Wastewater Lawsuit - Case Details

Emerald Bay Service District, South Coast Water District, City of Laguna Beach Lawsuit Against Moulton Niguel Water District

Lawsuit Facts: Case Details & The Parties Involved
Case Details

Case Name            SOCWA, City of Laguna Beach, South Coast Water District and Emerald Bay Service District v. Moulton Niguel Water District

Case #                     30-2017-00923143 CU-BC-CJC

Judge                       Hon. Ronald L. Bauer

Court                        Orange County Superior Court

Description            Court case to review illegal invoicing and breach of contract

Trial Date:               To Be Determined

The Parties

SOCWA
South Orange County Wastewater Authority – Joint powers authority that is currently under state audit for potential financial improprieties and mismanagement. The majority (43%) of SOCWA’s budget is paid by MNWD, but each agency receives one vote on the board of directors.

PC 15
Project Committee 15 – SOCWA project committee of four local agencies: City of Laguna Beach, Emerald Bay Service District, Moulton Niguel Water District & South Coast Water District, which owns, operates and manages a wastewater treatment plant in Aliso & Woods Canyon.

MNWD
Moulton Niguel Water District – Member of SOCWA and PC 15. Moulton Niguel provides high-quality water at low rates to 170,000 customers in Laguna Niguel, Aliso Viejo, Laguna Hills, Mission Viejo, Dana Point and San Juan Capistrano. As the largest contributor to SOCWA’s budget, Moulton Niguel funds approximately 43% of SOCWA expenditures, or $17 million annually.

Emerald Bay
Emerald Bay Service District – Member of SOCWA and PC 15. Emerald Bay pays less than 1% of SOCWA’s expenditures, but has equal voting power as the other 9 members. A water agency that serves 500 homes in the Emerald Bay gated community in unincorporated North Laguna Beach, which has failed to file timely compensation reports with the state’s public compensation watchdog.

South Coast
South Coast Water District – Member of SOCWA and PC 15. South Coast pays roughly 20% of SOCWA’s expenditures. It provides water and wastewater services to approximately 35,000 residents.

Laguna Beach
City of Laguna Beach – Member of SOCWA and PC 15. Laguna Beach pays roughly 13% of SOCWA’s expenditures.

Causes of Action and Affirmative Defenses

Cause 1:       Breach of Contract (Material Breach)

The Law: The SOCWA JPA agreement is a legally-binding contract. Under the agreement, capital improvement costs require unanimous consent.

Violation: Emerald Bay, South Coast and Laguna Beach along with SOCWA management attempted to force Moulton Niguel to pay for unlawful capital improvement costs in violation of the SOCWA joint powers agreement.

Excerpt: Cross-defendants’ attempt to force Moulton Niguel to pay for unlawfully capital improvement costs constitutes a material breach of the Joint Powers Agreement and PC 15 Agreement.”

Remedy: Damages; Termination of the PC 15 Agreement; and/or Moulton Niguel exit from PC 15 Agreement

 

Cause 2:       Breach of Contract (Frustration of Purpose)

The Law: Parties enter into a contract for a clear reason, or shared purpose. Consequently, events occur or circumstances can change so that the contract is no longer valid, fair or legally enforceable.

Violation: Emerald Bay, South Coast and Laguna Beach along with SOCWA management “frustrated the principal purpose of the applicable contract,” when they violated Moulton Niguel’s rights under the SOCWA joint powers agreement.

Excerpt: “Pursuant to the Joint Powers Agreement, operating and maintenance (“O&M”) budgets and project budgets must be approved by a two-thirds and a unanimous vote, respectively. This voting standard is so important to the legitimate management of the facilities that Section 8.2 of the Joint Powers Agreement even allows Project Committee members to make capital improvements when a member has voted against a capital improvement, so long as the member who does not want the improvement is not required to pay for the improvement. That member also does not receive the benefit of the improvement.”

Remedy: Damages; Termination of the PC 15 Agreement; and/or Moulton Niguel exit from PC 15 Agreement

 

Cause 3:       Breach of Contract (Anticipatory Breach)

The Law: Parties to the contract are expected to continue to fulfill the terms of the agreement. An anticipatory breach of contract reflects an ongoing problem when a party shows that it does not intend to live up to its obligations under the contract and has shown that it will violate the agreement.

Violation: Emerald Bay, South Coast and Laguna Beach have made clear that they will continue to manipulate the budget by bundling both operational and capital improvement expenses and send Moulton Niguel incorrect invoices.

Excerpt:“Cross-defendants continue to incorrectly allege that project budgets only require a two-thirds majority vote to justify their past incorrect invoices and their proposed current invoice. Cross-defendants have not provided any assurances that they will not charge Moulton Niguel for unapproved capital improvement project budgets.”

Remedy: Damages; Termination of the PC 15 Agreement; and/or Moulton Niguel exit from PC 15 Agreement