Exhibit,Appendix: SAN DIEGO COUNTY WATER AUTHORITY VS. METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA et al

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KEKER & VAN NEST LLP
JOHN W. KEKER - #49092
jkeker@kvn.com

DANIEL PURCELL - # 191424
dpurcell@kvn.com

DAN JACKSON - # 216091
djackson@kvn.com

WARREN A. BRAUNIG - # 243884
wbraunig@kvn.com

633 Battery Street

San Francisco, CA 94111-1809
Telephone: 415 391 5400
Facsimile: 415 397 7188

Attorneys for Petitioner and Plaintiff

SAN DIEGO COUNTY WATER AUTHORITY

ELECTRONICALLY
FILED

Supertor Court of Caiffornia,
County of San Francisco
10/23/2015

Clerk of the Court
BY-:ALISON AGBAY

Deputy Clerk

EXEMPT FROM FILING FEES
[GOVERNMENT CODE § 6103]

SUPERIOR COURT OF THE STATE OF CALIFORNIA

IN AND FOR THE COUNTY OF SAN FRANCISCO

SAN DIEGO COUNTY WATER
AUTHORITY,

Petitioner and Plaintiff,
v.

METROPOLITAN WATER DISTRICT OF
SOUTHERN CALIFORNIA; ALL
PERSONS INTERESTED IN THE
VALIDITY OF THE RATES ADOPTED
BY THE METROPOLITAN WATER
DISTRICT OF SOUTHERN CALIFORNIA
ON APRIL 13, 2010 TO BE EFFECTIVE
JANUARY 2011; and DOES 1-10,

Respondents and Defendants.

Case No. CPF-10-510830
Case No. CPF-12-512466

SAN DIEGO’S STATEMENT RE:
JUDGMENT AND CASE MANAGEMENT
AND EXHIBITS A-E

Date: October 30, 2015

Time: 2:00 p.m.

Dept.: 304

Judge: Hon. Curtis E.A. Karnow

Date Filed: June 11, 2010
June 8, 2012

Trial Date: March 30, 2015

SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
Case No, CPF-10-510830 & CPF-12-512466

993515aI Dw ss

Il.

Ill.

TABLE OF CONTENTS

Page

SAN DIEGO’S PROPOSED WRIT OF MANDATE IS PROPER .........:essssesesseseseereseeeenes 2
THE COURT SHOULD ENTER SAN DIEGO’S PROPOSED JUDGMENT .............0004 4
A. Judgment should be entered on causes of action, not on individual legal

theories (Para. 1)... cecseseesesesseseseeseseseensstessseeenesesssananensaneeeaes
B. The Court’s judgment should protect San Diego’s security deposit (Para.

5). ssssssssasssssevssevvevesesesesesesssnsssasasesevessseseseeseesssasssssnsnsssasnssnevseseessssesesssssssssssnsssssenevees 6
Cc. The judgment should prohibit Met from collecting any portion of the

judgment, or interest on the judgment, from San Diego (Para. 6). ........seeeeeeeeee 10
Dz. The Court should maintain continuing jurisdiction (Para. 7). .

The judgment should declare San Diego the prevailing party under the

Contract (Para. 8). ...cccccsessesssesssesesessseseseseseseseessesesesesesesesnsesesnseseensnsnseensnensteneeeneeeee 14
TIMING OF THE 2014 CASE wu... ccecsecseseeseseseeseseessenevencsesssanevencsesnsansvenceesesansvenenesesaeesenees 14

i

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SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
Case No, CPF-10-510830 & CPF-12-512466aI Dw ss

TABLE OF AUTHORITIES

Page(s)
State Cases
49er Chevrolet v. New Motor Vehicle Bd.
84 Cal. App. 3d 84 (1978) ...ceseeeceecseessessssssessesssessuessessssesussseesuessnesssessesssessesssesssessesneenneaneesnesseces 3

California Ass'n for Health Servs. v. State Dep’t of Health Care Servs.
204 Cal. App. 4th 676 (2012) .

California Hosp. Ass'n v. Maxwell-Jolly
88 Cal. App. 4th 559 (2010) ....ceceescecsesesssessesssesssessesssesuessecssecssessnesssssesansssessnessnessessneesseaseees 2

California Sch. Boards Ass'n v. State Bd. of Educ.
86 Cal. App. 4th 1298 (2010) oo... cecceccsecessesseessesssesseesseessessecsscssessscsssssnessnessesssessnessessneesneeseees 2

Carmel Valley Fire Protection Dist. v. State of California
90 Cal. App. 3d 521 (1987) ..seesceessessesssecsessesssessessesssessssssesssessnesssssseesusesuesuessuessesseesseesesenees 12

City of Carmel-By-The-Sea v. Bd. of Supervisors
37 Cal. App. 3d 964 (1982) ....eesseessessesseecssessecssessesssssesssessessuesssessssssessuessuesuessuessessresseesesenees 13

Common Cause v. Bd. of Supervisors
49 Cal. 3d 432 (1989)...

Conlan v. Bonta
02 Cal. App. 4th 745 (2002) w..ccccccecesescsescsesesesesceescecscscscecscscscscscscscecscecscecscecscesscasseeceeeseeese 3

Crouse v. Brobeck, Phleger & Harrison
67 Cal. App. 4th 1509 (1998) ceossscssecsssssssssssssssssssssssssessssesssiessisestsessiessssnesssessisnessese 5

Graham v. State Bd. of Control
33 Cal. App. 4th 253 (1995) eccccscssssscseesssesessssscestestsesesnssostiesienstuetssstesssetsestieetetee 3

Hebbring v. Hebbring
207 Cal. App. 3d 1260 (1989) sescssssssssssssessssessssssssuessssssissssnstsiasssuessiusstiusssissienee LI

Heckmann vy. Ahmanson
168 Cal. App. 3d 119 (1985) voccccecesessesneseessesteseestesessessesseesesesesesssesssessmenesaeenseseseaeaes &

