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Plantier v. Ramona Municipal Water District

California Court of Appeals, Fourth District, First Division

June 13, 2017

EUGENE G. PLANTIER, as Trustee, etc., et al., Plaintiffs and Appellants,
v.
RAMONA MUNICIPAL WATER DISTRICT, Defendant and Respondent.

         APPEAL from a judgment of the Superior Court of San Diego County, Super. Ct. No. 37-2014-00083195-CU-BT-CTL Timothy B. Taylor, Judge. Reversed and remanded with directions.

          Patterson Law Group, James R. Patterson, Allison H. Goddard, Catherine S. Wicker; Carlson Lynch Sweet Kilpela & Carpenter and Todd D. Carpenter for Plaintiffs and Appellants.

          Jonathan M. Coupal, Trevor A. Grimm and Timothy A. Bittle for Howard Jarvis Taxpayers Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

          Procopio, Cory, Hargreaves & Savitch, Kendra J. Hall, Gregory V. Moser, John D. Alessio and Adriana R. Ochoa for Defendant and Respondent.

          Daniel S. Hentschke; Colantuono, Highsmith & Whatley, Michael G. Colantuono and Eduardo Jansen for California Association of Sanitation Agencies, California State Association of Counties and League of California Cities as Amicus Curiae on behalf of Defendant and Respondent.

          BENKE, Acting P. J.

         Plaintiffs and appellants Eugene G. Plantier, as Trustee of the Plantier Family Trust (Plantier); Progressive Properties Incorporated (Progressive); and Premium Development LLC (Premium), on behalf of themselves and all others similarly situated (collectively plaintiffs), appeal the judgment in favor of defendant and respondent Ramona Municipal Water District (District or RMWD). In this class action, the trial court found plaintiffs failed to exhaust their administrative remedies under article XIII D of the California Constitution in connection with plaintiffs' substantive challenge to the method used by District to calculate wastewater service "fees or charges"[1] between about 2012 and 2014.

         On appeal, plaintiffs contend the trial court erred when it found there was a mandatory exhaustion requirement in section 6of article XIII D (hereinafter section 6).[2] Plaintiffs further contend they took the necessary steps to satisfy the general principle of exhaustion when they separately satisfied the administrative remedy in the Ramona Municipal Water District Legislative Code, as amended, which District adopted in 1996 (hereinafter RMWD legislative code); and that, in any event, the exhaustion doctrine in section 6 should not have been applied to them because the remedy therein was inadequate and because it was "futile" to purse any administrative remedy under this constitutional provision.

         As we explain, we independently conclude that plaintiffs' class action is not barred by their failure to exhaust the administrative remedies set forth in section 6 because plaintiffs' substantive challenge involving the method used by District to calculate its wastewater service fees or charges is outside the scope of the administrative remedies, and because, under the facts of this case, those remedies are, in any event, inadequate. Reversed.[3]

         BACKGROUND[4]

         A. District

         District is a municipal water district organized under the Municipal Water District Act. (Wat. Code, § 71000 et seq.) District is governed by the RMWD legislative code. District provides, among others, water and, as relevant here, wastewater services to about 40, 000 people living in Ramona, California, an unincorporated community within San Diego County. Ramona has two wastewater treatment plants, San Vicente and Santa Maria.

         District uses an "Equivalent Dwelling Unit" (EDU)[5] system to calculate wastewater service fees. "Parcels are assigned EDUs and charged for sewer services on a per-EDU basis." Charges for such services are "based on estimates of wastewater capacity needs, flow and strength for different customer types or classes.... The District levies fixed sewer rates based on the number of EDUs assigned to each connection. EDUs are assigned based on the type of development and associated wastewater flow and loadings."

         Sewer rates for residential customers within District living in single-family homes and multi-family dwelling units with one or more bedrooms are assigned 1 EDU per dwelling unit. District has over 20 sewer rate classes for commercial customers; EDUs are assigned for commercial customers based on such factors as "square footage, number of washing machines [and] number of students [per school]."

         District has authority to set and collect charges for sewer services. (Wat. Code, § 71670.) Revenues collected from service charges are used to pay operating and maintenance fees. (Id., § 71671.) District is required to recover sufficient revenues to cover both the operating expenses of the sewer services it provides to customers and repairs to, and depreciation of, works it owns and/or operates in connection with such services. If the board of directors (board) of District determines the "revenues... will be inadequate... to pay [its] operating expense[s]..., to provide for repairs and depreciation of works owned or operated by it, and to meet all of its obligations[, ] the board shall provide for the levy and collection of a tax... sufficient to raise the amount of money determined by the board to be necessary for the purpose of paying [its] operating expenses..., providing for repairs and depreciation of works owned or operated by it, and meeting all of its obligations." (Id., § 72092.)

