Transcript

IN THE SUPREME COURT OF THE UNITED STATES

STATE OF KANSAS, Plaintiff, v. STATE OF COLORADO

No. 105, Orig.

March 19, 2001

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 10:03 a.m.

APPEARANCES: JOHN B. DRAPER, ESQ., Special Assistant Attorney General, Santa Fe, New Mexico; on behalf of the Plaintiff.

JEFFREY P. MINEAR, ESQ., Assistant to the Solicitor General, Department of Justice, Washington, D.C.; on behalf of the United States, as Intervenor.

DAVID W. ROBBINS, ESQ., Special Assistant Attorney General, Denver, Colorado; on behalf of the Defendant.

PROCEEDINGS

(10:03 a.m.)

CHIEF JUSTICE REHNQUIST: We'll hear argument now in Number 105 Original, the State of Kansas v. the State of Colorado.

Mr. Draper.

ORAL ARGUMENT OF JOHN B. DRAPER

ON BEHALF OF THE PLAINTIFF

MR. DRAPER: Mr. Chief Justice, thank you, and may it please the Court:

The parties are here on exceptions to the third report in this case. After the Court determined that the State of Colorado had violated the Arkansas River Compact in 1995, the case was returned to the Special Master for further proceedings.

Subsequently, the Special Master determined that Colorado had violated the Arkansas River Compact in every year from the inception of their compact to the date of filing of this case in 1985. He further determined that, since the filing of the lawsuit, that Colorado has continued to violate the compact in every year through 1996, except for 1987. Colorado does not challenge those determinations.

Each of those determinations is in the unit of acre feet. Altogether, for the period 1950 through 1994, the period at issue here for the remedy, he determined that approximately 420,000 acre feet of water had been depleted from the Arkansas River by Colorado and its water users in violation of the compact. That amount of water is about 125,000 times the size of this courtroom, or a column the size of this courtroom extending upward about 1,000 miles.

He has determined that the proper remedy for these losses, which are both past and future, because of the lingering effects of the violations by Colorado, should be compensated in money rather than in water. At the end of trial, Kansas had determined that its losses were $62 million. Colorado's corresponding number was $9 million.

The Special Master recognized losses that we calculate to be approximately $57 million. However, the Special Master was persuaded by Colorado not to accord Kansas full compensation for its losses. He reduced it further by denying part of the prejudgment interest that had been quantified by Kansas at trial.

QUESTION: Why should any prejudgment interest be awarded as between States? I mean, this is based on a compact, isn't it, this lawsuit?

MR. DRAPER: This is based on the compact, yes, Your Honor.

QUESTION: And is there any provision in the compact for the provision of prejudgment interest?

MR. DRAPER: No, there is no specific provision on prejudgment interest, nor is there any provision specifically addressing the remedy, just as there was no provision in the Pecos River Compact, which this Court --

QUESTION: Well, the common law rule, I assume, is that you don't award prejudgment interest for unliquidated damages.

MR. DRAPER: That is the traditional rule, Your Honor, but it is a largely discredited rule at this point in history, and the Court has recognized that most recently --

QUESTION: Oh, but as between State sovereigns, I mean, who is going to pay the bill in Colorado? It's the taxpayers, isn't it?

MR. DRAPER: It's the State of Colorado. They are the signatory --

QUESTION: The taxpayers of the State of Colorado will end up footing the bill, and it just seems odd to me that we would all of a sudden craft some rule allowing prejudgment interest against a sovereign State. I mean, the States presumably had ample opportunity to negotiate at the time of the compact for the kinds of things that should go into a damages award in the event of a breach.

MR. DRAPER: In almost every case, the compacts that are in place now do not specify the precise remedy, or in most cases any remedy that might be afforded by this Court.

QUESTION: Did they just assume that, what, normal contractual remedies would be applied?

MR. DRAPER: I think that is the correct analysis, Your Honor. The Court has said in 1987, in the Texas v. New Mexico litigation, that the contract remedies should be looked to to determine the proper remedy for breach of a compact.

QUESTION: Was that the very first case in which damages, money damages were even awarded in one of these original jurisdiction cases?

MR. DRAPER: That is the first case, Your Honor, in which the prospect of money damages for violation of an interstate water compact were allowed. There was not a specific amount at that time. The Court returned the case to the Special Master, and it was settled before further determination was necessary.

QUESTION: The point wasn't even contested here, was it? Both sides wanted to resolve the case with monetary payment instead of with water, so that's hardly, you know, solid precedent for the proposition that money damages are awarded.

MR. DRAPER: In this case, Your Honor, if I understood your point, Colorado took the position initially that compensation should be in water, without interest. The State of Kansas took the position that it should be in money with interest.

QUESTION: Right, and this is the first case we've had where that conflict has been presented to us. One of the parties doesn't want to pay money damages.

MR. DRAPER: That is correct.

QUESTION: And if we didn't allow money damages, I presume it would -- and if one of the parties would prefer monetary damages, I presume they could negotiate it out and pay -- I mean, Colorado could negotiate it out and pay money instead of water.

MR. DRAPER: That's correct, and Colorado is not challenging the determination by the Special Master here that the remedy should be in money.

QUESTION: I know they're not, but --

QUESTION: If money damages were not awarded, and some form of water relief, then you have a master who's there forever and administering the thing at great cost, often, to the parties, so money damages have that to recommend them.

MR. DRAPER: Money damages certainly has that to recommend them, Your Honor. It's hard to tell whether we're receiving the water. You look at the river, and Colorado says, that's your water coming down in payment for our past violations. I can tell when we get a check. I'm not so sure when I'm looking at water in the river.

QUESTION: It's -- the interest question was never adjudicated before, but you're saying as well the damages question was never adjudicated, because last time around both parties said that's what they wanted.

MR. DRAPER: Last time around it was not clear that the parties were in agreement on the possibility of money damages, but this Court ruled that that was an option that should be considered by the Special Master.

