Opinion ID: 162215
Heading Depth: 2
Heading Rank: 2

Heading: Weighing of the Brillhart/Mhoon Factors

Text: 48 In Brillhart, the Supreme Court listed several factors to guide a district court's decision whether to exercise jurisdiction over a declaratory judgment action. A district court should evaluate the scope of the state proceeding, whether the claims of all parties can be adjudicated in that proceeding, whether necessary parties have been joined, whether they are amenable to process, and any other factor bearing on the central question of which forum can better resolve the controversy. See 316 U.S. at 495, 62 S.Ct. 1173. This circuit has adopted a list of five factors a district court should evaluate. See Mhoon, 31 F.3d at 983. The Mhoon factors are 49 [1] whether a declaratory action would settle the controversy; [2] whether it would serve a useful purpose in clarifying the legal relations at issue; [3] whether the declaratory remedy is being used merely for the purpose of procedural fencing or to provide an arena for a race to res judicata; [4] whether use of declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and [5] whether there is an alternative remedy which is better or more effective. See id. (quotations omitted) 50 The district court considered all five Mhoon factors. This court has evaluated the record and concludes that the district court's assessment of the Mhoon factors was not so unsatisfactory as to result in an abuse of discretion. 51
52 The district court found that the requested federal declaratory relief would not settle the entire controversy over water rights or even clarify the relative rights of the parties to Rio Grande water, because any declaration of the United States' rights to divert, impound, and store Project water would not be binding on parties not joined to the action. The United States and Texas parties, however, define the controversy as involving only the cloud placed on the United States' title by the named defendants. Because the federal action will completely settle this controversy, dismissal pursuant to Brillhart/Mhoon was inappropriate, they argue. 53 The appellants fail to acknowledge that the inquiry into whether the declaratory judgment settles a controversy and clarifies the legal relationships at issue is designed to shed light on the overall question of whether the controversy would be better settled in state court. See Brillhart, 316 U.S. at 495, 62 S.Ct. 1173. The federal suit may settle the controversy of whether the United States has superior title to the named defendants. As the district court pointed out, however, the declaration of superior title will not be binding on parties not joined to the action. See State Farm Mut. Auto. Ins. Co. v. Mid-Continent Cas. Co., 518 F.2d 292, 295 (10th Cir.1975). There are thousands of water users in New Mexico who may assert a right to Project water just as New Mexico State University and Stahmann Farms have in this case. Their claims will be adjudicated in the comprehensive New Mexico stream adjudication. By declining jurisdiction, the district court avoided a piecemeal approach to adjudicating the rights of the United States vis-a-vis innumerable water users in New Mexico. The district court acted within its discretion in determining that the United States' claims against the named defendants and other water users would be better settled in a unified proceeding. See State Farm Mut. Auto. Ins. Co. v. Scholes, 601 F.2d 1151, 1155 (10th Cir.1979) (quoting with approval a lower court opinion that considered the desirability of avoiding piecemeal adjudication); 10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2759; cf. Rienhardt v. Kelly, 164 F.3d 1296, 1303 (10th Cir.1999) (noting that avoidance of piecemeal adjudication may counsel against hearing the case in federal court in Colorado River context). 54 Appellants also argue the New Mexico adjudication will not settle the federal controversy because the stream adjudication will not resolve rights to store and divert Elephant Butte Reservoir water. The New Mexico proceeding as it currently exists may not encompass storage rights in the Elephant Butte Reservoir, but the New Mexico State Engineer has notified all parties that he intends to include the Reservoir in the stream adjudication. 13 The United States and Texas parties contend that the Notice of Intent does not guarantee the Reservoir will be included in the stream adjudication. They also argue that the Reservoir cannot be included in the adjudication without adding the portion of the Rio Grande north from the Reservoir to Otowi Gauge, near Santa Fe. There is no merit to either of these contentions. 14 55 Although the Notice of Intent is not a guarantee that the Reservoir will be included in the stream adjudication, the district court was well within its discretion in determining that the Notice of Intent signaled that the Reservoir likely would be included. 15 56 The United States and Texas parties have pointed to nothing in the record indicating that the state court will not grant the Engineer leave to amend his complaint to include the Reservoir. The state court has allowed the complaint to be amended four times to reflect changes in parties and claims; it will likely do so again. See First Nat'l Bank of Santa Fe v. Southwest Yacht & Marine Supply Corp., 101 N.M. 431, 684 P.2d 517, 520 (1984) (amendments to pleadings are generally favored and liberally permitted). 