Physical Solution would bring the AVAA into hydrological 

*See footnote, ante, page 1.
19.

balance and thereby “prevent its ultimate destruction.” (Peabody, supra, 2 Cal.2d at p. 

383.)

“Where findings of fact are challenged on a civil appeal, we are bound by 

the ‘elementary, but often overlooked principle of law, that ... the power of 

an appellate court begins and ends with a determination as to whether there 

is any substantial evidence, contradicted or uncontradicted,’ to support the 

findings below. (Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 

429.) We must therefore view the evidence in the light most favorable to 

the prevailing party, giving it the benefit of every reasonable inference and 

resolving all conflicts in its favor in accordance with the standard of review 

so long adhered to by this court.” (Jessup Farms v. Baldwin (1983) 33 

Cal.3d 639, 660.)

The testimony of a single witness, unless it is impossible or inherently improbable, will 

be sufficient to support the challenged findings. (Sonic Manufacturing Technologies, Inc. 

v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 465–466.) When a party asserts on 

appeal that a judgment lacks substantial evidentiary support, it is that party’s burden to 

summarize the evidence on that point—both favorable and unfavorable—and then to 

demonstrate how and why it is insufficient. (Huong Que, Inc. v. Luu (2007) 150 

Cal.App.4th 400, 409.)

Phelan’s insufficient evidence claim rests principally on the contention the 

testimony of two experts, which was offered by the proponents of the Physical Solution 

in Phase 6 of the underlying trial, does not provide sufficient evidence the Physical 

Solution would bring the AVAA into balance. The first expert, Mr. Binder, had 

extensive training and experience in water resource management and who (among other 

qualifications) served as the watermaster and the watermaster engineer to administer and 

enforce a similar physical solution for the Santa Margarita Watershed. Binder premised 

his opinion on a review of the terms of the proposed Physical Solution, the technical 

reports from a variety of agencies, and the court’s orders and decisions in the prior phases 

of the AVGC litigation. Based on his review of all these materials, Mr. Binder opined (1) 

the Physical Solution would result in reduced groundwater production to a level equal to 
20.

the amount of the safe yield resulting in the basin being stabilized into hydrologic 

balance, (2) the native safe yield plus available supplemental water supplies would be 

sufficient to meet total current water requirements under the allocations contemplated in 

the Physical Solution, and (3) the proposed judgment and Physical Solution would create 

a functional structure for administering the judgment and managing the groundwater 

basin. Binder noted the management structure included a watermaster and watermaster 

engineer to manage the groundwater basin, a financial plan to fund the management 

structure, flexible management tools to manage the basin, and retention of court 

jurisdiction to enforce or modify the judgment.

Dr. Williams, an expert geologist, hydrogeologist and groundwater hydrologist, 

and an expert on groundwater modeling and management, also concluded the proposed 

Physical Solution would bring the AVAA basin into hydrologic balance. Dr. Williams 

formed his opinion using a computer model created by the United States Geological 

Survey, known as a “distributed parameters” model, which he used to assess the impacts 

of pumping and recharging within the mapped area.16 Dr. Williams used the model to 

project the impacts on the AVAA’s hydrologic balance over the next 50-year period 

using multiple different scenarios. His first two scenarios (scenarios 1 and 1A) modeled 

and evaluated the long-term impacts on the AVAA basin without reduced pumping by 

16Williams explained that, before the “distributed parameters” computer model was 

available, hydrologists used a “lumped parameter” model that treated the entire basin as a giant 

bathtub in which total inflows and outflows were used to assess storage changes. In contrast, the 

distributed parameters model creates a fine mesh (comprising over 60,000 individual microparcels or “cells” measuring 1,000 by 1,000 meters per cell with each cell having several vertical 

layers to reflect the depths of the relevant geological features), which was overlaid on the AVAA 

basin to more finely evaluate the impacts of pumping and recharge and “solve” water balances 

for each of the cells. The United States Geological Survey model covered a much greater area 

than the AVAA, so only the cells relevant to evaluating the proposed Physical Solution 

(primarily the cells covering the alluvial sediments in the AVAA) were activated for purposes of 

running the computer modeling. The model allowed Williams to input the amount of pumping 

for each individual pumper (whether reduced or unreduced) and assign it to a particular “cell” of 

the map where that pumper was operating the specific pump.
21.

current users as contemplated by the proposed Physical Solution: scenario 1 assumed 

unreduced current pumping with aquifer recharge under drought conditions (where the 

rain and imported water recharging the AVAA basin was constricted), while scenario 1A 

again assumed unreduced current pumping but under average conditions where rain and 

imported water recharged the aquifer with the 110,000 afy of safe yield. Based on the 

model, he concluded either scenario would cause adverse impacts on the AVAA basin.

Dr. Williams then used the computer model to calculate the projected long-term 

impacts on the AVAA basin if the reduced pumping (and other measures) contemplated 

by the proposed Physical Solution were adopted using two more scenarios (scenarios 2 

and 2A), again using parallel aquifer recharge assumptions under drought conditions

(scenario 2) and under average recharge conditions (scenario 2A). Dr. Williams 

concluded that implementing the terms of the Physical Solution, in which existing rights

holders reduced their pumping over a specified period, would stabilize the AVAA’s 

hydrological balance under either scenario 2 or 2A.

Dr. Williams subsequently ran a computer modeling (which he denominated as 

scenario 2B) to simulate the impact on the AVAA of Phelan’s pumping from Well 14 of 

1,200 afy under the average recharge conditions employed in scenario 2A. He concluded 

such pumping from Phelan’s Well 14 would cause the AVAA to have a net loss to the 

AVAA groundwater supplies of 700 afy.

The testimony of Binder and Williams provides ample evidence to support the 

finding the Physical Solution prevented the “ultimate destruction” of the AVAA basin 

while providing protections for the parties with paramount rights to substantially enjoy 

the available supplies in that basin. (Peabody, supra, 2 Cal.2d at p. 383.) However, 

Phelan asserts Dr. Williams’s testimony must be disregarded in evaluating the evidentiary 

support for that finding because the methodology employed in his computer modeling 

was flawed. Specifically, Phelan asserts (1) not all of the cells in the United States 

Geological Survey model within the AVAA were “activated,” (2) there were no 
22.

“calibration wells” in the area near Phelan’s Well 14, and (3) the modeling of the impact 

of pumping from Well 14 was done by moving its location to the nearest “active” cell in 

order to simulate such impacts. Accordingly, argues Phelan, Dr. Williams’s testimony 

cannot provide substantial evidence for the findings the Physical Solution would stabilize 

the AVAA basin and bring it into hydrologic balance because the model did not 

“accurately depict the workings of the groundwater basin.” We reject Phelan’s claim that 

Williams’s opinion must be disregarded in assessing whether substantial evidence 

supports the trial court’s finding for two reasons. First, Phelan acknowledges its motion 

to strike Williams’s testimony, which appears to have been based on essentially the same 

alleged imperfections in the modeling, was denied by the trial court. Phelan makes no 

effort on appeal to satisfy its burden of showing the denial of its motion to strike 

Dr. Williams’s testimony was an abuse of discretion. (Sargon Enterprises, Inc. v. 

