Barajas v. Satvia L.A. County Water Dist. ( 2023 )

Filed 5/25/23
CERTIFIED FOR PARTIAL PUBLICATION *
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
MARTHA BARAJAS et al., B317653
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC713381)
v.
SATIVA L.A. COUNTY
WATER DISTRICT,
Defendant and
Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Daniel J. Buckley, Judge. Affirmed.
* Pursuant to California Rules of Court, rules 8.1100 and
8.1110, this opinion is certified for publication as to all parts
except Part II of the Discussion.
The Law Office of Mark Ravis & Associates and Mark
Ravis; Reyes & Associates and Jorge Reyes for Plaintiffs and
Appellants.
Kessel & Megrabyan, Elizabeth Mary Kessel, Armineh
Megrabyan and Steven J. Lowery for Defendant and Respondent.
******
The Cortese-Knox-Hertzberg Local Government
Reorganization Act of 2000 (the Reorganization Act or the Act)
governs the dissolution of local agencies in California, including
local water districts. (Gov. Code, §§ 56100, subd. (a), 56301,
56021, subd. (h); see generally § 56000 et seq.) 1 In this case, the
California Legislature took action to specifically dissolve the
board of directors of one such water district with a long history of
incompetent management, and the pertinent county’s Local
Agency Formation Commission (LAFCO) subsequently dissolved
the district itself. The question presented is: Can a lawsuit
against the district be maintained after the district and its board
are both dissolved, on the theory the district still must “wind up”
its affairs? The answer is: It depends. The Reorganization Act
grants a LAFCO discretion whether to permit a district to wind
up its own affairs or whether instead to appoint a successor
agency responsible for doing so. (§§ 56035, 57450-57463.)
Because the LAFCO in this case took the latter route, the
plaintiffs’ class action lawsuit against the dissolved district must
be dismissed. In the unpublished portion of this opinion, we
further conclude that the trial court’s dismissal of the successor
1 All further statutory references are to the Government
Code unless otherwise indicated.
2
agency was proper because our Legislature expressly granted
civil immunity to that agency. Thus, we affirm the trial court’s
dismissal of the plaintiffs’ lawsuit.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
A. Sativa Los Angeles County Water District (the
Sativa Water District or the District)
The Sativa Water District was created in 1938 under the
County Water District Law (Wat. Code § 30000 et seq.) to provide
potable drinking water to the residents living in a neighborhood
in the unincorporated community of Willowbrook and parts of the
City of Compton within Los Angeles County. The District’s
service area encompasses 180 acres of land, and uses nine miles
of pipeline and 1,643 service connections to deliver potable
drinking water to more than 6,800 residents. This area is also
considered a “disadvantaged unincorporated community,” which
means the median household income of the residents is less than
80 percent of the statewide annual median household income.
(Gov. Code, § 56033.5; Wat. Code, § 79505.5) The District is
governed by a five-member board of directors. In 2018, it was
insured by the Special District Risk Management Authority.
B. The Sativa Water District fails at its core task
From at least 1994 through July 2018, the Sativa Water
District “repeatedly” “failed to comply with the monitoring and
reporting requirements” designed to secure potable water to the
District’s residents. On June 1, 2018, the State Water Resources
Control Board (the State Board) issued a compliance order (1)
finding that the Sativa Water District was “violating the
California Safe Drinking Water Act” by “fail[ing] to provide its
customers with a reliable and adequate supply of pure,
3
wholesome, healthful, and potable water . . . and failed to comply
with the source capacity, minimum flushing velocity, and
minimum pressure requirements” of California law, and (2)
ordering the District to undertake regular testing of its water
supply and to submit to the State Board a corrective action plan.
After obtaining a month-long extension of the deadline to submit
the corrective action plan, the District first submitted an initial
plan that the State Board rejected as “incomplete” and riddled
with “various errors,” and then submitted a revised plan that the
State Board found did not “fully address the issues raised.”
C. The Legislature and State Board dissolve the
Sativa Water District’s board of directors
On September 28, 2018, the California Legislature enacted
Assembly Bill No. 1577 (2017-2018 Reg. Sess.) (AB 1577) as an
urgency measure. (Stats. 2018, ch. 859, §§ 2, 3, codified at Health
& Saf. Code, § 116687.) AB 1577 granted the State Board the
power to select an entity to administer the Sativa Water District
using expedited procedures (Health & Saf. Code, § 116687, subd.
