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SUPERIOR COURT OF CALIFORNIA

COUNTY OF SAN FRANCISCO

Document Scanning Lead Sheet

Nov-03-2014 10:59 am

Case Number: CGC-13-528312

Filing Date: Nov-03-2014 10:51
Filed by: SHAWNA VANTREE
Juke Box: 001

Image: 04676360

ORDER

CALIFORNIA-AMERICAN WATER COMPANY, A CALIFORNIA CO VS. MARINA

COAST WATER DISTRICT et al

001 C04676360

Instructions:
Please place this sheet on top of the document to be scanned.

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Cnunrv Suporior Court

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SUPERIOR COURT OF CALIFORNIA
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COUNTY OF SAN FRANCISCO

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CALIFORNIA-AMERICAN WATER CO.,

Plaintiff,

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vs.
MARINA COAST WATER DISTRICT, ET
AL.,
Defendants.

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Case No. CGC- 13-528312

AND RELATED CROSS ACTIONS

ORDER DENYING MONTEREY'S

MOTION FOR SUMMARY
ADJUDICATION OR JUDGMENT ON ITS
CROSS-COMPLAINT
AND
DENYING IN PART AND GRANTING IN
PART MONTEREY'S MOTION FOR
SUMMARY ADJUDICATION OF
MARINA'S CROSS-COMPLAINT

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The three parties here are California-American Water Company (Cal-Am), Marina Coast
Water District (Marina), and Monterey County Water Resources Agency (Monterey). Before the
Court is Monterey's motion for summary adjudication on the single cause of action in its cross-

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complaint and on all seven causes of action in Marina's cross-complaint. Cal-Amjoins in the
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motion. At issue is the validity of certain contracts (Agreements) entered into respecting a
Regional Desalination Project (Project).

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I heard extended argument October 23, 2014. The precise holding of this Order is

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narrow: It is that the motion for summary adjudication on Marina's cross complaint is granted in

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part and denied in part, and the motion as to Monterey's cross-complaint must be denied,

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because given the inferences I must make in Marina's favor at this stage, I am unable to conclude

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that as to all five pertinent agreements Collins had the relevant role for purposes of Govt. Code
1090. Nevertheless, the parties have expended considerable resources briefing other issues, and
there appear to be very few disputed facts; 1 so I have thought it useful (as we refine issues for

trial) to provide some analysis of those.

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Procedural History

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On October 4, 2012, Cal-Am filed its Complaint against Marina and Monterey, asserting
two causes of action for declaratory relief: (1) seeking a declaration as to whether the
Agreements are void pursuant to Government Code 1090 due to a conflict of interest attributed

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to Stephen Collins; and (2) seeking a declaration that, assuming the Agreements are not void,
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Cal-Am was entitled to terminate the contracts based on Monterey's anticipatory repudiation.

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Complaint, ~~ 28-29. 31-32. Then Marina filed its Cross-Complaint against Cal-Am and

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Monterey. Marina alleged seven causes of action for declaratory relief: (1) seeking a declaration

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that challenges to the validity of the Agreements were barred by the validation statutes, which

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were triggered by any of three statutory provisions (first three causes of action); and (2) seeking
a declaration that challenges to the validity of the Agreements are barred by operation of the

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Public Utilities Code (last four causes of action). Marina Cross-Complaint,~~ 20-44.
Marina moved for summary adjudication, and in a February 25, 2014 Order I granted

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summary adjudication of the first cause of action in the Complaint but denied summary

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adjudication on the causes of action in Marina's cross-complaint, finding that Monterey but not

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Pressed at argument, Marina suggested only that there were disputed facts regarding unclean hands and remedies
(the issue for which Marina relies on Thompson) and was unable to clearly articulate a position on whether the five
agreements rise or fall together. Marina did also suggest that there were disputed facts on the issue of indispensable
parties but did not point to any putatively undisputed or disputed facts in this connection (Marina noted its Fact# 70
as if it raised an issue whether one party to a contract 'adequately represented the interests' of another; but it does
not).

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Cal-Am could seek to void the Agreements. Feb. 25,2014 Order, 14. Then Monterey filed its
own cross-complaint seeking a judicial declaration that the Agreements are void. I have allowed

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Monterey to pursue its Cross-Complaint outside the validation statutes. See Oct. 2, 2014 Order,

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Undisputed Facts

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Cal-Am, Marina, and Monterey agreed to undertake the Project. Marina's Response to
Monterey's Separate Statement~ 5? In furtherance of the Project, the parties entered five
apparently related Agreements: (I) the Settlement Agreement; (2) the Reimbursement

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Agreement; (3) the Water Purchase Agreement; (4) the Credit Line Agreement; and (5) the
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Project Management Agreement. !d.

at~~

13-14.