Hsu v. Abbara
9 Cal. 4th 863 (1995) ..ceceecscececseseseesesesecsesesecseseseeseseesesesecaesesseseseceeteseeeesesaeseseeatsesaseeseeaeeeeseeee L4

In re Marriage of Stitt
147 Cal. App. 3d 579 (1983) voces cescsescsescsesesesesescsescecscscscsescsesesessscsvecssensessseesseesseasseeeaee LZ

Kaufman y. Diskeeper Corp.
229 Cal. App. 4th 1 (2014) occccccceecesessesesesseseseesessnsseesessessessessesssussesssanssesseseeeneeseeneenees 4

Kurwa v. Kislinger
57 Cal. 4th 1097 (2013) v.cceccecececcesessssessessessessessessesesneseesssanssessessessesessssssesseseesseesessessesnessesscaes &

ii

SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
Case No, CPF-10-510830 & CPF-12-512466
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Mycogen Corp. v. Monsanto Co.
28 Cal. 4th 888 (2002) o...esceeccecceessessscssessnesssssessnessessecsuecsucssecssessvesssssesansssessnessnesseessecsuesseess 4,5

Palmco v. Super. Ct.
16 Cal. App. 4th 221 (1993) .....ccesceescsesssessnsssesssessuessesssecsuesseessessnessvsssessnesseessessneese 9, 10, 12, 13

Panos v. Great W. Packing Co.
21 Cal. 2d 636 (1943) weccsecsesssessesssessessnessesssessnessecssecsuessecssessscsssssessnsssssuessnessecsuecsucssecenesaneesesene 5

Pearson v. Juarez
78 Cal. App. 122 (1926)...

People v. iMERGENT, Inc.
170 Cal. App. 4th 333 (2009) ......ssescesssssessessesssesssesseessecssesscssecssessvcssessnessnsssessnesseasesaneeseessee 10

People v. Mobile Magic Sales, Inc.
96 Cal. App. 3d 1 (1979) .esceeccesssecssessesseessesssessvessessnessnsssessuecsuessecsuecsuessecssecssceavcssesanessessnesseeese 10

San Luis Coastal Unified Sch. Dist. v. City of Morro Bay
81 Cal. App. 4th 1044 (2000) .o...eeeececeessecssessessessnessnsssessnessnessecsnecsuessecssecsnessvessesanessesaneesneese 13

Slater v. Blackwood
15 Cal. 3d 791 (1975) .oeeseesssessesssessessscssesssessnsssessuessuessecsuecsucssecssecssessvsssessnsssessuessneesesaseesuesseees 4,5

Steinmeyer v. Warner Cons. Corp.
42 Cal. App. 3d 515 (1974) ..

West Coast Constr. Co. v. Oceano Sanitary Dist.
17 Cal. App. 3d 693 (1971) .oeesecesesessesceseeseesesseesessesessessesuessesesstesessesseesessessessesesteseesmesesseeneees D

Wilson v. City of Laguna Beach
6 Cal. App. 4th 543 (1992) oo. cceceeeseseeessseesesessceeseesesesecseseseesesecsesesecseseciesesecaesesaeeeeneeeseeneees 13

Wulfjen v. Dolton
24 Cal. 2d 891 (1944) vec ccscscsescsescscscscscscscscscscscscscscscscacscacscscscacacscacacacacacacacacacssacseasecaceease 5

State Statutes

Code Civ. Proc. § 430.50(a)...cccecseseseesesesessesesessesesesesenesesuesesusnesesresesesueaeseaeseeneaearensansneaeseeneeeeeeseee 4
Code Civ. Proc. § 437C(f) .ceececsesesssseesesesesesessseesesesecsesessesesecsesesecsesecsesesecaeseciesesecaesecucaeeueaeseeuseeseeeee® 4
Code Civ. Proc. § 526( a)... eceeseseesesesesseseseseseseesesessesesesaesesecieseeassesecaesesecaesecaeseseeesesisseeeseeseeeseeeeeeeee &
Code Civ. Proc. § 577 ceccecsessssesessssesestesesesessesesenesesuesesusueaesvesesaneaesesssesucaeseeneaesueneseensaesueneseeneeeeeeeees 4
Code Civ. Proc. § 870( a)... eceecesecseseseeseseseseeeseesesesecseseaesesecseseseesesecaesesecaesecaesesecatsesaeeeseeeeseseeeeeeeeeee O
Code Civ. Proc. § 1095 ..ceeececcesessesesessesesesessesesnesesessesesuenesessesesussesesuesesnsneaesueaeseaneaeanensansusaeseeaseeeeeaeee 2
Civ. Code § 1717 cecceccssesssseseesesesesseseeeseseseseeeescseseseceeseeaesesecaeseseeaesecaesesesaesecaeseseeaesesaeeeseeatseceeeeeeeee 14
Gov't Code § 66013 oie ceceeceeceeceeeeeceeeeeeeneceneneneeeneeeneeeeeeeneneeeneeeneeeeeneeeseeeeeeeteeeeeeeeeeeneeeeeeeee O

iti

SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
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State Rules

Cal. Rule of Court 3.1700... ceccscecsecseseeeseeseeseesesssssessssnssecscsssseesessessssssssssnssessecseesneseesesseesseessneeneae 14
Cal. Rule of Court 3.1702 ....ccccsececsesseesessseesesseesesssssessssssecsecsnsseesessessssssssesnssesseessesneseesesseessensanseneas 14
Treatises

8 Witkin, Cal. Proc. Sth (2008) Writs, § 204... .ccceceseeseseseceseseseseseseseseseseseseseseseseseseseseseseseseaeseneas 2

CEB, Cal. Civil Writ Practice, § 9.41 (4th ed. 2015)...