57 Finally, appellants argue that the New Mexico adjudication would not settle the federal controversy because the stream adjudication excludes the Texas Parties. The district court, however, found that the state court would likely allow the Texas parties to intervene in the stream adjudication. The City of El Paso has been a party to the stream adjudication since it began in 1986. While El Paso Water District's attempt to intervene was opposed by some of the New Mexico parties, when the state court granted the District amicus status it also ruled that the District could request a ruling on its motion to intervene at any time. 58 In New Mexico, as in the federal courts, there are two types of intervention, intervention as of right and permissive intervention. See N.M. Ct. R. 1-024 (2001). 16 There are obviously common questions of fact and law relating to both the Texas parties' claims to Project water and the claims to Rio Grande water adjudicated in the New Mexico proceeding. The Texas parties may be entitled to intervention as of right since an adjudication of water rights in New Mexico could impede their ability to collect Project water. The continued, unmolested presence of El Paso and the state court's unwillingness to rule out intervention indicate that the Texas parties' assertion of Project water rights water can and will likely be adjudicated in the stream adjudication. Without a showing that intervention is impossible or the state forum is clearly hostile to the parties to the federal suit, this court cannot say that the district court abused its discretion. 59 An additional reason exists to reject the United States' and Texas parties' argument that the federal suit should proceed because it alone adjudicates the Texas parties' rights to Project water: the Texas adjudication will be more than adequate to decide the rights of the United States vis-a-vis the Texas parties. The United States filed a claim with the TNRCC on April 22, 1996, asserting claims against the Texas parties to the federal lawsuit identical to the claims made in its federal complaint, namely, that it held title to the Project water delivered to the City of El Paso, the El Paso Water District, and the Hudspeth County Conservation and Reclamation Dist. No. 1. According to Texas water law, the adjudication will resolve all storage, diversion, and use rights. See Tex. Water Code § 11.307 (Vernon, WESTLAW through 2001 Reg. Sess.) (requiring [e]very person claiming a water right of any nature to file a claim with the TNRCC during an adjudication) (emphasis added). Thus, the Texas adjudication can be expected to decide the title to Project water delivered to the Texas parties named in the federal suit. 60
61 The district court was concerned that the United States engaged in procedural fencing because it had moved to dismiss the New Mexico case on jurisdictional grounds several times. The court found that the United States' jurisdictional argument was rejected by every court to consider it, including the New Mexico Court of Appeals, and that the United States brought the present federal action shortly after losing its third attempt to dismiss on jurisdictional grounds. 62 The United States has attempted at every juncture in the New Mexico adjudication to resist jurisdiction. Other parties have made motions to dismiss. The State Engineer himself made several. This preliminary skirmishing has ended, however. After an extended period of pleadings and dismissal motions in the New Mexico proceedings and after realignment, the New Mexico stream adjudication is progressing rapidly. In the three years since the realignment and the denial of the State Engineer's last motion to dismiss, the parties have been cooperating; none have questioned the state court's jurisdiction. Only the United States and Texas parties still resist the stream adjudication. 63 As the district court found, it is significant that the United States filed the instant action just a short time after the last jurisdictional objections to the New Mexico adjudication were rejected and it became clear the adjudication will proceed to judgment. See St. Paul Fire & Marine Ins. Co. v. Runyon, 53 F.3d 1167, 1170 (10th Cir.1995) (holding no abuse of discretion when district court determined that insurer's filing of federal declaratory action on eve of insured's state contract suit after waiting three years before seeking declaration constituted procedural fencing). The United States contends that it waited until 1997 to file the present suit because only then did it become clear that the New Mexico and Texas adjudications would not reach the claims enumerated in its federal complaint. The exclusion of Elephant Butte Reservoir from the New Mexico adjudication, however, was apparent from the filing of the first complaint in 1986. Moreover, the Texas adjudication was initiated in 1994. This court agrees that the procedural fencing factor weighs against the exercise of jurisdiction. 64 3. Whether the exercise of federal jurisdiction would result in friction with the state courts and encroach upon their traditional jurisdiction 65 The district court expressed concern that if it declared relative rights to Project water, it could cause friction between the federal and state courts. The court's concern centered around the special role and expertise state courts have in adjudicating water rights. This court agrees with the district court that a federal declaration of rights could encroach upon the state courts' traditional role as arbiter of water rights disputes. 