Stephen P. Collins served on Monterey's appointed Board of Directors for 16 years

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at~

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preceding April!, 2011. !d.

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RMC Water and Environment to provide consulting services for the Project. !d. at ~ 17. At the

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18. On January 8, 2010, Collins entered into an agreement with

time, RMC was providing services to Marina in connection with the project. See Monterey
Appendix of Evidence, Ex. 36, Declaration of Kyle Brochard in Support of Opposition, Ex. K. 3

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Collins rendered services to RMC until at least November 24,2010, during which time RMC
compensated him pursuant to an hourly rate. Marina's Response to Monterey's Separate

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Statement~~

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capped at $25,000. !d.

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at~

42. On AprilS, 2010, Collins voted, as a member of Monterey's

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There are a number of Monterey's facts that Marina does not dispute, although it occasionally argues the recitation
is incomplete or irrelevant.
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Both cited exhibits are excerpts from the deposition ofLyndel Melton. Melton stated in his deposition that
pursuant to a May 2009 contract RMC agreed to assist Marina in drafting the Agreements, but the services RMC
actually provided consisted of engineering support to develop the basis of understanding between the parties. See
Monterey Appendix of Evidence, Ex. 36 at 40:5-44:9.

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Board of Directors, to recommend Monterey's Board of Supervisors to authorize Monterey staff

to execute the Settlement Agreement and Water Purchase Agreement. !d. at~ 28. Two days

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later, after Monterey's Board of Supervisors voted to approve the Project, the cap on Collins'
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compensation from RMC was raised to $75,000. !d.

again to a maximum of$125,000. !d.

at~

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43. In July 2010, the cap was raised

44. In December, just before Collins' contract with

RMC was terminated and on the same day the California Public Utilities Commission approved

the Project, Collins' compensation cap was raised to $160,000. !d.

Collins voted to approve the Credit Line Agreement. !d.

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at~

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45. In January 24,2011,

31. Collins also advocated for the

Project in the community and met with local elected officials to obtain their "buy-in" for the

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Project. !d.

at~

32.

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On February 28,2011, Collins recused himself from a public vote of Monterey's Board

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of Directors on the Project Management Agreement because Collins was uncomfortable voting

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on anything involving RMC. !d.

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Agreements were void because Collins had violated Government Code 1090. !d.

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at~~

47-48. In July 2011, Monterey took the position that the

at~

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Collins was charged with two felony violations ofthe same section, and numerous other criminal

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violations. !d.

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61. On March 17,2014, Collins pled no contest to a felony violation of

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Government Code 1090. !d. at~ 63. 4 By then the Project had been abandoned and this
litigation had commenced. See id.

at~~

57, 59-60.

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Requests for Judicial Notice

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Monterey requests judicial notice of eight documents. Monterey RJN ~~ 1-8; Monterey
Appendix, Exs. 5-7, 29-33. Exhibits 5 and 6 are orders of the State Water Resources Control

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The Government Code I 090 violation to which Collins pled guilty related only to the Settlement Agreement and
Water Purchase Agreement, and was limited in time to January 2010 through April2010. Declaration of Stephen P.
Collins in Support of Opposition~~ 7-10, Ex. A at 2.

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Board. Exhibits 7 and 29 are California Public Utilities Commission decisions. Exhibit 30 is a
filing before the Commission. Exhibit 31 is a criminal complaint. Exhibit 32 is a civil complaint

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with a supporting declaration. Exhibit 3 3 is a memorandum of law filed in a criminal case.

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Judicial notice of the existence of these is granted. The first four are administrative decisions.

See Pratt v. Coast Trucking, Inc., 228 Cal.App.2d 139, 143-44 (1964) (taking judicial notice of

the files and records of the Public Utilities Commission). The fifth is a part of the Commission's

official files. !d. The last three are court records. Evid. Code 452( d).

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Marina requests judicial notice of two documents. Marina RJN, 2-4; Declaration of Kyle
H. Brochard, Exs. R, U. Both requests are granted. The first is a part of the Commission's

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official files. The second is an administrative decision.

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Monterey requests judicial notice of two additional documents, one from the court file in

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a case captioned Monterey County Water Resources Agency v. Marina Coast Water District, et

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al., San Francisco Superior Court No. CGC-14-539082 and one from the court file in Collins'

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criminal case. Both requests are granted. Evid. Code 452(d).

