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CHARLES J. MCKEE, State Bar No. 152458

COUNTY COUNSEL
SUSAN K. BLITCH, State Bar No. 187761
Senior Deputy County Counsel
County of Monterey
168 W. Alisal Street, 3rd Floor
Salinas, California 93901
Phone: (831) 755-5045
Fax: (831) 755-5283
E-mail: mckeecj@co.monterey.ca.us
MARK A. WASSER, State BarNo. 060160
LAW OFFICES OF MARK A. WASSER
400 Capitol Mall, Suite 2640
Sacramento, California 95814
Phone: (916) 444-6400
Fax: (916) 444-6405
E-mail: mwasser@markwasser.com
Attorneys for Defendant, Cross-Defendant and
Cross-Complainant, Monterey County Water
Resources Agency

ELECTRONICALLY

FILED
Superior Court of California.
County of San Francisco

APR 16 2014
Clerk of the Court
BY: WILLIAM TRUPEK
Deputy Clerk

(Filing Fee Exempt: Gov. Code 6103)

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IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

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IN AND FOR THE COUNTY OF SAN FRANCISCO

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CALIFORNIA-AMERICAN WATER
COMPANY, a California corporation,

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Plaintiff,

Case No.: CGC-13-528312

CROSS-COMPLAINT FOR DECLARATORY
RELIEF

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(Code ofCiv. Proc. 1060)

VS.

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MARINA COAST WATER DISTRICT,

MONTEREY COUNTY WATER
RESOURCES AGENCY; and DOES 1
through 10, inclusive,

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Defendants.

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MARINA COAST WATER DISTRICT,

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Cross-Complainant,
vs.
CALIFORNIA-AMERICAN WATER
COMPANY, a California corporation;
MONTEREY COUNTY WATER
RESOURCES AGENCY; and ROES 1
through 50, inclusive,

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Dept.: 304
Judge: Honorable Curtis E.A. Kamow
Trial Date:
Vacated
Complaint Filed:
October 4, 2012
Cross-Complaint Filed: November 19, 2012

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MONTEREY COUNTY WATER

RESOURCES AGENCY, a public agency,
Cross-Complainant,

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vs.

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MARINA COAST WATER DISTRICT;

CALIFORNIA-AMERICAN WATER
COMPANY, a California corporation; and
ZOES 1 through 10, inclusive,

Cross-Defendants.

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Cross-complainant Monterey County Water Resources Agency ("Agency") alleges:

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FIRST CAUSE OF ACTION

(Declaratory relief, Code of Civ. Proc. 1060, against all cross-defendants)

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1.

The Agency is and at all times herein mentioned was a local public agency organized

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and existing under and pursuant to the Monterey County Water Resources Agency Act ("Agency

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Act"), West's Annotated Water Code Appendix, Chapter 52.

2.

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Cross-defendant Marina Coast Water District ("MCWD") is and at all times herein

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mentioned was a county water district organized and existing under and pursuant to the County

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Water District Law, section 30000 et seq. of the Water Code.

3.

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Cross-defendant California-American Water Company ("Cal-Am") is and at all times

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herein mentioned was a California corporation organized and existing under and pursuant to the laws

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of the State of California and doing business in Monterey County. Cal-Am is a privately owned

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water utility regulated by the California Public Utilities Commission ("CPUC"). Cal-Am owns and

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operates a water distribution system within Monterey County that provides domestic drinking water

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to thousands of consumers.

4.

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The Agency is ignorant of the true names and capacities of cross-defendants ZOES 1

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through 10, inclusive and, therefore, sues those cross-defendants by those fictitious names. The

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Agency is informed and believes and thereon alleges that each of the fictitiously named cross-

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defendants is a present or former employee, agent or representative of the cross-defendants, is

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responsible for the matters alleged herein and is interested in this proceeding. The Agency will

amend this complaint to set forth the true names and capacities of thdictitiously named cross-

defendants when the same have been ascertained. Each allegation in this cross-complaint regarding

the cross-defendants includes all the fictitiously named cross-defendants.