University of Southern California (2012) 55 Cal.4th 747, 773 [“Except to the extent the 

trial court bases its ruling on a conclusion of law (which we review de novo), we review 

its ruling excluding or admitting expert testimony for abuse of discretion”].) Because we 

may not interfere with the broad discretion accorded to trial courts in admitting expert 

testimony absent a showing such discretion was clearly abused (People v. Bui (2001) 86

Cal.App.4th 1187, 1196), and Phelan has made no showing such discretion was clearly 

abused here (cf. Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 281), we 

must presume the ruling on the motion to strike was properly denied and that the trial 

court therefore properly admitted and considered his testimony. Second, while Phelan 

makes multiple suggestions on appeal on how Williams’s computer modeling could have 

been more precise or comprehensive, Phelan cites no evidence those suggested 

improvements to the model (even if implemented) would have materially changed the 

results reached by the model (or Dr. Williams’s opinion based thereon) that the Physical 

Solution would stabilize the AVAA basin’s hydrological balance under either scenario 2 
23.

or 2A, or would have altered his opinion that pumping from Phelan’s Well 14 would 

cause the AVAA to have a net loss to the AVAA groundwater supplies of 700 afy.

Because Phelan has not demonstrated that admitting Dr. Williams’s testimony was 

an abuse of discretion, nor does the record contain evidence that any imperfections in the 

model so materially impacted his conclusions that his testimony (as admitted) should be 

entirely disregarded on appeal, Dr. Williams’s opinion provides ample support for the 

judgment. Other courts that have considered arguments attacking an expert’s testimony, 

analogous to those mounted by Phelan here, have similarly rejected such arguments on 

appeal. For example, in Corona Foothill Lemon Co. v. Lillibridge (1937) 8 Cal.2d 522, 

the appellants challenged whether there was substantial evidence for the trial court’s 

determinations of the boundaries of the aquifer, and supported that challenge by detailing 

the evidence at trial supporting a contrary conclusion. The court, noting there was 

“voluminous evidence of a highly conflicting nature [and] [w]ell qualified witnesses on 

each side testified concerning the geology of the area, its hydrology, and the relative 

permeability of soils in Temescal wash, on Norco mesa, and on the Corona slope” (id. at 

p. 527), rejected the appellate claim. The Corona court observed the evidence created 

“... substantial points of agreement and also decided points of material disagreement 

[among the experts on] whether the entire Corona area constitutes a single underground 

water basin or reservoir” (id. at p. 528) but rejected the appellants’ claim because, while 

the appellants’ contrary claims had evidentiary support, “... there is in contradiction of

[the appellants’] evidence ample proof which, if believed by the trial court, supports its 

conclusion that the underground reservoir embraces the entire Corona area.” (Ibid.; 

accord, Allen v. California Water and Tel. Co. (1946) 29 Cal.2d 466, 481 [expert 

testimony on absence of surplus for appropriation; court rejects substantial evidence 

challenge because “the trial court’s findings have substantial evidentiary support in the 

testimony of [expert] Lee and other witnesses for plaintiffs; [the appellate] attacks made 

by defendant upon the testimony of Mr. Lee go only to its credibility and weight; and ...
24.

these are matters committed to the trier of the facts for determination in the case of an 

expert as well as of lay testimony”].)

Moreover, even assuming Phelan had adequately carried its appellate burden 

demonstrating it was a clear abuse of discretion to admit Dr. Williams’s testimony, the 

testimony of Mr. Binder would alone provide substantial evidentiary support for the 

finding the panoply of provisions in the Physical Solution would bring the AVAA into 

hydrological balance. Although Phelan attacks Binder’s opinions on appeal,

17 Phelan did 

not move to strike Binder’s testimony below, nor does it articulate (apart from a 

peremptory allegation that his testimony must be deemed “irrelevant”) why his testimony 

does not provide substantial evidence to support the trial court’s conclusion the Physical 

Solution would protect the AVAA basin from further degradation. Because the 

testimony of a single witness (unless it is impossible or inherently improbable) is 

sufficient to support the challenged findings (Sonic Manufacturing Technologies, Inc. v. 

AAE Systems, Inc., supra, 196 Cal.App.4th at pp. 465–466), and Phelan has not shown 

Binder’s opinion was either impossible or inherently improbable, Binder’s opinion alone 

provides substantial evidentiary support for the conclusion the Physical Solution would 

bring the AVAA into hydrologic balance.

Phelan appears to argue our ordinary assessment of whether there is any 

substantial evidence to support the findings below (Crawford v. Southern Pacific Co., 

supra, 3 Cal.2d at p. 429), and which requires us to view the evidence in the light most 

favorable to the judgment with every reasonable inference drawn in favor thereof (Jessup 

Farms v. Baldwin, supra, 33 Cal.3d at p. 660), is inapplicable here because Phelan 

contends the final statement of decision affirmatively shows the court’s determinations 

17Phelan points out, for example, that certain numbers used in Binder’s analysis changed 

between the time he gave his deposition and the time of his trial testimony, and also claims 

Binder’s analysis considered nongroundwater sources in alleged contravention of a limiting 

determination from the Phase 1 trial.
25.

were not based on a weighing of the conflicting evidence. Specifically, Phelan argues the 

final statement of decision does not catalogue each item of evidence accepted or rejected 

by the court (and the rationale for each such acceptance or rejection) in reaching its final 

determinations, and that this lacuna shows the court reached its determinations without 

weighing the evidence. Based on this predicate—the claim the record affirmatively 

shows the decision was not based on a weighing of the evidence—Phelan asserts we are 

precluded from employing the deferential substantial evidence standard to review its 

decision under Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 

Cal.App.4th 1474 (Kemp) and Affan v. Portofino Cove Homeowners Assn. (2010) 189 

Cal.App.4th 930 (Affan).

However, Phelan’s contention that alleged deficiencies in the final statement of 

decision requires application of some standard of review other than the deferential 

substantial evidence standard is first raised in Phelan’s reply brief. Ordinarily, “‘[p]oints 

raised for the first time in a reply brief will ... not be considered, because such 

consideration would deprive the respondent of an opportunity to counter the argument.’

[Citation.] ... ‘“Obvious considerations of fairness in argument demand that the 

appellant present all of his points in the opening brief. To withhold a point until the 

closing brief would deprive the respondent of his opportunity to answer it or require the 

effort and delay of an additional brief by permission. Hence the rule is that points raised 

in the reply brief for the first time will not be considered, unless good reason is shown for 

failure to present them before.”’ [Citation.]” (Reichardt v. Hoffman (1997) 52 

Cal.App.4th 754, 764.)

Even assuming Phelan had preserved this argument, it rests on a predicate that 

misconceives what is required in a statement of decision. Phelan’s argument under Kemp

and Affan is predicated on its assertion that a statement of decision which does not 

contain a detailed discussion of all of the evidence and a discussion of why the court 

chose to credit some evidence while rejecting other evidence affirmatively shows the 
26.

court did not weigh the evidence in reaching its decision. However, a statement of 

decision is required only to set out ultimate findings rather than evidentiary ones. 

(Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1125.) A trial court “‘is not 

required to respond point by point to the issues posed in a request for statement of 

decision. The court’s statement of decision is sufficient if it fairly discloses the court’s 

determination as to the ultimate facts and material issues in the case.’ (Golden Eagle Ins. 

Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1379–1380; [citation].) ‘When 

this rule is applied, the term “ultimate fact” generally refers to a core fact, such as an 

essential element of a claim.’ (Central Valley General Hospital v. Smith (2008) 162 

Cal.App.4th 501, 513.) ‘Ultimate facts are distinguished from evidentiary facts and from 

legal conclusions.’ (Ibid.) Thus, a court is not expected to make findings with regard to 

‘detailed evidentiary facts or to make minute findings as to individual items of evidence.’ 

