Fernley flood settlement put on hold

RENO - A Nevada irrigation district's tentative agreement to pay $10 million to victims of a 2008 flood caused by the failure of a century-old irrigation canal was put on hold Tuesday when a U.S. judge reversed his earlier order that the Justice Department join the settlement talks.

Hundreds of Fernley residents whose homes were damaged have filed lawsuits accusing the Truckee-Carson Irrigation District and U.S. Bureau of Reclamation of negligently causing the flood by failing to properly maintain the earthen canal that burst on the edge of Fernley about 30 miles east of Reno.

Lawyers for the flood victims say TCID officials abruptly backed out of a $10 million settlement last week based in part on concerns the Justice Department raised about property TCID effectively wanted to put up as collateral to guarantee future payments.

Justice Department lawyers say some of the property is owned by the federal government, not TCID, including an old power plant and water rights at Donner Lake near Truckee, Calif.

At the request of the flood victims, U.S. Magistrate Robert McQuaid Jr. issued an order on Monday demanding DOJ lawyers attend a settlement conference with the others on Wednesday.

But after some testy exchanges with assistant U.S. attorney Greg Addington in court on Tuesday, Quaid overturned his order, scrapped the hearing scheduled for Wednesday and told the parties to resume mediation on Thursday without the presence of the Justice Department.

"I wish they (Justice) would be more cooperative but I don't know that I can order them to be more cooperative at this point," McQuaid said.

Justice has resisted such involvement in part because it is representing the Bureau of Reclamation as a defendant in a series of lawsuits related to the flood but the agency is being dealt with separately in terms of claims and damages.

"This is TCID's settlement, not ours, and we want no part of it until the time it is signed," Addington said Tuesday.

"They've had a contract with the Bureau of Reclamation since 1926. They certainly know what they own and they don't own. They don't need a federal overseer sitting over their shoulder telling them what they own," he said.

Unusually heavy rain preceded the canal collapse in January 2008 in an area that averages only 5 inches of precipitation annually. Nearly 600 homes reported damage. Total damage estimates reached $4 million across the town, which was declared a federal and state disaster area.

Farmers and ranchers dependent on the water for their crops and livestock in Nevada's high desert also suffered as a result of disruptions in canal operations and subsequent court orders limiting the amount of water allowed in the canals at any one time.

Michael Van Zandt, lead attorney representing TCID, told McQuaid during a teleconference hookup on Tuesday that TCID officials intend to continue mediation and have not ruled out signing a settlement agreement at some future time.

Robert Maddox, a lawyer for the flood victims, disagreed with Addington's claim the U.S. government doesn't have a dog in this particular fight. He said any potential liability the Bureau of Reclamation may face could be reduced depending on the amount of money TCID pays out in damages.

"They are deeply involved in this," Maddox said, citing court records that show the bureau warned TCID as early as March 2005 that the canal that eventually burst was at a "high hazard" level and needed significant repairs to avoid an "impending embankment failure."

"A year later, (TCID) said those repairs had been done, but they were not," he said. "They chose to look the other way and let TCID continue acting in the negligent manner that resulted in the pain and suffering of Fernley residents."D