Filed 7/15/24

CERTIFIED FOR PUBLICATION 

COURT OF APPEAL, FOURTH APPELLATE DISTRICT 

DIVISION ONE 

STATE OF CALIFORNIA 

MARK COZIAHR,

 Plaintiff and Appellant, 

 v. 

OTAY WATER DISTRICT, 

 Defendant and Appellant. 

 D081099

 (Super. Ct. No. 37-2015-00400000- 

 CU-MC-CTL) 

MARK COZIAHR, 

 Plaintiff and Appellant, 

 v. 

OTAY WATER DISTRICT, 

 Defendant and Appellant. 

 D081606

 (Super. Ct. No. 37-2015-00400000- 

 CU-MC-CTL) 

CONSOLIDATED APPEALS from a judgment of the Superior Court of 

San Diego County, Eddie C. Sturgeon, Judge. Affirmed in part, reversed in 

part, remanded with directions. 

Artiano Shinoff, Daniel R. Shinoff, Jack M. Sleeth, Jr.; Hanson 

Bridgett, Claire H. Collins, Adam W. Hofmann, Rosslyn Hummer, Patrick 
2

Burns and Breana L. Burgos for Defendant and Appellant.

Daniel S. Hentschke for Association of California Water Agencies, 

California Association of Sanitation Agencies, California Special Districts 

Association and League of California Cities as Amici Curiae on behalf of 

Defendant and Appellant.

Gibbs Law Group, Andre M. Mura, Steven M. Tindall; Scott D. Levine

and Scott D. Levine for Plaintiff and Appellant.

Ross, Wolcott, Teinert & Prout, William C. O’Neill; Ciresi Conlin, Katie 

Crosby Lehmann, Kyle W. Wislocky and Patrick A. Cochran for Mesa Water 

District as Amicus Curiae on behalf of Plaintiff and Appellant.

Plaintiff Mark Coziahr brought a class action against the Otay Water 

District (Otay), alleging Otay imposed tiered water rates on single-family 

residential customers (SFRs) that violated a constitutional requirement 

added by Proposition 218 known as Section 6(b)(3). (Cal. Const., art. XIII D, 

§ 6, subd. (b)(3).)1 Under Section 6(b)(3), a property-related fee or charge

“shall not exceed the proportional cost of the service attributable to the 

parcel.” The burden is on the local governmental agency to “demonstrate 

compliance” in a legal action as to fee validity. (Section 6(b)(5).)

After certifying the class, the trial court determined Otay did not meet 

its burden as to Section 6(b)(3). In a subsequent remedy phase, the court 

considered proposed refund calculation methods; used a classwide approach 

that included all water charges; and indicated it would hold a later individual 

allocation phase. The court awarded an estimated refund of approximately

$18 million, with monthly increases until Otay imposed rates consistent with 

1 Further section references are to article XIII D of the California 

Constitution, unless noted.
3

Section 6(b)(3). The court entered judgment for Coziahr, which stated Otay

remained free to use any compliant rate structure.

Otay appeals from the liability decision and damages, while Coziahr 

appeals only as to damages. On liability, Otay contends the trial court should 

have accepted its “reasonable, cost-based” approach, and improperly required 

“perfection.” On damages, Otay argues a refund was not authorized by 

Proposition 218; the trial court did not make a damages finding, and there 

was no support for one; and the court’s calculations were speculative. 

Coziahr, on cross-appeal, argues that only the overcharges at the two highest

tiers should have been included in the refund calculations, and the court’s 

method amounted to an unpled and unjustified offset.

We affirm the judgment as to liability, the availability and existence of 

damages, and the trial court’s inclusion of all charges in the damages

calculation. However, we conclude the court’s calculations were 

unreasonable, and remand for a new trial on the refund amount.

FACTUAL AND PROCEDURAL BACKGROUND

I. Underlying Events

Otay operates a water utility service in southeastern San Diego 

County. Otay’s water customers are grouped into four classes: single-family 

residential (SFR), multi-family residential (MFR), commercial, and irrigation.

Otay divides its water charges into two parts: fixed and variable. 

Fixed charges include “pass-through charges from the San Diego County 

Water Authority (CWA) and the Metropolitan Water District (MWD)” and the 

“District system fee,” which is based on meter size. According to Otay 

budgets during the relevant time, pass-through charges cover “construction, 

operation and maintenance of aqueducts and emergency storage projects,” 

and the system fee is for “water system replacement, maintenance, and 
4

operation.” Variable charges include water rate charges, energy charges (to 

cover elevation-related pumping), penalties, and, when applicable, 

improvement district charges. Variable water rate charges are based on 

consumption units of one hundred cubic feet (HCF).2

Otay periodically directs consultants to prepare a cost of service study, 

or rate study. In 2013, Otay retained WS Atkins (Atkins), and in 2017, it 

retained HDR Engineering, Inc. (HDR) for such studies. Both firms relied in 

part on water rate cost of service methodologies from an American Water 

Works Association (AWWA) manual titled, “M1 Manual, Principles of Water 

Rates, Fees and Charges” (M1 Manual).3

From 2014 to 2017, Otay used a tiered rate structure for all classes of 

customers, including SFRs. Customers subject to volume-based tiers pay a 

higher price for water units at each increasing tier. In 2018, Otay made 

changes to the SFR tiers, and moved commercial and irrigation customers to 

uniform rates (i.e., no price increase based on volume).4 We describe the rate 

studies used by Otay below.

2 The terms “charge” or “fee” generally refer to the method by which costs 

are recovered, while “costs” means the expenses themselves.

3 A copy of the M1 Manual (7th Ed., 2017) is in the record.

4 From 2014-2017, the SFR conservation tier applied to 0-5 HCF (if 

overall consumption was 10 or less HCF), Tier 1 was 6-10 HCF, Tier 2 was 

11-22 HCF, and Tier 3 was 23 or more HCF. In 2018, the conservation tier 

was eliminated, Tier 1 became 0-10 HCF, and Tiers 2 and 3 stayed the same.
5

II. Litigation

A. Class Action Lawsuit Challenging Rates

In July 2015, Coziahr filed a class action complaint and petition for 

writ of mandate against Otay for violating Section 6(b)(3).5 He alleged 

Otay’s SFR tiered water rates were “arbitrary” and did not “correspond to the 

actual cost of water service” to the parcel, as required. He sought (i) 

declaratory relief, (ii) injunctive relief, (iii) restitution damages based on 

excessive fees, and (iv) a writ of mandate to compel Otay to comply with its 

mandatory duties and reimburse unlawfully collected charges.

Coziahr moved for class certification. Otay disagreed on the statute of 

limitations period, to which the parties later stipulated. The trial court 

certified the class, which was defined as “All single-family residential 

customers of the Otay Water District who received water service” after

July 14, 2014. The case proceeded to trial in liability and damages phases.

B. Liability (Phase I)

The trial on liability proceeded as follows. Coziahr filed an opening 

brief, Otay filed an opposition, and Coziahr filed a reply. The parties also 

filed expert declarations and/or reports. Otay’s expert was Jason Mumm, an 

executive consultant at a firm specializing in municipal water rate 

development. His report included an “independent analysis” of Otay’s rates. 

Coziahr’s expert was David Vondle, a management consultant with 

experience in utility-related matters. The rate studies were in the 

administrative record, which was lodged in the trial court.

5 Coziahr’s initial complaint included the City of San Diego. His case 

was severed, the original case continued in Patz v. City of San Diego, and it 

also proceeded to class certification, judgment, and a refund. Appeals there

are proceeding in the Fourth Appellate District, Division 2.
6

In June 2021, the trial court held a hearing at which counsel presented 

argument. In March 2021, the court issued the Phase I Statement of 

Decision.

The trial court found Otay “failed to demonstrate by substantial 

evidence that its 2013 and 2017 tiered water rates were proportional to the 

cost of service attributable to each customer’s parcel, as required by 

Proposition 218.” The court determined, inter alia, that (i) the SFR tiered 

rate structures were based on “non-cost objectives such as conservation,” and 

had similar defects to the rate structures used in Capistrano Taxpayers 

Assn., Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4th 1493 

(Capistrano) and City of Palmdale v. Palmdale Water Dist. (2011) 

198 Cal.App.4th 926 (Palmdale); (ii) the record did not support Otay’s 

reliance on “peaking factors” (i.e., ratios meant to capture peak versus 

average demand) to justify its SFR rates; and (iii) Mumm’s post-hoc analysis 

did not support the constitutionality of Otay’s SFR rates.

C. Damages (Phase II), Posttrial Proceedings, and Judgment

The case proceeded to Phase II, during which the parties proposed 

different refund calculation methodologies. The parties continued to retain

Mumm and Vondle as experts. In June 2022, the trial court issued its

Phase II Statement of Decision, awarding an estimated refund of

$18,105,256.60 (to increase $208,762.50 monthly, pending compliant rates, 

and to be adjusted for individual allocations later).

In June 2022, Otay filed an opposed motion for new trial, arguing that 

damages were unavailable for a violation of Proposition 218. Otay also 

objected to the proposed judgment on this basis. The trial court denied the 

motion and overruled the objections.
7

In August 2022, the trial court entered judgment for Coziahr (filed in 

January 2023 nunc pro tunc), consistent with the statement of decision for 

each phase. Otay was “ordered to impose future water rates consistent 

with . . . [Section 6(b)(3)], and may use tiers, a uniform rate, or any other 

method, provided [Otay] complies” with that section.

Both parties appealed. The Association of California Water Agencies, 

the California Association of Sanitation Agencies, California Special Districts 

Association, and League of California Cities (local agency amici), filed an 

amicus curiae brief on behalf of Otay. Mesa Water District filed an amicus 

curiae brief for Coziahr. The parties filed answering briefs.

DISCUSSION

I. Otay’s Appeal Regarding Liability

Otay contends the trial court failed to consider whether it made a

“reasonable, cost-based” showing under Section 6(b)(3), instead requiring

“perfection,” and Otay’s evidence was sufficient to prove constitutional 

compliance. Otay also contends the court erred in applying Capistrano and 

Palmdale, and made certain other mistakes. We conclude the court used the 

proper level of scrutiny, it appropriately applied the case law, and that 

substantial evidence supports its resolution of the disputed factual issues.

A. Proposition 218 and Water Rate Cases

We begin with additional background on Proposition 218, as well as the 

cases focused upon by the trial court, Capistrano and Palmdale.

1. Background on Proposition 218

“Proposition 218, approved by voters in 1996, is one of a series of voter 

initiatives restricting the ability of state and local governments to impose 

taxes and fees.” (Plantier v. Ramona Municipal Water Dist. (2019) 7 Cal.5th 

372, 380 (Plantier).) The “first of these measures was Proposition 13,” which
8

“limited ad valorem property taxes” and “prohibited counties, cities, and 

special districts from imposing special taxes without a two-thirds vote of the 

electorate.” (Ibid., fn. omitted; art. XIII A, §§ 1-2, 4; see also former § 3 [new 

state taxes must be imposed by two-thirds vote of the Legislature].) 

However, local governments “were able to circumvent [these] limitations” by 

“labeling them fees, charges, or assessments rather than taxes.” (Plantier, at 

p. 381.)

“To address these and related concerns, voters approved Proposition 

218, known as the ‘Right to Vote on Taxes Act,’ which added articles XIII C 

and XIII D to the California Constitution.” (Plantier, supra, 7 Cal.5th at 

p. 381.) The preamble stated the “measure protects taxpayers by limiting the 

methods by which local governments exact revenue from taxpayers without 

their consent.” (Prop. 218, § 2, p. 108.) The California Supreme Court has 

observed that “[i]n passing Proposition 218, the voters clearly sought to limit 

local government’s ability to exact revenue under the rubric of special 

assessments.” (Silicon Valley Taxpayers’ Assn., Inc. v. Santa Clara County 

Open Space Authority (2008) 44 Cal.4th 431, 446 (Silicon Valley); id. at p. 445 

[legislative analyst found it “ ‘would be easier for taxpayers to win lawsuits’ ”; 

Prop. 218 “was intended to make it more difficult for an assessment to be 

validated in a court proceeding”].)

“Article XIII D imposes distinct procedural and substantive 

limitations.” (Plantier, supra, 7 Cal.5th at p. 381.) The “substantive 

limitations on property-related fees appear in subdivision (b) of article XIII D, 

section 6” (Section 6(b)). (Plantier, at p. 382, italics omitted; see Howard 

Jarvis Taxpayers Assn. v. City of Roseville (2002) 97 Cal.App.4th 637, 647-

648 (Roseville) [“theme” of Section 6(b) is that fees “may not exceed what it 
9

costs to provide . . . services,” which “includes all the required costs . . . 

including operation, maintenance, financial, and capital expenditures”].)

The limitation at issue here, Section 6(b)(3), states the “amount of a fee 

or charge imposed upon any parcel or person as an incident of property 

ownership shall not exceed the proportional cost of the service attributable to 

the parcel.” This “requirement ‘ensures that the aggregate fee collected on all 

parcels is distributed among those parcels in proportion to the cost of service 

for each parcel.’ ” (Plantier, supra, 7 Cal.5th at p. 382; id. at pp. 381-382 

[Section 6(b)(3) “concerns the method used to allocate a property-related 

service’s aggregate cost among fee payors” (italics omitted)].) Section 6(b)(5) 

is also pertinent, as it provides that “[i]n any legal action contesting the 

validity of a fee or charge, the burden shall be on the agency to demonstrate 

compliance . . . .”6

Voters later approved Proposition 26, which, among other things, 

amended the state tax limits of article XIII A to “ ‘close perceived loopholes’ 

in Proposition 13.” (California Building Industry Assn. v. State Water 

Resources Control Bd. (2018) 4 Cal.5th 1032, 1047 (CBIA).)

