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1 KEKER, VAN NEST & PETERS LLP
JOHN W. KEKER - # 49092
2 jkeker@keker.com
ELECTRONICALLY
DAN JACKSON - # 216091
3 djackson@keker.com F I L E D
Superior Court of California,
WARREN A. BRAUNIG - # 243884 County of San Francisco
4 wbraunig@keker.com
NICHOLAS S. GOLDBERG - # 273614 06/17/2020
5 ngoldberg@keker.com Clerk of the Court
BY: SANDRA SCHIRO
633 Battery Street Deputy Clerk
6 San Francisco, CA 94111-1809
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
11 Telephone: (858) 522-6600
Facsimile: (858) 522-6566
12
13
Attorneys for Petitioner and Plaintiff EXEMPT FROM FILING FEES
14 SAN DIEGO COUNTY WATER AUTHORITY [GOVERNMENT CODE § 6103]
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-10-510830
AUTHORITY,
18 Consolidated with: Case No. CPF-12-512466
Petitioner and Plaintiff,
19 DECLARATION OF WARREN A.
BRAUNIG IN SUPPORT OF SAN DIEGO
v.
20 COUNTY WATER AUTHORITY’S
OPENING BRIEF RE FORM OF
METROPOLITAN WATER DISTRICT
21 JUDGMENT AND ISSUANCE OF
OF SOUTHERN CALIFORNIA; ALL PEREMPTORY WRIT OF MANDATE;
PERSONS INTERESTED IN THE
22 EXHIBITS A-E
VALIDITY OF THE RATES ADOPTED
BY THE METROPOLITAN WATER
23 Date: July 30, 2020
DISTRICT OF SOUTHERN Time: 1:30 p.m.
CALIFORNIA ON APRIL 13, 2010 TO
24 Dept.: 304
BE EFFECTIVE JANUARY 2011; and
DOES 1-10,
25 Judge: Hon. Anne-Christine Massullo
Respondents and Defendants.
26
27
28
DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE
FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE
Case Nos. CPF-10-510830 & CPF-12-512466
1384664
1 I, Warren A. Braunig, declare and state that:
2 1. I am an attorney licensed to practice law in the State of California and am a partner
3 at the law firm of Keker, Van Nest & Peters LLP, counsel for Petitioner/Plaintiff San Diego
4 County Water Authority (“the Water Authority”) in the above-captioned actions. I am duly
5 admitted to practice law before this Court. Except where expressly stated, I have knowledge of
6 the facts set forth herein, and if called to testify as a witness thereto, could do so competently
7 under oath.
8 2. On April 28, 2020, following an unsuccessful meet-and-confer process with
9 counsel for Respondent/Defendant Metropolitan Water District of Southern California
10 (“Metropolitan”), the Water Authority filed a Motion for Entry of Judgment and Issuance of
11 Peremptory Writ of Mandate, attaching thereto a copy of its [Proposed] Judgment and [Proposed]
12 Peremptory Writ of Mandate. Due to the Court’s Covid-related restrictions on the scheduling of
13 new hearings, the Water Authority’s Motion was never set for a hearing and did not trigger a
14 standard briefing schedule.
15 3. Thereafter, on May 11, 2020, counsel for Metropolitan circulated a copy of
16 Metropolitan’s proposed judgment. The parties engaged in a further meet and confer on May 14,
17 which did not resolve the parties’ disagreements.
18 4. On May 20, 2020, the Court held a telephonic status conference, during which
19 counsel for the Water Authority and counsel for Metropolitan raised their dispute over the form of
20 the judgment and peremptory writ of mandate. The Court set the matter to be heard on July 30 at
21 1:30 p.m., and counsel agreed to file two rounds of simultaneous briefs regarding each party’s
22 preferred form of the judgment and the peremptory writ. The Court entered an order confirming
23 this agreement the following day. On June 4, the parties submitted a “Stipulation and [Proposed]
24 Order re Briefing Schedule on Proposed Final Judgment,” which set June 17 as the deadline to
25 file Opening Briefs and July 16 as the deadline to file Responsive Briefs. Pursuant to the
26 Stipulation, the Water Authority’s previously-filed Motion for Entry of Judgment and Issuance of
27 Peremptory Writ of Mandate was deemed withdrawn.
28 2
DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE
FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE
Case Nos. CPF-10-510830 & CPF-12-512466
1384664
1 5. On June 12, 2020, my colleague Nicholas Goldberg sent counsel for Metropolitan
2 a revised copy of the Water Authority’s [Proposed] Judgment and [Proposed] Peremptory Writ of
3 Mandate, the versions that are being submitted herewith. On June 15, counsel for Metropolitan,
4 Barry Lee, sent to counsel for the Water Authority a copy of Metropolitan’s revised proposed
5 judgment.
6 6. It is the Water Authority’s position that the final judgment in these cases should
7 not include a preamble recounting the litigation’s procedural history. However, should the Court
8 elect to adopt a judgment with a procedural preamble, the Water Authority has prepared an
9 alternative preamble that provides an accurate and complete history, rather than the one-sided,
10 inaccurate, and incomplete preamble in Metropolitan’s proposed judgment. Attached as Exhibit
11 A hereto is the Alternative Preamble to [Proposed] Judgment.
12 7. This Court previously “award[ed] the Water Authority $28,678,190.90 in damages
13 plus prejudgment interest at 10 percent per annum.” July 25, 2018 Order re Scope of Proceedings
14 Following Remand at 5; see also id. at 9. In connection with the final judgment, the Court must
15 calculate the amount of prejudgment interest owing. Attached as Exhibit B hereto is a true and
16 correct copy of a chart, prepared at my direction, calculating the total amount of the Water
17 Authority’s damages and prejudgment interest through July 31, 2020. If the Court enters
18 judgment on July 31, 2020 (the day after the hearing on the form of judgment), prejudgment
19 interest would be $20,965,024.06 (for a total judgment of $49,643,214.96). Prejudgment interest
20 continues to accrue at a rate of $238,984.83 per month thereafter. For the Court’s convenience, a
21 second chart included in Exhibit B identifies, on a daily basis through August 31, the prejudgment
22 interest amount and total judgment, so that the Court can determine the final amount based on the
23 date the judgment is entered. 1
24
1
The daily amount is calculated simply by dividing the monthly rate by the number of days in the
25 month. For August 2020, the daily rate is: $238,984.83 / 31 = $7,709.19.
26 For example, if the Court were to enter final judgment on August 7, 2020, prejudgment
interest would be calculated as follows: $20,965,024.06 + ($7,709.19 x 7) = $21,018,988.38.
27 That amount of prejudgment interest would then be added to the damages of $28,678,190.90 for a
total judgment of $49,697,179.28.
28 3
DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE
FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE
Case No. CPF-10-510830 & CPF-12-512466
1384664
1 8. The methodology and statutory prejudgment interest rate that the Water Authority
2 applied in calculating the amounts reflected in Exhibit B are the same as what was previously
3 adopted by this Court in the Original Judgment entered on November 18, 2015 and affirmed on
4 appeal. See San Diego Cty. Water Auth. v. Metropolitan Water Dist. of S. Cal., 12 Cal. App. 5th
5 1124, 1154–55 (2017), as modified on denial of reh’g (July 18, 2017). This calculation utilizes
6 the methodology that Metropolitan advanced, and the Court accepted, in Exhibit J to the
7 Declaration of Hal Soper III in Support of Metropolitan’s Opposition to Plaintiff’s Motion for
8 Prejudgment Interest, dated September 24, 2015 (“Soper Declaration”). A true and correct copy
9 of the Soper Declaration, and Exhibit J thereto, are attached hereto as Exhibit C.
