                                                                                        August 10 2012


                                         DA 11-0626

               IN THE SUPREME COURT OF THE STATE OF MONTANA

                                         2012 MT 170



MONTE GIESE, STEVEN KELLY,
and WILLIAM REICHELT,

           Petitioners and Appellants,

     v.

LEONARD BLIXRUD and BEN HOGE in their
capacities as Water Commissioner for the decree
in Perry v. Beattie, Cause No. 371, Mont. Ninth
Judicial District Court; and JOHN DOES 1 through 5,

           Respondents and Appellees.




APPEAL FROM:         District Court of the Ninth Judicial District,
                     In and For the County of Teton, Cause No. DV 11-009
                     Honorable Laurie McKinnon, Presiding Judge



COUNSEL OF RECORD:

              For Appellants:

                     Stephen R. Brown (argued); Elena J. Zlatnik; Garlington, Lohn &
                     Robinson, PLLP, Missoula, Montana (for Monte Giese, Steven Kelly and
                     William Reichelt)

              For Appellees:

                     John E. Bloomquist (argued); Abigail J. St. Lawrence; Rachel A. Kinkie;
                     Doney, Crowley, Payne, Bloomquist, P.C., Helena, Montana (for Eldorado
                     Cooperative Canal Company and Teton Cooperative Canal Company)

                     Michael J.L. Cusick, Moore, O’Connell & Refling, P.C., Bozeman,
                     Montana (for Patrick Saylor, Farmers Cooperative Canal Company, and
                     Ottis and Sylvia Bryan)
         David Weaver; Nash, Zimmer, Weaver & Grigsby, PLLC, Bozeman,
         Montana (for John E. Peebles and William S. Peebles)




                                 Argued and Submitted: May 16, 2012
                                              Decided: August 10, 2012




Filed:

         __________________________________________
                           Clerk




                             2
Chief Justice Mike McGrath delivered the Opinion of the Court.

¶1       Monte Giese, Steven Kelly and William Reichelt appeal from the District Court’s

order dismissing their Second Amended Petition and their Third Amended Petition and

Request for Certification to the Water Court and Injunctive Relief. We restate the issue

on appeal as whether the District Court erred in dismissing Appellants’ request for

certification to the Chief Water Judge pursuant to § 85-2-406(2)(b), MCA. We reverse.

                    PROCEDURAL AND FACTUAL BACKGROUND

¶2       This is a dispute over rights to use water from the Teton River in Montana. The

Teton River rises in the Rocky Mountain Front in west central Montana and flows

eastward for almost two hundred miles before joining the Marias River and soon

thereafter the Missouri River. Giese, Kelly and Reichelt use water from the lower or

downstream portion of the Teton near Fort Benton, Montana. They claim generally that

they are damaged by diversion practices on the upstream portion of the Teton near

Choteau, Montana, and that their “calls” on upstream appropriators to release water for

their downstream use have been ignored. They first filed a petition for a writ of

prohibition in the District Court in February, 2011, and ultimately filed second and third

amended petitions seeking to halt certain water diversions from the Teton.

¶3       The dispute arises at least in part from the decision in Perry v. Beattie, Cause No.

371, Montana Eleventh Judicial District Court, Teton County, March 28, 1908.1 Perry

decreed the priority date and flow rate of about 40 water right claims in the upper Teton


1
    Teton County is now part of the Ninth Judicial District.
                                              3
River west of Choteau. The District Court appointed a Water Commissioner pursuant to

§ 85-5-101, MCA, to administer the water rights decreed in Perry. The majority of water

users on the Teton (and their successors in interest, including downstream users Giese,

Kelly and Reichelt) were not parties to the Perry case. Giese, Kelly and Reichelt claim

water rights from the Teton with priority dates that are senior to or contemporary with the

upstream rights decreed in Perry. Water right claimants on the Teton are participating in

the Water Court’s on-going adjudication of water rights under Title 85, Chapter 2 of the

Montana Code. While that process is nearing its final stages, it is not yet complete and

the Water Court has not issued a final decree.

¶4    At some time after 19082, the Water Commissioner appointed by the District

Court to administer the Perry decree began diverting most or all of the flow of the Teton

River out of its natural channel and into the Bateman Ditch. That ditch runs roughly

parallel to the natural channel of the river and bypasses a stretch of the river channel

several miles long that is sometimes referred to as the Springhill Reach. The Reach is an

area of natural gravel riverbed near Choteau, and a significant amount of the water

flowing through it will seep into the ground. Diverting the Teton River’s flow through

the Bateman Ditch eliminates the seepage of water in the Reach. While up to 1500

miner’s inches3 of the water turned into the Bateman Ditch is used for a decreed right

currently held by Saylor, no other appropriator uses the Ditch as a point of diversion.