QUESTION: If you want to get a check instead of water, you can always negotiate that out. I mean --

MR. DRAPER: That's true, and we're asking for a check.

QUESTION: So I mean, and that wouldn't put the burden on us to try to figure out how you compute money damages for failure to deliver water. I mean, that's one of the big issues in this case, I suppose, isn't it? You're going to get to that, whether we compute the losses to the farmers of Kansas from the failure to have more water delivered.

MR. DRAPER: Yes. There's no dispute at this point in the case, Your Honor, that the compensation should be paid in money. That, as Your Honor alludes to, was quantified by Kansas in large part by assessing the injuries suffered by the water users in Kansas, mostly irrigating farmers.

The approach was taken to assess the losses in value suffered by the water users in Kansas because we had no ready market for water to which we could turn for the value of an acre foot of water in 1950, 1951 and so on. If we had that, that would have been the most direct way to do it.

QUESTION: I take it your argument for interest here is that there were -- that the money -- I'm sorry, that the water you didn't get in the 45 years in which the violations went on is translatable into crop loss, crop loss is translatable into money and, in order to be made whole on the money, you should be made whole on the loss of use of the money. I mean, that's your interest argument, isn't it?

MR. DRAPER: That's exactly right, Your Honor.

QUESTION: Okay.

MR. DRAPER: Yes.

QUESTION: Did you -- was there an inflationary factor added so that the damages, say for the early sixties were computed in 1995 or year 2000 dollars?

MR. DRAPER: For the years that were denied prejudgment interest treatment, 1950 through 1968, the Special Master did adjust those, at the suggestion of Colorado, not on the basis of principal, but simply because Colorado was not objecting to that. Those are adjusted, which is only a fraction of the time value of money that occurred from that period to the present.

QUESTION: But the people who are paying are really the present taxpayers, and they're paying for something that older generations of taxpayers maybe didn't do, and it could be horrendous amounts, if you have a violation that's 200 years old, as you could in a different case.

Rather than getting into all that, why wouldn't we assume that the States didn't want to unless they said it specifically in the compact?

MR. DRAPER: Your Honor, there are limits to keep such amounts from --

QUESTION: Why?

MR. DRAPER: -- becoming too large. The principle that was largely addressed in the last time that the case was before the Court, that is, laches, the question was, was there unreasonable delay in prosecuting Kansas' claim by Kansas? That was contested --

QUESTION: No, no, I suppose it's nobody's fault, you know. It just -- what I vision, and I want the answer to this, and I'll exaggerate it, but hoards of lawyers in State Attorneys Generals offices combing through the files of ancient documents looking for violations, primarily to receive for the State Treasury vast amounts of money coming out of compound interest. I mean, you see, that's the horror.

Now, what prevents that from happening, once we get into the habit of awarding prejudgment interest?

MR. DRAPER: The Court has stated that the determination of prejudgment interest is subject to the Court's discretion. It is also subject to consideration, again, of the time that has passed, and we are looking here at not simply any claim that could be found in the cellar of a courthouse.

This is the claim of the State of Colorado against the State of Kansas, or, I'm sorry, the State of Kansas against the State of Colorado, and it is Colorado, along with Kansas, who are the signatory parties to this compact, and the compact itself, in article 7(a), equates the State with its water users.

If I could turn your attention to that particular provision. It is in the topside brief, the blue brief, in the appendix at page A-11. Beginning at the bottom of A-10, article 7(a) of the Arkansas River Compact says, each State shall be subject to the terms of this compact. Where the name of the State or the term, State, is used in this compact, these shall be construed to include any person or entity of any nature whatsoever using, claiming, or in any manner asserting any right to the use of the waters of the Arkansas River under the authority of that State.

We believe that this equates the water users in both States with the States themselves both in terms of the actions in Colorado by Colorado water users constituting the actual violation by the State of Colorado and, on the other side of the State line, the losses suffered by the individual farmers in Kansas, being the losses that the State of Kansas, as State, is entitled to claim for breach of the obligation that Colorado had to the State of Kansas.

In further support of that point, I would point to a second provision of the compact. It's in the same appendix at page A-5, and this is in the famous provision -- at least famous to those of us who have been working on this case -- 4(d). This is the provision that makes explicit the obligation of Colorado, and it's the proviso in the last five lines of Article 4(d) that is important.

It reads, provided that the waters of the Arkansas River, as defined in Article 3, shall not be materially depleted in usable quantity or availability for use to the water users in Colorado and Kansas under this compact by future development or construction.

We believe that it is not the proper characterization of this case that it is going to be -- that is a problem for the individuals, either as taxpayers in Colorado or the water users in Kansas, but that these are State obligations, and they need to be settled between States on fair, compensatory rules that are normally applied in contract situations, because, as we know, compacts are contracts between the compacting States.

QUESTION: Is it the case that there is no market for an acre foot of water in Kansas? Is there such a price today that could be paid if a farmer were to go out and buy water from another farmer who had some? Would there be a price paid per acre foot?

MR. DRAPER: Your Honor, there is no specific evidence in the record on that, but from my knowledge the water tends to be transferred with the land, and it is used primarily for irrigation purposes.

QUESTION: Well, in today's world I think we all are aware that water can be severed from the land and sold, so much an acre foot, for application on a different piece of land.

MR. DRAPER: That's correct, Your Honor. However, that information was not available to a sufficient extent for the years 1950 and later to --

QUESTION: Well, presumably you'd take the current value and then adjust for values in earlier times.

MR. DRAPER: Our experts sought to determine from specific data applicable to each year what the losses were, what the crop prices were, what the appropriate interest rates were for that year and each following year, to get a --

QUESTION: It just seems like such a complicated, not obvious measure of damages. I was just struck by how strange it was, really, to try to measure damages here in dollars based on some estimated crop loss to individual farmers.

MR. DRAPER: It is a daunting task at times, Your Honor, but we wanted to present to the Special Master the most specific data that we could possibly find.