10 9. In particular, Mr. Soper attested in his declaration that, pursuant to Metropolitan’s
11 invoicing procedures, there is a “two month delay between the month of [Metropolitan’s] delivery
12 and the month of [the Water Authority’s] payment” for that same delivery. Soper Decl. ¶ 19; see
13 also id. ¶¶ 18, 20 & Ex. J thereto. The Water Authority’s prejudgment interest calculation
14 accounts for this two-month lag in determining the period of accrual for the Water Authority’s
15 prejudgment interest. For example, as shown in the chart filed at Exhibit B, to determine the
16 prejudgment interest on Metropolitan’s overcharges for water delivered in January 2011, the
17 Water Authority accrued interest for 112 months beginning on March 31, 2011 and ending on
18 July 31, 2020.
19 10. On April 16, 2020, I sent counsel for Metropolitan a version of the chart at Exhibit
20 B reflecting prejudgment interest calculations through May 30, 2020, June 30, 2020, and July 31,
21 2020. By email on May 18, 2020, Mr. Lee advised that “[s]ubject to the parties’ different legal
22 positions affecting the damages interest amounts, we have confirmed the accuracy of the
23 arithmetic set forth in your Apr. 16, 2020 schedule.”
24 11. Attached as Exhibit D hereto is a true and correct copy of the letter, dated
25 February 12, 2019, that Marcia Scully, General Counsel for Metropolitan, sent to Mark J. Hattam,
26 General Counsel for the Water Authority, re: “Tender of Payment for Trial Court’s Contract
27
28 4
DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE
FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE
Case No. CPF-10-510830 & CPF-12-512466
1384664
1 Damages Award for Water Stewardship Rate Payments under the Exchange Agreement for 2011–
2 2014, Plus Statutory Interest, in SDCWA v. MWD, et al., 2010 and 2012 Actions.”
3 12. Attached as Exhibit E hereto is a true and correct copy of the letter, dated March
4 7, 2019, that Mr. Hattam sent to Ms. Scully in response to Metropolitan’s purported tender offer.
5 13. The 2010 Case challenged rates for calendar years 2011 and 2012, which
6 Metropolitan had adopted as part of its biennial rate-setting process. The 2012 Case challenged
7 rates for calendar years 2013 and 2014, also adopted as part of Metropolitan’s biennial rate-
8 setting process. Each of these rates expired on the last day of the corresponding calendar year.
9 Specifically, the 2011 rates expired on December 31, 2011; the 2012 rates on December 31, 2012;
10 the 2013 rates on December 31, 2013; and the 2014 rates on December 31, 2014.
11 I declare under penalty of perjury under the laws of the State of California that the
12 foregoing is true and correct and that this declaration was executed on June 17, 2020, at San
13 Francisco, California.
14
15 _______________________________
WARREN A. BRAUNIG
16
17
18
19
20
21
22
23
24
25
26
27
28 5
DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE
FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE
Case No. CPF-10-510830 & CPF-12-512466
1384664
Exhibit A
1 KEKER, VAN NEST & PETERS LLP
JOHN KEKER - # 49092
2 jkeker@keker.com
DAN JACKSON - # 216091
3 djackson@keker.com
WARREN A. BRAUNIG - # 243884
4 wbraunig@keker.com
NICHOLAS S. GOLDBERG - # 273614
5 ngoldberg@keker.com
633 Battery Street
6 San Francisco, CA 94111-1809
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
11 Telephone: (858) 522-6600
Facsimile: (858) 522-6566
12
Attorneys for Petitioner and Plaintiff 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-10-510830
AUTHORITY,
18 Consolidated with: Case No. CPF-12-512466
Petitioner and Plaintiff,
19 ALTERNATIVE PREAMBLE TO
v. [PROPOSED] JUDGMENT
20
METROPOLITAN WATER DISTRICT OF Judge: Hon. Anne-Christine Massullo
21 SOUTHERN CALIFORNIA; ALL Dept.: 304
PERSONS INTERESTED IN THE
22 VALIDITY OF THE RATES ADOPTED Date Filed: June 11, 2010
BY THE METROPOLITAN WATER June 8, 2012
23 DISTRICT OF SOUTHERN CALIFORNIA
ON APRIL 13, 2010 TO BE EFFECTIVE
24 JANUARY 2011; and DOES 1-10,
25 Respondents and Defendants.
26
27
28
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
1385571
1 This final judgment fully resolves two cases pending in this Court: San Diego County
2 Water Authority v. Metropolitan Water District of Southern California et al., Case No. CPF-10-
3 510830 (“the 2010 Action”), and San Diego County Water Authority v. Metropolitan Water
4 District of Southern California et al., Case No. CPF-12-512466 (“the 2012 Action”).
5 Petitioner and Plaintiff San Diego County Water Authority (“Water Authority”) filed its
6 Petition/Complaint in the 2010 Action on June 11, 2010, alleging three causes of action
7 challenging Metropolitan Water District of Southern California’s (“Metropolitan”) transportation
8 rates and wheeling rate for calendar years 2011–2012: (1) writ of mandate, (2) declaratory relief,
9 and (3) determination of invalidity. The Water Authority filed its First Amended
10 Petition/Complaint on October 17, 2011, adding a fourth cause of action for breach of contract,
11 alleging that Metropolitan breached the October 10, 2003 Amended and Restated Agreement
12 between Metropolitan Water District of Southern California and the San Diego County Water
13 Authority for the Exchange of Water (“Exchange Agreement”). The First Amended
14 Petition/Complaint also added a fifth cause of action for breach of the implied covenant of good
15 faith and fair dealing, a sixth cause of action for breach of fiduciary duty, a seventh cause of
16 action for declaratory relief regarding Metropolitan’s Rate Structure Integrity (“RSI”) clause, and
17 an eighth cause of action for declaratory relief regarding Metropolitan’s preferential rights
18 calculation.
19 On January 4, 2012, the Court denied, with prejudice, Metropolitan’s motion to strike
20 portions of the Water Authority’s Petition/Complaint under the Strategic Lawsuit Against Public
21 Participation (“SLAPP”) statute. 1 The Court overruled Metropolitan’s demurrer to the Water
22 Authority’s fourth cause of action for breach of contract, rejecting Metropolitan’s defense under
23 the California Government Claims Act and holding that the Water Authority complied with the
24 Government Claims Act requirements. 2 The Court further overruled Metropolitan’s demurrer to
25 the Water Authority’s eighth cause of action for declaratory relief regarding Metropolitan’s
26
1
Jan. 4, 2012 Minute Order at 2.
27 2
Id. at 3; Jan. 4, 2012 Hr’g Tr. at 28:13–22 (holding that “plaintiff complied with the
28 Government Claims Act requirement”); see also id. at 35:23–36:14.
1
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
1385571
1 preferential rights calculation. 3 The Court sustained, without leave to amend, Metropolitan’s
2 demurrer to the Water Authority’s fifth cause of action for breach of the implied covenant of
3 good faith and fair dealing and sixth cause of action for breach of fiduciary duty. 4
4 The Water Authority filed its Second Amended Petition/Complaint on April 17, 2012 and
5 included six causes of action: (1) writ of mandate, (2) declaratory relief, (3) determination of
6 invalidity, (4) breach of contract, (5) declaratory relief regarding the RSI clause, and (6)
7 declaratory relief regarding Metropolitan’s preferential rights calculation.