2. Capistrano and Palmdale

We briefly describe the seminal Proposition 218 cases relied upon by 

the trial court. We start with the earlier decision, Palmdale.

6 The other limits are as follows: Sections 6(b)(1) (revenues from fee 

“shall not exceed the funds required to provide the . . . service”), 6(b)(2) 

(revenues “shall not be used for any purpose other than that for which the 

fee . . . was imposed”), 6(b)(4) (no fee “may be imposed” unless “service is 

actually used by, or immediately available to” property owner), and 6(b)(5) 

(no fee “may be imposed for general governmental services,” where “service is 

available to the public at large in substantially the same manner” as property 

owners).
10

Palmdale involved a city’s action against a water district that imposed 

a tiered rate structure with higher rates for irrigation customers. (Palmdale, 

supra, 198 Cal.App.4th at p. 930 [top tier started above 175% of water budget 

use for residential, 190% for commercial, and 130% for irrigators].) The city, 

an irrigator, argued the district did not show the cost of service to irrigators 

was “ ‘proportionately higher,’ ” but rather sought to “ ‘recoup most of its 

costs’ ” from them. (Id. at p. 934.) Reversing a judgment for the district, the 

Court of Appeal held irrigators were being “charged disproportionate rates,” 

without “any showing . . . of a corresponding disparity” in the cost of 

supplying water. (Id. at p. 937.) It explained the district failed to “identify 

any support in the record for the inequality between tiers, depending on the 

category of user.” (Id. at pp. 935-936.) The court also noted the district’s 

consultants had offered a defensible rate structure, which it declined to 

adopt. (Ibid.)

In Capistrano, the trial court found a city water agency’s tiered rates 

violated Section 6(b)(3), because it did not “carry its burden of proving its 

higher tiers reflected its costs of service.” (Capistrano, supra, 235 

Cal.App.4th at p. 1516; see id. at pp. 1498-1499 [to set tiers, consultant 

calculated “four possible budgets for water usage, based on historical data for

usage patterns”].) The Court of Appeal affirmed, finding Palmdale

instructive. (Id. at pp. 1506-1507.) It held the agency “had to correlate its 

tiered prices with the actual cost of providing water at those tiered levels” 

and failed to do so. (Id. at p. 1506.) The court also rejected the agency’s 

contentions that (i) calculating the cost of service at “various incremental 

levels of usage” was “too complex” to be required, and (ii) if required, it was 

“necessarily” a “discretionary matter, largely insulated from judicial review.” 

(Id. at p. 1505.) The court elaborated:
11

“If the phrase ‘proportional cost of the service attributable 

to the parcel’ (italics added) is to mean anything, it has to 

be that [Section 6(b)(3)] assumes that there really is an 

ascertainable cost of the service that can be attributed to a 

specific—hence that little word ‘the’—parcel. Otherwise, 

the cost of the service language would be meaningless. 

Why use the phrase ‘cost of the service to the parcel’ if a 

local agency doesn’t actually have to ascertain a cost of 

service to that particular parcel?” (Ibid., third & fourth 

italics added.)7

B. Applicable Review Standards

1. Burden of Proof

“[A]rticle XIII D, section 6, subdivision (b)(5) puts an important 

procedural limit on a court’s analysis in regard to the burden of proof,” by 

stating “ ‘the burden shall be on the agency to demonstrate compliance.’ ” 

(Capistrano, supra, 235 Cal.App.4th at p. 1504, quoting Section 6(b)(5).)

In Silicon Valley, the California Supreme Court held courts “exercise 

their independent judgment” in reviewing agency determinations under 

article XIII D. (Silicon Valley, supra, 44 Cal.4th at pp. 448-449 [addressing 

Section 4(f), burden provision for assessments; similar to Section 6(b)(5)].) 

The Court explained that, given Proposition 218’s purposes, including “to 

curtail . . . deference,” a “more rigorous standard of review is warranted.” (Id.

at p. 448.) The Court disagreed determinations “must be affirmed if 

substantial evidence supports them,” stating a “valid assessment under 

Proposition 218” must satisfy its “substantive requirements . . . .” (Id. at 

pp. 447-448; see Capistrano, supra, 235 Cal.App.4th at p. 1507 [“[I]t is not 

7 The Court of Appeal also reversed a separate ruling regarding recycled 

water and Section 6(b)(4), which is not at issue here. (Capistrano, supra, 

235 Cal.App.4th at p. 1498.)
12

enough that the agency have substantial evidence to support its action. That 

substantial evidence must itself be able to withstand independent review.”].)

“To carry its burden, an agency must generally provide evidence 

identifying the data used, analyzing the cost of service, and demonstrating 

the proportionality of the rate . . . .” (KCSFV I, LLC v. Florin County Water 

Dist. (2021) 64 Cal.App.5th 1015, 1030; see Malott v. Summerland Sanitary 

Dist. (2020) 55 Cal.App.5th 1102, 1111 [plaintiff in Prop. 218 case can submit 

evidence not presented to agency].) Courts “may and do disregard conclusory 

arguments,” including when the conclusory statements are in the supporting 

evidence. (Florin, at p 1031; id. at p. 1029 [rejecting district’s “rel[iance] on a 

single document to demonstrate proportionality—the [hearing] notice,” where 

“the notice also contain[ed] only a conclusory statement” (italics omitted)]; 

Capistrano, supra, 235 Cal.App.4th at pp. 1497-1498 [Prop. 218 requires 

agencies to calculate “actual costs”].)

We reject Otay’s description of the trial court’s task as “weigh[ing] the 

evidence in the quasi-legislative rate-setting record to determine if minimum 

constitutional requirements” are met. Quasi-legislative review implies 

deference, and the “drafters of Proposition 218 specifically targeted this 

deferential standard of review for change.” (Silicon Valley, supra, 44 Cal.4th 

at p. 444; Capistrano, supra, 235 Cal.App.4th at p. 1505 [disagreeing cost 

calculation is a “quasi-legislative, discretionary matter, largely insulated 

from judicial review”]; see Hill RHF Housing Partners, L.P. v. City of Los 

Angeles (2021) 12 Cal.5th 458, 488-489 [distinguishing prior case limiting 

evidence to administrative record in challenge to quasi-legislative decision; 
13

explaining Prop. 218 requires independent review, and the “interest in 

extending due deference” does “not carry the same weight”].)8

2. Standard of Review on Appeal

Like the trial court, we apply our independent judgment in assessing 

whether Otay’s rates violated Section 6(b)(3). (Capistrano, supra, 

235 Cal.App.4th at p. 1507 [“both trial and reviewing courts are to apply an 

independent review standard”], citing Silicon Valley, supra, 44 Cal.4th at 

p. 450.) “In applying this standard of review, we will not provide any 

deference to [Otay’s] determination of the constitutionality of its rate 

increase.” (Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 

912 (Morgan).)

“Even when we exercise our independent judgment in reviewing the 

record, we do not take new evidence or decide disputed issues of fact.” 

(Morgan, supra, 223 Cal.App.4th at p. 912; id. at p. 913 [“although we use a 

de novo standard of review here, we do not transform into a trial court”];

Moore v. City of Lemon Grove (2015) 237 Cal.App.4th 363, 368 (Moore) [we 

“presume that the appealed judgment is correct”].) Thus, if an “appellant 

challenges a finding of fact, we must employ the substantial evidence 

standard of review.” (Morgan, at p. 917; see Howard v. Owens Corning

(1999) 72 Cal.App.4th 621, 631 (Howard) [“Even in cases where the evidence 

is undisputed . . . , if two or more different inferences can reasonably be 

drawn from the evidence this court is without power to substitute its own 

inferences . . . for those of the trier of fact.”].)

8 Accordingly, we also reject Otay’s claims that the HDR rate study 

“cannot be construed as part of the administrative record” for 2013, and that 

“critiques of the [c]onservation [t]ier have no relevance” to 2017.
14

Although Otay acknowledges that substantial evidence review applies

to disputed factual issues, it also asserts the trial court’s “errors are contrary 

to established law and thus not supported by substantial evidence.” To the 

extent Otay is suggesting the liability issues here are primarily legal, rather 

than factual, we do not agree. The parties strongly disagreed at trial about 

whether Otay’s evidence was adequate to prove compliance with Section 

6(b)(3), presenting disputed facts and inferences whose resolution we review 

for substantial evidence. (See Morgan, supra, 223 Cal.App.4th at pp. 915-916 

[although plaintiffs did “not couch it as such,” their inadequate data claim 

“challeng[ed] the sufficiency of the evidence”]; Howard, supra, 72 Cal.App.4th 

at p. 631.)9

Finally, we also apply basic appellate briefing requirements. Points 

must be supported by reasoned argument, authority, and record citations, or 

may be deemed forfeited. (Badie v. Bank of America (1998) 67 Cal.App.4th 

779, 784-785 (Badie) [“When an appellant fails to raise a point, or asserts it 

but fails to support it with reasoned argument and citations to authority, we 

treat the point as waived”].) Points raised for the first time on reply may be 

forfeited as well. (Raceway Ford Cases (2016) 2 Cal.5th 161, 178 (Raceway) 

[“We generally do not consider arguments raised for the first time in a reply 

brief.”].) Here, we largely deem such belated points forfeited, and address 

them only as noted.

9 Courts treat the sufficiency of analytical methods and data as factual 

questions in other contexts as well. (See City of Long Beach v. Los Angeles 

Unified School Dist. (2009) 176 Cal.App.4th 889, 898 [CEQA; challenges to 

“methodology used for studying an impact, and the reliability or accuracy of 

the data upon which the EIR relied” involve “factual questions”]; State Farm 

Mutual Automobile Ins. Co. v. Quackenbush (1999) 77 Cal.App.4th 65, 74-75 

[insurance rates; “Whether State Farm’s data were reliable is a 

predominantly factual question”].)
15

C. The Trial Court Did Not Impose an Improper Standard on Otay

Otay argues the issue here is “whether its method to allocate costs 

proportionally is reasonable,” and the trial court instead “subject[ed] [its]

data to an impossible standard” of perfection. (Boldface & italics omitted.) It 

further asserts Otay met its burden based on its rate studies and Mumm’s 

expert report.

These contentions lack merit. As we will explain, being “reasonable” is 

not sufficient to satisfy Section 6(b)(3), the trial court did not require 

perfection, and Otay was free to use any analytical cost allocation method so 

long as there was relevant, verifiable data to support its analysis. That said, 

it was for the trial court to assess whether Otay’s evidence was sufficient to 

meet its burden under Section 6(b)(3).

1. Reasonableness Is Not the Standard of Proof

First, Otay asserts the “case law recognizes that courts review rates 

under Proposition 218 only to determine whether [they] represent ‘a 

reasonable way to apportion the cost of service,’ ” citing Griffith v. Pajaro 

Valley Water Management Agency (2013) 220 Cal.App.4th 586, 600-601

(Griffith), disapproved on other grounds in City of San Buenaventura v. 

United Water Conservation Dist. (2017) 3 Cal.5th 1191, 1209, fn. 6. On reply, 

Otay further asserts the trial court “applied an improper legal standard by 

requiring a higher burden of proof not consistent with reasonableness” 

(despite claiming its concern was being held to perfection, not a heightened 

standard). To whatever extent Otay is urging a focus on reasonableness, we 

are not persuaded.

As Capistrano makes clear, an agency’s burden of proof under

article XIII D, section 6(b)(3) is to show its water rates are proportional to the 

“ascertainable cost[s] of service that can be attributed to . . . specific . . . 
16

parcel[s].” (Capistrano, supra, 235 Cal.App.4th at p. 1505.) The California 

Supreme Court has distinguished this proportionality mandate from the 

reasonable allocation needed for certain levies, including regulatory fees, to 

be excepted from current state tax voting limits in article XIII A, section 3. 

(CBIA, supra, 4 Cal.5th at p. 1053; art. XIII A, § 3 [change in state statute 

which results in higher tax must be imposed by two-thirds vote].) Codified by 

Proposition 26, the exceptions and applicable burden of proof of article XIII A, 

section 3, require the state to show the amount of the levy does not exceed

the “reasonable costs of the governmental activity,” and the allocation 

method “bear[s] a fair or reasonable relationship” to the payor’s burdens on, 

or benefits from, the activity. (Art. XIII A, § 3, subds. (b), (d); see CBIA, at 

pp. 1047-1048; see also art. XIII C, § 1, subd. (e) [similar burden for local tax 

levies, with exception for property-related fees under art. XIII D].)

In CBIA, an industry group challenged stormwater permit fees imposed 

by a state agency pursuant to a larger permit program, arguing in part that 

the fees were not fairly allocated consistent with article XIII A. (CBIA,

supra, 4 Cal.5th at p. 1049.) The Court disagreed, holding the record showed 

the fees were “reasonably allocated among fee payors,” notwithstanding a 

small difference between the stormwater fees and attributable program costs.

(Id. at pp. 1052-1053; see id. at p. 1052 [“A ‘regulatory fee . . . does not 

require a precise cost-fee ratio.’ ”].) The Court squarely rejected the group’s 

attempted reliance on Capistrano, and by extension, the proportionality 

requirement of article XIII D, section 6(b)(3):

“[T]he restrictions on property-related fees in article XIII D 

of the state Constitution are different from those imposed 

on regulatory fees by article XIII A. Article XIII D provides 

that the amount of a property-related fee ‘shall not exceed 

the proportional cost of the service attributable to the 

parcel.’ . . . Under article XIII A, all that is required is that 
17

the record demonstrate a reasonable basis for the manner 

in which the fee is allocated among those who pay it.” 

(CBIA, at p. 1053.)

Thus, the California Supreme Court has made clear the proportionality 

requirement under article XIII D, section 6(b)(3) demands something more

than the reasonable basis standard under article XIII A. To satisfy Section 

6(b)(3), then, it is not enough for a water agency to show it uses a reasonable 

allocation method. Rather, an agency must show that the method produces 

rates that are proportional to costs.