(b)), and the authority to “order” the District’s board of directors
to “surrender all control” of itself “to the appointed
administrator”—at which point in time the District’s board of
directors “shall thereafter cease to exist” (id., subd. (c)(1)(A)).
Four days later, on October 2, 2018, the State Board gave
notice of its intention to dissolve the Sativa Water District’s
board of directors and assign full management and control of the
District to an administrator.
On October 31, 2018, the State Board issued an order
appointing the County of Los Angeles (the County) to serve as the
administrator, and directing the Sativa Water District to
“immediately and unconditionally accept administrative and
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managerial services” from the County and to allow the County “to
exercise full authority and control over” the District, including
“all technical, operational, administrative, and financial aspects
of the entire water system.” The State Board and the County
entered into a contract appointing the County as the
administrator of the District and authorizing the County to
“[t]ake necessary steps to implement full and complete
operational, fiscal, and managerial control.” By operation of AB
1577’s plain terms, the Sativa Water District’s board of directors
“cease[d] to exist” that day. (Health & Saf. Code, § 116687, subd.
(c)(1)(A).)
D. The local LAFCO dissolves the Sativa Water
District
On July 11, 2018 (and hence a few months prior to the
enactment of AB 1577), and in response to a study so
recommending, the LAFCO for the County of Los Angeles (the
County Commission) had passed a resolution to initiate
proceedings to dissolve the Sativa Water District.
On December 26, 2018 (and hence a few months after the
enactment of AB 1577 and dissolution of the District’s board of
directors), the County Commission gave public notice that, at its
February 13, 2019, public hearing, it would be considering a
proposed resolution ordering the dissolution of the District. The
Legislature had, in AB 1577, reaffirmed the County
Commission’s authority to dissolve the Sativa Water District and
to “designate[]” “a successor agency” using expedited procedures.
(Health & Saf. Code, § 116687, subds. (c)(3) & (c)(4).) Following
the public hearing, the County Commission adopted the proposed
resolution; it was recorded—and hence took effect—on March 19,
2019.
5
In pertinent part, the County Commission’s resolution:
● “[D]issolve[d] the Sativa . . . Water District.”
● Designated the County as “the successor agency for
the District, for the purpose[] of,” among other things, “winding
up the affairs of the District pursuant to [section] 56886[,
subdivision (m),] and [section] 57451[, subdivision (c),] and
subject to” AB 1577. To facilitate this task, the order:
● “[V]ested” “[a]ll of the [District’s] moneys or
funds,” “all property,” and the “control of all books, records,
papers, offices, equipment, supplies, . . . appropriations, licenses,
permits, entitlements, agreements, contracts, claims, judgments,
land, infrastructure, and other assets” “in the County as the
successor agency.”
● Granted the County “the power to exchange,
sell, or otherwise dispose of” or “use” the above-described “funds,
money or property of the dissolved District . . . for the purpose of
winding up the affairs of the District.”
● Granted the County the “power to” (1)
“compromise and settle claims of every kind and nature,” and (2)
“to sue or be sued in the same manner and to the same extent as
the District” “for the sole and exclusive purpose of winding up the
affairs of the dissolved District.”
II. Procedural Background
A. Plaintiffs sue the Sativa Water District
On July 9, 2018 (and hence days before the County
Commission initiated the process to dissolve the District), four
named individuals—Martha Barajas, Karen Lewis, Maria Jaime,
and Soledad Aguirre (collectively, plaintiffs)—filed a putative
class action lawsuit against the Sativa Water District. In the
operative first amended complaint filed on January 31, 2019,
6
plaintiffs sought classwide relief on the theory that the District’s
failure to provide potable drinking water (1) breached a contract,
(2) constituted a nuisance, and (3) was the product of negligence. 2
B. Plaintiffs add and then dismiss the County
On April 29, 2019, plaintiffs substituted the County in lieu
of a Doe defendant.
On September 30, 2020, plaintiffs moved to voluntarily
dismiss the County as a defendant with prejudice, citing AB
1577’s grant of “statutory immunity for its administration of the
[Sativa Water D]istrict following [its] dissolution.” The trial
court granted the requested dismissal on October 15, 2020.
