City of Missoula v. Mountain Water Co.
| Citation | 384 Mont. 193,2016 MT 183,378 P.3d 1113 |
| Decision Date | 02 August 2016 |
| Docket Number | No. DA 15–0375.,DA 15–0375. |
| Parties | The CITY OF MISSOULA, a Montana municipal corporation, Plaintiff and Appellee, v. MOUNTAIN WATER COMPANY, a Montana corporation, and Carlyle Infrastructure Partners, LP, a Delaware limited partnership, Defendants and Appellants. The Employees of Mountain Water Company, (Shanna M. Adams, Heather M. Best, Dennis M. Bowman, Kathryn F. Datsopoulos, Wayne K. Davis, Valarie M. Dowell, Jerry E. Ellis, Greg A. Gullickson, Bradley E. Hafar, Michelle Halley, Douglas R. Harrison, Jack E. Heinz, Josiah M. Hodge, Clay T. Jensen, Kevin M. Johnson, Carla E. Jones, Micky A. Kammerer, John A. Kappes, Susan M. Lowery, Lee Macholz, Brenda K. Maes, Jason R. Martin, Logan M. McInnis, Ross D. Miller, Beate G. Newman, Maureen L. Nichols, Michael L. Ogle, Travis Rice, Eric M. Richards, Gerald L. Schindler, Douglas J. Stephens, Sara S. Streeter, Joseph C. Thul, Denise T. Tribble, Patricia J. Wankier, Michael R. Wildey, Angela J. Yonce, and Craig M. Yonce), Intervenors and Appellants. |
| Court | United States State Supreme Court of Montana |
For Appellants: Bradley Luck, (argued), Kathleen L. DeSoto, William T. Wagner, Stephen R. Brown, Garlington, Lohn & Robinson, PLLP, Missoula, Montana.
Joe Conner, Adam Sanders, D. Eric Setterlund, Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Chattanooga, Tennessee (Attorneys for Defendant/Appellant Mountain Water Company).
Gary M. Zadick (argued), Ugrin, Alexander, Zadick & Higgins, P.C., Great Falls, Montana (Attorney for Intervenors/Appellants The Employees of Mountain Water Company).
William W. Mercer, Michael P. Manning, Adrian A. Miller, Holland & Hart, LLP, Billings, Montana (Attorneys for Defendant/Appellant Carlyle Infrastructure Partners, LP).
For Appellee: Scott M. Stearns, Natasha Prinzing Jones, Boone Karlberg P.C., Missoula, Montana, Harry H. Schneider, Jr. (argued), Perkins Coie LLP, Seattle, Washington, William K. VanCanagan, Phil L. McCreedy, Datsopoulos, MacDonald & Lind, P.C., Missoula, Montana.
For Amicus Curiae: Mark D. Parker, Parker, Heitz & Cosgrove, PLLC, Billings, Montana (Attorney for United Property Owners of Montana, Inc.).
delivered the Opinion of the Court.
¶ 1 Mountain Water Company (Mountain Water) owns the water system that provides potable water to the residents of Missoula. The City of Missoula (the City) filed a complaint in the Fourth Judicial District Court, Missoula County, to condemn the water system. Montana's eminent domain statutes required the City to prove that public ownership of the water system is “more necessary” than private ownership. After a bench trial regarding the necessity of condemnation, the District Court issued findings of fact, conclusions of law, and a preliminary order of condemnation. Mountain Water, its employees, and its corporate owner, Carlyle Infrastructure Partners, LP (Carlyle), appeal from the preliminary order of condemnation. We affirm.
¶ 2 We restate the issues on appeal as follows:
¶ 3 Issue One: Did the District Court deny Defendants procedural due process by denying their motions for a continuance?
¶ 4 Issue Two: Did the District Court abuse its discretion by declining to admit evidence of valuation during the necessity phase of the proceedings?
¶ 5 Issue Three: Did the District Court err by refusing to dismiss Carlyle as a party to this case?
¶ 6 Issue Four: Did the District Court err in concluding that collateral estoppel does not bar the City from initiating this condemnation action?
¶ 7 Issue Five: Did the District Court err in concluding that a municipality may condemn a water system even if the owner of the water system does not have a franchise agreement or a contract to provide the municipality with water?
¶ 8 Issue Six: Did the District Court err in concluding that the effect of condemnation on the Mountain Water Employees is a factor to be considered in determining whether the acquisition is “more necessary,” but is not a dispositive factor?
¶ 9 Issue Seven: Were the District Court's findings regarding the effects of condemnation on the Mountain Water Employees clearly erroneous?
¶ 10 Issue Eight: Did the District Court err in finding that public ownership of the water system is more necessary than private ownership?
