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Golden State Water Co. v. Casitas Municipal Water District

California Court of Appeals, Second District, Sixth Division

April 14, 2015

GOLDEN STATE WATER COMPANY, Plaintiff and Appellant,
CASITAS MUNICIPAL WATER DISTRICT et al., Defendants and Respondents.

Superior Court County of Ventura Kent M. Kellegrew, Judge No. 56-2013-00433986- CU-WM-VTA, (Ventura County)

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[Copyrighted Material Omitted]

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Manatt, Phelps & Phillips, Michael M. Berger, George M. Soneff, Edward G. Burg, and Benjamin G. Shatz, for Plaintiff and Appellant.

Nossaman, Stephen N. Roberts, Martin A. Mattes, and Mari R. Lane for Park Water Company and California Water Association as Amici Curiae on behalf of Plaintiff and Appellant.

Rutan & Tucker and Jeffrey M. Oderman for Defendants and Respondents Casitas Municipal Water District and Casitas Municipal Water District Community Facilities District No. 2013-1 (Ojai).

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Best Best & Krieger, Kendall MacVey, and Kira L. Klatchko for Association of California Water Agencies, League of California Cities, California State Association of Counties, and California Special Districts Association as Amici Curiae on behalf of Defendants and Respondents.

Ryan Blatz Law, Ryan Blatz; Law Offices of Ball and Yorke and Esther R. Sorkin for Defendants and Respondents Ojai Friends of Locally Owned Water, Richard H. Hajas, Dale Hanson, Patrick McPherson, Robert R. Daddi, Louis Torres, and Stanley Greene.



Monopolists have long been unpopular in this country. When King George III's choke hold on government led to intolerable levels of taxation, he was forced to divest his holdings. At the end of the nineteenth century, Congress passed the Sherman Antitrust Act with only a single dissenting vote. (15 U.S.C. § 1 et seq.) Introducing his landmark bill, Senator Sherman summed up the prevailing sentiment: "If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life." (21 Cong. Rec. 2457 (1890).)

Nothing is more necessary to life than water. Residents of Ojai, fed up with sky high water bills, voted to oust appellant Golden State Water Company (Golden State), the private utility that monopolizes water service to their city, and replace it with respondent Casitas Municipal Water District (Casitas), a municipal utility that they hope will be more responsive to their concerns. They plan to finance this transaction by selling bonds pursuant to the Mello-Roos Community Facilities Act of 1982 (Mello-Roos Act or Act). (Gov. Code, § 53311 et seq.)[1]

Golden State is unwilling to sell its business. Casitas therefore plans to acquire the assets by eminent domain. Golden State contends that the Mello-Roos Act cannot be used to finance eminent domain actions or to acquire intangible property. We disagree. The Act facilitates the purchase of property regardless of whether the seller consents to the sale or is compelled under force of law. Moreover, financing the acquisition of intangible property incidental to the real or tangible property being purchased is consistent with the Act's text and purpose. Accordingly, we affirm.


Casitas is a publicly owned water utility encompassing 140 square miles in western Ventura County. Its territory includes the City of Ojai, but for

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historical reasons most of Ojai and some adjacent areas receive water from Golden State. Golden State charges its customers rates that are more than double those charged by Casitas, and the disparity is growing. Over a 20-year period, Golden State's average annual rate increase was nearly twice that of Casitas's.

After several failed attempts to redress their grievances with the Public Utilities Commission (PUC), Golden State's regulatory agency, local residents formed respondent Ojai Friends for Locally Owned Water (Ojai FLOW), an interest group "with the intent to declare independence from the economic tyranny of Golden State." Ojai FLOW, supported by Ojai's city council and more than 1, 900 registered voters, petitioned Casitas to take over Golden State's water service in Ojai.

Casitas concluded that the Ojai community would benefit from having its water utility run by a locally controlled entity rather than an out-of-area corporation seeking to maximize profits for its owners. Casitas's board members live in the community and its customers have the right to participate in management decisions. Unlike Golden State, Casitas is subject to the Ralph M. Brown Act (§ 54950 et seq.) and the California Public Records Act (§ 6250 et seq.), and its meetings are conducted in public within its service area. Under Proposition 218 (Cal. Const., art. XIII D), Casitas's rates can be reduced by a majority of voters in its service area. (Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205, 217 [46 Cal.Rptr.3d 73, 138 P.3d 220].) The only recourse for Golden State's customers is to contend with the formal PUC process involving officials and staff located hundreds of miles away, whereas Casitas's customers can express their wishes at the local level.

Casitas determined that the Mello-Roos Act would be an appropriate means of financing the transaction in light of its objective to place the financial burden on Ojai residents rather than on its existing water customers. Pursuant to the Act, Casitas formed a community facilities district, respondent Casitas Municipal Water District Community Facilities District No. 2013-1 (Ojai) (Casitas CFD). Casitas passed resolutions listing the facilities to be acquired, declaring the necessity of raising bond revenue to finance their acquisition, and submitting the matter to voters for their approval in a special election. The ballot measure asked voters to authorize Casitas CFD to issue up to $60 million in bonds "to finance the acquisition of [Golden State's] property and property rights" in Ojai. To pay for the bonds, a special tax would be levied on property in Casitas CFD.

Golden State filed a reverse validation complaint and petition for writ of mandate (Code Civ. Proc., ยงยง 860 et seq., 1085) seeking to invalidate and set aside Casitas's resolutions. ...

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