Otay does not establish otherwise. Coziahr contends, and we agree, 

that Otay appears to derive its “preferred standard from select quotations 

from Proposition 218 decisions that used the word ‘reasonable.’ ” But the 

courts were not using the term “reasonable” in defining a standard of proof. 

Rather, they were discussing the nexus between the rate and cost of service, 

or describing the record while reviewing it for substantial evidence. (See, 

e.g., Capistrano, supra, 235 Cal.App.4th at p. 1499, fn. 6 [tiered rates are 

compatible with Prop. 218 “ ‘so long as’ . . . [they] reasonably reflect the cost 

of service attributable to each parcel”]; Roseville, supra, 97 Cal.App.4th at 

p. 648 [Section 6 “charge must reasonably represent the cost of providing 

service”]; Morgan, supra, 223 Cal.App.4th at p. 918 [district’s workers were 

“reasonably accurate in their water measurements”].)

To the extent Griffith could be viewed as supporting a reasonableness

standard, its proportionality analysis relied in part on inapposite authority,

and was later criticized by Capistrano. (Griffith, supra, 220 Cal.App.4th at 

pp. 600-601 [group usage was “reasonable way to apportion” there; stating

apportionment does not “lend[ ] itself to precise calculation,” citing, inter alia,

White v. County of San Diego (1980) 26 Cal.3d 897, 903, a pre-Prop. 13 case]; 

Capistrano, supra, 235 Cal.App.4th at p. 1514 [“When read in context, 
18

Griffith does not excuse water agencies from ascertaining the true costs of 

supplying water”; its “comments on proportionality” related only to property 

location and “trying to apply it to the . . . [Section 6](b)(3) issue[ ] is fatally 

flawed.”].)10

Otay’s approach is particularly misguided, because each case it cites 

here affirmed a judgment after trial and, in Morgan, this court expressly 

declined to reweigh disputed evidence. (See Griffith, supra, 220 Cal.App.4th 

at pp. 600-601 [affirming judgment for agency in challenge to groundwater 

extraction fees]; Capistrano, supra, 235 Cal.App.4th at p. 1506 [discussed 

above]; Roseville, supra, 97 Cal.App.4th at p. 648 [affirming for plaintiffs; “no 

showing that the in-lieu fee reasonably represents” costs at issue]; Morgan, 

supra, 223 Cal.App.4th at pp. 900, 915-917 [in affirming judgment for water 

district, acknowledging its consultant “did not have perfect data,” while 

noting other evidence, including system improvement study; stating data 

“adequacy. . . was . . . vehemently disputed,” trial court “found the [d]istrict’s 

explanation more credible,” and it was “not our role to reweigh the evidence”];

see also Moore, supra, 237 Cal.App.4th at pp. 373-377 [affirming decision for 

city in sewer fee dispute under other Section 6 subsections; city’s evidence 

reflected “informal” and “not ideal” procedures, but not unconstitutional ones, 

and plaintiff offered “no expert testimony”].)

10 We note there is a pre-Proposition 218 case, Brydon v. East Bay Mun.

Utility Dist. (1994) 24 Cal.App.4th 178, 193 that discussed a “standard of 

reasonableness” in analyzing a Proposition 13 rate challenge; Capistrano

found the case inapplicable to Proposition 218. (Capistrano, supra, 

235 Cal.App.4th at pp. 1512-1513 [Brydon “simply has no application to postProposition 218 cases”; describing it as “part of the general case law” that the 

Prop. 218 enactors wanted “replaced with stricter controls on local 

government discretion”].)
19

2. Trial Court Did Not Require Perfection

Otay argues the trial court imposed an “impossible” standard in spite of 

the fact that ratemaking does not require perfection and is beyond judicial 

expertise. (See Morgan, supra, 223 Cal.App.4th at p. 918 [“section 6 does not 

require perfection”]; Moore, supra, 237 Cal.App.4th at p. 375 [“cost allocation 

methods . . . present a subject beyond the trial court’s . . . experience and 

knowledge”].) These general principles do not aid Otay, because the court did 

not require perfection.

First, Otay contends the trial court erroneously determined that,

because courts review rates independently, “some greater . . . quality or 

quantity of evidence was required” and “proportionality must be proven with 

exact precision and perfect data.” We disagree. The court soundly rejected a 

similar argument by Otay that it was “being held to a standard of perfection,” 

stating the “record shows that Otay has not calculated the actual costs of 

providing water at various levels of usage” and the court could not “disregard 

its obligation to enforce Proposition 218 . . . .” The court properly recognized

it was required to apply its independent judgment to assess compliance with 

Section 6(b)(3). Otay identifies nothing in the Phase I Statement of Decision 

that shows the trial court required more. (Evid. Code, § 664 [“[i]t is 

presumed that official duty has been regularly performed”]; cf. People v. 

Castellano (1983) 140 Cal.App.3d 608, 612 [rule applies to “proper burden of 

proof”].)

Second, Otay’s reliance on this court’s decisions in Morgan and Moore

in support of its claim that the agency needs flexibility in ratesetting is 

misplaced. As described above, the evidence in those cases was not perfect, 

but we were reviewing judgments rendered in favor of the agencies, with the 

attendant appellate presumptions and inferences. (Morgan, supra, 
20

223 Cal.App.4th at pp. 915-917; Moore, supra, 237 Cal.App.4th at pp. 374-

377.)

Finally, Otay maintains that the administrative records for the 2013 

and 2017 ratemakings met its burden of proof, and Mumm’s expert opinion 

confirmed the “sufficiency of those records to justify” the tiers. It further 

contends the evidence showed it “thought seriously about its costs of service” 

and set rates that “reasonably allocate[d]” proportional costs. As our analysis 

of Section 6(b)(3) compliance will reflect, this argument rests on a one-sided, 

incomplete view of the record and trial court decision.11

Here, it suffices to state that having rate studies, and an expert who 

agrees with them, is not enough. Rather, Otay’s evidence had to withstand 

independent review for compliance with Section 6(b)(3). (Silicon Valley, 

supra, 44 Cal.4th at p. 449; Capistrano, supra, 235 Cal.App.4th at p. 1507.) 

Thus, Otay still had to substantiate the analysis with data that meaningfully 

captured the cost of service to the parcel for Otay’s SFRs. (Capistrano, at 

p. 1505 [“ ‘proportional cost’ ” means “there really is an ascertainable cost of 

service that can be attributed to a specific . . . parcel”].) Whether it did so 

was for the trial court to decide in the first instance. (See Morgan, supra, 

223 Cal.App.4th at pp. 915-916.)

D. Compliance with Section 6(b)(3)

Applying our independent judgment, we conclude Otay did not 

establish its SFR tiered rates complied with Section 6(b)(3).

11 An example is illustrative. The trial court had multiple concerns about 

HDR’s study, as we discuss post, but Otay cites one finding in the statement 

of decision on missing cost detail to suggest the trial court found a “single 

piece of arguably missing data” invalidated the rate study.
21

1. Additional Facts

a. 2013 Ratemaking

When Otay retained Atkins to prepare the 2013 rate study, it was 

already using a “conservation based tier structure” for all customer classes, 

consisting of a “three tier increasing block rate with a conservation tier . . . .”

At the outset of its rate study, Atkins said the applicable standards for water 

rates are the AWWA M1 Manual and the California Urban Conservation 

Council’s Best Management Practices (BMP), which “promotes water 

conservation rate structures.” Atkins noted that to “achieve conservation 

pricing,” a utility should, and Otay did, “recover no more than 30 percent 

of . . . revenue from fixed charges.” It also noted “[c]onservation pricing 

provides economic incentives (a price signal) to customers to use water 

efficiently.”

To carry out its rate study, Atkins followed a three-step process. First, 

it conducted a revenue requirement analysis. Second, it prepared a cost of 

service analysis, which involved, among other things, allocating costs to 

customer classes based on “relative contribution to the cost component.”

Third, Atkins prepared a rate design analysis. In the rate design section, it 

identified design criteria, which included “water conservation” and “ability to 

pay.”

Addressing rate design, Atkins stated the “first step in developing a 

conservation based tier structure is to perform an in-depth water usage 

analysis” of the prior year, to establish a winter and summer month average. 

It said the winter average, 10 HCF, “equates to estimated interior water 

usage and becomes the breakpoint for Tier 1.” The summer average, 22 HCF, 

“equates to normal interior plus exterior water usage and becomes the 

breakpoint for Tier 2.” Usage over 22 HCF (Tier 3) was “considered to be 
22

excessive and for irrigation” only. With these breakpoints, 14 percent of SFR 

water usage was in the Tier 3 category.

Atkins stated the “second step . . . is to establish the dollar amount for

each tier,” noting Otay used the “base-extra capacity cost allocation 

methodology” and citing AWWA guidelines. This method first involved 

dividing the “consumption-related cost . . . into the base, maximum-day, and 

maximum-hour cost of service.” Next, Atkins said:

“[T]he threshold between blocks (tiers) 1 and 2 is set at the 

transition between average indoor use and average outdoor 

use. The objective of this to have block 1 consumption 

approximate indoor usage and to charge a higher amount 

for outdoor usage in block 2 to promote conservation. 

Block 1 pricing is normally set just below the average cost 

of water and block 2 is set just above the average cost of 

water. Block 3, which is considered to be in excess of both 

average interior and exterior water usage, is set at a higher 

price differential.”

Atkins elaborated that above-average users use a “larger portion of the . . . 

system” and should pay for the “extra capacity to serve their needs,” noting 

“[a]ll water systems must be designed for peak . . . use, not average use.” 

Atkins then stated:

“To set the rates in each block, [Otay] uses a standard 

pricing structure. AWWA suggests that block 2 should be 

set at a level 30 percent higher than block 1 to reflect the 

cost incurred for increased capacity costs and supply 

purchases. Block 3 is then set at a price differential of 

2 times the rate of block 1 because the capacity 

requirement is twice that of block 2 (e.g. single family block 

1 breakpoint is 10 HCF and block 3 begins at 23 HCF).”

Otay’s Board of Directors (Board) reviewed Atkins’ rate study at 

meetings in early 2013. Otay finance manager Rita Bell said the “[t]iers were 

created to promote conservation . . . .” Atkins representative Karyn Keese 

noted, “You wish to have 10 to 15% of your users within tier III, top water 
23

users, to encourage conservation . . . .” Otay’s Chief Financial Officer (CFO), 

Joe Beachem, was asked if Otay gave “any thought to those customers with 

larger lots who have implemented efficient landscaping, but are still paying 

the highest tier.” He said the issue came up before and the Board indicated 

“customers on larger lots will pay the higher water rate due to their 

consumption. It is a lifestyle choice.” The Board later approved the proposed 

rates.

b. 2017 Ratemaking

Otay hired HDR to review its rates in light of “recent court decisions”

and the “need to continue to maintain cost‐based water rates.” HDR

acknowledged the then-current rate structure had “four pricing tiers, with 

the first tier specifically designed to encourage conservation”; it later 

reiterated the tiers were meant to encourage conservation. HDR stated its 

approach did “not consider . . . non‐cost based goals,” like conservation.

HDR, like Atkins, conducted a three-step process in its rate study: 

revenue requirement analysis; cost of service analysis; and rate design. It 

explained the system had to “supply water . . . when demanded,” and the 

“time of greatest demand is known as peak demand.” HDR developed 

“peaking factors” to capture demand for each customer class and SFR tier. It

said this method was discussed in the AWWA M1 Manual, and the “key 

assumption” was the “system must be built to . . . meet the demands of higher 

use customers.” We describe HDR’s peaking factor analysis post.

Addressing rate design, HDR stated the conservation tier was being 

eliminated, noting it was “put in place to encourage efficient use,” but also

addressed “affordability concerns”; “non‐cost based pricing tiers were recently 

found (ruled) to be illegal,” citing Capistrano; and the conservation tier 

resulted in “two different prices for essentially the same volume of 
24

water . . . .” For the other tiers, HDR stated that based on “review of 

consumption data . . . the tier sizes, as determined and established in the 

2013 Atkins analysis, remained relevant and appropriate.” It noted a recent,

severe drought impacted consumption, and both overall and Tier 3 water 

usage had declined. HDR also noted that “in a typical cost of service study,”

allocation factors generally reflect an entire class, and, in this study,

“additional cost detail was needed . . . to justify the cost‐basis” for the tiered 

rates. HDR determined the “current 1st and 3rd [SFR] tier pricing [was] too 

high, and the 2nd tier [was] below cost,” and recommended revised pricing. It

observed “high‐use customers [would] see a reduction in their bill, primarily 

as a result of the reduction of the tail block price to a cost‐based level.”12

HDR also recommended other changes, including moving commercial 

and irrigation customers to uniform rates and modifying the basis for the 

system fee.

Otay reviewed HDR’s recommendations at an April 2017 Board

meeting. HDR representative Tom Gould addressed the rate study, and 

indicated residential customers were not moved to uniform rates because 

their rates “should encourage efficient use,” including using pricing tiers to 

“encourage conservation.” The Board subsequently approved the proposed 

rates.

c. Coziahr’s Expert Evidence

Coziahr’s expert, Vondle, opined Otay’s rate studies reflected its “ratemaking method . . . was designed to promote conservation, not to allocate the 

proportional cost of water service” to different SFR tiers.

12 By “tail block,” HDR appeared to refer to the Tier 3, the last and 

highest tier in the SFR rate structure.
25

Regarding the 2013 rates, Vondle stated they were “clearly designed to 

promote conservation,” noting HDR “explicitly recognized that the first tier 

rate was not cost based” and recommended eliminating it. He also noted the

2013 rate study used “exact percentages” from AWWA in setting rates, 

“indicat[ing] that Otay did not try to correlate its rates with the actual costs 

of service . . . .”

