California-American Water Co. v. Marina Coast Water Dist.

Decision Date28 December 2022
Docket NumberA160662
Citation86 Cal.App.5th 1272,303 Cal.Rptr.3d 227
Parties CALIFORNIA-AMERICAN WATER COMPANY et al., Plaintiffs and Appellants, v. MARINA COAST WATER DISTRICT, Defendant and Respondent.
CourtCalifornia Court of Appeals

Attorney for Plaintiff and Appellant, California American Water Company: Allen Matkins Leck Gamble Mallory & Natsis, LLP, Robert R. Moore, Michael J. Betz, Alexander J. Doherty

Attorney for Plaintiff and Appellant, Monterey County Water Resources Agency Law Offices of Mark A. Wasser, Mark A. Wasser ; County of Monterey, Leslie J. Girard, County Counsel, Kelly L. Donlon, Deputy County Counsel

Attorney for Defendant and Respondent, Marina Coast Water District Richards, Watson & Gershon, Saskia T. Asamura, T. Peter Pierce, Kyle H. Brochard; Friedman & Springwater LLP, Ruth Muzzin

Richman, J.

Here, the third and fourth appeals in this case, we address two separate appeals by two separate plaintiffs from a summary judgment emanating from two separate summary adjudications against them. The first summary adjudication was based on the two-year statute of limitations, the second on the failure to comply with the claim-filing requirement in the Government Claims Act. The summary adjudications were entered in 2019, seven years after the first lawsuit among the parties was filed—and eight years after the parties spent some six months in formal and informal efforts attempting to resolve the issues between and among them.

Our de novo review leads to the conclusion that both summary adjudications were errors and, therefore, so was the judgment. We thus reverse.

BACKGROUND1
The Parties and the General Setting

The appeals here involve two separate appellants: Monterey County Water Resources Agency (Monterey) and California-American Water Company (Cal-Am). Both appeals have the same respondent: Marina Coast Water Company (Marina).

Appellant Monterey is an independent public agency created by the Monterey Coast Water Resources Act (MCWRA) (Water Code, Appendix, Chapter 52), responsible for analyzing water resources in Monterey County. Monterey has a dual governing board structure consisting of the elected Monterey County Board of Supervisors and a Board of Directors appointed by the Board of Supervisors. The appointed Board is responsible for the actual operation of the agency, approving and executing contracts and formulating recommendations to the Board of Supervisors on matters within the scope of the Supervisors’ duties. It also has final authority on most operational and administrative matters.

Appellant Cal-Am is an investor-owned water utility regulated by the California PUC, providing water to over 100,000 residents on the Monterey Peninsula, including Carmel-by the-Sea, Monterey, Pacific Grove, Seaside, Del Rey Oaks, and Sand City, as well as various unincorporated areas of Monterey County.

Respondent Marina is a public agency formed in 1960 under the County Water District law to provide water for the City of Marina and neighboring communities on the Monterey Peninsula.

A fourth entity involved, though not a party in either appeal, is RMC Water and Environment (RMC).

For many years, an adequate and sustainable source of potable water was a problem on the Monterey Peninsula. And in 1995 the State Water Resources Control Board (SWRCB) issued an Order (No. WR 95-10) to Cal-Am to stop drawing water from the Carmel River and develop an alternate water supply. The Order led to years of discussions, and culminated in late 2009 when Marina, Monterey, and Cal-Am reached agreement on a plan to develop and construct a regional desalinization project designed to extract brackish water from beneath Monterey Bay, purify it, and deliver it to consumers ("RDP" or "the project").

The project was to replace the Carmel River as a water supply, and in furtherance of the project, the parties entered into five interrelated agreements that came to be referred to as the RDP Agreements, specifically:

(1) A "Reimbursement Agreement," entered into in February and March 2010, under which Cal-Am agreed to reimburse Marina and Monterey their costs in pursuing the RDP, subject to later repayments or forgiveness.

(2) A "Water Purchase Agreement" (WPA), entered into on April 6, 2010, which provided for the financing and construction of the various facilities.

(3) A "Settlement Agreement," also entered into on April 6, which established a process for proposing the desalination project to the PUC for approval.

(4) A "Project Management Agreement," entered into on January 11, 2011, under which RMC was selected as the project manager; and

(5) A "Credit-Line Agreement," also entered into on January 11, which established a line of credit to Monterey and Marina to minimize their project-related finances.