8 On July 2, 2012, the Court overruled Metropolitan’s demurrer to the Water Authority’s
9 first, second, third, and fourth causes of action in its Second Amended Petition/Complaint,
10 rejecting Metropolitan’s defenses that its rates had been validated by operation of law and that the
11 Water Authority’s claims were barred by the statute of limitations. 5 The Court denied
12 Metropolitan’s motion to strike the Water Authority’s allegations regarding Proposition 13 and its
13 non-constitutional challenges to Metropolitan’s rates. 6 The Court also declined to strike the Water
14 Authority’s allegations regarding a working group of certain member agencies, but issued a ruling
15 precluding the Water Authority from taking discovery concerning those allegations. 7
16 On January 23, 2013, the Water Authority filed the operative Third Amended
17 Petition/Complaint in the 2010 Action alleging six causes of action: (1) writ of mandate, (2)
18 declaratory relief, (3) determination of invalidity, (4) breach of contract, (5) declaratory relief
19 regarding the RSI clause, and (6) declaratory relief regarding Metropolitan’s preferential rights
20 calculation.
21
22 3
Jan. 4, 2012 Minute Order at 4.
23 4
Id. at 3–4.
5
24 July 2, 2012 Minute Order at 1; July 2, 2012 Hr’g Tr. at 62:24–26 (“Neither the statute of
limitations nor the validating statute bar the allegations in the Second Amended Complaint.”).
25 6
July 2, 2012 Hr’g Tr. at 40:26–43:1, 62:24–63:6; July 2, 2012 Minute Order (confirming orders
“as reflected in the Court Reporter’s transcript of the record.”).
26 7
Id. at 41:26–42:14 (ordering that “discovery will be limited to the nature of the decisions that
27 were made and whether they comply with the applicable legal standards,” but declining to
otherwise strike allegations and “chop up the Complaint”); id. at 62:27–63:13; July 2, 2012
28 Minute Order (confirming orders “as reflected in the Court Reporter’s transcript of the record.”).
2
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
1385571
1 On March 29, 2013, the Court granted Metropolitan’s motion to strike the Water
2 Authority’s allegations concerning Proposition 26 in the 2010 Action, holding that “the rule
3 counseling against retroactive application” of constitutional amendments prevented the Court
4 from applying Proposition 26 retroactively to Metropolitan’s rates adopted before Proposition
5 26’s effective date. 8
6 On June 8, 2012, the Water Authority filed its Petition/Complaint in the 2012 Action,
7 which included four causes of action challenging Metropolitan’s rates for calendar years 2013 and
8 2014: (1) writ of mandate, (2) declaratory relief, (3) determination of invalidity, and (4) breach of
9 contract.
10 Metropolitan answered the operative Third Amended Petition/Complaint in the 2010
11 Action and the Petition/Complaint in the 2012 Action.
12 Metropolitan’s answer to the Third Amended Petition/Complaint in the 2010 Action
13 asserted thirty affirmative defenses: (1) failure to state facts sufficient to constitute a cause of
14 action; (2) statute of limitations; (3) California Government Claims Act; (4) California
15 Government Claims Act; (5) untimely claim; (6) laches; (7); exercise of administrative discretion;
16 (8) governmental immunity for exercise of discretion; (9) validation by operation of law; (10)
17 separation of powers; (11) ripeness; (12) waiver; (13) res judicata and collateral estoppel; (14)
18 justification; (15) no breach; (16) consent; (17) estoppel; (18) unclean hands; (19) failure to
19 mitigate; (20) unjust enrichment; (21) offset; (22) apportionment; (23) changed position; (24)
20 justifiable condition; (25) lack of standing; (26) Proposition 13, Government Code § 50076, and
21 Government Code § 54999.7(a) do not apply to Metropolitan’s rates; (27) Metropolitan’s rates
22 are paid only by the member agencies that set them and incurred voluntarily; (28) reservation of
23 right; (29) mistake of law; and (30) illegality of contract.
24 Metropolitan’s answer to the Petition/Complaint in the 2012 Action asserted thirty-two
25 affirmative defenses: (1) failure to state facts sufficient to constitute a cause of action; (2) statute
26 of limitations; (3) California Government Claims Act; (4) California Government Claims Act; (5)
27
8
28 Mar. 29, 2013 Order Granting MWD Mot. to Strike at 6.
3
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
1385571
1 untimely claim; (6) laches; (7); exercise of administrative discretion; (8) governmental immunity
2 for exercise of discretion; (9) validation by operation of law; (10) separation of powers; (11)
3 ripeness; (12) waiver; (13) res judicata and collateral estoppel; (14) justification; (15) no breach;
4 (16) consent; (17) estoppel; (18) unclean hands; (19) failure to mitigate; (20) unjust enrichment;
5 (21) offset; (22) apportionment; (23) changed position; (24) lack of standing; (25) inapplicability
6 of Proposition 26 because challenged rate structure and wheeling charges in place before
7 Proposition 26; (26) inapplicability of Proposition 26 because rate structure not “imposed”; (27)
8 System Access Rate, System Power Rate and Water Stewardship Rate are fees under Proposition
9 26; (28) RTS and Capacity Charges are fees under Proposition 26; (29) wheeling charge is fee
10 under Proposition 26; (30) reservation of right; (31) mistake of law; and (32) illegality of
11 contract.
12 On September 20, 2013, the Court denied Metropolitan’s motion for judgment on the
13 pleadings in the 2012 Action, rejecting Metropolitan’s defenses to the Water Authority’s “theory
14 of recovery based on Proposition 26.” 9
15 The Court coordinated the 2010 and 2012 Actions for discovery and trial, and bifurcated
16 trial into two phases: (1) causes of action challenging Metropolitan’s rates, and (2) the breach of
17 contract and preferential rights causes of action.
18 On November 5, 2013, the Court issued pre-trial rulings in advance of the first phase of
19 trial regarding the standards of review, burdens of proof, and the scope of evidence that would be
20 considered. 10
21 On December 4, 2013, the Court issued an order on the parties’ summary adjudication
22 motions. The Court denied Metropolitan’s motion for summary adjudication of the Water
23 Authority’s fourth cause of action for breach of contract in the 2010 and 2012 Actions, rejecting
24 Metropolitan’s argument that the Water Authority had “admitted that [Metropolitan’s] rate
25 structure” was “lawful.” 11 The Court denied Metropolitan’s motion for summary adjudication of
26 9
Sep. 19, 2013 Order Denying MWD’s Mot. for J. on the Pleadings at 2, 4.
27 10
Nov. 5, 2013 Pre Trial Rulings.
11
28 Dec. 4, 2013 Order on Summary Adjudication Motions at 3–5.
4
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
1385571
1 the Water Authority’s sixth cause of action in the 2010 Action for declaratory relief regarding
2 Metropolitan’s preferential rights calculation, holding that the Water Authority was not
3 collaterally estopped by an earlier decision. 12 The Court granted Metropolitan’s motion for
4 summary adjudication of the Water Authority’s fifth cause of action in the 2010 Action for
5 declaratory relief regarding the RSI clause, holding that, although the RSI clause constituted an
6 unconstitutional condition, the Water Authority lacked standing to challenge the clause. 13
7 The first phase of the bifurcated bench trial on the Water Authority’s causes of action
8 challenging Metropolitan’s rates (the first, second, and third causes of action in the 2010 and
9 2012 Actions), was held on December 17–23, 2013, with closing argument on January 23, 2014.