QUESTION: Does Kansas have the riparian system of water rights, or the appropriated system?

MR. DRAPER: Appropriated system, Your Honor.

QUESTION: There's one thing on the question of how far the compound interest could compound that I don't understand, and I was -- I want to ask the other side the same question, but maybe you can explain it.

As I understand, the Master decided that the interest ought to run from 1969, which was the date upon which each side either knew or should have known that a violation of the compact was taking place.

MR. DRAPER: Yes.

QUESTION: The Master also decided that there had been no undue delay on the part of Kansas in not instituting suit for another, what was it, 17 years, something like that?

MR. DRAPER: That's correct. It was -- suit was filed at the end of 1985.

QUESTION: Indeed. The two dates, or the findings with respect to the two dates struck me as being at least possibly in tension. I'm not suggesting that Kansas would have been obligated to file suit, of course, in 1969, the year that it first knew or should have known, but it also seems the case that there was rather a long gap between that time and the time that Kansas actually did institute suit, and yet the Master found no undue delay.

Now, all of this may be relevant if we determine that interest should run and try to come up with some determination about how to take the point at which it begins to run. Is there some tension between the knew or should have known in '69, and the no undue delay for a lawsuit that wasn't filed for 17 years?

MR. DRAPER: I believe there is some tension, Your Honor. We believe that the way that the Special Master has applied the lack of knowledge in the two areas, one area being where there was unreasonable delay, and the other area being whether prejudgment interest should be awarded, is inconsistent.

We suggest that it is impossible to find unreasonable delay if the plaintiff was unaware of the claim. That was essentially --

QUESTION: You mean, unaware in fact, even if the plaintiff should have been aware?

MR. DRAPER: That would go into the reasonableness of the delay. Should -- knew or should have known would be the complete statement of that test.

QUESTION: Okay.

QUESTION: In response to my question, my concern that they would dig up old claims and then have horrendous interest, you said, well, there's a lot of discretion in the Master to prevent that from happening. That's what he did here. He said, we're not going to give you the money between 1950 and 1968. Now you're complaining about that, so if he doesn't have discretion, then why isn't my horrendous imaginary hypothetical a real problem?

MR. DRAPER: Well, the cardinal rule, Your Honor, is complete compensation.

QUESTION: Well, fine. If it's complete compensation, then we're back to my problem, which is digging up very old claims from 1780 or something, and we discover that all of the taxpayers of Massachusetts are going to pay $5 billion to New Hampshire because they found a claim from 1782 and there's compound interest.

MR. DRAPER: I would suggest only, Your Honor, that there are methods by which the Court has dealt with significant or unreasonable delay in its interstate cases --

QUESTION: Yes, that's what I'm interested in, the cases where you can't say laches. They dig up some good claim, and now you previously said they have a lot of discretion on the prejudgment interest part. Now you're saying they don't have discretion on the prejudgment interest part.

MR. DRAPER: Well, I should clarify my position. I would say that there -- while there is discretion, it is a very limited scope, given the authorities of this Court, and that it is to be exercised according to a system of principles that have been set out by this Court.

QUESTION: Mr. Draper, why --

QUESTION: Certainly somebody bringing a 200- year-old claim would find a formidable barrier in the doctrine of laches, would they not?

MR. DRAPER: Yes, Your Honor. This Court in 1995 did not go so far as to decide that laches is applicable, but found that in this case there was unreasonable delay and that, either through the doctrine of laches or acquiescence, there was the ability of the Court to deal with stale claims.

QUESTION: Mr. Draper, could I come back to Justice Souter's question? I don't understand how it is that Kansas should not have known enough to bring the suit until 1987, but Colorado should have known that it was wrongfully taking too much water 17 years before that? It seems to me the two should go hand in hand.

MR. DRAPER: We believe that the existence or nonexistence of knowledge on the part of Colorado is absolutely irrelevant as a matter of law, and we have taken no position on what the right date might be if --

QUESTION: Well, how can that be? The whole purpose of the common law rule against prejudgment interest for unliquidated claims was because of lack of knowledge to the -- by the defendant. That was the whole reason for the common law rule, and if that's the reason, then you're asking us to adopt a new rule here. How could Colorado have known about prejudgment interest in an interstate compact dispute?

MR. DRAPER: Your Honor, that whole line of reasoning, we assert, has been discredited. It is not logical. It has faced trenchant criticism, to use the words of this Court, in the 1995 case, City of Milwaukee, and we believe that this is, as the Court has pointed out, essentially a contract dispute. One must keep in mind that it is sovereign States who are the contracting parties, but the guiding principles --

QUESTION: So shouldn't that, Mr. Draper, mean that there should be some modification? You say the common law rule has been abandoned in many States because it's illogical, the distinction between liquidated and unliquidated damages.

On the other hand, as Justice O'Connor's starting questions indicated, we are dealing here with a peculiar animal, a suit between two States, so why do you insist that you take the, what would be the rule for an ordinary contract in the State that's abandoned the liquidated-nonliquidated and take that over, jot and tittle, to the interstate suit?

MR. DRAPER: Because, Your Honor, it would violate the principle that this Court set out in 1987 that a remedy would be provided by this Court for violation of an interstate compact. If you do that, the Court is not providing a complete remedy.

QUESTION: Well, but that -- doesn't that sort of beg the question? If we start with the assumption that there is some discretion over the matter of interest, why couldn't we resolve the tension between the findings with respect to those two dates with a rule like this, that interest will be awardable from the time at which the violation either was or should have been known, and from the time after that at which suit was instituted, to avoid the problem of allowing a State, as apparently Kansas did here, to sit on its rights from 1969 to whatever it was, 1977?

MR. DRAPER: There are two answers to that, Your Honor --

QUESTION: '87. '87, yes.

MR. DRAPER: There are two answers. One is that this Court has already determined that there was not unreasonable delay in bringing this suit, and the Special Master did not base in any way his decision to limit prejudgment interest on any delay other than that considered in the laches analysis.

