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1 KEKER, VAN NEST & PETERS LLP
JOHN W. KEKER - # 49092
2 jkeker@keker.com
DAN JACKSON - # 216091 ELECTRONICALLY
3 djackson@keker.com
WARREN A. BRAUNIG - # 243884 F I L E D
4 wbraunig@keker.com Superior Court of California,
County of San Francisco
NICHOLAS S. GOLDBERG - # 273614
5 ngoldberg@keker.com 04/29/2022
633 Battery Street Clerk of the Court
BY: RONNIE OTERO
6 San Francisco, CA 94111-1809 Deputy Clerk
Telephone: (415) 391-5400
7 Facsimile: (415) 397-7188
8 MARK J. HATTAM - # 173667
mhattam@sdcwa.org
9 General Counsel
SAN DIEGO COUNTY WATER AUTHORITY
10 4677 Overland Avenue
San Diego, CA 92123-1233
11 Telephone: (858) 522-6791
Facsimile: (858) 522-6566
12
Attorneys for Petitioner, Plaintiff, and Cross-Defendant EXEMPT FROM FILING FEES
13 SAN DIEGO COUNTY WATER AUTHORITY [GOVERNMENT CODE § 6103]
14
15 SUPERIOR COURT OF THE STATE OF CALIFORNIA
16 IN AND FOR THE COUNTY OF SAN FRANCISCO
17
SAN DIEGO COUNTY WATER Lead Case No. CPF-14-514004
18 AUTHORITY,
Consolidated with Case Nos. CPF-16-515282
19 Petitioner, Plaintiff and Cross- & CPF-18-516389
Defendant,
20 SAN DIEGO COUNTY WATER
v. AUTHORITY’S PRETRIAL BRIEF
21
METROPOLITAN WATER DISTRICT OF Dept.: 306
22 SOUTHERN CALIFORNIA; ALL Judge: Hon. Anne-Christine Massullo
PERSONS INTERESTED IN THE
23 VALIDITY OF THE RATES ADOPTED Date Filed: May 30, 2014
BY THE METROPOLITAN WATER
24 DISTRICT OF SOUTHERN CALIFORNIA Trial Date: May 16–27, 2022
ON APRIL 8, 2014 TO BE EFFECTIVE
25 JANUARY 1, 2015 AND JANUARY 1,
2016; and DOES 1-10,
26
Respondents, Defendants and
27 Cross-Complainant.
28
THE WATER AUTHORITY’S PRETRIAL BRIEF
Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389
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1 TABLE OF CONTENTS
2 Page
3 I. INTRODUCTION .......................................................................................................... 1
4 II. BACKGROUND ............................................................................................................ 3
5 A. Arizona and the Wheeling Statutes. ..................................................................... 3
6 B. The parties’ initial Exchange Agreement negotiations and Resolution 8520. ........ 5
7 C. Metropolitan’s further admissions and Director Kennedy’s legislatively-
mandated findings regarding reasonable credit for offsetting benefits .................. 9
8
D. The 1998 Exchange Agreement. ........................................................................ 11
9
E. The negotiation of the 2003 Exchange Agreement. ............................................ 13
10
F. Relevant terms of the 2003 Exchange Agreement, as already preclusively
11 interpreted. ........................................................................................................ 16
12 III. THE WATER AUTHORITY’S CAUSES OF ACTION ............................................... 20
13 IV. METROPOLITAN’S REMAINING CLAIMS AND DEFENSES ................................ 24
14 V. CONCLUSION............................................................................................................. 25
15
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WATER AUTHORITY’S REPLY IN SUPPORT OF ITS MOTIONS FOR SUMMARY ADJUDICATION
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1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4 300 DeHaro Street Investors v. Department of Housing & Community
5 Development (2008) 161 Cal.App.4th 1240 ................................................................. passim
6 Carmel Valley Fire Protection Dist. v. State of California
(1987) 190 Cal.App.3d 521 ................................................................................................. 23
7
Denio v. City of Huntington Beach
8 (1946) 74 Cal.App.2d 424............................................................................................ passim
9 San Diego County Water Authority v. Metropolitan Water Dist. of Southern California
10 (2017) 12 Cal.App.5th 1124......................................................................................... passim
11 San Diego County Water Authority v. Metropolitan Water Dist. of Southern California
(Sept. 21, 2021, A161144) 2021 WL 4272331 ............................................................. passim
12
San Diego County Water Authority v. Metropolitan Water Dist. of Southern California
13 (Mar. 17, 2022, A162168) 2022 WL 806429 ............................................................... passim
14 Stockett v. Association of Cal. Water Agencies Joint Powers Ins. Authority
15 (2004) 34 Cal.4th 441 ......................................................................................................... 12
16 Statutes
17 Wat. Code, § 1810 et. seq. ................................................................................................. passim
18
19
20
21
22
23
24
25
26
27
28
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WATER AUTHORITY’S REPLY IN SUPPORT OF ITS MOTIONS FOR SUMMARY ADJUDICATION
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1 I. INTRODUCTION
2 The Water Code defines “fair compensation” for the conveyance of water as the
3 reasonable costs “incurred by the owner of the conveyance system,” minus the “reasonable credit
4 for any offsetting benefits for the use of the conveyance system.” (§ 1811(c), italics added.)1 For
5 more than two decades—from the period leading up to Metropolitan’s adoption, in 1997, of its
6 Resolution 8520 regarding “fair compensation,” until the Court of Appeal’s decision in San
7 Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12
8 Cal.App.5th 1124 (SDCWA I) 2)—the parties argued and litigated over the first part of section
9 1811(c)—the scope of Metropolitan’s “conveyance system” and its recoverable costs. Those
10 issues were finally decided in SDCWA I, leaving the second part of section 1811(c) at issue in this
11 trial: the reasonable credit for the offsetting benefits Metropolitan receives because the Water
12 Authority pays to conserve Colorado River water that Metropolitan otherwise would have to pay
13 for, and the Water Authority further pays, under the Exchange Agreement, for the use of the
14 conveyance system to bring that conserved water into Metropolitan’s service area.
15 More precisely, the issue in this trial is the contract damages Metropolitan owes the Water
16 Authority for failing to provide reasonable credit for the offsetting benefits Metropolitan received
17 in the years at issue, 2015 to 2020. It is already established that, to the extent Metropolitan
18 charged the Water Authority more than fair compensation, including by failing to credit offsetting
19 benefits, “there was a breach of the amended exchange agreement providing for future prices
20 ‘equal to the charge or charges set by Metropolitan’s Board of Directors pursuant to applicable
21 law and regulation and generally applicable to the conveyance of water by Metropolitan on behalf
22 of its member agencies.’” (SDCWA I, supra, 12 Cal.App.5th at p. 1154, quoting PTX65 [Tab
23 13], ¶ 5.2.) 3 “The Water Authority is entitled to recover damages” for that breach. (Ibid.)
24 1
Statutory references, unless stated otherwise, are to the Water Code.
2
25 See also Metropolitan Water Dist. of Southern California v. Imperial Irr. Dist. (2000) 80
Cal.App.4th 1403 (MWD); San Diego County Water Authority v. Metropolitan Water Dist. of
26 Southern California (Sept. 21, 2021, A161144 [nonpub. opn.]) 2021 WL 4272331 (SDCWA II);
and San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (Mar.
27 17, 2022, A162168 [nonpub. opn.]) 2022 WL 806429 (SDCWA III).
3
The Tab references in citations herein are to the accompanying Appendix, which includes, at
28 Tab 1, excerpts from Metropolitan’s 2014 administrative record, cited (without repeated
references to Tab 1) as “AR” followed by the significant digits of the bates number. Tab
1
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1 Despite its current protestations to the contrary, Metropolitan agreed to credit the Water
2 Authority for offsetting benefits under the Exchange Agreement. In negotiating the initial 1998
3 Exchange Agreement, Metropolitan agreed to credit offsetting benefits based on the value of the
4 Colorado River water the Water Authority pays to conserve and brings into Metropolitan’s
5 system. And in its Resolution 8520, Metropolitan adopted exactly the same language it proposed
6 in the contract negotiations, reiterating exactly the same promise. (See PTX751 [Tab 19] at p.
7 1914, ¶ 4; AR85586, § 10.) Metropolitan made the same promise again in negotiations before the
8 Director of the Department of Water Resources, David Kennedy, whom the Legislature
9 empowered in 1997 to determine fair compensation when the parties’ negotiations were stuck on
10 the final amount of the credit—not on the existence and measure of offsetting benefits, which
11 were already agreed upon and established. (See former § 1812.5 [Tab 36]; PTX481 [Tab 17].)
