Federal Court Strikes Third Party Flood Damage Claims Against North Dakota

Cavalier County, North Dakota

In Pembina County Water v. Government of Manitoba, 2011 FC 1118 (CanLII), Lafrenière, J. of the Federal Court of Canada considered separate motions brought by two groups of third parties, each seeking an order striking the Third Party Claim filed by the Defendants, the Rural Municipalities of Rhineland and Stanley (Municipal Defendants). The grounds were that the Federal Court lacked either personal jurisdiction or subject-matter jurisdiction in respect of the Third Party claims. Alternatively, the Third Parties requested that the Third Party Claim be stayed on the grounds that North Dakota was the most convenient forum or that they enjoyed state immunity.

The Municipal Defendants submitted that the subject matter of the Third Party Claim fell within the Court’s jurisdiction and there was no legitimate basis for striking out or staying the third party proceeding.

The Plaintiffs, Pembina County Water Resource District and various cities and townships in North Dakota, commenced an action against the Municipal Defendants and the Province of Manitoba back in 2004. The Statement of Claim alleged that the Defendants had blocked or impeded the flow of waters in their natural channels across the international boundary resulting in flood damage on the American side of the border.

The Plaintiffs’ action was based on section 4(1) of the International Boundary Waters Treaty Act, RSC 1985, c I-17 (IBWTA), which reads as follows:

4.(1) Any interference with or diversion from their natural channel of any waters in Canada, which in their natural channels would flow across the boundary between Canada and the United States or into boundary waters, as defined in the Treaty, resulting in any injury on the United States side of the boundary, gives the same rights and entitles the injured parties to the same legal remedies as if the injury took place in that part of Canada where the interference or diversion occurs.

The Municipal Defendants filed a Third Party Claim on July 26, 2010 alleging that the damage to public infrastructure and/or private lands, attributed to the Defendants’ breach of the IBWTA was “actually caused or exacerbated by water management activities undertaken by various entities and individuals in North Dakota.” The Third Party Claim sought contribution and indemnity from the Third Parties for alleged actions or inactions in North Dakota, relating to property in North Dakota, and causing alleged damages in North Dakota.

Noting that the Federal Court’s jurisdiction is “exceptional and statutory” ( ITO-International Terminal Operators v Miida Electronics 28 DLR (4th) 641)(SCC) , and that “[a]voiding multiple proceedings is certainly a laudable goal”, the court cited the Supreme Court of Canada in R v Thomas Fuller Construction Co (1958) Ltd et al 1979 CanLII 187 (SCC), [1980] 1 SCR 695 (Thomas Fuller),which held that a third party claim must itself be based on federal law to meet the requirements of jurisdiction in the Federal Court.

Justice Lafrenière concludes:

[18]           Unlike the main claim, section 4 of the IBWTA does not confer a right on the Municipal Defendants to claim against the Third Parties in Federal Court. It is clear on the face of the text of the section that it only applies to acts taken or committed in Canada that have caused injury in the United States. Section 4 creates an exceptional right for injured parties who have suffered injury on the United States side of the boundary to seek legal remedies in Canada. No reciprocal right is provided to Canadian entities or individuals.

[19]           Although the Federal Court does have some implied jurisdiction, it is only to the extent that the exercise of such powers is necessary for the Court to exercise fully the jurisdiction expressly conferred by a statutory provision: R v 974649 Ontario Inc2001 SCC 81 (CanLII), [2001] 3 SCR 575. The Municipal Defendants plead and rely on The Tortfeasors and Contributory Negligence Act, a Manitoba statute. They also claim that the Third Parties caused damage to property in North Dakota by their negligence, and that the Third Parties’ actions constitute a nuisance in law.

[20]           While the Federal Court may apply provincial law in reaching any particular decision, such application can only occur when the proceedings are otherwise properly founded on federal law, and are within the Federal Court’s jurisdiction. The fact that multiple proceedings and inconvenience may result is simply not a justification to extend the Court’s jurisdiction beyond statutory limits.

[21]           Absent a statutory grant of authority to form the basis of or “nourish” the Third Party Claim, I conclude that the Federal Court does not have jurisdiction to entertain the third party proceeding. The Third Party Claim will therefore be struck for want of jurisdiction.

The learned justice also rejected the Defendants’ forum non conveniens arguments. Finally, in accepting the Third Parties’ state immunity argument, the court held,

[29]           Each of the State Third Parties is a separate legal entity pursuant to North Dakota law. A waiver of sovereign immunity must be clear and unequivocal, and cannot be presumed. Although certain political subdivisions of the State of North Dakota have accepted the jurisdiction of the Federal Court by commencing this proceeding as Plaintiffs, there is no indication that the State Third Parties have attorned or otherwise submitted to the Federal Court’s jurisdiction over the Third Party Claim. Consequently, I conclude that the State Third Parties are entitled to state immunity and should be struck as third parties to the proceeding.

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