Order Denying Motion of Marina Coast Water District Cgc 13 528312 02-25-14

8/12/2019 Order Denying Motion of Marina Coast Water District Cgc 13 528312 02-25-14

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ackgroundThere are three parties in this action: California-American Water Company (Cal-Am),

Marina Coast Water District (Marina), and Monterey County Water Resources Agency(Monterey).

In 1995, the State Water Resources Control Board (SWR) ordered Cal-Am to diligentlytake action to stop diverting water from the Carmel River by finding sufficient replacementsources. 2 In a later order, SWR ordered Cal-Am to come into compliance with the above orderno later than December 31, 2016?

Cal-Am planned the Regional Desalination Project (Project) to come into compliance.The Project was planned as a partnership among Cal-Am, Marina, and Monterey.4 In connectionwith the Project, the parties entered five written contracts, including ( 1) the ReimbursementAgreement; (2) the Settlement Agreement; (3) the Water Purchase Agreement (WPA)(collectively, Agreements).5 The Agreements went into effect on or before January 11, 2011.6

The Public Utilities Commission (PUC) approved the Agreements.7 No entity sought judicialreview ofthe PUC s final approval. 8

2 Cal-Am and Monterey's Joint Response to Marina's Separate Statement of Undisputed Material Facts (Cal-AmResponse to SSUF), 113 d. 24.4 See id 33.5 See id t ~ ~ 34-37, 42-43, 45-49, 54-56, 60. Marina refers to only these three Agreements using the termAgreements. Cal-Am and Monterey refer to all five contracts, including the Credit Line Agreement and theProject Management Agreement (which engaged RMC Water and Environment) together as the RDP Agreements.See Motion, Glossary ofTerms ... , Cal-Am Opposition, 4:22-23; Monterey Opposition, 2:4-5; see also Cross

C o m p l a i n t ~ 9; C o m p l a i n t ~ 18 The parties do not suggest that this difference in terminology is material (even toMarina's Motion for Summary Adjudication on the first cause of action in the Complaint, which refers to all fivecontracts). At the February 7 2014 hearing the parties agreed that for purposes of these motions the contracts rose orfell together.6 See id t ~ ~ 34,47 (parties entered the Reimbursement Agreement in February 2010 and Commission approvalwas granted in August 2010), 56 (WPA and Settlement Agreement became effective on January 11, 2011).7 d. t ~ ~ 47-49, 52-54,66,70-73.8 d. 49, 66, 70-73.

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Requests for Judicial NoticeNone of the requests for judicial notice is opposed. They are granted. There are also a

large number of undisputed facts, arguably obviating the need to take judicial notice of several ofthe documents (many of which are also attached to declarations). Marina Exhibits L 0 and Rreferred to below, are PUC decisions subject to judicial notice. 13

8 Discussion9

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A Standards

The standards for summary judgment and adjudication are known to the reader. 14B Validation StatutesMarina relies on the 60-day limitations period provided by the validation statutes, which

it argues were triggered by any of three separate provisions: (1) 52-39 of Annotated WaterCode Appendix (the Agency Act); (2) Water Code 30066; and (3) Government Code53511. 15 Cal-Am and Monterey argue that a four-year limitations period applies pursuant toGovernment Code 1092(b), either because Government Code 1092(b) trumps the validationstatutes where a contract is allegedly invalid based on a conflict of interest or because thevalidation statutes do not apply to the contracts in this case.16

The validation statutes are found at C.C.P 860-870. They provide a mechanismwhereby a public agency may bring a validation proceeding in superior court within 60 days of

the existence of any matter which under any other law is authorized to be determined pursuant

13 Prattv. Coast Trucking Inc. 228 Cal.App.2d 139, 143-44 (1964).14 C.C.P. 437c; Aguilar v Atlantic Richfield Company 25 Cal.4th 826 (2001).15 Motion, 1316 Cal-Am Opposition, 9-15; Monterey Opposition, 5-12.