QUESTION: Well, I know that, but why shouldn't he have? I mean, it just seems odd whether the delay -- call the delay undue or not, the fact is there was a 17 or 18-year delay from the time at which Kansas could have brought this lawsuit. Why should Kansas be rewarded with interest for that delay, even if it was not undue?

MR. DRAPER: It's not a reward. It's simply compensation. There is no windfall.

QUESTION: Thank you, Mr Draper.

Mr. Minear, we'll hear from you.

ORAL ARGUMENT OF JEFFREY P. MINEAR

ON BEHALF OF THE UNITED STATES, AS INTERVENOR

MR. MINEAR: Mr. Chief Justice, and may it please the Court:

The United States would like to address two issues with respect to the Master's proposed remedy. First, the Master's calculation of damages here does not violate the Eleventh Amendment and, second, this Court should allow prejudgment interest on a discretionary basis in interstate compact suits.

QUESTION: When you get to the second point, and I don't mean to spoil your order, but will you sort of take up where we left off on the problem that we -- some of us seem to be having in finding that there was knowledge, or should have been knowledge in '69. We don't have a suit for a couple of decades, and interest is piling up. That's our problem, and I -- so will you address that when you get to point 2?

MR. MINEAR: I'd be happy to address that now, in fact, to preserve the continuity of the argument.

Your Honor, first of all, the Master's finding with respect to knowledge here related to Colorado's knowledge, and not Kansas' knowledge, and Colorado had knowledge that there was the prospect of some violation because it had complaints within its own State borders with respect to groundwater pumping depletion, depleting stream flow and, as you may recall, that is the basis for liability here, that Colorado had allowed its citizens to pump groundwater which reduced the State line flow.

QUESTION: No, I realize that. Did he, did the Master specifically find that Kansas was not under an obligation to have known in '69?

MR. MINEAR: He found that Kansas did not know at that time.

QUESTION: Did not know in fact?

MR. MINEAR: Did not know in fact.

QUESTION: And I suppose Colorado did not know in fact, but he found that Colorado should have known in '69. Did he make a finding that it was not the case that Kansas should have known in '69?

MR. MINEAR: I do not believe that he did. I don't believe that he specifically addressed that issue.

QUESTION: It would seem the same would apply. I mean, people from Kansas never go to Colorado? I mean, what's --

MR. MINEAR: Well, it's hard to say what the state of knowledge was in 1968, and to the extent there was some lack of proof here, I think the burden would fall on Kansas to have --

QUESTION: I mean, why can't we just make the assumption that if one side knew or should have known, the other side knew or should have known?

MR. MINEAR: I do think that we simply can't assume that --

QUESTION: Farmers know who's drilling wells, and so forth.

MR. MINEAR: On the other hand, though, the Colorado, for instance, had commissioned a study. It had done its own internal studies. I believe in 1965 it had begun to license groundwater pumping, so it's not clear that everything that was known to one sovereign would necessarily be known to another sovereign.

QUESTION: Let's assume, just -- and I think we've got your point, but assume for the sake of argument that Kansas would have been under the same duty to know that Colorado was, and that '69 is the date.

The case as it comes to us, I take it, is a case in which there is no question about Kansas being thrown out of court for suing too late, but it may well be that, by waiting so long to sue, Kansas should not be entitled to the same running and compounding of interest that it would have been entitled to if it had sued more promptly after the 1969 date. Why shouldn't we take that possibility into consideration in fashioning the rule as to when the interest starts to run?

MR. MINEAR: I think it's entirely fair to take that consideration into account. The United States' view with regard to prejudgment interest is that it should be allowed in interstate compact suits, but on a discretionary basis, based on the facts of the individual case.

QUESTION: Mr. Minear, one thing seems to have gotten lost in this discussion. I thought that it was -- when Colorado, or perhaps Kansas, knew that Kansas water was being depleted, and when you were able to prove in court how much, wasn't there something in the record that until there was computer modeling you couldn't estimate with any degree of accuracy --

MR. MINEAR: That's --

QUESTION: -- how much was involved, and that wasn't until the eighties.

MR. MINEAR: That's correct, Your Honor, that also there was difficulty in determining exactly how much water had been depleted. It wasn't clear when that knowledge was available, but it certainly was after, we believe, 1968.

QUESTION: No, but couldn't they have brought a suit in equity to stop depletion, and if they had done that, the damages wouldn't be running, we wouldn't have the interest question.

MR. MINEAR: Well, I agree with that as well, and again I think this focuses --

QUESTION: So the fact that they may not have been able to prove the precise predicate, which is the modeling predicate for the computation of money damages now, doesn't prove that they shouldn't have sued earlier.

MR. MINEAR: Your Honor, I agree with all of the points that are being made here, and the United States wishes to emphasize the principle that a rigid rule one way or another with regard to prejudgment interest is what ought to be avoided here. We do think these factors are relevant in considering what is the appropriate level of prejudgment interest.

QUESTION: Well, why not do the simplest thing? They're States. They can say what they want in the compact. Just say, the traditional common law, no interest on, no prejudgment interest on unliquidated damages, or whatever, applies, we assume it in the contract, compact, unless they work it out and say to the contrary.

MR. MINEAR: Your Honor, because I think that doesn't adequately address the common law rule, which I think we should look to the Restatement of Contracts in stating the rule in a compact case.

That's the closest analogy to the contract situation, and in the Restatement of Contracts, since 1932 the rule has been that, where damages are a fixed sum of money, or a performance that has a fixed value, prejudgment interest does apply, but in those cases, in all other cases prejudgment interest is applied under a rule of reasonableness, based on the aspects, the circumstances of the particular case.

So our position really simply suggests that the Restatement rule is what ought to be applied here. Both States would have been on knowledge of that principle as a background principle in this case.