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As alleged in Cal-Am's complaint and in MCWD's cross-complaint, there is a

historic water shortage on the Monterey Peninsula. The area has few adequate sources of potable

water. For many years, Cal-Am has diverted water from the Cannel River to serve its thousands of

residential and business customers on the Monterey Peninsula. However, as a result of orders issued

by the State Water Resources Control Board, Cal-Am must reduce its diversions from the Cannel

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River and develop alternative sources of potable water by December 31, 2016.

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6.

As further alleged in Cal-Am's complaint and in MCWD's cross-complaint, the

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Agency, Cal-Am and MCWD jointly entered into five written contracts for the purpose of

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developing, constructing and operating a regional desalination project that would provide an

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alternate source of potable water for Cal-Am's Monterey Peninsula customers and meet the

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requirements of the orders issued by the State Water Resources Control Board.

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7.

The parties' agreement to develop, construct and operate a regional desalination

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project was memorialized in the five contracts, which consisted of the Settlement Agreement, the

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Reimbursement Agreement, the Credit-Line Agreement, the Water Purchase Agreement and the

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Project Management Agreement. Throughout this proceeding, the parties have referred to the five

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contracts, collectively, as the "RDP Agreements." The Reimbursement Agreement was approved on

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February 26,2010. The Settlement Agreement, Water Purchase Agreement, Credit-Line Agreement

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and Project Management Agreement were approved effective January 11,2011. The Agency, Cal-

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Am and MCWD were parties to all the RDP Agreements. RMC Water and Environment ("RMC")

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was an additional party to the Project Management Agreement.

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The RDP Agreements were an interdependent and integrated set of contracts that,

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collectively, represented the parties' agreement and meeting of the minds on the development,

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construction and operation of the regional desalination project.

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In or about April, 2011, and after the RDP Agreements had been approved and

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executed, conflict of interest allegations arose regarding Stephen P. Collins, who was a long-serving

member of the Agency's appointed board of directors.

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It was publicly revealed that Collins had been secretly retained as a consultant by

RMC and paid to advocate approval of the regional desalination project and the RDP Agreements

while serving as a member of the Agency's appointed board of directors.

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The Agency retained the law firm of Remcho, Johansen & Purcell to investigate the

matter. In a report released in June, 2011 (the "Remcho Report"), the firm concluded Collins had

violated Government Code section 1090.

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MCWD retained the law firm of Richards, Watson & Gershon to investigate the

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matter. In a report signed by James Markman and released in July, 2011 (the "Markman Report"),

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that firm also concluded Collins had violated Government Code section 1090. The Markman Report

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reached the additional conclusion the RDP Agreements were not void, despite Collins' violation of

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section 1090.

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13.

Thereafter, in letters dated July 7, 2011, July 20, 2011 and August 22,2011 and in

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other public statements, the Agency announced the RDP Agreements were void as a result of

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Collins' conduct.

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14.

On September 28,2011, Cal-Am terminated the RDP Agreements and, thereafter,

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obtained approval from the CPUC to pursue an alternative project for development of the necessary.

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new source of water for its Monterey Peninsula customers.

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15.

The parties spent several months trying to mediate a resolution to their claims against

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each other over the failed regional desalination project. Although Cal-Am and the Agency were able

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to negotiate a settlement with each other, no settlement was reached with MCWD. MCWD

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continued to assert that the RDP Agreements were valid and enforceable and that the regional

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desalination project should be developed, constructed and operated despite the corruption that

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infected the RD P Agreements because of Collins' misconduct.

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16.

This action was commenced on October 4, 2012 when Cal-Am filed its complaint for

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declaratory relief. Although Cal-Am did not, at that time, take a position whether the RDP

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Agreements were void or valid, it acknowledged the controversy between the Agency and MCWD

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in that regard and requested a determination from the Court as to whether the RDP Agreements are

void or valid.
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MCWD answered Cal-Am's complaint for declaratory relief and filed a cross-

complaint on November 19,2012. In its cross-complaint, MCWD admitted Collins had been

retained as a paid consultant by RMC while he served as a member of the Agency's appointed board

of directors, that he participated in obtaining approval of the regional desalination project and that

MCWD had serious concerns about his conflict of interest.