12 Director Kennedy set the credit at $220 per acre-foot, splitting the difference between the parties’
13 valuations of the water at the time. (PTX481 [Tab 17].) That credit “absolutely was part and
14 parcel” of the 1998 Exchange Agreement. (Stapleton Dep. [Tab 27] at p. 42:14-25.)
15 Metropolitan also knew when it executed the operative 2003 Exchange Agreement that—
16 after five years in which the Water Authority hoped the parties would settle their price disputes,
17 during which the Water Authority agreed not to litigate those disputes—the Water Authority
18 would seek to enforce “applicable law and regulation,” including the required credit for offsetting
19 benefits. (PTX65 [Tab 13], ¶ 5.2.) As Metropolitan contemporaneously admitted:
20 It is clear where SDCWA is headed when they write that the ‘. . . lawful wheeling
rate [is] (generally equivalent to the continuation of the exchange rate identified in
21 the [1998] Exchange Agreement) . . . .’ This implies they believe that any rate
different than the favorable rate they have received is not lawful and they are already
22 arguing their case in their proposal.
23 (PTX398 [Tab 16].) The “lawful wheeling rate” in the 1998 Exchange Agreement included
24 reasonable credit for offsetting benefits. The 2003 Exchange Agreement, by incorporating
25 applicable law and regulation, likewise requires such credit. Metropolitan’s assertions that it was
26 unaware of that requirement are counterfactual and disingenuous. (See, e.g., ibid.)
27
references are provided for the remaining documents in the Appendix, including trial exhibits,
28 transcript excerpts, and other materials, such as the legislative history of the Wheeling Statutes, of
which this Court previously took judicial notice. (Prior Trial Tr. [Tab 26] at pp. 774:2–775:5.)
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1 Despite knowing full well that applicable law and regulation require credit for offsetting
2 benefits, and promising to provide such credit based on the agreed-upon method for calculating it,
3 Metropolitan set charges that omitted any such credit. The Water Authority paid those charges, in
4 full and under protest, from 2015 to 2020. Contrary to Metropolitan’s recent assertions—after
5 litigating these issues since 1997—that it must be given the opportunity to determine the
6 reasonable credit for offsetting benefits, Metropolitan already set the credit at zero. That was a
7 breach of contract, which entitles the Water Authority to damages to be proved at trial. “This is
8 the very essence of what a contract is all about.” (300 DeHaro Street Investors v. Department of
9 Housing & Community Development (2008) 161 Cal.App.4th 1240, 1256 (300 DeHaro).)
10 Metropolitan’s contrary arguments and dilatory procedures were already rejected in the
11 prior litigation over Metropolitan’s erroneous determination that “fair compensation” could
12 include its Water Stewardship Rate (WSR). The result of this Court’s ruling, as affirmed on
13 appeal, that Metropolitan was wrong about “fair compensation” was not a remand to
14 Metropolitan to redetermine “fair compensation.” The result was that the Water Authority was
15 “entitled to recover damages” (SDCWA I, supra, 12 Cal.App.5th at p. 1154), which this Court
16 awarded in a final judgment that was affirmed in SDCWA II, supra, 2021 WL 4272331 at page
17 *9. The Court should follow the same well-established procedure in this trial, and not begin—as
18 Metropolitan proposes—another decade or more of costly litigation.
19 Thus, as the Water Authority will prove at trial, the Court should enter judgment in the
20 Water Authority’s favor on its causes of action for breach of contract, as well as on the other
21 causes of action at issue, as discussed below.
22 II. BACKGROUND
23 A. Arizona and the Wheeling Statutes
24 In Arizona v. California (1963) 373 U.S. 546, 550–562 (Arizona), the Supreme Court
25 limited California’s basic allotment of Colorado River water to 4.4 million acre-feet annually,
26 based on the federal legislation that authorized the Hoover Dam and the All-American Canal.
27 That legislation went into effect in 1929 after California accepted the 4.4 million acre-feet
28 limitation, as the legislation required. Two years later, Metropolitan, Imperial Irrigation District
3
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1 (IID), Palo Verde Irrigation District, Coachella Valley Water District (Coachella), the City of Los
2 Angeles, and the City and County of San Diego entered into the “Seven-Party Agreement,”
3 apportioning California’s basic allotment and much more among themselves based on a priority
4 system. (Quantification Settlement Agreement Cases (2011) 201 Cal.App.4th 758, 783 (QSA).)4
5 All but 550,000 of the 4.4 million acre-feet was apportioned to the first three priorities,
6 which included IID but not Metropolitan, whose highest priority entitlement is fourth. (QSA,
7 supra, 201 Cal.App.4th at p. 785.) Notably, the Seven-Party Agreement did not quantify how
8 much water would go to each of the parties with the first three priorities, which “left the potential
9 for future conflict between the parties.” (Ibid.) “Even more conducive to future conflict” was the
10 fact that, if and when the 4.4 million acre-feet limitation were actually enforced, Metropolitan
11 would only receive the 550,000 acre-feet left over after the higher-priority parties took their share,
12 leaving Metropolitan’s Colorado River Aqueduct (CRA) “over half empty.” (Ibid.)
13 For decades after Arizona was decided, California was still able to take more than its
14 allotment because Arizona and Nevada were not yet using theirs, and the Colorado River was
15 therefore in “surplus.” Metropolitan, moreover, paid almost nothing for that additional surplus
16 water: 662,000 acre-feet per year, on top of its base of 550,000 acre-feet per year, nearly filling its
17 CRA, “which has an approximate capacity of more than 1.2 million acre-feet per year.” (QSA,
18 supra, 201 Cal.App.4th at p. 785 & fn. 9; see also, e.g., PTX30 [Tab 7] at p. 14981.) By 1986,
19 however, California’s “single most pressing water problem” was how to replace Metropolitan’s
20 “former Colorado River supplies now that Arizona has begun to claim its full share.” (Leg. Hist.
21 [Tab 35] at p. 109.) One solution was for the Water Authority to “purchase conserved waters”
22 from IID. (Id. at p. 151.) San Diego County, in particular, supported the enactment of the
23 Wheeling Statutes in 1986 because they would require Metropolitan to “wheel”—i.e., convey—
24 that conserved water for no more than fair compensation. (See ibid.)
25 4
The Water Authority is distinct from the City and County of San Diego, which is why the Water
26 Authority refers to itself as such. Nevertheless, many documents refer to the Water Authority as
“San Diego,” or as “SDCWA” or “SD.” Metropolitan is alternatively “MWD” or “Met.” Rather
27 than replace those terms when quoting such documents, this brief leaves the parties’ various
monikers in place. Note also that the original allocation of water to the City and County of San
28 Diego under the Seven-Party Agreement went to Metropolitan when the Water Authority became
a Metropolitan member agency. (QSA, supra, 201 Cal.App.4th at p. 785, fn. 9.)
4
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1 As already discussed, the Wheeling Statutes define “fair compensation” to include
2 “reasonable credit for any offsetting benefits for the use of the conveyance system.” (§ 1811(c).)
3 The credit for offsetting benefits must be “consistent with the requirements of law to facilitate the
4 voluntary sale, lease, or exchange of water.” (§ 1813.) These are crucial tools for avoiding water
5 shortages and “powerful incentive[s] for conservation: What you save you can sell. Trading
6 water can also be far cheaper and less environmentally damaging than building new water
7 projects.” (Leg. Hist. [Tab 35] at p. 107.)
8 B. The parties’ initial Exchange Agreement negotiations and Resolution 8520
9 After a devastating drought from 1987 to 1992, the Water Authority began negotiating an
10 agreement with IID for what would become “the largest agricultural-to-urban water transfer in
11 United States history.” (QSA, supra, 201 Cal.App.4th at p. 788.) In response, Metropolitan
12 began to develop a wheeling policy. Far from “act[ing] in a reasonable manner consistent with
13 the requirements of law to facilitate the voluntary sale, lease, or exchange of water” (§ 1813),
14 Metropolitan sought to “keep tight control of the system while assigning all system and financial
15 risk to potential wheeling parties,” as Metropolitan’s own experts acknowledged. (AR29445.)
16 On November 13, 1995, the Water Authority urged Metropolitan to comply with the
17 Wheeling Statutes and Metropolitan’s own policy of paying member agencies “up to $250 per
18 acre foot” at the time—now much more—“to reduce their MWD purchases.” (AR8238–39.)
19 Section 1811(c) of the water code provides that the transferor is to receive a
“reasonable credit for any offsetting benefit for the use of the conveyance system.”