10 Following the Phase I bench trial, the Court issued its Statement of Decision on Rate
11 Setting Challenges on April 24, 2014. 14 The Court ruled in the Water Authority’s favor on each
12 of the first, second, and third causes of action in the 2010 and 2012 Actions, and invalidated each
13 of Metropolitan’s System Access Rate, System Power Rate, Water Stewardship Rate, and
14 wheeling rate for calendar years 2011–2014. 15 The Court held that Metropolitan’s transportation
15 rates and wheeling rate violated Proposition 26 (for calendar years 2013–2014 only), the
16 Wheeling statute (Water Code § 1810 et seq.), Government Code § 54999.7(a), and the common
17 law because a “significant portion” of those rates were “attributable to supply, not transportation,”
18 and therefore “over-collect from wheelers.” 16 The Court found that the record failed to support
19 Metropolitan’s inclusion in its transportation rates and wheeling rate Metropolitan’s State Water
20 Project transportation costs and demand management costs recovered through the Water
21 Stewardship Rate. 17 The Court concluded, however, that the Water Authority failed to show that
22 Metropolitan’s rates “fail to fairly account” for “dry year peaking.” 18
23 12
Id. at 5–7.
24 13
Id. at 7–23.
14
25 Apr. 24, 2014 Statement of Decision on Rate Setting Challenges.
15
Id. at 65.
26 16
Id.
27 17
Id.
18
28 Id.
5
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
1385571
1 On February 6, 2015, the Court denied Metropolitan’s motion to dismiss the Water
2 Authority’s fourth cause of action in the 2010 and 2012 Actions for breach of contract. The Court
3 rejected Metropolitan’s separation of powers defense that the Water Authority’s breach of
4 contract cause of action required “hypothetical ratemaking” and thus was a “legislative role not
5 given to courts.” 19
6 The Court then held the second phase of the bifurcated bench trial on the Water
7 Authority’s breach of contract and preferential rights causes of action on March 30, April 1–2,
8 and April 27–29, 2015, with closing argument on June 5, 2015.
9 Following the Phase II bench trial, the Court issued a second Statement of Decision on
10 August 28, 2015. 20 As to the breach of contract cause of action (fourth causes of action in the
11 2010 and 2012 Actions), the Court found that Metropolitan had breached the price term of the
12 parties’ Exchange Agreement because it charged the Water Authority a price based on the
13 transportation rates that the Court had found unlawful in Phase I. 21 The Court held that the Water
14 Authority had proven that it was entitled to damages in the amount of $188,295,602, plus
15 prejudgment interest, and that Metropolitan had failed to carry its burden of establishing any
16 offset to the Water Authority’s damages or unjust enrichment. 22 The Court rejected each
17 affirmative defense Metropolitan advanced to the breach of contract cause of action—waiver,
18 consent, estoppel, illegality, mistake of law, offset, and unjust enrichment. 23
19 As to the preferential rights cause of action (the sixth cause of action in the 2010 Action),
20 the Court ruled in favor of the Water Authority and held that Metropolitan’s formula for
21 calculating preferential rights must give the Water Authority credit for amounts it paid under the
22 Exchange Agreement, reasoning that those payments were not for the “purchase of water,” which
23
24 19
Feb. 6, 2015 Order Re: MWD’s Mot. to Dismiss for Lack of Subject Matter Jurisdiction & The
25 Parties’ Mots. in Limine at 1.
20
Aug. 28, 2015 Statement of Decision.
26 21
Id. at 10–12.
27 22
Id. at 15, 18.
23
28 Id. at 18–25.
6
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
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1 would be excluded from the preferential rights calculation. 24 The Court concluded that the Water
2 Authority was “entitled to a judicial declaration (a) that [Metropolitan’s] current methodology for
3 calculating [the Water Authority’s] preferential rights violates § 135 of the Metropolitan Water
4 District Act; and (b) directing [Metropolitan] to include [the Water Authority’s] payments for the
5 transportation of water under the Exchange Agreement in [Metropolitan’s] calculation of [the
6 Water Authority’s] preferential rights.” 25
7 On October 9, 2015, the Court granted the Water Authority’s motion for prejudgment
8 interest, holding that the Water Authority was entitled to statutory prejudgment interest at 10
9 percent per annum and rejecting Metropolitan’s contrary argument that Section 12.4(c) of the
10 Exchange Agreement established a different interest rate. 26
11 On October 30, 2015, the Court issued an order on post-trial issues holding that: (1)
12 because judgment was entered in the Water Authority’s favor on its causes of action challenging
13 Metropolitan’s rates, “a peremptory writ of mandate, too, should now issue”; 27 (2) the judgment
14 should resolve “causes of action only,” and rejecting Metropolitan’s argument that the judgment
15 “ought to list the claims” on which each party prevailed, such as Proposition 26, Proposition 13,
16 Government Code § 66013, the MWD Act, and “dry year peaking”; 28 (3) “[c]ontinuing
17 jurisdiction is required where a writ issues … and should be included here”; 29 and (4) the Water
18 Authority was entitled to a corrected amount of prejudgment interest at 10 percent per annum
19 running through the date judgment is entered. 30
20 On November 18, 2015, the Court entered final judgment and a peremptory writ of
21
24
22 Id. at 25–29.
25
Id. at 29.
23 26
Oct. 9, 2015 Order Granting San Diego’s Mot. for Prejudgment Interest at 1–5.
24 27
Oct. 30, 2015 Order on Post Trial Issues, Form of Judgment and Writ, San Diego’s Mot. to
Correct Oct. 9, 2015 Order on Prejudgment Interest at 2 (citing Cal. Ass’n for Health Servs. at
25 Home v. State Dep’t of Health care Servs., 204 Cal. App. 4th 676 (2012)).
28
26 Id. at 3.
29
Id. at 4 (citing City of Carmel-By-The-Sea v. Bd. of Supervisors, 137 Cal. App. 3d 964, 971
27 (1982)).
30
28 Id. at 4–5.
7
ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT
Case Nos. CPF-10-510830 & CPF-12-512466
1385571
1 mandate in the 2010 and 2012 Actions. 31 The Court entered judgment in favor of the Water
2 Authority and against Metropolitan, and all other persons, on the first, second, and third causes of
3 action challenging Metropolitan’s transportation rates and wheeling rate in the 2010 and 2012
4 Actions. 32 The Court entered judgment in favor of the Water Authority and against Metropolitan
5 on the fourth cause of action for breach of contract in the 2010 and 2012 Actions and awarded the
6 Water Authority damages in the amount of $188,295,602, plus prejudgment interest in the
7 amount of $46,637,180, for a total judgment of $234,932,728. 33 The Court entered judgment in
8 favor of the Water Authority and against Metropolitan on the sixth cause of action in the 2010
9 Action, and declared that Metropolitan “shall include in its calculation of preferential rights [the
10 Water Authority’s] payments under the Exchange Agreement, because such payments are not
11 payments for the ‘purchase of water.’” 34 The Court entered judgment in favor of Metropolitan
12 and against the Water Authority on the fifth cause of action in the Petition/Complaint in the 2010
13 Action for breach of the implied covenant of good faith and fair dealing; the sixth cause of action
14 in the Petition/Complaint in the 2010 Action for breach of fiduciary duty; and the fifth cause of
15 action in the Third Amended Petition/Complaint in the 2010 Action for declaratory relief
16 regarding the RSI clause. 35 The Court held that, as the prevailing party, the Water Authority was
17 entitled to attorneys’ fees and costs. 36 The Court retained continuing jurisdiction over the cases. 37
18 The Court also issued a peremptory writ of mandate commanding Metropolitan “to enact
19 only legal transportation and wheeling rates in the future, and, specifically, not to do the things
20 this Court held were illegal and/or unconstitutional in the Court’s April 24, 2014 Statement of
21 Decision.” 38 The peremptory writ of mandate further commanded Metropolitan to “henceforth set
22
31
Nov. 18, 2015 Judgment; Nov. 18, 2015 Peremptory Writ of Mandate.
23 32
Nov. 18, 2015 Judgment at 3–4.
24 33
Id. at 4.
34
25 Id.
35
Id.