As for 2017, Vondle said it appeared HDR “introduced the theoretical 

‘peaking’ concept to justify the tiered [SFR] rates,” and he rejected that 

justification. Vondle noted HDR conceded “additional cost detail” was needed 

and opined it had not “developed any ‘additional cost detail’ through objective 

studies of the Otay water system.”

d. Otay’s Expert Evidence and Coziahr’s Critique of It

Otay’s expert, Mumm, opined both rate studies “result[ed] in a 

proportional allocation of costs among classes based on customer and 

demand-related factors,” and Otay “immediately implemented” their findings. 

He also maintained Otay could and did “achieve a conservation-oriented rate 

structure within a cost-of-service framework . . . .” Regarding evidence to 

justify the different SFR tier prices, Mumm cited the “difference in peak 

requirements” and an “independent analysis” that he conducted (which found 

rates were materially proportional to costs).

Coziahr’s expert, Vondle, disagreed Atkins used a peaking factor 

concept, noted Mumm focused primarily on the HDR study, and criticized 

Mumm’s independent analysis.

e. Statement of Decision

The trial court determined Otay did not provide substantial evidence 

that its 2013 and 2017 tiered water rates were proportional to the cost of 

providing water service.
26

For 2013, the trial court indicated that at the time of the Atkins’ rate 

study, Otay used an existing “four-tiered increasing rate structure” for SFRs. 

The court found Atkins’ design considerations, including conservation, did not 

comply with constitutional limits. It cited HDR’s recognition that the rate 

structure was “ ‘specifically designed to encourage conservation of water,’ ” 

and “ ‘created two different prices’ ” for the same water. It also noted Atkins’ 

statement about limiting revenue recovery to 30 percent from fixed costs to 

“achieve ‘conservation pricing’ . . . .”

Addressing the tiers, the trial court found Otay “set the breakpoints to 

discourage high water use,” because it assumed above-average use is 

“excessive use that should be penalized.” It also found Otay merely “followed 

AWWA guidelines in setting Tier 2 exactly 30% higher than Tier 1, and Tier 

3 at exactly 100% more than Tier 1,” and adherence to industry standards 

was insufficient. It noted Atkins “candidly acknowledge[d]” the goal of 

dividing costs into base and extra capacity, and setting tiers below and above 

cost, was to “promote conservation.” It also found HDR admitted “higher-use 

customers had been charged more than the cost of service,” citing its 

comment about reduction of the highest tier price to a cost-based level.

As for the 2017 rate study, the trial court found it was “also based on 

non-cost objectives such as conservation.” The court stated that although 

HDR “eliminated the admittedly below-cost conservation tier, it did not 

address the underlying flaws” in the rate structure. Rather, it “kept the 

other tiers which are not cost-based”; “failed to address” if they were “proper 

based on the cost of . . . service”; and said only that it “reviewed the tiers,” 

“adjusted the . . . levels based on average usage,” and “otherwise left them in 

place.” The court then found HDR “worked backwards to try to justify” the 

tiers with “AWWA’s ‘peaking factors’ methodology,” noting Vondle’s view that 
27

HDR failed to develop “ ‘additional cost detail’ ” through studies of the Otay 

system.

The trial court also found Otay engaged in differential treatment in 

violation of Palmdale, by moving customers other than SFRs to uniform rates 

(thus charging SFRs more for water); its peaking factor analysis was flawed; 

and Mumm’s independent analysis did not support Otay’s rates.

2. The Trial Court Properly Relied on Capistrano and Palmdale to 

Find Otay Did Not Demonstrate at Trial That Its SFR Rates Were 

Constitutional

Otay contends the trial court improperly relied on Capistrano and 

Palmdale with respect to: sufficiency of its proof, generally; conservation as a 

goal; use of the AWWA manual; and discrimination against SFR customers. 

We conclude the court’s application of these cases was sound, and Otay’s 

arguments lack merit.

a. Lack of Support for Tiered Rates

Capistrano upheld a Section 6(b)(3) determination against a water

agency, because it had “to correlate its tiered prices with the actual cost of 

providing water at those tiered levels,” and failed to do so. (Capistrano, 

supra, 235 Cal.App.4th at pp. 1506-1507.) The trial court found Otay 

similarly failed to establish such correlation, and the record supports this 

finding.

As in Capistrano, the trial court could impliedly find Otay’s SFR tiered 

rate structure rested on nonspecific data and assumptions, rather than on the

actual cost of providing water service to the parcel. (Capistrano, supra, 

235 Cal.App.4th at pp. 1498-1499.) There, even though the consultant used 

“historical data of usage patterns” to set the tier structure, the court 

determined the agency “never attempted to justify its price points as based on 

costs of service for those tiers,” as required, and merely “attribute[d] 
28

percentages of total costs to the various tiers.” (Id. at pp. 1499-1501, 1507; 

id. at p. 1499 [noting assumptions about indoor, outdoor, and excessive water 

use, and use of AWWA manual].)

Here, the 2013 Atkins rate study shows Otay kept an existing rate

structure meant to promote conservation; Atkins set the SFR tier breakpoints 

based on assumptions about winter, summer, and excessive outdoor use; and

it expressly acknowledged Tier 2 and 3 pricing would be set above average 

cost. The contemporaneous comments at the 2013 Board meetings from 

finance manager Bell and Atkins representative Keese confirmed 

conservation was the purpose of the tier structure, while CFO Beachem 

acknowledged Otay viewed paying higher rates on a large lot as a “lifestyle 

choice.”

The 2017 HDR rate study maintained this conservation-focused

structure, with the exception of folding the conservation tier into Tier 1 and 

stating it reviewed and confirmed the other tiers. Further, HDR 

representative Gould essentially admitted tiered residential rates were 

retained to encourage efficiency. HDR disclaimed water conservation was a 

rate design goal, but the trial court could impliedly reject this assertion as 

not credible.

Otay maintains its SFR tier “[b]reakpoints were set by analyzing data 

regarding Otay’s residential customers’ water use” in light of AWWA 

principles for “allocating the costs of peak demand,” citing both rate studies. 

It also argues the rate structure was not meant to penalize consumption, 

citing language in the Atkins rate study about cost recovery. But the rate 

studies were before the trial court, and it found Otay’s showing insufficient. 

(See Morgan, supra, 223 Cal.App.4th at p. 898.)
29

Also as in Capistrano, the trial court could impliedly find Otay’s SFR 

rates reflected questionable consistency. There, “fractional precision” 

between the tiers “suggested . . . [the agency] did not attempt to correlate its 

rates with cost of service,” as “mathematical tidiness is rare in multidecimalpoint calculations.” (Capistrano, supra, 235 Cal.App.4th at pp. 1504-1505.) 

Capistrano noted this “conclusion was confirmed at oral argument,” when the 

agency acknowledged it had not tried to correlate cost of service to pricing. 

(Id. at p. 1505.) Here, Atkins did not just use precise percentages. Rather, as 

the trial court found, it merely “followed AWWA guidelines in setting Tier 2 

exactly 30% higher than Tier 1, and Tier 3 at exactly 100% more than Tier 1,” 

and had “ ‘no objective evidence’ ” based on Otay system data for the cost 

difference. HDR did make rate adjustments, and aimed to justify the rates

with a peaking factor analysis. However, Coziahr’s expert Vondle criticized 

that justification and, again, the trial court rejected it. This rejection was 

supported by the record, as we discuss post.

Otay belatedly argues on reply that, unlike the agency in Capistrano, it 

has not conceded its rates did not reflect costs, and its “tiered rates did not 

utilize ‘tidy’ ratios and fractions, because [it] calculated the tiers using 

monthly customer use data.” Even if it had not forfeited these points 

(Raceway, supra, 2 Cal.5th at p. 178), we would reject them.

Capistrano said the agency’s admission at oral argument “confirmed”

its conclusion that the agency did not try to correlate the cost of providing 

service at various levels to prices at those levels. (Capistrano, supra, 

235 Cal.App.4th at pp. 1504-1505, 1508.) Further, the rest of Capistrano’s

analysis makes clear the issue for the court was not just the lack of a pricing 

rationale, but also the lack of evidence supporting the agency’s cost allocation. 
30

(See id. at pp. 1497-1498 [agency must “calculate the actual costs” of service],

1507 [evidence “must . . . withstand independent review”].)

Otay’s claim that it did not use “ ‘tidy ratios’ ” because it used monthly 

customer data also lacks force. The Atkins rate study used monthly data to 

set the SFR tier breakpoints, but then simply adopted formulaic AWWA 

pricing guidelines. In adjusting these rates, HDR used monthly data and 

AWWA methods to allocate purported peaking costs—but Coziahr’s expert 

Vondle opined this showing did not suffice to establish peaking costs or their 

allocation, which the trial court could credit. We address HDR’s peaking 

factor analysis further post. (Hanson v. Grode (1999) 76 Cal.App.4th 601, 607 

[“ ‘[E]xpert opinions . . . are worth no more than the reasons and factual data 

upon which they are based.’ ”]; cf. Centex Homes v. St. Paul Fire & Marine 

Ins. Co. (2015) 237 Cal.App.4th 23, 32 [“Centex is alleging conclusions 

without substance, not facts. As Gertrude Stein famously said about 

Oakland, there is no there there.”].)

b. Focusing on Conservation Instead of Cost of Service

Otay argues the trial court erred by relying on Capistrano and 

Palmdale to find it improperly promoted conservation. This argument lacks 

merit.

The agencies in both Capistrano and Palmdale cited their water 

conservation obligations under article X, section 2 of the state constitution in 

defending their rate structures. The courts rejected these arguments, 

making clear that constitutional obligations under article X, section 2, and 

article XIII D had to be harmonized. (See Capistrano, supra, 235 Cal.App.4th 

at p. 1510 [“nothing in article X, section 2, requires water rates to exceed the 

true cost of supplying that water, and in fact pricing water at its true cost is 

compatible with the article’s theme of conservation with a view toward 
31

reasonable and beneficial use”]; cf. Palmdale, supra, 198 Cal.App.4th at 

pp. 936-937 [“article X, section 2 is not at odds with article XIII D so long as, 

for example, conservation is attained in a manner that ‘shall not exceed the 

proportional cost of the service attributable to the parcel’ ”].)

The trial court properly cited this reasoning in rejecting Otay’s own

reliance on article X, section 2, to argue its encouragement of conservation 

was proper. The court emphasized that section “does not excuse” compliance 

with Proposition 218, and confirmed Otay “cannot point to conservation as a 

justification” to exceed the cost of the service attributable to the parcel. It

subsequently found “Otay and its consultants . . . ignored the key 

requirement of Proposition 218: setting the rates based upon the ‘cost of 

service’ . . . . Instead, the rates were set to send price signals or promote 

conservation . . . .” The court cited, inter alia, Vondle’s observation that 

“ ‘[c]onservation was a central tenet’ ” of the 2014-2017 rate structure.

Otay tries to distinguish Palmdale, arguing the consultants there 

“recommended two rate structures, one that emphasized conservation and 

the other that followed cost-of-service principles, and the agency chose the 

conservation structure.” (Palmdale, supra, 198 Cal.App.4th at p. 937.) This 

is not an accurate description, and regardless, Palmdale noted the rejected 

rate structure after concluding the record failed to justify the agency’s 

disproportionate rates for irrigation customers. (Id. at pp. 936-937; see id. at 

p. 937 [water district declined a cost of service option that sent a stronger 

conservation signal, but with more revenue fluctuation; option it chose sent a 

weaker conservation signal, with more rate stability].)

Otay also argues the “evidence confirms” it was “ensuring 

constitutional cost allocation[ ]” while pursuing conservation goals. It posits

it “was promoting conservation because inefficient use . . . increases . . . costs 
32

of service,” and “[c]onservation was thus an incidental benefit of the tier 

structure.” Otay’s assumption that inefficient use increases costs of service is 

unsupported by the record citations it provides,13 and its claims about its 

pursuit of conservation fare no better. The trial court found Otay prioritized

conservation instead of costs. The record supports that finding, including the 

2013 Atkins rate study and its intentional, above-cost tier pricing; HDR’s 

retention of most of the existing conservation-focused tier structure; Vondle’s 

expert opinion; and the Board meeting comments by finance manager Bell, 

CFO Beachem, Atkins representative Keese, and HDR representative Gould.

c. Reliance on AWWA Manual Untethered to Actual Costs

Otay contends the trial court improperly relied on Capistrano to 

criticize its consultants’ reliance on AWWA’s M1 Manual. Otay does not 

establish error.

In Capistrano, the agency’s consultant applied the manual, which 

recommended a “work-backwards-from-total-cost methodology,” but did not 

try to connect the water rates to the cost of service. (Capistrano, supra, 

235 Cal.App.4th at pp. 1504-1505, 1514.) The court stated the “[M1] manual 

might show working backwards is reasonable, but it cannot excuse utilities 

from ascertaining cost of service now that the voters and the Constitution 

have chosen cost of service.” (Id. at p. 1514.)

Citing the foregoing discussion, the trial court here stated “[a]dherence 

to industry standards . . . did not establish compliance with Proposition 218.” 

The court applied this principle to criticize Atkins’ lack of evidence for its 

13 Otay cites a page in the Atkins study discussing rate design, the 

introduction to the HDR study, and a page from 2008 Board minutes, where a 

consultant discussed peaking factors. We note amicus Mesa Water District 

contends tiered rates actually incentivize more water use, by pricing low-tier 

water below cost.
33

price differentials, also citing an observation from Vondle’s reply declaration

that Atkins followed the “generic guidelines from the AWWA” manual. Thus, 

the court’s criticism was consistent with Capistrano, and supported by the 

record.

Otay tries to distinguish Capistrano, stating that use of the AWWA 

manual there was “untethered from constitutional cost-of-service principles,” 

whereas here, Otay used the manual’s “engineering principles to identify and 

allocate” costs, based on peak demands. The trial court considered the Atkins 

study, and found otherwise: specifically, that the study reflected mere 

adherence to industry standards, not evidence of actual costs of service.