20 Causing MWD’s demands to be reduced provides a definite benefit, such as more
reliable supplies and lower costs for other agencies. MWD will be less likely to
21 incur shortages and therefore will maintain its revenues. The burden on MWD to
expand its supply base and [Capital Improvement Program (CIP)] will be eased.
22 Pressure to solve the Bay Delta problem within a short time frame will also be
reduced. . . . [S]olutions can be developed that are truly win-win for all parties.
23
(Id. at p. 8241.) Metropolitan’s own experts agreed, a few days later, criticizing Metropolitan for
24
failing to embrace the “win - win” opportunity of the Water Authority providing “true system
25
operations benefits” to Metropolitan “in return for affordable wheeling.” (AR29455.)
26
In April 1996, the Water Authority proposed an Exchange Agreement whereby it would
27
deliver conserved IID water to Metropolitan in exchange for Metropolitan’s “delivery of an
28
equivalent amount.” (PTX20 [Tab 2] at p. 53837.) The Water Authority refuted Metropolitan’s
5
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1 objections based on purported lack of conveyance capacity, demonstrating that Metropolitan’s
2 assumption that “its Colorado Aqueduct will be full for the next 25 years” was wrong because
3 Arizona’s claims to Colorado River water “are a factor that MWD’s estimates have not taken into
4 account. Furthermore, the long-run prospects for Colorado River demands are such that MWD
5 must anticipate being deprived of current and anticipated surpluses.” (Id. at p. 53844.) The
6 Water Authority’s “exchange proposal would provide significant immediate and long-term
7 benefits to Metropolitan and its member agencies,” particularly including “avoided supply
8 costs”—especially if, as the Water Authority presciently warned, “Colorado River supply
9 shortages could develop between 2000 and 2025.” (Id. at p. 53846 & fn. 1.)
10 In October 1996, Metropolitan proposed a set of “wheeling principles,” to which the
11 Water Authority objected. (AR8598–8605.) The Water Authority pointed out, among other
12 things, that Metropolitan proposed to include State Water Project (SWP) costs in its wheeling
13 charges. But if that were to be allowed (as SDCWA I later found regarding the specific SWP
14 costs at issue there), then conveyance charges “should also reflect an offsetting value for avoided
15 MWD supply costs which wheeled water replaces.” (Id. at pp. 8601, 8603.)
16 In November 1996, Metropolitan’s Board of Directors authorized a “Framework of Terms
17 as a basis upon which Metropolitan would proceed with discussions” about the proposed
18 Exchange Agreement. (PTX751 [Tab 19] at p. 1911.) “The primary issues of discussion,”
19 according to Metropolitan’s own Executive Summary, included “the regional benefits of the
20 proposed transfer”—i.e., offsetting benefits. (Id. at p. 1912.) Notably, although the proposal was
21 for an Exchange Agreement, Metropolitan itself said that “wheeling principles” would apply. (Id.
22 at p. 1913.) Even more notably, Metropolitan’s “Framework” provided:
23 Regional benefits. The regional supply benefits of the transfer will be recognized
in the form of credits toward payment of Metropolitan’s wheeling rate or other
24 commensurate financial mechanism. The regional benefits will be calculated in the
same manner as such benefits were calculated for use in the Local Projects and
25 Groundwater Recovery Program.
26 (Id. at p. 1914, ¶ 4.) In response, the Water Authority noted the parties’ agreement that the
27 transfer “would benefit MWD’s service area” and “help California to limit its consumption of
28 Colorado River water within its entitlement.” (AR8653.) The parties would continue to disagree
6
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1 about other issues (ibid.) but the existence and measure of offsetting benefits, in terms of
2 Metropolitan’s avoided costs, were established. (See, e.g., ibid.; AR8881 [“reasonable credit for
3 any offsetting benefits” required by statute and agreed upon by Metropolitan]; PTX750 [Tab 18]
4 at p. 482 [Metropolitan analysis of “the regional benefits of the SDCWA transfer”].)
5 On January 14, 1997, Metropolitan adopted its Resolution 8520. (AR85583–626.)
6 Resolution 8520 acknowledges the statutory requirement that “fair compensation” must include
7 “reasonable credit for any benefits for the use of its conveyance system.” (Id. at p. 85584.)
8 Accordingly, Metropolitan resolved: “That to the extent a wheeling transaction enables
9 Metropolitan to avoid costs, such avoidable costs should not be included in the wheeling rate.”
10 (Id. at p. 85586, § 6.) “The wheeling rates shall be reduced to reflect the regional water supply
11 benefits provided to Metropolitan’s service area, if any, on a case-by-case basis in response to a
12 particular wheeling transaction. The regional benefits, if any, shall be calculated by Metropolitan
13 in the same manner as such benefits are calculated for use in the Local Projects and
14 Groundwater Recovery Program.” (Id., § 10, emphasis added.) 5
15 The sentence italicized above in section 10 of Resolution 8520 comes from the parties’
16 initial Exchange Agreement negotiations (PTX751 [Tab 19] at p. 1914, ¶ 4), directly contrary to
17 Metropolitan’s misrepresentation in its briefing on summary adjudication that there “is no
18 evidence that Resolution 8520 is part of the Exchange Agreement or reflects the parties’
19 intentions when negotiating the Exchange Agreement.” (Met Reply re MSA at p. 8.)
20 The parties’ negotiations also show what crediting offsetting benefits “in the same manner
21
5
22 Metropolitan sued to validate its Resolution 8520, and the Water Authority and IID opposed
that validation action. The trial court ruled in favor of the Water Authority and IID as a matter of
23 law, but the Court of Appeal reversed and remanded for the trial court to make factual findings
about, inter alia, whether Metropolitan acted “‘in a reasonable manner consistent with the
24 requirements of law to facilitate the voluntary sale, lease, or exchange of water.’” (MWD, supra,
80 Cal.App.4th at p. 1436, quoting § 1813, italics in opinion.) Metropolitan then chose to dismiss
25 its validation action, and the parties later put litigation on hold as part of the 2003 Exchange
Agreement. Litigation resumed in the prior cases in this Court before the Honorable Judge Curtis
26 E. A. Karnow. Metropolitan represented to this Court that Resolution 8520 constituted
Metropolitan’s “written findings” regarding the “determinations required by” the Wheeling
27 Statutes. (§ 1813; Met Br. [Tab 32] at p. 19.) Although Metropolitan purported to rescind
Resolution 8520 in August 2020, it cannot evade its admissions in its own Resolution 8520,
28 especially not after defending it twice on appeal (see MWD, supra, 80 Cal.App.4th at p. 1418;
SDCWA I, supra, 12 Cal.App.5th at p. 1148), and incorporating it into the Exchange Agreement.
7
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1 as such benefits are calculated for use in the Local Projects and Groundwater Recovery Program”
2 means. (Res. 8520, AR85586, § 10; PTX751 [Tab 19] at p. 1914, ¶ 4.) When Metropolitan
3 adopted its “Framework” for negotiating the Exchange Agreement, and when it adopted
4 Resolution 8520, benefits under both the Local Projects Program and the Groundwater Recovery
5 Program were “based on the reduction of Metropolitan’s costs to supply” water. (PTX755 [Tab
6 23] at p. 296173.) The amount of such credits “based on Metropolitan’s avoided costs” was to be
7 “reviewed and adjusted periodically.” (Ibid.) At the time, Metropolitan estimated the cost of
8 recovering contaminated groundwater to be $250 per acre-foot. (Ibid.) Likewise, in its Integrated
9 Resources Plan (IRP), Metropolitan estimated the cost of water transfers, as of 1996, to be “about
10 $250 per acre-foot for transfer amounts under 450,000 acre-feet.” (AR7832.)
11 In February 1997, Metropolitan published a brochure entitled “Wheeling: Gearing for the
12 future of water marketing.” Metropolitan acknowledged that the significant regional benefits of
13 long-term wheeling arrangements, specifically including “the proposed agreement between the
14 San Diego County Water Authority and the Imperial Irrigation District,” should be “accounted for
15 in long-term wheeling contracts.” (PTX752 [Tab 20] at p. 1572.) Explaining its “framework” for
16 discussions with the Water Authority “regarding the development of a long-term transfer and
17 water service arrangement,” Metropolitan reiterated that it “would recognize the regional benefits
18 associated with a long-term supply of firm water for Southern California as a credit against the
19 costs of this water. This credit would be calculated utilizing methodology that is consistent with
20 that used to determine credits for Metropolitans other incentives including payments for recycled
21 water and storage operations.” (Id. at p. 1577, emphasis added.)
