United States v. Contra Costa County Water District

United States Court of Appeals for the Ninth Circuit · 1982 · Evidence

678 F.2d 90 (9th Cir. 1982)

Updated August 22, 2026

EvidenceFederal Rule of Evidence 408settlement negotiationssummary judgmentcontract ambiguityoperation and maintenance costscapital improvement vs maintenancejudicial notice

Facts

The United States owned the Contra Costa Canal System and supplied water to the District under a contract requiring the District to pay canal operation and maintenance costs. After adjoining landowner Hanford performed work on his land that endangered the canal bank, the Bureau of Reclamation, under emergency conditions, built a 600-foot retaining wall to prevent partial collapse; the total cost was $116,558.08. The government demanded that the District pay a portion of that cost as normal and necessary maintenance, but the District refused, arguing the wall was a capital improvement rather than ordinary maintenance. In separate litigation, the United States settled with Hanford for $75,000, of which it received $30,000 in cash and a $45,000 offset for diminution in Hanford's property value; in this suit the government credited the District only with the $30,000 received.

Issue

Whether the retaining wall expense was, as a matter of law, a maintenance cost recoverable from the District under the contract or whether the nature of the work created a factual issue precluding summary judgment. Also, whether Rule 408 permitted the District to use the Hanford settlement amount to obtain credit for the full $75,000 rather than only the $30,000 actually received by the United States.

Rule

Summary judgment may be granted only when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law; in contract cases, summary judgment is appropriate only if the contract is unambiguous. Expenditures made to keep a completed system operating as designed and to overcome injurious consequences arising from normal and ordinary operation are maintenance and operating expenses, not construction costs, when they add nothing to the system but restore it and permit continued operation. Under Federal Rule of Evidence 408, settlement negotiations and settlement figures are not admissible to prove liability, invalidity, or the amount of a claim.

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Blue Mesa Utility sued a neighboring quarry owner in Colorado Springs after blasting destabilized a finished water conduit. The case settled when the quarry owner paid $20,000 cash and Blue Mesa agreed to forgive a separate $35,000 easement dispute involving the same landowner. Blue Mesa later sought reimbursement from Pueblo Valley Water Cooperative under a contract requiring the cooperative to pay covered maintenance costs, and the cooperative argued it should receive a $55,000 credit based on the settlement figure.

If the cooperative offers the settlement amount to prove the amount of credit due on Blue Mesa's reimbursement claim, how should the court rule?

Explanation. Rule 408 bars use of settlement negotiations and settlement figures to prove liability, invalidity, or the amount of a claim. A party cannot use the prior settlement amount to establish the amount of a credit in later litigation. The majority emphasized both rationales for exclusion: settlement figures are often not probative of actual claim value, and exclusion promotes candid compromise.