Although the court did not specifically criticize HDR’s reliance on the AWWA 

manual, we can infer it was similarly critical of any prioritization of industry 

practice over the determination of the actual costs of providing water service.

Otay also argues California courts have “recognized that the [AWWA] 

M1 Manual provides relevant guidance” for ratesetting, citing Griffith, and 

that the manual “reflects the collected wisdom of . . . engineers around the 

country.” Griffith, as noted, involved review of a judgment for the agency, 

and Capistrano appeared critical of its discussion of the use of the manual. 

(Griffith, supra, 220 Cal.App.4th at p. 600 [defendant relied on methodology 

recommended by AWWA M1 Manual]; Capistrano, supra, 235 Cal.App.4th at 

p. 1514 [“we certainly do not read Griffith for the proposition that a mere 

manual used by utilities throughout the western United States can trump the 

plain language of the California state Constitution.”].) Further, the AWWA 

M1 Manual itself states tiered rates can “be more complicated to design” than 

other rates, and should be considered when an agency has the “analytical 

capability to design” them. The manual cautions tiered rates are a useful 

management tool “[w]hen legally defensible.” (Italics added). The trial court 
34

properly recognized that under California law, reliance on the AWWA M1 

Manual, without more, is insufficient.

d. Unjustified Differential Treatment

Otay argues the trial court erred in finding its rate tiers discriminated

against SFRs, in violation of Palmdale. We are not persuaded.

i. Additional Facts

In Palmdale, the water district’s tiered rates were higher for irrigation 

customers, and the Court of Appeal held irrigators were being “charged 

disproportionate rates,” without a “corresponding disparity” in costs. 

(Palmdale, supra, 198 Cal.App.4th at pp. 930, 934-937.)

Here, HDR’s 2017 rate study determined a uniform rate structure (i.e., 

same price per unit, regardless of volume) was more appropriate for 

commercial and irrigation customers. HDR explained, in part:

“The current structure for irrigation and commercial 

customers has very little difference in the pricing of tiers, 

which more closely resembles a uniform rate structure . . . . 

The use of a tiered rate structure in this manner adds a 

level of complexity . . . with no discernible benefit from a 

customer equity or conservation perspective.”

HDR subsequently stated that “[m]ovement to a uniform rate structure for 

commercial and irrigation would seem to offer a number of benefits including 

ease of customer understanding, ease of rate administration, and a greater 

ability to legally defend the rates, particularly as it relates to the pricing of 

the tiers.”

HDR also elaborated on commercial and irrigation usage patterns, as 

compared to residential customers. According to HDR, residential customers 

“have fairly similar consumption patterns,” whereas commercial usage “can 

vary significantly” and “high volumes of use do not necessarily signify 

inefficient or wasteful use.” As for irrigation customers, HDR said “there 
35

certainly can be inefficient . . . use, but most large irrigation customers 

manage their usage carefully” and there are “other means . . . to encourage” 

efficient use.

HDR representative Gould’s comments at the April 2017 Board 

meeting are pertinent here, and we expand on them. A director asked why a 

uniform rate was proposed only for nonresidential customers. Gould stated

that “with residential customers, the rates should encourage efficient use,” as 

the “philosophy of tiered rates is to provide efficient users with a cost based 

rate, but also price tiers for inefficient users to encourage conservation.” He 

further stated a uniform rate for residential users would “provide a 

significant benefit to the larger users and could encourage more water use,” 

while causing “more impact[ ]” to low water users. He said that if Otay 

“would like to move to a uniform rate for residential users,” it “could slowly 

collapse the tiers.”

The 2018 uniform rates for commercial and industrial customers ($3.61 

and $5.27, respectively) fell between the rates for 2018 SFR Tier 1 ($3.05 for 

0-10 HCF) and Tier 2 ($5.44 for 11-22 HCF). SFRs thus paid more for water 

use above 10 HCFs (i.e., SFR Tiers 2 and 3).

In the Statement of Decision, the trial court determined that, in the 

“same flaw” as in Palmdale, Otay “discriminated against [SFR] customers” by 

charging them more for water by tier “than other classes of customers . . . 

who are charged a flat rate.” The court found Otay “has not provided any 

cogent reason for this differential treatment, and none is apparent in the 

record given that the water sources and cost of delivery appear to be the 

same.” The court further found the “only explanation in the record is that 

Otay decided to keep non-cost-based rates for residential customers to 

‘encourage efficient use,’ ” citing Gould’s comments.
36

ii. Analysis

Palmdale stands for the proposition that rate differentials between 

groups, whether customer classes or tiers, support an inference of 

disproportionality—and, to be constitutional, must be supported by evidence 

of costs justifying the differences. (Palmdale, supra, 198 Cal.App.4th at 

p. 934; Campana v. East Bay Municipal Utility Dist. (2023) 92 Cal.App.5th 

494, 497 [Palmdale held Prop. 218 requires agencies using a “tiered-rate 

water structure to be able to prove that charges assessed at the various tiers 

are proportional” to costs of service to each parcel]; Capistrano, supra, 

235 Cal.App.4th at p. 1507 [recognizing Palmdale was “primarily focused on 

inequality between classes of users,” but applying it to tiers].) Here, the trial 

court properly relied on Palmdale to find Otay kept SFRs in tiered rates, 

despite moving others to uniform rates, to encourage SFR water use 

efficiency—further undermining Otay’s showing under Section 6(b)(3).

Otay does not establish this reliance was inappropriate. Otay’s position

is that “HDR explained its reasons for eliminating tiers for non-residential 

customers,” and the trial court was “simply wrong to perceive this change” as 

discriminatory. But the court could, and did, find HDR’s explanation 

inadequate to justify charging SFRs more for the same water than other 

customers. HDR, and its representative Gould, focused on multiple reasons 

unrelated to cost of service, including not only water use efficiency, but also 

equity and legal defensibility. Indeed, by conceding that water use of 

irrigation customers “certainly can be inefficient,” but there are “other” ways 

to encourage their efficiency, HDR drew the kind of arbitrary distinction 

Palmdale rejected. (See Palmdale, supra, 198 Cal.App.4th at p. 937 

[observing other customers could waste outdoor water “by, for example, 
37

filling, emptying and refilling a swimming pool or excessively hosing off a 

worksite or parking lot,” without the same cost].)14

3. The Trial Court Properly Rejected Otay’s Peaking Factor 

Justification on This Record

We now turn to Otay’s asserted justification for its SFR tiered rates:

that its consultants used peaking factors (i.e., ratios meant to capture peak 

versus average demand) to allocate costs. Coziahr’s expert disputed this 

explanation, and the trial court found no support for it. Otay does not 

establish reversible error on this basis, either.

a. Additional Facts

The 2013 Atkins rate study did not expressly apply a peaking factor

analysis. In addressing the design of the SFR tiered rates, it cited the use of 

the AWWA base-extra capacity method; claimed above-average use involves a 

“larger portion” of the water system; and said systems had to be designed for 

“peak . . . use,” but it did not identify peaking factors or describe any 

allocation of costs to base or extra capacity categories. At the February 2013 

Board meeting, finance manager Bell said Otay “uses [AWWA] Standards . . . 

when determining ‘peaking’ costs.” Atkins representative Keese explained

“peaking” was the “sizing of [Otay’s] infrastructure . . . to handle the highest 

water use,” noting residential use was “highest in the morning and 

evenings . . . .”

14 Otay claims on reply that it properly prioritized both costs and 

conservation for SFRs, and costs alone for others; even if not forfeited, Otay is

essentially just asking us to reweigh the evidence. For his part, Coziahr 

argues that Otay violated Palmdale in a second way: using the unsupported 

peaking factor analysis to allocate the revenue requirement to customer 

classes, thus “taint[ing]” total SFR revenue collection. Having concluded the 

trial court’s express findings under Palmdale are supported by the record, we 

need not reach this additional point.
38

In its 2017 rate study, HDR indicated it applied peaking factors at both 

the cost of service and ratesetting steps. For cost allocation, it developed the

“base allocation factor . . . using FY 2015 consumption” for each class. As 

“measured data was not available,” the “average month to peak month data 

was used as a reasonable surrogate (estimate) for the peak day 

characteristics of each class of service.” A “similar approach” was used for 

peak hour. For ratesetting, HDR stated that “only the peak day 

extra‐capacity cost classifier was utilized.” It explained a “slightly different 

approach was used to determine the peaking factors by tier,” wherein the 

“average of peak month to average month” was calculated by tier. Peaking 

factors were then “adjusted to reasonably tie to [Otay’s] actual system peak 

demand.”

Vondle opined there was no evidence Otay “determined actual peaking 

costs” and allocated them to “customers actually causing” increased system 

costs. Vondle opined the 2013 Atkins study “did not use a ‘peaking factor’ 

concept” at all. For HDR, Vondle said its peaking factor justification was 

“not . . . objective and defensible . . . .” He said HDR “arbitrar[ily]

misallocat[ed]” expenses as extra capacity costs, such as bulk water 

purchases, and that “without time-of-use meters,” Otay had no way to 

identify customers with higher use periods. He contrasted this with electrical 

utilities, where there was a “legitimate higher cost of ‘peak’ use,” and they 

used time-of-use meters to allocate costs based on particular customers’ 

energy use. Vondle further opined the “costs of the larger [water] system 

capacity built for use in higher use periods is recovered in the fixed charges,” 

and capacity costs are “appropriately recovered” from those charges, and not 

the variable rates. 
39

Mumm disagreed with Vondle. Among other things, he maintained

Atkins introduced the “concept of peak demand, characterized . . . by peaking 

factors,” citing its use of AWWA standards to allocate costs.

The trial court rejected Otay’s peaking factor justification. It found

Atkins made “no attempt” to show higher-tier usage occurred at peak times 

or used a “larger portion of the water system,” noting Vondle’s opinion that 

“Atkins did not use a ‘peaking factor’ concept in calculating the rates.’ ” The

court disagreed with Mumm that Atkins focused on peaking costs, stating he

“cite[d] nothing in the Atkins report to support his speculation.”

The trial court then found HDR’s “peaking analysis [was] flawed for 

two main reasons.”

First, it found the record had no “evidence that there is a difference in 

the cost of water used during high-use or low-use times.” It noted the costs 

categorized as extra capacity, such as water purchases and infrastructure,

were “not disproportionately greater” for larger volumes. Rather, Otay

“already recover[ed] most of these costs through other line items,” showing

they are fixed and cannot justify “disproportionately higher rates for the 

higher tiers.”

Second, the trial court found Otay “does not collect time-of-use data,” 

and thus “does not—and cannot—charge customers more based on when they 

use water . . . .” It noted Vondle’s comparison of “Otay’s system to a true 

peaking system, such as an electrical utility . . . .” The court also noted Keese 

conceded “peak use depends on when the water is being used,” not “overall 

quantity . . . .”

b. Analysis

Otay does not establish the trial court erred in rejecting its peaking 

factor justification for the SFR rate structure.
40

For the 2013 ratemaking, Otay argues that “[w]hile it is true that 

Atkins did not use the phrase ‘peaking factors,’ its analysis objectively 

utilized those principles,” and the trial court misunderstood the facts in 

finding otherwise. We disagree. The Atkins rate study addressed peak 

demand in general terms, including by reference to the AWWA manual, as 

did finance manager Bell and Atkins representative Keese. Although Otay’s 

expert Mumm opined use of AWWA standards sufficed to introduce the 

“concept of peak demand, characterized . . . by peaking factors,” Coziahr’s 

expert Vondle disagreed, and the court could and did reject Mumm’s opinion. 

(Cf. City of San Buenaventura v. United Water Conservation Dist. (2022) 

79 Cal.App.5th 110, 121 (San Buenaventura) [Prop. 26 case, where “parties 

produced considerable expert evidence to support their positions”; “[i]t is not 

our role to . . . reassess the strength of the experts’ opinions”].)

Otay also does not show the findings on HDR’s peaking analysis in 

2017 were unsupported by substantial evidence. As noted, the trial court 

found two main flaws with the consultant’s analysis: Otay did not establish 

that peaking-related costs existed, or have data to allocate them.

Otay disputes the trial court’s finding that most costs categorized as 

extra capacity were actually fixed costs. It argues that although it “recovers 

a portion of its fixed costs from fixed rates,” it obtains the “majority of fixed 

costs, including those impacted by the need to meet peak demands, from . . .

volumetric rates.” However, Otay’s admitted collection of some fixed costs 

from fixed charges reflects such costs are not necessarily related to peak

demands. Further, the Atkins rate study indicated Otay limited revenue 

recovery from fixed charges to 30 percent for conservation pricing purposes. 

This evidence supports an inference that Otay chose to recover certain fixed 

costs from variable rates—not because it had to account for peaking.
41

Otay also argues its use of “data connecting customers’ seasonal 

patterns of use to peak demands” and “reasonable estimates” was sufficient

to support its peaking analyses, citing Morgan, and that the trial court erred 

by adopting Vondle’s opinion that it could not use a peaking justification 

without time-of-use data. Otay suggests, in substance, that the trial court 

was required to accept its position on this key factual dispute (i.e., whether 

its evidence for its peaking factor justification was adequate). Otay is 

essentially asking us to reweigh the evidence and reach a different factual 

conclusion, which we cannot do. (Morgan, supra, 223 Cal.App.4th at p. 916; 

Howard, supra, 72 Cal.App.4th at p. 631.)