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Evidentiary Objections
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There are several evidentiary objections. I address the significant objections.

(1) Monterey's Appendix, Exs. 8, 10- These are Marina's responses to proposed

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statements of undisputed facts from earlier in the litigation. Exhibit 10 is inadmissible, for it was

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filed in response to a separate statement on a different summary judgment motion. Exhibit 8 is

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admissible as it appears to be a response related to the 1090 issue filed at a CMC. Marina

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argues that it is not a true pleading and is not signed (no signature page is attached). But these

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are Marina's court filed responses to stipulated facts.

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(2) Monterey's Appendix, Exs. 18-19, 33- These are two reports containing legal
analysis with respect to whether Collins violated 1090, and a brief filed by the District

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Attorney in Collins' criminal case. While this is evidence of the opinions taken and the bases for

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those opinions, the documents are not themselves evidence of the underlying facts and the legal
opinions taken by others do not appear to have any relevance. These reports are inadmissible for
the truth of their contents, and their legal opinions do not appear relevant.
(3) Monterey's Appendix, Ex. 32 at~ 39- This is a declaration filed by Collins in
another case, in which he states that an individual at Monterey did not express concern that
Collins was brought on to "close the deal." Monterey may wish to use this to show Collins was

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brought on to "close the deal." This appears to be inadmissible hearsay.
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(4) Declaration of Stephen P. Collins: Monterey and Cal-Am object to many paragraphs

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of the Collins Declaration. See e.g., Declaration at~~ 7-10 and 73-78. There are objections to

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paragraphs 73-78 as irrelevant, lacking foundation, and, as to some, statements of the intent of

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others. Collins' statements about attending meetings, the apparent purpose of the meetings he

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attended, identifying the individuals at the meetings, or describing their reactions to the content

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of the meetings do not lack foundation, and these are relevant to the unclean hands defense
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(assuming the defense is viable).

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Discussion

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February 25, 2014 Summary Adjudication Order and Marina's Cross-Complaint

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Monterey relies solely on the February 25,2014 Summary Adjudication Order to have
me enter summary adjudication against Marina on the entirety of Marina's cross-complaint.

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Triggers for the Validation Statutes

Marina's cross-complaint has seven causes of action. The first three pertain to the

validation statutes, and each relies on a separate trigger: (1) Water Code appendix 52-39; (2)
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Water Code 30066; and (3) Government Code 53511. I have found that the first trigger
applied to all of the contracts, but because the trigger was for Monterey's benefit it did not bar an

action brought by Monterey seeking to invalidate the contracts under Government Code 1090.

Feb. 25,2014 Order, 9, 14-15. Thus, I denied summary adjudication in Marina's favor on the

first cause of action in Marina's cross-complaint. !d. at 15.

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The triggers relied on in the second and third causes of action, both of which may be for

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Marina's benefit, differ from that in the first cause of action because those triggers apply only to
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contracts that involve financing obligations. !d. at 6-7,9-10. I wrote, "These statutes do not

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apply to all the Agreements at issue now. The Water Purchase Agreement contemplates

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financing, but does not create it .... Nor does the Settlement Agreement involve the creation of

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financing or financing obligations. Accordingly I cannot grant judgment on the second or third

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causes of action." !d. at 10. I noted in that context the parties' agreement, for the purposes of
those motions, that all of the contracts rise or fall together. !d. at 2 n.5. It is entirely unclear now

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whether that agreement (treating the Agreements together) continues to exist. There was no
coherent discussion of such an agreement at the October 23 argument, and there is an insufficient

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showing (under, e.g., doctrines of judicial estoppel) now that the earlier 'rise or fall together'

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agreement should still be in effect.

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At the time of the February 25,2014 order, because Marina had not shown that all of its
contracts created financing obligations, and in light of the agreement that the Agreements rose or

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fell together, there was no reason to further review the impact of Marina's triggers. While the
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February 25 Order found Marina had not shown that triggers favoring Marina were implicated,
that Order did not conclusively address whether those triggers were in fact implicated. So it is

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that Marina now argues the Order did not resolve the application of Government Code 53511

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and Water Code 30066 to all of the contracts at issue here. Monterey assumes, without
discussion, that I in effect found Monterey was not time barred, under any theory, from
challenging any of the Agreements.
Under the reasoning of the February 25, 2014 Order summary adjudication should be
entered with respect to Marina's first cause of action, because the Order has determined that
under C.C.P. 869 the shorter statute oflimitations derived from the validating statutes does not

