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Matched Legal Cases: ['§ 337', '§ 51', '§ 315', '§ 1413', '§ 3', '§ 337']

KANSASv. COLORADO - 533 U.S. 1 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 533 > KANSASv. COLORADO 533 U.S. 1 > Full Text
STEVENS, J., delivered the opinion of the Court, Parts I, IV, and V of which were unanimous, and Parts II and III of which were joined by REHNQUIST, C. J., and KENNEDY, SOUTER, GINSBURG, and BREYER,
The Arkansas River rises in the mountains of Colorado just east of the Continental Divide, descends for about 280 miles to the Kansas border, then flows through that State, Oklahoma, and Arkansas and empties into the Mississippi River. On May 20, 1901, Kansas first invoked this Court's original jurisdiction to seek a remedy for Colorado's diversion of water from the Arkansas River. See Kansas v. Colorado, 185 U. S. 125, 126 (1902) (statement of case). In opinions written during the past century, most recently in Kansas v. Colorado, 514 U. S. 673, 675-678 (1995), we have described the history and the importance of the river. For present purposes it suffices to note that two of those cases, Kansas v. Colorado, 206 U. S. 46 (1907), and Colorado v. Kansas, 320 U. S. 383 (1943), led to the negotiation of the Arkansas River Compact (Compact), an agreement between Kansas and Colorado that in turn was approved by Congress in 1949. See 63 Stat. 145. The case before us today in-
In 1986, we granted Kansas leave to file a complaint alleging three violations of the Compact by Colorado. See 514 U. S., at 679-680. After taking evidence in the liability phase of the proceeding, Special Master Arthur L. Littleworth filed his first report, in which he recommended that two of the claims be denied, but that the Court find that post-Compact increases in groundwater well pumping in Colorado had materially depleted the waters of the river in violation of Article IV-D. See id., at 680. We overruled
1 That Amendment provides: "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."
Moreover, the record in this case plainly discloses that the State of Kansas has been in full control of this litigation since its inception. Its right to control the disposition of any recovery of damages is entirely unencumbered. The injury to individual farmers is but one component of the formula adopted by the Special Master to quantify the damages caused by Colorado's violation of its contractual obligations. In short, there is simply nothing in the record to suggest that the State of Kansas is merely a "nominal party" to this
2 Though final damages have not yet been calculated, the importance of this issue is illustrated by breaking down the damages claimed by Kansas. Of $62,369,173 in damages so claimed, $9,218,305 represents direct and indirect losses in actual dollars when the damage occurred. Of the remaining $53,150,868, about $12 million constitutes an adjustment for inflation (a type of interest that Colorado concedes is appropriate) while the remaining amount (approximately $41 million) represents additional interest intended to compensate for lost investment opportunities. Third Report of Special Master 87-88 (hereinafter Third Report). The magnitude of prejudgment interest ultimately awarded in this case will, of course, turn on the date from which interest accrues. See Part III-B, infra.
3 For sources from the early part of the century criticizing, qualifying, or rejecting the distinction, see, e. g., Faber v. New York, 222 N. Y. 255, 262, 118 N. E. 609, 610-611 (1918); Bernhard v. Rochester German Ins. Co., 79 Conn. 388, 398, 65 A. 134, 138 (1906); Restatement of Contracts § 337, p. 542 (1932); C. McCormick, Law of Damages § 51, p. 210 (1935); 1 T. Sedgwick, Measure of Damages § 315 (9th ed. 1912); cf. 3 S. Williston, Law of Contracts § 1413, p. 2508 (1920) ("The disinclination to allow interest on claim of uncertain amount seems based on practice rather than theoretical grounds"). For a thorough modern treatment of the issue, see 1 D. Dobbs, Law of Remedies § 3.6(3) (2d ed. 1993).
