Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00603/USCOURTS-caed-1_05-cv-00603-0/pdf.json

Parties Involved:
Robert E. Baker
Defendant
Belridge Water Storage District
Defendant
Debra Wood Brants
Plaintiff
L.H. Meeker
Plaintiff
William D. Phillimore
Defendant
James M. Shaffer
Plaintiff
Larry Starrh
Defendant
Robert E. Sweeney
Plaintiff

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

L.H. MEEKER, et al.,

 Plaintiffs, 

 v. 

BELRIDGE WATER STORAGE

DISTRICT, et al., 

 Defendants.

1:05-CV-00603 OWW SMS

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS’

MOTION TO DISMISS (DOC. 16)

AND DENYING PLAINTIFFS’ MOTION

TO DISQUALIFY (DOCS. 23 & 24).

I. INTRODUCTION

This case concerns water entitlements appurtenant to lands

located in the Belridge Water Storage District (“Belridge”) in

Kern County, California. Plaintiffs L.H. Meeker, Debra Wood

Brants, James M. Shaffer, and Robert E. Sweeney, all residents of

Texas, own lands within Belridge along with appurtenant water

rights. Some of Plaintiffs’ lands are serviced by Belridges’

water supply system (“Service Area” or “SA” lands) while some are

not (“Non-Service Area” or “NSA” lands). Plaintiffs assert,

generally, that Belridge and certain members of Belridge’s Board

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Because the ethical violations alleged in the motion to 1

disqualify are not germane to the lawyers’ ability to participate

in this case at the motion to dismiss stage, it is appropriate to

decide the instant motion to dismiss at the same time as the

motion to disqualify.

2

of Directors, namely William D. Phillimore, Robert E. Baker, and

Larry Starrh (“Defendants”), violated various provisions of

California law and effected takings of their property (water)

without just compensation by passing a resolution that prohibited

the transfer of water entitlements from NSA lands to SA lands. 

Defendants now move to dismiss the entire complaint. (Doc.

16, filed May 31, 2005.) Plaintiffs oppose (Doc. 22, filed July

22, 2005), and move to disqualify two lawyers representing

Defendants, Joseph Hughes and Nichole Tutt, along with Mr.

Hughes’ law firm, on the grounds that the two attorneys may be

required to appear as witnesses in this case (Docs. 23 & 24,

filed July 22, 2005). During oral argument on the motion to 1

dismiss, Defendant was invited to submit supplemental information

concerning one of their arguments. The court has considered that

supplemental filing (Doc. 43, Oct. 13, 2005), Plaintiff’s

opposition to it (Doc. 45, filed Nov. 24, 2005), as well as two

responsive letter briefs (Docs. 46 and 47).

Plaintiffs also attached to their opposition a proposed

first amended complaint. Plaintiffs’ have not formally moved for

leave to amend, nor have they set their motion to amend for

hearing. Defendants have a right to have their motion to dismiss

heard. The proposed amended complaint will not be considered at

this time.

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II. BACKGROUND

Plaintiffs own land within the jurisdiction of the Belridge

Water Storage District (“Belridge”). Belridge contracts with the

Kern County Water Authority (“KCWA”) to receive water. KCWA in

turn contracts with the State Department of Water Resources

(“DWR”) to receive a supply of water from the State Water Project

(“SWP”). Jurisdiction is invoked under 28 U.S.C. § 1332, because

there is complete diversity and the amount in controversy is more

than $75,000.00 exclusive of costs. 

KCWA entered into a contract with DWR in the early 1960s,

pursuant to which KCWA was granted a maximum entitlement of

1.1534 million acre feet per year. Belridge’s contract with KCWA

grants Belridge an allocation of 163 thousand acre feet per year

from KCWA’s maximum annual entitlement. 

Belridge’s distribution of its 163 thousand acre feet per

year annual entitlement to users is subject to, among other

things, the California Water Storage District Law, which requires

equitable allocation to the lands within Belridge, subject to

other existing priorities of use. There are no “priority” zones

within Belridge that might entitle certain lands to higher

priority than other lands. 

Belridge is a landowner voting Water Storage District

governed by a five-member Board of Directors (“Board”). See

Water Code § 41000. The members of the Board are “public

officials” for the purposes of the Political Reform Act. See

Gov. Code § 87100. 

//

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The obligations contained within the LC were made 2

subject to the obligations and limitations imposed upon the

District by the contract between the State of California

Department of Water Resources and the Kern County Water Agency. 

4

A. The Landowner Contracts.

Belridge encompasses lands that are currently served by the

Belridge water distribution system (“Service Area” or “SA” lands)

and land that is entitled to receive water but is not currently

served by the distribution system (“Non-Service Area” or “NSA”

lands). Plaintiffs own both SA and NSA land in Belridge. All SA

and NSA lands are entitled to receive water pursuant to recorded

contracts (“Landowner Contracts”) with Belridge. 

The Landowner Contracts (“LCs”) were first entered into in

1966, but have been amended several times, most recently in 2004. 

The initial LC was between the Belridge Water Storage District

and the Occidental Land & Development Co., Ltd. (See Doc. 39, 

Carlson Suppl. Decl., Ex. 1 at 1. ) Article 5(b) of the LC sets 2

forth the method for calculating the volume of a Buyer’s

entitlement to water under the contract:

Commencing with the year of initial delivery,

[Belridge], each year, shall make available for

delivery to Buyer in each Zone of Benefit, as such

zones are shown on the plan attached hereto as Exhibit

“A”, the amount of Project Water expressed in acre feet

which is the product of Buyer’s acre foot per acre

antitlement in such Zone of Benefit for such year as

set forth in Exhibit “C” hereto attached multiplied by

the number of “owner acres” included within the portion

of Said Land in said Zone of benefit. The total of all

such amounts, for any year is referred to in this

Contract as Buyer’s annual entitlement for such year. 

Article 6 explains that Belridge’s delivery obligation is limited

to the delivery of Project Water to specified locations (set

forth in Exhibit D to the LC): 

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Project Water made available to Buyer pursuant to this

Contract shall be delivered to and accepted by Buyer

only at the locations specified on Exhibit “D” hereto

attached at which District has installed delivery

structures in accordance with Article 7 hereof 

(LC Art. 6 (emphasis added).) Article 7 sets forth additional

rights and obligations regarding the delivery of water to the

locations specified in Exhibit D: 

District shall, on six (6) months written request from

Buyer and upon payment by Buyer to District of the

connection service charge of District then in effect,

install and thereafter maintain during the term of this

Contract delivery structures at such of the locations

designated on Exhibit “D”, as Buyer shall direct. Said

delivery structures shall be and remain the property of

District. The cost of repairing any such structure

damages by cause other than normal wear or negligence

of District shall be paid by Buyer to District promptly

upon written demand.

(LC Art. 7 (emphasis added).) Nothing in the record clearly

explains the relationship between the locations designated on

“Exhibit D” and the locations of Plaintiffs’ lands. However,

Plaintiffs do not allege that their NSA lands are serviceable by

delivery structures at any of the locations designated in Exhibit

D as points of delivery. 

The right to receive water under the LC is “appurtenant to

[the] land,” (LC Art. 21), but a Buyer’s ability to transfer the

appurtenant water entitlement to other lands is limited:

Project water delivered to Buyer pursuant to this

Contract shall not be sold or otherwise disposed of by

Buyer for use other than on Said Land without the prior

written consent of District. 

(LC Art. 20.) 

//

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B. Plaintiffs’ Lands and Water Entitlements.

The parcels in question in this suit passed from Occidental

to a series of subsequent landowners, each of whom specifically

assumed the duties and rights under the LC by signing an

“Agreement Amending the Landowner Contract with Belridge Water

Storage District for a Water Supply.” (Doc. 39, Exs. 3, 4, 5 &

7.) On February 1, 2000, Plaintiffs assumed the terms of the LC

for six parcels of land totaling 1599.16 acres, with associated

water entitlements of slightly more than 27,000 acre feet. (See

id. Ex. 7.) 

Also on February 1, 2000, Plaintiffs’ entered into an

additional agreement amending their water supply contract. This

amendment permits the permanent transfer of an unspecified volume

of Plaintiffs’ water entitlement so that Belridge could

permanently transfer such water entitlement (along with other

water entitlements secured from other landowners) to urban users

pursuant to a separate agreement. (See id. Ex. 6.) This was a

one-time transfer for which Plaintiffs were compensated. 

Finally, at some point in early 2004, Plaintiffs appear to

have purchased an additional 471.27 acres within Belridge. On

February 3, 2004, Plaintiffs entered into an agreement with

Belridge assuming the rights and duties under the LC for those

parcels. (See id. at Ex. 7.) The record reflects no additional

agreement transferring any portion of the water entitlement

appurtenant to these 471.27 acres to other lands. 