Cal. Practice Guide, Civ. App. & Writs § 7:76... ccsssssesessssessesessesssesresesnsssansnenesnensansnensanssasaneneaees 9

Moore & Thomas, Cal. Civ. Prac. Procedure § 31:32 v..cceccsesssesssssesereseserereseresenesereseseseseseseseseseseaes 2

iv

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SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
Case No, CPF-10-510830 & CPF-12-512466aI Dw ss

The Court’s August 28, 2015 Scheduling Order instructed the parties to “confer and
arrange with the clerk of this Department a mutually convenient date to do these things: hear San
Diego’s motion for prejudgment interest (assuming the parties disagree on the calculation), fix
language for the judgments, and discuss next steps including the parties’ preferred approach to the
related cases which address post-2012 rate settings.” Aug. 28, 2015 Order. The parties met and
conferred telephonically about those issues on September 3, 2015, and submitted to the Court
draft forms of judgments and preliminary statements concerning the judgment. At the October 8,
2015 hearing on San Diego’s motion for prejudgment interest, the Court instructed the parties to
meet and confer further about the form of judgment, and next steps for the 2014 case challenging
Met’s 2015 and 2016 rates. The parties met and conferred again telephonically, and exchanged
further drafts of the form of judgment and proposed writ of mandate. While the parties were able
to resolve some issues, five significant issues remain:

1) Whether a writ of mandate should issue ordering Met to set future rates in a manner

consistent with the Court’s Statements of Decision and judgment;

2) Whether final judgment should be entered on each cause of action, or, as Met argues,

on each individual legal theory in the case (San Diego’s [Proposed] Judgment § 1);

3) Whether the judgment should prohibit Met from spending or using the money in San

Diego’s Section 12.4(c) security deposit (4 5);
4) Whether the judgment should prohibit Met from recovering any portion of the

judgment and post-judgment interest from San Diego (| 6); and

5) Whether the court should retain continuing jurisdiction (§ 7).
Met has also objected to standard language, certainly correct in this case, that San Diego is the
“prevailing party” on the contract claim, and entitled to make appropriate requests for fees and
costs. Finally, the parties disagree about what should happen next with respect to the 2014 case.
San Diego is submitting herewith its [Proposed] Judgment and [Proposed] Peremptory
Writ of Mandate, both of which also will be submitted separately to the Court in MS Word
format. San Diego respectfully requests that the Court enter San Diego’s proposed judgment and

peremptory writ of mandate.
1

SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
Case No, CPF-10-510830 & CPF-12-512466
993515aI Dw ss

I. SAN DIEGO’S PROPOSED WRIT OF MANDATE IS PROPER

Having prevailed on its First Cause of Action for writ of mandate, San Diego is entitled,
as a matter of law, to the issuance of a peremptory writ of mandate. Under Code of Civil
Procedure § 1095, when judgment in a writ of mandate action is “given for the applicant, the
applicant may recover the damages which the applicant has sustained . . . and a peremptory
mandate must also be awarded without delay.” Code Civ. Proc. § 1095 (emphasis added).
Accordingly, a “petitioner who receives a favorable judgment receives a peremptory writ.”

8 Witkin, Cal. Proc. 5th (2008) Writs, § 204, p. 1107; see CEB, Cal. Civil Writ Practice, § 9.41
(4th ed. 2015) (“When the petitioner prevails in a mandate or prohibition proceeding, the superior
court will order the issuance of the peremptory writ.”); Moore & Thomas, Cal. Civ. Prac.
Procedure § 31:32 (“If the court finds for the petitioner, the court will issue a judgment or
decision granting the peremptory writ.”).

All San Diego seeks here is a writ directing Met to set its future rates and charges “in a
manner consistent with the Court’s Statements of Decision and judgment.” Proposed Peremptory
Writ of Mandate at 1. It is black-letter law that a writ of mandate may compel an agency “both to
exercise [its] discretion (if [it] is required by law to do so) and to exercise it under a proper
interpretation of applicable law.” Common Cause v. Bd. of Supervisors, 49 Cal. 3d 432, 442
(1989); accord California Ass'n for Health Servs. v. State Dep’t of Health Care Servs., 204 Cal.
App. 4th 676, 683 (2012); California Hosp. Ass’n v. Maxwell-Jolly, 188 Cal. App. 4th 559, 571
(2010); California Sch. Boards Ass'n v. State Bd. of Educ., 186 Cal. App. 4th 1298, 1327 (2010).
This is all San Diego is asking the Court to do here.

The Court of Appeal’s decision in California Association for Health Services is
particularly instructive. In that case, an association of home health care providers filed a
mandamus action challenging the Department of Health Care Services’ rate review as
inconsistent with federal and state law. 204 Cal. App. 4th at 682. The trial court held that the
Department’s rate review failed to comply with applicable law and issued a writ of mandate
directing the Department to “perform a further rate review which is consistent with . . . the

Court’s September 25, 2009 Minute Order.” /d. Just like Met here, the Department argued that
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SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
Case No, CPF-10-510830 & CPF-12-512466
993515aI Dw ss

the writ was improper because it “‘seek[s] to control its discretion . . . to consider provider costs
and determine whether its rates bore a reasonable relationship to such costs in performing its rate
review.” Jd. at 683. The court, however, held that even though the Department had “broad
discretion” to perform the rate review, “the fact that an agency’s action is subject to its broad
discretion does not mean mandate is unavailable to aggrieved parties as a matter of law.” Id.
Accordingly, the Court of Appeal directed the trial court to issue a “supplemental writ of mandate
compelling the Department to conduct a further rate review of the Medi-Cal reimbursement rates
paid to the providers of home health agency services . . . in accordance with [the law], the [prior]
writ of mandate, and the provisions of this opinion.” /d. at 689-90.

As in California Association for Health Services, San Diego is entitled to a writ of
mandate to compel Met to set rates “under a proper interpretation of the applicable law” and to
prevent Met from disregarding the Court’s ruling. /d. at 683. Indeed, writs directing a party to
take future actions consistent with a court’s orders and opinions are common and perfectly
appropriate. See id. at 682, 689-90.!