I would like to address the Eleventh Amendment issue, because I think that also merits this Court's concern. The Master properly determined, in accordance with this Court's decision in Texas v. New Mexico, that Kansas is entitled to money damages as a basis for Colorado's compact violations, as a remedy for the compact violations, and he calculated those damages by determining the value of the water that Kansas was entitled to but did not receive and, in making that determination, he evaluated the cost to Kansas farmers, which was reflected in two matters, increased groundwater pumping costs, and also lost crop production.

Colorado has challenged that aspect of the award on the basis that it violates the Eleventh Amendment, and we disagree. Our view is, the Master's determination of damages here was simply by reference to what the water was worth to the Kansas users, not to provide any sort of compensation for the Kansas users themselves.

QUESTION: Well, you mean Colorado can't turn around and give it to the Kansas users who had been deprived of it, if they're still around?

MR. MINEAR: You mean, could Kansas turn around and give the money --

QUESTION: Right. Right.

MR. MINEAR: Yes. Yes, I believe that Kansas could do that if they wished.

QUESTION: So what's the difference between that and these users just suing Colorado themselves?

MR. MINEAR: Well, it's not clear that the users individually have a claim against Colorado. Kansas does have its own claim predicated on the compact.

QUESTION: Let's assume they don't. Let's assume they don't. Let's assume it would violate the Eleventh Amendment for these farmers who are deprived of the water to sue Colorado. Why does it make any sense to allow Kansas to sue on their behalf, and then turn around and give them the money?

MR. MINEAR: Because Kansas is not suing on their behalf. Kansas is suing for the performance that was due to it under the compact. Kansas is asserting, in essence, its own claim, which was for delivery of a usable quantity of water, usable water at the State line, and --

QUESTION: Why shouldn't the measure of damages, then, relate to what Kansas as a State lost? It did, in part, lost income taxes and that kind of thing. I mean, why would the measure be specifically what each farmer would have lost in terms of dollars?

MR. MINEAR: The Master did include State income taxes and secondary taxes.

QUESTION: I can understand that, but it's hard to know why the measure of money damages should be based strictly on, or in part on what the individual farmer would have lost if the State doesn't plan to turn around and give it to the farmer.

MR. MINEAR: Well, Your Honor, the reason why is, we have to determine what was the value of the water at the State line, and as you pointed out before, there is no market for the water like there would be a market for so many bushels of wheat.

QUESTION: Why does the United States have any position or interest as to what kind of damages Colorado pays Kansas, or the Eleventh Amendment, for that matter?

MR. MINEAR: Well, Your Honor, we have a general interest in these original actions to make sure that there's a fair allocation of damages and rights and responsibilities.

QUESTION: Why is that? Where does that interest stem from?

MR. MINEAR: We are parties to these suits frequently, most likely in issues revolving, involving liability. We are a party to this suit because of our operation of the upstream reservoirs.

QUESTION: But does the award of damages from Colorado to Kansas in any way affect the Government's operation of those upstream reservoirs?

MR. MINEAR: It would affect them if it were repayment in water. Here, money is being used as a substitute for water, and we thought it appropriate to weigh in on that question with respect to the position that the Master has taken, and our position is very simply, simply that we have to look to what the value of the water was at the State line.

QUESTION: Well, my problem is, if you do it in this kind of suit, which is under a compact, I presume you would have to do the same thing in a parens patriae suit by a State against another State, wouldn't you? Wouldn't you apply the same rule?

MR. MINEAR: Not necessarily Your Honor, because the compact situation involves a situation where there is a clear claim by the State under the -- an agreement that is entered into by the States.

QUESTION: Thank you, Mr. Minear.

Mr. Robbins, we'll hear from you.

ORAL ARGUMENT OF DAVID W. ROBBINS

ON BEHALF OF THE DEFENDANT

MR. ROBBINS: Mr. Chief Justice, and may it please the Court:

I would like to turn initially to the prejudgment interest issue, since that seemed to draw the Court's attention early on. I would ask you to look at Article 4(d) that Mr. Draper drew your attention to, because he only asked you to read the second half of Article 4(d).

QUESTION: What page is that on?

MR. ROBBINS: That's on page A-5 of the Kansas opening brief.

Article 4(d) describes for the parties and for the Court what the parties actually intended, and that was not to impede or limit development of water within the Arkansas Basin, subject only to the proviso, both States understood that there would be additional development within the basin, and both States understood that there would be a risk that that development might cause material depletion to usable flow.

QUESTION: Are you now summarizing article, section (d), Mr. Robbins?

MR. ROBBINS: Yes. Yes, Your Honor. I did not take the time to read the entire article, Your Honor.

The -- later in the compact, in the enforcement provision, the two States address the manner in which they are going to determine when usable flows might be depleted by setting up an interstate agency called the Arkansas River Compact Administration, and the Arkansas River Compact Administration is charged with investigating concerns about material depletions to usable flow.

There was no contemplation in this compact that Colorado -- I want to draw a distinction between other compacts that States have entered into, the Colorado River Compact, where the obligation to deliver water is set out at 75 million acre feet over 10 years by the Upper Basin, the Rio Grande Compact, where there is a table of relationship located right in the compact, where each signatory understands what it must do each year to comply with the compact.

In the case of the Arkansas River Compact, there was no obligation on the part of Colorado to deliver a particular quantum of water in any year. Rather, both States sought to have the opportunity to continue to develop unused waters, and both States agreed that they would be vigilant, working through the interstate agency, to investigate when and if a violation or an under delivery was occurring.

Now, no investigation was requested. Under the compact, under Article 7(h) -- 8(h), I'm sorry, until 1985. Prior to that time, both States cooperated together and worked together on the operation of the river. Neither State expressed an understanding that there was any way in which the river was being depleted by activities in Colorado or in Kansas.