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MCWD alleges that, despite Collins' conduct, the RDP Agreements are still valid

because they were approved by the CPUC and can no longer be challenged and, also, because they

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are "contracts" within the meaning of the Government Code section 53511, Water Code section

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30066 and section 52-39 of the Agency Act and are subject to the 60-day statute oflimitations in

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Code of Civil Procedure section 860, which has expired.

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MCWD filed a motion for summary judgment on its cross-complaint. On February

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25,2014 this Court issued its Order denying MCWD's motion for summary judgment on its cross-

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complaint and ruling judicial challenge to the RDP Agreements is not barred as a result of their

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approval by the CPUC.

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Agency Act and that Cal-Am is, thereby, barred from challenging the RDP Agreements.
21.

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The Court found the RDP Agreements have been validated by section 52-39 of the

The Court also found the Agency is not barred from challenging the RDP

Agreements.

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An actual controversy has arisen and presently exists between the parties in that the

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Agency contends the RDP Agreements are void as a result of Collins' conduct and financial interest

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in the RDP Agreements, whereas MCWD disagrees and contends the RDP Agreements are valid.

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RDP Agreements and a declaration the RDP Agreements are void.

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The Agency requests a declaration of the parties' rights and duties with respect to the

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This cross-complaint is subject to the four-year statute of limitations in Government

Code section l 092(b) and is timely filed.

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25.

The controversy alleged herein affects the parties' substantial rights as well as the

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substantial public interest in the integrity of government and the honesty of public officials. Its

prompt resolution is in the best interests of the parties and the public.

WHEREFORE, the Agency prays for a declaratory judgment determining the parties' rights

and duties with respect to the RDP Agreements and declaring the RDP Agreements void, awarding

the Agency its reasonable attorney's fees and costs and providing such other relief as this Court

deems just.

LAW OFFICES OF MARK A. WASSER

Dated: April16, 2014

By:
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Is/ Mark A. Wasser

MARK A. WASSER
Attorneys for Defendant, Cross-Defendant
and Cross-Complainant,
Monterey County Water Resources Agency

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NO VERIFICATION REQUIRED
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Code of Civil Procedure 446
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PROOF OF SERVICE

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I, Amy Rem1y, declare:

I am a citizen of the United States, employed in the City and County of Sacramento,
California. I am over the age of 18 years and not a party to the within action. My business
address is 400 Capitol Mall, Suite 2640, Sacramento, California 95814.
On April 16, 2014 I served the attached:

CROSS-COMPLAINT FOR DECLARATORY RELIEF

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[ ]

Sacramento, California, following ordinary business practices addressed as listed below;

and/or

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BY PERSONAL SERVICE: I caused each such envelope to be delivered by hand to the

address listed below; and/or

VIA FEDERAL EXPRESS: I caused each such envelope to be delivered via Federal
Express overnight service to the address listed below; and/or

VIA FACSIMILE: I caused each such document to be sent by facsimile machine number
(916) 444-6405 to the following persons or their representative at the address and the
facsimile number listed below by Amy Remly; and/or

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VIA EMAIL: I caused each such document to be sent by electronic mail to the email
address listed below:

[X]

BY ELECTRONIC SERVICE VIA FILE & SERVEXPRESS: I transmitted a true and

correct copy of the above-entitled pleading via "LexisNexis File and Serve" on the
recipients designated on the Transaction Receipt located on the LexisNexis File and
Serve website.

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BY U.S. MAIL: I placed such sealed envelope, with postage thereon fully prepaid for
first-class mail, for collection and mailing at Law Offices of Mark A Wasser,

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Robert Moore
Allen Matkins LLP
Three Embarcadero Center, 12th Floor
San Francisco, California 94111
Email: rmoore@allenmatkins.com

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James L. Markman
B. Tilden Kim
Richards, Watson & Gershon
355 South Grand Avenue, 40th Floor
Los Angeles, California 90071
Email: jmarkman@rwglaw.com
Email: tkim(a)rwglaw.com

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Mark Fogelman
Friedman Springwater LLP
33 New Montgomery Street, Suite 290
San Francisco, California 941 05
Email: mfogelman@friedmanspring.com

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I declare under penalty of perjury that the foregoing is true and correct. Executed at
Sacramento, California, on April 16, 2014.

~~Y'vT \UJ~~v\ ,

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Amy Rem1y

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caw Office of

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