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apply to an action under Government Code 1090 brought by the government agency whose
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contract is validated. Summary adjudication cannot be entered with respect to Marina's second

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or third causes of action, because I have not finally resolved whether three of the five Project

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Agreements involve financing obligations so as to be validated under Government Code 53511

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or Water Code 30066 (and Monterey makes no new argument on this now). For example, it

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may be that the Reimbursement Agreement involves some financing obligations. See Monterey

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Appendix, Ex. 11 at '1['1[ 1, 6.
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The ultimate result may depend on whether the parties agree that all of the Agreements
rise or fall together, or if as a matter of law or fact I should hold them all to be in effect aspects
of a single agreement. E.g., C. C. 1642.
In any event, these issues are not fully presented by the pending motion. In particular,
the parties have not briefed the law that governs when (1) not only validation statutes made for
Monterey's benefit are implicated (which would as I said in the February Order allow Monterey

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to proceed here) but also (2) validation statutes arguably for Marina's benefit are implicated.

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2.

Public Utilities Commission

The last four causes of action in Marina's cross-complaint concern the effect of

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California Public Utilities Commission proceedings concerning the contracts at issue here. I
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have previously denied Marina's motion for summary adjudication on those four cases of action,

concluding that allowing the suit to proceed would not violate the rules of administrative finality.

Feb. 25, 2014 Order, 19.

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Monterey argues that the Court's holding forecloses Marina from obtaining the relief it
seeks in the last four causes of action in its cross-complaint. Motion, 19. Marina does not offer
any substantive opposition. Opposition, 19-20. Summary adjudication should be entered as to

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those last four causes of action.

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Monterey's Cross Complaint

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1.

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Conflict oflnterest: Law

Government Code 1090 prohibits public officials or employees from having a financial

interest in any contract made by them in their official capacity or by any body or board of which
they are members, 1092(a), and invalidates contracts made in violation of 1090.

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"The evil to be thwarted by section I 090 is ... : If a public official is pulled in one
direction by his financial interest and in another direction by his official duties, his judgment

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cannot and should not be trusted, even if he attempts impartiality." Lexin v. Superior Court, 47

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Cal.4th 1050, 1073 (2010) (citation omitted). "Accordingly, section 1090 is concerned with

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ferreting out any financial conflicts of interest, other than remote or minimal ones, that might

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impair public officials from discharging their fiduciary duties with undivided loyalty and

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allegiance to the public entities they are obligated to serve. [Citation.] Where a prohibited
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interest is found, the affected contract is void from its inception [citation] and the official who
engaged in its making subject to a host of civil and (if the violation was willful) criminal

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penalties .... " !d.
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"To determine whether section 1090 has been violated, a court must identifY (1) whether

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the defendant government officials or employees participated in the making of a contract in their

official capacities, (2) whether the defendants had a cognizable financial interest in that contract,

and (3) (if raised as an affirmative defense) whether the cognizable interest falls within any one

of section 1091's or section 1091.5's exceptions for remote or minimal interests." !d. at 1074.

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2.

Collins was a Government Official or Employee

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It is undisputed that members of Monterey's Board of Directors are public officials

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within the meaning of Government Code I 090. Marina Response to Monterey's Separate
Statement~

12. It is undisputed that Collins served as a member of Monterey's Board of

at~

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Directors for 16 years preceding his resignation on April!, 2011. !d.

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agree that Collins was a government official or employee under the statute for the 16 years

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18. Thus, the parties

preceding April I, 20 II.

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Collins' Financial Interest in the Contracts

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"The defining characteristic of a prohibited financial interest is whether it has the

potential to divide an official's loyalties and compromise the undivided representation of the

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public interests the official is charged with protecting." Eden Township Healthcare Dist. v.

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Sutter Health, 202 Cal.App.4th 208,221 (2011). "Put in ordinary, but nonetheless precise,

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terms, an official has a financial interest in a contract if he might profit from it." !d. In Eden, the

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Court held that the fact that a public official was employed by and received a salary from a

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private entity that contracted with the public agency on whose board the public official sat was
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insufficient to establish a cognizable financial interest in the contracts absent some direct or
indirect nexus between the contracts and the public official's compensation. !d. at 221-28. The

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Court emphasized that there was "simply no evidence of any change in [the official's] salary,

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benefits, or status in [the] record." !d. at 227.