Met’s objections to San Diego’s proposed writ are meritless. Met claims that “it is not
possible” to comply with the proposed writ because the Court’s Statements of Decision are based
on the 2010 and 2012 records only and “did not determine the appropriate rate of allocation
[sic].”. 10/7/15 MWD’s Objs. to SDCWA’s Proposed Judgment and Proposed Writ of Mandamus
(“MWD Objections”) at 6. But San Diego’s proposed writ does not tell Met how to set future
rates or allocate future costs. All it does is require Met to do those things in accordance with
applicable law—exactly what San Diego has been asking for from the start. See, e.g., Trial Tr. at
8:11-13. While Met may have to go back to the drawing board when it adopts future rates,

“ignoring [San Diego’s] rights and doing nothing is not an option.” Conlan, 102 Cal. App. 4th at

' See also, e.g., Conlan v. Bonta, 102 Cal. App. 4th 745, 764 (2002) (writ of mandate directing
state agency to “adopt and implement procedures consistent with this opinion”); Graham v. State
Bad. of Control, 33 Cal. App. 4th 253, 256 (1995) (ordering the trial court to issue a peremptory
writ of mandate “directing the Board to . . . proceed in a manner consistent with this opinion’);
49er Chevrolet v. New Motor Vehicle Bd., 84 Cal. App. 3d 84, 93 (1978) (peremptory writ
“ordering the Department to vacate its decision and to conclude its administrative proceeding in a
manner consistent with this opinion”).

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SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
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764 (directing trial court to issue a writ of mandate compelling the Department of Health Services
to “adopt and implement procedures [to reimburse Medi-Cal recipients] consistent with this
opinion”). Met’s claim that San Diego’s proposed writ “operate[s] as an injunction against MWD
from collecting its future rates” is simply wrong. MWD Objections at 7. The only thing San
Diego’s proposed writ forbids is Met’s continued disregard of California law and the Court’s
Statements of Decision.

IL. THE COURT SHOULD ENTER SAN DIEGO’S PROPOSED JUDGMENT

A. Judgment should be entered on causes of action, not on individual legal
theories (Para. 1).

San Diego’s proposed judgment appropriately enters judgment in San Diego’s favor on
the causes of action challenging Met’s rates—the First, Second, and Third Causes of Action in the
2010 and 2012 cases—whereas Met proposes that the Court enter judgment on each legal theory
raised in connection with those causes of action. Met’s proposal contravenes well-established
law. The Court should enter judgment on causes of action, not individual legal theories.

A final judgment is a “final determination of the rights of the parties in an action or
proceeding,” Code. Civ. Proc. § 577, which must dispose of “all the causes of action pending
between the parties.” Kurwa v. Kislinger, 57 Cal. 4th 1097, 1100 (2013) (emphasis added); see
also, e.g., Code Civ. Proc. § 437c(f)(1) (“A motion for summary adjudication shall be granted
only if it completely disposes of a cause of action. . . .”); Code Civ. Proc. § 430.50(a) (“A

demurrer to a complaint . . . may be taken to the whole complaint . . . or to any of the causes of

action stated therein.”). The final judgment is not intended to recapitulate every legal theory
presented in the case. On the contrary, “California has consistently applied the ‘primary rights’
theory, under which the invasion of one primary right gives rise to a single cause of action,”
which “is based upon the harm suffered, as opposed to the particular theory asserted by the
litigant.” Slater v. Blackwood, 15 Cal. 3d 791, 795 (1975).

The cause of action “must therefore be distinguished from the legal theory on which
liability for that injury is premised: Even where there are multiple legal theories upon which
recovery might be predicated, one injury gives rise to only one claim for relief.” Mycogen Corp.

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SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
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v. Monsanto Co., 28 Cal. 4th 888, 904 (2002) (citation and internal quotation marks omitted)
(emphasis in original). The cause of action “must also be distinguished from the remedy sought:
The violation of one primary right constitutes a single cause of action, though it may entitle the
injured party to many forms of relief, and the relief is not to be confounded with the cause of
action, one not being determinative of the other.” /d. (internal quotation marks omitted)
(emphasis in original); accord, e.g., Wulfjen v. Dolton, 24 Cal. 2d 891, 895-96 (1944).

The primary right at issue in the first three causes of action in both cases is San Diego’s
right to be charged only lawful transportation rates for the years at issue. Indeed, because the first
three causes of action in each case involve the same primary right and differ only as to the
remedy sought, they might have been presented as just one cause of action in each case. See
Mycogen, 28 Cal. 4th at 904. But under no circumstances should San Diego’s first three causes
of action in the two cases be treated as fifteen separate causes of action. Yet that is precisely
what Met proposes. See Met’s Proposed Judgment {ff 3, 7.

In a transparent effort to manufacture multiple “causes of action” on which it will claim to
have “prevailed” when the time comes to litigate attorneys’ fees, Met argues that judgment should
be “entered in favor of MWD and against San Diego and all other persons,” in the 2010 case, on
the following purported “claims”: Proposition 26, Proposition 13, Government Code § 66013,
and the Met Act. /d. 93. And in the 2012 case, Met contends that judgment should be “entered
in favor of MWD and against San Diego and all other persons” on the following so-called
“claims”: Proposition 13, Government Code § 66013, the Met Act, and ‘dry year peaking.’” Jd. J
7. But constitutional and statutory provisions are legal theories, not separate causes of action.
See, e.g., Slater, 15 Cal. 3d at 794-96. Similarly, San Diego’s allegations about dry-year peaking
set forth “different invasions of plaintiff’s primary right and different breaches of the same duty,”
but there was only “one injury and one cause of action”—Met’s failure to set lawful rates. Panos
v. Great W. Packing Co., 21 Cal. 2d 636, 638 (1943); see also Crouse v. Brobeck, Phleger &
Harrison, 67 Cal. App. 4th 1509, 1526 n.2 (1998); 2012 Compl. #4 51, 65, 79, 89, 96 (alleging
dry-year peaking as an alternative legal basis for finding Met’s rates to be unlawful, not as a

separate cause of action).
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SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
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There can be no doubt that San Diego prevailed on each of the first three causes of action
in each case. Indeed, San Diego achieved 100% of the relief it sought—the invalidation of each
and every one of Met’s 2011-2014 transportation rates. That the Court relied on certain of San
Diego’s legal theories but not others has no bearing on the ultimate judgment. The Court,
therefore, should enter judgment in favor of San Diego and against Met (and all other persons”)
on the First, Second, and Third Causes of Action in the 2010 and 2012 cases.