//

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salary in excess of $100,000 from PFE, BNF, POP and PFC.

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C. The Agricultural Interests of the Defendant Directors.

Belridge Directors William Phillimore, Robert Baker, and

Larry Starrh are connected with various agricultural enterprises

operating within Belridge. 

Mr. Phillimore is the President of the Belridge Board. He

is also affiliated in one way or another with the following

agricultural enterprises:

- Paramount Farming Enterprises, Inc. (“PFE”), Executive

Vice President and Chief Financial Officer. 

- Paramount Land Company, L.P. (“PLC”), Executive Vice

President and Chief Financial Officer.

- Belridge New Farming, LLC (“BNF”), Executive Vice

President and Chief Financial Officer.

- Paramount Orchards Partners VI, LLC (“POP”), Executive

Vice President and Chief Financial Officer.

- Paramount Farming Company, LLC (“PFC”), Executive Vice

President and Chief Financial Officer.3

These entities, collectively referred to as the “Paramount

Business Entities” are connected to one another in a variety of

ways. For example, PFE is the managing partner of PLF, while PFC

manages PLC and POP pursuant to a farm management agreement. PLC

and POP own land in Belridge. 

Mr. Phillimore is also the Executive Vice President and

Chief Financial Officer of West Valley Acquisition Corporation

and Westside Mutual Water Company, LLC, from each of which Mr.

Phillimore receives a salary in excess of $100,000 per year. 

Plaintiffs assert that these two additional entities may be

related to the Paramount Business Entities. 

Robert E. Baker is the Secretary of Belridge’s Board. He is

also employed by PFC as “Ranch Manager” for which employment he

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receives a salary of $100,000 per year along with an annual bonus

based on the overall profitability of the Paramount Business

Entities. 

Larry Starrh is the Belridge Board’s Treasurer. Mr. Starrh

is also a partner in Starrh & Starrh Cotton Growers, which pays

Mr. Starrh a salary in excess of $100,000 per year. 

D. The Top Contract.

Certain entities in Belridge, including entities connected

to the three individual Defendants in this case, are parties to a

1999 contract with Belridge, known as the “Top Contract.” This

agreement allows contracting parties to purchase water that is

allocable (but undeliverable) to the NSA lands. The water

available for purchase under the Top Contract is known as “Top

Water.” The parties to the Top Contract purchase Top Water from

Belridge and use it on their SA lands. 

Specifically, parties to the Top Contract purchase from

Belridge portions of the annual entitlement associated with NSA

lands as of January 1, 1999, less any portion transferred outside

the NSA after January 1, 1999. Each party to the Top Contract is

entitled to purchase a certain percentage of the NSA entitlement. 

The parties to the Top Contract are not required to pay any

transfer charges to change the place of use of Top Water from NSA

to SA lands. 

In exchange, the parties to the Top Contract agreed to make

annual payments to Belridge (the “Buyer’s Agency Charge,” the

“Buyer’s District Capital Charge,” “The Buyer’s Delivery Charge,”

and the “Buyer’s Overhead Charge”). These fees help to cover

Belridge’s costs (under Belridge’s KCWA contract) and the costs

of delivering water to the SA lands. 

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The Top Contract gives each Buyer a right of termination

under certain circumstances by specified dates. These dates have

expired and no Buyers exercised their right of termination. 

Belridge New Farming LLC (62.84%), Starrh & Starrh Cotton

Growers (16.61%), and Paramount Land company (14.46%) are the

three largest parties to the Top Contract. The remainder is held

by others. 

The operative effect of Plaintiffs’ proposed transfer from

NSA to SA lands would be to decrease the volume of water

available for distribution under the Top Contract.

E. Plaintiffs’ request to use NSA water on SA lands.

Plaintiffs requested permission to use the water

entitlements associated with their NSA lands on SA lands. In

order to obtain permission to use NSA-attributable water on SA

land, Plaintiffs’ Landowner Contracts must be amended. If such

amendment is not permitted, Plaintiffs cannot use their water

entitlements.

On January 10, 2005, Plaintiffs sent a letter to the Board,

notifying the Board that they intended to “request to have

[their] non service area water activated into the service area. 

More specifically, [they] plan on farming with this water with

Sandridge Farms and or other existing land owners and we depend

on this water for the economic use of our lands in the district.” 

(Doc. 18, Hughes Decl., Ex. D.) The letter went on to state:

We have been informed of a series of meetings the

district has had regarding two requests that land

owners have made in early 2004. The two land owners

are Sandridge and Chevron. We have been made aware of

an identical request from a land owner, Stiefvater,

which was approved under the same Board Policies that

are currently in place. I have been informed that

several of the current Board Members have been

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participating in discussions, talked to the manager and

have voted to delay the transfer of this water. It

appears these Board members currently may have free use

of about 10,000 acre feet of water of this character

through a unique arrangement set up by the Board and

called top contracts. If the foregoing is true, the

value of the top contracts of these Board Members is in

excess of 10 million dollars assuming a value of $1,000

per acre foot. 

(Id.) 

F. The Allegedly Improper/Unlawful Vote.

On January 11, 2005, the Board held a regularly scheduled

board meeting. The agenda for that meeting referenced the

following item:

Legal Counsel: 

(a) Report re: Charge for Permanent Transfers from

Non-service Area to Service Area.

(Doc. 25, Carlson Decl., Ex. 7). No vote on this issue was taken

during the January 11, 2005 meeting. Instead, the meeting was

adjourned until February 16, 2005 to allow time for public

comment and for the board to consider the matter. 

The agenda for the February 16, 2005 meeting includes the

following modified agenda item:

Other Business:

a. Policy re: Permanent Transfer of Annual

Entitlement from Non-Service Area to Service area. 

(Doc. 19, Req. for Judicial Notice, Ex. C.)

On February 16, 2005, the Board voted 3-2 to prohibit

amendments to Landowner Contracts that would transfer water from

NSA land to SA land. The three votes in favor of the prohibition

were Defendant Directors William Phillimore, Robert Baker and

Larry Starrh. 

On March 18, 2005, in accordance with the exhaustion

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requirements of the Brown Act, Cal. Gov. Code § 54960.1,

Plaintiffs sent a letter to the Board demanding that the action

be nullified because the vote violated the terms of the Brown

Act. On April 18, 2005, the Board refused to nullify the vote. 

III. SUMMARY OF THE COMPLAINT

Plaintiffs allege that the Belridge Board’s February 16,

2005 decision to prohibit intra-district transfers of water from

NSA to SA lands:

(1) Should be declared void because it violated the

Political Reform Act, Cal. Gov. Code § 87100, which

prohibits any public official from making decisions in

which he or she knows or has reason to know that he or

she has a financial interest. 

(2) Should be declared void because it violated California

Government Code § 1090, which prohibits public

officials from being financially interested in any

contract made by them in their official capacity. 

(3) Should be declared void because it violated the Ralph

M. Brown Act, Cal. Gov. Code §§ 54950-54963, which

requires that local legislative bodies hold open

meetings and public agendas of topics to be discussed

at those meetings in accordance with the requirements

of the Act. 

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(4) Constitutes a taking of property without just

compensation in violation of the Fifth Amendment to the

United States Constitution and subjects Belridge to

inverse condemnation exposure under state law,

entitling Plaintiffs to damages and prejudgment

interest in excess of $75,000. 

(5) Constitutes unfair competition based on an unlawful

business practice, entitling Plaintiffs to injunctive

relief. 

Plaintiffs also seek costs of suit and reasonable attorney’s

fees in accordance with several provisions of California law. 

IV. STANDARD OF REVIEW - MOTION TO DISMISS

Fed. R. Civ. P. 12(b)(6) provides that a motion to dismiss

may be made if the plaintiff fails “to state a claim upon which

relief can be granted.” However, motions to dismiss under Fed.

R. Civ. P. 12(b)(6) are disfavored and rarely granted. The

question before the court is not whether the plaintiff will

ultimately prevail; rather, it is whether the plaintiff could

prove any set of facts in support of his claim that would entitle

him to relief. See Hishon v. King & Spalding, 467 U.S. 69, 73

(1984). “A complaint should not be dismissed unless it appears

beyond doubt that plaintiff can prove no set of facts in support

of his claim which would entitle him to relief.” Van Buskirk v.

CNN, Inc., 284 F.3d 977, 980 (9th Cir. 2002) (citations omitted).