(Nunes Turfgrass, Inc. v. Vaughan-Jacklin Seed Co. (1988) 200 Cal.App.3d 1518, 

1525.)” (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 983.) Phelan’s argument 

“would require the court to make detailed findings of evidentiary facts as to each 

individual piece of evidence relied upon by the trial court. Under the law, [Phelan is] not 

entitled to such a detailed analysis.” (People v. Dollar Rent-A-Car Systems, Inc. (1989) 

211 Cal.App.3d 119, 128.) Here, the statement of decision fairly disclosed the court’s 

determination as to the ultimate facts and material issues in dispute in each phase of the 

proceedings. Accordingly, we reject Phelan’s claim the statement of decision was too 

inadequate to warrant review under the substantial evidence standard.18

18This analysis renders moot Phelan’s reliance on Kemp and Affan. In both of those 

cases, the record affirmatively showed the trial court’s judgment was based on reasons unrelated 

to an assessment of the conflicting evidence. In Kemp, for example, a prime contractor sued a 

subcontractor for breach of contract and sought a pretrial right to attach order against the 

subcontractor’s accounts receivable, which required an affirmative showing by the prime 

contractor of the “probable validity” of its breach of contract claim. The court granted the 

attachment order, but the minute order and reporter’s transcripts showed the court granted the 

order not because the plaintiff had affirmatively shown the probable validity of its claim, but 

because it ruled the defendant was barred (by collateral estoppel principles) from contesting the 
27.

Phelan’s final attack on the evidentiary support for adopting the Physical Solution 

appears to argue the evidence was insufficient because there was no evidence Phelan’s 

pumping “substantially harms the AVAA such that Phelan should be required to pay a 

replacement assessment” for the amounts it pumps. However, there is substantial 

evidence Phelan’s pumping harms the AVAA basin’s water balance. Dr. Williams 

testified Phelan’s pumping diminished the AVAA water balances by 700 AF each year, 

and Phelan’s own expert agreed Well 14 extracts more water from the AVAA basin than 

was being returned to the AVAA basin from return flows from those extracted waters. 

This final argument by Phelan appears to suggest that, as long as the negative impacts of 

its pumping on the AVAA basin do not substantially harm the AVAA basin, there is no 

evidence supporting the Physical Solution’s regulation of its pumping. However, Phelan 

cites no authority that a court lacks evidentiary support for a Physical Solution merely 

because any one party regulated thereunder can argue that exempting its pumping from 

its terms would only minimally diminish the effectiveness of the Physical Solution. 

(Contra, City of Lodi v. East Bay Mun. Utility Dist. (1936) 7 Cal.2d 316, 341 [trial court 

has power and duty to admit evidence relating to possible physical solutions and “to 

enforce such solution regardless of whether the parties agree”].) Indeed, we believe this 

plaintiff’s breach of contract claim. (Kemp, supra, 146 Cal.App.4th at pp. 1476–1481.) The 

appellate court, concluding the trial court erred by using collateral estoppel on the probable 

validity issue, also rejected invoking substantial evidence review to affirm the determination on 

the probable validity issue because it was clear the court never considered or weighed any 

evidence once it determined (erroneously) collateral estoppel obviated examination of that issue. 

(Id. at pp. 1477–1478.) Similarly, in Affan, supra, 189 Cal.App.4th 930, the trial court rejected 

an owner’s claim of negligence against a homeowners association because it apparently 

misconstrued a fact-based “judicial deference” defense (available to associations under Lamden 

v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249) as a blanket 

immunity defense (Affan, supra, at pp. 938–940), and therefore never examined whether the 

requisite facts had been established to invoke that judicial deference defense. (Id. at pp. 940–

944.) Unlike those cases, the statement of decision here does not show the approval of the 

Physical Solution was based on matters dehors the evidence (as in Kemp) or on erroneous legal 

standards (as in Affan), but was instead based on correct legal considerations and after 

considering the evidence. Accordingly, neither Kemp or Affan is relevant here.
28.

argument (if credited) would eviscerate the ability of a court to adopt any basin-wide 

physical solution: if any single water rights holder could bar adoption of a proposed 

physical solution unless it was exempted from it by asserting its specific unconstrained 

pumping would have limited impact on the effectiveness of its remaining regulations, any

proposed physical solution could be exposed to a “death by a thousand cuts” because 

each objecting water claimant could likewise claim exemption from its regulation under 

the “individual de minimus impacts” argument.

We conclude Phelan has not carried its appellate burden of showing there was 

inadequate evidence to support the conclusion the Physical Solution adequately met the 

twin goals of protecting the paramount rights of vested water rights holders while 

preventing the ultimate destruction of the AVAA aquifer (Peabody, supra, 2 Cal.2d at p. 

383), and we therefore reject Phelan’s first argument on appeal.

II. The Trial Court Correctly Rejected Phelan’s Fourth Cause of Action 

Asserting It Had Acquired Water Rights as a “Public Use Appropriator”

Phelan’s cross-complaint, in addition to asserting it had acquired protectable water 

rights either as an appropriator (if surplus water existed) or by prescription (if there was 

not surplus water), also asserted it had “rights to pump water from the Basin to meet its 

municipal water demands ... as a matter of law and public policy” under California 

Water Code sections 106 and 106.5, which Phelan contended provided it with a “prior 

and paramount right to Basin water as against all non-municipal uses.” The trial court’s 

final statement of decision concluded Phelan had not acquired any right, whether 

appropriative or otherwise, to AVAA basin groundwater. On appeal, Phelan appears to 

assert the “public use” doctrine and policies embodied in Water Code sections 106 and 

106.5 confer on Phelan a right—as a municipal appropriator for public use—to pump 

water from the AVAA for municipal purposes regardless of whether a surplus existed 

when it began pumping from Well 14.
29.

California’s “dual system of water rights”19 essentially provides two sources by 

which water rights in surface waters can be acquired: by riparian rights holders who 

have first priority to the available water for riparian uses, or by appropriation of water for 

nonriparian uses when there is water in surplus beyond that used by first priority users. 

(See generally Santa Barbara Channelkeeper v. City of San Buenaventura (2018) 19 

Cal.App.5th 1176, 1183.)

“Similar principles govern rights to water in an underground basin. First 

priority goes to the landowner whose property overlies the groundwater. 

These ‘overlying rights’ are analogous to riparian rights in that they are 

based on ownership of adjoining land, and they confer priority. [Citation.] 

Surplus groundwater also may be taken by an appropriator, and priority 

among ‘appropriative rights’ holders generally follows the familiar 

principle that ‘“the one first in time is the first in right.”’ (City of Barstow 

v. Mojave Water Agency, supra, 23 Cal.4th] at p. 1241.) With groundwater 

there is an exception, however, that gives rise to a third category of rights.

Under certain circumstances, an appropriator may gain ‘prescriptive rights’

by using groundwater to which it is not legally entitled in a manner that is 

‘“actual, open and notorious, hostile and adverse to the original owner, 

continuous and uninterrupted for the statutory period of five years, and 

under claim of right.”’ (Ibid.)” (Santa Barbara Channelkeeper v. City of 

San Buenaventura, supra, at p. 1184.)