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to [the validation statutes.] 17 If an agency does not initiate a validation proceeding, anyinterested person may bring an action within the time and in the court specified by Section 860 todetermine the validity of such matter. 18 The interested person must bring a validatingproceeding within 60 days: No contest except by the public agency or its officer or agent of anything or matter under this chapter shall be made other than within the time and the manner hereinspecified. 19

That is, if the validation statutes apply a public agency may either ( 1 initiate a validationproceeding, or (2) do nothing- in which case the act will become immune from attack if no

interested person brings a proceeding to establish the acts validity or invalidity within 60 days?0A validation judgment is conclusive.21 If a judgment in a validation is affirmed on appeal,

or if no appeal is taken, the judgment shall, notwithstanding any other provision of law ...thereupon become and thereafter be forever binding and conclusive as to all matters thereinadjudicated or which at that time could have been adjudicated. 22

There are three potential triggers for the validation statutes in this case. 23First, 52-39 of the Agency Act:

Any judicial action or proceeding to attack, review, set aside, void, annul,or challenge the validity or legality of the formation of a zone, anycontract entered into by the agency or a zone, any bond or evidence ofindebtedness of the agency or a zone, or any assessment, rate, or charge of

17 Kaatz v City o Seaside, 143 Cal.App.4th 13, 29 (2006), quoting C.C.P 860.8 Jd. at 30, quoting C.C.P. 863.19 Jd. quoting C.C.P. 869.20 ld., citing Friedland v City o Long Beach, 62 Cal.App.4th 835, 850-51 (1998). See also City o Ontario v

Superior Court, 2 Cal.3d 335, 341 (1997) ( a statute which begins by providing a remedy to be pursued by publicagencies, ... concludes by making it unnecessary for such agencies to do anything at all, and the incidental orderivative remedy of an 'interested person' turns out to be controlling. )2 Friedland, 62 Cal.App.4th at 844.22 Jd. at 846 (emphasis in original), quoting C.C.P. 870(a).23 Cal-Am and Monterey take the position that all three triggers for the validation statutes are sufficiently analogousthat the case law interpreting each can be applied to all three. Cal-Am Opposition, 10 (each trigger is inapplicablefor the same reasons); Monterey Opposition, 8 (for the purposes of the issues presented here, the language in allthree statutes is equivalent). Marina counters that Agency Act 52-39 is broader than the other two provisions withrespect to the scope of the contracts to which it applies. Reply, 7-8. As noted below, I agree.

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the agency or a zone shall be commenced within 60 days of the effectivedate thereof.The action or proceeding shall be brought pursuant to Chapter 9(commencing with Section 860) of Title 1 of Part 2 of the Code ofCivilProcedure.The agency may bring an action pursuant to that Chapter 9 to determinethe validity of any of the matters referred to in this section.

Second, Water Code 30066 provides:n action to determine the validity of an assessment, or of warrants,

contracts, obligations, or evidences of indebtedness pursuant to thisdivision may be brought pursuant to Chapter 9 (commencing with Section860) of Title 10 of Part 2 of the Code of Civil Procedure.

Third, Government Code 53511 provides:(a) A local agency may bring an action to determine the validity of itsbonds, warrants, contracts, obligations or evidences of indebtednesspursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2of the Code of Civil Procedure.(b) A local agency that issues bonds, notes, or other obligations theproceeds ofwhich are to be used to purchase, or to make loans evidencedor secured by, the bonds, warrants, contracts, obligations, or evidences ofindebtedness of other local agencies, may bring a single action in thesuperior court of the county in which the local agency is located todetermine the validity of the bonds, warrants, contracts, obligations, orevidences of indebtedness of the other local agencies, pursuant to Chapter9 (commencing with Section 860) of Title 10 of Part 2 of the Code ofCivil Procedure.

In spite of its broad language, not all public agency contracts fall within the purview of53511.24 The term contract s in the context of 53511 refers to contracts involving financingand financial obligations.25

24 Kaatz 143 Cal.App.4th at 32.25 Friedland 62 Cal.App.3th at 843.

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The Kaatz Court identified four reasons to read the term contracts narrowly: (1) theLegislative Counsel's digest characterized the measure as one to determine the validity ofevidences of indebtedness; (2) 53511 was placed in a Chapter entitled Bonds rather than thechapters entitled General or Miscellaneous; (3) the bonds, warrants, contracts, obligationsor evidences of indebtedness language was taken from an earlier statute that applied to suchmatters as the legality of the local enti ty's existence, the validity of bonds and assessments, andthe validity of join t financing agreements with other agencies; and ( 4) the inclusion of the wordcontracts amidst four other terms that all deal with the limited topic of a local agency's

financial obligations.26 But Kaatz cited Agency Act 52-39 as an example of language thatclearly provides a broad scope for matters embraced by the validation statutes- permittingproceedings to determine the validity of any contract. The four rationales for a constructedreading of the other validation statutes do not apply to 52-39.27

C Government ode 1092 b)Government Code 1090 prohibits public officials or employees from having a financial

interest in any contract made by them in their official capacity or by any body or board of whichthey are members. Section 1092(a) invalidates contracts made in violation of 1090.

