Barajas v. Satvia L.A. County Water Dist.Barajas v. Satvia L.A. County Water Dist.
* Pursuant to
The Law Office of Mark Ravis & Associates and Mark Ravis; Reyes & Associates and Jorge Reyes for Plaintiffs and Appellants.
Kessel & Megrabyan, Elizabeth Mary Kessel, Armineh Megrabyan and Steven J. Lowery for Defendant and Respondent.
* * * * * *
The Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (the Reorganization Act or the Act) governs the dissolution of local agencies in California, including local water districts. (
agency was proper because our Legislature expressly granted civil immunity to that agency. Thus, we affirm the trial court‘s dismissal of the plaintiffs’ lawsuit.
I. Facts
A. Sativa Los Angeles County Water District (the Sativa Water District or the District)
The Sativa Water District was created in 1938 under the County Water District Law (
B. The Sativa Water District fails at its core task
From at least 1994 through July 2018, the Sativa Water District “repeatedly” “failed to comply with the monitoring and reporting requirеments” designed to secure potable water to the District‘s residents. On June 1, 2018, the State Water Resources Control Board (the State Board) issued a compliance order (1) finding that the Sativa Water District was “violating the California Safe Drinking Water Act” by “fail[ing] to provide its customers with a reliable and adequate supply of pure,
wholesome, healthful, and potable water . . . and failed to comply with the source capacity, minimum flushing velocity, and minimum pressure requirements” of California law, and (2) ordering the District to undertake regular testing of its water supply and to submit to the State Board a correctivе action plan. After obtaining a month-long extension of the deadline to submit the corrective action plan, the District first submitted an initial plan that the State Board rejected as “incomplete” and riddled with “various errors,” and then submitted a revised plan that the State Board found did not “fully address the issues raised.”
C. The Legislature and State Board dissolve the Sativa Water District‘s board of directors
On September 28, 2018, the California Legislature enacted Assembly Bill No. 1577 (2017-2018 Reg. Sess.) (AB 1577) as an urgency
Four days later, on October 2, 2018, the State Board gave notice of its intention to dissolve the Sativa Water District‘s board of directors and assign full management and control of the District to an administrator.
On October 31, 2018, the State Board issued an order appointing the County of Los Angeles (the County) to serve as the administrator, and directing the Sativa Water District to “immediately and unconditionally аccept administrative and
managerial services” from the County and to allow the County “to exercise full authority and control over” the District, including “all technical, operational, administrative, and financial aspects of the entire water system.” The State Board and the County entered into a contract appointing the County as the administrator of the District and authorizing the County to “[t]ake necessary steps to implement full and complete operational, fiscal, and managerial control.” By operation of AB 1577‘s plain terms, the Sativa Water District‘s board of directors “cеase[d] to exist” that day. (
D. The local LAFCO dissolves the Sativa Water District
On July 11, 2018 (and hence a few months prior to the enactment of AB 1577), and in response to a study so recommending, the LAFCO for the County of Los Angeles (the County Commission) had passed a resolution to initiate proceedings to dissolve the Sativa Water District.
On December 26, 2018 (and hence a few months after the enactment of AB 1577 and dissolution of the District‘s board of directors), the County Commission gave public notice that, at its February 13, 2019, public hearing, it would be considering a proposed resolution ordering the dissolution of the District. The Legislature had, in AB 1577, reaffirmed the County Commission‘s authority to dissolve the Sativa Water District and to “designate[]” “a successor agency” using expedited procedures. (
In pertinent part, the County Commission‘s resolution:
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“[D]issolve[d] the Sativa . . . Water District.” - Designated the County as “the successor agency for the District, for the purpose[] of,” among other things, “winding up the affairs of the District pursuant to [section] 56886[, subdivision (m),] and [section] 57451[, subdivision (c),] and subject to” AB 1577. To facilitate this task, the order:
- “[V]ested” “[a]ll of the [District‘s] moneys or funds,” “all property,” and the “control of all books, records, papers, offices, equipment, supplies, . . . appropriations, licenses, permits, entitlements, agreements, contracts, claims, judgments, land, infrastructure, and other assets” “in the County as the successor agency.”
- Granted the County “the power to exchange, sell, or otherwise dispose of” or “use” the above-described “funds, money or property of the dissolved District . . . for the purpose of winding up the affairs of the District.”
- Granted the County the “power to” (1) “compromise and settle claims of every kind and nature,” and (2) “to sue or be sued in the same manner and to the same extent as the District” “for the sole and exclusive purpose of winding up the affairs of the dissolved District.”
