UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

ELEPHANT BUTTE IRRIGATION DISTRICT OF NEW MEXICO; EL PASO COUNTY WATER IMPROVEMENT, District No. 1 of Texas, Plaintiffs-Appellees,

v. DEPARTMENT OF THE INTERIOR; MANUEL LUJAN, Secretary of the Interior; DENNIS UNDERWOOD, Commissioner of Reclamation, Defendants, and ANITA LOCKWOOD, Secretary of the State of New Mexico; GARY JOHNSON, Governor of the State of New Mexico, Defendants-Appellants. No. 97-2188

ORDER Filed November 25, 1998 Before BRORBY, McWILLIAMS and HENRY, Circuit Judges

. This matter is before the court on plaintiff-appell ee’s motion to add counsel’s name to the court’s published opinion filed on Nove mber 6, 1998. The motion is granted. Attached to this order is a revised coverpage for the opinion reflecting the name of James M. Speer, Jr., counsel for plaintiff- appellee, El Paso County Water-2-

Improvement District No. 1.

Entered for the Court PATRICK FISHER, Clerk of Court
by: Keith Nelson Deputy Clerk

## F I L E D United States Court of Appeals Tenth Circuit 

### NOV 6 1998 

### PATRICK FISHER Clerk PUBLISH UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

ELEPHANT BUTTE IRRIGATION DISTRICT OF NEW MEXICO; EL PASO COUNTY WATER IMPROVEMENT, District No. 1 of Texas, Plaintiffs-Appellees,

v. DEPARTMENT OF THE INTERIOR; MANUEL LUJAN, Secretary of the Interior; DENNIS UNDERWOOD, Commissioner of Reclamation, Defendants, and ANITA LOCKWOOD, Secretary of the State of New Mexico; GARY JOHNSON, Governor of the State of New Mexico, Defendants-Appellants. No. 97-2188

Appeal from the United States District Court for the District of New Mexico (D.C. No. CIV-90-95-HB)
Herman E. Ortiz (Lee E. Peters, Hubert & Hernandez, P.A., Las Cruces, New Mexico, and James M. Speer, Jr., Attorney at Law, E l Paso, Texas, with him on the brief) of Hubert & Hernandez, P.A., Las Cruces, New Mexico, for PlaintiffsAppellees. Christopher D. Coppin (Tom Udall, Attorney General, and Marilyn S. Hebert, Special Assistant Attorney General, Santa Fe, New M exico, with him on the briefs), Assistant Attorney General, Albuquerque, N ew Mexico, for Defendants--2-

Appellants.

Before BRORBY, McWILLIAMS and HENRY , Circuit Judges.

BRORBY , Circuit Judge.

Introduction This case involves Eleventh Amendment state soverei gn immunity and the doctrine of Ex parte Young , 209 U.S. 123 (1908), as applied to state official s accused of a continuing violation of federal law. Plaintiffs, Elephant Butte Irrigation District of New Mexico and El Paso County Water Improvement District (collectively “Irrigation and Improvement Districts”) accuse the United States Department of the Interior and its Secretary(collectively “Federal Defendants”), the State of New Mexico, and certain state officials of illegally retaining net profits under a recreational land lea se with the United States. Plaintiffs allege a portion of the net profit from the lease belongs to them under federal land reclamation laws that supersede and antedate the lease between the United States and New Mexico. Citing the general i mmunity provisions of the Eleventh Amendment and the doctrine of Ex parte Young , the district court dismissed New Mexico and the New Mexico Department of Energy, Minerals and1 Gary Johnson is the current Governor of New Mexic o, Gary Carruthers

was the Governor at the time this case was filed.

-3- Natural Resources but refused to dismiss Governor Gary Carruthers 1 and Secretary of the New Mexico Energy, Minerals and Natural Resources Department, Anita Lockwood (collectively “state off icials”). The district court also ruled Plaintiffs are entitled to their lawful share of net profits, and has ordered a hearing to reform the offending lease pro vision to properly reflect the division of profits under federal law.

The state officials appeal solely on the basis of t he district court’s refusal to dismiss them based on Eleventh Amendment immunity. We affirm.