66 Water rights adjudications traditionally have been within the ambit of state court expertise. See Arizona v. San Carlos Apache Tribe, 463 U.S. 545, 569, 103 S.Ct. 3201, 77 L.Ed.2d 837 (1983) (observing that considering the specialized resources and experience of the state courts in adjudicating water rights, it was far from obvious federal adjudications would proceed faster). Congress recognized as much when it enacted Section 8 of the Reclamation Act, requiring the federal government to procure water for reclamation projects in accordance with state law. See 43 U.S.C. § 383. As stated by the 1951 Senate Judiciary Committee in discussing Section 8 of the Reclamation Act, 67 Down through the years the courts of the respective States marked out the pathway whereby order was instituted in lieu of chaos. [Water] [r]ights were established, and all of this at the expense, trial, and labor of the pioneers of the West, without material aid from our United States Government until a much later time when irrigation projects were initiated by Congress through the Department of Interior and later the Bureau of Reclamation. Even then Congress was most careful not to upset, in any way, the irrigation and water laws of the Western States. 68 S.Rep. No. 82-755, at 3 (1951). Declaring title to water would thus encroach upon the traditional jurisdiction of the state courts. 69 In addition, the federal action carries the danger of grave interference with the state proceedings. The likelihood of such interference is another justification for the refusal of jurisdiction. See Mhoon, 31 F.3d at 984 (finding no abuse of discretion when federal proceeding involved no undue interference with the state proceeding). The McCarran Amendment was enacted out of the concern that without the participation of the United States, state adjudications, intended to adjudicate the interlocking rights of all users, would be left unable to adjudicate the rights of any. See S.Rep. No. 82-755, at 4-5 (1951); see also United States v. Dist. Court for Eagle County, 401 U.S. 520, 525, 91 S.Ct. 998, 28 L.Ed.2d 278 (1971). Precisely the same chaos could result in this case if the United States is permitted to litigate its claim in federal court. Faced with an ongoing federal dispute, the New Mexico court could be faced with the question whether to defer resolution of the claims of water users dependent on the resolution of the United States' fight with the named defendants over title. Unable to reach some claims, and needing to reach all in order to establish priority, the state adjudication could grind to a halt. On the other hand, the New Mexico state court could adjudicate the title fight that is the subject of the federal action. The district courts are given discretion to decline jurisdiction over declaratory judgment actions, however, precisely to avoid becoming such an arena for a race to res judicata.  See Mhoon, 31 F.3d at 983 (quotations omitted). 70 4. Whether the state remedy is the most effective remedy 71 The district court concluded that the state adjudications would provide a more effective remedy to the general controversy than the federal declaratory judgment action. The state proceedings would produce a more comprehensive and cohesive remedy, because the rights of all, including the parties to the federal action, would be decided. The district court was correct in concluding that the state adjudications are the more effective remedy. 72 In arguing that the state proceedings are not the more effective remedies, the United States and Texas parties fail to acknowledge the reality of water rights disputes in the West. Thousands of individuals claim water rights that depend on the resolution of the claims of others. The situation has long been recognized as demanding a comprehensive adjudication of all users' claims. See El Paso & R.I. Ry. Co. v. District Court, 36 N.M. 94, 8 P.2d 1064, 1067 (1931). Congress recognized this need when it passed the McCarran Amendment: 73 [The concern over inconsistent dispositions of property] is heightened with respect to water rights, the relationships among which are highly interdependent. Indeed, we have recognized that actions seeking the allocation of water essentially involve the disposition of property and are best conducted in unified proceedings. The consent to jurisdiction given by the McCarran Amendment bespeaks a policy that recognizes the availability of comprehensive state systems for adjudication of water rights as the means for achieving these goals. 74 Colorado River, 424 U.S. at 819, 96 S.Ct. 1236 (citation omitted). The New Mexico and Texas adjudications are designed to provide such a comprehensive solution to a complex problem. See United States v. Bluewater-Toltec Irrigation Dist., 580 F.Supp. 1434, 1446 (D.N.M.1984) (The idea that New Mexico lacks a comprehensive system for adjudication of water rights is not grounded in facts and needs no further comment.); Tex. Water Code Ann. § 11.307 (Vernon, WESTLAW through 2001 Reg. Sess.) (requiring [e]very person claiming a water right of any nature to file a claim with the TNRCC during an adjudication) (emphasis added). As such, they are the preferred mechanisms for settling water rights disputes. 75 Moreover, a federal declaration of rights will be particularly ineffective. Even if the federal action proceeds, both state adjudications will continue to go forward with the United States as a party. Because a federal declaratory judgment will affect only the named defendants, the United States will be forced to litigate its rights relative to other water users in the state proceedings. The federal declaration can hardly be considered an effective remedy since the United States will have to reargue numerous factually similar issues against water users excluded from the federal action. See Runyon, 53 F.3d at 1169-70 (noting that district courts generally should not entertain jurisdiction over declaratory judgment action involving the same fact-dependent issues likely to be decided in another proceeding).