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August 16, 1968


Pollack, District Judge.

The opinion of the court was delivered by: POLLACK

POLLACK, District Judge.

This is a diversity case. Motions by both parties are before the Court for summary judgment under Rule 56 F.R.Civ.P.

 Plaintiff Hackensack Water Company, ("Hackensack" hereafter), is a water service company which draws water from the Hackensack River to service the public in the counties of Bergen and Hudson in Northern New Jersey. Hackensack owns riparian lands in New Jersey along and adjoining the River which are located 5 miles downstream (south) of the point where the Nyack Water Works, i.e., the defendant, obtains water from the River for the use of the cluster of communities known respectively as South, Central, West and Upper Nyack and the Village of Nyack itself. Nyack returns virtually none of the diverted water to the River, but releases any excess into the Hudson River or within the Hudson watershed thus depriving Hackensack River downstream owners or users of the quantity taken by the defendant.

 Plaintiff asserts that the flow of the River is decreased by defendant's average diversion of more than 1.384 million gallons per day rendering the flow inadequate to meet plaintiff's water supply requirements and that plaintiff has had to purchase water from other suppliers to meet its needs. Consequently, the plaintiff seeks a summary judgment under Section 429-j(5) of the New York Conservation Law, McKinney's Consol. Laws, c. 65, declaring the rights of the plaintiff Hackensack to be compensated by the defendant Nyack for its withdrawal and diversion without return of the water of the River and limiting further proceedings in this case to an assessment of the amount of damages.

 The answer to the complaint admits that Nyack is drawing water from the River and that it is supplying customers in its area, but denies that it is interfering with or violating any rights of the plaintiff. The answer also raises as affirmative defenses that (i) the complaint is insufficient in law, (ii) that plaintiff, having failed to comply with notice of claim statutes, is barred from prosecuting the law suit, (iii) that plaintiff has been guilty of inexcusable laches, (iv) that New York State which owns and controls waters of the River in the State has given Nyack permission to use the waters, (v) that the New York Water Power and Control Commission (now Water Resources Commission) and the Appellate Division of the Supreme Court of New York rendered certain decisions which are a bar to the plaintiff's claims.

 Defendant contends that if the following are not found in its favor as a matter of law, there are genuine issues to be tried herein concerning: whether in fact there has been any diversion of water; whether the authorization to Nyack to construct a new water filtration plant also held that lower riparian owners were to be compensated by the courts for damages; whether Nyack plans to divert water at double the present rate from the Hackensack River to the Hudson River watershed; whether the flow of the River has been inadequate to meet plaintiff's legitimate requirements; and whether plaintiff did in fact meet the requirements for filing of claims against Nyack in accordance with the relevant sections of the Village Law of New York State. The defendant also challenges plaintiff's factual contention that plaintiff has annually incurred substantial expenditures for the regulation of the flow of the River, improvements of conditions during dry weather and conservation of the waters of the River.

 The defendant has counterclaimed for damages asserting that plaintiff and its wholly owned subsidiary, Spring Valley Water Company, have attempted unfairly to interfere with and appropriate Nyack's water customers and have inspired a groundless taxpayer's action against Nyack and done other acts with the intent or result of unfair competition or violation of the federal and state antitrust laws.

 The plaintiff's opposing statement denies the substantive facts of the counterclaim.

 Affidavits and exhibits submitted by the parties in support of their respective motions and in opposition to the motions of the other party reveal the following background facts:

 The Hackensack River rises in the northern part of the town of Clarkstown in Rockland County, New York, flowing southward, west of and parallel to the Hudson River. The River flows past property owned by the defendant village near the New York-New Jersey border, then past the riparian land of the plaintiff through New Jersey and into Newark Bay and the Atlantic Ocean.

 Both parties are dependent upon the Hackensack River as a source of water supply. The plaintiff renders water service to the public in Bergen and Hudson counties in New Jersey, furnishing water for domestic, commercial, industrial and fire protection purposes in 59 municipalities having a combined population in excess of 800,000 persons. Plaintiff is the owner in fee of approximately 90% of the riparian lands lying along and adjoining both banks of the Hackensack River in New Jersey, and has for many years developed and improved the River as a source of water. Plaintiff has constructed two reservoirs in the mainstream of the River in New Jersey, one located at Oradell, the other in Rivervale and Old Tappan (Lake Tappan).

 The defendant has constructed a water intake system approximately five miles upstream of plaintiff's riparian land. The water thereby diverted serves approximately 12,500 persons and commercial enterprises in the Village of Nyack as well as inhabitants of South Nyack, Central Nyack, and portions of West Nyack, and Upper Nyack. Water diverted and not consumed by the defendant is expelled into the Hudson watershed and so is lost to the plaintiff.