I. Background Although we review only the district court’s decisi on not to dismiss the state officials pursuant to the Eleventh Amendment and express no opinion as to the merits of the underlying controversy, see Idaho v. Coeur d'Alene Tribe , 521 U.S. 261, ___, 117 S. Ct. 2028, 2043 (1997) (statin g the question before the Court “[was] not the merit of either party’s claim, ... b ut the relation between the sovereign [interest] at issue and the immunity the State asserts”), in order to determine whether federal jurisdiction is appropriate under the exception to2The Elephant Butte Irrigation District is a quasi -municipal corporation

organized and operating under New Mexico law, while El Paso County Water Improvement District is a Texas public corporation.

-4- Eleventh Amendment state immunity found in Ex parte Young , we must examine “the essential nature and effect of the proceeding, as it appears in the entire record.” In re State of New York , 256 U.S. 490, 500 (1921) (applicability of Ex parte Young “is to be determined not by the mere names of the titular parties”). Therefore, we proceed with an examination of the fa cts.

This quarrel over profits involving Federal Defendants, the state officers of New Mexico and the Irrigation and Improvement Distr icts stems from a complex series of land management statutes and land use contracts arising over the course of the past century. The controversy begins with the Reclamation Act of 1902, 32 Stat. 388, as amended and compiled, 43 U.S.C. §§ 372 et. seq ., which authorized the construction of the Rio Grande Project (“the Pr oject”). The Project was a reclamation effort authorizing the construction of water projects under repayment contracts with various irrigation districts to supp ly water for growing crops on arid and semi-arid lands in the southwestern UnitedStates. Both Plaintiffs control water projects within the Rio Grande Project area. 2They are responsible for operating and maintaining irrigation systems fo r their respective portions of3 The Fact Finders Act of 1924, 43 U.S.C. § 501, pr ovides in relevant part: Whenever the water users take over the care, operat ion, and maintenance of a project, or a division of a project, the total accumulated net profits , as determined by the Secretary, derived from the operation of project power plants, leasing of project grazing and farm lands, and the sale or use of town sites shall be credited to the construction charge of the project , or a division thereof, and thereafter the net profits from such s ources may be used by the water users to be credited annually .... (Emphasis added.) -5- the Project area, and cooperating with the United S tates under federal reclamation law.

In 1937, the United States entered into a contract with the irrigation district and the predecessor in interest to the improvement district to sell Plaintiffs’ right to use and develop stored water on the Project land s for the purposes of hydroelectric power generation. In return for the sale of these power privileges, the Irrigation and Improvement Districts received, among other things, the benefits accorded under Subsection I of the Fact Fi nders Act of 1924, 43 U.S.C. § 501. The primary benefit under this provision is the right to credit for accumulated net profits derived from various uses o f the Rio Grande Project lands. 3-6-

The potential for conflict over these profits did n ot arise until many years later, when Congress enacted Pub. L. No. 87-542, 76 Stat. 171 (1962). This statute authorized the establishment and administration of “basic [public] recreation facilities at the Elephant Butte and Cab allo Reservoirs” and allowed the Federal Defendants to enter into a lease agreem ent with the State of New Mexico for the “administration, operation, and maintenance” of the public recreation facilities. Id . at §§ 1, 3. Pursuant to this statute, Federal De fendants entered into two separate lease agreements with NewMexico, one in 1964 and the other in 1973. Under these lease agreements, Feder al Defendants assigned to New Mexico the right to revenues generated from the leased premises. The leases covered grazing and farm lands of the Rio Grande Pr oject, from which the Project had historically received credit for net profits. This assignment of profits from the Project lands to New Mexico contravened the pri or appropriation of net profits to the Irrigation and Improvement Districts under prior agreements codified in federal law, thus giving rise to the pr esent controversy.