Phelan does not assert its pumping from Well 14 is pursuant to the exercise of 

rights it holds either as an overlying landowner or by prescription. Accordingly, 

assuming the court correctly rejected Phelan’s claim there was surplus water upon which 

Phelan could have acquired protectable rights in the final recognized category of water 

rights (i.e., as an appropriator of surplus water), Phelan lacks any cognizable groundwater 

19Although courts generally refer to the “dual system” of water rights, the courts have 

acknowledged that “California’s water rights system is not really dual but is instead tripartite, 

because some pueblo rights superior to riparian or appropriative rights exist.” (Siskiyou County 

Farm Bureau v. Department of Fish & Wildlife (2015) 237 Cal.App.4th 411, 423, fn. 3.) 

Because the pueblo rights overlay is not implicated by Phelan’s appeal, we employ the “dual 

system” nomenclature and principles in evaluating its appeal.
30.

rights in the AVAA.20 Phelan’s “public use appropriator” argument instead posits there 

is another possible source for acquiring protectable rights to groundwater: that even 

without a surplus upon which Phelan could premise a claim as an appropriator, Water 

Code sections 106 and 106.5 and a variety of cases have created a public-policy-based 

alternative upon which Phelan could have acquired a protectible interest in the aquifer.

We conclude neither Water Code sections 106 and 106.5 nor the cases cobbled 

together by Phelan provides support for this novel theory that a pumper for municipal 

purposes can tap into an overdrafted aquifer and in doing so acquire protectable water 

rights in that aquifer. While the statutes cited by Phelan are declarative of general public 

policy,21 Phelan has cited no case (nor have we located any) in which those sections were 

employed to acquire a water right that would not otherwise have been acquired under the 

laws governing acquisition of water rights by overlying, appropriative, or prescriptive 

users. Instead, those sections appear to only be relevant to assigning and protecting 

priorities among existing water rights holders. (See, e.g., Deetz v. Carter (1965) 232 

Cal.App.2d 851 [dispute among riparian rights holders resolved with domestic user given 

priority over irrigator].) Because those sections appear limited to assigning and 

protecting priorities, and the same legislative enactment which created those includes the 

express declaration that “[i]n the enactment of this code the Legislature does not intend 

thereby to effect any change in the law relating to water rights” (Wat. Code, § 103), we 

reject Phelan’s argument these sections create a special avenue by which municipal water 

suppliers can acquire a correlative appropriative right in an overdrafted aquifer.

20In the unpublished portions of this opinion, we conclude the trial court did not err when 

it concluded there was no available surplus upon which Phelan could premise a claim as an 

appropriator.

21Water Code section 106 merely states that it is “the established policy of this State that 

the use of water for domestic purposes is the highest use of water and that the next highest use is 

for irrigation.” Section 106.5 states only that it is “the established policy of this State that the 

right of a municipality to acquire and hold rights to the use of water should be protected to the 

fullest extent necessary for existing and future uses.”
31.

The cases cited by Phelan are equally inapposite to its argument. For example, 

while Phelan relies heavily on Peabody, supra, 2 Cal.2d 351 for its “appropriat[ion] for 

public use” argument, Peabody’s legal relevance is limited. There, the riparian owners 

sued a public agency for impairing their rights to river water after the agency had 

completed a dam and began impounding river water (for diversion to municipal uses),

thereby reducing the water available to the downstream riparian owners. The trial court 

concluded the downstream owners were entitled to all of the waters from the stream and 

enjoined the agency from impounding waters behind the dam. (Id. at pp. 358–363.) The 

Peabody court merely concluded that, because the public use had commenced before the 

plaintiffs commenced their action to establish their water rights, the plaintiffs could not 

enjoin the agency from continuing to operate the dam, but were instead limited to other 

remedies, such as recovering any appropriate damages or to a physical solution 

minimizing or eliminating any damages otherwise recoverable. (Id. at pp. 377–380.) We 

conclude Peabody does not hold a public agency can acquire an appropriative water right 

merely by constructing and operating facilities diverting water for public use, but instead 

merely delimits the remedies which might be available when such activity by the public 

agency injures the rights held by paramount water rights holders.22

The other cases relied on by Phelan are equally inapposite. (See, e.g., Tulare Dist. 

v. Lindsay-Strathmore Dist. (1935) 3 Cal.2d 489, 535–538 [discussing availability of 

injunctive relief against public use appropriator]; Hillside Water Co. v. City of Los 

Angeles (1938) 10 Cal.2d 677, 688 [same]; Wright v. Goleta Water Dist. (1985) 174 

Cal.App.3d 74, 90 [“Intervention of a public use does not bar suit by the owner of a water 

22Peabody is also factually distinguishable. There, the agency had already completed a 

dam and began impounding river water before the riparian owners filed suit to establish their 

paramount water rights. (Peabody, supra, 2 Cal.2d at p. 377.) Here, while Phelan had acquired 

the parcel on which it constructed Well 14 before commencement of the AVGC litigation, the 

litigation commenced before it began operating its well. Thus, unlike Peabody, the public use 

here did not commence until after the action to establish water rights in the AVAA was 

underway.
32.

right; it merely limits his remedy to damages in place of an injunction”].) Neither these 

cases, nor Phelan’s remaining authorities, provides any additional support for its claim 

that the municipal priority sections of the Water Code create an independent avenue for 

acquiring water rights in an overdrafted aquifer.

23

We conclude neither the cited Water Code sections nor the case law supports 

Phelan’s argument a public agency may acquire appropriative rights in water from an 

aquifer absent a surplus in that aquifer to which appropriative rights can attach.

III. The Phased Decisional Procedure Did Not Deprive Phelan of Due Process*

Phelan appears to argue it was deprived of its due process rights because of the 

order in which issues were resolved in the trial court’s phased proceedings. Phelan 

specifically asserts the court erred when it determined (during the Phase 3 trial) the 

AVAA basin was in overdraft while deferring the subsidiary determination of whether 

the water use by all water users in the AVAA basin (whether overlying owners, 

prescriptive rights holders, or prior appropriators) were for reasonable and beneficial 

uses. This alleged error, asserts Phelan, deprived it of its due process right to show there 

was surplus water upon which Phelan could premise its claim to an appropriative water 

right. Phelan also appears to argue the court erroneously placed on Phelan the burden to 

show there was unreasonable water uses by claimants with priority over Phelan that

23For example, Phelan states that “‘[p]ublic use of percolating water is a nonoverlying 

use, whether the lands that receive such public service are overlying lands or whether they are 

located outside of the ground-water area. Such public use is therefore an appropriative use of 

the water.’” (Quoting Hutchins, The California Law of Water Rights (1956) p. 458, italics and 

boldface supplied by Phelan.) While this accurately describes what is an “appropriative use,” it 

is an excerpt taken from Hutchins’s overall discussion on the “Appropriation of Surplus 

Percolating Waters,” which cautions that “[i]t is surplus or excess waters above the quantities to 

which the paramount rights of the overlying owners attach that are subject to appropriation for 

nonoverlying uses.” (Id. at p. 454.) Thus, Hutchins’s description of one type of appropriative 

use (public use outside the groundwater area) does not obviate the predicate for acquiring 

protectable appropriative user rights: the existence of surplus water above that water which is 

subject to paramount rights holders.

*See footnote, ante, page 1.
33.

might have (if eliminated) provided surplus water available for appropriation by Phelan. 

Before we can evaluate Phelan’s claims of procedural error, we must outline the 

substantive law the trial court was required to apply in the proceedings below.