 Nyack originally acquired its water supply system in 1896 by condemning the property of a private water company. Water has been taken from the Hackensack River for use in the system since the nineteenth century. Until 1951, the plaintiff was the only other public water supply system using the River. In that year, however, the Spring Valley Water Company, a wholly owned subsidiary of the plaintiff, then supplying water from wells to residents of Rockland County in New York, applied to the New York Water Resources Commission for permission to draw water from the Hackensack River, and to build a dam and reservoir on the River above the defendant's intake (Application No. 2189, decided July 23, 1952; such application was required by §§ 450-451 of the New York Conservation Law). Creation of the dam and reservoir was expected to increase the dependable yield of the River in Rockland County below the dam to 20 million gallons per day (abbreviated hereafter as "MGD"). The papers submitted to the Court do not reveal the yield prior to 1951.

 In approving the project, to be known as the DeForest Dam and Reservoir, the Commission cited the water needs of residents of Rockland County and of New Jersey, and placed certain restrictions on the daily yield of the watershed. Ten MGD were forever reserved for the needs of inhabitants of Rockland County (Finding No. 60). Spring Valley must release from the reservoir "at least" two MGD reserved for Nyack, subject to adjustment should Nyack's needs prove greater than anticipated (Finding No. 57 and Condition K); and 7.75 MGD must be released from the reservoir for passage into New Jersey (Finding No. 56).

 Residents of the area to be flooded opposed the proposed dam and reservoir. New Jersey appeared before the Commission to insure that a sufficient amount of water would be permitted to flow into the State of New Jersey. The objectors contended that no direct benefit would accrue to residents of Rockland County, but rather to Bergen County in New Jersey. The Commission, however, stated that it had "full power to see that this project is operated solely for the benefit of citizens of Rockland County. The only benefit to the Hackensack Water Company [in New Jersey] and the people of New Jersey is the incidental benefit of a regulated flow in the river" (Finding No. 37). The Commission stated that it had given due regard to the interests of the State of New Jersey in maintaining a regulated flow, in pursuance of a policy of "'equitable apportionment'" (Finding No. 51).

 The determination of the Commission was affirmed on appeal, Rockland County Anti-Reservoir Ass'n v. Duryea, 282 App.Div. 457, 123 N.Y.S.2d 445 (3rd Dept. 1953). The plaintiff herein agreed to the conditions of the Commission and argued in favor of its affirmance in the Appellate Division.

 Spring Valley completed and began operation of its reservoir in 1956 but actual use of the reservoir, dam and filtration plant to supply its customers did not occur until 1963. Meanwhile, between 1952 and 1958, Nyack continued to distribute water from the River to its users. Nyack's requirements had grown from 1.102 MGD pumped in 1952 to 1.4 MGD in 1957. At this rate of increase, a new filtration plant of increased capacity would be needed to meet Nyack's present and future needs for water.

 In 1958, Nyack applied to the Water Resources Commission for approval of a new filtration plant of increased capacity (Application No. 3431, decided December 9, 1958). The defendant's application was for permission to take up to an average of 3 MGD, and up to 4.8 MGD during peak periods, from the River.

 The plaintiff and Spring Valley objected to the 1958 application, contending that the entire flow of the stream except for a small amount which had been acquired by prescription or had been used for the past fifteen years by defendant, should be reserved to them. In support of this objection the plaintiff contended that because one purpose for the construction of the DeForest Dam and Reservoir had been to maintain a regulated flow into its Oradell Reservoir in New Jersey, it had advanced large sums of money to Spring Valley for the completion of that project.

 The Commission, over this objection, granted Nyack permission to take an average of 3 MGD from the River, with a peak diversion not to exceed 3.75 MGD (Condition A). In its findings of fact, the Commission pointed out that its 1952 decision reserved 10 MGD, not for Spring Valley, but for the residents of Rockland County and that the construction of the DeForest Reservoir had increased the plaintiff's yield from the Hackensack River from 45 MGD to between 52.5 and 61.5 MGD.

 Nevertheless, Hackensack claimed, it and its subsidiary holding companies owning riparian land along the River would sustain damages from the defendant's diversion. It was contended that if no provision were made for the payment of damages and for the power of the defendant to borrow money for that purpose, such additional diversion would violate the constitution and laws of the State of New York, in that it would authorize a taking of plaintiff's property without compensation. The Commission, in response to this claim, stated:

"It is not within the purview of this Commission to determine the amount of compensable damages which might be caused by the diversion of water from the Hackensack River. Payment for such legal damages presumably could be made by the village from sources of funds available to it * * *. The compensable amounts can be determined, if necessary, by the courts * * *." (Finding No. 44).