Plaintiffs’ standing to claim credit for net profit s as a third-party beneficiary of the lease between New Mexico and the United States did not begin until 1979 and 1981, when the Irrigation and Improv ement Districts each took control of their respective portions of the Projectarea encompassing Elephant4Under the continuing-claim doctrine, where the party is to make periodic

payments, “each successive failure to make proper p ayment gives rise to a new claim upon which suit can be brought,” even when th e grounds for refusing to pay occurred more than six years before. Friedman v. United States , 310 F.2d 381, 385 (Ct. Cl.), cert. denied , 373 U.S. 932 (1962)

.
-7- Butte Reservoir and Caballo Reservoir. However, Pl aintiffs did not file their lawsuit until 1990, well beyond the six-year statut e of limitations for federal claims. See 28 U.S.C. §2401(a) (1994). The district court allo wed the suit to proceed under the “continuing claim” doctrine. 4

The Irrigation and Improvement Districts seek to vi ndicate their rights under federal law as third-party beneficiaries of the lease agreement between the United States and New Mexico. The majority of Plai ntiffs’ complaint seeks relief only from the named Federal Defendants; however, Co unt II of the amended complaint is also directed at the state and state o fficials as co-defendants. Plaintiffs request, inter alia , “an order declaring the lease agreement with the State of New Mexico void as an ultra vires act and as unconscionable or, alternatively, for reformation of the lease contrac t in equity to require prospective compliance with Federal Law by providing revenues t o the Project beneficiaries.” Even though Plaintiffs’ primary dispute is with the United States for the alleged violation of Subsection I of the Fact Finders Act, Plaintiffs included the state-8-

defendants so that all the parties necessary to ref orm the contested lease provision were before the court.

The district court granted Plaintiffs’ motion for s ummary judgment as to Count II (B) of the complaint, and determined the I rrigation and Improvement Districts are entitled to have the lease between th e Federal Defendants and the State of New Mexico reformed to reflect their preem inent right to profits from categorical uses of the recreation area lands. NewMexico moved to dismiss the suit based on state sovereign immunity under the El eventh Amendment. The district court granted the motion to dismiss, but o nly as to the State of New Mexico, not the state officials. The district court ruled the state officials were committing an ongoing violation of federal law and thus their conduct fell squarely within the Ex parte Young exception to the general rule of Eleventh Amendment state immunity.

II. Discussion A. Jurisdiction This court has jurisdiction to hear this interlocut ory appeal under the collateral order doctrine of Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc. , 506 U.S. 139 (1993). See also Garramone v. Romo , 94 F.3d 1446,5 The fact the state appeared and contested this ca se in the proceedings

below does not indicate consent to suit under the Eleventh Amendment. See Florida v. Treasure Salvors, Inc. , 458 U.S. 670, 683 n.18 (1982); Edelman v. -9- 1452 (10th Cir. 1996) (allowing an interlocutory ap peal from the denial of claim of Eleventh Amendment sovereign immunity under the collateral order doctrine). We review de novo a district court's consideration of subject-matterjurisdiction in the context of a Fed. R. Civ. P. 12(b)(1) motion to dismiss based on Eleventh Amendment immunity. ANR Pipeline Co. v. Lafaver , 150 F.3d 1178, 1186 (10th Cir. 1998).

B. The Eleventh Amendment and Ex parte Young – An Overview The Eleventh Amendment generally bars suits againsta state in federal court commenced by citizens of that state or citizens of another state. See Hans v. Louisiana , 134 U.S. 1, 13-15 (1890). This concept of state sovereign immunity is based on the traditional notion that a state shouldnot be “‘amenable to the suit of an individual without its consent.’” Hans , 134 U.S. at 13 (1890) (quoting The Federalist , No. 81 (A. Hamilton)). There are, however, two c learly recognized exceptions to the general immunity protections of the Eleventh Amendment: (1) a state may consent to be sued, or (2) Congress may c learly and expressly abrogate the states’ immunity. See ANR Pipeline , 150 F.3d at 1187. Neither exception is applicable to the present appeal. 5 So, we turn our attention to the third judiciallyJordan 415 U.S. 651, 678 (1974) (“[t]he Eleventh Amendmen t defense

sufficiently partakes of the nature of a jurisdicti onal bar” that it may be raised at any point during the proceedings).

-10- created alternative for avoiding the general applic ation of state sovereign immunity – the Ex parte Young doctrine.