26 36
Preview
1 KEKER, VAN NEST & PETERS LLP JOHN W. KEKER - # 49092 2 jkeker@keker.com ELECTRONICALLY DAN JACKSON - # 216091 3 djackson@keker.com F I L E D Superior Court of California, WARREN A. BRAUNIG - # 243884 County of San Francisco 4 wbraunig@keker.com NICHOLAS S. GOLDBERG - # 273614 06/17/2020 5 ngoldberg@keker.com Clerk of the Court BY: SANDRA SCHIRO 633 Battery Street Deputy Clerk 6 San Francisco, CA 94111-1809 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 11 Telephone: (858) 522-6600 Facsimile: (858) 522-6566 12 13 Attorneys for Petitioner and Plaintiff EXEMPT FROM FILING FEES 14 SAN DIEGO COUNTY WATER AUTHORITY [GOVERNMENT CODE § 6103] 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-10-510830 AUTHORITY, 18 Consolidated with: Case No. CPF-12-512466 Petitioner and Plaintiff, 19 DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO v. 20 COUNTY WATER AUTHORITY’S OPENING BRIEF RE FORM OF METROPOLITAN WATER DISTRICT 21 JUDGMENT AND ISSUANCE OF OF SOUTHERN CALIFORNIA; ALL PEREMPTORY WRIT OF MANDATE; PERSONS INTERESTED IN THE 22 EXHIBITS A-E VALIDITY OF THE RATES ADOPTED BY THE METROPOLITAN WATER 23 Date: July 30, 2020 DISTRICT OF SOUTHERN Time: 1:30 p.m. CALIFORNIA ON APRIL 13, 2010 TO 24 Dept.: 304 BE EFFECTIVE JANUARY 2011; and DOES 1-10, 25 Judge: Hon. Anne-Christine Massullo Respondents and Defendants. 26 27 28 DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE Case Nos. CPF-10-510830 & CPF-12-512466 1384664 1 I, Warren A. Braunig, declare and state that: 2 1. I am an attorney licensed to practice law in the State of California and am a partner 3 at the law firm of Keker, Van Nest & Peters LLP, counsel for Petitioner/Plaintiff San Diego 4 County Water Authority (“the Water Authority”) in the above-captioned actions. I am duly 5 admitted to practice law before this Court. Except where expressly stated, I have knowledge of 6 the facts set forth herein, and if called to testify as a witness thereto, could do so competently 7 under oath. 8 2. On April 28, 2020, following an unsuccessful meet-and-confer process with 9 counsel for Respondent/Defendant Metropolitan Water District of Southern California 10 (“Metropolitan”), the Water Authority filed a Motion for Entry of Judgment and Issuance of 11 Peremptory Writ of Mandate, attaching thereto a copy of its [Proposed] Judgment and [Proposed] 12 Peremptory Writ of Mandate. Due to the Court’s Covid-related restrictions on the scheduling of 13 new hearings, the Water Authority’s Motion was never set for a hearing and did not trigger a 14 standard briefing schedule. 15 3. Thereafter, on May 11, 2020, counsel for Metropolitan circulated a copy of 16 Metropolitan’s proposed judgment. The parties engaged in a further meet and confer on May 14, 17 which did not resolve the parties’ disagreements. 18 4. On May 20, 2020, the Court held a telephonic status conference, during which 19 counsel for the Water Authority and counsel for Metropolitan raised their dispute over the form of 20 the judgment and peremptory writ of mandate. The Court set the matter to be heard on July 30 at 21 1:30 p.m., and counsel agreed to file two rounds of simultaneous briefs regarding each party’s 22 preferred form of the judgment and the peremptory writ. The Court entered an order confirming 23 this agreement the following day. On June 4, the parties submitted a “Stipulation and [Proposed] 24 Order re Briefing Schedule on Proposed Final Judgment,” which set June 17 as the deadline to 25 file Opening Briefs and July 16 as the deadline to file Responsive Briefs. Pursuant to the 26 Stipulation, the Water Authority’s previously-filed Motion for Entry of Judgment and Issuance of 27 Peremptory Writ of Mandate was deemed withdrawn. 28 2 DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE Case Nos. CPF-10-510830 & CPF-12-512466 1384664 1 5. On June 12, 2020, my colleague Nicholas Goldberg sent counsel for Metropolitan 2 a revised copy of the Water Authority’s [Proposed] Judgment and [Proposed] Peremptory Writ of 3 Mandate, the versions that are being submitted herewith. On June 15, counsel for Metropolitan, 4 Barry Lee, sent to counsel for the Water Authority a copy of Metropolitan’s revised proposed 5 judgment. 6 6. It is the Water Authority’s position that the final judgment in these cases should 7 not include a preamble recounting the litigation’s procedural history. However, should the Court 8 elect to adopt a judgment with a procedural preamble, the Water Authority has prepared an 9 alternative preamble that provides an accurate and complete history, rather than the one-sided, 10 inaccurate, and incomplete preamble in Metropolitan’s proposed judgment. Attached as Exhibit 11 A hereto is the Alternative Preamble to [Proposed] Judgment. 12 7. This Court previously “award[ed] the Water Authority $28,678,190.90 in damages 13 plus prejudgment interest at 10 percent per annum.” July 25, 2018 Order re Scope of Proceedings 14 Following Remand at 5; see also id. at 9. In connection with the final judgment, the Court must 15 calculate the amount of prejudgment interest owing. Attached as Exhibit B hereto is a true and 16 correct copy of a chart, prepared at my direction, calculating the total amount of the Water 17 Authority’s damages and prejudgment interest through July 31, 2020. If the Court enters 18 judgment on July 31, 2020 (the day after the hearing on the form of judgment), prejudgment 19 interest would be $20,965,024.06 (for a total judgment of $49,643,214.96). Prejudgment interest 20 continues to accrue at a rate of $238,984.83 per month thereafter. For the Court’s convenience, a 21 second chart included in Exhibit B identifies, on a daily basis through August 31, the prejudgment 22 interest amount and total judgment, so that the Court can determine the final amount based on the 23 date the judgment is entered. 1 24 1 The daily amount is calculated simply by dividing the monthly rate by the number of days in the 25 month. For August 2020, the daily rate is: $238,984.83 / 31 = $7,709.19. 26 For example, if the Court were to enter final judgment on August 7, 2020, prejudgment interest would be calculated as follows: $20,965,024.06 + ($7,709.19 x 7) = $21,018,988.38. 27 That amount of prejudgment interest would then be added to the damages of $28,678,190.90 for a total judgment of $49,697,179.28. 28 3 DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE Case No. CPF-10-510830 & CPF-12-512466 1384664 1 8. The methodology and statutory prejudgment interest rate that the Water Authority 2 applied in calculating the amounts reflected in Exhibit B are the same as what was previously 3 adopted by this Court in the Original Judgment entered on November 18, 2015 and affirmed on 4 appeal. See San Diego Cty. Water Auth. v. Metropolitan Water Dist. of S. Cal., 12 Cal. App. 5th 5 1124, 1154–55 (2017), as modified on denial of reh’g (July 18, 2017). This calculation utilizes 6 the methodology that Metropolitan advanced, and the Court accepted, in Exhibit J to the 7 Declaration of Hal Soper III in Support of Metropolitan’s Opposition to Plaintiff’s Motion for 8 Prejudgment Interest, dated September 24, 2015 (“Soper Declaration”). A true and correct copy 9 of the Soper Declaration, and Exhibit J thereto, are attached hereto as Exhibit C. 10 9. In particular, Mr. Soper attested in his declaration that, pursuant to Metropolitan’s 11 invoicing procedures, there is a “two month delay between the month of [Metropolitan’s] delivery 12 and the month of [the Water Authority’s] payment” for that same delivery. Soper Decl. ¶ 19; see 13 also id. ¶¶ 18, 20 & Ex. J thereto. The Water Authority’s prejudgment interest calculation 14 accounts for this two-month lag in determining the period of accrual for the Water Authority’s 15 prejudgment interest. For example, as shown in the chart filed at Exhibit B, to determine the 16 prejudgment interest on Metropolitan’s overcharges for water delivered in January 2011, the 17 Water Authority accrued interest for 112 months beginning on March 31, 2011 and ending on 18 July 31, 2020. 