C. Plaintiffs succeed in certifying the class on all
three claims, but the class is later decertified as to the
nuisance claim
1. Class certification and notice
On August 15, 2019, plaintiffs moved to certify a class as to
all three claims in the operative complaint.
On April 27, 2020, the trial court certified a class of “all
individuals who paid a monthly water utility payment to [the]
Sativa [Water District] . . . at any time from March 13, 2017, to
March 13, 2018.” On December 7, 2020, the trial court approved
plaintiffs’ proposed notice to the class members.
2 Plaintiffs also initially sued the five individual members of
the District’s board of directors, but voluntarily dismissed them
without prejudice after recognizing that they were immune from
liability in their individual capacities. (Accord, Caldwell v.
Montoya (1995) 10 Cal.4th 972, 976-980 (Caldwell) [establishing
immunity for individual board members].)
7
2. Partial decertification of the class
On January 29, 2021, the Sativa Water District moved to
decertify the class as to the nuisance claim on the ground that
the District’s interference with each resident’s use and enjoyment
of the land varied (because the water quality varied), thereby
defeating the predominance of common issues necessary to
maintain a class on that claim. Following briefing and a hearing,
the trial court on March 26, 2021, granted the motion and
decertified the class as to plaintiffs’ nuisance claim.
D. The Sativa Water District’s motion to dismiss
On April 22, 2021, the Sativa Water District moved to
dismiss plaintiffs’ entire lawsuit. Following briefing, a hearing,
and supplemental briefing, the trial court granted the motion on
September 9, 2021 (and entered its order to that effect a few
months later). As a threshold matter, the court construed the
motion as one for judgment on the pleadings, and then granted
the motion after finding that the District was not a “proper
party.” The court reasoned that the District “cease[d] to exist as
an entity” once the County Commission recorded its dissolution
resolution on March 19, 2019, and that a lawsuit cannot be
maintained against a nonexistent entity. The court noted that
the County Commission had designated the County as the
“successor” agency to the District, but that the Legislature in AB
1577 had expressly granted the County immunity from any
liability for its role as successor. 3
3 The trial court also denied plaintiffs’ motion for leave to
amend its complaint to name, as a defendant, “Sativa Los
Angeles County Water District, by and through its successor-in-
interest/interim administrator, County of Los Angeles.” The
8
E. Plaintiffs’ motion to vacate dismissal of the
County
On July 15, 2021—while the Sativa Water District’s motion
to dismiss was pending—plaintiffs moved to set aside the trial
court’s October 2020 order that had, at plaintiffs’ request,
dismissed the County as a defendant. After further briefing and
a hearing, the trial court denied this motion at the same time it
granted the District’s motion to dismiss. The court reasoned that
plaintiffs’ motion was filed too late to qualify for relief as a
statutory motion to vacate under Code of Civil Procedure section
473, and that “there [wa]s no basis” to exercise its inherent
equitable power to vacate prior orders because doing so would be
futile given that, due to AB 1577, the County is “immunized from
the claims asserted” by plaintiffs in its “status as administrator
and successor.”
F. Plaintiffs appeal
Upon entry of the judgment dismissing plaintiffs’ action
with prejudice, plaintiffs filed this timely appeal.
DISCUSSION
In this appeal, plaintiffs assert that the trial court erred in
(1) granting the Sativa Water District’s motion for judgment on
the pleadings, (2) denying plaintiffs’ motion to vacate the order
dismissing the County as a defendant, and (3) decertifying their
class as to the nuisance claim. 4 Because, for the reasons set forth
court reasoned that the County was immune, such that amending
the complaint to reinstate the County as a defendant was futile.
4 Plaintiffs at times suggest that they also desire to reinstate
as defendants the District’s board members in their individual
capacities, but we reject this suggestion because it is being raised
for the first time on appeal (Premier Medical Management
9
below, we conclude that the trial court’s first two rulings were
correct, we have no occasion to reach plaintiffs’ arguments
attacking the third ruling.