In deciding whether to grant a motion to dismiss, the court

“accept[s] all factual allegations of the complaint as true and

draw[s] all reasonable inferences” in the light most favorable to

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the nonmoving party. TwoRivers v. Lewis, 174 F.3d 987, 991 (9th

Cir. 1999); see also Rodriguez v. Panayiotou, 314 F.3d 979, 983

(9th Cir. 2002). A court is not “required to accept as true

allegations that are merely conclusory, unwarranted deductions of

fact, or unreasonable inferences.” Sprewell v. Golden State

Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 

V. DISCUSSION

A. Motion to Dismiss.

1. Request for Judicial Notice.

Plaintiffs request that the district court take judicial

notice of the following documents: The “Top Contract”; Board of

Directors’ Minutes of May 3, 1999; Board of Directors’ Minutes

and Agenda of February 16, 2005; A portion of the Board of

Directors’ Packet for Board Meeting of February 16, containing a

letter dated January 10, 2005. 

A court may take judicial notice of facts “not subject to

reasonable dispute in that it is either (1) generally known

within the territorial jurisdiction of the trial court or 

(2) capable of accurate and ready determination by resort to

sources whose accuracy cannot be reasonably questioned.” Fed. R.

Evid. 201(b). Under certain circumstances, a court may take

judicial notice of a document relied upon in the complaint and/or

matters of public record outside the pleadings, without

converting a motion to dismiss into a motion for summary

judgment. See In re Silicon Graphics Inc. Secs. Litig., 183 F.3d

970, 986 (9th Cir. 1999); MGIC Indem. Corp v. Weisman, 803 F.2d

500, 503 (9th Cir. 1986). 

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Plaintiffs note that the copy attached to Defendants’ 4

motion to dismiss is not certified, but do not object to the

court taking judicial notice of this document.

Plaintiffs also questioned the genuineness of the May 5

3, 1999 minutes because they were not signed by Belridge’s

Secretary, but Defendants submitted a signed copy along with

their reply memorandum, (see Doc. 34, Ex. 1), rendering this

objection moot. 

14

Under this rule, the Top Contract is judicially noticeable

because it is referenced in Plaintiffs’ complaint and its

authenticity is not challenged. 

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Minutes from an irrigation district’s board meeting are

public records subject to judicial notice in a motion to dismiss,

see Sumner Peck Ranch, Inc. v. Bureau of Reclamation, 823 F.

Supp. 715, 724-25 (E.D. Cal. 1993), but only if “the accuracy of

the minutes cannot be reasonably questioned,” Fed. R. Evid.

201(b)(2). Plaintiffs object to the district court taking

judicial notice of the Board minutes on a variety of grounds. 

Plaintiffs assert that the minutes from the February 16, 2005

meeting are “considerably embellished” in comparison with the

handwritten notes of the February 16, 2005. (Doc. 25 at 14.)

Plaintiffs also suggest that the February 16, 2005 meeting

minutes are misleading when not viewed alongside minutes from the

February 1, 2005 meeting and agenda. (Id. at 5.) Although 5

Plaintiffs’ objections may be relevant to the weight accorded

these documents, these arguments do not call into doubt the

district court’s authority to take judicial notice of these

minutes, which are records of a public entity’s proceedings kept

pursuant to a duty, under Federal Rule of Evidence 201. 

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Defendants also submit for judicial notice a letter from

Plaintiffs to Defendant dated January 10, 2005. This letter was

contained within an agenda packet distributed to Belridge’s

Board. As such, it is part of the public record of the Board’s

proceedings and is subject to judicial notice. Plaintiffs object

that the letter “without context, distorts the issues,” and

protest that “[i]f this document is considered, all documents

prepared for and distributed at the January 11, 2005 meeting

should be considered.” Plaintiffs’ argument is a logical one,

but they do not dispute the authenticity or accuracy of the

letter or that it was part of the agenda packet for the Board

meeting. The proper remedy is for the district court to consider

the additional documents. Plaintiffs, however, have not provided

any. 

Defendants request for judicial notice is GRANTED as to all

documents for which such notice was requested. As a practical

matter, judicial notice recognizes the authenticity and existence

of these documents. Where a dispute exists as to the accuracy of

the underlying matters in the writings, such matters are “subject

to reasonable dispute.” As such, they will be considered, but

not for their truth.

2. Subject Matter Jurisdiction. 

“Whenever it appears by suggestion of the parties or

otherwise that the court lacks jurisdiction over the subject

matter, the court shall dismiss the action.” Fed. R. Civ. P.

12(h)(3). This court has “federal question jurisdiction” over

civil actions “arising under the Constitution, laws, or treaties

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Should the Fifth Amendment takings claim be dismissed, 6

the Complaint would contain no federal question. Diversity

Jurisdiction may exist. All Plaintiffs are residents of Texas,

while all defendants are residents of California. However, it is

not clear whether Plaintiffs can satisfy the amount in

controversy requirement without their takings claim, as the

takings allegation is the only claim providing for damages as a

remedy. A claim for attorneys fees may be counted toward the

amount in controversy if fees are recoverable under a statute or

contract. Both the PRA and the Brown Act so provide, but

Plaintiffs have not alleged an estimate of the amount of

attorneys fees claimed.

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of the United States.” 28 U.S.C. § 1331. Alternatively, federal

district courts possess “diversity jurisdiction” over civil suits

where the parties are citizens of different states and the

dispute involves more than $75,000.00, exclusive of interests or

costs. 28 U.S.C. § 1332. 

In this case, Plaintiffs arguably allege both a Fifth

Amendment takings claim and a state-law inverse condemnation

claim. If the federal takings claim does not survive this motion

to dismiss, the only alleged basis for this court’s jurisdiction

is diversity of citizenship. If the state-law inverse

condemnation action also does not survive this motion to dismiss,

whether Plaintiffs will be able to satisfy the $75,000 amount-incontroversy requirement becomes a significant question. None of

Plaintiffs’ other state-law claims seek monetary damages, as the

statutes upon which these claims are based do not provide for

monetary damages as a remedy. Accordingly, because the district

court’s jurisdiction may turn on the viability of one or both of

the closely-related takings claims, they are analyzed before

Plaintiffs’ other state-law claims. 

6

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3. Takings Claim(s).

Plaintiffs assert that:

[t]he District’s actions, through the actions of its

Board, in banning the amendment of Plaintiffs’

Landowner Contract to prevent Plaintiffs from

transferring the NSA entitlement from their land to

other lands in the Service Area of the District, which

amounts to a total deprivation of Plaintiffs’

investment-backed expectations, and deprives Plaintiffs

of any reasonable return on their investment,

constitutes a seizure of the water attributable to the

NSA entitlement of Plaintiffs’ land; and therefore,

constitutes a taking of Plaintiffs’ property under

California law.

(Compl. at ¶94.)

Plaintiffs appear to assert that the “taking” in this case

was the passage of the resolution/ordinance on February 16, 2005,

prohibiting plaintiffs from transferring water from NSA to SA

lands. This, according to plaintiffs, was a regulation that

deprived them of all economically beneficial use of their

property and was, therefore, the equivalent of a physical taking. 

To put it another way, Plaintiffs allege that their NSA water was

seized by Belridge without compensation for sale to other

Belridge entities. Plaintiffs emphasize that this is not a

situation in which “almost all uses are taken.” Instead

plaintiffs assert that:

the very property (water entitlement appurtenant to

real property) was taken. It is well established that

real property rights encompass a “bundle of rights” and

included in Plaintiffs’ bundle is the right or

entitlement to receive water from Belridge. It is this

property that has been taken without any compensation.

(Doc. 25 at 16-17.)

a. Ripeness of the Federal Takings Claim. 

Although Plaintiffs’ takings allegation is titled “inverse

condemnation” and appears to be grounded in state law, Plaintiffs

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assert in their opposition that they have properly alleged a

taking under federal law. (Doc. 25 at 15.) To the extent that

any such claim is impliedly asserted in the complaint, it is

unripe. 

In most cases, where a state provides an adequate procedure

for seeking just compensation, such as through a state action in

inverse condemnation, a facial regulatory takings claim based on

the Fifth Amendment is not considered ripe until the property

owner has exhausted available state remedies. Hacienda Valley

Mobile Estates v. City of Morgan Hill, 353 F.3d 651, 655 (9th

Cir. 2003); Richardson v. Honolulu, 124 F.3d 1150, 1165 (9th Cir.

1997)(citing Williamson County Reg'l Planning Comm'n v. Hamilton

Bank, 473 U.S. 172, 195 (1985)).

In certain circumstances, such as when a Fifth Amendment

takings claim is based on a theory that the challenged regulation

does not substantially advance a legitimate state interest, a

facial challenge may be deemed ripe even if the plaintiff has

failed to exhaust state remedies. See Sinclair Oil Corp v.

County of Santa Barbara, 96 F.3d 401, 405-06 (9th Cir. 1996);

Spoklie v. Montana, 411 F.3d 1051, 1057 (9th Cir. 2005). 