The Ex parte Young doctrine is not actually an exception to Eleventh Amendment state immunity because it applies only wh en the lawsuit involves an action against state officials, not against the state. Generally, the law considers state officials acting in their official capacities to be acting on behalf of the state and immune from unconsented lawsuits under the Elev enth Amendment. Kentucky v. Graham , 473 U.S. 159, 165-66 (1985) (“[A]n official-capac ity suit is, in all respects other than name, to be treated as asuit against the entity. ... It is not a suit against the official personally, for the real party in interest is the entity.”); see also Pennhurst State Sch. & Hosp. v. Halderman , 465 U.S. 89, 101- 02 (1984). However, Ex parte Young creates a narrow exception to this general rule. In Ex parte Young , the Supreme Court held the Eleventh Amendment generally does not bar a suit against a state offic ial in federal court which seeks only prospective equitable relief for violations of federal law, even if the state is immune. Ex parte Young , 209 U.S. 123, 159-60 (1908) The Court “recognize [d]-11-

that if a state official violates federal law, he i s stripped of his official or representative character and may be personally liable for his conduct.” Coeur d’Alene Tribe , 521 U.S. at ___, 117 S. Ct. at 2043 (1997) (O'Con nor, J., concurring). For years, the Supreme Court has applied Ex parte Young to allow suits for prospective relief against a state office r to enjoin future violations of federal law, but it has consistently prohibited anyretroactive or compensatory relief. Edelman , 415 U.S. at 666-68 (relief that includes retroact ive payments, even if brought against a state official, is actual ly a suit against the state and barred by the Eleventh Amendment).

The general doctrine from Ex parte Young allows expanded federal jurisdiction over state action, and gives the feder al courts a powerful tool for ensuring state compliance with federal laws. Howev er, the decision whether to apply Ex parte Young and allow a suit to proceed in federal court is of ten less than clear, and case law in this area reveals the d ifficulty of drawing principled distinctions on the facts of different cases. Courts struggle to find a compromise between vindicating the supremacy of federal law an d upholding the immunity of the states under the Eleventh Amendment. This is e specially true when, as in the case before us, the controversy involves not simplya violation of federal law, but6Many of the cases cited by both parties illustrat e how state property

interests impact whether the court chooses to exerc ise jurisdiction over state officials. Compare Treasure Salvors, 458 U.S. at 697 (Court agreed that where state has a colorable claim to a possessory interes t in property, absent the state’s consent, the federal district court had no power to adjudicate the state’s interest in the property), and Ford Motor Co. v. Department of Treasury of Indiana , 323 U.S. 459 (1945) (barring federal jurisdiction over taxpayer’s suit against state officials to recover gross income taxes paid becaus e the suit was in reality an action against the state and required the payment f rom the state treasury) and ANR Pipeline , 150 F.3d at 1193 (applying Coeur d’Alene Tribe to deny federal jurisdiction finding that the state had a “special and fundamental interest” in maintaining authority over its power to assess and levy property taxes), with Ex parte Young , 209 U.S. 123 (allowing suit to proceed in federal court to address prevention of unconstitutional state conduct, but the case did not substantially involve state property interests), and Powder River Basin Resource Council v. Babbitt , 54 F.3d 1477 (10th Cir. 1995) (allowed federal ju risdiction, but this case involved a request to enjoin a state’s continuing v iolation of provisions of a federal environmental law and did not principally i nvolve a state property interest), and Johns v. Stewart 57 F.3d 1544 (10th Cir. 1995) (Court held the Eleventh Amendment did not bar the portion of the P laintiffs’ complaint seeking prospective relief preventing an ongoing violation of federal law, but no state property interest was implicated. Although the sui t required the state to distribute monies under the Social Security Act, th e state did not have a property interest in the benefit payments. The state was me rely overseeing a federal program.).

-12- relief impacting the validity of an asserted state property interest. 6

The struggle to define the limits of the Ex parte Young doctrine is evident from recent Supreme Court precedent. In Coeur d’Alene Tribe , the Supreme Court barred federal jurisdiction over claims for p urely prospective relief against7 Seminole Tribe v. Florida , 517 U.S. 44 (1996), decided in the term just

before Coeur d’Alene , also denied federal jurisdiction under Ex parte Young , even in the face of an alleged violation of federal law, in cases where Congress has already “prescribed a detailed remedial scheme for the enforcement against a State of a statutorily created right.” Id . at 74. Although the case is instructive regarding the new limits placed on the Ex parte Young doctrine and the trend toward narrowing its scope, the central holding of Seminole Tribe has little relevance to this present appeal. In the case befo re us, no alternative, Congressionally mandated statute limits or prevents federal jurisdiction in this matter, so Plaintiffs are not automatically preclud ed from bringing the suit in federal court against the state officials