B. The Court’s judgment should protect San Diego’s security deposit (Para. 5).

San Diego’s proposed judgment includes a provision, Paragraph 5, to ensure that Met
actually segregates and maintains the security deposit it is obligated to maintain by Section
12.4(c) of the Exchange Agreement, until the conclusion of the appeal. As the Court is well
aware, Section 12.4(c) of the Exchange Agreement requires Met, during the pendency of this
dispute, to maintain a “separate interest bearing account” containing the “disputed funds” San
Diego paid under protest. Ex. A (2003 Exchange Agreement (PTX-65)). Last year, in its
September 12, 2014 Memorandum of Law Re: Measure of Damages, Met explained the purpose
of this vital provision:

Section 12.4(c) is a security provision. It is a practical solution to a
problem of enforcing monetary judgments against government
agencies. A government agency may not have cash to pay an
adverse judgment. This clause protects both MWD and

SDCWA.... [I]f MWD did not set aside the alleged overpayment,
SDCWA might not recoup the overage if it prevails.

9/12/14 MWD Mem. at 1. The Court agreed, holding that “the primary purpose of § 12.4(c) was
to prevent either side from spending disputed funds during the pendency of a dispute and to
ensure that disputed funds were promptly available to the prevailing party upon the resolution of a
dispute.” Nov. 4, 2014 Order at 7; see also Oct. 9, 2015 Order at 3.

In light of Met’s own prior statements, and the Court’s ruling, about the meaning of
12.4(c), a provision prohibiting Met from spending or otherwise utilizing the 12.4(c) security

deposit monies until the resolution of the appeal should not be controversial. At the most recent

* See Code Civ. Proc. § 870(a). Met does not dispute this aspect of the proposed judgment. See
Met’s Proposed Judgment {ff 3, 7.

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hearing in this case, on October 8, 2015, in response to direct questioning from the Court about
whether money was actually being held in a separate interest-bearing account, Met’s counsel
represented that there was indeed a “separate fund,” which contains $192 million attributable to
the 2010 and 2012 cases.

What Met did not make clear to the Court is that the “fund” that contains San Diego’s
security deposit is, in fact, Met’s general unrestricted reserves. Earlier this month, in connection
with a proposed bond offering, Met provided its Board with a Draft Remarketing Official
Statement, which states that “Metropolitan held $209.8 million in its financial reserves pursuant
to the exchange contract between Metropolitan and SDCWA. Of that amount, $192.3 million is
associated with exchange water deliveries from January 2011 through December 2014.” Ex. B
(10/13/15 Met Board Action 8-2), Attachment 2, at A-46 (emphasis added). Later in that same

document, Met acknowledged that its

unrestricted reserves, which consist of the Water Rate Stabilization
Fund and the Revenue Remainder Fund, totaled $476 million on a
modified accrual basis including $188 million held in
Metropolitan’s financial reserves pursuant to the exchange
contract between Metropolitan and SDCWA due to SDCWA’s
litigation challenging Metropolitan’s rate structure.

Id., Attachment 2, at A-49 (emphasis added). This was confirmed by Met Chief Financial Officer
Gary Breaux at an October 12, 2015 Met Board meeting; although Met accounts for the deposit
separately as a matter of record-keeping, the actual funds are simply part of Met’s reserves and
commingled with other funds therein. Ex. C (10/12/15 Transcript of MWD Finance & Insurance
Committee) at 1 (“We have set it aside in a separate account in our financial records... [bJut
yes it is part of the unrestricted reserves in effect.”) (emphasis added).

This is a distinction with a huge difference with respect to the “security” of San Diego’s
“security deposit.” First, unrestricted reserves “may be used for any lawful purpose of
Metropolitan as directed by the Board.” See Ex. B at A-50; see also Ex. E(MWD Admin Code
§§ 5200(g)-(h)) (same). This is consistent with Met’s 2013 letter to San Diego pronouncing that
“Metropolitan is under no obligation to refrain from using the funds in this [12.4(c)] account,” but
instead may “put these funds to use for district purposes” and “re-deposit the principal and

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interest when funds are available.” See 9/24/15 Declaration of Hal Soper i/s/o MWD’s Opp. to
Pl.’s Mot. for Prejudgment Interest, Ex. F. (2/25/13 Letter from Kightlinger to Stapleton). In
other words, Met is holding San Diego’s money as part of its general reserves, not in an
“account,” let alone a “separate” account; and, Met claims the right to raid the money at its
discretion. Second, it is apparent that Met is actually using San Diego’s security-deposit money
to meet Met’s own minimum-reserve requirements—because Met does not have enough cash on
hand to do both. Met is obligated to maintain minimum unrestricted reserves in order to maintain
working capital and cover shortfalls in revenue collection. Ex. B at A-49; Ex. E(MWD Admin
Code) § 5200. At the end of June 2015, Met was obligated to maintain minimum unrestricted
reserves of $205 million. At that time, it had $476 million in unrestricted reserves—but has since
spent $104 million of its reserves to acquire land in Riverside and Imperial counties, and another
$44.4 million to purchase water from the Southern Nevada Water Authority, leaving only $327.6
million in unrestricted reserves. Ex. B at A-49, 50. Without including the $209.8 million that is
San Diego’s security deposit, Met falls well below its minimum reserves. Indeed, earlier this
month, Met cited the depletion of its reserves as justification for asking the Met Board to
authorize the issuance of $500 million in new debt. See Ex. D (10/13/15 Met Board Action 8-1).
Met cannot have it both ways. If, as Met’s counsel represented to the Court, there really is
a “separate” cash fund securing San Diego's judgment, then Met should have no objection to a
provision in the judgment requiring that Met preserve the status quo by leaving those funds alone.
But if, in fact, Met is double-counting the amount of cash in its unrestricted reserves, saying that
the same cash is both meeting unrestricted reserve fund requirements and securing San Diego’s
judgment, then there is in fact not only no “separate account,” but no security at all for payment
of San Diego’s judgment. In those circumstances, the Court should exercise its “broad power” to
enjoin conduct that would result in the dissipation of funds and “would render the court’s ultimate
judgment ineffectual or require a multiplicity of suits.” Steinmeyer v. Warner Cons. Corp., 42