Remember, if you look again at Article 4(d), it applies to both States, not just Colorado, so what we need to do here is understand what the deal was, and the deal wasn't that Colorado was automatically guaranteeing that it was going to deliver a certain amount of water every year, which would be what would be assumed by the argument which Kansas has made, and therefore failing to deliver some amount over a 40-year period, we automatically should owe them significant damages, when, in fact, the concept here was that both States would work to allow full development of the system, and both States would be responsible to ensure that if overdevelopment occurred in one or the other State that affected usable flows, an investigation would be undertaken and appropriate enforcement undertaken.

So in our view, at a minimum, on prejudgment interest, until 1985 Colorado knew no more than Kansas. There is nothing in the record to suggest that Colorado did. The Master --

QUESTION: But they had a report done, which Kansas didn't. Didn't they have a report done?

MR. ROBBINS: Absolutely. We -- Justice Scalia, we certainly did. That report did not deal with the issue of material depletion to usable flow. It was looking, rather, at the general hydrology in the basin. It did not look at other impacts that were affecting the flows of the --

QUESTION: Well, I mean, it was clear from that study that flow would be affected, wasn't it? I mean, you didn't have to be a water expert to understand that the inevitable consequence of that study was that you were taking water from the river.

MR. ROBBINS: There is no question about that. Your point is exactly well-taken, but remember, we were entitled to take additional water from the river under Article 4(d), subject only to the constraint that we not deplete usable flows materially.

QUESTION: Okay, but you've also got a finding which you seem to -- I think you want to ignore here, that you should have known in '69. What do we do with that?

MR. ROBBINS: Justice Souter, the finding that the Master made, in our opinion, is contrary to this Court's 1995 ruling. We argued in 1995, the two States, about the very Wheeler report upon which the Master relied. We argued that that report should have given the States notice of the existence of a potential problem under the compact, and this Court found, different than the master's first report to you, that the evidence was vague and conflicting.

It is our view that in fairness, if it was too vague and conflicting to find that Kansas should have known in 1969 and brought suit at that time if it was concerned, or, better, referred it to the compact administration, that in fairness Colorado should be held to no higher standard of knowing that it was in fact depleting usable flows.

QUESTION: Well --

MR. ROBBINS: You're asking us to actually know there were depletions occurring when you did not find that Kansas was even charged --

QUESTION: Okay, but is that properly before us here?

MR. ROBBINS: I believe it is, yes.

QUESTION: I hadn't realized your claim went that far, but I will assume it does.

MR. ROBBINS: So it is our view that prejudgment interest ought not be -- if you are to consider it as a remedy in this case, it ought not be held against Colorado at a minimum until 1985, the time at which there was official notice that, in fact, Kansas was asserting that there were depletions material depletions --

QUESTION: And what's your position after 1985?

MR. ROBBINS: Well, I --

QUESTION: Suppose the shoe were on the other foot, and Colorado was suing some other State?

MR. ROBBINS: I do not believe, Justice O'Connor, that prejudgment interest is appropriate in this context until damages are liquidated. There was no contemplation between the States that there would even be a monetary consequence in these compacts. There might be injunctive relief. You have to think that in 1949, that the law was such that the common law was generally accepted to be damages only suffered, prejudgment interest on liquidated damages.

The parties never discussed anything to do with damages in this case. The parties contemplated only that they would work together through this interstate agency, the compact administration, and would seek to ensure that depletions to usable flow didn't occur.

QUESTION: When I suggested that, the Government said -- it sounded sensible. They said, well, the prejudgment interest rule has always been the common law, just part of the common law, and why should we -- and you ought to just stick to that.

MR. ROBBINS: I agree completely with that, and I think the cases cited by my loyal opposition are not -- do not stand for the proposition. I do not believe the City of Milwaukee v. National Gypsum stands for the proposition that prejudgment interest is applicable in every dispute that involves some form of a contract.

In fact, I believe that stands for the proposition that if you are in an admiralty circumstance, and if you know or should have known that, in fact, damage had occurred, and in that case there was a Great Lakes carrier sitting at the bottom of the harbor, and the good faith was about who put it there, not the good faith that Colorado's talking about here today, which was, we didn't have a clue, I don't think it's appropriate.

QUESTION: So your basic -- one part of your basic rule is, if the plaintiff isn't barred by laches, then the defendant shouldn't be hit with prejudgment interest.

MR. ROBBINS: That's correct.

QUESTION: All right.

MR. ROBBINS: If we don't have a tolling --

QUESTION: But that can't be the whole rule. What's the principle that you think we should adopt in respect to prejudgment interest in a suit between two States?

MR. ROBBINS: In my view, until a damage, the damages are liquidated, there should not be prejudgment interest in this case, and I think that's --

QUESTION: Well, in other words --

QUESTION: Unless it's specifically mentioned in the compact.

MR. ROBBINS: Unless it's described in the compact, that's correct.

QUESTION: You say until damages are liquidated. Until there's a judgment, then.

MR. ROBBINS: That's correct.

QUESTION: There would be no prejudgment interest.

MR. ROBBINS: That's correct.

QUESTION: I just want to get clear on the point that you and I discussed a minute ago on your exception to the Master's finding that you should have known in '69. Which one of the four Colorado exceptions raises that in your judgment? Three seems to be the closest to it.

MR. ROBBINS: Well, I --

QUESTION: Your number 3.

MR. ROBBINS: I believe that's the closest one, that's correct.

QUESTION: Okay.

QUESTION: What number?

QUESTION: Three.

MR. ROBBINS: Number 3.

QUESTION: You don't contest post judgment interest?

MR. ROBBINS: No, ma'am. You determined that very clearly in Texas v. New Mexico.

QUESTION: But that's -- and that's something that this Court determined. It didn't come from the statute that governs post judgment interest for district courts.

MR. ROBBINS: That's correct, Justice Ginsburg.

QUESTION: So --

MR. ROBBINS: We're not here to argue to you that you do not have discretion in these interstate original proceeding actions. You do. You have discretion to formulate what you believe to be is the appropriate remedy. I think you made that very clear in Texas v. New Mexico in response to the Texas claim that you were barred from awarding post judgment interest unless there was a statute or other authority to grant it, so I -- we don't dispute that, no, Your Honor.