A. General Principles: Overlying/Appropriative/Prescriptive Rights, the 

Significance of “Surplus” and the “Reasonable and Beneficial Use” 

Limitations on Water Use

As previously discussed, California’s “dual system of water rights” in water 

courses contemplates two sources by which water rights can be acquired: by riparian 

rights (water rights held by virtue of owning land adjacent to or through which flowing 

water passes to use the water for such owned lands) or by appropriative rights (water 

rights held from diverting and using such water for the benefit of noncontiguous lands). 

(Light v. State Water Resources Control Bd. (2014) 226 Cal.App.4th 1463, 1477–1478.) 

As between riparian rights holders and appropriative rights holders, the former group has 

paramount priority to the available water in times of shortages. (Id. at p. 1478.)

Analogous principles apply to water from aquifers: rights can be held by an 

overlying landowner (who has paramount priority to use the water to benefit the owned 

land analogous to a riparian owner) or by an appropriator if there is surplus water above 

the needs of paramount claimants. (See generally Santa Barbara Channelkeeper v. City 

of San Buenaventura, supra, 19 Cal.App.5th at pp. 1183–1184.) In the case of aquifers, 

however, there is an exception giving rise to a possible third category of rights: an 

appropriator may (under certain circumstances) gain “prescriptive rights” by using 

groundwater to which it was not legally entitled if the ordinary elements of prescription 

are satisfied. (Ibid.)

The key issue in deciding whether a party has acquired a protectable appropriative

right is the existence of a “surplus,” i.e., whether there was water beyond the amounts 

needed by paramount rights holders. (City of Barstow v. Mojave Water Agency, supra,

23 Cal.4th at pp. 1240–1242 [“‘Any water not needed for the reasonable beneficial use of 
34.

those having prior rights is excess or surplus water and may rightly be appropriated on 

privately owned land for non-overlying use, such as devotion to public use or exportation 

beyond the basin or watershed’”].) The converse concept is overdraft: when the 

withdrawals from the aquifer exceed the available recharge, there is no surplus but there 

is instead overdraft. (City of Los Angeles v. City of San Fernando, supra, 14 Cal.3d at 

pp. 277–278, disapproved on other grounds in City of Barstow, supra, at p. 1248 

[“Overdraft commences whenever extractions increase, or the withdrawable maximum 

decreases, or both, to the point where the surplus ends. Thus, on the commencement of 

overdraft there is no surplus available for the acquisition or enlargement of appropriative 

rights. Instead, appropriations of water in excess of surplus then invade senior basin 

rights”].)

An overlay to this dual system for defining water rights is a key limiting principle: 

the rule of reasonableness. (Santa Barbara Channelkeeper v. City of San Buenaventura, 

supra, 19 Cal.App.5th at p. 1184.) There is an “overriding constitutional limitation that 

the water be used as reasonably required for the beneficial use to be served.” (United 

States v. State Water Resources Control Bd. (1986) 182 Cal.App.3d 82, 105.) The rule of 

reasonableness means that paramount rights holders, while entitled to priority for water 

devoted to their reasonable and beneficial uses, may not be so profligate with their uses 

of available water that they deprive others of water that would otherwise be “surplus” and 

hence available for appropriation. As articulated by City of Pasadena v. City of 

Alhambra (1949) 33 Cal.2d 908:

“[I]t is now clear that an overlying owner or any other person having a legal 

right to surface or ground water may take only such amount as he 

reasonably needs for beneficial purposes. [Citations.] Public interest 

requires that there be the greatest number of beneficial uses which the 

supply can yield, and water may be appropriated for beneficial uses subject 

to the rights of those who have a lawful priority. [Citation.] Any water not 

needed for the reasonable beneficial uses of those having prior rights is 

excess or surplus water ..., [which] water may rightfully be appropriated 
35.

on privately owned land for nonoverlying uses, such as devotion to a public 

use or exportation beyond the basin or watershed.” (Id. at pp. 925–926, 

italics added.)

B. Analysis

Phelan’s due process claim on appeal, while imprecise, appears to have two 

embedded claims of prejudicial error. First, Phelan argues it was error to determine 

during the Phase 3 proceedings that the AVAA basin was in overdraft based on a 

comparison of current extractions against the average safe yield, while bifurcating and 

deferring to later stages whether the current extractions by all other water users in the 

AVAA basin qualified as reasonable and beneficial uses for such extracted water. 

Second, Phelan appears to argue the trial court’s delimitation of the issues determined in 

Phase 3 somehow foreclosed Phelan from proving its claim that there was (or could have 

been) a surplus which Phelan could pump as an appropriator, and erroneously placed on 

Phelan the burden of showing there was a surplus available for appropriation by Phelan.

A trial court has discretion to determine the order in which claims or issues are 

bifurcated and determined, and the selection and scheduling of those phased 

determinations will not be disturbed absent an abuse of that discretion. (See generally 

Orange County Water Dist. v. Alcoa Global Fasteners, Inc. (2017) 12 Cal.App.5th 252, 

353; Hoopes v. Dolan (2008) 168 Cal.App.4th 146, 163.) The issue bifurcated and 

resolved in Phase 3 was a core issue common to all of the various actions—whether the 

AVAA basin was currently in a state of overdraft based on current extractions in light of 

the safe yield of the aquifer such that judicial intervention was required to provide for 

managing the aquifer and protecting it against further degradation. We cannot conclude 

that selecting this core issue for resolution at this earlier stage—whether the AVAA basin 

was in overdraft—was an abuse of discretion.

Indeed, Phelan does not contend on appeal that selecting “overdraft” as the issue 

to be examined in Phase 3 was an abuse of discretion. Instead, Phelan appears to assert 

the court should have employed a different metric for the Phase 3 “overdraft” 
36.

determination. Rather than comparing safe yield to current actual extractions from the 

AVAA basin, Phelan argues the court should instead also have made the separate 

determination as part of the Phase 3 trial on whether these actual extractions exceeded

withdrawals devoted to reasonable and beneficial uses. Phelan contends on appeal that 

only after the court decided whether “all pumpers [from the AVAA] were pumping for 

reasonable and beneficial uses” could it then decide whether such pumped amounts were 

above the safe yield (overdraft) or below the safe yield (surplus). Phelan therefore argues 

it was an abuse of discretion to defer examining the separate issue of whether current 

actual extractions exceeded the amounts reasonably and beneficially used by the 

paramount rights holders.

However, there is no indication Phelan timely objected to the issues as delimited 

for the Phase 3 trial.24 Prior to the Phase 3 trial, the court (in connection with its order 

consolidating all pending actions concerning water claims to the AVAA basin,) ordered a 

case management conference to hear argument concerning the sequencing of common 

issues to be heard at the next phase, and proposed the issues for the Phase 3 trial would 

be limited to “safe yield” and “overdraft” while numerous other issues (including 

“reasonable and beneficial use of water”) would be deferred for later determination. 

Phelan apparently concurred with the proposal that Phase 3 be focused on “a 

determination of Basin characteristics including its safe yield and overdraft (past or 

present),” and there is no suggestion Phelan objected to deferring numerous other 

questions—including questions about reasonable and beneficial use—to subsequent 

24Although Phelan’s reply brief on appeal asserts it did lodge an objection, Phelan’s 

citations to the record rely solely on its objections to the proposed statement of decision 

following trial of Phelan’s second and sixth causes of action, which resolved Phelan’s claims for 

appropriative and return flow rights long after Phase 3 had been concluded. Phelan interposed 

no timely objection, prior to the Phase 3 trial, that the issues of safe yield and overdraft 

necessarily required a concurrent determination during that phase of whether the water being 

extracted was being devoted to reasonable and beneficial uses.
37.

phases.25 Indeed, rather than objecting or contending there might be evidence showing 

the AVAA was not in overdraft, Phelan’s trial brief for Phase 3 seemed affirmatively to 

assert the subbasin most relevant to Phelan (i.e., the Butte subbasin in the southeast 

portion of the AVAA where Well 14 was operating) was “in overdraft or trending toward 

overdraft.”