Here, it is undisputed that Collins received hourly compensation to consult with RMC in

connection with the Project between at least January 2010 and November 2010. Based on this

evidence, Monterey has satisfied its initial burden of showing that Collins had a cognizable

financial interest in contracts related to the Project at the time he consulted for RMC. Collins'

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work for RMC pertained to the Project. If the Project kept moving forward, then Collins stood to

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continue receiving work, and pay, from RMC. This is supported by the undisputed fact that the
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contractual cap on Collins' compensation from RMC was raised over time, including just after

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Monterey approved the Settlement Agreement and Water Purchase Agreement. There is no

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indication that Collins had a financial interest in the Project for any reason other than his

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consulting contract with RMC, or at any time other than that in which the consulting contract

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was in effect.

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Marina does not appear to disagree that Collins had a fmancial interest in contracts
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related to the Project between January 2010 and at least November 2010. See Opposition, 4-9
(arguing that financial interest ended by at least December 2010). Marina's substantive

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contention is that Collins had no cognizable financial interest at the time the several of the

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contracts were entered into, or at least when the contracts went into effect or were re-affirmed.

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This overlaps with a consideration of Collins' participation in making the contracts, and is

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discussed below.

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4.

Collins' Participation in Making the Contracts

"Although section 1090 refers to a contract 'made' by the officer or employee, the word

'made' is not used in the statute in its narrower and technical contract sense but is used in the

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broad sense to encompass such embodiments in the making of a contract as preliminary

discussions, negotiations, compromises, reasoning, planning, drawing of plans and specifications

and solicitation of bids." People v. Vallerga, 67 Cal.App.3d 847, 868 (1977), quoting Millbrae

Ass 'nfor Residential Survival v. City ofMillbrae, 262 Cai.App.2d 222, 237 (1968). This

construction is predicated on the rationale that government officers and employees are expected

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to exercise absolute loyalty to the governmental body that they represent, and the statute is

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intended to remove or limit the possibility of any personal influence that may bear on an officer's
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or employee's decision. Millbrae, 262 Cal.App.2d at 237. Mere membership on the board or

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council establishes the presumption that the officer participated in the forbidden transaction or

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influenced other members of the council. Thomson v. Call, 38 Cal. 3d 633, 649 (1985).

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It is thus clear that the 'making' of a contract is not confined to its execution date. Here,

it is undisputed that Collins participated in making the Settlement Agreement and the Water
Purchase Agreement in his official capacity while he was a financially interested public official

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because it is undisputed that he voted to approve both agreements in April2010. See Marina's
Response to Monterey's Separate Statement, 'If 28.

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It is less clear that Collins participated in making the other three agreements in his

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official capacity. Monterey argues that Collins participated in obtaining approval of the Project,

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including through his work for RMC, while a member of Monterey's Board. Motion, 14. But

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this does not necessarily mean that Collins participated in the making of each contract while he

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had a financial conflict. See Vallerga, 67 Cal.App.3d at 867 n.5 (stating in dicta that where a
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consulting services were performed for a fee and completed to prior the execution of a contract,
and the evidence supported an inference that the defendant was to be paid for those services
whether or not a contract was consummated, that consulting services alone would not give rise to

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a financial interest). Monterey points out that Collins voted to approve the Credit Line
Agreement in January 2011, but there is no evidence that Collins continued to have a financial

interest in the Project in January 2011. !d. at 15. Monterey provides voluminous records

showing a history of Collins' work for RMC, including work related to the Project. See

Monterey Appendix, Ex. 24 (Collins' invoices to RMC). But it is difficult to ascertain to which

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agreement Collins' work for RMC pertained, 5 and on motions such as these I obligated to make

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all reasonable inferences in favor of the defending party-Marina. Monterey has not
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satisfactorily explained why the contracts are so closely related that voiding one would lead to

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the invalidation of the other Agreements, relying instead on Marina's concession that if one

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contract falls all of the Agreements fall, made during oral argument for the purposes of the prior

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summary adjudication motion. See Motion, 11; February 25, 2014 Order, 2 n.5 (noting that the

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parties agree for the purposes of those motions that the contracts rise or fall together). 6 I have

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discussed this above, and noted that the status of this agreement or concession is not clear.