II. Procedural Background
A. Plaintiffs sue the Sativa Water District
On July 9, 2018 (and hence days before the County Commission initiated the process to dissolve the District), four named individuals—Martha Barajas, Karen Lewis, Maria Jaime, and Soledad Aguirre (collectively, plaintiffs)—filed a putative class action lawsuit against the Sativa Water District. In the operative first amended complaint filed on January 31, 2019,
plaintiffs sought classwide relief on the theory that the District‘s failure to provide potable drinking water (1) breached a contract, (2) constituted a nuisance, and (3) was the product of negligence.2
B. Plaintiffs add and then dismiss the County
On April 29, 2019, plaintiffs substituted the County in lieu of a Dоe defendant.
C. Plaintiffs succeed in certifying the class on all three claims, but the class is later decertified as to the nuisance claim
1. Class certification and notice
On August 15, 2019, plaintiffs moved to certify a class as to all three claims in the operative complaint.
On April 27, 2020, the trial court certified a class of “all individuals who paid a monthly water utility payment to [the] Sativa [Water District] at any time from March 13, 2017, to March 13, 2018.” On December 7, 2020, the trial court approved plaintiffs’ proposed notice to the class members.
2. Partial decertification of the class
On January 29, 2021, the Sativa Water District moved to decertify the class as to the nuisance claim on the ground that the District‘s interference with each resident‘s use and enjoyment of the land varied (because the water quality varied), thereby defeating the predominance of common issues necessary to maintain a class on that claim. Following briefing and a hearing, the trial court on March 26, 2021, granted the motion and decertified the class as to plaintiffs’ nuisance claim.
D. The Sativa Water District‘s motion to dismiss
On April 22, 2021, the Sativa Water District mоved to dismiss plaintiffs’ entire lawsuit. Following briefing, a hearing, and supplemental briefing, the trial court granted the motion on September 9, 2021 (and entered its order to that effect a few months later). As a threshold matter, the court construed the motion as one for judgment on the pleadings, and then granted the motion after finding that the District was not a “proper party.” The court reasoned that the District “cease[d] to exist as an entity” once the County Commission recorded its dissolution resolution on March 19, 2019, and that a lawsuit cannot be maintained against a nonexistent entity. The court noted that the County Commission had designated the County as the “successor” agency to
E. Plaintiffs’ motion to vacate dismissal of the County
On July 15, 2021—while the Sativa Water District‘s motion to dismiss was pending—plaintiffs moved to set aside the trial court‘s October 2020 order that had, at plaintiffs’ request, dismissed the County as a defendant. After further briefing and a hearing, the trial court denied this motion at the same time it granted the District‘s motion to dismiss. The court reasoned that plaintiffs’ motion was filed too late to qualify for relief as a statutory motion to vacate under
F. Plaintiffs appeal
Upon entry of the judgment dismissing plaintiffs’ action with prejudice, plaintiffs filed this timely appeal.
DISCUSSION
In this appeal, plaintiffs assert that the trial court erred in (1) granting the Sativa Water District‘s motion for judgment on the pleadings, (2) denying plaintiffs’ motion to vacate the order dismissing the County as a defendant, and (3) decertifying their class as to the nuisance claim.4 Because, for the reasons set forth
below, we conclude that the trial court‘s first two rulings were correct, we have no occasion to reach plaintiffs’ arguments attacking the third ruling.
A. Pertinent law
1. Judgment on the pleadings
As pertinent here, a motion for judgment on the pleadings is appropriate where the operative complaint “does not state facts sufficient to constitute a cause of action against [the named] defendant.” (
We independently evaluate whether a trial court properly granted judgment on the pleadings. (Harris, supra, 59 Cal.4th at p. 777.) We also review de novo any subsidiary questions of law, such as those involving statutory interpretation or the
application of the law to undisputed facts. (Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 724 [statutory interpretation]; Boling v. Public Employment Relations Bd. (2018) 5 Cal.5th 898, 912 [application of law to undisputed facts].)
2. Procedures for dissolving a local water district
a. The Reorganization Act
(i) Generally
To stave off what was perceived to be a haphazard and often duplicative proliferation of local government entities (San Bernardino Valley Water Conservation Dist. v. San Bernardino County Local Agency Formation Com. (2009) 173 Cal.App.4th 190, 194), our Legislature enacted the Reorganization Act as a “comprehensive scheme” to рrovide a more “orderly” approach to the “formation and development of local [entities].” (
To effectuate its more orderly approach, the Reorganization Act relies upon LAFCOs to serve as the
“watchdog” in each county.5 (
(ii) The Act‘s procedures for dissolving districts
The Reorganization Act prеscribes a three-step procedure for dissolving districts.