26

 Finally, the record is devoid of any suggestion Phelan sought to proffer 

evidence, during this (or any other) phase, that actual extractions exceeded reasonable 

and beneficial uses.27 Because there is no indication Phelan timely objected to the issues 

as delimited for the Phase 3 trial, it may not argue for the first time on appeal that the 

discretionary determination on the scope of issues to be resolved in Phase 3 was an abuse 

of the trial court’s discretion. (See generally In re Kevin S. (1996) 41 Cal.App.4th 882, 

885–886; Consolidated World Investments, Inc. v. Lido Preferred Ltd. (1992) 9 

Cal.App.4th 373, 382.)

25The court, after several case management hearings, eventually ordered the Phase 3 trial 

would examine whether the basin was in overdraft and specified it “does [not] expect to hear 

evidence of individual pumping of water by any party within the basin; rather, it expects to hear 

evidence concerning total pumping and total recharge from all sources.” That same order 

advised that “[a]ny party requiring further clarification of the issues in this third phase of trial is 

invited to request such clarification.” Phelan cites nothing suggesting it objected, sought 

clarification, or otherwise sought to inject the “reasonable and beneficial use” issue into Phase 3.

26Phelan’s Phase 3 trial brief stated it would “offer evidence that pumping from 

[Phelan’s] six wells located within the Groundwater Basin intercepts groundwater that would 

otherwise flow to the northwest and into a portion of the Adjudication Area where irrigation 

pumping by others is occurring. The evidence indicates, among other things, that the 

combination of [Phelan’s] pumping and downgradient pumping by others has resulted in 

declining groundwater levels in the Southeast portion of the Adjudication Area, particularly over 

the past ten years. Groundwater level trends indicate that overdraft exists in the Southeast area 

of the Adjudication Area, or will exist in the near future, if groundwater pumping in this area 

continues at current rates or increases.”

27Although Phelan did submit a case management statement seeking to clarify whether 

the issues to be decided in Phase 3 would necessitate testimony from their expert (Harder), none 

of the subjects on which Harder was proffered purported to address reasonable and beneficial 

uses of water by other AVAA users.
38.

Phelan also appears to complain it was prejudiced because the Phase 4 trial order 

originally contemplated, but ultimately omitted, consideration of the “reasonable and 

beneficial use” question.28 While Phelan correctly recites the evolution of the Phase 4 

“trial issues” order, Phelan cites nothing to indicate it objected to this delimitation of the 

Phase 4 issues, even though it participated in the lengthy hearing at which the proposed 

modification was considered and ultimately approved. Accordingly, we must deem any 

claim of error to be waived. (In re Kevin S., supra, 41 Cal.App.4th at pp. 885–886.)

Moreover, even assuming Phelan could assert it was error to exclude “reasonable 

and beneficial uses” from the Phase 4 trial, Phelan has not demonstrated such error would 

constitute reversible error. While the Phase 4 trial ultimately was limited to quantifying 

the amounts pumped during the relevant period by the numerous parties (other than the 

Small Pumper Class and Granite Construction) who claimed pumping rights in the 

AVAA aquifer, Phelan does not articulate on appeal how deferring the “reasonableness 

of use” question foreclosed Phelan from subsequently demonstrating the existence of 

waste (as alleged in its seventh cause of action) or the existence of a basin-wide surplus 

necessary to its second cause of action. Phelan does complain on appeal that its seventh

cause of action for “waste, unreasonable use or an unreasonable method of diversion or 

use” was “never heard,” but Phelan does not explain how the delineation of issues in 

Phases 3 or 4 precluded Phelan from litigating its seventh cause of action. To the 

28The Phase 4 trial order originally described its scope to include determining the 

“reasonable and beneficial use of water for each parcel to be adjudicated.” However, a 

subsequent proposal was submitted by counsel for the Wood class, and joined by other parties, to 

winnow the issues to be tried in Phase 4 and limit it to identifying the actual amounts extracted 

by each claimant (for the relevant years) along with the actual use to which the water was put, 

while excluding from Phase 4 any litigation over whether such actual use was reasonable as to 

either the type or manner of use. After extensive discussion among the parties, the Phase 4 order 

was amended to clarify that the trial would be limited to “the amount of water used by each party 

and the identification of the beneficial use to which that amount was applied, but will not include 

any determination as to the reasonableness of that type of use, of the manner in which the party 

applied water to that use, or any determination of a water right.”
39.

contrary, the record shows (after the Phase 3 and 4 proceedings had been concluded) the 

court held a lengthy hearing to determine which of Phelan’s claims should next be 

scheduled for trial, and ultimately set the Stage One trial to encompass litigation of 

Phelan’s claimed “right to pump water as an appropriator of right, Number one; and 

Number two, [to] brief and present evidence ... concerning [Phelan’s] right ... as a public 

producer apart from whether there was a surplus.” (Some capitalization omitted.) Phelan 

was provided adequate opportunity to litigate whether there was available surplus in the 

AVAA aquifer to support its claim as an appropriator, which could have included the 

subsidiary issue it now asserts it was foreclosed from litigating: whether elimination of 

unreasonable or nonbeneficial water uses would have produced a surplus (from the native 

safe yield) that Phelan could have claimed as an “appropriator.” However, Phelan did not 

introduce any evidence the actual amounts pumped by other users exceeded the amounts 

reasonably appropriate for the beneficial purposes of those users, much less that such 

wasteful uses were (in the aggregate) so enormous that eliminating such waste would 

have reduced reasonable and beneficial uses to below the native safe yield and created a 

surplus available for appropriation by Phelan. We conclude Phelan was not deprived of 

the due process opportunity to show unreasonable or nonbeneficial uses.29

29It also appears Phelan could have resurrected and litigated its seventh cause of action 

on two other occasions. First, after the court ruled on Phelan’s causes of action alleging it held 

water rights as an appropriator of a surplus or as a municipal-uses appropriator, the court held the 

August 2015 Stage 2 trial for Phelan to present evidence on its “remaining causes of action.” 

Phelan’s trial brief for that Stage 2 trial addressed only its third cause of action (for a physical 

solution), its claim it should have municipal appropriator status, and its eighth cause of action 

seeking declaratory relief as to the “Antelope Valley Groundwater Basin.” Additionally, its 

evidentiary presentation at that hearing proffered no evidence of “waste.” Phelan’s trial brief for 

the August 2015 Stage 2 trial did “reserve[] the right to present evidence on its Seventh Cause of 

Action,” which it suggested would be presented during the “prove up hearings” on the Physical 

Solution scheduled for later that year. While these “prove-up” hearings in Phase 6 provided yet 

another opportunity for Phelan to introduce evidence supporting its claim of unreasonable use of 

water, Phelan ultimately disclaimed any effort to present affirmative evidence at the final phase 

examining the proposed Physical Solution.
40.

