For a sixty-year period the Lassen County Superior Court routinely dealt with law suits involving Eagle Lake issues. Of course, the majority of these involved the various enterprises to tap the lake for irrigation. In the late 1920s, court filings were numerous as the local banks filed on foreclosures of the numerous ranchers of the Tule & Baxter Creek Irrigation Districts who defaulted on their loans on the failed Bly Tunnel.
It was in 1932 that witnessed an unusual lawsuit filed by Malvena Gallatin and James Fritter, both Eagle Lake property owners. Malvena was the leading figure and to give credence brought in Eagle Lake resident Fritter. In the complaint it alleged the districts were wasting Eagle Lake water, due to the leakage at the tunnel during the non-irrigation season. It was their contention that fifty percent of the winter run-off was lost through the tunnel, since the districts did not have properly installed head gates. Malvena stressed the recreational value of the lake would depreciate dramatically if the districts continued to waste the lake water.
Not divulged was Malvena had an ulterior motive. She had entered into agreement to sell her Eagle Lake property to a group who had plans to develop a million dollar resort at the lake, whereby Malvena would receive $500,000. A stipulation to the sale was that she had to guarantee that the districts would not lower the lake any further. She did not succeed. The litigation dragged on and the lake level dropped even more. When the judgement was entered on April 17, 1936, she had already lost her option to sell her property. In addition, she lost the case. The court cited that both Gallatin and Fritter had entered into agreements with Leon Bly that allowed the irrigation system to draw forty feet below the 1917 level of the lake, and when they commenced the action the lake level had only dropped twenty-four feet.