 The determination of the Commission was upheld on review. Spring Valley Water Works and Supply Company v. Wilm, 14 A.D.2d 658, 218 N.Y.S.2d 800 (3d Dept. 1961).

 The new filtration plant authorized by the 1958 decision has not yet been built because of certain undecided litigation. The defendant's diversion of water from the River averaged 1.374 MGD in 1966 and 1.384 MGD in 1967. It presently withdraws more than 1.4 MGD as a daily average. Recently, the defendant has announced plans for the construction of a new filtration plant and new pumping facilities which will operate to double this flow having a rated capacity of 3 MGD.

 In 1965, the plaintiff applied to the New York Water Resources Commission for and was granted permission to build a reservoir, now known as Lake Tappan. (Application No. 4925, decided July 22, 1965). It was estimated that this reservoir would add another 10 MGD to the safe yield of the River available to Hackensack, raising the plaintiff's yield from the River to 77 MGD. The New York Commission, in approving the plan, specifically reserved to the defendant the amounts granted in 1958 as well as the right to apply for increases in the future. New Jersey's Commission also approved the project. (Application to New Jersey Department of Conservation and Economic Development, Division of Water Policy and Supply, No. 1239, Approved May 20, 1965, Amended June 17, 1965, Amended July 6, 1965).

 The New Jersey Commission limited the diversion from the Oradell Reservoir - Woodcliff Lake - New Jersey Reservoir No. 3 system to a maximum annual average of 92 million gallons daily exclusive

"of any water which may be obtained from sources in New York State in excess of the actual use of water in New York State pursuant to the requirements of the New York State Water Resources Commission and of the releases from storage in DeForest Lake allocable to the maintenance of the required releases for the benefit of the State of New Jersey." (P2, p. 2).

 The dam has since been constructed and was dedicated on June 10, 1967.

 Plaintiff is unable to meet its water supply requirements through the use of the Hackensack River alone, and has, during the period 1964-1966, expended a total of $759,512 in purchasing 5,710,468,000 gallons from other sources.

 The questions presented on these motions for summary judgment are whether there is a genuine issue as to any material fact, and if not, which party is entitled to judgment as a matter of law.

 The respective rights of upstream and downstream riparian owners are simply stated. An upstream riparian owner may not unreasonably divert or appropriate the waters of a flowing stream. This has been the common law of both New York and New Jersey for more than a century. Society for Establishing Useful Manufactures v. Morris Canal and Banking Co., 1 N.J.Eq. 157 (Ct.Ch.1830); Gardner v. Trustees of Village of Newburgh, 2 Johns. Ch. 161 (N.Y.Ct.Ch.1816). The courts of both states have consistently and repeatedly required riparian land owners to restore all flowing waters to the stream, subject only to a reasonable allowance for domestic use and consumption. Higgins v. Flemington Water Co., 36 N.J.Eq. 538 (Ct.Err. & App.1883); City of Paterson v. East Jersey Water Co., 74 N.J.Eq. 49, 70 A. 472 (Ct.Ch.1908), aff'd 77 N.J.Eq. 588, 78 A. 1134 (Ct.Err. & App.1910); Smith v. City of Rochester, 92 N.Y. 463 (1883); Strobel v. Kerr Salt Co., 164 N.Y. 303, 58 N.E. 142, 51 L.R.A. 687 (1900); Van Etten v. City of New York, 226 N.Y. 483, 124 N.E. 201 (1919); Ferguson v. Village of Hamburg, 272 N.Y. 234, 5 N.E.2d 801 (1936).

 Diversion, as applied to watercourses, is the taking of water from a stream without returning it for the use of lower riparian owners. Strobel v. Kerr Salt Co., 164 N.Y. 303, 58 N.E. 142, 51 L.R.A. 687 (1900).

"* * * each owner of land contiguous to a natural watercourse has a right, as owner of such land and as naturally connected with and incident to it, to the natural flow of the stream along his land and its descent, and all of the force to be derived therefrom, for any domestic or hydraulic purpose to which he may decide to apply it. He may, by means of a ditch or conduit, withdraw water from the stream and cause it to flow unnaturally through his land for agricultural, industrial or other purpose, provided he causes it, in its substantial volume, to return upon his land to the stream." United Paper Board Co. v. Iroquois Pulp and Paper Co., 226 N.Y. 38, 44-45, 123 N.E. 200, 202 (1919).

 The absolute right of a lower riparian owner to the undiminished flow of water is qualified by a doctrine of reasonable use. As was stated in ...

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