The evil to be thwarted by section 1090 is .. . : If a public official is pulled in onedirection by his financial interest and in another direction by his official duties, his judgmentcannot and should not be trusted, even if he attempts impartiality. 28 Where a prohibited

interest is found, the affected contract is void from its inception ... and the official who engagedin its making subject to a host of civil and if the violation was willful) criminal penalties .... 29

26 Kaatz, 143 Cal.App.4th at 35, citing City o Ontario, 2 Cal.3d at 343-44.27 Section 52-39.28 Lex n v Superior Court, 4 7 Cal. 4th 1050, 1073 (20 10) (citation omitted).29 d.

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Section 1092(b) provides: An action under this section shall be commenced within fouryears after the plaintiff has discovered, or in the exercise of reasonable care should havediscovered, a violation in subdivision (a). Section 1092(b) was enacted in 2007.

The legislative history noted conflicting court rulings on the length of the statute oflimitations and settled on four years, noting that the bill would give public entities more time togather information and develop their cases for voiding contracts that are grounded in violationsof the public trust.30 The reports also tend to confirm the view, cited by Cal-Am and Monterey,to account for the fact that 1090 claims involve coordinated action between board members

and private parties who hide their relationships such that a minimum of a four-year statute oflimitations was necessary from the date of discovery to protect a public entity's rights.

D Conflict o StatutesI address two questions: (1) whether the validation statutes apply here; and (2) whether

1092(b) overrides the validation statutes.1 pplication o Validation Statutes

Marina argues that the validation statutes apply to any contract Monterey enters under theplain language ofAgency Act 52-39. Next, Marina argues that the other validation statutesapply because the contracts at issue are pursuant to Government Code 53511 and Water Code30066; that is so, Marina argues, because the Agreements contemplate financial commitments.

30 The history contains four reports: an Assembly Committee Report, an Assembly Floor Report, a SenateCommittee Report, and a Senate Floor Report. These reports reflect a desire to clarify the statute of limitationsapplicable to 1092 actions. Both Assembly Reports, at page 3, indicate that 1090 defendants argued a one-yearor three-year statute of limitations applied, whereas public entities seeking to invalidate contracts argued that a fouryear statute of limitations applied. Both Senate Reports reflect, at page 2, that existing law does not specify whatstatute of limitations applies to 1090 or 1092 claims, and further reflect, at page 3, that defendants have sought toassert a one-year statute of limitations.

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The first argument is persuasive. Agency ct 52-39 is part of Monterey' s enablingact.31 The Agency Act grants Monterey numerous powers, including the power to [m]akecontracts, and employ labor, and do all acts necessary for the full exercise of all powers vested inthe agency or any ofthe officers thereof, by this act. 32 Section 52-39 subjects [a]ny judicialaction or proceeding to attack, review, set aside, void, annul, or challenge the validity or legalityof the formation of a zone, any contract entered into by the agency or a zone, any bond orevidence of indebtedness of the agency or a zone, or any assessment, rate, or charge of theagency or a zone to a sixty day statute of limitations.

As noted above, Kaatz cited this statute as an example demonstrating that the Legislatureknows how to draft language that invokes the validation statutes to determine the validity of anycontract.33 Kaatz of course made this distinction with respect to the very statutes which Cal-Amand Monterey now argue are essentially the same as 52-39, e.g. Government Code 53511.Cal-Am and Monterey provide no good argument why I should reject Kaatz or otherwise findthat 52-39 does not apply to all agency contracts.

Because Monterey was a party to the Agreements, the validation statutes apply to theAgreements. Thus the Agreements were validated by operation of statute.