19 10. On April 16, 2020, I sent counsel for Metropolitan a version of the chart at Exhibit 20 B reflecting prejudgment interest calculations through May 30, 2020, June 30, 2020, and July 31, 21 2020. By email on May 18, 2020, Mr. Lee advised that “[s]ubject to the parties’ different legal 22 positions affecting the damages interest amounts, we have confirmed the accuracy of the 23 arithmetic set forth in your Apr. 16, 2020 schedule.” 24 11. Attached as Exhibit D hereto is a true and correct copy of the letter, dated 25 February 12, 2019, that Marcia Scully, General Counsel for Metropolitan, sent to Mark J. Hattam, 26 General Counsel for the Water Authority, re: “Tender of Payment for Trial Court’s Contract 27 28 4 DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE Case No. CPF-10-510830 & CPF-12-512466 1384664 1 Damages Award for Water Stewardship Rate Payments under the Exchange Agreement for 2011– 2 2014, Plus Statutory Interest, in SDCWA v. MWD, et al., 2010 and 2012 Actions.” 3 12. Attached as Exhibit E hereto is a true and correct copy of the letter, dated March 4 7, 2019, that Mr. Hattam sent to Ms. Scully in response to Metropolitan’s purported tender offer. 5 13. The 2010 Case challenged rates for calendar years 2011 and 2012, which 6 Metropolitan had adopted as part of its biennial rate-setting process. The 2012 Case challenged 7 rates for calendar years 2013 and 2014, also adopted as part of Metropolitan’s biennial rate- 8 setting process. Each of these rates expired on the last day of the corresponding calendar year. 9 Specifically, the 2011 rates expired on December 31, 2011; the 2012 rates on December 31, 2012; 10 the 2013 rates on December 31, 2013; and the 2014 rates on December 31, 2014. 11 I declare under penalty of perjury under the laws of the State of California that the 12 foregoing is true and correct and that this declaration was executed on June 17, 2020, at San 13 Francisco, California. 14 15 _______________________________ WARREN A. BRAUNIG 16 17 18 19 20 21 22 23 24 25 26 27 28 5 DECLARATION OF WARREN A. BRAUNIG IN SUPPORT OF SAN DIEGO’S OPENING BRIEF RE FORM OF JUDGMENT AND ISSUANCE OF PEREMPTORY WRIT OF MANDATE Case No. CPF-10-510830 & CPF-12-512466 1384664 Exhibit A 1 KEKER, VAN NEST & PETERS LLP JOHN KEKER - # 49092 2 jkeker@keker.com DAN JACKSON - # 216091 3 djackson@keker.com WARREN A. BRAUNIG - # 243884 4 wbraunig@keker.com NICHOLAS S. GOLDBERG - # 273614 5 ngoldberg@keker.com 633 Battery Street 6 San Francisco, CA 94111-1809 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 11 Telephone: (858) 522-6600 Facsimile: (858) 522-6566 12 Attorneys for Petitioner and Plaintiff 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-10-510830 AUTHORITY, 18 Consolidated with: Case No. CPF-12-512466 Petitioner and Plaintiff, 19 ALTERNATIVE PREAMBLE TO v. [PROPOSED] JUDGMENT 20 METROPOLITAN WATER DISTRICT OF Judge: Hon. Anne-Christine Massullo 21 SOUTHERN CALIFORNIA; ALL Dept.: 304 PERSONS INTERESTED IN THE 22 VALIDITY OF THE RATES ADOPTED Date Filed: June 11, 2010 BY THE METROPOLITAN WATER June 8, 2012 23 DISTRICT OF SOUTHERN CALIFORNIA ON APRIL 13, 2010 TO BE EFFECTIVE 24 JANUARY 2011; and DOES 1-10, 25 Respondents and Defendants. 26 27 28 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 This final judgment fully resolves two cases pending in this Court: San Diego County 2 Water Authority v. Metropolitan Water District of Southern California et al., Case No. CPF-10- 3 510830 (“the 2010 Action”), and San Diego County Water Authority v. Metropolitan Water 4 District of Southern California et al., Case No. CPF-12-512466 (“the 2012 Action”). 5 Petitioner and Plaintiff San Diego County Water Authority (“Water Authority”) filed its 6 Petition/Complaint in the 2010 Action on June 11, 2010, alleging three causes of action 7 challenging Metropolitan Water District of Southern California’s (“Metropolitan”) transportation 8 rates and wheeling rate for calendar years 2011–2012: (1) writ of mandate, (2) declaratory relief, 9 and (3) determination of invalidity. The Water Authority filed its First Amended 10 Petition/Complaint on October 17, 2011, adding a fourth cause of action for breach of contract, 11 alleging that Metropolitan breached the October 10, 2003 Amended and Restated Agreement 12 between Metropolitan Water District of Southern California and the San Diego County Water 13 Authority for the Exchange of Water (“Exchange Agreement”). The First Amended 14 Petition/Complaint also added a fifth cause of action for breach of the implied covenant of good 15 faith and fair dealing, a sixth cause of action for breach of fiduciary duty, a seventh cause of 16 action for declaratory relief regarding Metropolitan’s Rate Structure Integrity (“RSI”) clause, and 17 an eighth cause of action for declaratory relief regarding Metropolitan’s preferential rights 18 calculation. 19 On January 4, 2012, the Court denied, with prejudice, Metropolitan’s motion to strike 20 portions of the Water Authority’s Petition/Complaint under the Strategic Lawsuit Against Public 21 Participation (“SLAPP”) statute. 1 The Court overruled Metropolitan’s demurrer to the Water 22 Authority’s fourth cause of action for breach of contract, rejecting Metropolitan’s defense under 23 the California Government Claims Act and holding that the Water Authority complied with the 24 Government Claims Act requirements. 2 The Court further overruled Metropolitan’s demurrer to 25 the Water Authority’s eighth cause of action for declaratory relief regarding Metropolitan’s 26 1 Jan. 4, 2012 Minute Order at 2. 27 2 Id. at 3; Jan. 4, 2012 Hr’g Tr. at 28:13–22 (holding that “plaintiff complied with the 28 Government Claims Act requirement”); see also id. at 35:23–36:14. 1 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 preferential rights calculation. 3 The Court sustained, without leave to amend, Metropolitan’s 2 demurrer to the Water Authority’s fifth cause of action for breach of the implied covenant of 3 good faith and fair dealing and sixth cause of action for breach of fiduciary duty. 4 4 The Water Authority filed its Second Amended Petition/Complaint on April 17, 2012 and 5 included six causes of action: (1) writ of mandate, (2) declaratory relief, (3) determination of 6 invalidity, (4) breach of contract, (5) declaratory relief regarding the RSI clause, and (6) 7 declaratory relief regarding Metropolitan’s preferential rights calculation. 8 On July 2, 2012, the Court overruled Metropolitan’s demurrer to the Water Authority’s 9 first, second, third, and fourth causes of action in its Second Amended Petition/Complaint, 10 rejecting Metropolitan’s defenses that its rates had been validated by operation of law and that the 11 Water Authority’s claims were barred by the statute of limitations. 5 The Court denied 12 Metropolitan’s motion to strike the Water Authority’s allegations regarding Proposition 13 and its 13 non-constitutional challenges to Metropolitan’s rates. 6 The Court also declined to strike the Water 14 Authority’s allegations regarding a working group of certain member agencies, but issued a ruling 15 precluding the Water Authority from taking discovery concerning those allegations. 