¶ 11 The City of Missoula is a municipal corporation. Its residents obtain potable water through a water system fed by an underground aquifer. Missoula is the only one of Montana's 129 municipalities that does not own its own water system; its water system is owned and operated by Mountain Water. Mountain Water is a corporation owned by Park Water Company, whose only equities are Mountain Water and two other water utilities in California. Park Water Company is the sole equity of Western Water Holdings. Western Water Holdings is a holding company; its controlling member is Carlyle, a global investment partnership. Carlyle acquired Mountain Water by acquiring Western Water Holdings' stock in 2011.
¶ 12 The City desired to own the water system that serves its residents because City officials believe a community's water system is a public asset best owned and operated by the public. In January 2014, the City offered to purchase Mountain Water from Carlyle for $50 million. Carlyle rejected the offer. The City then filed an amended complaint in the Fourth Judicial District Court, Missoula County, on May 5, 2014, in which it sought to condemn the water system, pursuant to Montana's law of eminent domain. The City intends to put the water system to the same use to which it is currently put by Mountain Water and Carlyle (collectively, the Defendants): providing potable water to Missoula residents. Cognizant of the statutory requirement to proceed with all aspects of a condemnation proceeding “as expeditiously as possible,” § 70–30–206(5), MCA
, the District Court set a three-week bench trial for March 18, 2015. The parties proceeded with discovery.
¶ 13 On May 28, 2014, thirty-eight employees of Mountain Water (Employees) moved to intervene in the action, asserting that the condemnation of Mountain Water would affect their rights, benefits, and interests in employment. The City did not object to the intervention, so long as the Employees' participation was limited to addressing their employment interests and how those interests affect the analysis of whether public ownership of the water system is more necessary than private ownership. The District Court granted the Employees' motion to intervene and allowed them to participate in the action “based upon the twelve specific interests asserted in their motion to intervene.” The District Court reserved the right to confine the Employees' participation in the litigation should they stray from those interests. The Employees participated in the litigation from this point forward.
¶ 14 Five months after the City commenced its condemnation action, Liberty Utilities Company (Liberty) entered into a merger agreement with Carlyle to purchase Mountain Water. Liberty then sought to intervene in the condemnation action, arguing that because it is under contract to purchase Mountain Water, it has a contractual interest in the property sufficient to justify intervention. The District Court denied Liberty's motion to intervene, finding that present, vested ownership is necessary for intervention under Rule 24(a) of the Montana Rules of Civil Procedure
, and that Liberty's interests would be adequately pursued by Carlyle. Liberty filed a petition for a writ of supervisory control with this Court, seeking a stay of the proceedings and a right to intervene as a defendant. We denied Liberty's petition on February 5, 2015. See Liberty Utils. Co. v. Mont. Fourth Judicial Dist. Court, 2015 Mont. LEXIS 284, 378 Mont. 539, 348 P.3d 671. Discovery and trial preparation continued.
¶ 15 Three weeks before trial, the City produced thousands of documents that were, for the first time, in usable electronic formats. Mountain Water filed a motion for a continuance of the trial to allow the Defendants more time to review the documents and prepare for trial. The District Court denied the motion. Mountain Water then filed a petition for a writ of supervisory control with this Court on March 5, 2015, seeking to compel the District Court to grant the continuance. We denied the petition, but we noted that “we are troubled by what appears to be the City's obstruction of discovery to gain a tactical advantage.” We denied the petition because Mountain Water “[did] not ma[ke] a compelling case that it cannot be ready for trial,” and we concluded that “the extent, if any, to which [Mountain Water] ultimately is prejudiced by the delay [in document production] is a matter that may be raised on appeal.” See Mountain Water Co. v. Mont. Fourth Judicial Dist. Court, 2015 Mont. LEXIS 647, ––– Mont. ––––, ––– P.3d ––––.
¶ 16 A three-week bench trial commenced on March 18, 2015. On June 15, 2015, Judge Townsend issued a 68–page Findings of Fact, Conclusions of Law, and Preliminary Order of Condemnation. On June 23, 2015, Mountain Water, Carlyle, and the Employees appealed the Findings of Fact, Conclusions of Law, and Preliminary Order of Condemnation and all orders and rulings that led up to and resulted in that Order.
¶ 17 By statute, condemnation proceedings occur in two phases, a necessity phase and a valuation phase. The necessity phase was concluded with the District Court's Preliminary Order of Condemnation. The results of that phase are before us on appeal. The valuation phase occurs after entry of a preliminary order of condemnation, § 70–30–207(1), MCA
, and begins with filing of the condemnee's claim of just compensation. If the condemnor fails to accept the claim, the District Court appoints three condemnation commissioners to determine the value of the property being condemned. In this case, Mountain Water, Carlyle, and the Employees filed their claims of just...
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