As a result I need not decide whether Government Code 53511 or Water Code 30066apply with respect to the first cause of action in the Complaint.

However, Water Code 30066 and Government Code 53511 are implicated by the

second and third causes of action in the Cross-Complaint, respectively. All parties assume theanalysis is the same for both statutes. These statutes apply when the contracts at issue involve

31 Agency ct 52-3 (title), 52-4 (creating agency), 52-5.2(a) (defining Agency to mean Monterey CountyWater Resources Agency ).32 Agency Act, 52-9(k) ( Powers of agency ).33 Kaatz 143 Cal.App.4th at 41.

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financing and financial obligations? These statutes do not apply to all the Agreements at issuenow. The Water Purchase Agreement contemplates financing, but does not create it. Marina Ex.Z 7.1(a). Nor does the Settlement Agreement involve the creation of financing or financingobligations. Accordingly I cannot grant judgment on the second or third causes of action.

2 The Impact o 1 9The dispute resolved here is whether the validation statutes bar challenges based on

Government Code 090 brought more than 60 days after the public agency enters the relevant

contract.The validation statutes are designed to quickly determine the validity of public agency

action?5 The validation statutes should be construed so as to uphold this purpose. Validationstatutes are commonly used to facilitate financial transactions with third parties by quicklyaffirming their validity.36 Courts have recognized that the validation statutes provide a shortstatute of limitations, but have noted that what constitutes a reasonable time is a questionordinarily left to the Legislature. 37 The sixty day statute of limitations is not unreasonable.38

An action seeking a declaration that a contract subject to the validation statutes is voidis within the scope ofthe validat ion statutes. Matters, including constitutional challenges, whichhave been or which could have been adjudicated in a validation action are waived if they are not

34 Friedland, 62 Cal.App.3rd at 843; City o Ontario v Superior Court, 2 Cal.3d 335, 343-345 (1970).35 California Commerce Casino, Inc. v Schwarzenegger, 46 Cal.App.4th 1406, 1420-21 (2007).36 d. at 1421.37 d. at 1420, citing Friedland, 62 Cal.App.4th at 846.38 d., citing Friedland, 62 Cal.App.4th at 843, 846.

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raised within the limitations period. 39 There is no authority exempting challenges underGovernment Code 1090.

Cal-Am and Monterey have made two arguments that the validation statutes do not apply.In the first they suggest that because the Agreements were void ab initio (as opposed to beingmerely voidable) there were no extant contracts to be subject to the validation statutes. A secondargument, made at the February 7 hearing and reiterated in supplemental briefing, was thatbecause the validation statutes contemplate 'in rem' proceedings, only attacks confined to thefour corners of the contracts are truly contemplated and accordingly attacks that are premised

on extrinsic matters (such as a section 1090 attack based on a conflict of interest) are notcontemplated by the validation statutes, and hence such 1090 attacks are permitted outside the 60day statute of limitations.

As to the first argument, I must note that validation statutes expressly hold that attacksbecause contracts are void are covered. Here it is again:

Any judicial action or proceeding to attack, review, set aside, void annul,or challenge the validity or legality of the formation of a zone, anycontract entered into by the agency or a zone, any bond or evidence ofindebtedness of the agency or a zone, or any assessment, rate, or charge ofthe agency or a zone shall be commenced within 60 days of the effectivedate thereof.40

As to the second argument, I think it misconstrues the impact of the in rem proceedingcontemplated the statute. The Latinate phrase comes from C.C.P. 860 which notes that thevalidation proceeding which an agency may commence is a proceeding 'in rem'. Theproceeding which must be brought some other interested person, 863, too is an in rem action,because the summons too must be as for the 860 proceeding, that is, to all interested persons,39 Friedland 62 Cai.App.4th at 846-47; see also Travis v County o Santa Cruz 33 Cal.4th 757, 767-78 (2004) (90-day limitations period after which all persons are barred from any further action or proceeding cannot be avoided byclaiming that the permit or condition is void and thus subject to challenge at any time).40 Agency Act 52-39 (emphasis supplied).