7 16 On January 23, 2013, the Water Authority filed the operative Third Amended 17 Petition/Complaint in the 2010 Action alleging six causes of action: (1) writ of mandate, (2) 18 declaratory relief, (3) determination of invalidity, (4) breach of contract, (5) declaratory relief 19 regarding the RSI clause, and (6) declaratory relief regarding Metropolitan’s preferential rights 20 calculation. 21 22 3 Jan. 4, 2012 Minute Order at 4. 23 4 Id. at 3–4. 5 24 July 2, 2012 Minute Order at 1; July 2, 2012 Hr’g Tr. at 62:24–26 (“Neither the statute of limitations nor the validating statute bar the allegations in the Second Amended Complaint.”). 25 6 July 2, 2012 Hr’g Tr. at 40:26–43:1, 62:24–63:6; July 2, 2012 Minute Order (confirming orders “as reflected in the Court Reporter’s transcript of the record.”). 26 7 Id. at 41:26–42:14 (ordering that “discovery will be limited to the nature of the decisions that 27 were made and whether they comply with the applicable legal standards,” but declining to otherwise strike allegations and “chop up the Complaint”); id. at 62:27–63:13; July 2, 2012 28 Minute Order (confirming orders “as reflected in the Court Reporter’s transcript of the record.”). 2 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 On March 29, 2013, the Court granted Metropolitan’s motion to strike the Water 2 Authority’s allegations concerning Proposition 26 in the 2010 Action, holding that “the rule 3 counseling against retroactive application” of constitutional amendments prevented the Court 4 from applying Proposition 26 retroactively to Metropolitan’s rates adopted before Proposition 5 26’s effective date. 8 6 On June 8, 2012, the Water Authority filed its Petition/Complaint in the 2012 Action, 7 which included four causes of action challenging Metropolitan’s rates for calendar years 2013 and 8 2014: (1) writ of mandate, (2) declaratory relief, (3) determination of invalidity, and (4) breach of 9 contract. 10 Metropolitan answered the operative Third Amended Petition/Complaint in the 2010 11 Action and the Petition/Complaint in the 2012 Action. 12 Metropolitan’s answer to the Third Amended Petition/Complaint in the 2010 Action 13 asserted thirty affirmative defenses: (1) failure to state facts sufficient to constitute a cause of 14 action; (2) statute of limitations; (3) California Government Claims Act; (4) California 15 Government Claims Act; (5) untimely claim; (6) laches; (7); exercise of administrative discretion; 16 (8) governmental immunity for exercise of discretion; (9) validation by operation of law; (10) 17 separation of powers; (11) ripeness; (12) waiver; (13) res judicata and collateral estoppel; (14) 18 justification; (15) no breach; (16) consent; (17) estoppel; (18) unclean hands; (19) failure to 19 mitigate; (20) unjust enrichment; (21) offset; (22) apportionment; (23) changed position; (24) 20 justifiable condition; (25) lack of standing; (26) Proposition 13, Government Code § 50076, and 21 Government Code § 54999.7(a) do not apply to Metropolitan’s rates; (27) Metropolitan’s rates 22 are paid only by the member agencies that set them and incurred voluntarily; (28) reservation of 23 right; (29) mistake of law; and (30) illegality of contract. 24 Metropolitan’s answer to the Petition/Complaint in the 2012 Action asserted thirty-two 25 affirmative defenses: (1) failure to state facts sufficient to constitute a cause of action; (2) statute 26 of limitations; (3) California Government Claims Act; (4) California Government Claims Act; (5) 27 8 28 Mar. 29, 2013 Order Granting MWD Mot. to Strike at 6. 3 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 untimely claim; (6) laches; (7); exercise of administrative discretion; (8) governmental immunity 2 for exercise of discretion; (9) validation by operation of law; (10) separation of powers; (11) 3 ripeness; (12) waiver; (13) res judicata and collateral estoppel; (14) justification; (15) no breach; 4 (16) consent; (17) estoppel; (18) unclean hands; (19) failure to mitigate; (20) unjust enrichment; 5 (21) offset; (22) apportionment; (23) changed position; (24) lack of standing; (25) inapplicability 6 of Proposition 26 because challenged rate structure and wheeling charges in place before 7 Proposition 26; (26) inapplicability of Proposition 26 because rate structure not “imposed”; (27) 8 System Access Rate, System Power Rate and Water Stewardship Rate are fees under Proposition 9 26; (28) RTS and Capacity Charges are fees under Proposition 26; (29) wheeling charge is fee 10 under Proposition 26; (30) reservation of right; (31) mistake of law; and (32) illegality of 11 contract. 12 On September 20, 2013, the Court denied Metropolitan’s motion for judgment on the 13 pleadings in the 2012 Action, rejecting Metropolitan’s defenses to the Water Authority’s “theory 14 of recovery based on Proposition 26.” 9 15 The Court coordinated the 2010 and 2012 Actions for discovery and trial, and bifurcated 16 trial into two phases: (1) causes of action challenging Metropolitan’s rates, and (2) the breach of 17 contract and preferential rights causes of action. 18 On November 5, 2013, the Court issued pre-trial rulings in advance of the first phase of 19 trial regarding the standards of review, burdens of proof, and the scope of evidence that would be 20 considered. 10 21 On December 4, 2013, the Court issued an order on the parties’ summary adjudication 22 motions. The Court denied Metropolitan’s motion for summary adjudication of the Water 23 Authority’s fourth cause of action for breach of contract in the 2010 and 2012 Actions, rejecting 24 Metropolitan’s argument that the Water Authority had “admitted that [Metropolitan’s] rate 25 structure” was “lawful.” 11 The Court denied Metropolitan’s motion for summary adjudication of 26 9 Sep. 19, 2013 Order Denying MWD’s Mot. for J. on the Pleadings at 2, 4. 27 10 Nov. 5, 2013 Pre Trial Rulings. 11 28 Dec. 4, 2013 Order on Summary Adjudication Motions at 3–5. 4 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 the Water Authority’s sixth cause of action in the 2010 Action for declaratory relief regarding 2 Metropolitan’s preferential rights calculation, holding that the Water Authority was not 3 collaterally estopped by an earlier decision. 12 The Court granted Metropolitan’s motion for 4 summary adjudication of the Water Authority’s fifth cause of action in the 2010 Action for 5 declaratory relief regarding the RSI clause, holding that, although the RSI clause constituted an 6 unconstitutional condition, the Water Authority lacked standing to challenge the clause. 13 7 The first phase of the bifurcated bench trial on the Water Authority’s causes of action 8 challenging Metropolitan’s rates (the first, second, and third causes of action in the 2010 and 9 2012 Actions), was held on December 17–23, 2013, with closing argument on January 23, 2014. 10 Following the Phase I bench trial, the Court issued its Statement of Decision on Rate 11 Setting Challenges on April 24, 2014. 14 The Court ruled in the Water Authority’s favor on each 12 of the first, second, and third causes of action in the 2010 and 2012 Actions, and invalidated each 13 of Metropolitan’s System Access Rate, System Power Rate, Water Stewardship Rate, and 14 wheeling rate for calendar years 2011–2014. 15 The Court held that Metropolitan’s transportation 15 rates and wheeling rate violated Proposition 26 (for calendar years 2013–2014 only), the 16 Wheeling statute (Water Code § 1810 et seq.), Government Code § 54999.7(a), and the common 17 law because a “significant portion” of those rates were “attributable to supply, not transportation,” 18 and therefore “over-collect from wheelers.” 