QUESTION: You want us to say that we should apply the common law rule?

MR. ROBBINS: That's correct.

QUESTION: Why is -- should that be different from what we held in the Milwaukee case for admiralty?

MR. ROBBINS: Well, the circumstances are very different. In the Milwaukee case the factual circumstance is different. There was knowledge on behalf of Milwaukee. Their good faith that they didn't know something was --

QUESTION: Well, but why should admiralty as a general classification be treated differently than the common law? Of course, the cases will always differ.

MR. ROBBINS: Well --

QUESTION: Have varying facts.

MR. ROBBINS: -- I would argue to the Court, Justice Kennedy, that the situation in the Milwaukee case was a commercial transaction. In this -- where whatever was occurring was understood to involve money damages.

In this case --

QUESTION: So as you read Milwaukee, if two ships collide there's no -- well, of course, I don't know how you'd get prejudgment --

MR. ROBBINS: They didn't tie the ship up right, and the argument was whether the wharfinger had failed to provide an adequate berth, or whether the owner of the ship had allowed it to --

QUESTION: Well, but if you say the facts of Milwaukee are different than this, I -- that doesn't answer why admiralty and common law should go on two different paths.

MR. ROBBINS: Well, they always have. Admiralty has --

QUESTION: I'm asking, why, in this context of prejudgment interest? What is it about an admiralty case that makes prejudgment interest proper, and not in a common law case.

MR. ROBBINS: For over --

QUESTION: Is it sophistication of the parties or something?

MR. ROBBINS: For over 150 years, prejudgment interest has been a part of admiralty judgments.

QUESTION: Well, but we now have Milwaukee, that confirms that.

MR. ROBBINS: That's correct.

QUESTION: Why should there be a difference?

MR. ROBBINS: Because the common law traditionally viewed the necessity of the defendant understanding that, in fact, an injury was occurring, so that the defendant could either --

QUESTION: You mean, common law defendants are not as smart as admiralty defendants?

(Laughter.)

MR. ROBBINS: Well, I'm afraid I can't fully illuminate you on the history of --

QUESTION: Mr. Robbins, I think that your point is that the States thought that they were incorporating common law rather than admiralty law.

MR. ROBBINS: I -- there is absolutely no way for them --

QUESTION: Isn't that your --

MR. ROBBINS: -- Justice Scalia to have done anything else.

Thank you.

QUESTION: Well, yeah, but I mean --

QUESTION: When do you --

QUESTION: No, but I'm asking whether there should be a difference.

MR. ROBBINS: You're asking me a very hard philosophical question. I can only respond, Justice Kennedy, that historically --

QUESTION: We have a hard philosophical question before us in distinguishing Milwaukee. That's the point.

MR. ROBBINS: I can say that in my judgment the states did not contemplate that prejudgment interest was to be considered. In fact, they didn't even discuss damages.

QUESTION: What about the provision of the Restatement, which came out, I guess, in 1932? I mean, that is supposed to be a summary of common law, is it not?

MR. ROBBINS: There were certainly -- there have certainly been cases that have described the fact that there was no rational basis in a commercial transaction between awarding prejudgment interest on liquidated damages, but not doing so on unliquidated damages if the intention of the litigation was to restore the plaintiff fully to the position it would have been in.

QUESTION: I mean --

MR. ROBBINS: In this circumstance, however, that doesn't really work very well, because, as was described by counsel for Kansas, the damages which Kansas seeks run to individuals, and Kansas seeks the money from the general Treasury of the State of Colorado.

Our view is that that, in and of itself, works a problem because, as we understand it, the Eleventh Amendment was intended to protect State Treasuries from enormous damage --

QUESTION: Oh, I don't know about the Eleventh Amendment. I mean, the -- but the -- my thought was, and this might be totally wrong, that it isn't that the -- you know, the fact that something was done in the Middle Ages is not, whoever Holmes said, a reason for following it, so let's start with the Restatement rule. Why shouldn't that be the rule? I think it should be the rule in normal civil cases.

If there's something different about this one, it must stem from the fact that in a very old case what we're talking about are two groups of taxpayers, neither of whom was around at the time, shifting money between each other and stirring up a lot of trouble between their States.

Now, is there a basis for distinguishing that and if so, what, and why?

MR. ROBBINS: In my view, the distinction is that the agreement that was reached between the two States was, 1) that contemplated the States would work together to ensure that additional usable flows did not -- depletions to usable flow did not occur, and that there was no contemplation that there would be exchanges of money between the two States as a result of the compact.

There's nothing to suggest that either State contemplated or discussed the fact that there would be a monetary consequence. Colorado acknowledges this Court's decision in Texas v. New Mexico that damages can be, under certain circumstances, awarded in order to --

QUESTION: Are you going to discuss that, the proper measure of damages?

MR. ROBBINS: I would --

QUESTION: Your time's flying away here, and you haven't said a word about it. What do you think the proper measure of damages should be?

MR. ROBBINS: Thank you, Justice Scalia. I do not believe that Texas v. New Mexico addressed the standard of damages. You merely made the statement in that case, this Court, that damages would be appropriate, and would be appropriate in certain circumstances in interstate litigation.

The proper measure of damages in our view are those damages which represent damages to the sovereign and quasi sovereign damages which would be damages to the general economy. We do not agree, and strongly disagree, that summing the individual damages -- and I want to make a point here. We disagree with the United States. What the Master did was not use damages to farmers as a measure of the value of water. You will see in his report that he specifically found that he was relying upon the specific damages to those farmers.

QUESTION: But you say the general economy. You just have all sorts of causation problems there, if you try to prove damage to the general economy, don't you?