First, the LAFCO must be presented with a proposal to dissolve the district. Among other ways, that proposal may come from the LAFCO itself passing a resolution to dissolve the district.6 (
Second, the LAFCO must conduct a public hearing—preceded by advance notice—regarding the proposal. (
(iii) The terms and conditions of dissolution of a district
On the day a dissolution order becomes “effective,” the “district shall be dissolved, disincorporated, and extinguished, its existence . . . terminated . . . and all of its corporate powers . . . cease.” (
When it comes to winding up the dissolved district‘s affairs, the Act gives the LAFCO overseeing the dissolution two options.
First, the LAFCO may specify that the dissolved district is to wind up its own affairs. (
Second, and alternatively, the LAFCO may designate a “local agency” as the “successor” for the district and task the successor agency with “winding up the affairs of the dissolved district.” (
- “[A]ll of the moneys or funds” and “all property . . . of the dissolved district is vested in the successor [agency] for the purpose of winding up the affairs of the district.” (
§ 57452 .) - The successor agency is granted the power to “use” “any funds, money, or property of [the] dissolved district” as well as “to exchange, sell, or otherwise dispose of all property . . . of the dissolved district” “for the purpose of winding up the affairs of the district.” (
§§ 57463 ,57453 ; see also,§ 57455 .) -
The successor agency is granted the “power[]“—“[f]or the sole and exclusive purpose of winding up the affairs of the dissolved district” and “until the time when the affairs of the dissolved district have been completely wound up“—to (1) “compromise and settle claims of every kind and nature,” and (2) “sue or be sued in the same manner and to the same extent as the
dissolved district and the officers and legislative body of the dissolved district.” (
No matter which option the LAFCO takes, the LAFCO has the power to impose “terms and conditions” of dissolution that deviate from the “terms and conditions” that the Reorganization Act sets forth as the default terms. (
b. AB 1577
Taking effect as an urgency measure on the day it was enacted, AB 1577 deals specifically—and solely—with the Sativa Water District. In order to address that district‘s long-running failure to prоvide the residents it served with potable drinking water, AB 1577 changed the law in three ways pertinent to this appeal. First, AB 1577 authorized the State Board to immediately dissolve the District‘s board of directors and to appoint the County to administer the District. (
B. Analysis
We independently agree with the trial court‘s conclusion that plaintiffs’ claims against the Sativa Water District must be dismissed because the judicially noticed documents indicate that the District was properly dissolved in accordance with the Reorganization Act. Specifically, the Act granted—and AB 1577 reaffirmed—the County Commission‘s authority to name a successor agency, and the County Commission later exercised that authority by (1) designating the County as the successor agency to the Sativa Water District, (2) transferring all of the District‘s assets to the County, and (3)
Plaintiffs resist this conclusion with what can be grouped into four arguments.
First, plaintiffs argue that sections 56035 and 57450—which are part of the Reorganization Act—define “dissolution” as “the disincorporation, extinguishment, or termination of the existence of a district and the cessation of all its corporate powers, except as the [LAFCO] may otherwise provide pursuant to section 56886 or for the purpose of winding up the affairs of the district.” (
defending litigation. This plain text, plaintiffs insist, must be followed.
We reject this argument for two reasons.
To begin, we agree with plaintiffs that the best indicator of legislative intent is the text of a statute. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1233). However, we must also read a statutory scheme like the Reorganization Act as a whole. (Meza v. Portfolio Recovery Associates, LLC (2019) 6 Cal.5th 844, 856.) Although sections 56035 and 57450 might, upon first blush, suggest that a district always continues to exist—notwithstanding its dissolution—for purposes of winding up its affairs, those statutes merely set up default terms and conditions for dissolution under the Act. As noted above, the Act elsewhere provides that the LAFCO has the power to specify the “terms and conditions” that apply upon dissolution in a specific case, and those specific terms “control over the general provisions” governing dissolution under the Act. (
Further, construing sections 56035 and 57450 as mandating that a dissolved district always continues to exist to wind up its affairs leads to an absurd result, which also counsels strongly against that construction. (Lopez v. Ledesma (2022) 12 Cal.5th 848, 858-859.)
wind up the affairs of the District, when only one of them (the County) has ownership and control over the District‘s assets necessary to do so? Because it is nonsensical in this context for the District to continue to exist to wind up its own affairs, we decline to read the Act as mandating this result.
Second, plaintiffs argue that it is a “consistent principle in California statutes and case law” that all entities have a winding up period after their dissolution (and hence can be sued during that period). The Sativa Water District may no longer have an “operational existence,” plaintiffs urge, but it still has a “legal existence” under this principle. To illustrate this principle, plaintiffs cite
AIDS Healthcare Foundation v. City of Los Angeles (2022) 86 Cal.App.5th 322, 335 [“it is a basic rule of statutory construction that specific statutes control general ones“].)