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See Monterey Appendix, Ex. 24 at RMC 000396 (Collins read Water Provision Agreement), RMC 000397 (Collins
read the revised Water Purchase Agreement and commented on it), MCWD000024 (Collins traveled to San
Francisco to participate in the PUC hearing on the Project), RMC 000371 (Collins met with Monterey
representatives to get buy-in on the Regional Plan); see also Ex. 27 (Collins advised Marina to play hardball with
Cal-Am on the Reimbursement Agreement), Ex. 32 at 1[39 (Collins' declaration in another case in which he stated
that a Monterey representative did not express any concern about the fact that Collins was retained by Marina to
close the deal), Ex. 36 at 72:18-73:18 (deposition testimony ofLyndel Melton to the effect that Collins took trips
during which he represented both Marina and Monterey, although Melton was not sure how Collins represented
himself at the time).
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Monterey provides legal analyses concluding that Collins violated Government Code I 090 with respect to other
contracts. See id., Exs. 18 (Remcho Report especially at 51-53, suggesting a court would find the agreements
related), 33 (District Attorney brief). But these are legal opinions, not evidence. The Remcho Report concluded that
Collins "arguably" made the Reimbursement Agreement because he apparently attempted to influence the Board of
Supervisors' decision to enter the agreement by participating the closed session and appearing as a representative of
Monterey in the open session. Remcho Report, 40.

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Monterey may be able to make the connection at trial. See Vallerga, 67 Cal.App.3d at 867
("However devious and winding the chain may be which connects the officer with the forbidden

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contract, if it can be followed and the connection made, the contract is void").
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Monterey has not shown that there are no triable issues of material fact with respect to

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whether Collins participated in making the Reimbursement Agreement, the Credit Line

Agreement, and the Project Management Agreement in his official capacity at a time when he

had a financial interest in those agreements. Therefore, I must deny Monterey's motion for

summary adjudication of its Cross-Complaint.

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5.

Re-Approval

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Marina may contend that re-approval of the contracts after Collins' contract with RMC
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terminated, or the fact that the contracts went into effect after Collins' contract with RMC

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terminated, means that Collins did not make the contracts at a time when he had a financial

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interest. Opposition, 4-9. But Monterey has produced evidence that Collins had a financial

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interest at a time when he exercised influence over the making of at least two of the agreements

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in his official capacity. As discussed above, the contracts did provide Collins a financial benefit
at the time. 'Re-approval' does not appear material.

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6.

Remedies
Marina argues that even if Government Code I 090 was violated, I need not invalidate

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the contracts. Opposition, 19. Marina relies on Thomson v. Call, 38 Cal.3d 633 (1985). But

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Supreme Court there stated that the contract at issue was void because it violated I 090. 38

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Cal.3d at 646. The Court addressed appropriate remedies after the fully executed and performed

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contract was found to be in violation of I 090. !d. Consistent with Thomson, if a violation of

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I 090 is found then the contract is void, although such a finding might not resolve all issues of
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remedy, at least where the contract has been performed (which is not, it appears, the case here).
Thomson v. Call is not helpful to Marina here.

7.

Statute of Limitations

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A 1090 action must be commenced within four years after the plaintiff has discovered,
or in the exercise of reasonable care should have discovered, a violation. Gov. Code 1092(b).

Marina argues that summary adjudication of Monterey's claims is inappropriate because

Monterey discovered the 1090 violations with respect to three of the five pertinent contracts

more than four years before filing its Cross-Complaint. Opposition, 14. Specifically, Marina

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argues that Monterey was aware of the conflict of interest on January 11, 2010 and that the

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statute oflimitations began to run, at the latest, when the contracts were first executed. !d. at 1312
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14. With respect to the Reimbursement Agreement, that date was March 30,2010. !d. at 14.

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With respect to the Settlement Agreement and Water Purchase Agreement, that date was April 6,

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2010. !d. Monterey's cross-complaint was filed on April16, 2014, so Marina argues that

16

Monterey's action is time-barred as to those contracts. !d.

17
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Monterey responds that it filed a complaint in a new action on March 19, 2014 putatively
to guard against the imposition of the statute oflimitations. Monterey Reply, 4-5; Monterey

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Supplemental RJN, Ex. A. Monterey never explained why that matters to the argument raised by
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21

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Marina here. Monterey also joins in Cal-Am's argument. Cal-Am argues that the statute of
limitations was tolled by the filing of Cal-Am's Complaint. Cal-Am Reply, 7-8.
"It has consistently been held that the commencement of an action tolls the statute of

limitations as to a defendant's then unbarred cause of action against the plaintiff, 'relating to or
depending upon the contract, transaction, matter, happening, or accident upon which the action is

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2
3

brought[.]" Trindade v. Superior Court, 29 Cal.App.3d 857, 860 (1973). A cross-complaint

need only be subject-matter related to the plaintiffs complaint- i.e. arise out of the same
occurrence - to relate back to the date of the filing of the complaint for statute oflimitations

4
5

purposes. Luna Records Corp., Inc. v. Alvarado, 232 Cal.App.3d 1023, 1028 (1991). However,
as to cross-actions against codefendants or new parties, the statute of limitations is not tolled by

the commencement of the plaintiffs action. Trindade, 29 Cal.App.3d at 859; see also Luna

Records, 232 Cal.App.3d at 1027 ("The principle underlying the rule that a statute oflimitations

is suspended by the filing of the original complaint is that the plaintiff has thereby waived the

10

claim and permitted the defendant to make all proper defenses to the cause of action pleaded.