Moreover, the record supports the trial court’s finding that Otay lacked 

data to allocate peaking costs. HDR acknowledged it used monthly data in 

the absence of “measured data,” along with AWWA methods, and Vondle 

opined this evidence was not sufficient (stating there was no evidence for the 

existence or allocation of peak costs, not simply no time-of-use data, in 

contrast to electrical utilities). The trial court was entitled to accept Vondle’s 

view. Morgan does not aid Otay, as that case did not address peaking and, 

again, there we were reviewing a judgment in favor of the agency with the 

concomitant appellate presumptions. (See Morgan, supra, 223 Cal.App.4th 

at pp. 899-900.)15

Finally, and more generally, Otay suggests that the trial court did not 

understand peaking is an analytical concept that “systems must be built to 

15 To the extent the trial court could be seen as requiring time-of-use data 

(as Otay suggests), we note Section 6(b)(3) does not require or bar use of any 

particular type of supporting data, so long as it meaningfully reflects cost of 

service to the parcel. But once experts have weighed in, as here, it is for the 

trial court to decide whether the showing meets the constitutional cost of 

service standard. (San Buenaventura, supra, 79 Cal.App.5th at p. 121.)
42

accommodate peak demands,” not a literal time of day. To the contrary, the 

court recognized that, according to the HDR rate study, “theoretical costs 

associated with ‘peaking’ relate to when customers choose to use their 

water . . . .” (First italics added, second italics in original.) This was 

consistent with HDR’s own explanation: that a system must be able to 

supply water at the “time of greatest demand,” known as “peak demand.”16

4. The Trial Court Properly Rejected Mumm’s Analysis

Finally, Otay contends the trial court “concluded that Otay’s approach 

was undermined” by part of Mumm’s independent analysis, but the court 

misunderstood the analysis. Otay does not establish the court erred in 

rejecting Mumm’s analysis. (Howard, supra, 72 Cal.App.4th at p. 632

[“ ‘expert testimony, like any other, may be rejected by the trier of fact, so 

long as the rejection is not arbitrary’ ”].)

Mumm conducted an “independent evaluation of [Otay’s] water rates,”

using billing records and peaking factors. For the Atkins period, he 

developed his own factors, and for the HDR period, he used theirs. He 

compared the “average cost per unit of demand” for water to the “average 

effective rate per unit” for SFRs and found there was “no material difference.” 

In his analysis, Mumm discussed “total cost[s]” at various points, and also 

noted that “[b]ecause a portion of every customer’s service is a fixed cost,” the 

“initial unit cost is high but decreases as the fixed cost is divided among 

more . . . units,” until “average cost starts to increase” due to peak capacity.

Vondle opined that Mumm’s analysis “does not show that HDR’s cost 

allocation method is correct; it only shows that Mr. Mumm’s cost allocation 

16 We deem forfeited additional points that Otay raises on reply regarding 

its peaking factor justification, including as to expert evidence. (Raceway, 

supra, 2 Cal.5th at p. 178.)
43

methodology is the same as HDR’s” and because they both “use the same 

flawed cost allocation . . . both are incorrect.”

The trial court found Mumm’s analysis did not support Otay’s rates for 

several reasons. First, the court found Mumm’s analysis is “flawed because it 

is based on the same faulty assumptions as the HDR Report. . . .” Second, it 

found his “approach . . . is little more than post-hoc rationalization,” much of 

which “simply does not match” the record. As for the court’s other findings, it 

viewed Mumm’s approach as being contrary to Capistrano, which held an 

agency must “ ‘do more than merely balance’ ” total costs with revenues. 

(Capistrano, supra, 235 Cal.App.4th at p. 1506.) Citing Mumm’s observation 

that cost-per-unit decreases as demand increases, it found this “undercut[ ]

Otay’s sole justification” for its rates (i.e., greater volume means higher 

costs). Lastly, it found Mumm’s approach was “inconsistent with customers’ 

experience” of being “charged more for water in higher tiers” without a “cost 

basis.”

The trial court’s key findings—that Mumm basically replicated the 

flawed HDR study, and provided an unsupported, post-hoc rationalization—

are consistent with the record, and support the court’s rejection of his

analysis without more. Mumm relied on monthly billing records, like HDR; 

he applied peaking factors used by HDR (and factors that he developed for 

the Atkins period); and he concluded the resulting costs were consistent with

the consultant-proposed rates.17

17 Otay’s arguments here, which concern the trial court’s other findings, 

also lack merit. First, Otay claims the court “misread[ ]” Mumm’s 

decreasing-costs discussion, stating his point was that “fixed costs go[ ] down 

if more units are delivered,” while peaking implicates increased system costs. 

To the extent the court was imprecise here, it is understandable. As noted, 

Otay chose to recover some fixed costs through fixed rates, and some through 

variable rates supposedly based on peaking, so Mumm’s distinction is not 
44

In sum, Otay did not establish the SFR tiered rates it set during its 

2013 and 2017 ratemaking processes were compliant with Section 6(b)(3). 

We affirm the trial court’s liability determination.

II. Parties’ Appeals Regarding the Refund

Both parties assert error as to the refund award. For purposes of these 

appeals, they appear to agree that if a refund is available under Section 

6(b)(3), the measure is the difference between (a) a constitutional rate, and 

(b) what Otay charged class members. However, Otay’s appeal raises three 

fundamental questions: whether a monetary remedy was available in the 

first place; if so, whether there was evidence of damages here; and, if so, 

whether the refund calculations were reasonable. Coziahr’s cross-appeal 

challenges only the trial court’s inclusion of water charges at all SFR tiers in 

the refund calculation. We conclude that a refund was available, and the 

trial court’s only error was in using unreasonable calculations.

A. Additional Facts

During the Phase II damages proceedings, Coziahr and Otay submitted 

briefs addressing proposed refund calculations, supported by expert 

declarations from Vondle and Mumm respectively. Vondle offered multiple 

alternatives, all of which resulted in refund awards; Mumm’s calculations 

resulted in a classwide undercharge. The trial court held a Phase II hearing, 

at which it heard argument from counsel.

obvious. Second, Otay claims the court erroneously rejected his analysis for 

“advocating . . . a ‘total cost’ approach,” stating that although he discussed 

total costs, his conclusion was that costs were proportionally allocated. The 

court could fairly cite Capistrano to criticize his total costs discussion. (See 

Capistrano, supra, 235 Cal.App.4th at p. 1506 [agency had to “do more” than 

balance total costs and revenues].)
45

The trial court issued another statement of decision for Phase II,

stating it already found damages at Phase I; setting forth its refund 

calculation approach, which included all SFR water charges in the 

calculation; and indicating it would hold an individual allocation phase. The

court then entered judgment, awarding an estimated class refund of around 

$18 million that increased monthly until compliance. It also awarded 

prejudgment interest, said plaintiffs were the prevailing parties, and 

retained jurisdiction to hear an attorney’s fee request.

B. Applicable Law

“An appellant’s challenge to damages, depending upon its specific 

nature, may be subject to a substantial evidence, abuse of discretion, or de 

novo standard of review.” (JMR Construction Corp. v. Environmental

Assessment & Remediation Management, Inc. (2015) 243 Cal.App.4th 571, 

583 (JMR).)

The “question of whether a plaintiff was, in fact, damaged by the 

defendant’s [conduct] is reviewed for substantial evidence.” (JMR, supra, 

243 Cal.App.4th at p. 583.) A “party claiming damage must prove that he 

has suffered damage and prove the elements thereof with reasonable 

certainty.” (Carpenter Foundation v. Oakes (1972) 26 Cal.App.3d 784, 799.) 

“ ‘Where the fact of damages is certain, the amount of damages need not be 

calculated with absolute certainty.’ ” (Sargon Enterprises, Inc. v. University

of Southern California (2012) 55 Cal.4th 747, 774 (Sargon) [law “requires 

only that some reasonable basis of computation of damages be used”].)

The issue of whether a “certain measure of damages is permissible 

given the legal right the defendant has breached, is a matter of law, subject 

to de novo review.” (New West Charter Middle School v. Los Angeles Unified 

School Dist. (2010) 187 Cal.App.4th 831, 843; see Greene v. Marin County 
46

Flood Control & Water Conservation Dist. (2010) 49 Cal.4th 277, 287 [legal 

questions regarding Prop. 218 are reviewed de novo].) A court’s “choice 

among several legally permissible measures of damages, under the specific 

circumstances of the case, is a matter of discretion.” (New West, at p. 843.)

Additionally, “[d]amages must, in all cases, be reasonable . . . .” (Civ. 

Code, § 3359; accord, Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 

738 (Atkins).)

C. A Refund Remedy Is Available for a Section 6(b)(3) Violation

Otay argues that monetary relief is unavailable under Section 6(b)(3). 

We disagree. As we shall explain, a refund may be awarded pursuant to a 

mandate claim, and Otay establishes no grounds to limit such relief here.

1. Additional Facts

Prior to commencing this lawsuit, Coziahr sent a notice of government 

claim to Otay, which Otay rejected. Coziahr then filed his complaint, which 

included claims for restitution damages based on excessive fees, and a writ of 

mandate pursuant to Code of Civil Procedure section 1085 compelling Otay to

reimburse unlawfully collected fees, among other things. His prayer for relief 

included damages and “[r]estitution . . . or reimbursement” pursuant to “all 

applicable laws . . . .” Otay pled affirmative defenses that the claims were 

barred under the Government Claims Act, and plaintiffs were “not entitled to 

equitable relief insofar as they have adequate remedies at law.”

After Coziahr obtained class certification, Otay moved to set the statute 

of limitations to one year before Coziahr’s lawsuit, based on the Government 

Claims Act. The parties jointly stipulated to a one-year statute of limitations.

The parties also entered a stipulation on trial structure, which said that if 

the court granted the petition for writ of mandate, the parties would 

“undertake a second phase related to remedies/restitutionary relief.”
47

The Phase II Statement of Decision and judgment directed Otay to 

refund overcharges, but did not specify the cause or causes of action to which 

the directive pertained.

Otay filed an opposed motion for new trial, asserting Section 6(b)(3) did 

not authorize a refund, and that under Katzberg v. Regents of University of 

California (2002) 29 Cal.4th 300 (Katzberg), there was no damages remedy 

for this kind of constitutional violation. Otay also objected to the judgment 

on this basis. The court summarily denied Otay’s motion and overruled its 

objection.

2. Summary of Katzberg

In Katzberg, a public university professor sought damages for the 

university’s failure to provide a “name-clearing” hearing after his removal 

from a department chairmanship, which he claimed was a violation of his due 

process liberty interest under the state constitution. (Katzberg, supra, 

29 Cal.4th at p. 303.) The California Supreme Court set forth a framework to 

assess if an “action for damages is available to remedy a constitutional 

violation that is not tied to an established common law or statutory” action. 

(Id. at p. 303, fn. 1; id. at p. 317 [if no affirmative intent to permit or preclude 

damages appears, relevant factors are “whether an adequate remedy exists”; 

“extent to which a constitutional tort action would change established tort 

law”; and “nature and significance of the constitutional provision”; if factors 

support damages, court further considers “any special factors counseling 

hesitation”].) Applying this framework, the Court held there was no 

“constitutional tort cause of action for damages” to remedy the asserted due 

process liberty interest violation, and the plaintiff could not pursue a direct 

action for damages. (Id. at pp. 326-329.)
48

Pertinent here, the Court noted that “had plaintiff timely sought a writ 

of mandate under [Code of Procedure] section 1085 and prevailed in that 

action, [he] might have been entitled to obtain damages . . . pursuant to . . . 

section 1095.” (Katzberg, supra, 29 Cal.4th at p. 326, fn. 27.)

3. The Class Could Obtain a Refund for Otay’s Section 6(b)(3) 

Violation Via Coziahr’s Mandate Claim

We reject Otay’s belated challenge to monetary relief based on 

Katzberg. The parties have not identified, and our independent research has 

not disclosed, any cases deciding whether monetary remedies are available 

under Proposition 218. Coziahr contends a “writ of mandate directing an 

agency to refund fees” is appropriate. Otay acknowledges this argument

(while listing Coziahr’s points and stating they lack merit), but offers no 

substantive response. Without foreclosing other potential grounds for 

monetary relief, we conclude a ratepayer can obtain a refund for a 

Section 6(b)(3) violation via a petition for writ of mandate.

First, as the California Supreme Court acknowledged in Katzberg, 

damages may be available for a constitutional violation pursuant to a 

mandate claim. (Katzberg, supra, 29 Cal.4th at p. 326, fn. 27; see Code Civ. 

Proc., § 1095 [judgment granting a writ of mandamus may allow petitioner to 

“recover the damages which [the petitioner] has sustained”]; ibid. [damages 

“shall be paid as other claims against a public entity are paid”].)

Consistent with this principle, one Court of Appeal has recognized a 

refund may be available to a plaintiff who secured mandamus relief for a 

Proposition 218 violation. (Water Replenishment Dist. of Southern California

v. City of Cerritos (2013) 220 Cal.App.4th 1450, 1453-1454, 1463-1469 

[reversing denial of preliminary injunction requiring city to cease 

groundwater production or pay assessment; although another court granted 

mandamus relief under Prop. 218, a damages phase remained pending and 
49

the “amount . . . to be invalidated, if any, ha[d] not been determined”].) 

Another Court of Appeal affirmed the grant of a writ of mandate and refund 

order in a Proposition 26 case (albeit without analysis of the refund 

component). (Newhall County Water Dist. v. Castaic Lake Water Agency

(2016) 243 Cal.App.4th 1430, 1433, 1439-1440 [affirming grant of writ 

petition finding Prop. 26 violation and order for agency to revert to prior

rates and refund the difference with challenged rates].)

We see no principled reason why a trial court would be foreclosed from 

including a refund in mandamus relief under Section 6(b)(3).

Second, Otay offers no substantive argument that the trial court was 

unable to grant a refund pursuant to Coziahr’s mandate claim, and forfeits 

any challenge in this regard. (Badie, supra, 67 Cal.App.4th at pp. 784-785.) 