4JU8TICE O'CONNOR argues that the state of the law was insufficiently evolved by 1949 for Colorado to have had notice that the courts might award prejudgment interest if it violated its obligations under the Compact. See post, at 21-25 (opinion concurring in part and dissenting in part). Though the law was indeed in flux at that time, this Court had already made it clear that it put no stock in the traditional common-law prohibition, see Funkhouser v. J. B. Preston Co., 290 U. S. 163, 168 (1933), and had stated explicitly that such interest may accrue when "considerations of fairness" demand it, see Board of Comm'rs of Jackson Cty. v. United States, 308 U. S. 343, 352 (1939). The contemporary Restatement of Contracts was in accord. See Restatement of Contracts § 337(b), at 542 ("Where the contract that is broken [is not for a set or easily ascertainable amount of money], interest may be allowed in the discretion of the court, if justice requires it, on the amount that would have been just compensation if it had been paid when performance was
due"). Under those circumstances, we think it is clear that, in 1949, an informed contracting party would not have concluded that an agreement's silence on the issue deprived a reviewing court of the authority to award compensatory interest if the party willfully violated its contractual obligations. Moreover, under JUSTICE O'CONNOR'S reasoning, States who entered into interstate compacts before 1987, see post, at 23, would retain a perpetual incentive to breach their contractual obligations and reap the benefits of such a breach with the full knowledge that the courts lack the authority to order a fully compensatory remedy.
However, despite the clear direction indicated by some of our earlier opinions, we cannot say that by 1949 our case law had developed sufficiently to put Colorado on notice
5 JUSTICE O'CONNOR, JUSTICE SCALIA, and JUSTICE THOMAS would not allow any prejudgment interest. See post, at 20. JUSTICE KENNEDY and THE CHIEF JUSTICE are of the opinion that prejudgment interest should run from the date of the filing of the complaint. JUSTICE SOUTER, JUSTICE GINSBURG, JUSTICE BREYER, and the author of this opinion agree with the Special Master's view that interest should run from the time when Colorado knew or should have known that it was violating the Compact. In order to produce a majority for a judgment, the four Justices who agree with the Special Master have voted to endorse the position expressed in the text.
Colorado's final objection challenges the Special Master's determination of the value of the crop losses attributable to the Compact violations, the largest component of Kansas' damages claim. The Special Master accomplished the calculation by estimating the amount of farmland affected by
6 As the Special Master noted, "Colorado experts did not dispute, in general, the linear relationship between [water usage] and crop yield .... However, they were of the view that the particular linear crop yield coefficients used by Kansas were not sufficiently reliable to determine the increase in yields that would have occurred if there had been no depletions of headgate deliveries to the [affected] lands." Third Report 47. Colorado suggests that Kansas' model, based as it is upon academic studies, does not adequately account for reductions in crop yield from such realworld conditions as "weather, disease, and pests." Brief for Colorado 44, n. 12. But, as the Special Master correctly noted, Kansas' experts reduced the predicted crop yield by 25% in order to account for such possibilities. Third Report 51 ("The 25% reduction was calculated to adjust the controlled experimental data to 'realistic long-term type conditions' in western Kansas, including high temperatures, winds, insects, and other stressful conditions").
7Professor Whittlesey served for 20 years as a full professor and agricultural economist at Washington State University. His publications, many of which concern the kind of issues presented by this case, fill 14 pages on his curriculum vitae. See Kan. Exh. 891.
8We also agree with the Special Master's decision to disregard the Colorado expert's comparison of the numbers produced by Kansas' model with numbers drawn from the literature on the various crops planted on the affected farmland. As Colorado admits, see Brief for Colorado 46, the water values in the literature were not based on "a 'short-short run' situation, that is, an intra-seasonal transaction in which no capital costs were involved, and only additional harvesting and irrigation costs would
be required." Third Report 63. Because the circumstances in Kansas involved short-short run situations, and because such short-short run situations generally involve higher values for water, values derived from other contexts are of limited use in evaluating Kansas' model. See ibid.