22 The following month, Metropolitan proposed “wheeling (‘transportation’) services” under
23 an Exchange Agreement based on its “wheeling principles” and “Framework.” (PTX24 [Tab 3].)
24 Specifically, Metropolitan proposed: “Regional Benefit. Between 50-75% of the Market Value of
25 Water Transfers would be paid to SDCWA in recognition of the reduction in costs the remaining
26 member agencies would realize as a result of the SDCWA/IID transfer. These payments would
27 begin in 2010.” (Id., ¶ 7, bold in original, italics added.) Thus, Metropolitan’s own calculation of
28 regional benefits “in the same manner as such benefits were calculated for use in the Local
8
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1 Projects and Groundwater Recovery Program”—as required by both the “Framework” referenced
2 in the proposal itself and the identical language in Resolution 8520—was based on the market
3 value of the transfer water. (See ibid.; PTX751 [Tab 19] at p. 1914, ¶ 4; AR85586, § 10.)
4 Metropolitan’s calculations put the market value at between $200 and $300 per acre-foot at the
5 time (PTX24 [Tab3] at p. 264560), consistent with its estimate that the cost of “these types of
6 transfers” was “about $250 per acre-foot” in 1996. (AR7832.)
7 C. Metropolitan’s further admissions and Director Kennedy’s legislatively-mandated
findings regarding reasonable credit for offsetting benefits
8
Despite assistance in their negotiations from the State’s Director of Water Resources,
9
David Kennedy, the parties still had not reached agreement in October 1997. Emergency
10
legislation was enacted because the water transfer “is a matter of statewide interest in that it
11
addresses a significant need for water in the southern state through the conservation of water now
12
being consumed there.” (Former § 1812.5(a)(1) & (4) [Tab 36].) Further, the “Secretary of the
13
Interior has strongly urged California to develop a plan to enable it to live within its basic
14
apportionment of 4.4 million acre-feet from the Colorado River.” (Id., (a)(2).) And it “is of vital
15
state interest that every effort be made to ensure that the Colorado River Aqueduct continues to
16
operate at its full capacity at fair and reasonable terms in order to minimize statewide disruptions
17
from diminishing Colorado River supplies.” (Id., (a)(3).) Accordingly, Director Kennedy was
18
empowered to “make those determinations prescribed by Section 1812” (id., (c)(2)), including
19
“fair compensation” and “reasonable credit for any offsetting benefits.” (§§ 1812(b), 1811(c).) If
20
either party objected to his findings “prescribed by Section 1812,” the dispute was to be resolved
21
by formal mediation. (Former § 1812.5(c)(3) [Tab 36].)
22
In subsequent negotiations involving Director Kennedy, the Water Authority pointed out
23
that Metropolitan’s own Senior Resources Specialist, Shane Chapman, had calculated that
24
“without a plan for Colorado River supplies Metropolitan may have to raise its water rate by as
25
much as $65 per acre-foot in order to maintain a full Colorado River Aqueduct.” (PTX25 [Tab
26
4].) Chapman included a handwritten note on his memorandum, cautioning: “let’s not put
27
ourselves in a position where SDCWA can say, ‘See [what] the SDCWA/IID Transfer is
28
worth. . . .” (Ibid.) But that is exactly what the Water Authority did, and rightly so, using
9
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1851142
1 Metropolitan’s own calculations to show that the offsetting benefits by the tenth year of the
2 transfer would be $100 million per year. (PTX26 [Tab 5] at p. 264779.)
3 Metropolitan did not deny the substantial offsetting benefits of the transfer. Nor did it
4 deny that those benefits should be calculated based on Metropolitan’s avoided supply costs. On
5 the contrary, those were the exact parameters of the negotiations before Director Kennedy, just as
6 they were central to Metropolitan’s own interpretation of its “Framework” and Resolution 8520 in
7 March 1997. (See PTX24 [Tab 3].) Likewise, in December 1997, Metropolitan’s negotiators
8 proposed to “offer San Diego a substantial discount below Met’s normal ‘as available’ water
9 transportation rate because of the benefits to the region that are likely to accrue from the San
10 Diego/IID transfer.” (PTX26 [Tab 5] at p. 264786.) The so-called “discount” rate was “less than
11 one half of Met’s normal wheeling rate for ‘as available’ transfers.” (Ibid.) The term “discount”
12 is misleading because the law requires credit for offsetting benefits. In any event, the proposal
13 was to “offer SDCWA a discount of more than 50% from MWD’s average cost wheeling rate. A
14 rate in that range would leave MWD in substantially the same economic position as if it were to
15 acquire and store the IID water.” (Id. at p. 264791, emphasis added.)
16 Director Kennedy issued his findings on January 5, 1998. (PTX481 [Tab 17].) He found
17 that a wheeling rate of $80 per acre-foot was a fair “compromise between various rates advocated
18 by MWD an
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PEOPLE CENTER, INC. D/B/A RIPPLING, A DELAWARE VS. ASURE PAYROLL TAX MANAGEMENT LLC, A DELAWARE LLC ET AL
Jul 11, 2024 |
CGC24615613
Matter on the Law & Motion calendar for Thursday, July 11, 2024, Line 15. PLAINTIFF PEOPLE CENTER, INC. D/B/A RIPPLING's Motion For Preliminary Injunction. Plaintiff People Center, Inc. d/b/a Rippling's motion for a preliminary injunction is denied. (The Court's complete tentative ruling has been emailed to the parties.) For the 1:30 p.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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A & A GENERAL BUILDING CONSTRUCTION INC., A VS. ARLENE S. TASIM ET AL
Jul 12, 2024 |
CGC23609755
Matter on the Law & Motion calendar for Friday, July 12, 2024, Line 12. DEFENDANT ARLENE TASIM AND ALI TASIM'S Motion For Sanctions Against A A General Building Construction Inc. Pursuant To Code Of Civil Procedure Section 1281.99. Defendants and Cross-Complainants' unopposed Motion for Sanctions in the amount of $8350.00 is granted (CCP section 1281.99), payment to be made within 30 days of the filing of this order. Friday's Law & Motion Calendar will be called out of Dept. 301. Anyone intending to appear in person should report to Dept. 301. However, anyone intending to appear remotely should use the regular Zoom information for Dept. 302's Law & Motion Calendar for 9:30 a.m. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RCE)
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YOLANDA JONES ET AL VS. GENERAL MOTORS, LLC ET AL
Jul 10, 2024 |
CGC23609805
Matter on the Law & Motion calendar for Wednesday, July 10, 2024, Line 10. 2 - DEFENDANT GENERAL MOTORS, LLC's MOTION TO STRIKE 1ST Amended COMPLAINT. Off calendar. The Quezada declaration fails to show that the parties met and conferred "in person, by telephone, or by video conference" in compliance with CCP 435.5. The parties are ordered to comply with the code. The response to the complaint is now due August 7, 2024. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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EDWARD WESTERMAN VS. FTI CONSULTING, INC. ET AL
Jul 09, 2024 |
CGC24615152
Matter on the Law & Motion Calendar for Tuesday, July 9, 2024, Line 12. PLAINTIFF EDWARD WESTERMAN's Motion To Seal. Plaintiff's unopposed motion to seal is granted. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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CLEAR HOMES LLC, A NEW MEXICO LIMITED LIABILITY VS. BRENDAN MICHAEL WEE ET AL
Jul 11, 2024 |
CGC23607972
Real Property/Housing Court Law and Motion Calendar for July 11, 2024 line 2. DEFENDANT BRENDAN WEE, ERIKA HILTON MOTION FOR JUDGMENT ON THE PLEADINGS is Off Calendar - Per request of moving party. =(501/HEK) Parties may appear in-person, telephonically or via Zoom (Video - Webinar ID: 160 560 5023; Password: 172849; or Phone Dial in: (669) 254-5252; Webinar ID: 160 560 5023; Password: 172849). Parties who intend to appear at the hearing must give notice to opposing parties and the court promptly, but no later than 4:00 p.m. the court day before the hearing unless the tentative ruling has specified that a hearing is required. Notice of contesting a tentative ruling shall be provided by sending an email to the court to Department501ContestTR@sftc.org with a copy to all other parties stating, without argument, the portion(s) of the tentative ruling that the party contests. A party may not argue at the hearing if the opposing party is not so notified and the opposing party does not appear.