2
  The commencement date of this practice is in dispute, and may have been as late as the
1970s.
3
  A miner’s inch is a method of measuring the flow of water, and 100 inches is equivalent
to 2.5 cubic feet of water per second. Section 85-2-103, MCA.
                                             4
Diversion of water into the Bateman Ditch in excess of the Saylor right has been a

practice of the water commissioner, but one not expressly authorized by any prior decree

of the District Court. See Fellows v. The Office of the Water Comm’r, 2012 MT 169, ___

Mont. ___, ___P.3d ___.

¶5     The decreed Choteau Cattle Company right is one of the most senior rights on the

Teton, and its point of diversion is the Burd Ditch, the headgate for which is located just

downstream from where the Bateman Ditch water re-enters the river channel. Diversion

of water through the Bateman ditch in excess of that needed for the Saylor right has been

justified as necessary to provide water to Choteau Cattle Company. However, Choteau

Cattle has specifically disclaimed any intent to use the Bateman Ditch as a point of

diversion and has taken the position that its senior right should be transported to its point

of diversion through the natural channel of the Teton River. A direct consequence of the

Bateman diversion is to make water available to upper Teton River water users that

would not be available for their use if they were required to allow enough water to flow

through the Reach for the use of senior appropriators downstream such as Choteau Cattle.

¶6     Giese, Kelly and Reichelt challenge the Water Commissioner’s practice of

diverting the flow of the Teton down the Bateman Ditch. They contend that their water

rights pre-date the rights of many upstream Perry decree rights and pre-date the Water

Commissioner’s diversion of the Teton through the Bateman Ditch. They contend that

since the Bateman Ditch was not used to divert the entire river at the time of the Perry

decree, the Water Commissioner lacked the authority to make the diversion.             They

                                             5
contend that they are entitled to have the river flow in the natural channel in the condition

it was in at the time their appropriations were perfected and that the natural channel flow

cannot be altered if it adversely affects their rights. They contend that allowing the

natural water seepage through the Springhill Reach is a key element in the hydrology of

the Teton River; that it is essential to stable groundwater and springs; and that it is

essential to their access to the Teton River water and to the exercise of their water rights.

¶7     Giese, Kelly and Reichelt acknowledge that it is proper to divert Teton water into

the Bateman Ditch as needed to fulfill the Saylor right, which was decreed in Perry and

which has historically been diverted from the river through the Bateman Ditch. But they

contend that diversion of any water in addition to that needed for the Saylor right is not a

beneficial use of water and is unlawful.     They prayed for an injunction to prohibit the

Water Commissioner from diverting the excess water through the Bateman Ditch.

¶8     The District Court dismissed the Second Petition in part because Giese, Kelly and

Reichelt had other remedies through the on-going adjudication process in the Water

Court, or through a petition seeking relief under § 85-2-406(2)(b), MCA. That statute

allows a water user to petition the district court to certify a dispute to the Chief Water

Judge (commonly called the Water Court) for a determination of rights when the dispute

involves water rights not all of which have been conclusively determined in prior court

decrees. The District Court invited Giese, Kelly and Reichelt to re-file their petition and

request certification to the Water Court under § 85-2-406(2)(b), MCA. They accepted




                                              6
the District Court’s invitation and filed a Third Amended Petition seeking certification to

the Water Court and injunctive relief. 4

¶9     The District Court dismissed the Third Amended Petition for failure to state a

claim, on the ground that the petitioners had “not set forth any averments regarding their

water right claims on the lower Teton River,” and the existence and priority of water

claims are the only matters that can be certified to the Water Court under § 85-2-406,

MCA. The District Court determined that injunctive relief was not available because

petitioners had not plead a certifiable claim, and that the Court’s “authority, and

obligation, is to the decreed water users under Perry.” Giese, Kelly and Reichelt appeal.

                               STANDARD OF REVIEW

¶10    A district court’s decision dismissing a complaint for failure to state a claim under

M. R. Civ. P. 12(b)(6) is reviewed as an issue of law to determine whether it is correct.

This Court will construe the complaint in a light most favorable to the plaintiff, deeming

all factual allegations to be true. This Court will affirm the dismissal only if it finds that

the plaintiff is not entitled to relief under any set of facts that could be proven in support

of the claims. Missoula YWCA v. Bard, 1999 MT 177, ¶ 3, 295 Mont. 260, 983 P.2d 933;

Hauschulz v. Michael Law Firm, 2001 MT 160, ¶¶ 7-8, 306 Mont. 102, 30 P.3d 357;

Meagher v. Butte-Silver Bow County, 2007 MT 129, ¶ 13, 337 Mont. 339, 160 P.3d 552.



4
  The Chief Water Judge has the responsibility to administer the adjudication of existing
water rights. Section 3-7-223(1), MCA. The Chief and the Associate Water Judge have
jurisdiction over “all matters relating to the determination of existing water rights” in
Montana. Section 3-7-224(2), MCA.
                                             7
                                     DISCUSSION

¶11   The dispositive issue on appeal is whether the District Court correctly dismissed

appellants’ request for certification to the Chief Water Judge pursuant to § 85-2-

406(2)(b), MCA. That statute provides, in part:

              When a water distribution controversy arises upon a source of water
      in which not all the existing rights have been conclusively determined . . . ,
      any party to the controversy may petition the district court to certify the
      matter to the chief water judge. If a certification request is made, the
      district court shall certify to the chief water judge the determination of the
      existing rights that are involved in the controversy . . . . The district court
      from which relief is sought shall retain exclusive jurisdiction to grant
      injunctive or other relief that is necessary and appropriate pending
      adjudication of the existing rights certified to the water judge. Certified
      controversies must be given priority over all other adjudication matters.
      After determination of the matters certified, the water judge shall return the
      decision to the district court with a tabulation or list of the existing rights
      and their relative priorities.