We would reject it regardless. Coziahr pled a Code of Civil Procedure section 

1085 mandate cause of action, which asked that Otay be compelled to 

reimburse unlawful fees. The parties’ trial structure stipulation then stated

that if the trial court granted Coziahr’s mandate petition, they would proceed 

to “remedies/restitutionary relief.” The case did proceed to a remedy phase, 

where the trial court awarded a refund. Although the court did not specify 

the basis for the refund, we infer it relied on available grounds—which 

included Coziahr’s mandate claim. (See In re Marriage of Arceneaux (1990) 

51 Cal.3d 1130, 1133 (Arceneaux) [“A judgment . . . of a lower court is 

presumed to be correct on appeal, and all intendments and presumptions are 

indulged in favor of its correctness”].)

4. Otay Does Not Establish Katzberg Precluded the Refund

Otay argues that “monetary damages, like refunds, are rarely available 

for [state] constitutional violations” and Katzberg “devised a framework to 

identify those rare circumstances in which they are.” But Katzberg involved 
50

a claimed due process liberty interest violation, and the framework was to 

identify when a “tort cause of action for damages” was available. (Katzberg, 

supra, 29 Cal.4th at p. 327.) The Court did not address refunds—or fees, 

charges, or assessments, generally. Indeed, Otay identifies no cases applying 

Katzberg to bar refunds for local government levies, under Proposition 218 or 

otherwise.

Coziahr contends “this makes sense,” because “Katzberg only applies if 

there is no other path to a remedy,” and under Proposition 218, a refund is 

authorized by the Government Claims Act (the Act) and recoverable in 

mandate. The Act “established a standardized procedure for bringing claims 

against local governmental entities,” including claims presentation 

requirements. (Ardon v. City of Los Angeles (2011) 52 Cal.4th 241, 246

(Ardon); accord, McWilliams v. City of Long Beach (2013) 56 Cal.4th 613, 618-

619 (McWilliams); see Gov. Code, § 910 [contents of claim].)

Monetary relief under Section 6(b)(3) is consistent with the Act. A

mandate claim, which we already determined can support a refund, is subject 

to the Act if money is sought. (Sparks v. Kern County Bd. of Supervisors

(2009) 173 Cal.App.4th 794, 798.) The California Supreme Court also has 

made clear the Act may be an avenue for a refund, in the absence of a specific 

refund procedure for a “local ‘tax, assessment, fee, or charge.’ ” (McWilliams, 

supra, 56 Cal.4th at p. 621; id. at p. 629 [“except as to ‘[c]laims under the 

Revenue and Taxation Code or other statute prescribing procedures for the 

refund . . . of any tax,” the “Legislature has determined that the . . . Act 

applies”]; Ardon, supra, 52 Cal.4th at p. 251 [a “class claim . . . for a tax 

refund against a local governmental entity is permissible” under the Act “in 

the absence of a specific tax refund procedure . . . in an applicable governing 

claims statute”].) And courts have applied the Act’s requirements to
51

Proposition 218 actions seeking refunds. (See, e.g., Plata v. City of San Jose

(2022) 74 Cal.App.5th 736, 748-749 [claim did not include Section 6(b) 

allegations]; Daneshmand v. City of San Juan Capistrano (2021) 

60 Cal.App.5th 923, 937 [untimely claim].)18

Addressing issues implicated by the Katzberg framework, Otay argues, 

inter alia, that a refund was not contemplated by Proposition 218, not a 

necessary remedy under it, and contrary to public policy. These points lack 

merit. Otay contends that because the ballot materials do not reference 

damages, this “suggests no monetary remedy was intended.” But Otay does

not establish those materials mention declaratory, injunctive, or mandate

relief either. (Katzberg, supra, 29 Cal.4th at p. 320 [“[T]here is nothing to 

suggest that the issue [of damages] was considered at all.”].) Otay next

contends these other forms of relief are sufficient. Katzberg was about

damages, implying nonmonetary relief does not always suffice. For example, 

nonmonetary relief would not compensate SFR class members who are no 

longer Otay customers. As for public policy, Otay claims in part that the 

refund “cost . . . devolves” to ratepayers. All judgments against public 

entities may impact revenues, hence the bar on punitive damages against 

them, but such actions remain cognizable. (See Wells v. One2One Learning 

Foundation (2006) 39 Cal.4th 1164, 1196, fn. 20 [describing purpose for

punitive damages bar]; cf. Ardon, supra, 52 Cal.4th at p. 252 [policy “favoring 

18 We thus also reject Otay’s claim that when no “provision authorizes a 

refund,” courts “bar such relief.” Otay cites Capistrano Beach Water Dist. v. 

Taj Development Corp. (1999) 72 Cal.App.4th 524, which involved a statutory 

exclusion, and is inapposite. (Id. at p. 526 [challenge to sewer connection 

fee/capacity charge; no refund available, where fees at issue were excluded 

from refund provisions (see Gov. Code, § 66013, subd. (h))].)
52

fiscal responsibility . . . does not justify precluding legitimate class 

proceedings for the refund of allegedly illegal taxes”].)19

Finally, Otay contends that “allowing a refund creates a problem of 

proof.” According to Otay, because calculating damages “requires a 

comparison of the rate paid against the amount that should . . . have been 

charged,” this compels courts to “determine . . . a lawful rate” and “act[ ] as 

super-rate-setters”—and, as they cannot do so, courts have “no basis upon 

which to calculate damages.” We disagree. The purpose of Phase II was to 

calculate a refund remedy, not set rates, and both parties offered expert

damage calculations. The cases cited by Otay merely support using a refund

measure based on comparing a lawful rate and the charged rate, which the 

trial court did here. (See, e.g., Macy’s Dept. Stores, Inc. v. City and County of 

San Francisco (2006) 143 Cal.App.4th 1444, 1451-1452, 1454-1455 [reversing 

full refund of local business taxes, for an “amount sufficient to cure the 

discriminatory effect”].)

19 Otay further claims the Legislature showed “it agrees prospective 

remedies are appropriate,” by its later enactment of a water rate validation 

statute. (Gov. Code, § 53759; Stats. 2021, ch. 216, § 1.) On our own motion, 

we take judicial notice of the legislative history solely to observe that, if the 

bill is pertinent at all, it seems to support Coziahr’s position. The history 

indicates “[e]xisting law” “[p]rovides a procedure for seeking a tax refund” 

(e.g., Assem. Com. on Local Gov., Analysis of Sen. Bill No. 323 (2021-2022 

Reg. Sess.) Jun. 9, 2021), at one point citing article XIII, section 32 and the 

Government Code for this procedure. (Sen. Com. on Judiciary, Analysis of 

Sen. Bill No. 323 (2021-2022 Reg. Sess.) Apr. 20, 2021; see also Assem. Com.

on Judiciary, Analysis of Sen. Bill No. 323 (2021-2022 Reg. Sess.) June 22, 

2021 [bill sponsor Association of California Water Agencies (ACWA) and 

supporting agency coalition stated “existing law allows lawsuits that seek 

refunds”].) We note the local agency amici, including ACWA, claim here that

a Proposition 218 “refund . . . is unavailable under existing law . . . .”
53

D. The Record Supports the Existence of Damages

Next, Otay contends the trial court “skipped the . . . step” of assessing 

whether Coziahr established damages, and there is no evidence of damages

regardless. These contentions lack merit.

As a preliminary matter, we disagree with Otay that the trial court 

failed to make a damages finding. Otay claims the court erroneously found in 

its Phase II Statement of Decision that it “already determined” the fact of 

damages in Phase I. Otay asserts the court only found the rates were 

unconstitutional at Phase I, not that they caused financial loss. Whether or 

not the court found damages earlier, the court’s Phase II finding reflects it 

did find damages existed. Further, Otay did not object to this aspect of the

statement of decision, so we would imply factual findings necessary to 

support the judgment, regardless. (Arceneaux, supra, 51 Cal.3d at pp. 1133-

1134.)20

Turning to the record, Otay does not establish the damages finding was 

unsupported by substantial evidence. As the trial court found at Phase I, the 

2013 Atkins rate study set water rates for Tiers 2 and 3 above the average 

cost of water, HDR admitted high-tier customers had been charged above 

cost, and HDR left that rate structure substantially in place. After 2017, 

Otay also charged higher-tier SFRs more for water than commercial and 

irrigation customers. Customers who were overcharged presumptively had

monetary damages, unless undercharges negated them. (See Lueter v. State 

of California (2002) 94 Cal.App.4th 1285, 1302-1303 [drawing distinction 

20 Otay’s objections to the proposed judgment are in the record, and they 

address refund availability and prejudgment interest. The register of actions 

shows Otay also filed objections to the Phase II Statement of Decision. We 

take judicial notice on our own motion to note these objections were limited to 

the issue of refund availability.
54

between the fact of harm, and the amount of damages]; cf., e.g., Daar v. 

Yellow Cab Co. (1967) 67 Cal.2d 695, 706 [damages based on overcharged taxi 

rides].) And the Phase II calculations of Coziahr’s expert, Vondle, showed 

class members sustained monetary damages, even when accounting for 

undercharges. (See GHK Associates v. Mayer Group, Inc. (1990) 

224 Cal.App.3d 856, 873-874 (GHK) [substantial evidence “support[ed] the 

trial court’s finding that GHK was in fact damaged by the breaches of the 

agreements”]; cf., e.g., Pannu v. Land Rover North America, Inc. (2011) 

191 Cal.App.4th 1298, 1322-1323 [expert testimony on lost earning capacity 

provided substantial evidence for damages award].)

Otay’s arguments do not compel a different result.

First, Otay contends that overcharging does not necessarily cause

damage. Rather, Otay argues, some customers never “reach[ ] an overpriced 

tier” or never do so “enough to have net loss,” and “Mumm’s analysis 

reveals . . . the actual experience of the [c]lass members” fits into these 

categories. But Mumm used classwide data, so it is unclear how his analysis 

could reveal anything about individual class members. Otay essentially asks 

us to assume no customer used enough overpriced water to sustain economic 

loss—an inference against both the trial court’s Phase II damages finding 

and the judgment. We cannot do so. (Cf. GHK, supra, 224 Cal.App.3d at 

p. 874 [“To accept appellants’ argument. . . that [respondent] suffered no 

loss . . . would require this court to reweigh the evidence and reverse the trial 

court’s factual findings, because [it] found, as a factual matter . . . that 

[respondent] had been damaged” (italics omitted)].)21

21 Otay cites Coziahr as someone who did not use enough high-tier water 

to incur net loss, citing the declaration of Otay Assistant Chief of Finance, 

Kevin Koeppen. But Koeppen stated Coziahr would have damages under two 

Vondle approaches (and no damages under two others).
55

Second, Otay argues Vondle’s opinion did not “meet minimum 

standards for proving damages.” The record shows Otay unsuccessfully 

moved to exclude his testimony. Otay does not address this ruling, and does 

not show it was an abuse of discretion. (Antelope Valley Groundwater Cases

(2020) 59 Cal.App.5th 241, 262-263 [where district made “no effort” to show 

denial of motion to strike expert testimony was an abuse of discretion, the 

reviewing court “must presume” the trial court properly denied the motion 

and considered the testimony].)

Otay relatedly argues the trial court “tacitly acknowledged” Vondle’s 

calculations “lacked the certainty required to prove the fact of damages” by 

describing them as “merely sufficient” to show the measure of damages. Otay 

misstates the record. In the Phase II Statement of Decision, the court 

rejected Otay’s argument that no overcharge amount could be determined.

Instead, the court noted that “where the fact of damages is clear, as it is here”

(emphasis added), the “amount . . . need not be calculated with absolute 

certainty,” and used Vondle’s calculations in setting the refund.

E. The Trial Court’s Refund Calculations

Coziahr argues the trial court erred by including all charged amounts

in the refund calculation, not just overcharges, which he contends amounted

to an unpled offset without legal or equitable justification. Otay objects, in 

part, that the court unreasonably relied on projections and estimates based 

partially on a different case. We reject Coziahr’s argument, but conclude

these objections by Otay have merit and a new trial on the refund amount is 

necessary. We need not and do not reach Otay’s remaining contentions 

regarding the refund and related amounts.
56

1. Coziahr Does Not Show Including Undercharges Was Error

The trial court impliedly rejected Coziahr’s view that including all 

charges in the refund calculation amounted to an unpled offset. That 

rejection was sound.

a. Coziahr Does Not Show the Refund Involved an Unpled Offset

Setoff is a defense “founded on the equitable principle that ‘either party 

to a transaction involving mutual debts and credits can strike a balance, 

holding himself owing or entitled only to the net difference . . . .’ ” (Granberry 

v. Islay Investments (1995) 9 Cal.4th 738, 744 (Granberry).) Code of Civil 

Procedure section 431.70, which now codifies setoff, “authorizes a party who 

has been sued and has a ‘cross-demand[ ] for money’ against the plaintiff to 

‘assert in the answer the defense of payment.’ ” (David S. Karton, a Law 

Corp. v. Musick, Peeler & Garrett LLP (2022) 83 Cal.App.5th 1027, 1041.)

Here, Coziahr’s expert, Vondle, opined the “overcharges are the 

difference between the rates paid by [SFRs] and the cost of water in Tiers 2 

and 3,” while Otay’s expert, Mumm, asserted “net damages . . . must include 

both under and over billing . . . .” Coziahr then argued in his Phase II 

briefing that including lower-tier charges would amount to an unpled offset 

and retroactive ratemaking. At the Phase II hearing, Otay denied its 

calculation involved a setoff affirmative defense, as in a contract or tort case. 

The trial court impliedly rejected Coziahr’s argument by using an all-charges

refund approach (while elsewhere criticizing Otay’s classwide approach to net 

damages, and indicating refunds would be calculated individually). Coziahr 

does not show this rejection was erroneous.