I. Dismissal of the Sativa Water District
A. Pertinent law
1. Judgment on the pleadings
As pertinent here, a motion for judgment on the pleadings
is appropriate where the operative complaint “does not state facts
sufficient to constitute a cause of action against [the named]
defendant.” (Code Civ. Proc., § 438, subds. (c)(1)(B)(ii) &
(c)(3)(B)(ii).) A motion sought on this basis is equivalent to a
demurrer (People ex rel. Harris v. Pac Anchor Transportation,
Inc. (2014) 59 Cal.4th 772, 777 (Harris)), such that our task is to
examine the operative complaint’s allegations and any judicially
noticed documents in order to assess whether the pled cause of
action is legally viable (ibid.; Hart v. Darwish (2017) 12
Cal.App.5th 218, 224). A cause of action is viable “only against a
legal person”; no cause of action can be maintained “against an
entity which is legally nonexistent.” (Oliver v. Swiss Club Tell
(1963) 222 Cal.App.2d 528, 537-538.)
We independently evaluate whether a trial court properly
granted judgment on the pleadings. (Harris, supra, 59 Cal.4th at
p. 777.) We also review de novo any subsidiary questions of law,
such as those involving statutory interpretation or the
Systems, Inc. v. Cal. Ins. Guarantee Assn. (2008) 163 Cal.App.4th
550, 564; Newton v. Clemons (2003) 110 Cal.App.4th 1, 11), and
because it is utterly without merit given—as plaintiffs frankly
acknowledged when they dismissed those defendants—the board
members are indisputably immune from liability in their
individual capacities (Caldwell, supra, 10 Cal.4th at p. 980).
10
application of the law to undisputed facts. (Bruns v. E-Commerce
Exchange, Inc. (2011) 51 Cal.4th 717, 724 [statutory
interpretation]; Boling v. Public Employment Relations Bd.
(2018) 5 Cal.5th 898, 912 [application of law to undisputed
facts].)
2. Procedures for dissolving a local water district
a. The Reorganization Act
(i) Generally
To stave off what was perceived to be a haphazard and
often duplicative proliferation of local government entities (San
Bernardino Valley Water Conservation Dist. v. San Bernardino
County Local Agency Formation Com. (2009) 173 Cal.App.4th
190, 194), our Legislature enacted the Reorganization Act as a
“comprehensive scheme” to provide a more “orderly” approach to
the “formation and development of local [entities].” (§ 56301;
Sierra Club v. San Joaquin Local Agency Formation Com. (1999)
21 Cal.4th 489, 495; Las Tunas Beach Geologic Hazard
Abatement Dist. v. Superior Court (1995) 38 Cal.App.4th 1002,
1008.) Toward this end, the Act sets out the “sole and exclusive
authority and procedure for the initiation, conduct, and
completion of changes of organization and reorganization for
cities and districts.” (§ 56100, subd. (a).) “‘Districts’” are
“agenc[ies] of the state [that exist] . . . for the local performance of
governmental or proprietary functions within limited boundaries”
(and sometimes “outside [those] boundaries” if properly
“authorized”) (§ 56036, subd. (a)), and include “water agenc[ies]”
except where an agency is specifically determined not to be a
“‘district’” (§ 56036.6).
To effectuate its more orderly approach, the
Reorganization Act relies upon LAFCOs to serve as the
11
“‘watchdog’” in each county. 5 (§§ 56027, 56325; Southcott v.
Julian-Cuyamaca Fire Protection Dist. (2019) 32 Cal.App.5th
1020, 1026 (Southcott); Timberidge Enterprises, Inc. v. City of
Santa Rosa (1978) 86 Cal.App.3d 873, 884.) Each LAFCO is
tasked with approving or disapproving—in whole or in part—any
proposal to change the districts within its geographic boundaries.
(§ 56375, subd. (a)(1); Fallbrook Sanitary Dist. v. San Diego Local
Agency Formation Com. (1989) 208 Cal.App.3d 753, 758-760
(Fallbrook).) The Act also lays out the specific procedures that
must be followed to effectuate any “change” in a district,
including its dissolution (§ 56021, subd. (h)).
(ii) The Act’s procedures for dissolving
districts
The Reorganization Act prescribes a three-step procedure
for dissolving districts.
First, the LAFCO must be presented with a proposal to
dissolve the district. Among other ways, that proposal may come
from the LAFCO itself passing a resolution to dissolve the
district. 6 (§ 56375, subd. (a)(2)(B); Southcott, supra, 32
Cal.App.5th at p. 1029.)
5 The Act spells out the composition of each LAFCO, and has
a special definition for the composition of the LAFCO in Los
Angeles County (§ 56326).