This statute clearly applies to the Giese, Kelly and Reichelt Third Amended Petition filed

in District Court. The petitioners alleged in their pleadings throughout this case the

existence of a Teton River water distribution controversy as required by § 85-2-

406(2)(b), MCA. They alleged that their “calls” on upstream junior water users have

been ignored and they alleged that they disagreed with the water commissioner’s

diversion of the Teton through the Bateman Ditch. In addition, several upper Teton River

water users who benefit from the diversion through the Bateman Ditch have appeared to

assert their interests, including their interests in continuing the Bateman diversion,

underscoring the existence of a water distribution controversy.

                                            8
¶12    It is also clear that the petitioners alleged that they hold valid water rights on the

Teton River. The opening paragraphs of their petition specifically describe their water

right claims in the Teton River and it was error for the District Court to conclude

otherwise. Petitioners alleged, and there is no disagreement, that not all existing rights in

the Teton have been conclusively determined.

¶13    By making these specific factual allegations in the petition, Giese, Kelly and

Reichelt qualified to have their dispute certified to the Chief Water Judge under § 85-2-

406(2)(b), MCA. That statute provides that upon request “the district court shall certify

to the chief water judge the determination of the existing rights that are involved in the

controversy.” (Emphasis added.) They were not required to do any more to qualify for

certification to the Chief Water Judge as provided in § 85-2-406(2)(b), MCA.

¶14    It is well established that in considering a motion to dismiss the district court must

construe the complaint in a light most favorable to the plaintiff and must deem all factual

allegations of the complaint to be true. Dismissal for failure to state a claim is proper

only if the district court finds that the plaintiff, accepting the truth of the allegations of

the complaint, is not entitled to relief under any set of facts that could be proven in

support of the claims. Missoula YWCA, ¶ 3; Hauschulz, ¶¶ 7-8; Meagher, ¶ 13.

¶15    The petitioners here alleged in their Petition the existence of a controversy

concerning the manner in which the water commissioner distributes water on the Teton

River, namely, the practice of diverting water through the Bateman Ditch.                 The

petitioners alleged and it is a fact that not all existing rights on the Teton River have been

                                              9
conclusively determined. The petitioners alleged that their water rights in the Teton

River have been adversely affected by upstream junior appropriators who benefit from

the Bateman Ditch diversion and that neither the upstream users nor the commissioner

will alter the practice. The allegations of the petition were therefore sufficient to state a

case for referral of the matter to the Chief Water Judge under § 85-2-406(2)(b), MCA. It

was error for the District Court to conclude otherwise.

¶16    Without expressing any view as to the merits of the underlying dispute, it is clear

that Giese, Kelly and Reichelt have been left without any forum in which to pursue a

remedy. The District Court held that its “authority and obligation is to the decreed water

users under Perry,” which would continue until petitioners demonstrated “a conclusively

established water right and priority requiring administration beyond the parameters of the

Perry decree.” Yet the District Court rejected the petitions, including the petition seeking

certification of the issue to the Chief Water Judge under § 85-2-406(2)(b), MCA, where

the petitioners could establish that they had a water right that required administration

beyond the parameters of the Perry decree. Not being allowed to present their claims to

the Chief Water Judge under § 85-2-406(2)(b), MCA, the petitioners were without any

avenue to advance their claims, except to wait until some unknown time in the future

when all water rights in the Teton River are conclusively established. Section 85-2-

406(2)(b), MCA, should not be narrowly interpreted so as to frustrate solutions to water

distribution controversies, but rather should be applied so as to allow for the expeditious

resolution of these controversies.

                                             10
¶17    Further, § 85-2-406(2)(b), MCA, provides that the district court in which

certification is sought “shall retain exclusive jurisdiction to grant injunctive or other relief

that is necessary and appropriate” after certification to the Chief Water Judge. Giese,

Kelly and Reichelt have requested injunctive relief, and the District Court had

jurisdiction to consider that request.

¶18    Therefore, we reverse and remand to the District Court with instructions to certify

all appropriate issues to the Chief Water Judge as provided in § 85-2-406(2)(b), MCA,

and to grant such injunctive or other relief that, in the District Court’s discretion, it

determines to be necessary and appropriate.

¶19    Reversed.

                                                   /S/ MIKE McGRATH


We Concur:


/S/ JIM RICE
/S/ JAMES C. NELSON
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ MICHAEL E WHEAT
/S/ BRIAN MORRIS




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