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ELIANE DOS SANTOS VITAL, AN INDIVIDUAL ET AL VS. AMERICAN HONDA MOTOR CO., INC., A CALIFORNIA ET AL
Jul 12, 2024 |
CGC22601133
Matter on the Discovery Calendar for Friday, Jul-12-2024, Line 2, PLAINTIFFS ELIANE DOS SANTOS VITAL, AN INDIVIDUAL, and WIDES VITAL DA SILVA'S, AN INDIVIDUAL, Motion To Compel Further Responses To Plaintiffs Request For Production Of Documents, Set Two. Pro Tem Judge William Lynn, a member of the California State Bar who meets all the requirements set forth in CRC 2.812 to serve as a temporary judge, has been assigned to hear this motion. Prior to the hearing all parties to the motion will be asked to sign a stipulation agreeing that the motion may be heard by the Pro Tem Judge. If all parties to the motion sign the stipulation, the hearing will proceed before the Judge Pro Tem who will decide the motion with the same authority as a Superior Court Judge. If a party appears by telephone, the stipulation may be signed via fax or consent to sign given by email. If not all parties to the motion sign the stipulation, the Pro Tem Judge will hold a hearing on the motion and, based on the papers submitted by the parties and the hearing, issue a report in the nature of a recommendation to the Dept. 302 Judge, who will then decide the motion. If a party does not appear at the hearing, the party will be deemed to have stipulated that the motion will be decided by the Pro Tem Judge with the same authority as a Superior Court Judge. The Pro Tem Judge has issued the following tentative ruling: Parties to appear if the motion remains unresolved. For the 9:00 a.m. Discovery calendar, all attorneys and parties are required to appear remotely. Hearings will be conducted by videoconference using Zoom. To appear at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link (DISCOVERY, DEPARTMENT 302 DAILY AT 9:00 A.M.), or dial the corresponding number and use the meeting ID, and password for Discovery Department 302. Any party who contests a tentative ruling must send an email to williamclynn@gmail.com with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. If the tentative ruling is not contested, the parties are deemed to have stipulated to the Pro Tem hearing the motion and the Pro Tem will sign an order confirming the tentative ruling. The prevailing party is required to prepare a proposed order repeating verbatim the substantive portion of the tentative ruling and must e-mail it to the Judge Pro Tem. The court no longer provides a court reporter in the Discovery Department. Parties may retain their own reporter, who may appear remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/JPT)
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Y.P. VS. WELLS FARGO & COMPANY, ET AL
Jul 10, 2024 |
CGC24613065
Matter on the Law & Motion calendar for Wednesday, July 10, 2024, Line 12. DEFENDANT EARL IGNACIO AND WELLS FARGO BANK, N.A.'s Motion To Compel Arbitration. Defendants Wells Fargo Bank, N.A. and Earl Ignacio's motion to compel arbitration and stay is denied. (The Court's complete tentative ruling has been emailed to the parties.) For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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MARY ELIZABETH LEMASTERS VS. SCHOENBERG FAMILY LAW GROUP P.C. ET AL
Jul 09, 2024 |
CGC22600572
Matter on the Law & Motion Calendar for Tuesday, July 9, 2024, Line 4. PLAINTIFF MARY LEMASTERS' MOTION FOR WITHDRAWAL OF ATTORNEY OF RECORD. Hearing required. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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JOHN P BERNARD VS. BMW OF NORTH AMERICA, LLC ET AL
Jul 10, 2024 |
CGC23608339
Matter on the Law & Motion calendar for Wednesday, July 10, 2024, Line 8. PLAINTIFF JOHN BERNARD's Motion For Award Of Attorneys Fees, Costs, And Expenses. Off calendar for noncompliance with Local Rule 2.7(B) (courtesy copies). The motion may be re-set for a Mon.-Thurs. after July 24, with papers to bear new hearing date. In meantime, counsel shall meet and confer to resolve their differences. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
Preview
1 KEKER, VAN NEST & PETERS LLP JOHN W. KEKER - # 49092 2 jkeker@keker.com DAN JACKSON - # 216091 ELECTRONICALLY 3 djackson@keker.com WARREN A. BRAUNIG - # 243884 F I L E D 4 wbraunig@keker.com Superior Court of California, County of San Francisco NICHOLAS S. GOLDBERG - # 273614 5 ngoldberg@keker.com 04/29/2022 633 Battery Street Clerk of the Court BY: RONNIE OTERO 6 San Francisco, CA 94111-1809 Deputy Clerk Telephone: (415) 391-5400 7 Facsimile: (415) 397-7188 8 MARK J. HATTAM - # 173667 mhattam@sdcwa.org 9 General Counsel SAN DIEGO COUNTY WATER AUTHORITY 10 4677 Overland Avenue San Diego, CA 92123-1233 11 Telephone: (858) 522-6791 Facsimile: (858) 522-6566 12 Attorneys for Petitioner, Plaintiff, and Cross-Defendant EXEMPT FROM FILING FEES 13 SAN DIEGO COUNTY WATER AUTHORITY [GOVERNMENT CODE § 6103] 14 15 SUPERIOR COURT OF THE STATE OF CALIFORNIA 16 IN AND FOR THE COUNTY OF SAN FRANCISCO 17 SAN DIEGO COUNTY WATER Lead Case No. CPF-14-514004 18 AUTHORITY, Consolidated with Case Nos. CPF-16-515282 19 Petitioner, Plaintiff and Cross- & CPF-18-516389 Defendant, 20 SAN DIEGO COUNTY WATER v. AUTHORITY’S PRETRIAL BRIEF 21 METROPOLITAN WATER DISTRICT OF Dept.: 306 22 SOUTHERN CALIFORNIA; ALL Judge: Hon. Anne-Christine Massullo PERSONS INTERESTED IN THE 23 VALIDITY OF THE RATES ADOPTED Date Filed: May 30, 2014 BY THE METROPOLITAN WATER 24 DISTRICT OF SOUTHERN CALIFORNIA Trial Date: May 16–27, 2022 ON APRIL 8, 2014 TO BE EFFECTIVE 25 JANUARY 1, 2015 AND JANUARY 1, 2016; and DOES 1-10, 26 Respondents, Defendants and 27 Cross-Complainant. 28 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 TABLE OF CONTENTS 2 Page 3 I. INTRODUCTION .......................................................................................................... 1 4 II. BACKGROUND ............................................................................................................ 3 5 A. Arizona and the Wheeling Statutes. ..................................................................... 3 6 B. The parties’ initial Exchange Agreement negotiations and Resolution 8520. ........ 5 7 C. Metropolitan’s further admissions and Director Kennedy’s legislatively- mandated findings regarding reasonable credit for offsetting benefits .................. 9 8 D. The 1998 Exchange Agreement. ........................................................................ 11 9 E. The negotiation of the 2003 Exchange Agreement. ............................................ 13 10 F. Relevant terms of the 2003 Exchange Agreement, as already preclusively 11 interpreted. ........................................................................................................ 16 12 III. THE WATER AUTHORITY’S CAUSES OF ACTION ............................................... 20 13 IV. METROPOLITAN’S REMAINING CLAIMS AND DEFENSES ................................ 24 14 V. CONCLUSION............................................................................................................. 25 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i WATER AUTHORITY’S REPLY IN SUPPORT OF ITS MOTIONS FOR SUMMARY ADJUDICATION Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1842587 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 300 DeHaro Street Investors v. Department of Housing & Community 5 Development (2008) 161 Cal.App.4th 1240 ................................................................. passim 6 Carmel Valley Fire Protection Dist. v. State of California (1987) 190 Cal.App.3d 521 ................................................................................................. 23 7 Denio v. City of Huntington Beach 8 (1946) 74 Cal.App.2d 424............................................................................................ passim 9 San Diego County Water Authority v. Metropolitan Water Dist. of Southern California 10 (2017) 12 Cal.App.5th 1124......................................................................................... passim 11 San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (Sept. 21, 2021, A161144) 2021 WL 4272331 ............................................................. passim 12 San Diego County Water Authority v. Metropolitan Water Dist. of Southern California 13 (Mar. 17, 2022, A162168) 2022 WL 806429 ............................................................... passim 14 Stockett v. Association of Cal. Water Agencies Joint Powers Ins. Authority 15 (2004) 34 Cal.4th 441 ......................................................................................................... 