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which is the typical mode for in rem proceeding. In either event, the point is to have singleproceeding and bind all persons who might conceivably have some right in the subject (here, inthe contract). 41

The result, and indeed the very point of such a proceeding, is to have a resultingjudgment conclusive as against all the world. 42 After the time expires, no one, except the publicagency, can contest the legality of validity of the matter.43 I do not see a distinction herebetween some claims which are barred and some which are not. Specifical ly, I have not seenany authority that suggest that some sort of claims are excluded from this res judicata effect, that

is, that claims based on extrinsic evidence (such as conflicts of interest, or perhaps fraudulentinducement or promissory fraud, 44 incapacity, or a whole host of other attacks which mightinvoke extrinsic evidence) can avoid the impact of the validation statutes. Because the effect ofthese sorts of proceeding is the same as (after 60 days) no proceeding at all, 45 no person exceptthe public agency may assert claims-no matter what sort of claim they might conceive of.

3 Principles to Resolve Statutory onflictsSection 52-39 bars the actions because they are brought beyond the 60 day limit, but

1090 permits them because they were brought within four years. There are a variety of tests onemight invoke to resolve the conflict.

41 Friedland v City o Long Beach 62 Cal. App. 4th 835, 843 (1998); Cmty. Youth Athletic Ctr v City o Nat. City170 Cal. App. 4th 416, 427 (2009).42 Cmty. Youth Athletic Ctr v City o Nat. City 170 Cal. App. 4th 416, 427 (2009); Eiskamp v Pajaro Valley WaterManagement Agency 203 C.A.4th 97, 105 (2012) (stipulated judgment was binding and conclusive against allpersons). See generally 2 B Witkin, CALIFORNIA PROCEDURE 5 1h ed. 2008) Jurisdiction 245 (2012).43 C.C.P. 869.44 E.g., River sland Cold Storage v Fresno-Madera Etc. Credit 55 Cal. 4th 1169 (20 13).45 Kaatz 143 Cal.App.4th at 41.

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First, courts are instructed to make the conflict go away under the rule of 'harmoniousconstruction,' and so give effect to both statutes. 46

On occasion courts look to the timing of the statutes. Thus for example, the secondstatute may be held to in effect amend the earlier one. 47 Or to the opposite effect, we might saythat the Legislature is presumed to be aware of the earlier law, and not having addressed theconflict thusly intended the prior statutes to remain in full force.48 We might tend to this becausethere is deep presumption against a court finding of implicit repeal. 49 But that repeal mightindeed be the result when there is no rational basis for harmonizing the two potentially

conflicting statutes [citation], and the statutes are 'irreconcilable, clearly repugnant, and soinconsistent that the two cannot have concurrent operation. 5

Typically courts resort to the heuristic that distinguishes general from specific statutes,favoring the latter as exceptions to the former. 51 Under those circumstances, it doesn t matterwhich statute came first. 52 But this might not help--sometimes neither law appears to be morespecific than the other. 53 So too here. Government Code 1092(b) applies to a specific subset

6 Strother v. California Coastal Comm n, I73 Cal.App.4th 873, 88I (2009). See also, Stone St. Capital, LLC v.California State Lottery Comm n, I65 Cal.App.4th I 09, II9 (2008)( courts are bound, if possible, to maintain theintegrity of both statutes if the two may stand together ).47 Stone St. Capital, LLC v. California State Lottery Comm n, I65 Cal. App. 4th I 09, I24 (2008) ( rule givingprecedence to the more recently enacted statute is invoked only if the two cannot be harmonized ).48 Anson v. County o Merced, 202 Cai.App.3d II95, II99 (1988).49 Garcia v. McCutchen, I6 Cal.4th 469, 476-77 (1997).50 Garcia v. McCutchen, I6 Cal.4th 469, 476-77 (1997).51 Strother v. California Coastal Comm n, I73 Cal. App. 4th 873, 879 (2009); McLaughlin v. State Bd. o Educ., 75Cal.App.4th I96, 224 (1999); C.C.P. I959; Creditors Collection Serv. v. Castaldi, 38 Cal.App.4th I039, 1043-44(1995).52 Bradwell v. Superior Court, 156 Cal.App.4th 265, 269 (2007).53 E.g., Garcia v. McCutchen, 16 Cal.4th 469, 478 (1997); Anson v. Cnty. o Merced, 202 Cal. App. 3d 1195, 1199(1988).

