SUPREME COURT OF THE UNITED STATES
KANSAS v. COLORADO
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
 No. 105, Orig. Argued March 19, 2001­Decided June 11, 2001
 The Arkansas River rises in Colorado and flows through Kansas and several other States
before emptying into the Mississippi River. In 1949, Congress approved the Arkansas
River Compact (Compact), which Colorado and Kansas negotiated, and which provided
in Article IV-D that, inter alia, future development of the river basin could not
materially deplete the usable quantity or availability to other users of the river's waters.
In 1986, Kansas filed a complaint alleging that Colorado had violated the Compact. In his
first report, the Special Master found that post-Compact increases in groundwater well
pumping in Colorado had materially depleted the waters in violation of Article IV-D; in
his second report, he recommended that damages be awarded to Kansas; and in his third
report, he recommended that such damages be measured by Kansas' losses attributable to
Compact violations since 1950, be paid in money not water, and include prejudgment
interest from 1969 to the date of judgment. Colorado has filed four objections to the third
report, Kansas has filed one, and the United States submits that all objections should be
overruled.
Held:
1. The recommended damages award does not violate the Eleventh Amendment. Thus,
Colorado's first exception is overruled. Colorado contends that that the Amendment
precludes damages based on losses sustained by individual Kansas farmers, as the Report
recommends. Kansas has unquestionably made the required showing that it has a direct
interest of its own and is not merely seeking recovery for the benefit of individuals who
are the real parties in interest. Oklahoma ex rel. Johnson v. Cook, 304 U.S. 387, 396. This
is but one of several proceedings in which Kansas' own interest in preventing upstream
diversion of the river has justified the exercise of this Court's original jurisdiction.
Kansas has been in full control of this litigation since its inception, and its right to control
the disposition of any recovery of damages is unencumbered. The injury to individual
farmers is but one component of the formula adopted by the Special Master to quantify
damages here. When a State properly invokes this Court's original jurisdiction, neither
the measure of, nor the method for calculating, damages can retrospectively negate that
jurisdiction. Nor would jurisdiction be affected by Kansas' postjudgment decision about
whether to deposit the money recovered in its general coffers or use the money to benefit
those who were hurt by the violation. Pp. 3-6.
2. The unliquidated nature of Kansas' money damages does not bar an award of
prejudgment interest. Thus, Colorado's second exception is overruled. This Court has
long recognized that the common-law distinction between liquidated and unliquidated
damages is unsound, Funkhouser v. J. B. Preston Co., 290 U.S. 163, 168, and that a
monetary award does not fully compensate for an injury unless it includes an interest
component, see, e.g., Milwaukee v. Cement Div., National Gypsum Co., 515 U.S. 189,
195. The Special Master acted properly in declining to follow this long-repudiated
common-law rule. Pp. 6-9.

Opinion of O'Connor, J.
SUPREME COURT OF THE UNITED STATES
 No. 105, Orig.
 STATE OF KANSAS, PLAINTIFF v. STATE
OF COLORADO
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
[June 11, 2001]
Justice O'Connor, with whom Justice Scalia and Justice Thomas join, concurring in part
and dissenting in part.
I agree with the Court's disposition of this case as to Colorado's first and fourth
exceptions to the Special Master's Third Report, concerning the award and determination
of damages. I therefore join Parts I, IV, and V of the Court's opinion. I do not concur in
Parts II and III of the Court's opinion because I believe that the award of prejudgment
interest to Kansas, coming over half a century after the Arkansas River Compact's
(hereinafter Compact) negotiation and approval, is clearly improper under our precedents.
We are dealing with an interstate compact apportioning the flow of a river between two
States. A compact is a contract. It represents a bargained-for exchange between its
signatories and "remains a legal document that must be construed and applied in
accordance with its terms." Texas v. New Mexico, 482 U.S. 124, 128 (1987); see also
Petty v. Tennessee&nbhyph;Missouri Bridge Comm'n, 359 U.S. 275, 285 (1959)
(Frankfurter, J., dissenting) ("A Compact is, after all, a contract"). It is a fundamental
tenet of contract law that parties to a contract are deemed to have contracted with
reference to principles of law existing at the time the contract was made. See, e.g.,
Norfolk & Western R. Co. v. Train Dispatchers, 499 U.S. 117, 129-130 (1991); Farmers
and Merchants Bank of Monroe v. Federal Reserve Bank of Richmond, 262 U.S. 649,
660 (1923); see generally 11 Williston on Contracts §30:19 (4th ed. 1999). The basic
question before the Court is thus one of "the fair intendment of the contract itself."
