Kelly v. Teton Prairie, LLC

Kelly v. Teton Prairie, LLC, 2016 MT 179 (July 26, 2016) (Wheat, J.; Rice, J., concurring) (5-0, aff’d)

Issue: (1) Whether the district court correctly applied the prior appropriation doctrine; (2) whether the district court correctly found that Teton Prairie failed to establish the elements of the futile call doctrine; and (3) whether the district court erred in issuing an injunction.

Short Answer: (1) Yes; (2) yes; and (3) no.

Affirmed

Facts: Each of the Kelly appellees (“Kelly”) owns property in Choteau County, where they have farms and ranches. Teton Prairie owns property in Teton County, upstream of Kelly on the Teton River. Kelly’s water rights are primarily for stockwater, with some for domestic use. Teton Prairie’s water rights are for irrigation, and are junior to all of Kelly’s rights.

In July 2013, Kelly determined that Teton River flows had diminished such that they were not longer receiving the full extent of their water rights. On July 18, 2013, the Loma gauge recorded .92 mean cfs, prompting Kelly to instruct their attorneys to send call letters to junior upstream water users on the middle Teton River. The next day, the Loma gauge recorded .55 mean cfs, and Kelly’s attorney sent call letters to junior water rights holders on Deep Creek and Muddy Creek. By July 23, 2013, the Loma gauge recorded 0.00 cfs, and remained there through August 6, 2013, although on August 5, 2013, the flows at Kelly’s point of diversion returned to a level that rendered the call unnecessary. At the time of the July calls Teton Prairie was not diverting water, as it was shut down to hay.

Later in August 2013, flows decreased again and Kelly made another call. Despite the call, Teton Prairie continued to divert water. In response, Kelly filed suit claiming wrongful interference of a water right, wrongful diversion of water by a junior water right holder, and requested injunctive relief.

The parties file cross-motions for summary judgment. Teton Prairie argued that Kelly’s August call was futile, and that it was procedurally improper.

Procedural Posture & Holding: In June 2015, the district court granted Kelly’s motion for summary judgment and denied Teton Prairie’s. It found Teton Prairie violated the prior appropriation doctrine by ignoring Kelly’s August 22, 2013 call, and further found the call was not futile because the evidence showed water would have reached Kelly’s point of diversion but for Teton Prairie’s diversion. The court enjoined Teton Prairie from continuing out-of-order diversions after receiving call letters form senior appropriators. Teton Prairie appeals, and the Supreme Court affirms.

Reasoning: (1) Teton Prairie argues the August call was invalid because Kelly made calls only to those junior appropriators who were observed diverting water. The district court properly noted there is no statutory or judicial procedure that senior water rights holders must follow in making a call. If a senior’s water right is injured by a junior’s use, any and all juniors injuring the senior are equally liable for the injury. Requiring a senior appropriator to make call in a strict order of reverse priority is contrary to the purpose of the prior appropriation doctrine. The district court properly applied the prior appropriation doctrine, and Kelly was entitled to judgment as a matter of law.

(2) The futile call doctrine is an affirmative defense that a junior water right holder may invoke. A call is deemed futile if the amount of water needed to meet an appropriation will not reach the senior appropriator’s diversion because of carriage losses. The purpose behind the doctrine is to put water to beneficial use and avoid waste. While Montana has not explicitly adopted the doctrine, it has long recognized that the junior user bears the burden of showing his actions are not injuring the senior user. Here, expert testimony established that usable water could have reached Kelly’s diversions 5-10 days after Teton Prairie stopped diverting, had it done so.

(3) The district court’s injunctive relief was within its authority and sound discretion, and the Court finds no instance of manifest abuse.

Justice Rice’s Concurrence: Justice Rice writes separately to offer additional observation on water law issues for which Montana has no prior precedent. First, he notes that Teton Prairie cited no authority for its argument that a senior user must issue calls in a particular order. While technology may someday make that possible, it is not required and is not currently practical.

Secondly, Teton Prairie argued that Kelly made a “preemptive” call, before flows fell below their allotted rights. It based its assertion on a formula for calculating flowrate necessary to satisfy an animal unit. Kelly points out that their stockwater rights were not adjudicated with flowrates, and Teton Prairie’s use of this formula is a collateral attack on their water rights. Justice Rice finds it unnecessary to use a calculation to resolve the issue presented. The parties’ properties are about 200 river miles apart. Even the expert witnesses could not say with certainty the timing and impact of Teton Prairie’s cessation of water use on Kelly’s properties. The science is currently inexact. But Kelly made the call with reasonable knowledge that the loss of sufficient water was imminent. Justice Rice believes a senior appropriator is entitled to make a call at that point. Requiring the river to run dry before making a call would feed a junior appropriator’s futile call defense.