SVLG Wins Multi-Million Dollar Judgment against The Santa Clara Valley Water District over Illegal Water Charges

On behalf of its client, Great Oaks Water Company, SVLG successfully tried claims against the Santa Clara Valley Water District for illegal and excessive groundwater charges. Great Oaks is a water utility serving over 100,000 customers. Great Oaks obtains the water that it distributes to its customers from wells. The District is a government agency responsible for water supply. The groundwater charge is a fee charged by the Water District to pay for its activities recharging the groundwater basin.

After four years of litigation and a hard fought multi-phase trial, the Santa Clara County Superior Court determined that the groundwater charge during water year 2005-2006 was illegally imposed in two major respects. First, the court agreed that the groundwater charge was entirely illegal under Proposition 218 because it had been imposed without proper notice and without a vote of the ratepayers. On that basis the court ordered a complete refund of $4,623,095 plus interest in the amount of $1,285,523. Second, the Court found that the District abused its discretion under its enabling Actby overcharging Great Oaks approximately $1,300,000 in groundwater charges. Great Oaks is currently pursuing claims arising from subsequent years.

The benefits conferred upon the public from this case are tremendous. Both the Proposition 218 and District Act portions of the case will affect all of the 1,700,000 water users within the Santa Clara Valley. More than 4,000 wells are subject to the groundwater charge, including the municipal and private wells furnishing water to the cities of San Jose, Morgan Hill, Santa Clara, Gilroy, Los Gatos, Monte Sereno, Saratoga, Campbell and Cupertino. Approximately $70,000,000 per year is collected in groundwater charges by the District. The groundwater charge accounts for nearly 50% of most water bills, including the bills of Great Oaks' customers.

The revenue the District received from overcharging groundwater ratepayers was commingled into District overhead and accounts unrelated to recharging the groundwater basin. Further, the District's financial reserves, partly as a result of its overcharging, were in excess of $300,000,000.00. One objective of the Great Oaks lawsuit is bringing these financial practices to an end.

The post trial status of the case is that, to date, the District has not changed its accounting practices. The District has instituted a protest procedure to try to avoid Proposition 218 liability, but refuses to comply with the requirement for a vote. The District has appealed the judgment and the case is likely to reach its final resolution in the California Supreme Court.

Jeffrey S. Lawson led the SVLG trial team. Johnson & James served as co-counsel.