MR. ROBBINS: The reason that Colorado engaged in the evidentiary proceeding to determine what the damages were to farmers and to the farm community was to permit the assessment of general damages, and the Master made a finding about general damage to the Kansas economy which is called secondary damages, and it was, in fact -- that number was derived and is contained in his report. We do not disagree that damages to the general economy are part of the sovereign and quasi sovereign damages that the State of Kansas suffered.

In addition, he identified and found the amount of lost tax revenues that the State suffered, which in our view is also an appropriate damage.

QUESTION: Why aren't the farmers' losses part of the loss to the general economy? I gather what you're considering loss to the general economy is the farmers had less money, and therefore didn't buy as many luxury goods at the grocery stores. I don't know why you should take into account the latter, the secondary effect of this taking of water, and not take into account the former, the more immediate effect of it.

MR. ROBBINS: The problem that we have is this. In North Dakota v. Minnesota, you set out a fairly bright line between what a State could, in fact, recover in the way of damages and what it could not.

In this case, as the record, as the briefs made clear, if you calculate the specific amount of damage that each individual suffered, and if you award prejudgment interest on the rate at that, that that individual would have enjoyed or paid if he had had the money, or obtained if he'd had the money, and you add all that up, and simply say, that is the amount of money that the State of Kansas is entitled to, and then, reading Texas v. New Mexico, you say a State can decide in the public interest, which is the term used in Texas v. New Mexico, they can return that money to the individuals, you have simply permitted, in the context of trying to determine damages, a back door to avoid North Dakota v. Minnesota.

QUESTION: But you leave one thing out in your argument, at least I think you do, and that is in this case the compacts -- the compact was entered into specifically for the purpose of protecting the individual water users as well as for protecting whatever the sovereign interest of the State as such was, so that the -- I think the reading that you're trying to give it ignores the object of the compact in, frankly in protecting the farmers.

MR. ROBBINS: Justice Souter, I have a different take on Article 7(a) of the compact.

QUESTION: That's -- and that's what I want to --

MR. ROBBINS: And the reason I do is this. All compacts, after your decision in Hinderlider, the Court's decision in Hinderlider v. La Plata and Cherry Creek Ditch. All compacts tie the interest of the State and the interest of the water users together. There was no more an argument within this country whether or not water users could say, my interest is independent of the State's interest, because that was the whole issue in the Hinderlider case.

What -- 10 years later, when this compact was entered into, the history was that the States had been before you several times. The last time it involved water users in Kansas suing water users in Colorado, Colorado petitioning for this Court's protection to stop the inter -- the fight between the individual ditch companies and individuals in the two States.

I believe Article 7(a) was placed in the compact for the purpose of making certain that all of the people in the Arkansas basin who were going to be bound by it understood on the face of the compact that they would be bound thereby, if for no other reason --

QUESTION: Well, but if they are bound by it, I don't see why, by a parity of reasoning, their interest may not be considered in valuing the violation. In other words, if they're bound by it I suppose either they get a benefit or the State may legitimately measure a benefit by reference to their interests.

You want to have it one -- you don't want to have it -- you want to have the benefits but not the burden.

MR. ROBBINS: We understand that we have the burden. We understand, the State of Colorado understands that it has to deliver water to the State of Kansas, and has endeavored to do so.

What we do not want to do is see damages paid to the State of Kansas that represent individual damages impermissible under the Eleventh Amendment from being brought against the State, summed up, and paid to the State of Kansas.

In my view, the way in which this case has unfolded, there is a significant risk, if one assumes that allowing a State to distribute any damages it receives in the public interest, that a State can simply, by clever pleading, fail to announce that it is seeking the damages of the individuals. That was not --

QUESTION: Mr. Robbins, I was thinking when you were making the argument in your brief, of what you would say the Eleventh Amendment means in the kind of claim you say that the Secretary of Labor would bring against a State for violation of the Fair Labor Standards Act where the recovery would go directly into the pocket of the affected worker. Are those suits impermissible under the Eleventh Amendment?

MR. ROBBINS: That is pursuant to Federal statute, and that's a topic that I know this Court has had a significant amount of debate about.

QUESTION: Well, why isn't the compact on the same level as a Federal statute? Congress had to approve it.

MR. ROBBINS: Well --

QUESTION: I assume it has the status of a Federal statute --

MR. ROBBINS: It has been described --

QUESTION: -- so I assume the analogy is exact.

QUESTION: Well, the United States can sue for damages without an Eleventh Amendment problem.

MR. ROBBINS: That's correct, and it has been described as a Federal statute, but it is a --

QUESTION: Well, of course, the United States can, but what you're saying here is, it's not the State. You're not questioning that one State can sue another without an Eleventh Amendment barrier, but you say what makes it no good is that it's for the benefit of the farmers, so similarly, in the Fair Labor Standards Act, the United States is suing, but if you apply your reasoning, the workers are the same as the farmers.

MR. ROBBINS: Justice Ginsburg, I am arguing North Dakota v. Minnesota to you, which -- in which case a lawsuit was filed by the State of North Dakota against Minnesota. They claimed -- they asked for three things. They asked specifically for an injunction, which the Court found was appropriate.

They asked for proprietary damages, or damages to the State itself, which the Court found was appropriate, and they asked specifically for specific damages to individual farmers who were injured by the actions of Minnesota, and the Court found that was inappropriate, because North Dakota was trying to stand in the shoes --

QUESTION: Yes but in this case there is not a claim comparable to your third example. In this case --

MR. ROBBINS: That is absolutely correct, and that's why I say it becomes a matter of pleading. If you are entitled to plead generally, and not speak about the farmers when you file your complaint, but simply seek their damages, and those damages are then permissible to be collected, and then you say, under Texas v. New Mexico, I can distribute them as I wish, if I determine it's in the public interest, I can turn around and give them back.

QUESTION: Was there a compact in Minnesota v. North Dakota?

MR. ROBBINS: There was not, Mr. Chief Justice.

I thank you very much for your time.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Robbins.

The case is submitted.

(Whereupon, at 11:03 a.m., the case in the above-entitled matter was submitted.)