United States v. Sacramento Municipal Utility District

The United States of America brought this action for declaratory relief, seeking judicial interpretation of its contract with the Sacramento Municipal Utilities District (SMUD). The district court granted summary judgment in favor of the government ruling that 1) the contract was clear and unambiguous on its face and thus extrinsic evidence was inadmissible; 2) the interpretation urged by SMUD would restrict Congress’ plenary power to define the scope of the Central Valley Project and therefore would be illegal. SMUD appeals.

We find that the contract is not unambiguous on its face and thus extrinsic evidence is admissible if relevant to determine if there is a genuine issue of material fact with regard to the meaning of the contract. Further, we find the interpretation of the contract urged by SMUD does not produce an illegal result in that it does not unlawfully intrude on Congress’ plenary power to define the scope of the Central Valley Project. Accordingly, we reverse and remand the case to the district court for reconsideration.

FACTS

In 1952, the United States, through the Bureau of Reclamation, Department of the Interior, entered into a contract to sell electrical power…