Purgatory Recreation I, LLC v. United States.
No. 24-1241. 10/21/2025. D.Colo. Judge Ebel. Administrative Procedure Act—Declaratory Judgment Act—Quiet Title Act—Subsurface Mineral Rights—Subject Matter Jurisdiction—Lack of Prudential Ripeness.
October 21, 2025
Purgatory Recreation I, LLC and Purgatory Village Land, LLC (collectively, Purgatory) owns Purgatory Ski Resort (resort) and an affiliated resort community. The resort was originally developed by Duncan and certain related entities he founded (collectively, Duncan). In the 1970s and 1980s, certain conditional water rights on the East Fork of Hermosa Creek (water rights) were decreed to Duncan pursuant to Colorado law. The water rights are for groundwater within the Hermosa Creek watershed that is accessible by drilling a well. In 1991, Duncan conveyed a tract of land to the United States in a land exchange, retaining ownership of the water rights (exchange land). The exchange land contained the areas that had been identified as possible well sites to access the water rights. But the conveyance documents did not mention the water rights or give Duncan any right of access over the conveyed land, which is now managed by the US Forest Service (USFS). Between 2001 and 2007, Purgatory’s predecessor-in-interest Durango Mountain Resort (Durango) submitted four proposals for a special use permit (SUP) to the USFS to drill two test wells on the exchange land. Although the USFS’s responses were generally framed as requests for more information, they also indicated that the USFS believed it had the authority to deny the requests altogether if use of the water rights would decrease stream flows and thus conflict with its management of the water to develop and restore fisheries habitat in the upper East Hermosa drainage. Durango also periodically filed applications with the state water court to show reasonable diligence in developing the conditional water rights as required by state statute. The USFS did not oppose the first four applications, but in 2010 and 2012 it opposed them and claimed that the water rights should be extinguished because the USFS would not grant the necessary land authorization.
Purgatory brought this action in 2022 against the United States and the USFS under the Quiet Title Act (QTA) and the Declaratory Judgment Act (DJA), asserting that it has a right of access across the federal land to develop its water rights. Purgatory sought to quiet title to an implied easement of necessity under the QTA, and its DJA claim requested declarations that (1) it is against Colorado law for USFS to ensure instream flows in the East Fork Hermosa Creek by requiring Purgatory to forfeit its water rights; (2) federal law requires owners of inholdings (including water rights) on federal land to have the ability to use that property, subject to reasonable regulation; and (3) a total prohibition on Purgatory’s use of the water rights would constitute a taking of private property in violation of the Fifth Amendment of the US Constitution and Article II, § 15 of the Colorado Constitution. The district court concluded that Purgatory’s claim accrued at the time of the land exchange in 1991. It granted defendants’ motion to dismiss both claims, concluding that the QTA claim was barred by that statute’s 12-year statute of limitations and the DJA claim was, in effect, a quiet title claim that can be brought only under the QTA, so that claim was also barred by the QTA’s statute of limitations.
Purgatory argued on appeal that the QTA claim did not accrue until 2010, when the USFS first asserted exclusive control over the exchange lands by arguing in Colorado water court that the water rights should be extinguished because the USFS would not grant necessary land use authorization, so its 2022 suit was timely. First, the Tenth Circuit disagreed with the district court’s reasoning that the recorded interest must actually conflict with the plaintiff’s asserted interest to start the statute of limitations running on a potential QTA claim. While Purgatory and its predecessors knew the United States claimed express unencumbered title to the land at issue, they could not have known at the time of the conveyance that the United States also disputed the existence of an implied easement, because the recorded warranty deed did not necessarily conflict with Purgatory’s asserted implied easement. But by 2006, at the latest, the USFS had asserted exclusive control of the conveyed land sufficient to put Purgatory’s predecessor on notice that the USFS denied the existence of Purgatory’s alleged easement. Therefore, the QTA’s statute of limitations expired in 2003 or, at the latest, 2018, both of which predated the filing of Purgatory’s QTA claim, and the district court correctly dismissed it as time-barred.
Purgatory also argued that the DJA claim is distinct from the QTA claim and, therefore, not subject to the QTA’s statute of limitations. The DJA does not confer federal court jurisdiction, so the power to issue declaratory judgments must have an independent basis of jurisdiction. Further, the DJA does not provide a waiver of sovereign immunity. Purgatory asserted that the waiver of sovereign immunity in § 702 of the Administrative Procedure Act applied to its DJA claim. While Purgatory failed to plead a waiver of sovereign immunity under § 702, that section clearly provides a waiver of sovereign immunity for Purgatory’s DJA claim, so the Tenth Circuit exercised its discretion and declined to dismiss the claim on grounds that Purgatory failed to properly plead this waiver. On the merits, Purgatory’s first request for a declaration asserted that, under Colorado law, only the Colorado Water Conservation Board may reserve water for instream flows, so the USFS’s refusal to allow access to the water rights amounted to an impermissible reservation of water for instream flows without going through the state water appropriation process. This request was based on state law; because it did not arise under federal law, it was dismissed for lack of subject matter jurisdiction. Purgatory’s second request was “inextricably linked” to whether Purgatory has a right of access, which the court determined also belongs under the QTA and was also dismissed for lack of subject-matter jurisdiction. The third request was dismissed for lack of prudential ripeness because Purgatory must first bring a Tucker Act claim for compensation for an alleged taking.
Because the Tenth Circuit decided this case on statute of limitations and jurisdictional grounds, it did not address whether Purgatory would otherwise be entitled to its asserted right of access or whether defendants have complied with applicable state and federal law.
The dismissal of both claims was affirmed.