6 There are two other ways to initiate a proposal to dissolve a
district—namely, (1) a third party may file a petition with the
LAFCO seeking to dissolve the district (§§ 56650, 56870 [special
requirements for petitions for dissolution]), or (2) the district’s
own legislative body may pass a resolution to dissolve the district
(§§ 56650, 56654). Such proposals also trigger specific notice and
hearing procedures. (§ 56658 [process when request initiated by
12
Second, the LAFCO must conduct a public hearing—
preceded by advance notice—regarding the proposal. (§§ 56662,
subd. (b), 56666, 57008 [hearing required for a LAFCO-initiated
proposal].)
Third, the LAFCO may then “order the dissolution.” (§
57077.1, subd. (a).) The LAFCO may not do so without first
considering any other conflicting proposals for dissolution or
other changes of organization submitted to the LAFCO. (§§
56657, 56655.) An order to dissolve a district is subject to
confirmation of the voters only if written protests have been
lodged by a sufficient number of voters. (§§ 57052, 57077.1, subd.
(b)(3), 57078, 57094 [protest thresholds]; Southcott, supra, 32
Cal.App.5th at p. 1027.) 7
petition or resolution]; Julian Volunteer Fire Co. Assn. v. Julian-
Cuyamaca Fire Protection Dist. (2021) 62 Cal.App.5th 583, 590.)
7 Under prior versions of the Act, the LAFCO lacked the
unilateral authority to approve the dissolution process; after the
LAFCO approved a change, secondary approval was required by
the local “conducting authority”—that is, the “legislative body” of
the “affected city,” “county” or “district.” (Former §§ 57077,
56029; Fallbrook, supra, 208 Cal.App.3d at p. 759.) As noted
above, the current version of the Act grants the LAFCO the
power to initiate the dissolution process on its own; the current
version does so, in part, by designating the LAFCO itself to be a
“conducting authority.” (§§ 57077.1, 56029; accord, Tracy Rural
County Fire Protection Dist. v. Local Agency Formation Com. of
San Joaquin County (2022) 84 Cal.App.5th 91, 108-109
[acknowledging statutory changes post-Fallbrook].)
13
(iii) The terms and conditions of
dissolution of a district
On the day a dissolution order becomes “effective,” the
“district shall be dissolved, disincorporated, and extinguished, its
existence . . . terminated . . . and all of its corporate powers . . .
cease.” (§ 57450.)
When it comes to winding up the dissolved district’s affairs,
the Act gives the LAFCO overseeing the dissolution two options.
First, the LAFCO may specify that the dissolved district is
to wind up its own affairs. (§§ 56035, 57450.)
Second, and alternatively, the LAFCO may designate a
“local agency” as the “successor” for the district and task the
successor agency with “winding up the affairs of the dissolved
district.” (§§ 56035, 57451, 56078.5.) If the LAFCO takes this
option, the Act provides that upon dissolution of the district:
● “[A]ll of the moneys or funds” and “all property
. . . of the dissolved district is vested in the successor [agency] for
the purpose of winding up the affairs of the district.” (§ 57452.)
● The successor agency is granted the power to
“use” “any funds, money, or property of [the] dissolved district” as
well as “to exchange, sell, or otherwise dispose of all property . . .
of the dissolved district” “for the purpose of winding up the affairs
of the district.” (§§ 57463, 57453; see also, § 57455.)
● The successor agency is granted the “power[]”—
“[f]or the sole and exclusive purpose of winding up the affairs of
the dissolved district” and “until the time when the affairs of the
dissolved district have been completely wound up”—to (1)
“compromise and settle claims of every kind and nature,” and (2)
“sue or be sued in the same manner and to the same extent as the
14
dissolved district and the officers and legislative body of the
dissolved district.” (§ 57453.)
No matter which option the LAFCO takes, the LAFCO has
the power to impose “terms and conditions” of dissolution that
deviate from the “terms and conditions” that the Reorganization
Act sets forth as the default terms. (§§ 57302, 56886, subd. (v).)
b. AB 1577
Taking effect as an urgency measure on the day it was
enacted, AB 1577 deals specifically—and solely—with the Sativa
Water District. In order to address that district’s long-running
failure to provide the residents it served with potable drinking
water, AB 1577 changed the law in three ways pertinent to this
appeal. First, AB 1577 authorized the State Board to
immediately dissolve the District’s board of directors and to
appoint the County to administer the District. (Health & Saf.