.
-13- a state official to compel compliance with federal law. 7 Coeur d’Alene Tribe involved a suit by an Indian Tribe against Idaho’s state officials to establish the Tribe’s ownership rights to submerged lands within the boundaries of a reservation established under federal law in 1873. 521 U.S. at ___, 117 S. Ct. at 2032. The Court held that even when a suit is comm enced against state officials, and “the [plaintiff] has alleged an on-going violat ion of its property rights in contravention of federal law and seeks prospective injunctive relief,” that is not enough to invoke the Ex parte Young doctrine if the suit over property interests is the “ functional equivalent of a quiet title action which implicates special sovereignty interests.” Id . at 2040 (emphasis added). The Court found “the S tate itself will have a continuing interest in the litig ation whenever state policies or procedures are at stake,” and that to “interpret Young to permit a federal courtaction to proceed in every case where prospective d eclaratory and injunctive relief-14-

is sought against an officer, named in his individu al capacity, would be to adhere to an empty formalism and to undermine the principl e ... that Eleventh Amendment immunity represents a real limitation on a federal court’s federalquestion jurisdiction.” Id . at 2034. The Court suggested that if the relief requested involved the adjudication of property int erests (like a quiet title action) that “implicate[] special sovereignty interests” an d is coupled with far-reaching and invasive relief, the Ex parte Young doctrine is inapplicable, and the state should be allowed to respond to the claims against it in its own courts. Id . at 2040, 2043.

Coeur d’Alene Tribe imposes an important new requirement on us. We must examine whether the relief Plaintiffs seek aga inst the state officials “implicates special sovereignty interests,” and “wh ether that requested relief is the functional equivalent to a form of legal relief against the state that would otherwise be barred by the Eleventh Amendment.” ANR Pipeline , 150 F.3d at 1190. Accordingly, we add this latest pronouncement to the traditional three-part inquiry articulated in Treasure Salvors , 458 U.S. 670, to establish a framework for determining whether a suit against a state offi cial is barred under the Eleventh Amendment. First, we must determine whether this i s an action against the state officials or against the State of New Mexico itself; second, whether the alleged-15-

conduct of the state officials constitutes a violat ion of federal law, or merely a tortious interference with Plaintiffs’ property rig hts; third, whether the relief Plaintiffs seek is permissible prospective relief o r is it analogous to a retroactive award of damages impacting the state treasury; Treasure Salvors , 458 U.S. at 690, and finally, whether the suit rises to the level of implicating “special sovereignty interests.” ANR Pipeline , 150 F.3d at 1193 (internal citation omitted).

C. Application (1) Is this a proper suit against state officials? The state officials argue the State of New Mexico i s the real party in interest because the lease the district court inten ds to reform was entered into between the United States and an agency of the Stat e of New Mexico. They also argue all of their conduct with regard to the lease and the disputed profits was authorized, official state action, thus immunizing them under the state’s Eleventh Amendment protection. Even though these allegation s would appear to immunize the state officials, these arguments fail to understand the Ex parte Young exception. Because the states cannot authorize anyact that violates federal law, the Supreme Court has established that an action se eking to prospectively enjoin a state official’s ongoing violation of federal law is not barred by the Eleventh Amendment. Pennhurst , 465 U.S. at 102 (“a suit challenging the-16-

constitutionality of a state official’s action is n ot one against the State”). Even though the state officials claim to act under the authority of valid state law, if their conduct is not in accord with federal law the state cannot cloak their actions with state authority or state immunity. Ex parte Young , 209 U.S. at 160.