Virginia v. West Virginia, 238 U.S. 202, 233 (1915). Specifically, the question is
whether, at the time the Compact was negotiated and approved, Colorado and Kansas
could fairly be said to have intended, or at least to have expected or assumed, that
Colorado might be exposing itself to liability for prejudgment interest in the event of the
Compact's breach. Cf. id., at 232-236 (awarding interest to Virginia in a suit against
West Virginia for breach of a contract to assume "an equitable proportion" of Virginia's
interest-bearing public debt upon finding that "there is no escape from the conclusion that
there was a contract duty on the part of West Virginia to provide for accruing interest as a
part of the equitable proportion assumed").
I fail to see how Colorado and Kansas could have contemplated that prejudgment interest
would be awarded. The "venerable ... rule" at common law was that prejudgment interest
was unavailable on claims for unliquidated or, even more significantly, unascertainable
damages. Milwaukee v. Cement Div., National Gypsum Co., 515 U.S. 189, 197 (1995).
Contrary to the Court's suggestion, see ante, at 6-8, 11, that rule had not been
abandoned by the period between 1943 and 1949, the years of the Compact's negotiation
and ultimate approval by Congress. By that time, the state of the law in general regarding
awards of prejudgment interest for unliquidated claims was uncertain at best, as the Court

SUPREME COURT OF THE UNITED STATES
 No. 105, Orig.
 STATE OF KANSAS, PLAINTIFF v. STATE
OF COLORADO
ON EXCEPTIONS TO REPORT OF SPECIAL MASTER
[June 11, 2001]
Justice Stevens delivered the opinion of the Court.
The Arkansas River rises in the mountains of Colorado just east of the Continental
Divide, descends for about 280 miles to the Kansas border, then flows through that State,
Oklahoma, and Arkansas and empties into the Mississippi River. On May 20, 1901,
Kansas first invoked this Court's original jurisdiction to seek a remedy for Colorado's
diversion of water from the Arkansas River. See Kansas v. Colorado, 185 U.S. 125, 126
(1902) (statement of case). In opinions written during the past century, most recently in
Kansas v. Colorado, 514 U.S. 673, 675-678 (1995), we have described the history and
the importance of the river. For present purposes it suffices to note that two of those
cases, Kansas v. Colorado, 206 U.S. 46  (1907), and Colorado v. Kansas, 320 U.S. 383
(1943), led to the negotiation of the Arkansas River Compact (Compact), an agreement
between Kansas and Colorado that in turn was approved by Congress in 1949. See 63
Stat. 145. The case before us today involves a claim by Kansas for damages based on
Colorado's violations of that Compact.
The Compact was designed to "[s]ettle existing disputes and remove causes of future
controversy" between the two States and their citizens concerning waters of the Arkansas
River and to "[e]quitably divide and apportion" those waters and the benefits arising from
construction and operation of the federal project known as the "John Martin Reservoir."
Arkansas River Compact, Art. I, reprinted in App. to Brief for Kansas A-1, A-2.
Article IV-D of the Compact provides:
"This Compact is not intended to impede or prevent future beneficial development of the
Arkansas River basin in Colorado and Kansas by Federal or State agencies, by private
enterprise, or by combinations thereof, which may involve construction of dams,
reservoir, and other works for the purpose of water utilization and control, as well as the
improved or prolonged functioning of existing works: Provided, that the waters of the
Arkansas River, as defined in Article III, shall not be materially depleted in usable
quantity or availability for use to the water users in Colorado and Kansas under this
Compact by such future development or construction." Id., at A-5.
It is the proviso to that paragraph that is of special relevance to this case.
In 1986, we granted Kansas leave to file a complaint alleging three violations of the
Compact by Colorado. See 514 U.S., at 679-680. After taking evidence in the liability
phase of the proceeding, Special Master Arthur L. Littleworth filed his first report, in
which he recommended that two of the claims be denied, but that the Court find that post-
Compact increases in groundwater well pumping in Colorado had materially depleted the
waters of the river in violation of Article IV-D. See id., at 680. We overruled
Colorado's exceptions to that recommendation, including an argument that Kansas was
guilty of laches. Id., at 687-689. We remanded the case to the Special Master to
determine an appropriate remedy for the violations of Article IV-D. Id., at 694.