This one takes a bit of sifting through, but if you do so, you will eventually savor the arguments. Try and follow this thread.
In 2014, pistachio growers with what seemed to be established rights to pump groundwater for irrigation of their trees and who never had to pay fees or were subject to other governmental regulation, were subject to the newly-adopted Sustainable Groundwater Management Act. This statute, designed to manage groundwater, empowers local groundwater agencies to create management plans and the typical things that such regulatory agencies do.
In the course of determining the "sustainable yield" of the groundwater basin that supplies the pistachio growers' water, the local agency purported to determine the rights of various users relative to each other. The agency concluded that "public pumpers" have entitlement to 100% of the native groundwater, the pistachio growers' preexisting water rights notwithstanding. If the pistachio farmers wanted to pump any groundwater, they'd have to pay a "replenishment fee" to be used to purchase nonnative water to import to the area. The fee? $8.5 million. The pistachio growers didn't pay that fee nor had they paid it since 2021, meaning that the cumulative fee is in the neighborhood of $25 million.
The agency acknowledged that turning off the native groundwater taps and making replacement water very expensive would likely result in the demise of large-scale agriculture in the area (including the pistachio farms). So perhaps not surprisingly, the next step was a lawsuit by the pistachio growers challenging the zero allocation of native groundwater as a taking, inter alia. Of special note, the pistachio growers did not challenge the replenishment fee itself (mark that one down for later use -- that fact becomes important).
The trial court dismissed the claim, and in this opinion the Court of Appeal affirmed.
The court held that in order to pursue these challenges, the pistachio growers must first pay the replenishment fee. The court relied on California's "pay first, litigate later" rule -- which requires that in order to challenge a tax or a fee, a plaintiff must first pay the challenged tax or fee.
But wait, you say, you said that the pistachio growers didn't challenge the replenishment fee, right? Yes, we did. But the court held that because the allegedly illegal allocation was made under the authority of the same ordinance that imposed the replenishment fee and that the allocation would indirectly impact the fee charged, the pistachio growers must pay the fee before they could challenge their zero allocation:
As for the physical takings claim (the eleventh cause of action), the [trial] court reasoned that Mojave had not alleged it was in fact physically prevented from extracting water, and thus had not stated a claim.We agree with respondent court’s analysis. If Mojave had paid the Replenishment Fee in compliance with the “pay first” rule, it could perhaps state a takings cause of action on the theory that the Replenishment Fee makes Mojave’s agricultural operations economically unviable because the fees for extracting groundwater are so high. Perhaps because Mojave has not paid the fee, however, it omitted any reference to the Replenishment Fee from the TAC’s takings claims, instead relying on the other Implementing Actions.As respondent court correctly concluded, this attempt to escape the previous demurrer ruling fails because the only Implementing Action with an economic effect on Mojave is the Replenishment Fee. Since none of the other Implementing Actions physically prevent Mojave from extracting groundwater or interfere economically with Mojave’s ability to extract groundwater, Mojave’s TAC fails to state a cause of action for a taking.
Slip op. at 35-36.
In other words, the pistachio growers have not suffered an injury unless they pay first. They can still pump groundwater, right?
The growers have now asked the California Supreme Court to take up the case. In their petition, they argue "[t]his Court's guidance is necessary to ensure that overlying water rights holders, otherwise entitled to recognition, priority and protection under the holding of this Court in City of Barstow v. Mojave Water Agency (2000) 23 Cal.4th 1233, 1253 (“Barstow”), may challenge an administrative action that (1) allocates them zero groundwater; (2) establishes an extortionate fee designed to bar challenge; and (3) bankrupts their businesses as a condition of litigating their claims." Pet. at 8.
Here are the Issues Presented:
1. Under the 2014 Sustainable Groundwater Management Act (“SGMA”), may a groundwater sustainability agency (“GSA”) determine law and facts to conclude that an overlying landowners’ correlative water rights are “inferior” to others and allocate them no (zero) groundwater?2. Does the “pay first, litigate later” rule, California Constitution, article XIII, section 32 (“Pay First Rule”) apply to SGMA fees (or extend to non-fee provisions separately included in the local agency fee ordinance)?3. If so, does the Pay First Rule immunize local agencies from constitutional takings claims where an agency establishes a usurious fee designed to bar challenge?
Pet. at 7.
Now we wait to see if the court agrees to review the case.
Petition for Review, Mojave Pistachios, LLC v. Superior Court, No. S284252 (Cal. Mar. 19, 2024)