Cal. App. 3d 515, 520 (1974); see also Code Civ. Proc. § 526(a)(3).? As the Court of Appeal has

3 On that principle, courts may enter prohibitory injunctive relief, at any time during the

litigation, if there is a risk that assets are being dissipated or will not be available to fully satisfy

the judgment. See Heckmann v. Ahmanson, 168 Cal. App. 3d 119, 136 (1985) (court may issue
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often held: “An equity court has inherent power to make its decree effective by additional orders
affecting the details of performance, irrespective of reservation of power in the decree.” Palmco
vy, Super. Ct., 16 Cal. App. 4th 221, 225 (1993) (citing Barnes v. Chamberlain, 147 Cal. App. 3d
762, 767 (1983)). Treating San Diego’s security deposit as Met’s ATM, with an I.0.U. to pay it
back later from unknown sources when “funds are available,” would be irreconcilable with the
Court’s ruling regarding the purpose of Section 12.4(c), and would undermine the security for
which San Diego bargained.

Met’s primary objection to this proposed provision is that San Diego has not separately
alleged a breach of Section 12.4(c), and that because Section 12.4(c) “was not tried,” the Court is
powerless to fashion a remedy relating to Section 12.4(c). MWD Objections at 5. “The obvious
answer to this is that the contract upon which the suit is based expressly provided for” a separate
interest bearing account, “and that it was not necessary, therefore, that the appellants demand [it]
in their pleading, but they were justified in relying upon a performance of the contract.” Pearson
vy, Juarez, 78 Cal. App. 122, 126 (1926). Moreover, the Court has now twice reviewed extensive
briefing on, and addressed the meaning of, Section 12.4(c). See Nov. 4, 2014 Order; Oct. 9, 2015
Order. Having found that San Diego is entitled to $188 million in damages, the Court rightly held
that the purpose of 12.4(c) was to prevent Met from spending those funds during the pendency of
this dispute. See Nov. 4, 2014 Order at 7; Oct. 9, 2015 Order at 3. The Judgment should preserve
San Diego’s security deposit in the manner the Court already held it must be preserved."

Finally, the Judgment should specify that this prohibition on Met’s use of San Diego’s
security deposit will not be stayed pending appeal. Unlike a mandatory injunction “a

‘prohibitory’ injunction is not automatically stayed by appeal.” Cal. Practice Guide, Civ. App. &

injunctive relief to prevent dissipation of assets necessary to preserve judgment); West Coast
Constr. Co. v. Oceano Sanitary Dist., 17 Cal. App. 3d 693, 698-702 (1971) (affirming injunction
to prevent spending of local agency’s limited funds that would be necessary to satisfy judgment).

4 To ensure Met’s compliance with this provision, the proposed judgment includes a requirement
that Met, upon request, provide accounting records to confirm that San Diego’s disputed funds
are in a “separate account,” are not commingled and have not been borrowed or spent. See
Palmco, 16 Cal. App. 4th at 225 (affirming trial court’s order of an accounting pending appeal
pursuant to the Court’s “inherent equity power” to “ensure compliance with the letter and intent
of the judgment”).

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Writs § 7:76. A “prohibitive order seeks to restrain a party from a course of conduct or to halt a
particular condition.” People v. iMERGENT, Inc., 170 Cal. App. 4th 333, 342 (2009) (internal
citations omitted). An order that “simply compels [a party] to abide by their agreement and to
maintain the status quo” is prohibitory, not mandatory. /d. at 343. In the same way, Paragraph 5
of the proposed judgment simply compels Met to abide by its agreement.” The relief afforded by
12.4(c) establishing security for the judgment would be illusory if Met did not have to comply
with that restriction, and could raid the security-deposit at will, until the appellate process is
complete. Cf Palmco, 16 Cal. App. 4th at 225-26. The Court should therefore exercise
continuing jurisdiction, even during the appellate process, to ensure that Met complies with its

12.4(c) obligations. See id.

Cc. The judgment should prohibit Met from collecting any portion of the
judgment, or interest on the judgment, from San Diego (Para. 6).

San Diego also seeks, in Paragraph 6 of the proposed judgment, an order that Met cannot
circumvent the Court’s ruling that San Diego has been damaged in the amount of $188 million
plus interest, by turning around and attempting to recoup a portion of that judgment from San
Diego. To that end, consistent with the terms and intent of Section 12.4(c), the judgment should
specify that Met must first satisfy the monetary award by paying San Diego the full amount in the

12.4(c) security deposit. Before judgment has even been entered, Met is already raising the

specter that payment of the judgment could threaten Met’s “fiscal integrity” and impact “future
planning and operations.” Met Objections at 3-4. To avoid that problem, Met should maintain
the “separate interest bearing account” it promised to create in the Exchange Agreement, and, if
the judgment is affirmed, immediately transfer that money to San Diego. Ex. A § 12.4(c). The

$192 million Met claims to have set aside pursuant to Section 12.4(c) in connection with

5 Met has suggested, during the parties’ meet and confer, that this proposed relief is “mandatory,”
rather than “prohibitory” because, in prohibiting Met from spending or utilizing San Diego’s set-
aside money, the Court would require Met to keep San Diego’s money as a restricted fund, rather
than unrestricted reserves. Even if that constituted a modest change from the status quo, “[t]he
character of prohibitory injunctive relief, however, is not changed to mandatory in nature merely
because it incidentally requires performance of an affirmative act.” People v. Mobile Magic
Sales, Inc., 96 Cal. App. 3d 1, 13 (1979) (order requiring removal of mobile homes, in order to
“restrain further violation of a valid statutory provision” was prohibitive).

