## Facts

- The United States, acting through the Bureau of Reclamation, developed and operated the Klamath Reclamation Project to divert and deliver water for irrigation and other project purposes.
- A private utility (Copco, succeeded by Pacificorp) owned and operated the Link River Dam under federal licensing, and later operated it pursuant to a 1956 contract with Reclamation.
- The 1956 contract required dam operations to conform to regulations prescribed by the Secretary of the Interior and granted the United States an unrestricted right to use water for irrigation and other project purposes.
- In the 1990s, Reclamation adjusted project operations to protect fish and tribal resources, including meeting Endangered Species Act requirements and tribal trust responsibilities, which at times reduced water deliveries to project irrigators.
- Irrigators sued, claiming they were intended third-party beneficiaries of the 1956 contract and sought to enforce contract terms to compel dam operation favoring irrigation deliveries.
- The district court granted summary judgment against the irrigators, concluding they were not intended third-party beneficiaries; the irrigators appealed.

## Issues

1. Whether project irrigators were intended third-party beneficiaries of the 1956 contract between Reclamation and the dam operator, allowing them to enforce the contract’s operational terms.
2. Whether the 1956 contract limited the United States’ discretion to operate the dam to comply with the Endangered Species Act and to carry out tribal trust responsibilities, even when that reduced irrigation deliveries.
3. Whether the case required adjudication of underlying water-right priorities that were also the subject of a comprehensive state water-rights proceeding.

## Decision

- The Ninth Circuit affirmed summary judgment for defendants.
- The court held the irrigators were not intended third-party beneficiaries of the 1956 contract and therefore lacked enforceable rights under it.
- The court interpreted the contract as preserving federal operational discretion, including discretion necessary to comply with the Endangered Species Act and tribal trust duties.
- The court clarified that its ruling addressed only federal project operation and management questions, not general adjudication of relative water-rights amounts or priorities being addressed in state proceedings.

## Legal Principles

- Under federal common law of contracts, a nonparty may enforce a contract only if the contracting parties intended to confer a direct, enforceable benefit; incidental benefits do not create enforcement rights.
- The fact that a government contract may benefit third parties does not, without clear contractual intent, make those third parties intended beneficiaries.
- Federal contracts governing reclamation operations are construed consistently with the United States’ statutory obligations and trust responsibilities; they are not read to disable later-imposed federal duties.
- Contract language authorizing federal use of water for project purposes does not, without clear beneficiary intent, create enforceable delivery guarantees to particular water users.
- A federal court may resolve contract and operational-discretion questions without adjudicating basin-wide water-right priorities reserved to comprehensive state proceedings.

## Conclusion

The Ninth Circuit held that Klamath Project irrigators could not enforce the 1956 Link River Dam operating contract because they were, at most, incidental beneficiaries, and it construed the contract to preserve federal discretion to operate the project in compliance with the Endangered Species Act and tribal trust responsibilities without adjudicating general basin water-right priorities.


Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206 (9th Cir. 1999)