In the present case, the state officials were actin g pursuant to state law authorizing the development of recreation areas und er the lease agreement with the United States. See N.M. Stat. Ann. §§ 16-2-11(A) & (J), 16-2-12, 16-2 -13 (Michie 1978) (state law authorizing, inter alia , the state to acquire lands or interests in lands in the name of the state, for st ate park purposes, subject to legislative approval). However, because the lease agreement allegedly conflicted with federal law at its inception, the state offici als’ acts of signing the lease and subsequently accepting benefits under the assignmen t provision may constitute an ongoing violation of federal law. Accordingly, Pla intiffs’ claims are properly brought against the state officials, not the state. The state is not the real party in interest because the state cannot “authorize” the o fficials to violate federal law. See Ex parte Young , 209 U.S. at 159-60 (holding that when a state off icial seeks to enforce a state legislative enactment that is vo id because unconstitutional, the state officer comes into conflict with the supremac y of the federal law and enjoys8 We also note that even though the State of New Me xico itself was named

but subsequently dismissed from the suit, its dismi ssal does not mean the state officials are also automatically discharged. The s uit is properly brought against the state officials, even in the absence of the State of New Mexico. “Neither the fact that the State elected to defend on behalf of its agents, nor the fact that the District Court purported to adjudicate the rights o f the State, deprive[] the federal court of jurisdiction that had been properly invoke d over other parties.” Treasure Salvors , 458 U.S. at 691-92.

-17- no immunity). 8

(2) Violation of federal law or tortious interferen ce with property rights As a general rule, if the state officials’ conduct was authorized by state law, and no federal rights were infringed, then the alleged violation of Plaintiffs’ rights is merely tortious interference and the Elev enth Amendment bars federal jurisdiction. Larson v. Domestic & Foreign Commerce, Corp ., 337 U.S. 682, 693 (1949). Although this rule from Larson appears to require us to ascertain whether state officials actually violated federal law, in f act we do not need to dispositively decide this question. The Supreme Court has ruled we need only determine whether Plaintiffs state a non-frivolous, substanti al claim for relief against the state officials that does not merely allege a violation of federal law “solely for the purpose of obtaining jurisdiction.” Larson , 337 U.S. at 690 n.10 (1949); see also Tindal v. Wesley , 167 U.S. 204, 216 (1897) (“It is to be presumed i n favor of the jurisdiction of the court that the plaintiff may be able to prove the right which he-18-

asserts in his declaration.”). Even “[t]he possibi lity that a defendant will ultimately prevail on the merits does not clothe th at defendant in Eleventh Amendment immunity.” Coeur d’Alene Tribe v. Idaho , 42 F.3d 1244, 1251 (9th Cir. 1994), cert. denied , 517 U.S. 1133 (1996), and rev’d on other grounds , 117 S. Ct. 2028 (1997).

Plaintiffs’ complaint seeks prospective equitable r elief to enjoin the state officials from committing continuing violations of federal law. The Irrigation and Improvement Districts claim the lease between the U nited States and New Mexico contains an assignment clause that violates existin g federal law, and as parties to the lease and knowing recipients of the illegal ben efits under the assignment provision, the state officials are committing an on going violation of federal law. State officials, on the other hand, argue they are not violating federal law and cannot violate the terms of Subsection I of the Fac t Finders Act, upon which Plaintiffs base their claims to credit for profits. We find the state officials’ argument unpersuasive. The factual record indicate s the United States assigned the right to profits from the operation, maintenanc e and development of a recreation area on Project lands to the State of Ne w Mexico under the 1964 and 1973 leases. New Mexico has continued to retain th e profits, if any, from use of the recreation areas over the term of the lease. T his arrangement arguably9Government contracts must comply with statutory l aws and regulations.

The state officials, on behalf of the State of New Mexico, entered a lease (contract) with the United States that violated Sub section I of the Fact Finders Act. Accordingly, the state officials are on “dire ct notice,” constructive or otherwise, that the lease is “plainly illegal.” Total Med. Management, Inc. v. United States 104 F.3d 1314, 1319 (Fed. Cir. 1997). This at the very least raises a substantial issue as to whether the state officia ls’ acceptance of the disputed profits while participating in the development of the recreation areas under the lease agreements is an ongoing violation of federal law.