The final aspect of Phelan’s claim it was denied due process appears to assert the 

court misallocated the burden of proof by placing the burden on Phelan to show a surplus 

existed in the AVAA basin. Phelan sub silencio argues that, under Peabody, supra, 2 

Cal.2d 351, the burden should instead have been on all parties to show the amounts 

actually pumped by each of the competing priority pumpers was devoted solely to 

reasonable and beneficial uses, and that the absence of such evidence left the issue of 

surplus unresolved.30 Cross-defendants contend the trial court correctly ruled that 

Phelan, as the party asserting there was a surplus available for appropriation (necessary to 

its second cause of action) or there was “waste” (as asserted in Phelan’s seventh cause of 

action), had the burden to show the amounts actually pumped exceeded the amounts 

devoted to reasonable and beneficial uses by the paramount rights holders.

We conclude the trial court correctly held Phelan had the burden of proof to show 

surplus and, to the extent Phelan contended that eliminating wasteful uses would reveal a 

surplus existed that would be available for appropriative uses by Phelan, to show the fact 

and extent of such alleged unreasonable or nonbeneficial use. Several cases support 

30Phelan also claims the statement of decision from the Stage One trial, which rejected 

Phelan’s “surplus” claim, was “flawed” because it “does not explain” why (under Peabody) the 

burden of proof was not placed on all parties to first establish their actual water use was also 

“reasonable and beneficial.” Phelan did assert the statement of decision required such 

explanation, but the court’s final statement of decision from Stage One addressing Phelan’s 

claim for surplus did explain why it concluded Phelan had the burden of proof as to surplus. 

Moreover, we reject Phelan’s claim that the issue of “reasonable and beneficial use” was never 

resolved below. While the Stage One statement of decision stated the court had not yet made 

(but would ultimately make) a determination whether other paramount rights holders devoted the 

water to reasonable and beneficial uses, it ultimately did resolve that question. The trial on the 

proposed Physical Solution contemplated that it would encompass evidence that the actual uses 

by the various pumpers were reasonable and beneficial uses, and evidence on this issue was

introduced by proponents of the Physical Solution. Finally, the issue was addressed and resolved 

in the final statement of decision following Phase 6, when the court stated that “[b]ased on their 

credible and undisputed expert witness testimony, and substantial evidence in the fourth and 

sixth phases of trial, the Court finds that each stipulating Landowner Party and each Public 

Overlier has reasonably and beneficially used amounts of water which collectively exceeded the 

total native safe yield.”
41.

placing the burden of proof on Phelan, as the party asserting an appropriative right, to 

prove a surplus existed upon which it could predicate its claimed appropriative right.

(Allen v. California Water & Tel. Co., supra, 29 Cal.2d at p. 481 [“It is true that the 

burden of proving the existence of a surplus is on” the party asserting the appropriative 

right against overlying owners]; cf. City of Lodi v. East Bay Mun. Utility Dist., supra, 7 

Cal.2d at p. 339 [in dispute between later appropriator against prior appropriator, burden 

on former to prove surplus]; Monolith Portland Cement Co. v. Mojave Public Utilities 

Dist. (1957) 154 Cal.App.2d 487, 494 [dicta].) This allocation of the burden of proof is 

consonant with the general rule that a plaintiff has the burden of production and 

persuasion to support the allegations of its claims for relief. (See generally Roddenberry 

v. Roddenberry (1996) 44 Cal.App.4th 634, 652.)

Phelan’s reliance on Peabody does not alter our conclusion the trial court correctly 

assigned to Phelan the burden of showing surplus and, as a predicate to establishing such 

a surplus existed, that there was waste. In Peabody, the trial court had entered a 

judgment in favor of the riparian owners and against the later appropriator on the theory 

that riparian owners were entitled to “all of the waters of the stream as the same were 

wont to flow in the course of nature, including the flood and freshet flows thereof, 

regardless of any waste or surplus that might result from the exercise of such a right and 

regardless of any rule of reasonable use.” (Peabody, supra, 2 Cal.2d at p. 363.) The trial 

court in Peabody had not considered the impact of the then-recent amendment of the 

California Constitution, which added section 3 to article XIV, declaring “[t]he right to 

water or to the use or flow of water in or from any natural stream or watercourse in this 

State is and shall be limited to such water as shall be reasonably required for the 

beneficial use to be served, and such right does not and shall not extend to the waste or 

unreasonable use or unreasonable method of use or unreasonable method of diversion of 

water.” (Peabody, at p. 366.) The Peabody court reversed and remanded the judgment 

for reconsideration in light of those limitations, noting the issue is whether “after 
42.

excluding all of the reasonable beneficial uses present and prospective (considering in 

connection therewith reasonable methods of use and reasonable methods of diversion) to 

which the waters of the stream are put, either under the riparian right or by prior 

appropriation, is there then water wasted or unused or not put to any beneficial use? If 

so, the supply or product of the stream may be said to be ample for all, a surplus or 

excess exists, ... and the appropriator may take the surplus or excess without 

compensation.” (Id. at pp. 368–369.) However, Peabody specifically considered 

whether the burden of proof should be on the riparian owner to show its riparian rights 

were injured by the appropriator’s diversion, or should instead be on the appropriator to 

show “‘that there is a surplus ... upon the ground that such [appropriated] waters were 

waste or lost waters’” as had been held in Miller v. Bay Cities Water Co. (1910) 157 Cal. 

256, 272. (Peabody, supra, at p. 381.) Peabody concluded “[t]he general rule in this 

state as to the burden of proof is laid down in [former] section 1981 of the Code of Civil 

Procedure as follows: ‘The party holding the affirmative of the issue must produce the 

evidence to prove it; therefore, the burden of proof lies on the party who would be 

defeated if no evidence was given on either side.’ However, when one enters a field of 

water supply and seeks by appropriation to take water from such supply on the claim that 

there is more than sufficient for all reasonable beneficial uses by those who have the prior 

and preferential right, it would seem to comport with the principles of fairness and justice 

that the appropriator, in whatever way the issue may arise, should have the burden of 

proving that such excess exists. We therefore reaffirm the rule to that effect in the Miller

case.” (Ibid.)

Thus, while Peabody and its progeny make clear that determining surplus can 

include consideration of whether the actual amounts used by paramount water rights 

holders are being applied to reasonable and beneficial uses, Peabody also casts upon the 

person claiming appropriative rights the burden of showing there is available surplus after 

accounting for reasonably and beneficially applied water by paramount rights holders. 
43.

When a showing of available surplus necessarily encompasses showing actual uses by 

paramount rights holders are unreasonable (as to either the type or manner of use), as 

well as quantifying such unreasonable uses in an amount necessary to provide for the 

surplus claimed by the appropriator, we conclude the burden of proof is upon the 

appropriator under Peabody.

We conclude Phelan was provided adequate opportunity to proffer evidence in 

support of its claim to water rights in the AVAA basin, that the trial court correctly 

placed on Phelan the burden of proving its claims, and that the phased proceedings did 

not impair Phelan’s opportunity to present its case. We therefore reject Phelan’s claim it 

was denied due process.