Here, Plaintiffs’ do not allege that the February 16, 2005

decision fails to advance a legitimate interest of Belridge.

Plaintiffs must exhaust their state judicial remedies prior to

bringing a federal takings claim. Nothing in the record

indicates that Plaintiffs have pursued state judicial remedies

(save for their efforts to do so with their state-law inverse

condemnation action in this case). Accordingly, Plaintiffs’

federal takings claim is DISMISSED WITHOUT PREJUDICE.

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4. District Court Jurisdiction Over the State-law

Inverse Condemnation Claim. 

It is proper for a federal district court to assume

jurisdiction over a state-law claim of inverse condemnation in a

diversity action, provided the claim would be ripe under state

law. Sinclair, 96 F.3d at 408 (assuming jurisdiction over state

law inverse condemnation claims but finding claims unripe under

California law). 

As a general rule in California, an inverse condemnation

claim based on an as-applied challenge to a regulation is not

ripe until plaintiffs have exhausted the available administrative

remedies (e.g., seeking a variance). However, where the inverse

condemnation claim is based on a facial challenge to a

regulation, there is no need to pursue administrative remedies;

plaintiff may proceed directly to court. Hensler v. City of

Glendale, 8 Cal. 4th 1 (1994)(en banc). A regulation can only be

challenged facially if its terms will not permit administration

that avoids unconstitutionality. Tahoe Sierra Preservation

Council v. State Water Resources Control Bd., 210 Cal. App. 3d

1421, 1442 (1989); see also Del Oro Hills v. City of Oceanside,

31 Cal. App. 4th 1060, 1076 (1995) (“an ordinance is safe from a

facial challenge if it preserves, through some permit procedure

or otherwise, some economically viable use of the property”). 

However, according to the California Supreme Court’s Hensler

decision, a property owner may bring an action to set aside or

void a regulation, but may only bring a damages claim after

successfully challenging the regulation. See Hensler, 8 Cal. 4th

at 7, 26; see also Kavanau v. Santa Monica Rent Control Bd., 16

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Cal. 4th 761, 779 (1997).

Here, Plaintiffs allege that the February 16, 2005 decision

completely prohibited the permanent transfer of water

entitlements from NSA lands to SA lands. The Board did not

provide any mechanism (e.g., a permit process, rule, or by-law)

that would preserve a landowner’s “right” to transfer his or her

water entitlement under certain circumstances. This is a facial

challenge. There is therefore no requirement that Plaintiffs

pursue administrative remedies prior to the initiation of an

inverse condemnation action. The district court may assume

jurisdiction over this state law inverse condemnation claim, but

under Hensler, may only issue declaratory or injunctive relief at

this stage.

The question then becomes: Have Plaintiffs’ stated a valid

claim for inverse condemnation under the United States

Constitution or California law? 

5. Does the Complaint State a Valid Inverse

Condemnation Claim.

California inverse condemnation law largely parallels the

standards that apply to a federal takings claim. The California

Constitution, article I, section 19, provides that property may

be taken or damaged for public use only where just compensation

is paid to the owner. 

[Article I, section 19] authorizes both eminent domain

proceedings instituted by a public entity to acquire

private property, as well as inverse condemnation

proceedings initiated by a landowner to obtain

compensation for a claimed taking or damaging of his or

her property. Both types of actions are governed by the

same principles.

San Diego Metro. Transit Dev. Bd. v. Handlery Hotel, Inc., 73

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Cal. App. 4th 517, 529 (1999).

A local government regulation which “‘goes too far’ may

constitute a taking even though the property remains in private

hands.” Massingill v. Dept. of Food & Agric., 102 Cal. App. 4th

498, 508 (2002) (citing Kavanau v. Santa Monica Rent Control Bd.,

16 Cal. 4th 761, 773, (1997)). “The property owner may bring an

inverse condemnation action and, if successful, the regulatory

agency must either withdraw the regulation or pay just

compensation.” Kavanau, 16 Cal. 4th at 773. 

Two categories of regulatory action are considered “per se”

regulatory takings (i.e., they are automatically deemed to have

gone “too far”): (1) where the property owner has suffered a

physical invasion of his property and (2) where the regulation

denies all economically beneficial or productive use of land. 

Lucas v. So. Carolina Coastal Council, 505 U.S. 1003, 1015

(1992). If neither of those per se categories apply, a court

must analyze the Penn Central factors to determine whether a

regulation nevertheless constitutes a taking: 

(1) the economic impact of the regulation on the

claimant; 

(2) the extent to which the regulation has interfered

with distinct investment-backed expectations; and 

(3) the character of the governmental action.

Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124

(1978).

The California Supreme Court, in Kavanau, enunciated the

following ten additional factors, building upon Penn Central’s

analysis: 

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(1) whether the regulation interferes with interests

that are sufficiently bound up with the reasonable

expectation of the claimant to constitute property

for Fifth Amendment purposes; 

(2) whether the regulation affects the existing or

traditional use of the property and thus

interferes with the owner's primary expectation; 

(3) the nature of the state's interest in the

regulation, in particular, whether the regulation

is “reasonably necessary to the effectuation of a

substantial public purpose”; 

(4) whether the property owner's holding is limited to

the specific interest the regulation abrogates or

is broader; 

(5) whether the government is acquiring resources to

permit or facilitate uniquely public functions,

such as government's "entrepreneurial operations”;

(6) whether the regulation permits the property owner

to profit and obtain a reasonable return on

investment; 

(7) whether the regulation provides the property owner

benefits or rights that mitigate whatever

financial burdens the law has imposed; 

(8) whether the regulation prevents the best use of

the land; 

(9) whether the regulation extinguishes some

fundamental attribute of ownership; and 

(10) whether the government is demanding the property

as a condition for the granting of a permit. 

Kavanau, 16 Cal. 4th at 775-76. The list is not comprehensive,

and the factors should be applied as appropriate rather than used

as a checklist. Id. at 776. 

Before any of these standards come into play, however, the

court must as a threshold matter, determine whether Plaintiffs

possess a vested property right:

The first step in [a] taking analyses is to determine

whether there is a property right that is protected by

the Constitution. See, e.g., Bowen v. Public Agencies

Opposed to Social Security Entrapment, 477 U.S. 41,

54-55 [additional citations]. In Public Agencies, a

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taking case, the Court held that the contractual right

at issue "\”did not rise to the level of ‘property’”

and “[could] not be viewed as conferring any sort of

‘vested right.’” 477 U.S. at 55. Without a property

right, there could be no “taking within the meaning of

the Fifth Amendment.” Id. at 55-56.

Peterson v. United States Dept. of Interior, 899 F.2d 799, 807

(9th Cir. 1990).

The parties expend a great deal of energy discussing whether

Belridge’s conduct in this case constitutes a per se taking or

satisfies the requirements of the Penn Central test. The parties

totally neglect, however, to address the threshold question of

whether the right Plaintiffs claim was condemned by Belridge is

of a type that is protected by the California or United States

constitutions. 

Unless Plaintiffs possess water rights separate and distinct

from those granted to them under their landowner contracts,

Plaintiffs’ entitlement (or “right”) to SWP water is defined

exclusively by that contract. Here, Plaintiffs do not claim to

possess any vested water rights other than their entitlement as a

District landowner to contract for water service under the

landowner contracts, nor do they claim that any provision of

state law conveys upon them or creates any other form of water

right. The terms of the contracts solely determine the nature of

any water rights Plaintiffs hold.

Here, Plaintiffs claim that they have been injured by

Defendants decision to prohibit transfers from the parcels of

land designated in the landowner contracts to other parcels of

land within Belridge. Yet, the Landowner Contracts specifically

prohibit the transfer of water entitlements without express

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written permission from Belridge. 

Project water delivered to Buyer pursuant to this

Contract shall not be sold or otherwise disposed of by

Buyer for use other than on Said Land without the prior

written consent of District. 

(LC Art. 20.) The contract does not contain a provision that the

District’s consent to a requested transfer shall not be

unreasonably withheld

Plaintiffs purchased 1599.16 acres of NSA land in early 2000

and an additional 471.27 acres of NSA land in 2004. At the time

Plaintiffs executed the LC for the lands purchased in 2000,

Plaintiffs entered into an agreement with Belridge that permitted

Plaintiffs to transfer some of their NSA water to urban uses. 

This, however, was a limited, one-time transfer as part of a

larger negotiated transfer of agricultural water entitlements to

urban water users. 