12 16 Statutes 17 Wat. Code, § 1810 et. seq. ................................................................................................. passim 18 19 20 21 22 23 24 25 26 27 28 2 WATER AUTHORITY’S REPLY IN SUPPORT OF ITS MOTIONS FOR SUMMARY ADJUDICATION Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1842587 1 I. INTRODUCTION 2 The Water Code defines “fair compensation” for the conveyance of water as the 3 reasonable costs “incurred by the owner of the conveyance system,” minus the “reasonable credit 4 for any offsetting benefits for the use of the conveyance system.” (§ 1811(c), italics added.)1 For 5 more than two decades—from the period leading up to Metropolitan’s adoption, in 1997, of its 6 Resolution 8520 regarding “fair compensation,” until the Court of Appeal’s decision in San 7 Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 8 Cal.App.5th 1124 (SDCWA I) 2)—the parties argued and litigated over the first part of section 9 1811(c)—the scope of Metropolitan’s “conveyance system” and its recoverable costs. Those 10 issues were finally decided in SDCWA I, leaving the second part of section 1811(c) at issue in this 11 trial: the reasonable credit for the offsetting benefits Metropolitan receives because the Water 12 Authority pays to conserve Colorado River water that Metropolitan otherwise would have to pay 13 for, and the Water Authority further pays, under the Exchange Agreement, for the use of the 14 conveyance system to bring that conserved water into Metropolitan’s service area. 15 More precisely, the issue in this trial is the contract damages Metropolitan owes the Water 16 Authority for failing to provide reasonable credit for the offsetting benefits Metropolitan received 17 in the years at issue, 2015 to 2020. It is already established that, to the extent Metropolitan 18 charged the Water Authority more than fair compensation, including by failing to credit offsetting 19 benefits, “there was a breach of the amended exchange agreement providing for future prices 20 ‘equal to the charge or charges set by Metropolitan’s Board of Directors pursuant to applicable 21 law and regulation and generally applicable to the conveyance of water by Metropolitan on behalf 22 of its member agencies.’” (SDCWA I, supra, 12 Cal.App.5th at p. 1154, quoting PTX65 [Tab 23 13], ¶ 5.2.) 3 “The Water Authority is entitled to recover damages” for that breach. (Ibid.) 24 1 Statutory references, unless stated otherwise, are to the Water Code. 2 25 See also Metropolitan Water Dist. of Southern California v. Imperial Irr. Dist. (2000) 80 Cal.App.4th 1403 (MWD); San Diego County Water Authority v. Metropolitan Water Dist. of 26 Southern California (Sept. 21, 2021, A161144 [nonpub. opn.]) 2021 WL 4272331 (SDCWA II); and San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (Mar. 27 17, 2022, A162168 [nonpub. opn.]) 2022 WL 806429 (SDCWA III). 3 The Tab references in citations herein are to the accompanying Appendix, which includes, at 28 Tab 1, excerpts from Metropolitan’s 2014 administrative record, cited (without repeated references to Tab 1) as “AR” followed by the significant digits of the bates number. Tab 1 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 Despite its current protestations to the contrary, Metropolitan agreed to credit the Water 2 Authority for offsetting benefits under the Exchange Agreement. In negotiating the initial 1998 3 Exchange Agreement, Metropolitan agreed to credit offsetting benefits based on the value of the 4 Colorado River water the Water Authority pays to conserve and brings into Metropolitan’s 5 system. And in its Resolution 8520, Metropolitan adopted exactly the same language it proposed 6 in the contract negotiations, reiterating exactly the same promise. (See PTX751 [Tab 19] at p. 7 1914, ¶ 4; AR85586, § 10.) Metropolitan made the same promise again in negotiations before the 8 Director of the Department of Water Resources, David Kennedy, whom the Legislature 9 empowered in 1997 to determine fair compensation when the parties’ negotiations were stuck on 10 the final amount of the credit—not on the existence and measure of offsetting benefits, which 11 were already agreed upon and established. (See former § 1812.5 [Tab 36]; PTX481 [Tab 17].) 12 Director Kennedy set the credit at $220 per acre-foot, splitting the difference between the parties’ 13 valuations of the water at the time. (PTX481 [Tab 17].) That credit “absolutely was part and 14 parcel” of the 1998 Exchange Agreement. (Stapleton Dep. [Tab 27] at p. 42:14-25.) 15 Metropolitan also knew when it executed the operative 2003 Exchange Agreement that— 16 after five years in which the Water Authority hoped the parties would settle their price disputes, 17 during which the Water Authority agreed not to litigate those disputes—the Water Authority 18 would seek to enforce “applicable law and regulation,” including the required credit for offsetting 19 benefits. (PTX65 [Tab 13], ¶ 5.2.) As Metropolitan contemporaneously admitted: 20 It is clear where SDCWA is headed when they write that the ‘. . . lawful wheeling rate [is] (generally equivalent to the continuation of the exchange rate identified in 21 the [1998] Exchange Agreement) . . . .’ This implies they believe that any rate different than the favorable rate they have received is not lawful and they are already 22 arguing their case in their proposal. 23 (PTX398 [Tab 16].) The “lawful wheeling rate” in the 1998 Exchange Agreement included 24 reasonable credit for offsetting benefits. The 2003 Exchange Agreement, by incorporating 25 applicable law and regulation, likewise requires such credit. Metropolitan’s assertions that it was 26 unaware of that requirement are counterfactual and disingenuous. (See, e.g., ibid.) 27 references are provided for the remaining documents in the Appendix, including trial exhibits, 28 transcript excerpts, and other materials, such as the legislative history of the Wheeling Statutes, of which this Court previously took judicial notice. (Prior Trial Tr. [Tab 26] at pp. 774:2–775:5.) 2 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 Despite knowing full well that applicable law and regulation require credit for offsetting 2 benefits, and promising to provide such credit based on the agreed-upon method for calculating it, 3 Metropolitan set charges that omitted any such credit. The Water Authority paid those charges, in 4 full and under protest, from 2015 to 2020. Contrary to Metropolitan’s recent assertions—after 5 litigating these issues since 1997—that it must be given the opportunity to determine the 6 reasonable credit for offsetting benefits, Metropolitan already set the credit at zero. That was a 7 breach of contract, which entitles the Water Authority to damages to be proved at trial. “This is 8 the very essence of what a contract is all about.” (300 DeHaro Street Investors v. Department of 9 Housing & Community Development (2008) 161 Cal.App.4th 1240, 1256 (300 DeHaro).) 10 Metropolitan’s contrary arguments and dilatory procedures were already rejected in the 11 prior litigation over Metropolitan’s erroneous determination that “fair compensation” could 12 include its Water Stewardship Rate (WSR). The result of this Court’s ruling, as affirmed on 13 appeal, that Metropolitan was wrong about “fair compensation” was not a remand to 14 Metropolitan to redetermine “fair compensation.” The result was that the Water Authority was 15 “entitled to recover damages” (SDCWA I, supra, 12 Cal.App.5th at p. 1154), which this Court 16 awarded in a final judgment that was affirmed in SDCWA II, supra, 2021 WL 4272331 at page 17 *9. The Court should follow the same well-established procedure in this trial, and not begin—as 18 Metropolitan proposes—another decade or more of costly litigation. 19 Thus, as the Water Authority will prove at trial, the Court should enter judgment in the 20 Water Authority’s favor on its causes of action for breach of contract, as well as on the other 21 causes of action at issue, as discussed below. 22 II. BACKGROUND 23 A. Arizona and the Wheeling Statutes 24 In Arizona v. California (1963) 373 U.S. 546, 550–562 (Arizona), the Supreme Court 25 limited California’s basic allotment of Colorado River water to 4.4 million acre-feet annually, 26 based on the federal legislation that authorized the Hoover Dam and the All-American Canal. 