SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 2000
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
No. 105, Orig. Argued March 19, 200l-Decided June 11,2001
The Arkansas River rises in Colorado and flows through Kansas and several other States before emptying into the Mississippi River. In 1949, Congress approved the Arkansas River Compact (Compact), which Colorado and Kansas negotiated, and which provided in Article IV-D that, inter alia, future development of the river basin could not materially deplete the usable quantity or availability to other users of the river's waters. In 1986, Kansas filed a complaint alleging that Colorado had violated the Compact. In his first report, the Special Master found that post-Compact increases in groundwater well pumping in Colorado had materially depleted the waters in violation of Article IV -D; in his second report, he recommended that damages be awarded to Kansas; and in his third report, he recommended that such damages be measured by Kansas' losses attributable to Compact violations since 1950, be paid in money not water, and include prejudgment interest from 1969 to the date of judgment. Colorado has filed four objections to the third report, Kansas has filed one, and the United States submits that all objections should be overruled.
1. The recommended damages award does not violate the Eleventh Amendment. Thus, Colorado's first exception is overruled. Colorado contends that the Amendment precludes damages based on losses sustained by individual Kansas farmers, as the Report recommends. Kansas has unquestionably made the required showing that it has a direct interest of its own and is not merely seeking recovery for the benefit of
individuals who are the real parties in interest. Oklahoma ex rel. Johnson v. Cook, 304 U. S. 387, 396. This is but one of several proceedings in which Kansas' own interest in preventing upstream diversion of the river has justified the exercise of this Court's original jurisdiction. Kansas has been in full control of this litigation since its inception, and its right to control the disposition of any recovery of damages is unencumbered. The injury to individual farmers is but one component of the formula adopted by the Special Master to quantify damages here. When a State properly invokes this Court's original jurisdiction, neither the measure of, nor the method for calculating, damages can retrospectively negate that jurisdiction. Nor would jurisdiction be affected by Kansas' post judgment decision about whether to deposit the money recovered in its general coffers or use the money to benefit those who were hurt by the violation. Pp. 7-9.
2. The unliquidated nature of Kansas' money damages does not bar an award of prejudgment interest. Thus, Colorado's second exception is overruled. This Court has long recognized that the common-law distinction between liquidated and unliquidated damages is unsound, Funkhouser v. J. B. Preston Co., 290 U. S. 163, 168, and that a monetary award does not fully compensate for an injury unless it includes an interest component, see, e. g., Milwaukee v. Cement Div., National Gypsum Co., 515 U. S. 189, 195. The Special Master acted properly in declining to follow this long-repudiated common-law rule. Pp. 9-12.
3. The Special Master determined the appropriate rate for the prejudgment interest award and determined that interest should begin running in 1969. Colorado's third exception is overruled insofar as it challenges the interest rates and sustained insofar as it challenges the Special Master's recommendation that the interest should begin to accrue in 1969. Kansas' exception that the interest should begin to accrue in 1950 is overruled. Pp. 12-16.
(a) Because this Court has decided that Kansas could measure a portion of its damages by individual farmers' losses, the interest rates applicable to individuals in the relevant years, rather than the lower rates available to States, may properly be used to calculate damages. Pp.12-13.
(b) The Special Master concluded that interest should be awarded according to fairness considerations rather than a rigid theory of compensation for money withheld. Kansas' argument that this Court has effectively foreclosed that equities-balancing approach has some merit, but this Court cannot say that by 1949 the Court's case law had developed sufficiently to put Colorado on notice that prejudgment interest would automatically be awarded from the time of injury for a Compact violation. Therefore, the Special Master acted properly in analyzing