IV. The Trial Court Correctly Concluded Phelan Had No Priority Claim to 

Return Flows from Native Safe Yield*

Phelan finally asserts that, to the extent native water was extracted from the 

AVAA basin by Well 14 and then used by Phelan’s customers on land overlying the 

AVGB, Phelan was entitled to any return flows from such water, and therefore it was 

error to require Phelan to pay a replenishment assessment without accounting for such 

return flows. Phelan, relying on Montana v. Wyoming (2011) 563 U.S. 368 and various 

other foreign authorities discussing water law concepts of recapture of waste and seepage 

water, asserts the trial court erred in limiting claims for return flows to importers of 

nonnative waters. Cross-defendants argue the trial court below correctly held state law is 

dispositive and, under cases such as City of Los Angeles v. City of San Fernando, supra, 

14 Cal.3d 199 (San Fernando), the interests recognized in return flows by California 

courts is limited to return flows from water imported by the claimant. Cross-defendants

*See footnote, ante, page 1.
44.

argue that, because Well 14 only draws native water from the AVAA aquifer, the trial 

court correctly rejected Phelan’s claim to return flows for water drawn from Well 14.31

California courts, when addressing the allocation of a limited supply of 

groundwater among competing claimants, have distinguished at least three sources of 

such water: (1) native groundwater (rainfall, infiltration from lakes and streams, and 

other natural inflows that percolate into the aquifer), (2) imported water and the return 

flows it generates (imported water that is used on the surface which then percolates into 

the aquifer), and (3) salvaged water (water that would have wasted to the sea during the 

rainy season but for the dams and reservoirs capturing and saving it from loss to the sea) 

and the return flows generated by its capture and use. (See generally City of Santa Maria 

v. Adam, supra, 211 Cal.App.4th at p. 280.) The courts have concluded that, when a 

party imports water into a basin that would otherwise not be available to that basin (i.e.,

not attributable to native sources of recharge), that party (after applying the water in the 

first instance) also has “the prior right to quantities of groundwater attributable to return 

flows of imported water.” (Id. at p. 301.) This is a rule of priorities and “means that one 

who brings water into a watershed may retain a prior right to it even after it is used. 

[Citation.] The practical reason for the rule is that the importer should be credited with 

31Although we will conclude the trial court correctly rejected Phelan’s claims to return 

flows from native water, nothing in this opinion should be construed to foreclose Phelan from 

seeking relief under the terms of the judgment to the extent Phelan has become a de facto 

importer of water. Under paragraph 6.4.1.2 of the Physical Solution, Phelan must pay a 

“Replacement Water Assessment pursuant to Paragraph 9.2” for water it pumps from Well 14. 

This Replacement Water Assessment is apparently designed to cover the watermaster’s costs for 

“replacement waters” and specifies it “shall be used [by the watermaster] to acquire Imported 

Water.” (Physical Solution, ¶ 9.2, italics added.) Phelan was not party to the provisions of the 

Physical Solution (which delimited which persons or entities would be entitled to claim the 

benefits of “return flows”) nor was it party to any other agreement which might exclude water 

purchased by the watermaster with replacement assessments from qualifying as “imported 

water.” We express no views on whether Phelan has become, albeit involuntarily, a participant 

in a consortium of parties paying the watermaster to import water into the AVAA or whether 

such status entitles Phelan to claim return flow interests under the rationale of San Fernando.
45.

the ‘fruits ... of his endeavors in bringing into the basin water that would not otherwise 

be there.’” (Ibid.)

This “fruits-of-his-endeavors” rationale has an important corollary: priority is not

given to return flows from native waters. In San Fernando, our Supreme Court rejected 

such a claim, explaining:

“Defendants contend that if any party is given rights to a return flow 

derived from delivered imported water, it is ‘obvious’ and ‘axiomatic’ that 

the same rights should be given to the return flow from delivered water 

derived from all other sources, including native water extracted from local 

wells. This argument misconceives the reason for the prior right to return 

flow from imports. Even though all deliveries produce a return flow, only 

deliveries derived from imported water add to the ground supply. The 

purpose of giving the right to recapture returns from delivered imported 

water priority over overlying rights and rights based on appropriations of 

the native ground supply is to credit the importer with the fruits of his 

expenditures and endeavors in bringing into the basin water that would not 

otherwise be there. Returns from deliveries of extracted native water do 

not add to the ground supply but only lessen the diminution occasioned by 

the extractions.” (San Fernando, supra, 14 Cal.3d at p. 261, 2d & 3d italics 

added.)

We agree with cross-defendants the trial court correctly ruled California does not 

grant an appropriator of native water any priority interest in return flows. In addition, the 

authorities relied on by Phelan do not convince us that San Fernando has been overruled 

sub silencio. For example, in Montana v. Wyoming, supra, 563 U.S. 368, the United 

States Supreme Court examined a narrow question: whether an interstate compact barred 

an upstream appropriator of native water supplies from using more efficient irrigation 

techniques because such efficiencies reduced the amounts returning to the watercourse 

for use by downstream appropriators. The Montana court merely concluded the interstate 

compact incorporated (and was not intended to alter) background appropriative water 

rights concepts, including the right of an appropriator to recapture and reuse his own 

waste and seepage before it escapes his possession and control, and that improving 

irrigation efficiencies was merely a form of recapture permitted under existing water law. 
46.

(Id. at pp. 378–388.) The Montana court did not purport to examine whether an 

appropriator is entitled to priority over return flows from native waters that have returned 

to the aquifer and is therefore inapposite.32

The California statutes cited by Phelan do not alter our conclusion. For example, 

while Water Code section 71610 does permit a water district to “recycle, recapture, and 

salvage any water ... for the beneficial use or uses of the district” (id. at subd. (a)), that 

section only describes powers of a water district and has never been applied to expand 

rights held by a water district. Indeed, because that statute was in effect at the time the 

court issued its decision in San Fernando (see Stats. 1963, ch. 156, § 1, p. 823), but the 

court nevertheless held extractions of native waters are not accompanied by return flow 

rights in such water, we decline to apply that section to undermine the San Fernando

holding.

CONCLUSION

We conclude substantial evidence supports the judgment as to Phelan and Phelan 

was not deprived of its due process rights to present its claims. We also conclude the 

court correctly rejected Phelan’s claim its status as a municipal purposes appropriator 

32The other cases cited by Phelan are equally unpersuasive. For example, in Department 

of Ecology v. United States Bureau of Reclamation (1992) 118 Wash.2d 761, the issue resolved 

by the court was a narrow question: whether a state agency could grant a permit to a landowner 

to appropriate water from a stream where such water was still subject to the appropriative rights 

held by the federal government. The stream water in dispute was generated because a federal 

reclamation project drew water from the Columbia River and distributed that water to users 

within the project boundaries for irrigation and other purposes, but some portion of the water 

(after its initial use) then fed a stream that was still within the boundaries of that project. (Id. at 

pp. 763–765.) The Department of Ecology court merely concluded the water in the stream was 

still subject to the federal government’s appropriation rights (which specifically reserved the 

right to recapture and reuse waste and seepage waters generated by the reclamation project), and 

because it remained appropriated water owned by the federal appropriator within the project 

boundaries, it was not public water and could not be reappropriated by the landowner. (Id. at pp. 

767–769.) It appears that the water considered by the Department of Ecology court was more 

analogous to water “imported” into the reclamation project’s boundaries by the reclamation 

project, and thus according superior rights to the federal importer is consonant with the rights 

accorded to importers of water under California law.
47.

created an appropriative water right that was improperly constrained by the judgment, 

and did not err in rejecting Phelan’s claim to return flows from native water pumped by 

Phelan from the AVAA basin. Accordingly, we affirm the judgment as to Phelan. Each 

party is responsible for its costs on appeal.

PEÑA, Acting P.J.

WE CONCUR:

SMITH, J.

SNAUFFER, J.