Meanwhile, while some of the above agreements were still being negotiated and executed, in December 2010, the PUC approved the project, ( Cal-Am One, supra , 2 Cal.App.5th at p. 753, 206 Cal.Rptr.3d 439 ), approval that was a condition precedent to it.2

Meanwhile, in January 2010, Marina hired Stephen Collins who sought to facilitate approval of the project by the PUC, including by working on the draft WPA. Our colleagues described Collins's involvement in more detail:

"Stephen Collins was a member of Monterey's appointed board of directors when the RDP agreements were being negotiated and, in some cases, entered into. Starting in January 2010, he also was a paid consultant for RMC to advocate for the agreements through a contract he had with Marina. RMC ultimately paid Collins $160,000 for his work. At a February 2011 meeting of Monterey's board of directors, Collins exposed his potential conflict of interest by recusing himself from a vote on the selection of RMC as the manager of the desalination project. Local media began reporting on the possible conflict of interest, and an investigation followed. Collins resigned from Monterey's board of directors on April 1, 2011." ( Cal-Am One, supra , 2 Cal.App.5th at p. 753, 206 Cal.Rptr.3d 439.)3

On July 7, 2011, Monterey's outside counsel, Kevin O'Brien, sent a letter to Marina and Cal-Am expressing the opinion the RDP Agreements were void as a consequence of Collins's financial interest in the Project. Cal-Am then gave notice the RDP Agreements were terminated.

Marina, Monterey, and Cal-Am thereafter engaged in months of negotiation and mediation in an attempt to resolve the future of the project, efforts that included several mediation sessions at JAMS and with an Administrative Law Judge at the PUC, and various private sessions. These efforts continued, off and on, for several months, finally ending on January 16, 2012 without resolution.

On January 25, Mark Fogelman, Marina's outside counsel, e-mailed the parties noting "[t]he mediation is over" and declaring "the parties should be free to pursue their legal remedies." And in a later e-mail, Mr. Fogelman further represented that Marina had "no objection" to the parties being able to raise in court any and all "issues and legal claims" referred to in the parties’ pre-mediation correspondence or other issues "reasonably related" to such issues and claims.

Despite that, uncertainty surrounded the parties’ pre-lawsuit discussions: Marina insisted the parties were obligated to comply with the dispute resolution procedure in the WPA; Monterey disagreed, but nevertheless followed the contractual procedure. Marina then injected more uncertainty into the setting by refusing to agree that the parties’ efforts were in fact compliant with the terms of the WPA, noting, for example, that "[W]hile it is true that representatives of the parties met on July 13, 2011, in a non-confidential meeting, [Marina] does not admit that the July 13, 2011, meeting was conducted pursuant to Article 19 of the WPA or that it constituted an ‘attempt in good faith to resolve the dispute.’ "

In light of this uncertainty, on September 18, 2012, Cal-Am submitted a claim "pursuant to the California Government Claims Act, Government Code sections 810 et seq" (Claims Act). It was four-pages in length, single-spaced, and in it Cal-Am alleged that the SWRCB had ordered it to come up with an alternative to the Carmel River as a source of water for the Monterey Peninsula. The RDP was that alternative and, Cal-Am alleged, Marina was responsible for causing the project's failure, thereby forcing Cal-Am "to apply to the CPUC for authority to pursue another water supply project...." In short, the claim was based on harm incurred from the RDP's collapse, caused by Marina.

With respect to the specific cause of the project's collapse, the claim alleged Marina failed to obtain financing for its portion of the project. However, the claim also asserted that Marina had taken the position that the RDP's implementing agreements "were void pursuant to Government Code section 10904 due to the conduct of a former MCWRA director," Collins. The claim identified, by date, the letters in which Marina took that position. And it further alleged that Marina's actions led to Monterey's assertion that the RDP agreements are void under Government Code section 1090, which led to the termination of the RDP agreements.

Cal-Am filed then a lawsuit.

The Lawsuit and the Appeals

On October 4, 2012, Cal-Am filed a complaint naming as defendants Marina and Monterey. It alleged two causes of action, both for declaratory relief: the first, whether the RDP Agreements were void as a consequence of Marina's payments to Collins; the second, whether Cal-Am had the right to terminate the Agreements regardless of any conflict of interest, as a result of Monterey's anticipatory repudiation. ( Cal-Am One, supra , 2 Cal.App.5th at p. 753, 206 Cal.Rptr.3d 439.)

On November 19, Marina filed an answer. Marina also filed a cross-complaint against Cal-Am and Monterey seeking a declaration barring any challenges to the RDP Agreements. The cross-complaint alleged seven causes of action, three of which were based on the...

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