News Release

Judge Limits MWD’s Discovery Demands in Litigation Challenging its Rates

Ruling keeps the focus where it belongs – on MWD’s rates
May 14, 2013

A San Francisco Superior Court judge on Tuesday agreed with most of the discovery limits proposed by the San Diego County Water Authority, denying the majority of a motion to compel filed by the Los Angeles-based Metropolitan Water District of Southern California.  Tuesday’s order followed a court hearing held last Friday in San Francisco on MWD’s motion.

The court ruled that most of MWD’s discovery requests were too broad and not related to the pending litigation, which alleges that MWD’s rates fail to comply with constitutional and statutory cost-of-service standards. The pre-trial ruling means MWD is entitled to discovery only on issues that are relevant to the pending litigation.  MWD’s motion had sought production of Water Authority documents on a large number of unrelated topics. 

While spending more than a year in court fighting to block the Water Authority from obtaining any documents that are directly related to its rates and cost-of-service standards, MWD’s own discovery requests strayed far from the narrow limits it claimed should govern discovery in the case.   

Tuesday’s order by Judge Curtis E.A. Karnow essentially reaffirmed the scope of discovery in the case that had been established in January 2012, and is properly focused on MWD’s rates that are the subject of the litigation.

“The parties, including MWD, spent over a year litigating the limits of discovery in this case,”said Daniel Purcell, special counsel for the Water Authority with the law firm of Keker & Van Nest in San Francisco.  “When the shoe was on the other foot, MWD argued for strictly limited discovery, if there was going to be any discovery at all.  Then, after persuading the court on those limits, MWD turned around and sought discovery well beyond those boundaries and having nothing to do with the legality of MWD’s rates.  The court saw MWD’s tactic for exactly what it was – a fishing expedition that would serve no purpose but to distract the court from the real issues in the case, namely, MWD’s illegal water rates and charges.”

The Water Authority sued MWD in 2010 and again in 2012 for imposing unlawful rates that are not based on the costs of providing the services for which they are collected. Numerous state statutes, the California Constitution and common law require that public water agencies – including MWD – base rates on the actual cost of providing services.

On April 23, Judge Karnow had ordered MWD to produce information no later than May 10 that shows how it allocates its costs to rates, or admit it does not have any such documentation.  On May 10, MWD confirmed that it does not perform any allocation of its costs to its individual rates.  

Before the court’s April 23 ruling, MWD had refused to respond to requests by the Water Authority for documentation to support MWD’s past claims that its rates reflect its cost of providing its services.  In recent court filings, MWD has stated that it is exempt from the requirements of California statutes and the California Constitution requiring public agencies to tie the rates they charge to the actual cost of the services they provide.

Before last Friday’s court hearing, the Water Authority agreed to respond to 28 of MWD’s 78 discovery requests, which were consistent with prior court orders – but it objected to the large number of MWD’s requests that were overbroad and not relevant to any of the issues pending before the court.

For example, MWD had requested more than four years of records related to the Water Authority’s own rate-setting process, which is not being challenged in this or any other case. MWD also sought all documents related to the Water Authority’s Carlsbad Desalination Project. “Neither the Water Authority’s rates nor the desalination plant have anything to do with how MWD sets its rates, and the court’s ruling reflects that,” said Purcell. 

The Water Authority’s two lawsuits against MWD present common factual and legal elements. In both cases, the Water Authority asserts that MWD assigns water supply costs to transportation rates in violation of state law, the California Constitution and common law. The lawsuits also allege that MWD’s rates discriminate against the Water Authority by artificially inflating the price it charges for transporting the Water Authority’s independent Colorado River water supplies through MWD’s pipelines.

The first challenge was filed in June 2010, after MWD set its 2011 and 2012 rates. The Water Authority filed a second complaint in June 2012, after MWD set rates for 2013 and 2014 based on the same misguided methodology. The court agreed to coordinate management of the lawsuits, and Judge Karnow has said he intends to try both cases in November.

Under MWD’s current rate scheme, water ratepayers in San Diego County will be overcharged for transportation services this year by $57 million. By 2021, the overcharges could grow to more than $217 million annually. For more information about the Water Authority’s lawsuits against unlawful rates and charges levied by MWD, go to www.sdcwa.org/mwdrate-challenge.

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