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exchange water deliveries from January 2011 through December 2014 should be sufficient to
satisfy the $188,295,602 in contract damages Met owes to San Diego. However, depending on
the length of the appellate process, Met may owe San Diego as much as another $80 million to
$120 million in prejudgment and post-judgment interest. Met should not be allowed to charge
San Diego for any portion of the prejudgment and post-judgment interest on San Diego’s
damages that Met is obligated to pay.

Given the history of this matter, San Diego is reasonably concerned that Met will force

San Diego to bear the burden of paying its own damages and continue footing the bill for Met’s
unlawful conduct. There can be no justification for that. Prejudgment and post-judgment interest
serve to compensate a damaged party for the loss of use of its funds during the pendency of the
case—and in this case, San Diego has been denied access to $188 million of its money that it
otherwise would have had available to invest in infrastructure, develop new water sources, or
reduce the water rates of its own customers. It would be unfair and inequitable for Met to charge
San Diego the cost of paying that interest, when San Diego has already borne the costs of being
denied the use of its money for what will be close to a decade (a result that would be all the more
inequitable if Met itself is allowed to spend the money San Diego has paid under protest). After
all, it was Met that enacted illegal rates, twice, over San Diego’s vociferous objections that they
were illegal (resulting in $188 million in damages). It was Met that dragged this litigation out for
years (resulting in more than $45 million in pre-judgment interest). And it is Met that will
inevitably appeal this decision and avoid the day of reckoning as long as it can, generating what
will be substantial post-judgment interest. San Diego should in no way be on the hook for the
avoidable costs of Met’s unlawful acts and insistence on litigating every conceivable (and, often,
ill-conceived) issue.

This Court has the power to prohibit Met from trying to recover any portion of the
judgment from San Diego, the party injured by Met’s conduct. The relationship between San
Diego and Met can be analogized to a failed marriage, and in divorce decisions, courts regularly
direct a spouse not to use the other spouse’s assets to pay a judgment owing to that other spouse.

See, e.g., Hebbring v. Hebbring, 207 Cal. App. 3d 1260, 1275 (1989) (trial court properly
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“required [husband] to reimburse [wife] for the value [of jewelry he threw into the ocean] from
his share of the community property . . . as the court may fashion an order to effect its decree”)
(citations and quotation marks omitted); /n re Marriage of Stitt, 147 Cal. App. 3d 579, 588 (1983)
(“[I]t was proper for the court to make orders which carried out the law’s intention that only
responsible participants in crime or tort bear the loss.”). Similarly, in Carmel Valley Fire
Protection Dist. v. State of California, 190 Cal. App. 3d 521 (1987), the County of Los Angeles
and others sued the State for its failure to reimburse certain state-mandated expenditures. The
trial court ruled in favor of the petitioners, finding that they were properly entitled to
reimbursements. The trial court’s judgment for Los Angeles County, among other things,
specified that “the State Respondents are prohibited from offsetting, or attempting to implement
an offset against moneys due and owing Petitioner until Petitioner is completely reimbursed.” Jd.
at 532 n.7 § 11. The Court of Appeal agreed and held that “[i]n view of State’s manifest
reluctance to reimburse, . . . the trial court was well within its authority to prevent this method of
frustrating County’s collection efforts from occurring.” /d. at 551.

The same principles should apply here: Met cannot “rob Peter to pay Peter.” Having
breached the Exchange Agreement and caused damages to San Diego in the amount of
$188,295,602 plus interest, Met may not collect even more money from San Diego to pay its own
damages and interest due.®

In its prior objections to San Diego’s proposed judgment, Met conflated how it pays
damages in this breach of contract case with how, going forward, it will allocate the costs that the
Court held Met misallocated to transportation. MWD Objections at 4. To be clear, San Diego is
not asking to be excused from paying lawful water rates; nor is it asking the Court to decree how
Met should lawfully allocate its costs to future rates in order to recover its future State Water
Project and other expenses. All San Diego is asking for is an order saying that San Diego should

not be forced to pay any share of its own contract damages and interest that exceeds the amount

6 Again, to confirm Met’s compliance with this requirement, the judgment should order Met, at
the appropriate time and upon request, to provide accounting records sufficient to demonstrate its
compliance. See Palmco, 16 Cal. App. 4th at 225 (trial court had “inherent equity power” to
order an accounting).

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of payments San Diego has already made to Met under protest.

D. The Court should maintain continuing jurisdiction (Para. 7).

San Diego’s proposed judgment states that the Court will retain continuing jurisdiction
over these cases to ensure that, after the conclusion of the appeal, Met complies with the Court’s
orders and judgment.” Continuing jurisdiction is mandatory in connection with the issuance of a
writ of mandate: “It is well settled that the court which issues a writ of mandate retains continuing
jurisdiction to make any order necessary to its enforcement.” City of Carmel-By-The-Sea v. Bd.
of Supervisors, 137 Cal. App. 3d 964, 971 (1982).

But even in the absence of a writ of mandate, continuing jurisdiction is appropriate to
ensure compliance with the Court’s orders. See, e.g., Palmco, 16 Cal. App. 4th at 225. Over the
past five years and beyond, Met has devised one strategy after another to try to avoid statutory
and constitutional cost-of-service requirements, including ignoring completely this Court’s
Phase I Statement of Decision when it set its 2015 and 2016 rates. The Court in Wilson v. City of
Laguna Beach, 6 Cal. App. 4th 543 (1992), confronted a similar situation, where a local
municipality consistently and repeatedly ignored state law to achieve the outcome it desired.
There, as here, the local entity “spent considerable tax dollars in an effort to deprive some of its
own citizens of the benefits clearly accorded them by a state law.” Jd. at 561. Accordingly, the
trial court was instructed to “retain continuing jurisdiction to assure compliance with its orders.”
Id. \n San Luis Coastal Unified Sch. Dist. v. City of Morro Bay, 81 Cal. App. 4th 1044 (2000),
which likewise dealt with a successful challenge under the Wheeling Statute, the trial court again
kept continuing jurisdiction “to assure compliance with its order,” and to ensure that the agency
responsible for setting a lawful wheeling rate did so in a “reasonable and timely manner.” Jd. at
1051 (citing Wilson, 6 Cal. App. 4th at 561). Here, continuing jurisdiction will enable the Court
to resolve any disputes about the payment of San Diego’s damages, the maintenance of the

security deposit, and the corrected calculation of preferential rights.