Plaintiffs assert that Defendants have “seized” their NSA

water and suggest that this amounts to a “per se” physical taking

of their property. But, again, Plaintiff’s right to water is

defined by the LC and any applicable amendments. According to

these documents, Plaintiffs only right to water is for their

lands in Zones of Benefits (Art. 5(b)), which may be qualified to

receive water by following the service connection procedure of

Article 7 for locations specified on Exhibit D. Plaintiffs’

right to receive and use water under the LC is subject to the

further condition that if any water to be delivered is not for

use on the lands specified in Plaintiffs’ LC, the District’s

consent must be obtained under Article 20. Plaintiffs have no

absolute vested right to transfer their water away from their NSA

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lands. (Plaintiffs do not allege that they were wronged by

Belridge’s failure to deliver water to their NSA land.) 

Plaintiffs argue in the alternative that they have alleged a

regulatory taking because the Board’s vote has deprived them of

“all economically beneficial use of their property.” Plaintiffs

suggest that the district court should follow the holding in,

Tulare Lake Basin Water Storage Dist. v. United States, 49 Fed.

Cl. 313, 318 (2001), where Judge Wiese held that “the federal

government, by preventing plaintiffs from using the water to

which they would otherwise have been entitled, [has] rendered the

usufructuary right to that water valueless, [and has] thus

effected a physical taking.” The Court of Claims decision has no

binding effect in the Eastern District of California. Moreover,

the conclusory reasoning in the Tulare Lake Basin case is without

analytical foundation and is suspect, as it has been criticized

in the Court of Claims. See Klamath Irrigation Dist. v. United

States, 67 Fed. Cl. 504, 513 (2005) (criticizing Tulare Lake

Basin for its failure to engage in any analysis of the contracts

which establish the rights in question). In the Ninth Circuit

and California, it is the contract that defines the nature and

terms of the water right possessed by users of water from the CVP

or SWP. Peterson, 899 F.2d at 807 (“The first step in both due

process and taking analyses is to determine whether there is a

property right that is protected by the Constitution.”); Planning

and Conservation League v. DWR, 83 Cal. App. 4th 892, 899 (2000)

(SWP contractors are obligated to pay for their contractual

entitlements to water “whether the water is delivered or not”). 

Here, Plaintiffs’ contract specifically withholds the right

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to transfer water without written permission from Belridge. In

essence, Belridge’s vote amounts to an announcement that no such

written permission will be granted until further notice. 

Plaintiffs were offered an opportunity at oral argument to point

to any alternative source of a vested property right in this case

and were unable to do so. Plaintiffs do not state a claim for

inverse condemnation under California law. Accordingly,

Defendants’ motion to dismiss the state law inverse condemnation

claim is GRANTED WITH LEAVE TO AMEND, subject to Rule 11's

requirement that a good faith investigation and analysis provide

a basis for the claim of a vested property right in District

water.

6. Without the Inverse Condemnation Claim, Plaintiffs

Must Demonstrate Satisfaction of the Amount-InControversy Requirement.

Whether the district court may assert jurisdiction over the

remaining claims depends upon the amount in controversy, which

will primarily be attorney’s fees Plaintiffs may be able to

recover as damages under their other state-law claims. Although

none of the other statutes invoked by Plaintiffs provide for

damages, several provide for the recovery of attorney’s fees

and/or costs of suit by successful litigants. Where a state

statute so provides, such fees can be considered as part of the

amount in controversy for the purposes of establishing diversity. 

Missouri State Life Ins. Co. v. Jones, 290 U.S. 199, 202 (1933);

Suber v. Chrysler Corp., 104 F.3d 578, 585 (3d Cir. 1997). 

//

//

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7. Political Reform Act Claim.

The California Political reform Act (“PRA”), Cal. Gov. Code

§ 87100, prohibits a public official from participating in

decision-making that will affect the official’s own financial

interest. Essentially, this is a prohibition against conflicts

of interest:

No public official at any level of state or local

government shall make, participate in making or in any

way attempt to use his official position to influence a

governmental decision in which he knows or has reason

to know he has a financial interest.

Cal. Gov. Code § 87100. A public official has a conflict of

interest “if the decision will have a reasonably foreseeable

material financial effect on one or more of his/her economic

interests, unless that effect is indistinguishable from the

effect on the public generally.” 2 Cal. Code Regs. § 18700. 

a. Standing.

A private right of action to enforce the PRA is created by

California Government Code § 91003:

Any person residing in the jurisdiction may sue for

injunctive relief to enjoin violations or to compel

compliance with the provisions of this title.

(emphasis added). Defendants argue that Plaintiffs, all of whom

are residents of Texas, are not persons “residing in the

jurisdiction,” for purposes of § 91003. 

Plaintiffs rejoin that the political reform act is to be

liberally construed, to effectuate the purpose of the act: “to

preclude a government official from participating in decisions

where it appears he may not be totally objective because the

outcome will likely benefit a corporation or individual by whom

he is also employed.” Cal. Gov. Code § 81003. Plaintiffs cite

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Kunec v. Brea Redevelopment Agency, 55 Cal. App. 4th 511 (1997)

for the proposition that the Political Reform Act is intended to

extend, not limit, standing to bring a private civil action. 

Although the Kunec court did not address the specific question

here presented, it noted in dicta: 

[W]e doubt whether the PRA actually requires condemnees

to be residents of the jurisdiction where the affected

property is located to challenge the validity of the

governmental decision. The PRA on its face is intended

to extend standing, not limit it. Its legislative

findings expressly speak of the need to afford private

citizens as well as public officials such “[a]dequate

enforcement mechanisms” to ensure “this title will be

vigorously enforced.” (Gov. Code, § 81002, subd. (f).)

It is absurd to allow the 35,122 residents in Brea

standing to challenge the Agency's decision, but not

the person with the greatest beneficial interest.

Under the common law, “...those who are adversely

affected by the operation of an ordinance may question

its validity.” For example, in Clark v. City of

Hermosa Beach (1996) 48 Cal. App. 4th 1152, 1170, a

husband and wife whose primary residence was in

Phoenix, but who owned a duplex in Hermosa Beach,

challenged the validity of a city decision affecting

their beach property. The council member who cast the

deciding vote lived a block away and admittedly would

lose some of his ocean views. Speaking of the

plaintiffs' right to a fair hearing by impartial

officials, the Clark court stated, “[T]he common law

doctrine against conflicts of interest ... prohibits

public officials from placing themselves in a position

where their private, personal interests may conflict

with their official duties.” (Id. at p. 1171.)

Id. at 519 (emphasis added). 

Defendants do not point to contrary authority, but rather to

reasoning more closely associated with the actual holding from

Kunec. In Kunec, the plaintiff in a PRA case owned property in

Brea that was the subject of a condemnation action. Although

Kunec resided initially in Anaheim, he later acquired residency

in Brea. Defendants insisted that Kunec needed to have been a

resident when the condemnation resolution was adopted. The Kunec

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court rejected this argument:

[W]e reject the [defendants’] efforts to rewrite the

PRA to insert a durational residency requirement....

Section 91003 contains no specific time reference for

the residency provision, and we will not add one....

Our interpretation of the PRA does not render the

residency requirement “utterly meaningless” nor does it

encourage “political bounty hunters” to “move about

from jurisdiction to jurisdiction, filing lawsuit after

lawsuit, attempting to extract money from public

officials.” As the [defendant] itself points out,

Kunec can only be a resident of one jurisdiction. 

Having physically relocated from Anaheim to Brea, Kunec

was precluded from voting in Anaheim elections or from

bringing PRA lawsuits within that city as a resident.

That is a fairly significant price to pay.

Id. at 518 (emphasis added). Defendants suggest that this

passage establishes that only actual residents have standing

under the PRA. Although it is a close call, in light of the

additional discussion (albeit in dicta) the underscored passage

is more faithfully interpreted as an acknowledgment of the need

to safeguard against “political bounty hunters.” Here, the

ownership of property is an additional safeguard against this

problem. Plaintiffs own property in Belridge, within the

territorial jurisdiction of the court, and allege that the

Board’s action has injured them with respect to this property. 

Plaintiff has been “adversely affected by the operation” of this

vote and should be permitted to “question its validity.” 

Plaintiffs have standing to raise a challenge to the Board’s

actions under the PRA. 

b. The “public generally” exception.

Defendants argue that Plaintiffs’ PRA claim should be

dismissed as a matter of law because their actions were proper

under a provision of the PRA which exempts from its prohibitions

decisions made by Directors who are affected by the subject

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matter of their vote in the same manner as the “public

generally.” Cal. Gov. Code § 87103. The PRA’s implementing

regulations contain a number of provisions further explaining the

application of the “public generally” exception. Defendants

point specifically to Title 2 of the California Code of

Regulations § 18707.2, titled “Special Rule for Rates,

Assessments, and Similar Decisions,” which provides:

The financial effect of a governmental decision on the

official's economic interest is indistinguishable from

the decision's effect on the public generally if any of

the following apply:

(a) The decision is to establish or adjust

assessments, taxes, fees, charges, or rates or

other similar decisions which are applied on a

proportional basis on the official's economic

interest and on a significant segment of the

jurisdiction, as defined in 2 Cal. Code of

Regulations, section 18707.1(b).