         B. Plaintiffs and Their Operative Complaint

         Since 1998, Plantier has owned a commercial property in Ramona. As such, he pays wastewater service fees to District.

         Progressive, a California corporation, owns a 25, 000 square foot office building in Ramona. Like Plantier, Progressive pays for wastewater services provided by District.

         Finally, Premium, a California limited liability company, owns two properties located in Ramona. It too pays District for wastewater services.

         Plaintiffs' operative complaint asserted claims on behalf of themselves and all other District customers who paid a wastewater service fee on or after November 22, 2012.[6] The complaint alleged causes of action against District for declaratory relief and for "refund [of] unlawful sewer service charges." Plaintiffs sought a declaration that District's method of determining the costs of sewer service based on each parcel's assigned EDU violated the "proportionally" provision of subdivision (b)(3) of section 6. Plaintiffs also sought a refund from District of alleged overcharges for wastewater service fees paid by its customers.

         Specifically, plaintiffs in their operative class action complaint alleged that District assigned EDU's arbitrarily and without regard to a property's actual wastewater use and to the proportional cost of providing that property's wastewater service; that District's EDU-based wastewater billing system was "inconsistent with general practice among California water districts"; that all District wastewater customers were required to pay an annual sewer service fee imposed on a per-EDU basis; that at all times relevant, District's board established the dollar amount of the sewer service fee on an "ad-hoc basis, without reliance on a rate study or other technical document providing a rational basis for [the sewer service fees it] adopted"; that the sewer service charge was a property-related fee subject to section 6, subdivision (b)(3); that the then-current sewer service fee for District customers in the San Vicente sewer service area was about $605 per EDU, and about $637 per EDU for the Santa Maria sewer service area; and that the lack of "any rational relationship between the [sewer service fee] and actual wastewater use has resulted in the systematic overcharge of wastewater customers for whom the proportional cost of providing their property with wastewater service is less than their EDU-based" sewer service fee.

         C. Proposition 218

         California voters in November 1996 passed Proposition 218, which added articles XIII C and XIII D to the California Constitution. (Paland v. Brooktrails Tp. Community Services Dist. Bd. of Directors (2009) 179 Cal.App.4th 1358, 1365.) As noted ante, the instant case concerns article XIII D, which undertook to "constrain the imposition by local governments of 'assessments, fees and charges.' (Art. XIII D, § 1.)" (Pajaro Valley Water Management Agency v. Amrhein (2007) 150 Cal.App.4th 1364, 1378.) "Article XIII D sets forth procedures, requirements and voter approval mechanisms for local government assessments, fees and charges." (Howard Jarvis Taxpayers Assn. v. City of Roseville (2002) 97 Cal.App.4th 637, 640.)

         At issue in this case is section 6 (of article XIII D), which sets forth mandatory procedures an agency, such as District, must follow "in imposing or increasing any fee or charge." Among other requirements, section 6 mandates that an agency provide "written notice by mail of the proposed fee or charge to the record owner of each identified parcel upon which the fee or charge is proposed for imposition" (§ 6, subd. (a)(1)); the amount of the proposed fee or charge (ibid.); the "basis" upon which the fee or charge was "calculated" and the "reason" for the fee or charge (ibid.); "together with the date, time, and location of a public hearing on the proposed fee or charge" (ibid.).

         An agency is required to conduct a public hearing on the proposed fee or charge "not less than 45 days after mailing the notice... to the record owners of each identified parcel" upon which the fee or charge is sought to be imposed. (§ 6, subd. (a)(2).) At the public hearing, the agency shall "consider all protests against the proposed fee or charge" and if "written protests against the fee or charge are presented by a majority of owners of the identified parcels, the agency shall not impose the fee or charge." (Ibid.)

         D. Exhaustion of Administrative Remedies

         On District's motion, the court bifurcated the trial into two phases, as noted. In phase 1, the court considered the threshold issue of whether Proposition 218 imposed an exhaustion requirement and, if so, whether plaintiffs satisfied that requirement or were otherwise excused from doing so. After hearing witness testimony and the argument of counsel, the court ...


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