7 The Court would maintain continuing jurisdiction over the maintenance of San Diego’s security
deposit even during the course of the appeal, because, as explained above, that portion of the
judgment should not be stayed pending appeal.

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E. The judgment should declare San Diego the prevailing party under the
contract (Para. 8).

San Diego’s proposed judgment further provides that, as the prevailing party, San Diego is
entitled to an award of attorneys’ fees and costs. Under the Exchange Agreement, and as a matter
of law, an award of attorney’s fees and costs is mandatory. See Ex. A § 5.2 (“In the event that
SDCWA contests a matter pursuant to the foregoing sentence, the prevailing Party shall be
entitled to recovery of reasonable costs and attorneys fees incurred in prosecuting or defending
against such contest.”) (emphasis added). Section 1717 of the Civil Code provides that where—
as here—the parties’ contract provides for attorney’s fees, “the party prevailing on the contract ...
shall be entitled to reasonable attorney’s fees in addition to other costs.” Civ. Code § 1717
(emphasis added). Given the contractual fee provision, the “trial court has no discretion to deny
attorney fees” where—again, as here—the party seeking them obtained an “unqualified victory.”
Hsu v. Abbara, 9 Cal. 4th 863, 877 (1995). San Diego’s proposed judgment further provides that
San Diego may submit its costs bill and a motion for attorneys’ fees following entry of judgment.
See Cal. Rule of Court 3.1700, 3.1702; see also Kaufman v. Diskeeper Corp., 229 Cal. App. 4th
1, 9 (2014).

Given Met’s effort in its proposed judgment to cast itself as a prevailing party in this case,
despite losing on all five causes of action that went to trial and being assessed every penny in
damages sought by San Diego, plus interest, the Court should take the opportunity to clarify what
should be obvious: that San Diego is the prevailing party on the breach of contract claim.

il. TIMING OF THE 2014 CASE

As it stands now, the 2014 case “is stayed for the present time, with each party reserving
its right to move to lift the stay at a later date.” Feb. 19, 2014 Order at 1. The Court will recall
that the 2014 case challenges Met’s 2015 and 2016 rates on the same grounds as the 2010 and
2012 cases, and includes a corresponding claim for breach of contract. The matters set forth in
the 2014 complaint should be easily resolved: Met made no meaningful additions to the
administrative record during the administrative process for approving the 2015 and 2016 rates,

and its internal “Cost of Service Report” relied on the same theories and documents the Court

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rejected in the Phase I Statement of Decision in the 2010 and 2012 cases. Given the broad sweep
of the legal and factual issues presented in the earlier cases, the absence of any new evidentiary
support presented to the Met Board before it adopted the 2015/2016 rates, and the Court’s
familiarity with the issues, San Diego believes the 2014 case will be a much simpler and more
straightforward proceeding than the 2010 and 2012 cases have been. Even if collateral estoppel
does not technically apply yet because Met is going to appeal, the Court has already decided
virtually every factual or legal issue that would be presented in the new case.

Met apparently disagrees, on the basis that the 2014 administrative record is substantially
different from the 2010 and 2012 administrative records, and supposedly will include significant
new information that was not before the Court in the 2010 and 2012 cases. San Diego is familiar
with the information presented to the Met Board during the 2014 rate-setting cycle, and
participated in that process, and disagrees that there is anything meaningfully new in the 2014
record. For example, Met offered no additional analysis from an expert or even from its own staff
to justify the illegal cost allocations that persisted in the rates for 2015 and 2016. But to fully
evaluate whether the 2014 record offers any new justification for Met’s 2015 and 2016 rates, San
Diego has asked Met to prepare and file the 2014 administrative record so that San Diego can
make a more informed decision about whether to move to lift the stay. Met has refused.
Preparing the administrative record will not be an intensive or burdensome task—most of what
was before Met when it adopted its 2015/2016 rates was already part of the 2010 and 2012
administrative records. Moreover, it makes practical sense to prepare the administrative record
now, while the memories of what was provided or available to the Met Board are fresh in
peoples’ minds and the individuals involved in the process (both at Met and on the Met Board)
are still around—even if, at the end of the day, the parties or the Court decide the case should
remain stayed.

Therefore, San Diego urges the Court to instruct Met to file the 2014 administrative record
within the next 90 days. Thereafter, the parties can meet and confer about whether or not to lift

the stay.

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Dated: October 6, 2015 KEKER & VAN NEST LLP

/s/ Warren Braunig

By: JOHN KEKER
DANIEL PURCELL
DAN JACKSON
WARREN A. BRAUNIG

16

993515

SAN DIEGO’S STATEMENT RE: JUDGMENT AND CASE MANAGEMENT
Case No, CPF-10-510830 & CPF-12-512466EXHIBIT APTX0065

AMENDED AND RESTATED AGREEMENT BETWEEN THE
METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA
AND THE SAN DIEGO COUNTY WATER AUTHORITY

FOR THE EXCHANGE OF WATER

THIS AMENDED AND RESTATED AGREEMENT FOR THE EXCHANGE OF
WATER ("Agreement”) is made and entered into as of October 10, 2003, between The
Metropolitan Water District of Southern California (hereinafter "Metropolitan") and the San
Diego County Water Authority (hereinafler "SDCWA"). Metropolitan and SDCWA are
sometimes referred to as the "Parties".

RECITALS

A. SDCWA is a county wate: authority incorporated under the Califomia County
Water Authority Act, Stats. 1943, ¢.545 as amended, codified at Section 45-1 ef seg. of the
Appendix to the Califomia Water Code, for the purpose of providing its member agencies in San
Diego County with a safe, reliable, and sufficient supply of imported water.

B. Metropolitan is a public agency of the State of California incorporated under the
Metropolitan Water District Act, Stats. 1969, ch. 209, as amended, codified at Section 109.1 et
seq. of the Appendix to the California Water Code, engaged in transporting, storing