(b) The decision is made by the governing board of a

landowner voting district and affects the

official's economic interests and ten percent of

the landowners or water users subject to the

jurisdiction of the district in proportion to

their real property interests or by the same

percentage or on an “across-the-board” basis for

all classes.

(c) The decision is made by the governing board of a

water, irrigation, or similar district to

establish or adjust assessments, taxes, fees,

charges, or rates or other similar decisions, such

as the allocation of services, which are applied

on a proportional or “across-the-board” basis on

the official's economic interests and ten percent

of the property owners or other persons receiving

services from the official's agency.

The decision in question, the February 16, 2005 vote to

prohibit the transfer of NSA water to SA lands, is not even

arguably an assessment, tax, charge, fee, rate, or other similar

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Plaintiffs also suggest that subsection (b) should not 7

apply here because the vote in question did not concern the

increase, decrease or change in any rate or assessment. Although

the title of the provision does imply applicability to only

“Rates, Assessments, and Similar Decisions” the plain language of

the entire provision suggests that subsection (b) should not be

so narrowly construed. On the one hand, subsection (a)

explicitly applies to decisions to “establish or adjust

assessments, taxes, fees, charges, or rates or other similar

decisions” and subsection (c) applies to decisions to “establish

or adjust assessments, taxes, fees, charges, or rates or other

similar decisions, such as the allocation of services.” In

contrast, subsection (b) omits any mention of assessments, taxes,

fees, or related terms, but rather applies to all decisions of a

“landowner voting district” that “affect[] the official's

economic interests and ten percent of the landowners or water

users subject to the jurisdiction of the district in proportion

to their real property interests or by the same percentage or on

an ‘across-the-board’ basis for all classes.” Subsection (b) is

not limited to rates, fees, assessments, and the like. 

Defendants also suggest that Plaintiffs bear the burden 8

of proving, at this pleading stage of the case, that the public

generally exception does not apply. Defendants point to the

Minutes from the February 16, 2005 Board meeting, which have been

judicially noticed, to support the assertion that the public

generally exception operates to shield Defendants from liability

in this case. The Minutes state:

[E]ven if focus is made on the Top Contract, there is

no disqualifying conflict of interest since any

financial effect with respect to the Top Contract would

be on a Director’s economic interest in proportion to

the interest of the Top Contract and at least ten

percent of all water users since the number of water

users who are parties to the Top Contract other than

[the companies associated with the Defendant Directors]

exceeds ten percent of all water users in the District. 

Defendants suggest that this document shows that “the Directors’

vote was premised upon the ‘public generally’ rule contained in

the PRA.... Since that was the basis for the Directors’ vote, the

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decision, so sub-parts (a) and (c) do not apply. Defendant 7

strenuously maintains, however, that subpart (b) does apply to

the facts of this case. The parties point to no authority 8

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Complaint should set forth facts that show Directors do not fall

under the public generally rule.” (Doc. 17, at 7.) Defendants

also argue that “[b]ecause no such allegations are made, the

Complaint fails to state a claim upon which relief can be

granted.” (Id.) However, Defendants point to no authority that

suggests the wel l-accepted liberal pleading standard set forth

in Federal Rule of Civil Procedure 8 should be disregarded here. 

Even if a different pleading standard did apply, as discussed, §

18707.2 is inapplicable to the facts of this case. 

Although the regulation references “landowners or water 9

users,” all landowners subject to Belridge’s jurisdiction hold

water entitlements in proportion to their acreage. Accordingly,

it is sufficient to refer to individuals under Belridge’s

jurisdiction simply as “landowners.” 

32

construing the language of §§ 18707.2(b). The applicability of

this provision to the facts of this case presents several unique

questions that have not yet been addressed by any court. 

Specifically, Defendants maintain that the February 16, 2005

vote affected at least ten percent of the other “landowners or

water users subject to the jurisdiction of the district in

proportion to their real property interests or by the same

percentage or on an ‘across-the-board’ basis for all classes.” 

Defendants make a critical assumption in support of this

assertion: that the February 16, 2005 decision, affects all

District landowners in the same way, because it prohibits all 9

landowners from transferring their NSA water to SA lands. 

Operating under this assumption, Defendants present various

arithmetical analyses of the individual Defendants’ property

interests vis-a-vis all other Belridge landowners. Based on

these analyses, Defendants contend that the decision affects at

least ten percent of the non-voting landowners. Assuming,

arguendo, the validity of Defendants’ fundamental assumption,

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their calculations appear to satisfy the ten percent rule. 

Plaintiffs argue, however, that Defendants’ fundamental

assumption is flawed, and maintain that the February 16 decision

does not affect all District landowners in the same way, because

it financially benefits those district landowners who are parties

to the Top Contract while not providing similar financial

benefits to other district landowners.

Plaintiffs’ view of the effect of the February 16 decision

is the more persuasive, particularly in light of the purpose of

the PRA. Here, the Plaintiffs allege (and Defendants do not

appear to dispute) that the operative effect of individual

landowners transferring NSA entitlement to SA lands is to

diminish the amount of water available under the Top Contract. 

Accordingly, prohibiting such transfers (permanently or

temporarily) will ensure that the parties to the Top Contract

have exclusive access to these (valuable) surplus water

entitlements. The PRA is designed to ensure that “[n]o public

official at any level of state or local government shall make,

participate in making or in any way attempt to use his official

position to influence a governmental decision in which he knows

or has reason to know he has a financial interest.” Cal. Gov.

Code § 87100. Although the February 16, 2004 decision does not

directly reference the Top Contract, the beneficial effect of the

decision upon parties to the Top Contract is undeniable as the

vote ensures that Plaintiffs’ NSA water is available to be

allocated to the Directors’ Top Contract claims. 

Assuming that the February 16, 2005 decision affects the

parties to the Top Contract differently from the remaining

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landowners, the question then becomes whether § 18707.2(b)

nevertheless shields Defendants. With respect to this inquiry

Plaintiffs raise an important threshold question: Does 

§ 18707.2(b) even apply to a decision that affects one group of

landowners differently from its effect on other landowners. The

plain language of the provision, suggest that it does not. 

Section 18707.2(b) provides for an exception from the PRA when: 

The decision is made by the governing board of a

landowner voting district and affects the official's

economic interests and ten percent of the landowners or

water users subject to the jurisdiction of the district

in proportion to their real property interests or by

the same percentage or on an “across-the-board” basis

for all classes.

According to the plain language of the provision, an official may

participate in making a decision, even if the decision affects

the official’s economic interests, if the decision also affects

ten percent of the landowners or water users subject to the

jurisdiction of the district in a proportional manner. The

provision offers three alternative ways to calculate whether ten

percent of other landowners are affected: (1) in proportion to

their real property interests; (2) by the “same percentage”; or

(3) on an “across the board basis.” No further definitions or

guidance is provided. The “across the board” option is fairly

self-explanatory and applies only if all landowners are affected

equally by a decision. For example, if all landowners were

assessed a flat fee for a particular administrative service. 

Although the wording is not particularly clear, a similar

interpretation is appropriate for the “by the same percentage”

language. For example, if a fee was levied at one percent of the

value of a landowner’s water entitlement or at a fraction of the

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total acres owned. The February 16, 2005 decision affects

parties to the Top Contract differently from other landowners,

and neither the “by the same percentage” nor the “across-theboard” language is applicable here. 

A more difficult question is whether the February 16, 2005

decision affects the Defendant Directors’ “economic interests and

ten percent of the landowners or water users subject to the

jurisdiction of the district in proportion to their real property

interests....” § 18707.2(b)(emphasis added). Both parties

submit sets of calculations addressing whether or not the ten

percent threshold is met, but Plaintiffs assert that these

“various arithmetical scenarios” assume too much. (Doc. 45,

Pltf’s Suppl. Brief, at 2.) Plaintiffs maintain that the “in

proportion to their real property interests” language of 

§ 18707.2(b) does not apply because the allocation of benefits

under the Top Contract does not track the parties’ proportional

landownership interests in the District. Plaintiffs appear to be

correct. 

The chart below compliles information from various exhibits

in the record. The first two columns list the parties to the Top

Contract and which, if any, Defendant is affiliated with those

entities. The third column lists the various entities’ share of

water under the Top Contract. The Fourth presents the entities’

share of the total land in Belridge, both in Acreage and as a

percentage share of the total. Finally, the Fifth column shows

the entities’ share of the total water entitlement actually used

in Belridge, exclusive of any entitlement gained under the terms

of the Top Contract. 