Third, plaintiffs argue that we must construe the Reorganization Act to authorize a lawsuit against the Sativa Water District because, in light of AB 1577‘s grant of immunity to the County, any other outcome would be inconsistent with legislative intent because, in plaintiffs’ view, it is “impossible to conclude that the Legislature intended to slam the courthouse door shut” on plaintiffs by cutting off suit against the District and the County. We do not find this outcome to be inconsistent with the Legislature‘s intent. AB 1577 was meant to solve an urgent problem—namely, the Sativa Water District‘s persistent failure to do its job of providing potable drinking water to residents. The Legislature‘s concern was fixing that problem immediately. Thus, AB 1577 authorized the State Board to
pending lawsuits like plaintiffs’ crystal clear (
Fourth and finally, plaintiffs argue that the fact that the Sativa Water District‘s insurer is continuing to defend the lawsuit somehow means that the District is still a proper defendant or that the District has somehow waived its right to litigate its nonexistence by participating in the case for nearly three years. Ironically, it is plaintiffs who have waived these particular arguments by playing hide-and-go-seek with them before the trial court: They raised the “insurer is still here” argument for the first time at the hearing on the District‘s motion to dismiss, but when the court gave plaintiffs the opportunity to brief the issue, they opted not to do so and the court deemed the issue waived. They cannot resurrect it now. Even if we ignore this waiver, plaintiffs’ arguments lack merit because, contrary to what plaintiffs implicitly posit, an insurer is not the stand-in for the insured. Plaintiffs can often sue the insured, but cannot sue the insurer until there is a judgment or assignment of rights. (Shaolin v. Safeco Ins. Co. (1999) 71 Cal.App.4th 268, 271.) That is also why the insurer‘s continued involvement has no effect whatsoever on whether the District ceases to exist and hence can be sued.
II. Refusal to Reinstate the County As a Defendant
Where, as here, a party seeks to vacate an order dismissing a case more than six months after the dismissal оrder was issued,9 that party must ask the court to exercise its inherent equitable power to vacate orders secured by “extrinsic fraud” or “extrinsic mistake.” (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 470-472; Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241, 1245-1246.) A court may exercise this power only if the moving party demonstrates, at a minimum, that it has “a meritorious case“—that is, “a good claim or defense which, if asserted in a new trial [once the prior order dismissing the case is vacated], would be likely to result in a judgment favorable to him.” (In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1071 (In re Marriage of Stevenot); Page v. Insurance Co. of North America (1969) 3 Cal.App.3d 121, 130.) While the exercise of this equitable power is “not governed by any statutory time limit” (Department of Industrial Relations v. Davis Moreno Construction, Inc. (2011) 193 Cal.App.4th 560, 570-571), “there is a strong public poliсy in favor of the finality of judgments” that counsels against exercising that power outside the six-month statutory deadline absent “exceptional circumstances” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 982 (Rappleyea); In re Marriage of Stevenot, supra, at p. 1071). We review a trial court‘s order
denying a motion to vacate a dismissal under either mechanism for an abuse of discretion. (Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 503; Rappleyea, supra, at p. 981.)
The trial court here did not abuse its discretion in declining to exercise its inherent, equitable power to reinstate the County as a defendant. That is because plaintiffs cannot demonstrate that they have a meritorious case for the simple reason—the very same reason plaintiffs cited when they dismissed the County in the first place—that AB 1577 renders the Cоunty absolutely immune from liability for the claims plaintiffs seek to vindicate in this case. (
Plaintiffs try to sidestep the seemingly absolute inapplicability of the court‘s equitable power to vacate by asserting that the trial court‘s dismissal order was void when it was entered (and hence need not be vacated at all); specifically, they assert that the dismissal order was void because the trial court did not comply with (1)
These arguments lack merit.
Rule 3.769 is irrelevant because it applies to settlements of a class action, not the voluntary dismissal of one of several defendants.
Rule 3.770 applies here, but its dictates have been satisfied. Under this rule, the dismissal of a party to a class actiоn is valid only if (1) the court has approved the dismissal (
notice” requirement is met if either (1) notice is “given in the manner and to those class members specified by the court,” or (2) the court “finds that the dismissal [of the party] will not prejudice” the class members. (
DISPOSITION
The judgment is affirmed. The Sativa Water District is entitled to its costs on appeal.
CERTIFIED FOR PARTIAL PUBLICATION.
HOFFSTADT, J.
We concur:
ASHMANN-GERST, Acting P. J.
KWAN, J.*
* Judge of the Superior Court of Los Angeles County, assigned by the Chief Justice pursuant to