I fail to see how Colorado and Kansas could have contemplated that prejudgment interest would be awarded. The "venerable ... rule" at common law was that prejudgment interest was unavailable on claims for unliquidated or, even more significantly, unascertainable damages. Milwaukee v. Cement Div., National Gypsum Co., 515 U. S. 189, 197 (1995). Contrary to the Court's suggestion, see ante, at 9-11, 13-14, that rule had not been abandoned by the period between 1943 and 1949, the years of the Compact's negotiation and ultimate approval by Congress. By that time, the state of the law in general regarding awards of prejudgment interest for unliquidated claims was uncertain at best, as the Court itself recognizes. See ante, at 9-11, and n. 3; cf. ante, at 13-14; see also Funkhouser v. J. B. Preston Co., 290 U. S. 163, 168 (1933) (noting "the numerous, and not harmonious, decisions upon the allowance of interest in the case of unliquidated claims," and that "the rule with respect to unliquidated claims has been in evolution"). To be sure, we had by
Awards of such interest on claims for unliquidated and unascertainable damages for breach of a contract appear to have been rarer still. See, e. g., Williams v. Idaho Potato Starch Co., 73 Idaho 13,24,245 P. 2d 1045, 1051-1052 (1952); Meyer v. Strom, 37 Wash. 2d 818, 829-830, 226 P. 2d 218, 224 (1951); Lineman v. Schmid, supra, at 207-213, 195 P. 2d, at
Finally, and most important to this case, an award of prejudgment interest on unliquidated and unascertainable damages for breach of an interstate compact was unheard of at the time of the Compact's negotiation and approval. Unlike cases involving bonds or other instruments of credit, see, e. g., Virginia v. West Virginia, supra, at 232-236; South Dakota v. North Carolina, 192 U. S. 286, 317-321 (1904), monetary damages in cases of this sort, involving the apportionment of water between States, are notoriously difficult to ascertain. Indeed, despite 15 years of litigation over the Compact, and resort to a great deal of data, expert testimony, complicated methodologies, and sophisticated analyses on the subject, the final value of Kansas' damages still has yet to be determined. See ante, at 9, n. 2; see also Third Report §§ III to X (detailing and analyzing the numerous variables and data elements necessary to arrive at a determination of Kansas' damages). It thus is not surprising that, until 1987, we had never even suggested that monetary damages could be recovered from a State as a remedy for its violation of an interstate compact apportioning the flow of an interstate stream. And when we first allowed such damages in Texas v. New Mexico, 482 U. S. 124 (1987), we
In light of this history, it seems inescapable that any participant in the drafting and negotiation of the Compact would, if asked at the time, have reacted with marked surprise to the notion that the Compact rendered its signatories liable for an award of prejudgment interest such as that sanctioned by the Court today. As both the Compact itself and the parties' post-Compact course of dealing make clear, the "fair intendment" of the Compact very probably was simply for the in-kind recovery of water as a remedy for its breach. The Compact says nothing about the availability of prejudgment interest on money damages as part of any remedy or, for that matter, about the availability of money damages as a remedy in the first instance. It contemplates the delivery of water from Colorado to Kansas, pure and simple. See Arkansas River Compact, reprinted in App. to Brief for Kansas A-l. When Kansas filed its complaint in this matter, "it sought only a decree commanding Colorado 'to deliver the waters of the Arkansas River in accordance with the provisions of the Arkansas River Compact.'" Third Report § XI, at 98. Cf. Colorado v. Kansas, 320 U. S. 383, 391 (1943) (discussing Kansas' prayer for relief in the form of "an apportionment in second feet or acre feet"). Not until our decision in Texas v. New Mexico, supra, did Kansas amend its complaint to include a claim for monetary damages. See Third Report § XI, at 98. Neither Kansas nor Colorado appears ever to have anticipated or assumed, much
There is nothing fair about awarding prejudgment interest as a remedy for the Compact's breach when all available evidence suggests that the signatories to the Compact neither intended nor contemplated such an unconventional remedy. Many compacts between States are old; suits involving compacts concerning water rights are late in starting and are invariably long pending; and, because statutes of limitation or the doctrine of laches is rarely available to preclude the steady buildup of prejudgment interest, the amount of such interest can become quite large, as Kansas' claim for approximately $41 million illustrates. See ante, at 9, n. 2. One