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 Figures for this column taken from the Top Contract. (Hughes Decl., Ex. A.) 10

 Figures for this column taken from Defendants’ supplemental brief. (Doc. 44, 11

Hammett Decl., Ex. G.)

 Figures for this column taken from Plaintiffs’ supplemental brief. (Doc. 45 12

at 13.)

 Defendants Phillimore and Baker are grouped together for purposes of this 13

analysis because their interests appear to be intertwined. Defendants own briefing

concedes as much. (See Doc. 43 at 6.)

 Although Paramount Land Company is the only Paramount entity that is a party 14

to the Top Contract, all of the Paramount entities are considered together in this

analysis because they are clearly intertwined and controlled by the same individuals.

36

Parties to Top

Contract

Share of

Top

Contract1 0

Share of Total Land in

Belridge1 1

Share of Total

Belridge Water

Entitlement

(actually used)1 2

Defendants

Phillimore &

Baker1 3

Paramount Business

Entities:1 4

Paramount Land

Company

14.46% 6,962.71 A (7.26%) 2,456.17 AF

(2.37%)

Paramount Citrus

Association

0 2,833.75 A (2.95%) 8,758.14 AF

(8.45%)

Paramount Orchards 0 21,257.33 A (22.16%) 52,088.69 AF

(50.28%)

Paramount Farms 0 396.42 A (0.41%) 0

Belridge New Farming

LLC

62.84% 0 0

Total for

Phillimore &

Baker

77.3% 32.78% 61.1%

Defendant

Starr

Starrh & Starrh

Cotton Growers

16.61% 6,444.91 A (6.72%) 13,289.39 AF

(12.84%)

NonDefendant

Parties to

the Top

Contract

BLC Farmlands, LLC 0.16%

80.00 A (0.08%)

159.20 AF

(0.15%)

California Pistachio,

Inc.

0.19% 87.17 A (0.09%) 190.81 AF

(0.18%)

Chaparral Industries,

Inc.

2.02% 965.93 (1.01%) 2,047.77 AF

(1.98%)

Rod Steifvater 1.00% 2,446.90 A (2.55%) 1,113.83 AF

(1.08%)

Steifvater et al. 1.79% 1277.06 (1.33%) 4,256.24 AF

(4.11%)

Theta Oil and Land

Company

0.93% 796.36 (0.83%) 947.96 AF

(0.91%)

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Without even attempting to apply the ten percent rule, it is

evident that the Defendants’ share of water under the Top

Contract (and therefore the parties’ share of the benefits of the

Top Contract) does not track either their proportional land

ownership or their water entitlement. For example, Defendant

Starr holds a 16.61% share of water under Top Contract, but 6.72%

of the total land in Belridge and 12.84% of the total used water

entitlement. Similarly, Defendants Pillimore and Baker, who are

together affiliated with the Paramount entities and Belridge New

Farming, hold a 77.3% interest in the Top Contract, but (counting

all of their related entities) only 32.78% of the total acreage

in Belridge and 61.1% of the total used water entitlement. Some

of the non-defendant parties to Top Contract hold shares in the

Top Contract that are similar to their overall share of

Belridge’s used water entitlement (for example, BLC Farmlands,

California Pistachio, Chaparral, and Theta Oil), but such is not

the case with the Steifvater entities. Overall, the record

reveals that Defendants’ collective share in the Top Contract is

disproportionately larger than their share of either the land in

Belridge or of the used water entitlement. It is inappropriate

to apply § 18707.2(b), which is supposed to exempt officials who

make decisions affecting their own economic interests only if the

decision also affects “ten percent of the landowners or water

users subject to the jurisdiction of the district in proportion

to their real property interests....” (emphasis added).

Under the facts and circumstances of this case, applying the

§ 18707.3(b) exemption would not comport with the over-arching

purpose of the PRA: to ensure that “[n]o public official at any

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level of state or local government shall make, participate in

making or in any way attempt to use his official position to

influence a governmental decision in which he knows or has reason

to know he has a financial interest.” Cal. Gov. Code § 87100.

Although the parties have not pointed to any legislative history,

judicial interpretation, or administrative guidance on the

intended scope and purpose of § 18707.2(b), it is reasonably

inferred that the purpose of the exception is to permit

interested directors to only make decisions for landowner voting

districts when these decisions affect all landowners in a fair

and even-handed manner. The complaint alleges that Defendants;

actions have preferred their economic self-interest to the

detriment of other district members. 

Defendants’ motion to dismiss Plaintiffs’ PRA claim is

DENIED.

8. California Government Code § 1090.

Section 1090 of the California Government Code prohibits

Directors of a water district from being “financially interested

in any contract made by them in their official capacity, or by

any body or Board of which they are a member.” Cal. Gov. Code 

§ 1090 (emphasis added). Section 1090 “encompass such

embodiments in the making of a contract as preliminary

discussions, negotiations, compromises, reasoning, planning,

drawing of plans and specifications and solicitations for bids.”

Millbrae Assoc. for Residential Survival v. Millbrae, 262 Cal.

App. 2d 222, 237 (1968). 

Plaintiffs appear to concede that the Defendant directors

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did not actually cause the Top Contract to be created. The Top

Contract was drafted and signed prior to any of the Defendant

Directors becoming members of the Board. 

Plaintiffs also appear to concede that the February 16, 2005

vote did not expressly “make” a contract. Rather, Plaintiffs

assert that:

The Board’s action at the February 16, 2005 special

Board meeting amended the Top Contract into a permanent

contract whereby all of the NSA entitlement is

permanently made available to the Buyers under the Top

Contract, effectively transforming the Top Contract

from an interim or temporary measure into a permanent

arrangement. 

(Doc. 1, Compl., at ¶77.) Essentially, Plaintiffs argue that the

adoption of the policy was a de facto contract amendment,

“insuring a supply of seized NSA water to Top Contract buyers.” 

(Doc. 25 at 12.) Plaintiffs offer no legal support for the

proposition that liability under § 1090 may be triggered by such

an implied amendment. (The appropriate legal remedy appears to

be under the PRA.)

Plaintiffs also suggest that Milbrae and its progeny call

upon courts to read of the statutory language liberally. For

example, in Thomson v. Call, 38 Cal. 3d 633 (1985), a complex,

multi-party contract transaction was found to be “part of a

single multiparty agreement.” It was therefore improper for a

city councilman, whose own property was acquired in one of the

more tangential transactions, to have participated in the making

of any of the interrelated contracts:

[T]he prospect that performance of the contract would

involve acquisition of the [councilman’s land and

conveyance of that land to the city was contemplated by

all parties....[T]he policy goals of section 1090

support the rule that public officers “are denied the

right to make contracts in their official capacity with

themselves or to become interested in contracts thus

made.”

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Id. at 645. A similarly broad view of the meaning of the term

“contract” was taken in People v. Honig, 48 Cal. App. 4th 289

(1996). In that case, a state educational official was married

to the founder and director of a nonprofit corporation involved

in education. At this official’s direction, grants were made by

the state to certain school districts. But, these funds were

actually used to pay the salaries of employees who worked for his

wife’s nonprofit organization. The official was found to have

violated § 1090 because he had indirectly caused the improper

contracts to be made. The Honig court reasoned:

In considering conflicts of interest we cannot focus

upon an isolated 'contract' and ignore the transaction

as a whole. It appears clear that the payment of DOE

funds to the school districts, the districts' payment

of those funds to QEP employees in the form of

continued salaries and benefits, and the employees'

work for QEP, were in performance of single multiparty

agreements. In short, defendant simply used the school

district contractors as conduits to funnel DOE funds to

individuals as compensation for working for his wife's

corporate employer. The use of a third party as a

contractual conduit does not avoid the inherent

conflict of interest in such a transaction. 

Id. at 320. See also People v. Gnass, 101 Cal. App. 4th 1271,

1293 (2002)(“[T]he test is whether the officer or employee

participated in the making of the contract in his official

capacity.”). 

Although these cases take a broad view of the term contract,

Plaintiffs suggest an even broader interpretation of § 1090. 

Under Plaintiffs’ interpretation, any vote of a government

official that advances an independent existing contractual

interest held by that government official would be prohibited by

§ 1090. Plaintiffs essentially argue that § 1090 should be read

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to subsume any action that advances a contractual interest. This

in effect rewrites § 1090. (Noticeably, § 1090 lacks the “public

generally” exception which threatens Plaintiffs’ PRA claim.) The

Belridge Board’s vote on the transfer of NSA water is not a

“contract made” by the Board, unless an agreement between the

district and the Top Contractors results from the vote. 

Defendants’ motion to dismiss the § 1090 claim is GRANTED WITH

LEAVE TO AMEND.

9. Brown Act Claims.

The Brown Act is California’s local government open meeting

law. Belridge is a “local agency” covered by the Brown Act. 