First, Coziahr argues the right to an offset applies when the parties 

have “mutual debts and credits” and “may assert cross-demands for money,” 

summarizing offset principles from Granberry and elsewhere. (See 
57

Granberry, supra, 9 Cal.4th at pp. 741-744 [class action by former tenants 

against a landlord regarding security deposits].) Unlike Granberry, this 

dispute does not involve a private transactional relationship, or debts and 

credits. Rather, this is a ratepayer action in which the trial court determined 

at Phase I of the trial that Otay was liable to the class for failing to 

demonstrate that “its 2013 and 2017 tiered water rates were proportional to 

the cost of service,” and the purpose of Phase II of the trial was to calculate 

damages. Nor did the court find, as Coziahr claims, that Otay was “owed a 

credit” for amounts “charged . . . below the proportional cost of service.”

(Italics omitted.) There is no merit to Coziahr’s attempt to label parts of the 

court’s Phase II refund calculation as “debts” and “credits.”

Second, Coziahr argues Otay sought to apply an offset, while denying it 

was seeking an offset. There is no dispute Otay’s refund calculation approach 

considered both undercharges and overcharges, to assess net damages. But 

Otay maintains, and we agree, that this case does not involve a cross-demand 

for money, or the application of an offset in a legal action.

Third, Coziahr argues that having failed to plead an offset, Otay 

waived the issue. Given that Otay did not seek an offset, any failure to plead 

one is not relevant.22

22 Coziahr cites additional cases in asserting the refund involved an 

unpled, improper offset. (See, e.g., Kruger v. Wells Fargo Bank (1974) 

11 Cal.3d 352, 362, 367-368; Title Ins. Co. v. State Bd. of Equalization (1992) 

4 Cal.4th 715, 728-732; Morris Cerullo World Evangelism v. Newport Harbor 

Offices & Marina, LLC (2021) 67 Cal.App.5th 1149, 1159.) Because no offset 

is at issue, these cases are inapposite.
58

b. Coziahr Does Not Establish Any Other Legal or Equitable 

Grounds for Reversal

Coziahr also argues that even if Otay had pled an offset, it never 

established a legal or equitable basis for it. Because Coziahr has not shown 

the refund method involved an offset, this argument fails. However, we elect 

to construe certain points as legal and equitable objections to the trial court’s 

inclusion of lower tier charges, and address them. We conclude they lack 

merit as well.

First, Coziahr argues the refund calculation amounts to a “partial 

retroactive assessment” or “impermissible shadow ratemaking,” which 

violates the procedural obligations of Section 6. (See § 6(a) [setting forth 

procedures for “imposing or increasing any fee or charge,” including notice, a 

public hearing, and consideration of protests].) Specifically, he argues the 

calculation was based on rates not proposed to the public, citing City 

National Corp. v. Franchise Tax Bd. (2007) 146 Cal.App.4th 1040. City 

National is distinguishable, and his position lacks merit. (Id. at pp. 1042-

1043 [reversing dismissal of tax refund action for not first paying disputed 

tax, where proposed assessments were not final].)

The rate used by the trial court to reflect what Otay should have 

charged (i.e., the constitutional rate) was developed by Coziahr’s own expert, 

Vondle, for purposes of the Phase II refund calculations. Coziahr does not 

establish any additional fees are being “impos[ed] or increased” by Otay, or 

that any person or parcel is being levied as a result of the refund calculation. 

(See Gov. Code, § 53750, subd. (h)(1) [for article XIII D, “ ‘Increased,’ when 

applied to a . . . property-related fee or charge, means a decision by an 

agency” that “A. Increases any applicable rate” or “B. Revises the 

methodology . . . if that revision results in an increased amount being levied 
59

on any person or parcel”]; Plantier, supra, 7 Cal.5th at p. 385 [describing Gov. 

Code, § 53750, subd. (h)(1)(B)].)

Second, and along similar lines, Coziahr argues Otay has no basis to 

“assert a cross-demand for money from any class member,” as they already 

“paid their water bills at the established rates.” (Italics omitted.) By way of 

contrast, he cites lien procedures available to water districts with delinquent 

charges. (See Pub. Util. Code, § 16472.1.) He relatedly argues the trial 

court’s method would make rates unpredictable, as “charges from one bill can 

retroactively impact” another. We view these points as variations of his

procedural argument, and they rest on the same flawed assumption that the 

refund amounts to retroactive ratemaking.

Third, Coziahr contends there is no “equitable basis” for the refund 

method. We do not agree. The trial court found a refund amount that 

accounted for undercharges was “more reasonable . . . .” The court could 

fairly conclude an all-charges approach was both more consistent with the 

relief pursued by Coziahr under Section 6(b)(3), and a more reasonable way 

to provide a make-whole remedy. (See Atkins, supra, 8 Cal.App.5th at p. 738

[damages must be reasonable].) Coziahr alleged and established that Otay

violated Section 6(b)(3) as to all SFRs by charging water rates that exceeded 

the proportional cost of service to the parcel. Otay reasonably argued, and 

the court accepted, that the refund had to “reflect both the underpayment in 

the lower tiers and any overpayment in the upper tiers” in the rate structure. 

We cannot say the court’s conclusion was inequitable.23

23 We have considered Coziahr’s arguments regarding other equitable 

considerations, and they do not persuade us to reach a different conclusion.

We address a final point. Otay asserts Section 6(b)(3) requires inclusion of all 

charges in a refund calculation; Coziahr disagrees. Given the procedural 

posture—the trial court included all charges, and Coziahr has not shown 
60

2. Refund Calculations Were Unreasonable

We now turn to Otay’s objections to the calculations. Otay argues, in 

part, that the trial court’s calculations were “impermissibly speculative and 

uncertain,” including because it used projected water units rather than actual 

units and an “undercharge methodology” based on another case. We agree 

these aspects of the court’s refund calculations were unreasonable, especially 

in light of the planned individual allocation phase, and we remand for a new 

trial on the refund amount.

a. Additional Facts

In Vondle’s Phase II expert declaration, he used projected units from 

Otay’s rate models to calculate an “average cost of water” to represent the 

constitutional rate. He offered a few alternative calculations; Alternative 2 

was an “[a]verage rate for all customer classes.” He then “multipl[ied] the 

projected units” in Tiers 2 and 3, by the difference between the “average cost 

of water” and the “actual rate used,” to “get the overcharge for each tier for 

each period.” He added these overcharges to arrive at a class refund, and

estimated future overcharges based on a “trend of . . . generally increasing”

overcharges.

In Vondle’s rebuttal declaration, he described the refund approach 

adopted in the San Diego case, Patz, which involved using actual customer 

bills to calculate net overcharges based on water charges in all tiers. He 

explained it was “impossible to duplicate” these calculations, because Otay’s 

SFR bills were “not available in the record . . . .” But, he indicated, an 

“approximate . . . amount for this case” could be calculated by (i) identifying 

error—we need not and do not address whether this was the only permissible 

method to calculate a refund. (See Loeffler v. Target Corp. (2014) 58 Cal.4th 

1081, 1102 [courts “avoid resolving constitutional questions if the issue may 

be resolved on narrower grounds”].)
61

the “proportion[al]” difference between the Patz refund and an overchargesonly version (“Patz case percentage”; updated to 74.25 percent at the Phase II 

hearing), and (ii) multiplying the Patz case percentage by an overchargesonly refund here.

Mumm opined, among other things, that actual units of water, not 

projected units, must be used in the damages calculation. His expert 

declaration appeared to use actual unit data. 

In the Phase II Statement of Decision, the trial court adopted a refund 

methodology that consisted of “calculat[ing] . . . uniform rate[s] that could 

have been charged . . . during the class period,” and comparing them to the 

“tiered rates actually charged . . . .” The court used Vondle’s “Alternative 2” 

for the uniform rate calculation (and projected water unit numbers), noting 

Vondle was the plaintiff’s expert in the Patz case and it accepted similar 

calculations there.

In explaining how it was going to consider undercharges, the trial court 

cited Vondle’s rebuttal declaration, which described the approach in Patz, 

and stated that “[a]pplying this approach” here “recognizes that a comparable 

reduction was made in Patz where similar breakpoints” were used. The court 

noted an overcharges-only refund would be $24,384,184, impliedly multiplied

this number by the Patz case percentage (74.25 percent), and found “total 

‘net’ overcharges are reasonably estimated to be $18,105,256.60 through June 

2021.” The court stated “individual class member refunds will be determined 

during the refund allocation phase, with any adjustments to be made in light 

of customer billing,” and “[n]o class member[ ] will receive more or less than 

he or she was overcharged” in the class period.

The trial court further found Otay continued to charge noncompliant 

rates, so as in Patz, the court “remedies these continuing violations by 
62

increasing the award after June 2021 by $208,762.50 in overcharges each 

month thereafter” until Otay imposed rates consistent with Section 6(b)(3). 

The court also stated that “consistent with Patz, the Court will award prejudgment and post-judgment interest . . . .” The judgment reflected the

foregoing amounts.

b. Analysis

The trial court’s refund calculations relied unnecessarily on projected 

and proxy data, and thus were unreasonable under the circumstances. (See 

Sargon, supra, 55 Cal.4th at p. 774 [damages must have “reasonable basis of 

computation”].) Specifically, the court used projected water use units, not 

actual water units, and the Patz case percentage, to determine an estimated 

class refund award, even though actual water unit data was available (or 

could be) and the court was already planning an individual allocation phase 

using Otay customers’ billing records. The court also relied on Patz as the 

basis for the monthly increases and prejudgment interest. Further, as Otay 

points out, the court did not explain what it would do with any surplus.

Coziahr does not establish the calculations were reasonable.

First, he contends the trial court “reserved jurisdiction for an 

administrative ‘refund allocation phase’ to finalize each individual class 

member’s specific refund,” and this “approach is well-established,” citing In re 

Cipro Cases I & II (2004) 121 Cal.App.4th 402 and Bell v. Farmers Ins. 

Exchange (2004) 115 Cal.App.4th 715. The court said individual refunds 

“will be determined during the refund allocation phase, with any adjustments 

to be made in light of customer billing upon this [c]ourt’s consideration.” 

(Italics added.) This reflects the court anticipated a judicial, not 

administrative, determination, and that the key calculations (i.e., per 

individual parcel) would take place at that time. As for Cipro and Bell, they 
63

are distinguishable, including because both focused on distribution of a set 

damages amount, not one still being calculated. (Cipro, at pp. 406, 417 

[granting partial writ relief in challenge to certification; noting if “there is a 

finding at trial as to the amount of classwide damages, . . . individual 

entitlement . . . may be litigated in a nonadversary administrative claims 

procedure”]; Bell, at pp. 759-763 [appeal from judgment and distribution plan

in wage and hour class action; affirming on most issues, and noting 

“ ‘allocation of [the] aggregate sum . . . is an . . . accounting question’ ”].)

Second, Coziahr defends the trial court’s use of estimates based on 

Otay’s actions. He contends that because Otay “never produced the 

individual bills necessary to precisely measure that offset,” the court “did not 

require” a “bill-by-bill analysis.” But Coziahr does not establish Otay

“ ‘creat[ed] a situation in which the court must estimate rather than 

compute’ ” damages. (Sanchez-Corea v. Bank of America (1985) 38 Cal.3d 

892, 908.) Coziahr bore the burden of proof on damages, both sides used 

classwide data, and he does not show he sought production of the individual

bills that were not produced. More importantly, the trial court did not find it 

was unable to compute damages on an individual basis; rather, it deferred 

that step to a later “allocation” phase. (Compare Electronic Funds Solutions, 

LLC v. Murphy (2005) 134 Cal.App.4th 1161, 1181 [court erred by declining 

to award lost profits, where “defendants deliberately thwarted legitimate 

discovery”; “special circumstances . . . may allow the court more latitude in 

estimating damages, particularly where the difficulty . . . arises from the 

defendant’s bad faith”].)24

24 Coziahr does not address the use of projected water units until his 

reply brief, where he asserts the difference from actual usage was “ ‘less than 

one percent’ ” and “[b]esides, actual usage data could be used in the allocation 
64

We conclude a new trial limited to the refund amount is necessary and 

appropriate. (Cf., e.g., Mealy v. B-Mobile, Inc. (2011) 195 Cal.App.4th 1218, 

1220, 1225, fn. 1 [plaintiff was “entitled to a new trial limited to determining 

the amount of damages” for claim at issue].) We will remand for a new trial 

on the refund amount, including the monthly increases and prejudgment 

interest, consistent with this opinion. We express no view on the evidence to 

be considered on remand. (Cf. Torres v. Automobile Club of So. California

(1997) 15 Cal.4th 771, 781, fn. 3 [declining to restrict trial court discretion on 

retrial of punitive damages].)

III. Coziahr’s Attorney’s Fees

Coziahr requests that if we at least affirm the judgment, we direct the 

trial court to award appellate attorney fees and costs when it determines trial 

court fees and costs. He states “attorney fees would be appropriate under 

either the common fund doctrine or section 1021.5,” and the judgment 

showed the trial court intended to hear this request after the appeal.

“ ‘Although this court has the power to fix attorney fees on appeal, the 

better practice is to have the trial court determine such fees.’ ” (Huntingdon 

Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 

129 Cal.App.4th 1228, 1267.) That is appropriate here, where the trial court 

has not yet addressed fee entitlement, Coziahr did not prevail in his crossappeal, and we are remanding for a new trial on the refund amount. (Cf. 

Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 

230, 250 [remanding for determination of fees on appeal].)

phase . . . .” His concession that actual data can be used for the allocation 

phase underscores that it was unreasonable to delay its use.
65

DISPOSITION

The judgment is reversed as to the refund amount, including monthly 

increases and prejudgment interest, and is otherwise affirmed. The matter is 

remanded for a new trial on the refund amount, which shall be conducted 

consistent with this opinion. The parties shall bear their own costs on 

appeal.

IRION, J.

WE CONCUR:

HUFFMAN, Acting P. J.

KELETY, J.