11
But, where the controversy is limited to cross-defendants, none of whom has done any act in the
12
13

nature of a waiver the reason for the rule does not exist").
Here, it is cross-defendant Marina, not Plaintiff Cal-Am, raising the statute of limitations.

14
15

Thus, the filing of Cal-Am's Complaint appears irrelevant. On the other hand, Marina filed a

16

timely cross-complaint, naming Monterey, seeking to preclude any challenged to the validity of

17

the Agreements. It may be that Marina's cross-complaint is enough to toll the statute of

18
limitations in this case; but I cannot so find because no party addressed this. Thus on the present
19
record Marina has shown that I cannot now resolve this issue against it.
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7

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The Rutter Guide distinguishes between compulsory cross-complaints (i.e., a cross-complaint that is subjectmatter related) and non-compulsory (i.e., unrelated) cross-complaints. CAL. PRAC. GUIDE C!V. PRO. BEFORE TRIAL
6:592 et seq. (Rutter Group 20 14) (cited here as RUTTER). Marina relies on this distinction noting a declaratory
relief cross-complaint is non-compulsory by statute. See C.C.P. 426.60(c). Marina then argues without further
explanation that tolling cannot apply. Opposition, 14 n.7. But the cases cited in RUTTER do not support a distinction
between compulsory cross-complaints and non-compulsory cross-complaints in this context where the crosscomplaint is subject matter related but, by statute, non-compulsory. At least one reason the statute makes crosscomplaints in declaratory relief actions non-compulsory is to protect the defendant, not limit its rights. California
State Auto. Assn. Inter-Ins. Bureau v. Superior Court, 184 Cai.App.3d 1428, 1433 n.6 (1986) (C.C.P. 426.60(c)
means that an individual cannot be barred from bringing a cause of action after the issues raised in the action for
declaratory relief have been determined, not that a cross-complaint cannot be filed in a declaratory relief action;
noting that the statute protects a party's rights rather than curtails them). Toi!ing should not be denied because the
cross-complaint was not compulsory.

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8.

Joinder of Necessary and/or Indispensable Parties

C.C.P. 389 provides:

3
(a) A person who is subject to service of process and whose joinder will
not deprive the court of jurisdiction over the subject matter of the action
shall be joined as a party in the action if (1) in his absence complete relief
cannot be accorded among those already parties or (2) he claims an
interest relating to the subject of the action and is so situated that the
disposition of the action in his absence may (i) as a practical matter impair
or impede his ability to protect that interest or (ii) leave any of the persons
already parties subject to a substantial risk of incurring double, multiple,
or otherwise inconsistent obligations by reason of his claimed interest. If
he has not been so joined, the court shall order that he be made a party.

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7
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(b) If a person as described in paragraph (1) or (2) of subdivision (a)

cannot be made a party, the court shall determine whether in equity or
good conscience the action should proceed among the parties before it, or
should be dismissed with prejudice, the absent person being thus regarded
as indispensable. The factors to be considered by the court include: (1) to
what extent a judgment rendered in the person's absence might be
prejudicial to him or those already parties; (2) the extent to which, by
protective provisions in the judgment, by the shaping of relief, or other
measures, the prejudice can be lessened or avoided; (3) whether a
judgment rendered in the person's absence will be adequate; (4) whether
the plaintiff or cross-complainant will have an adequate remedy if the
action is dismissed for nonjoinder.

10

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12
13
14
15
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17

C.C.P 389(a)-(b).

18
"Section 389 of the Code of Civil Procedure requires joinder of persons materially
19

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interested in an action whenever feasible. [Citation.] Parties to a contract should usually be

joined in an action challenging the validity of the contract." Vanoni, 40 Cal.App.3d 743, 746
8

22

(1974). If joinder is not feasible, then C.C.P. 389(b) applies and the court should proceed to

23

determine if the party is indispensable. Id. at 747.