-19- contravenes prior agreements and statutory provisio ns that provide Plaintiffs with the preeminent right to a portion of the profits. We have, in this instance, a lease between the State of New Mexico and the United Stat es that conflicts with existing federal law. The district court could fin d federal law was violated both at the inception of the lease and each time the state retained profits that ought to have been credited to the Irrigation and Improvement Districts. Simply because a federal law, like the Fact Finders Act, specificall y imposes affirmative obligations on the federal government, does not mean state acti on cannot also violate that law. Such a conclusion would lead to absurd result s and undermine the supremacy of federal law. If the state action aids , encourages, cooperates with, or accepts the benefits of a federal governmental viol ation of federal law, we believe the state is also potentially culpable. 9That is precisely the situation we have in this case. New Mexico is purportedly enjoying the benefits the federal government unlawfully assigned to them. Accordingl y, without deciding the-20-

merits of their claims, we hold Plaintiffs have mad e an adequate, substantial, and non-frivolous allegation that the state officials a re committing violations of federal law, not merely a tortious interference wit h Plaintiffs’ property rights. Plaintiffs’ claim is sufficient to support federal jurisdiction, assuming the other requirements for the application of the Ex parte Young doctrine are met.

(3) Is the relief sought permissible prospective re lief? Plaintiffs argue the relief they request will have no effect on the state treasury of New Mexico because they seek only prosp ective compliance with federal law. However, the prospective/retrospectiv e analysis is often not as simple as it appears. In many instances, even pros pective relief will burden the state’s treasury to some degree. Edelman , 415 U.S. at 668. The “overriding question” is not whether the relief will require th e payment of state funds, but whether the relief will “remedy future rather than past wrongs.” Coeur d’Alene Tribe, 42 F.3d at 1252 (“An injunction that will in practi cal effect require payment of funds out of the state treasury is nonetheless permissible if it requires only that officials conform their future actions to federal law.” (Internal citation omitted.)).

Even though the request for relief against the stat e officials in this case-21-

will affect New Mexico’s interest in profits under the assignment clause of the lease, the relief will have no retrospective effect . The relief Plaintiffs seek will only affect the state’s right to future revenues. While this may cause difficulties for New Mexico and require additional expenditures from the state’s coffers in order to effectively operate and maintain the affec ted recreation areas, it does not transform Plaintiffs’ claim into an impermissible r equest for retrospective relief or damages.

The state officials also argue the Ex parte Young doctrine does not allow the courts to interfere with their discretionary ac ts. Although this general premise is sound, Ex parte Young does not extend this rule to preclude judicial review of discretionary acts that violate federal law. See 209 U.S. at 158-59 (holding the state officials’ “general discretion r egarding the enforcement of the laws ... is not interfered with by an injunction wh ich restrains the state officer from taking any steps towards the enforcement of an unconstitutional enactment, to the injury of the complainant.”). In the present case, it is true the law will not permit the courts to force New Mexico officials int o negotiating changes in lease agreements, but it certainly permits the courts to vindicate federal rights. Plaintiffs have sufficiently alleged a federal viol ation, and we will not deny jurisdiction solely on the basis that a ruling might indirectly impact state officials’-22-

discretionary acts.

Even if Plaintiffs meet all the traditional require ments for the application of the Ex parte Young doctrine we have discussed above, that does not automatically allow the suit to proceed in federal court. The rule from Coeur d’Alene Tribe requires a more thorough investigation into the nature of the claim, the state’s interest and the potential effect of the requested relief in order to determine what sovereign interests the court’s decision might affe ct and whether federal jurisdiction is appropriate.

(4) Are special sovereign interests at stake? After Coeur d’Alene , if we determine the relief Plaintiffs seek, altho ugh prospective and not tantamount to a damages award, is an excessive intrusion into an area of special state sovereign interest, Ex Parte Young does not apply, and the the Eleventh Amendment bars the suit. Coeur d’Alene Tribe , 521 U.S. at ___, 117 S. Ct. at 2043. However, if the relief involve s enjoining a continuing violation of federal law that would have only an in cidental effect on special state sovereign interests, then federal jurisdiction is p roper under the traditional approach to Ex Parte Young