27 That legislation went into effect in 1929 after California accepted the 4.4 million acre-feet 28 limitation, as the legislation required. Two years later, Metropolitan, Imperial Irrigation District 3 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 (IID), Palo Verde Irrigation District, Coachella Valley Water District (Coachella), the City of Los 2 Angeles, and the City and County of San Diego entered into the “Seven-Party Agreement,” 3 apportioning California’s basic allotment and much more among themselves based on a priority 4 system. (Quantification Settlement Agreement Cases (2011) 201 Cal.App.4th 758, 783 (QSA).)4 5 All but 550,000 of the 4.4 million acre-feet was apportioned to the first three priorities, 6 which included IID but not Metropolitan, whose highest priority entitlement is fourth. (QSA, 7 supra, 201 Cal.App.4th at p. 785.) Notably, the Seven-Party Agreement did not quantify how 8 much water would go to each of the parties with the first three priorities, which “left the potential 9 for future conflict between the parties.” (Ibid.) “Even more conducive to future conflict” was the 10 fact that, if and when the 4.4 million acre-feet limitation were actually enforced, Metropolitan 11 would only receive the 550,000 acre-feet left over after the higher-priority parties took their share, 12 leaving Metropolitan’s Colorado River Aqueduct (CRA) “over half empty.” (Ibid.) 13 For decades after Arizona was decided, California was still able to take more than its 14 allotment because Arizona and Nevada were not yet using theirs, and the Colorado River was 15 therefore in “surplus.” Metropolitan, moreover, paid almost nothing for that additional surplus 16 water: 662,000 acre-feet per year, on top of its base of 550,000 acre-feet per year, nearly filling its 17 CRA, “which has an approximate capacity of more than 1.2 million acre-feet per year.” (QSA, 18 supra, 201 Cal.App.4th at p. 785 & fn. 9; see also, e.g., PTX30 [Tab 7] at p. 14981.) By 1986, 19 however, California’s “single most pressing water problem” was how to replace Metropolitan’s 20 “former Colorado River supplies now that Arizona has begun to claim its full share.” (Leg. Hist. 21 [Tab 35] at p. 109.) One solution was for the Water Authority to “purchase conserved waters” 22 from IID. (Id. at p. 151.) San Diego County, in particular, supported the enactment of the 23 Wheeling Statutes in 1986 because they would require Metropolitan to “wheel”—i.e., convey— 24 that conserved water for no more than fair compensation. (See ibid.) 25 4 The Water Authority is distinct from the City and County of San Diego, which is why the Water 26 Authority refers to itself as such. Nevertheless, many documents refer to the Water Authority as “San Diego,” or as “SDCWA” or “SD.” Metropolitan is alternatively “MWD” or “Met.” Rather 27 than replace those terms when quoting such documents, this brief leaves the parties’ various monikers in place. Note also that the original allocation of water to the City and County of San 28 Diego under the Seven-Party Agreement went to Metropolitan when the Water Authority became a Metropolitan member agency. (QSA, supra, 201 Cal.App.4th at p. 785, fn. 9.) 4 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 As already discussed, the Wheeling Statutes define “fair compensation” to include 2 “reasonable credit for any offsetting benefits for the use of the conveyance system.” (§ 1811(c).) 3 The credit for offsetting benefits must be “consistent with the requirements of law to facilitate the 4 voluntary sale, lease, or exchange of water.” (§ 1813.) These are crucial tools for avoiding water 5 shortages and “powerful incentive[s] for conservation: What you save you can sell. Trading 6 water can also be far cheaper and less environmentally damaging than building new water 7 projects.” (Leg. Hist. [Tab 35] at p. 107.) 8 B. The parties’ initial Exchange Agreement negotiations and Resolution 8520 9 After a devastating drought from 1987 to 1992, the Water Authority began negotiating an 10 agreement with IID for what would become “the largest agricultural-to-urban water transfer in 11 United States history.” (QSA, supra, 201 Cal.App.4th at p. 788.) In response, Metropolitan 12 began to develop a wheeling policy. Far from “act[ing] in a reasonable manner consistent with 13 the requirements of law to facilitate the voluntary sale, lease, or exchange of water” (§ 1813), 14 Metropolitan sought to “keep tight control of the system while assigning all system and financial 15 risk to potential wheeling parties,” as Metropolitan’s own experts acknowledged. (AR29445.) 16 On November 13, 1995, the Water Authority urged Metropolitan to comply with the 17 Wheeling Statutes and Metropolitan’s own policy of paying member agencies “up to $250 per 18 acre foot” at the time—now much more—“to reduce their MWD purchases.” (AR8238–39.) 19 Section 1811(c) of the water code provides that the transferor is to receive a “reasonable credit for any offsetting benefit for the use of the conveyance system.” 20 Causing MWD’s demands to be reduced provides a definite benefit, such as more reliable supplies and lower costs for other agencies. MWD will be less likely to 21 incur shortages and therefore will maintain its revenues. The burden on MWD to expand its supply base and [Capital Improvement Program (CIP)] will be eased. 22 Pressure to solve the Bay Delta problem within a short time frame will also be reduced. . . . [S]olutions can be developed that are truly win-win for all parties. 23 (Id. at p. 8241.) Metropolitan’s own experts agreed, a few days later, criticizing Metropolitan for 24 failing to embrace the “win - win” opportunity of the Water Authority providing “true system 25 operations benefits” to Metropolitan “in return for affordable wheeling.” (AR29455.) 26 In April 1996, the Water Authority proposed an Exchange Agreement whereby it would 27 deliver conserved IID water to Metropolitan in exchange for Metropolitan’s “delivery of an 28 equivalent amount.” (PTX20 [Tab 2] at p. 53837.) The Water Authority refuted Metropolitan’s 5 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 objections based on purported lack of conveyance capacity, demonstrating that Metropolitan’s 2 assumption that “its Colorado Aqueduct will be full for the next 25 years” was wrong because 3 Arizona’s claims to Colorado River water “are a factor that MWD’s estimates have not taken into 4 account. Furthermore, the long-run prospects for Colorado River demands are such that MWD 5 must anticipate being deprived of current and anticipated surpluses.” (Id. at p. 53844.) The 6 Water Authority’s “exchange proposal would provide significant immediate and long-term 7 benefits to Metropolitan and its member agencies,” particularly including “avoided supply 8 costs”—especially if, as the Water Authority presciently warned, “Colorado River supply 9 shortages could develop between 2000 and 2025.” (Id. at p. 53846 & fn. 1.) 10 In October 1996, Metropolitan proposed a set of “wheeling principles,” to which the 11 Water Authority objected. (AR8598–8605.) The Water Authority pointed out, among other 12 things, that Metropolitan proposed to include State Water Project (SWP) costs in its wheeling 13 charges. But if that were to be allowed (as SDCWA I later found regarding the specific SWP 14 costs at issue there), then conveyance charges “should also reflect an offsetting value for avoided 15 MWD supply costs which wheeled water replaces.” (Id. at pp. 8601, 8603.) 16 In November 1996, Metropolitan’s Board of Directors authorized a “Framework of Terms 17 as a basis upon which Metropolitan would proceed with discussions” about the proposed 18 Exchange Agreement. (PTX751 [Tab 19] at p. 1911.) “The primary issues of discussion,” 19 according to Metropolitan’s own Executive Summary, included “the regional benefits of the 20 proposed transfer”—i.e., offsetting benefits. (Id. at p. 1912.) Notably, although the proposal was 21 for an Exchange Agreement, Metropolitan itself said that “wheeling principles” would apply. (Id. 22 at p. 1913.) Even more notably, Metropolitan’s “Framework” provided: 23 Regional benefits. The regional supply benefits of the transfer will be recognized in the form of credits toward payment of Metropolitan’s wheeling rate or other 24 commensurate financial mechanism. The regional benefits will be calculated in the same manner as such benefits were calculated for use in the Local Projects and 25 Groundwater Recovery Program. 26 (Id. at p. 1914, ¶ 4.) In response, the Water Authority noted the parties’ agreement that the 27 transfer “would benefit MWD’s service area” and “help California to limit its consumption of 28 Colorado River water within its entitlement.” (AR8653.) The parties would continue to disagree 6 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 about other issues (ibid.) but the existence and measure of offsetting benefits, in terms of 2 Metropolitan’s avoided costs, were established. (See, e.g., ibid.; AR8881 [“reasonable credit for 3 any offsetting benefits” required by statute and agreed upon by Metropolitan]; PTX750 [Tab 18] 4 at p. 482 [Metropolitan analysis of “the regional benefits of the SDCWA transfer”].) 5 On January 14, 1997, Metropolitan adopted its Resolution 8520. (AR85583–626.) 6 Resolution 8520 acknowledges the statutory requirement that “fair compensation” must include 7 “reasonable credit for any benefits for the use of its conveyance system.” (Id. at p. 85584.) 8 Accordingly, Metropolitan resolved: “That to the extent a wheeling transaction enables 9 Metropolitan to avoid costs, such avoidable costs should not be included in the wheeling rate.” 10 (Id. at p. 85586, § 6.) “The wheeling rates shall be reduced to reflect the regional water supply 11 benefits provided to Metropolitan’s service area, if any, on a case-by-case basis in response to a 12 particular wheeling transaction. The regional benefits, if any, shall be calculated by Metropolitan 13 in the same manner as such benefits are calculated for use in the Local Projects and 14 Groundwater Recovery Program.” (Id., § 10, emphasis added.) 