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8

25

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Marina cites People ex rei. Lungren v. Community Redevelopment Agency, 56 Cal.App.4th 868 (1997) for the
proposition that "Courts have uniformly held that '[n]o procedural principle is more deeply embedded in the
common law than that, in an action to set aside a leaser or a contract, all parties who may be affected by the
determination of the action are indispensable."' Opposition, 15 (internal quotation taken from Lungren). But
Lungren, which was itself quoting federal authority,just says "it has been stated that '[n]o procedural principle is
more deeply embedded in the common law than that, in an action to set aside a leaser or a contract, all parties who

may be affected by the determination of the action are indispensable."' Lungren, 56 Cal.App.4th at 877 (emphasis

. 17.

The three parties presently before the Court are all parties to the Reimbursement
Agreement (Monterey Appendix, Ex. 11 at 1), the Water Purchase Agreement (Monterey

3
Appendix, Ex. 12 at 1), and the Credit Line Agreement (Monterey Appendix, Ex. 14 at 1). There

4
5
6

is a fourth party to the Project Management Agreement: RMC. Monterey Appendix, Ex. 15 at
1. There are at least three additional parties to the Settlement Agreement: Monterey Regional

Water Pollution Control Agency, Public Trust Alliance, and Surfrider Foundation. Brochard

Declaration, Ex. Q at 2. 9 From the Settlement Agreement, it appears that Public Trust Alliance

and Surfrider Foundation were parties to the underlying Public Utilities Commission

10

proceedings. !d. at '1[1 0. 7.

11

Marina argues that all parties to the Project Agreements are indispensable and therefore
12
13

must be joined, else I do not have "jurisdiction" to grant the motion for summary judgment nor, I

14

suppose, to entertain a trial. Opposition, 16. (What that does to Marina's demand for e.g.

15

declaratory relief I do not know.) Marina provides no analysis. Monterey responds other parties

16

are unnecessary because only Monterey can seek to invalidate the contracts, and they have no

17

need to argue that the contracts are valid because the Court has ruled that the contracts were

18
validated by the passage of time. Monterey Reply, 5.
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21

Cal-Am takes a different tack, which Monterey joins. Cal-Am contends that the other
parties to the contracts are not indispensable because the absent parties' interests are adequately

22

represented by the parties already present and there is no risk of inconsistent relief. Cal-Am

23

Reply, 8-9 (citing Deltakeeper v. Oakdale Irrigation District, 94 Cal.App.4th 1092 (200 1)).

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supplied). Indeed, the Lungren Court rejected the proposition that all parties to a contract are indispensable. I d. at
877-85.
9
Marina asserts that Citizens for Public Water later joined the settlement agreement, but I do not see evidence of
that. Opposition, 16. There is no indication that Citizens for Public Water, if it is a party to the contract, is in any
different position than Public Trust Alliance or Surfrider.

- 18-

In Deltakeeper, the trial court dismissed a petition for writ of mandate challenging an
environmental impact report (EIR) for failure to join indispensable parties. Deltakeeper, 94

3
Cal.App.4th at 1095-96. The plaintiff had named some parties to a water purchase agreement,

5
6

for which the EIR was prepared, but not others. !d. The Court of Appeal reversed dismissal,
reasoning that the named parties, which were parties to the underlying water purchase

agreement, would adequately represent the nonjoined parties in arguing for the sufficiency of the

EIR and that the nonjoined parties, through a separate agreement with one of the named parties,

were able to participate in control of the litigation. !d. The Court ultimately assumed without

10

deciding that the nonjoined parties were necessary, but held that the nonjoined parties were not

11
indispensable. !d. at 1105, 1109.
12
The parties' discussion is muddled. The issue of so-called 'indispensable' parties is

13
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generally presented-early on in litigation 10-by way of a motion to dismiss or a demurrer.

15

RUTTER 'if 2:160. Presented with such a motion, the court weighs a series of factors. RUTTER 'if

16

2:161. See generally, VanZant v. Apple Inc., 229 Cal.App.4th 965, 974 (2014),pet. rev. filed

17

Oct. 22,2014 (analysis described as that regarding "necessary" parties). The matter is generally

18
left to the discretion of the court. There is no strict demarcation between parties which are (to use
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21

22

dated terminology 11 ) 'necessary' or 'indispensable.' And it is simply not true that, as Marina
seems to assume, all parties to a contract are indispensable. The entirety of Marina's argument
based, e.g. on Covarrubias v. James, 21 Cal. App. 3d 129 (1971) (Opposition at 15-16),

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See e.g., RUTTER~ 2:191 (late motion may be a waiver). In the central case relied on by Marina, the issue was
raised by an (early) demurrer. Covarrubias v. James, 21 Cal. App. 3d 129, 132 (1971).
11
RUTTER~ 2:155.
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