.-23-

The fundamental difficulty with the present suit in terms of the sovereign interests at stake, is that in addition to involvin g a possible continuing violation of federal law, it also has a direct bearing on the validity of New Mexico’s claim to profits under the lease. The district court is primarily adjudicating the validity of the state’s asserted property interest, even if the court decides the illegality of the assignment provision voided any state property interest from the inception of the lease. Any decision and remedy in this matter at the very least affects the validity of the state’s asserted property interest in the revenues and poses a challenge to its current position with regard to th e recreation area lands. Thus, we find ourselves in virtually the same dilemma the Ninth Circuit articulated in its Coeur d’Alene Tribe opinion. We are constrained by two general princi ples: (1) “federal courts may not hear actions to quiet t itle to property in which the state claims an interest, without the state’s conse nt,” and (2) “declaratory and injunctive relief against state officials to forecl ose future violations of federal law is available even if that relief works to put the p laintiff in possession of property also claimed by the state.” 42 F.3d at 1252 (9th Cir. 1994) (internal citation omitted). Admittedly, the district court is not “q uieting title” to the state’s real property in this case, but it is determining the va lidity of a property interest – New Mexico’s claim to profits under the lease. Id. We struggle to find a principled means of distinguishing the real property interest at stake in Coeur-24-

d’Alene Tribe with New Mexico’s asserted right to income under the assignment provision of the lease in the present case. Both the State of Idaho’s interest in submerged lands in Coeur d’Alene Tribe , and New Mexico’s interest in profits from the recreation areas, although qualitatively d ifferent, fall under the general heading of “state property.”

It is easy to understand how a majority of the Justices in Coeur d’Alene Tribe could decide that the Tribe’s suit to divest the S tate of Idaho of all authority and ownership over submerged lands was actually a s uit against the state. 521 U.S. at ___, 117 S. Ct. at 2047 (O’Connor, J. concu rring). However, it is more difficult to say whether the Court intended its rul ing to extend to every situation where a state property interest is at issue. We believe the holding of Coeur d’Alene Tribe does not extend that far, but instead reflects the extreme and unusual case in which, although the doctrine of Ex parte Young under traditional principles is applicable, the suit is prohibited be cause it involves “particular and special circumstances,” id . at 2043, that affect “special sovereignty interes ts” and cause “offense to [the state’s] sovereign authority,” id . at 2040.

In this light, we examine whether the property inte rest rises to the level of a “special sovereignty interest,” ANR Pipeline ,150 F.3d at 1193 (internal citation-25-

omitted). After looking at the complete record bef ore us, we decide that although the relief accorded to Plaintiffs will affect the S tate of New Mexico’s future interest in profits under the recreational land lea se, either through reformation of the lease or some other form of equitable relief, t his impact on state interests does not rise to the level of implicating special sovere ignty interests. We rest our decision on a variety of factors we find implicit i n the Supreme Court’s ruling in Coeur d’Alene Tribe and our recent application of its holding in ANR Pipeline

. First, we cannot say the relief the Irrigation and Improvement Districts request is as far-reaching or intrusive as that sought in Coeur d’Alene Tribe and ANR Pipeline . The State of Idaho’s interest in its submerged lands in Coeur d’Alene Tribe , and the State of Kansas’ interest in its property tax scheme in ANR Pipeline present state sovereign interests to a degree not attained by New Mexico’s claims in the present case. Second, the remedy in this ca se only presents the possibility of a readjustment of priorities for the distributio n of profits from certain uses of Project lands, not an impermissible affront to New Mexico’s political authority. Our decision to allow this suit in federal court wi ll have minimal effect on the sovereignty and autonomy of the State of New Mexico . Finally, the balance of New Mexico’s interest and the federal rights and interests at stake in this matter swings decidedly in favor of federal jurisdiction. See Papasan v. Alain , 478 U.S. 265, 277 (1986) (recognizing certain types of cases formally meet the-26-

requirements of Ex parte Young , but “stretch that case too far and would upset th e balance of federal and state interests”). The inte rest of vindicating the federal rights and answering the federal questions involvedsubstantially outweigh the state’s sovereign interests. See id. These considerations, coupled with the traditional analysis supporting the application of the Ex parte Young doctrine persuade us the relief Plaintiffs seek does not imp ermissibly intrude upon the state’s “dignity and status” as a sovereign government. ANR Pipeline ,150 F.3d at 1194.

IV. Summary & Disposition Since the state property interest at stake in this proceeding does not rise to the level of a “special sovereign interest,” nor is this suit the “functional equivalent” of an action against the state “implicat[ing] special sovereignty interests,” the Eleventh Amendment is not a bar to federal jurisdiction over the state officials. Coeur d’Alene Tribe , 521 U.S. at ___, 117 S. Ct. at 2040. Accordingly, we AFFIRM the decision of the district court.