Cal. Gov. Code §§ 54950.5, 54951. Among other things, the Brown

Act sets forth various procedural requirements for local

government meetings, including requirements for the posting of

agendas prior to such meetings. For example, at least 72 hours

before a “regular meeting,” a local legislative body must post an

agenda containing a “brief general description of each item of

business to be transacted or discussed at the meeting....” 

§ 54954.2. Other types of meetings are subject to different

notice requirements. For example, “special meetings” must be

“posted at least 24 hours prior to the special meeting in a

location that is freely accessible to members of the public.” 

§ 54956.

The parties dispute whether the February 16, 2005 meeting

was an “adjourned regular meeting” or a “special meeting.” 

Defendants contend that it was an “adjourned regular meeting,”

pointing to the minutes from the February 16th meeting. As such,

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Defendants submit the meeting was subject to the regular

notification procedures under the Brown Act. 

Plaintiffs insist that the meeting was actually a “special

meeting” pointing to passages from the appointment calendar of

Belridge’s manager, Greg Hammett, which indicates that a “Special

Board Meeting” was held on February 16, 2005 at 1:30 pm. 

Plaintiffs also submit that the February 16th meeting must be

considered a special meeting because Defendants altered the

agenda item from that which was posted for the January 11, 2005

meeting. Plaintiffs argue that “such an impermissible change in

the agenda without following the procedures for a Special Meeting

appears to be a clear violation of the Brown Act....” (Doc. 25

at 14.) However, Plaintiffs cite no authority for this

proposition. Nothing in the Brown Act explicitly prohibits

alteration of an agenda prior to holding re-adjourned regular

board meeting. What seems to be required prior to the readjourned regular meeting is the re-posting of some agenda that

complies with the Brown Act’s provisions. Here, such an agenda

was posted. The agenda announced that the following topic would

be considered “Policy re: Permanent Transfer of Annual

Entitlement from Non-Service Area to Service Area.” This is a

“brief general description of each item of business to be

transacted or discussed at the meeting....” § 54954.2. Absent

any other procedural objection, Plaintiffs have failed to state a

claim under the Brown Act.

Defendants motion to dismiss the Brown Act Claim is GRANTED

WITH LEAVE TO AMEND.

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Section 17201 provides that “As used in this chapter, 15

the term person shall mean and include natural persons,

corporations, firms, partnerships, joint stock companies,

associations and other organizations of persons.”

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10. Unfair Competition Claim.

California’s Business and Professions Code § 17203 allows

any “person” to sue for an injunction to prevent any other

“person” from engaging in “unfair competition.” Section 17200

defines unfair competition:

[U]nfair competition shall mean and include any

unlawful, unfair or fraudulent business act or practice

and unfair, deceptive, untrue or misleading advertising

and any act prohibited by Chapter 1 (commencing with

Section 17500) of Part 3 of Division 7 of the Business

and Professions Code. 

Essentially, an action based on the Unfair Competition Statute

“to redress an unlawful business practice ‘borrows’ violations of

other laws and treats these violations, when committed pursuant

to business activity, as unlawful practices independently

actionable under [] § 17200 et seq., and subject to the distinct

remedies provided thereunder.” Farmers Ins. Exch. v. Superior

Court, 2 Cal. 4th 377, 383 (1992)

Defendants first assert that plaintiffs have not alleged

violations of any other statute. As discussed above, at least

one other statutory claim remains.

Defendants argue in the alternative that public entities are

not “persons” under § 17201. See Cal. Med. Ass’n Inc. v. 15

Regents of the Univ. of Calif, 79 Cal. App. 4th 542, 550-51

(2000). Plaintiffs concede this with respect to Belridge itself,

but maintain that the individual defendants are not immune from

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liability. Plaintiffs point to several cases which have held

public officials liable for violations of the PRA and California

Government Code § 1090. (See Doc. 25, at 17:25.) Plaintiffs

point to no similar authority holding public officials liable for

their decisions under the Unfair Competition Statute. By analogy

to the federal RICO laws, which prohibit unlawful racketeering

acts, which include violations of the antitrust laws, individual

public officials can be liable. United States v. Thompson, 685

F.3d 993 (6th Cir. 1982). Moreover, a public entity can be a

racketeering enterprise for RICO purposes. United States v.

Freeman, 6 F.3d 586, 597 (9th. Cir. 1993). It is not unwarranted

to apply the Unfair Competition law to unlawful anti-competitive

conduct by public officials in the performance of their official

duties. Defendants’ motion to dismiss the Unfair Competition

Claim is DENIED.

B. Motions to Disqualify.

Plaintiffs move to disqualify attorneys Joseph Hughes, of

Kuhs, Parker & Hughes (“KPH”), and Nicole Tutt, of Nossaman,

Gunther, Knox & Elliot L.L.P. (Docs. 23 & 24.)

Mr. Hughes is the Assistant Secretary of Belridge and has

appeared in this case as an advocate on behalf of both Belridge

and Defendant Starrh. Plaintiffs submit that Mr. Hughes may be

subject to deposition and giving testimony because Defendant

Starrh apparently asserts that he acted on Mr. Hughes’ legal

advice. Plaintiffs note that Mr. Hughes has submitted sworn

declarations in this case concerning the authenticity of various

documents in dispute. Finally, Plaintiffs assert that Mr. Hughes

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may have played a role in preparing and negotiating the Top

Contract, and in preparing the Minutes and Agenda for the

February 6, 2005 meeting, all of which are at issue in this case. 

Ms. Tutt prepared a memorandum regarding conflict of

interest issues involving Belridge and Defendants Phillimore and

Baker. This memorandum was distributed as part of the “agenda

packet” for the February 16, 2005 Board meeting and was

referenced in the Minutes from that meeting. Specifically, the

memorandum concludes that Defendants Phillimore and Baker do have

a conflict of interest under the PRA but that they “likely” would

qualify under the “public generally” exception. The memorandum

states that the “Board is considering a water transfer policy

that would apply equally to any and all persons within the

district.” But, according to Defendants, the policy Tutt

analyzed in her memorandum was one that would impose a fee upon

transfers, not one that would bar transfers altogether. 

Plaintiffs believe that Defendants will assert advice of counsel

as a defense. Plaintiffs assert that they have the right to

conduct discovery concerning this defense, and that this

discovery will require both Mr. Hughes and Ms. Tutt to appear as

witnesses. 

Plaintiffs point to rules from the ABA Model Code of

Professional Responsibility and the ABA Model Rules of

Professional Conduct, which generally prohibit advocates from

appearing as witnesses in a case. These rules make exception for

certain extreme circumstances which do not apply in this case. 

As a threshold matter, Plaintiffs point to the wrong set of

rules. The rules which apply here are the Rules of Professional

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Available at http://www.calbar.ca.gov. 16

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conduct of the State Bar of California (“State Rules”). See

Local Rule 83-180(e). 

The State rules permit an advocate to appear as a witness if

either the testimony would pertain to an uncontested matter or if

the advocate has the informed, written consent of the client. 

See State Rule 5-210. Defendants have given their written 16

consent in this case. Defendants also maintain that there is no

reason either lawyer will be required to testify before a jury on

a contested matter. Defendants insist that there are many other

witnesses who can speak to the same set of facts. If any

conflict exists, it is between Defendant Starrh and the two

lawyers who gave him advice. Plaintiffs are not injured by the

existence of such a conflict. If facts developed in discovery

show otherwise, Plaintiff may resubmit the issue of any conflict

of counsel. Plaintiffs’ motion to disqualify is DENIED WITHOUT

PREJUDICE

VI. CONCLUSION

For the reasons set forth above, 

(1) Defendants’ motion to dismiss the federal takings claim

and state-law inverse condemnation claim is GRANTED

WITH LEAVE TO AMEND subject to Rule 11's requirement

that a good faith investigation and analysis provide a

basis for the claim of a vested property right in

District water.

(2) Defendants’ motion to dismiss the Political Reform Act

claim is DENIED.

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(3) Defendants’ motion to dismiss the California Government

Code § 1090 claim is GRANTED WITH LEAVE TO AMEND. 

(4) Defendants motion to dismiss the Brown Act Claim is

GRANTED WITH LEAVE TO AMEND. 

(5) Defendants’ motion to dismiss the Unfair Competition

claim is DENIED.

(6) Plaintiffs’ motions to disqualify are DENIED WITHOUT

PREJUDICE. 

Plaintiff shall file any amended complaint within twenty

(20) days of the date of service of this order.

SO ORDERED

 /S/ Oliver W. Wanger 

OLIVER W. WANGER

United States District Judge

Case 1:05-cv-00603-OWW -SMS Document 48 Filed 01/17/06 Page 47 of 47