Code, § 116687, subd. (c)(1)(A).) Second, AB 1577 gave the
County Commission (as the LAFCO for the County of Los
Angeles) the option to dissolve the District itself and name a
successor agency. (Health & Saf. Code, § 116687, subd. (c)(4).)
Third, AB 1577 excused the County Commission from following
all of the Act’s usual procedures for dissolving districts (id., subd.
(c)(3)) and also protected the County—in its role as
“administrator” and “successor” agency—from being “held liable
for claims by past or existing district ratepayers or those who
consumed water provided through the district concerning the
operation and supply of water from the district” at any time
before the County took the reins as administrator. (Id., subds. (f)
& (g).)
15
B. Analysis
We independently agree with the trial court’s conclusion
that plaintiffs’ claims against the Sativa Water District must be
dismissed because the judicially noticed documents indicate that
the District was properly dissolved in accordance with the
Reorganization Act. Specifically, the Act granted—and AB 1577
reaffirmed—the County Commission’s authority to name a
successor agency, and the County Commission later exercised
that authority by (1) designating the County as the successor
agency to the Sativa Water District, (2) transferring all of the
District’s assets to the County, and (3) tasking the County with
“winding up” the District’s affairs (accord, § 57450 et seq.).
Because the County Commission tasked the County with winding
up the District’s affairs, the District was not doing so and hence
had no further function to carry out; it could not continue as a
defendant.
Plaintiffs resist this conclusion with what can be grouped
into four arguments.
First, plaintiffs argue that sections 56035 and 57450—
which are part of the Reorganization Act—define “dissolution” as
“the disincorporation, extinguishment, or termination of the
existence of a district and the cessation of all its corporate
powers, except as the [LAFCO] may otherwise provide pursuant
to section 56886 or for the purpose of winding up the affairs of
the district.” (§§ 56035, 57450, italics added.) Plaintiffs read this
statute as saying, “a district ceases to exist once it is dissolved”
except (1) when a LAFCO provides otherwise, or (2) for the
purpose of winding up affairs; in plaintiffs’ view, the use of the
italicized “or” means that a district always continues to exist for
purposes of winding up its own affairs, which in turn includes
16
defending litigation. This plain text, plaintiffs insist, must be
followed.
We reject this argument for two reasons.
To begin, we agree with plaintiffs that the best indicator of
legislative intent is the text of a statute. (Lee v. Hanley (2015) 61
Cal.4th 1225, 1233). However, we must also read a statutory
scheme like the Reorganization Act as a whole. (Meza v. Portfolio
Recovery Associates, LLC (2019) 6 Cal.5th 844, 856.) Although
sections 56035 and 57450 might, upon first blush, suggest that a
district always continues to exist—notwithstanding its
dissolution—for purposes of winding up its affairs, those statutes
merely set up default terms and conditions for dissolution under
the Act. As noted above, the Act elsewhere provides that the
LAFCO has the power to specify the “terms and conditions” that
apply upon dissolution in a specific case, and those specific terms
“control over the general provisions” governing dissolution under
the Act. (§§ 57302, 56886, subd. (v).) Here, the County
Commission specifically designated the County as the District’s
successor, transferred the District’s assets to the County, and
explicitly tasked the County with using those assets to “wind[] up
the affairs of the District.” These specific terms control.
Further, construing sections 56035 and 57450 as
mandating that a dissolved district always continues to exist to
wind up its affairs leads to an absurd result, which also counsels
strongly against that construction. (Lopez v. Ledesma (2022) 12
Cal.5th 848, 858-859.) Plaintiffs’ argument means that—
notwithstanding the County Commission’s designation of the
County as the District’s successor agency for purposes of winding
up the District’s affairs—the District also still exists for purposes
of winding up the District’s affairs. But how can both entities
17
wind up the affairs of the District, when only one of them (the
County) has ownership and control over the District’s assets
necessary to do so? Because it is nonsensical in this context for
the District to continue to exist to wind up its own affairs, we
decline to read the Act as mandating this result.