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of government contracts that are void based specifically on a conflict of interest. And AgencyAct 52-39 applies to a specific subset of government contracts entered into by Monterey.54

4 Resolution o the onflictHere, the validation statutes and Government Code 1092(b) can be harmoniously

construed by applying both to this action. The validation statutes afford finality. The validationstatutes preclude any contest except by the public agency or its officer or agent of any thing ormatter within their purview other than within the time and manner specified in the validationstatutes.55 The availability to any public agency ... of the remedy provided by [the validation

statutes] shall not be construed to preclude the use by such public agency ... of mandamus or anyother remedy to determine the validity of any thing or matter. 56 Here, the validation statuteswere triggered by Agency Act 52-39, which validates Monterey's contracts. As noted above,the legislative history of Government Code 1092(b) reflects the legislative intent to allowpublic agencies sufficient time to gather information and develop their cases for voidingcontracts that are grounded in violations of the public trust. Applying both the validation statutesand Government Code 1 092(b , the contracts were validated by the passage of time such thatno entity except for Monterey can seek to void the contracts in this case on the basis of a 1092violation. 57

As a result, Marina's motion for summary adjudication as to the first cause of action inCal-Am's Complaint is granted- Cal-Am is barred from seeking to void these agreements by the

54 Anson v County o Merced 202 Cal.App.3d 1195, 1199 (1988) (both statutes addressed specific areas of lawgovernment tort liability and medical negligence liability- such that each could be viewed as a subset of the other;rule that specific statute of limitations trumps general statute of limitations inapplicable).55 C.C.P. 869.56 Id.; see also Kaatz 143 Cal.App.4th at 30 n.l7 (public agency is in effect authorized by C.C.P. 869 to disregardthe 60-day statute of limitations imposed by 860); City o Ontario 2 Cal. 3d at 341 (same).57 While this interpretation limits the finality afforded by the validation statutes, that limitation results from the plainlanguage ofC.C.P. 869.

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validation statutes.58 On the other hand, Marina's motion for summary adjudication of the firstcause of action in its Cross-Complaint is denied. On the present record, Monterey's time forchallenging the validity of the agreements under 1092 has not expired.

E Public Utilities CodeMarina argues that no party may challenge the validity of the Agreements because the

Agreements were approved by final PUC decisions under P.U.C. 1731(b) and 1756(). 59Marina also says those final decisions are conclusive pursuant to P.U.C. 1709. Finally, Marinaargues that no court may review, reverse, correct, or annul the PUC s final, conclusive decisions

concerning the Agreements pursuant to P.U.C. 1759(a).In short the argument is that the PUC s final decisions, when not timely appealed, divest

the courts of jurisdiction. Monterey and Cal-Am counter that that Government Code 1090allegations are outside the scope of the Commission's purview and so not subject to the finalityrules.60

1 Commission DecisionsMarina relies on Commission decisions D 1 0-08-008 and D.1 0-12-016. 6 No ... water

corporation ... shall begin the construction of a ... plant, or system, or of any extension thereof,without having first obtained from the commission a certificate that the present or future publicconvenience and necessity require or will require such construction. 62 Cal-Am is a water

58 Even so, Marina s motion for summary adjudication of its second affirmative defense cannot be granted becauseas plead in the Answer it extends to both causes of action in the Complaint- and the second cause of action assumesthat the Agreements are valid.59 Motion, 8-9.60 Monterey Opposition, 12-17; Cal-Am Opposition, 15-19.61 Marina Exs. L 062 P.U.C. 1001.

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corporation, as defined in Public Utilities Code 241. The PUC considers community values,recreational and park areas, historical and aesthetic values, and influence on environment.63

In Application 04-09-019 (A.04-09-019), Cal-Am applied for such a certificate toconstruct and operate a desalination plant and associated facilities. 64 Monterey and Marinajoined in the proceedings, and all three joined in a motion for approval of the ReimbursementAgreement, pursuant to which Cal-Am would advance funds to Monterey and Marina to coverproject related costs, subject to future repayment. 65 The PUC approved the ReimbursementAgreement in D.1 0-08-008. 66 No conflict of interest issue was raised nor was the validity of the

Reimbursement Agreement raised by any party or discussed by the PUC.Then the PUC issued D.10-12-016, in which it approved the Settlement Agreement

(including the Water Purchase Agreement), approved the Project, and issued a certificate to Cal-Am for several components of the Project.67 The PUC found that the Settlement Agreement andthe Water Purchase Agreement were reasonable, in compliance with the law, and in the public0 68mterest.

