Great Oaks Water Co. v. Santa Clara Valley Water Dist.
15 Cal. Daily Op. Serv. 13
| Cal. Ct. App. 6th | 2015Background
- Great Oaks Water Co., a private water retailer, paid a groundwater extraction fee imposed by Santa Clara Valley Water District under the Santa Clara Valley Water District Act (District Act); Great Oaks operated wells in two District zones (W-2 and W-5).
- The District enacted 2005–2006 groundwater charges after statutorily required reports and a series of April 2005 hearings; adopted rates were $420/acre-foot (non‑ag) and $42 (ag) in W‑2, $215/$21.50 in W‑5.
- Great Oaks submitted a pre‑suit Government Code claim alleging the District used pump‑tax revenues for unauthorized purposes and thus overcharged; the District did not act and the claim was deemed rejected.
- Great Oaks sued asserting claims under the District Act, Article XIII D (Prop. 218 / Art. 13D), mandamus/declaratory relief, refund, unfair competition, and fees; trial was bifurcated into liability (Phase I) and remedies (Phase II).
- The trial court found Article 13D violations (notice/hearing and voter‑ratification), and that the District abused its discretion under the District Act (not using cost‑of‑service, commingling/misusing proceeds), and awarded a full refund (~$4.6M) or, alternatively, a partial award; District appealed.
Issues
| Issue | Plaintiff's Argument (Great Oaks) | Defendant's Argument (District) | Held |
|---|---|---|---|
| Whether the extraction charge is a "property‑related fee/charge" under Art. 13D | Charge is incident to property ownership because it burdens extraction rights tied to land; thus Art.13D applies and voter ratification required | Charge funds water service/programs; if a "water service" charge it is exempt from voter approval under Art.13D §6(c) | Charge is a property‑related charge but qualifies as a "water service" charge and is exempt from Art.13D voter‑ratification requirement; Art.13D otherwise applies for notice/hearing and substantive limits |
| Whether District complied with Art.13D notice/hearing requirements | Notice failed to state exact rate, calculation basis, and protest mechanism; hearings too soon after notice | Notices disclosed maximum/minimum rates, unit basis (per acre‑foot), and hearing dates; final rate was posted before adoption; procedures satisfied Art.13D | Notice that disclosed a range satisfied the notice requirement; District's hearing process satisfied Art.13D's notice/hearing (trial court's contrary finding reversed) |
| Whether Great Oaks preserved monetary remedies by filing an adequate pre‑suit government claim | Pre‑suit claim put District on notice of overcharging and misuse of funds, so monetary relief for Art.13D and District Act violations is preserved | Pre‑suit claim did not mention Art.13D procedural defects (notice, protest, voter‑ratification) so monetary relief on those grounds is barred by Gov. Code claim‑presentation rules | Pre‑suit claim did not fairly notify District of the procedural Art.13D theories that the trial court awarded as a full refund; monetary relief based on those procedural defects is precluded; some substantive Art.13D theories may survive depending on factual overlap |
| Standard and scope of review for District Act challenges to rates/spending | Great Oaks urged de novo review under Art.13D principles and revisited cost allocations via the trial record | District contended actions are quasi‑legislative (rates/budget) and review must be deferential (arbitrary/capricious), typically confined to the administrative record | Court must review District Act challenges under the deferential quasi‑legislative standard (abuse of discretion/arbitrary or irrational); while parties introduced extra‑record evidence, findings cannot substitute judicial reweighing of policy choices; trial court erred to the extent it substituted its judgment for District's in light of the record |
Key Cases Cited
- Apartment Ass'n of Los Angeles Cnty., Inc. v. City of Los Angeles, 24 Cal.4th 830 (Cal. 2001) (applicability and de novo review principles for Prop. 218 questions)
- Silicon Valley Taxpayers Assn., Inc. v. Santa Clara County Open Space Authority, 44 Cal.4th 431 (Cal. 2008) (courts exercise independent judgment reviewing assessments/fees under Prop. 218)
- Bighorn‑Desert View Water Agency v. Verjil, 39 Cal.4th 205 (Cal. 2006) (charges for water delivery constitute property‑related water service under Prop. 218)
- Richmond v. Shasta Cmty. Serv. Dist., 32 Cal.4th 409 (Cal. 2004) (water delivery fees analyzed under Prop. 218 as property‑related services)
- Amrhein v. Pajaro Valley Water Mgmt. Agency, 150 Cal.App.4th 1364 (Cal. Ct. App. 2007) (groundwater augmentation/extraction charges analyzed under Prop. 218)
- Griffith v. Pajaro Valley Water Mgmt. Agency, 220 Cal.App.4th 586 (Cal. Ct. App. 2013) (groundwater augmentation charge held to be a water service fee exempt from vote requirement)
- Stockett v. Assn. of California Water Agencies JPA, 34 Cal.4th 441 (Cal. 2004) (Government Claims Act claim‑presentation rules; claim must fairly describe facts giving rise to each cause of action)
- Western States Petroleum Assn. v. Superior Court, 9 Cal.4th 559 (Cal. 1995) (review of quasi‑legislative administrative actions is limited; courts may not reweigh policy judgments)
- American Coatings Assn., Inc. v. S. Coast Air Quality Dist., 54 Cal.4th 446 (Cal. 2012) (arbitrary/capricious standard for quasi‑legislative action; review confined to administrative evidence that rationally supports decision)
- Lewin v. St. Joseph Hosp. of Orange, 82 Cal.App.3d 368 (Cal. Ct. App. 1978) (distinguishing quasi‑legislative rule‑making from adjudicative action; limited review appropriate)