16 The Court found that the record failed to support 19 Metropolitan’s inclusion in its transportation rates and wheeling rate Metropolitan’s State Water 20 Project transportation costs and demand management costs recovered through the Water 21 Stewardship Rate. 17 The Court concluded, however, that the Water Authority failed to show that 22 Metropolitan’s rates “fail to fairly account” for “dry year peaking.” 18 23 12 Id. at 5–7. 24 13 Id. at 7–23. 14 25 Apr. 24, 2014 Statement of Decision on Rate Setting Challenges. 15 Id. at 65. 26 16 Id. 27 17 Id. 18 28 Id. 5 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 On February 6, 2015, the Court denied Metropolitan’s motion to dismiss the Water 2 Authority’s fourth cause of action in the 2010 and 2012 Actions for breach of contract. The Court 3 rejected Metropolitan’s separation of powers defense that the Water Authority’s breach of 4 contract cause of action required “hypothetical ratemaking” and thus was a “legislative role not 5 given to courts.” 19 6 The Court then held the second phase of the bifurcated bench trial on the Water 7 Authority’s breach of contract and preferential rights causes of action on March 30, April 1–2, 8 and April 27–29, 2015, with closing argument on June 5, 2015. 9 Following the Phase II bench trial, the Court issued a second Statement of Decision on 10 August 28, 2015. 20 As to the breach of contract cause of action (fourth causes of action in the 11 2010 and 2012 Actions), the Court found that Metropolitan had breached the price term of the 12 parties’ Exchange Agreement because it charged the Water Authority a price based on the 13 transportation rates that the Court had found unlawful in Phase I. 21 The Court held that the Water 14 Authority had proven that it was entitled to damages in the amount of $188,295,602, plus 15 prejudgment interest, and that Metropolitan had failed to carry its burden of establishing any 16 offset to the Water Authority’s damages or unjust enrichment. 22 The Court rejected each 17 affirmative defense Metropolitan advanced to the breach of contract cause of action—waiver, 18 consent, estoppel, illegality, mistake of law, offset, and unjust enrichment. 23 19 As to the preferential rights cause of action (the sixth cause of action in the 2010 Action), 20 the Court ruled in favor of the Water Authority and held that Metropolitan’s formula for 21 calculating preferential rights must give the Water Authority credit for amounts it paid under the 22 Exchange Agreement, reasoning that those payments were not for the “purchase of water,” which 23 24 19 Feb. 6, 2015 Order Re: MWD’s Mot. to Dismiss for Lack of Subject Matter Jurisdiction & The 25 Parties’ Mots. in Limine at 1. 20 Aug. 28, 2015 Statement of Decision. 26 21 Id. at 10–12. 27 22 Id. at 15, 18. 23 28 Id. at 18–25. 6 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 would be excluded from the preferential rights calculation. 24 The Court concluded that the Water 2 Authority was “entitled to a judicial declaration (a) that [Metropolitan’s] current methodology for 3 calculating [the Water Authority’s] preferential rights violates § 135 of the Metropolitan Water 4 District Act; and (b) directing [Metropolitan] to include [the Water Authority’s] payments for the 5 transportation of water under the Exchange Agreement in [Metropolitan’s] calculation of [the 6 Water Authority’s] preferential rights.” 25 7 On October 9, 2015, the Court granted the Water Authority’s motion for prejudgment 8 interest, holding that the Water Authority was entitled to statutory prejudgment interest at 10 9 percent per annum and rejecting Metropolitan’s contrary argument that Section 12.4(c) of the 10 Exchange Agreement established a different interest rate. 26 11 On October 30, 2015, the Court issued an order on post-trial issues holding that: (1) 12 because judgment was entered in the Water Authority’s favor on its causes of action challenging 13 Metropolitan’s rates, “a peremptory writ of mandate, too, should now issue”; 27 (2) the judgment 14 should resolve “causes of action only,” and rejecting Metropolitan’s argument that the judgment 15 “ought to list the claims” on which each party prevailed, such as Proposition 26, Proposition 13, 16 Government Code § 66013, the MWD Act, and “dry year peaking”; 28 (3) “[c]ontinuing 17 jurisdiction is required where a writ issues … and should be included here”; 29 and (4) the Water 18 Authority was entitled to a corrected amount of prejudgment interest at 10 percent per annum 19 running through the date judgment is entered. 30 20 On November 18, 2015, the Court entered final judgment and a peremptory writ of 21 24 22 Id. at 25–29. 25 Id. at 29. 23 26 Oct. 9, 2015 Order Granting San Diego’s Mot. for Prejudgment Interest at 1–5. 24 27 Oct. 30, 2015 Order on Post Trial Issues, Form of Judgment and Writ, San Diego’s Mot. to Correct Oct. 9, 2015 Order on Prejudgment Interest at 2 (citing Cal. Ass’n for Health Servs. at 25 Home v. State Dep’t of Health care Servs., 204 Cal. App. 4th 676 (2012)). 28 26 Id. at 3. 29 Id. at 4 (citing City of Carmel-By-The-Sea v. Bd. of Supervisors, 137 Cal. App. 3d 964, 971 27 (1982)). 30 28 Id. at 4–5. 7 ALTERNATIVE PREAMBLE TO [PROPOSED] JUDGMENT Case Nos. CPF-10-510830 & CPF-12-512466 1385571 1 mandate in the 2010 and 2012 Actions. 31 The Court entered judgment in favor of the Water 2 Authority and against Metropolitan, and all other persons, on the first, second, and third causes of 3 action challenging Metropolitan’s transportation rates and wheeling rate in the 2010 and 2012 4 Actions. 32 The Court entered judgment in favor of the Water Authority and against Metropolitan 5 on the fourth cause of action for breach of contract in the 2010 and 2012 Actions and awarded the 6 Water Authority damages in the amount of $188,295,602, plus prejudgment interest in the 7 amount of $46,637,180, for a total judgment of $234,932,728. 33 The Court entered judgment in 8 favor of the Water Authority and against Metropolitan on the sixth cause of action in the 2010 9 Action, and declared that Metropolitan “shall include in its calculation of preferential rights [the 10 Water Authority’s] payments under the Exchange Agreement, because such payments are not 11 payments for the ‘purchase of water.’” 34 The Court entered judgment in favor of Metropolitan 12 and against the Water Authority on the fifth cause of action in the Petition/Complaint in the 2010 13 Action for breach of the implied covenant of good faith and fair dealing; the sixth cause of action 14 in the Petition/Complaint in the 2010 Action for breach of fiduciary duty; and the fifth cause of 15 action in the Third Amended Petition/Complaint in the 2010 Action for declaratory relief 16 regarding the RSI clause. 35 The Court held that, as the prevailing party, the Water Authority was 17 entitled to attorneys’ fees and costs. 36 The Court retained continuing jurisdiction over the cases. 37 18 The Court also issued a peremptory writ of mandate commanding Metropolitan “to enact 19 only legal transportation and wheeling rates in the future, and, specifically, not to do the things 20 this Court held were illegal and/or unconstitutional in the Court’s April 24, 2014 Statement of 21 Decision.” 38 The peremptory writ of mandate further commanded Metropolitan to “henceforth set 22 31 Nov. 18, 2015 Judgment; Nov. 18, 2015 Peremptory Writ of Mandate. 23 32 Nov. 18, 2015 Judgment at 3–4. 24 33 Id. at 4. 34 25 Id. 35 Id. 26 36