Proceedings on A.04-09-019 were not closed until the Commission issued D.12-07-008. 69The PUC found the Project had no reasonable prospect of achieving its goals7 and so declined torequire Cal-Am to continue to pursue the Project. Marina asked the Commission to find that theWater Purchase Agreement was valid against a Government Code 1090 challenge by operationof the statute of limitations. PUC Commission expressly did not address the argument. 71

63 P.U. C. 1002(a); see also Marina Ex. L at 193.64 Marina Ex. at 2.65 /d. at 4 766 /d at 2 27-30.67 Marina Ex. L at 5-668 Rule 12.1(d) ofthe Commission s Rules of Practice and Procedure.69 Marina Ex. R at 1.70 /d. at 19.71 d. at 19.

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3. iscussionThe first question is whether the PUC had authority to validate the Agreements. No party

has thoroughly explained the scope of the PUC s authority to review contracts in approvingthem, or whether that review encompasses the validity of a contract. Marina points to thePellandini case78 to support the proposition that the Commission has authority to determine thevalidity of public utility contracts. There the PUC interpreted a written contract that waspurportedly for the sale of limestone as one for transportation, and ordered a party to collectundercharges. 79 The Court noted that the Commission had exclusive jurisdiction over the issues

involved in the case- regulation and enforcement of rights of public carriers.80

Accordingly, theCommission s determination was conclusive.81 The case did not involve a determination ofcontract validity.

In Camp Meeker82 the Court stated that the PUC functions do not include determining thevalidity of contracts, whether claims may be asserted under a contract, or interests in or title toproperty; those being questions for the courts. Rather, the Commission has jurisdiction toconstrue the existing rights of a public utility for the purposes of exercising its regulatory andratemaking authority. 83 For that reason, Camp Meeker held that the PUC acted within itsjurisdiction when it constrained itself to the latter purpose. 84 this suggests the PUC does nothave the authority to validate the Agreements.

The second factor examines whether the PUC validated the Agreements. The PUC

certainly approved the Agreements. With respect to the Settlement Agreement and the Water78 Pellandini v. Pacific Limestone Products, Inc., 245 Cal.App.2d 774 (1966).79 Pellandini, 245 Cal.App.2d at 775.80 d. at 779.81 d.82 Camp Meeker Water System, Inc. v. Public Utilities Commission, 51 Cal. 3d 845, 861 ( 1990), superseded bystatute on other grounds as stated in Pacific Bell v. Public Utilities Com., 79 Cal.App.4th 269, 281 (2000).83 Camp Meeker, 51 Cal.3d at 861.84 d.

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Purchase Agreement, this included the determination that the Agreements were in compliancewith the law although it is not clear from the Commission decisions or from the parties' briefswhether the Commission was referring to all law or some narrower set of laws within itspurview. t is clear that the Commission never addressed the 1090 challenges raised now. TheCommission did not analyze whether the contracts were valid. Importantly, when the 1090issues were brought to the Commission's attention, it declined to address them. Thus, it does notappear that the Commission v lid ted the Agreements.

The third question is whether this action would hinder or interfere with the Commission's

exercise of its regulatory authority. t follows from the above that court action now would notinterfere with any PUC authority. To be sure, the PUC has authority to, and did, approveprojects. But here the Commission has already decided that the project may be abandoned,leaving the question of contractual liability to the courts.

Accordingly I conclude that the suit before me would not violate the rules ofadministrative finality such as those in P.U.C. 1709, 1731(b) and 1756() and 1759(a).Marina's motion for summary adjudication is denied as to causes of action 4-7 of its Cross-Complaint.

onclusion

For these reasons, Mar ina 's motion is granted with respect to the first cause of action in

Cal-Am's Complaint and denied in all other respects.

26 Dated: February 25, 201427 Judge of The Superior Court

Order Denying Motion of Marina Coast Water District Cgc 13 528312 02-25-14

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Transcript of Order Denying Motion of Marina Coast Water District Cgc 13 528312 02-25-14