An employment lawsuit is pitting two of the state’s largest actors on water issues against each other, and some say its outcome could complicate Arizona’s efforts to manage its water and prepare for drought.

The lawsuit, filed in 2012 by a former employee of the Central Arizona Water Conservation District, which operates the Central Arizona Project, alleged that CAP violated the federal Family Medical Leave Act.

But it’s not the specifics of the employee’s allegations that have the Arizona Department of Water Resources troubled. It’s the argument CAP is making to try to fend off $1 million or more in damages and attorney’s fees.

The district, which delivers water to millions who live in Maricopa, Pima and Pinal counties, argues it is an arm of the state and, thus, entitled to sovereign immunity under the 11th Amendment.

CAP also claimed that it is the “single entity” created by Arizona to secure, manage and deliver more than half of Arizona’s share of water from the Colorado River.

That is overstating CAP’s role, said ADWR Director Tom Buschatzke.

“The ‘secure’ and ‘manage’ part, we believe that’s me. That’s ADWR, pursuant to state law. It’s very important to the executive branch of the state that they have the control over the policy direction of the management of the Colorado River water,” he said.

Buschatzke’s remarks underscore a delicate matter. The state is negotiating a proposal, called the Lower Colorado Basin Drought Contingency Plan, with Nevada and California (the lower basin states), and the federal government to keep Lake Mead’s water from reaching critical levels, when catastrophic reductions in water allocations are triggered.

Just early this month, lawmakers approved a resolution giving ADWR the authority to negotiate this issue on behalf of the state, as Arizona’s laws require the Legislature’s approval via a concurrent resolution for such agreements.

And last year, Arizona water officials launched a campaign to convince stakeholders to agree to a statewide strategy, the aim of which is also to leave sufficient water in Lake Mead and improve the chances that the lake will stay above manageable levels over the next few years.

Former ADWR Director Kathleen Farris recently wrote in the Arizona Republic that the conflict “boils down to who’s in charge of Arizona’s Colorado River water issues.”

“The conservation district’s important role is to manage CAP infrastructure, move CAP water through its canals and fulfill its obligations to CAP contractors. But the Department of Water Resources must take the lead on all major water policy issues,” she wrote. “Ambiguity and confusion will reign if others try to assume the mantle of authority.”

CAP insisted that the case is a narrow employment issue, and doesn’t involve other parties.

After losing in U.S. District Court, CAP appealed to the Ninth Circuit Court of Appeals, which will hear the case on April 4.

In a brief filed with the Ninth Circuit, CAP asserts that it can’t be sued by its former employee for violating FMLA because it is an arm of the state of government, and thus, immune from private lawsuits.

In arguing its case, CAP said it should be covered by the 11th Amendment, which grants immunity to states from private lawsuits and from which flows the concept of “sovereign immunity,” though the term is not used in the amendment itself.

“(CAP) was created by the Arizona Legislature solely to serve a critical state function: securing, managing, and delivering more than half of Arizona’s entitlement of Colorado River water to the citizens of the State,” the district argued.

CAP attorney Jay Johnson told the Arizona Capitol Times that, until this case, the district has never argued it should be covered by the 11th Amendment.

“It’s a rare thing that we get sued to begin with,” he said.

To determine if an entity is an arm of a state, the courts have set up a five-part test, but two provisions in the test are most important, CAP argued.

First, Arizona would be “functionally liable” for CAP’s debt obligations if CAP is unable to meet them. Second, CAP serves a critical function for the state because it manages and delivers a large chunk of its Colorado River water.

CAP insists that the case is narrow. If it wins the appeal, the precedent would only apply to the specific provision under FMLA that it was alleged to have violated.

“[And] if we lose this case, the CAP and its taxpayers will be liable for a damage award. Other than that, there is no effect on the State of Arizona, any agency in the State of Arizona, any other entity in the State of Arizona,” Johnson said.

But ADWR officials believe the case could have far-reaching effects on the state, including some potential implications for CAP water customers.

The department wants to file an amicus brief, though the submission deadline has passed. The department only recently was made aware of the case, Buschatzke said.

“We found out just accidentally in an off-hand conversation between two attorneys,” he said, adding that the 11th Amendment claims are a “pretty big deal.”

Also concerning to ADWR is the claim that Arizona could be on the hook for CAP’s debts. That position runs directly into state statutes, which say the three counties that receive CAP water would be liable, he said.

“It’s kind of a strange argument, and it’s kind of a scary argument to be making, in my mind,” he said.

If CAP wins the appeal, ADWR believes CAP’s sovereign immunity would be “very broad,” Buschatzke said, noting it is attached to a lawsuit in federal court and thereby giving it heft.

Buschatzke said there could be some scenario in which a contractual dispute between water rights brings CAP to state court. Since the U.S. Bureau of Reclamation would be a party to the suit because it’s tied into the CAP process, the case would go to federal court, and CAP could invoke its sovereign immunity, Buschatzke posited.

“It seems to me it gives them the potential to have more power than they otherwise should have. That’s one of our concerns,” he said.

There’s usually a much clearer, direct link between the state and its arms, he said.

In a strongly worded statement, the governor’s office argued that CAP erred in its interpretation of the 11th Amendment, and added that the state, through ADWR, plays the “primary role” in water policy and implementation.

“Efforts by CAP to undermine the primacy of state leadership, and state sovereignty, are misguided and counterproductive to good water planning,” said Daniel Scarpinato, the governor’s spokesman.

The City of Phoenix, which gets water from CAP to sell to its customers, said its water services department “fully supports the role” of ADWR “as the authority that protects and manages Arizona’s rights to the Colorado River.”

And the Gila River Indian Community, another Colorado River water rights holder, also sides with ADWR, though it hasn’t filed any briefs. GRIC Gov. Stephen Roe Lewis said in a statement that “CAP may be overstating its role” and ADWR “is the lead entity when it comes to developing water policy in Arizona and representing Arizona’s collective water interests.”

Johnson said everything in CAP’s brief is accurate, and CAP is the only entity that secures, manages and delivers water.

“What it boils down to is that this case involves CAP. It doesn’t involve ADWR. This is an employment matter that only concerns us,” Johnson said.

CAP’s arguments about its role in water management serve to bolster its case in court, but the arguments don’t “implicate” ADWR, he added.

As to whether the state is liable for debts, CAP noted that it is only “functionally liable,” not “legally liable,” meaning that “if for some unforeseen, virtually impossible reason its debts were not paid, it is so important to the State of Arizona that Arizona would have to find a way to keep it running,” Johnson said.

Buschatzke said CAP is an important part of the water community, and he hopes the two sides will find ways to work out their differences and come together to negotiate future water issues.

“Having this kind of public airing our differences in public is not a good thing. It weakens that whole one voice of Arizona,” Buschatzke said.