Second, plaintiffs argue that it is a “consistent principle in
California statutes and case law” that all entities have a winding
up period after their dissolution (and hence can be sued during
that period). The Sativa Water District may no longer have an
“operational existence,” plaintiffs urge, but it still has a “legal
existence” under this principle. To illustrate this principle,
plaintiffs cite Water Code section 33241 and Corporations Code
sections 2010 and 2011. 8 These statutes are irrelevant: Water
Code section 33241 deals specifically—and, critically, solely—
with the Costa Mesa County Water District (Wat. Code, §§ 33240,
33200, 33201, 33215), and the Corporations Code deals
specifically—and, critically, solely—with the dissolution of
“corporation[s] organized under [that] division” of the Code (Corp.
Code, § 162). Neither deals with the Sativa Water District
created by a nearly century-old provision of the Water Code, and
neither supports a general principle that would trump the more
specific terms of the Reorganization Act. (Southcott, supra, 32
Cal.App.5th at p. 1027 [“special provisions control over the more
general provisions of the Reorganization Act”]; see generally,
8 Plaintiffs also cite North American Asbestos Corp. v.
Superior Court (1986) 180 Cal.App.3d 902 (North American) in
support of their view that the Corporations Code applies to more
than just California-created corporations; however, our Supreme
Court overruled that specific holding of North American in Greb
v. Diamond Internat. Corp. (2013) 56 Cal.4th 243, 272-273.
18
AIDS Healthcare Foundation v. City of Los Angeles (2022) 86
Cal.App.5th 322, 335 [“‘it is a basic rule of statutory construction
that specific statutes control general ones’”].)
Third, plaintiffs argue that we must construe the
Reorganization Act to authorize a lawsuit against the Sativa
Water District because, in light of AB 1577’s grant of immunity to
the County, any other outcome would be inconsistent with
legislative intent because, in plaintiffs’ view, it is “impossible to
conclude that the Legislature intended to slam the courthouse
door shut” on plaintiffs by cutting off suit against the District and
the County. We do not find this outcome to be inconsistent with
the Legislature’s intent. AB 1577 was meant to solve an urgent
problem—namely, the Sativa Water District’s persistent failure
to do its job of providing potable drinking water to residents. The
Legislature’s concern was fixing that problem immediately.
Thus, AB 1577 authorized the State Board to appoint an
administrator and the County Commission to dissolve the
District and appoint a successor agency—all using expedited
procedures. A logical way to induce the County to agree to
assume those duties was to grant it immunity. Indeed, our
Legislature found such immunity not only to be logical, but also
to be critical to incentivizing someone to assume stewardship of
the District’s infrastructure, as it explained in the legislative
history for AB 1577: “[N]o public agencies have been willing to
acquire Sativa because of its water quality violations and more
than $10 million in deferred maintenance and infrastructure
improvements.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d
reading analysis of Assem. Bill 1577 (2017-2018 Reg. Sess.) as
amended Aug. 7, 2018, pp. 5-6.) Our Legislature accordingly
made its intent to immunize the County against liability to
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pending lawsuits like plaintiffs’ crystal clear (Health & Saf. Code,
§ 116687, subd. (f)), and our Legislature may cut off potential
recovery in pending lawsuits as long as it speaks with a clear
voice (Carr v. State of California (1976) 58 Cal.App.3d 139, 147;
accord, Beverly Hilton Hotel v. Workers’ Comp. Appeals Bd. (2009)
176 Cal.App.4th 1597, 1604). Plaintiffs may be understandably
upset with the Legislature’s policy assessment of the situation,
but that does not justify rewriting the Reorganization Act to
effectuate an outcome at odds with that assessment.
Fourth and finally, plaintiffs argue that the fact that the
Sativa Water District’s insurer is continuing to defend the
lawsuit somehow means that the District is still a proper
defendant or that the District has somehow waived its right to
litigate its nonexistence by participating in the case for nearly
three years. Ironically, it is plaintiffs who have waived these
particular arguments by playing hide-and-go-seek with them
before the trial court: They raised the “insurer is still here”
argument for the first time at the hearing on the District’s motion
to dismiss, but when the court gave plaintiffs the opportunity to
brief the issue, they opted not to do so and the court deemed the
issue waived. They cannot resurrect it now. Even if we ignore
this waiver, plaintiffs’ arguments lack merit because, contrary to
what plaintiffs implicitly posit, an insurer is not the stand-in for
the insured. Plaintiffs can often sue the insured, but cannot sue
the insurer until there is a judgment or assignment of rights.
