SAN DIEGO -- The San Diego County Water Authority board of directors has voted to pursue legislation to require the Metropolitan Water District of Southern California (MWD) to indemnify member agencies for litigation costs and fees incurred directly or indirectly by a member agency that prevails in litigation between MWD and the member agency.
The action came in response to a vote by the MWD Board of Directors Feb. 10 to appeal the loss of its validation lawsuit. In that suit, MWD sought official legal approval -- or "validation" -- of the methodology it used in setting rates to move, or "wheel," other agencies' water through its system. In a ruling made final Jan. 30, San Francisco Superior Court Judge Laurence Kay ruled against Metropolitan and found Metropolitan's wheeling rates invalid. Judge Kay also rejected the methodology Metropolitan used in setting its rates, including Metropolitan's "postage stamp" approach and the inclusion in its wheeling rates of all of Metropolitan's systemwide costs.
In addition to its own legal costs in the validation lawsuit, the Water Authority -- by virtue of its status as a Metropolitan member agency -- will be forced to pay approximately 25 percent of MWD's legal bills. The Water Authority may also be forced to pay a commensurate share of any legal fees MWD may be ordered to reimburse other defendants in the validation lawsuit.
"It is ironic, but more importantly, unfair that Water Authority ratepayers should end up paying more for Metropolitan's legal bills in the prosecution of its unsuccessful lawsuit than they have paid for a successful defense in the case," said Water Authority Chairwoman Chris Frahm. "This untenable situation is bound to get worse as MWD pursues a multi-year appeal that has very little, if any, chance of success.
"The legislation the Water Authority is seeking will protect MWD member agencies that find themselves at the receiving end of Metropolitan's litigation machine and the more than $1 billion cash reserves that sustain it," Frahm said.
In a related action, the Water Authority Board directed Chairwoman Frahm to send a letter to the Metropolitan Water District of Southern California formally protesting MWD's vote Feb. 10 to appeal its validation lawsuit defeat. The Water Authority contends that the manner in which the vote was taken was improper and appears to have violated provisions of the state's Brown Act open meeting law.
A formal letter of protest is the first step involved in seeking redress of Brown Act violations. The Brown Act requires the public's business be conducted in public.
The complex, four-part motion to appeal the verdict -- reportedly prepared by MWD staff at the direction of select MWD directors -- was circulated among many, but not all, MWD board members before the meeting began; Metropolitan directors representing the Water Authority were not provided copies of the motion until they requested copies after the motion was read aloud during the open board meeting. Board members were also lobbied to support the motion both in and out of the MWD board room prior to the board meeting.
"We are deeply concerned about the manner in which the public's business is conducted at MWD, namely that the public's business is often conducted out of the public's view," Frahm said.
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