5 15 The sentence italicized above in section 10 of Resolution 8520 comes from the parties’ 16 initial Exchange Agreement negotiations (PTX751 [Tab 19] at p. 1914, ¶ 4), directly contrary to 17 Metropolitan’s misrepresentation in its briefing on summary adjudication that there “is no 18 evidence that Resolution 8520 is part of the Exchange Agreement or reflects the parties’ 19 intentions when negotiating the Exchange Agreement.” (Met Reply re MSA at p. 8.) 20 The parties’ negotiations also show what crediting offsetting benefits “in the same manner 21 5 22 Metropolitan sued to validate its Resolution 8520, and the Water Authority and IID opposed that validation action. The trial court ruled in favor of the Water Authority and IID as a matter of 23 law, but the Court of Appeal reversed and remanded for the trial court to make factual findings about, inter alia, whether Metropolitan acted “‘in a reasonable manner consistent with the 24 requirements of law to facilitate the voluntary sale, lease, or exchange of water.’” (MWD, supra, 80 Cal.App.4th at p. 1436, quoting § 1813, italics in opinion.) Metropolitan then chose to dismiss 25 its validation action, and the parties later put litigation on hold as part of the 2003 Exchange Agreement. Litigation resumed in the prior cases in this Court before the Honorable Judge Curtis 26 E. A. Karnow. Metropolitan represented to this Court that Resolution 8520 constituted Metropolitan’s “written findings” regarding the “determinations required by” the Wheeling 27 Statutes. (§ 1813; Met Br. [Tab 32] at p. 19.) Although Metropolitan purported to rescind Resolution 8520 in August 2020, it cannot evade its admissions in its own Resolution 8520, 28 especially not after defending it twice on appeal (see MWD, supra, 80 Cal.App.4th at p. 1418; SDCWA I, supra, 12 Cal.App.5th at p. 1148), and incorporating it into the Exchange Agreement. 7 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 as such benefits are calculated for use in the Local Projects and Groundwater Recovery Program” 2 means. (Res. 8520, AR85586, § 10; PTX751 [Tab 19] at p. 1914, ¶ 4.) When Metropolitan 3 adopted its “Framework” for negotiating the Exchange Agreement, and when it adopted 4 Resolution 8520, benefits under both the Local Projects Program and the Groundwater Recovery 5 Program were “based on the reduction of Metropolitan’s costs to supply” water. (PTX755 [Tab 6 23] at p. 296173.) The amount of such credits “based on Metropolitan’s avoided costs” was to be 7 “reviewed and adjusted periodically.” (Ibid.) At the time, Metropolitan estimated the cost of 8 recovering contaminated groundwater to be $250 per acre-foot. (Ibid.) Likewise, in its Integrated 9 Resources Plan (IRP), Metropolitan estimated the cost of water transfers, as of 1996, to be “about 10 $250 per acre-foot for transfer amounts under 450,000 acre-feet.” (AR7832.) 11 In February 1997, Metropolitan published a brochure entitled “Wheeling: Gearing for the 12 future of water marketing.” Metropolitan acknowledged that the significant regional benefits of 13 long-term wheeling arrangements, specifically including “the proposed agreement between the 14 San Diego County Water Authority and the Imperial Irrigation District,” should be “accounted for 15 in long-term wheeling contracts.” (PTX752 [Tab 20] at p. 1572.) Explaining its “framework” for 16 discussions with the Water Authority “regarding the development of a long-term transfer and 17 water service arrangement,” Metropolitan reiterated that it “would recognize the regional benefits 18 associated with a long-term supply of firm water for Southern California as a credit against the 19 costs of this water. This credit would be calculated utilizing methodology that is consistent with 20 that used to determine credits for Metropolitans other incentives including payments for recycled 21 water and storage operations.” (Id. at p. 1577, emphasis added.) 22 The following month, Metropolitan proposed “wheeling (‘transportation’) services” under 23 an Exchange Agreement based on its “wheeling principles” and “Framework.” (PTX24 [Tab 3].) 24 Specifically, Metropolitan proposed: “Regional Benefit. Between 50-75% of the Market Value of 25 Water Transfers would be paid to SDCWA in recognition of the reduction in costs the remaining 26 member agencies would realize as a result of the SDCWA/IID transfer. These payments would 27 begin in 2010.” (Id., ¶ 7, bold in original, italics added.) Thus, Metropolitan’s own calculation of 28 regional benefits “in the same manner as such benefits were calculated for use in the Local 8 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 Projects and Groundwater Recovery Program”—as required by both the “Framework” referenced 2 in the proposal itself and the identical language in Resolution 8520—was based on the market 3 value of the transfer water. (See ibid.; PTX751 [Tab 19] at p. 1914, ¶ 4; AR85586, § 10.) 4 Metropolitan’s calculations put the market value at between $200 and $300 per acre-foot at the 5 time (PTX24 [Tab3] at p. 264560), consistent with its estimate that the cost of “these types of 6 transfers” was “about $250 per acre-foot” in 1996. (AR7832.) 7 C. Metropolitan’s further admissions and Director Kennedy’s legislatively-mandated findings regarding reasonable credit for offsetting benefits 8 Despite assistance in their negotiations from the State’s Director of Water Resources, 9 David Kennedy, the parties still had not reached agreement in October 1997. Emergency 10 legislation was enacted because the water transfer “is a matter of statewide interest in that it 11 addresses a significant need for water in the southern state through the conservation of water now 12 being consumed there.” (Former § 1812.5(a)(1) & (4) [Tab 36].) Further, the “Secretary of the 13 Interior has strongly urged California to develop a plan to enable it to live within its basic 14 apportionment of 4.4 million acre-feet from the Colorado River.” (Id., (a)(2).) And it “is of vital 15 state interest that every effort be made to ensure that the Colorado River Aqueduct continues to 16 operate at its full capacity at fair and reasonable terms in order to minimize statewide disruptions 17 from diminishing Colorado River supplies.” (Id., (a)(3).) Accordingly, Director Kennedy was 18 empowered to “make those determinations prescribed by Section 1812” (id., (c)(2)), including 19 “fair compensation” and “reasonable credit for any offsetting benefits.” (§§ 1812(b), 1811(c).) If 20 either party objected to his findings “prescribed by Section 1812,” the dispute was to be resolved 21 by formal mediation. (Former § 1812.5(c)(3) [Tab 36].) 22 In subsequent negotiations involving Director Kennedy, the Water Authority pointed out 23 that Metropolitan’s own Senior Resources Specialist, Shane Chapman, had calculated that 24 “without a plan for Colorado River supplies Metropolitan may have to raise its water rate by as 25 much as $65 per acre-foot in order to maintain a full Colorado River Aqueduct.” (PTX25 [Tab 26 4].) Chapman included a handwritten note on his memorandum, cautioning: “let’s not put 27 ourselves in a position where SDCWA can say, ‘See [what] the SDCWA/IID Transfer is 28 worth. . . .” (Ibid.) But that is exactly what the Water Authority did, and rightly so, using 9 THE WATER AUTHORITY’S PRETRIAL BRIEF Lead Case No. CPF-14-514004; Consolidated with CPF-16-515282 & CPF-18-516389 1851142 1 Metropolitan’s own calculations to show that the offsetting benefits by the tenth year of the 2 transfer would be $100 million per year. (PTX26 [Tab 5] at p. 264779.) 3 Metropolitan did not deny the substantial offsetting benefits of the transfer. Nor did it 4 deny that those benefits should be calculated based on Metropolitan’s avoided supply costs. On 5 the contrary, those were the exact parameters of the negotiations before Director Kennedy, just as 6 they were central to Metropolitan’s own interpretation of its “Framework” and Resolution 8520 in 7 March 1997. (See PTX24 [Tab 3].) Likewise, in December 1997, Metropolitan’s negotiators 8 proposed to “offer San Diego a substantial discount below Met’s normal ‘as available’ water 9 transportation rate because of the benefits to the region that are likely to accrue from the San 10 Diego/IID transfer.” (PTX26 [Tab 5] at p. 264786.) The so-called “discount” rate was “less than 11 one half of Met’s normal wheeling rate for ‘as available’ transfers.” (Ibid.) The term “discount” 12 is misleading because the law requires credit for offsetting benefits. In any event, the proposal 13 was to “offer SDCWA a discount of more than 50% from MWD’s average cost wheeling rate. A 14 rate in that range would leave MWD in substantially the same economic position as if it were to 15 acquire and store the IID water.” (Id. at p. 264791, emphasis added.) 16 Director Kennedy issued his findings on January 5, 1998. (PTX481 [Tab 17].) He found 17 that a wheeling rate of $80 per acre-foot was a fair “compromise between various rates advocated 18 by MWD an