(Shaolin v. Safeco Ins. Co. (1999) 71 Cal.App.4th 268, 271.) That
is also why the insurer’s continued involvement has no effect
whatsoever on whether the District ceases to exist and hence can
be sued.
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II. Refusal to Reinstate the County As a Defendant
Where, as here, a party seeks to vacate an order dismissing
a case more than six months after the dismissal order was
issued, 9 that party must ask the court to exercise its inherent
equitable power to vacate orders secured by “extrinsic fraud” or
“extrinsic mistake.” (Kulchar v. Kulchar (1969) 1 Cal.3d 467,
470-472; Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th
1241, 1245-1246.) A court may exercise this power only if the
moving party demonstrates, at a minimum, that it has “a
meritorious case”—that is, “a good claim or defense which, if
asserted in a new trial [once the prior order dismissing the case is
vacated], would be likely to result in a judgment favorable to
him.” (In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051,
1071 (In re Marriage of Stevenot); Page v. Insurance Co. of North
America (1969) 3 Cal.App.3d 121, 130.) While the exercise of this
equitable power is “not governed by any statutory time limit”
(Department of Industrial Relations v. Davis Moreno
Construction, Inc. (2011) 193 Cal.App.4th 560, 570-571), “there is
a strong public policy in favor of the finality of judgments” that
counsels against exercising that power outside the six-month
statutory deadline absent “exceptional circumstances” (Rappleyea
v. Campbell (1994) 8 Cal.4th 975, 982 (Rappleyea); In re Marriage
of Stevenot, supra, at p. 1071). We review a trial court’s order
9 When the motion to vacate the order of dismissal is filed
within six months of the order, the moving party may invoke the
court’s statutory authority to vacate under Code of Civil
Procedure section 473, subdivision (b). It is undisputed, however,
that plaintiffs’ July 2021 motion was filed more than six months
after the October 2020 order dismissing the County. Thus, we
need not consider the manifold ways in which that statutory
relief is unavailable to plaintiffs.
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denying a motion to vacate a dismissal under either mechanism
for an abuse of discretion. (Cruz v. Fagor America, Inc. (2007)
146 Cal.App.4th 488, 503; Rappleyea, supra, at p. 981.)
The trial court here did not abuse its discretion in declining
to exercise its inherent, equitable power to reinstate the County
as a defendant. That is because plaintiffs cannot demonstrate
that they have a meritorious case for the simple reason—the very
same reason plaintiffs cited when they dismissed the County in
the first place—that AB 1577 renders the County absolutely
immune from liability for the claims plaintiffs seek to vindicate in
this case. (Health & Saf. Code, § 116687, subd. (f).)
Plaintiffs try to sidestep the seemingly absolute
inapplicability of the court’s equitable power to vacate by
asserting that the trial court’s dismissal order was void when it
was entered (and hence need not be vacated at all); specifically,
they assert that the dismissal order was void because the trial
court did not comply with (1) California Rules of Court, rule
3.769, and (2) California Rules of Court, rule 3.770.
These arguments lack merit.
Rule 3.769 is irrelevant because it applies to settlements of
a class action, not the voluntary dismissal of one of several
defendants.
Rule 3.770 applies here, but its dictates have been satisfied.
Under this rule, the dismissal of a party to a class action is valid
only if (1) the court has approved the dismissal (Cal. Rules of
Court, rule 3.770(a)), and (2) proper notice of the dismissal has
been given (id., rule 3.770(c)). Where notice of a class action had
not already been given to the class members by the time of the
dismissal (as it was not here because the October 2020 dismissal
of the County preceded class notice in early 2021, the “proper
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notice” requirement is met if either (1) notice is “given in the
manner and to those class members specified by the court,” or (2)
the court “finds that the dismissal [of the party] will not
prejudice” the class members. (Cal. Rules of Court, rule 3.770(c).)
Although the trial court here did not make an express finding
that dismissal of the County would not prejudice the class
members, we may infer an implied finding of no prejudice. (Cf.
Citizens of Humanity, LLC v. Ramirez (2021) 63 Cal.App.5th 117,
124 [dismissal of class action without prejudice and without
notice means court “impliedly found the class members would not
be prejudiced by the dismissal”]; Mass. Mutual Life Ins. Co. v.
Superior Court (2002) 97 Cal.App.4th 1282, 1287-1288 [findings
necessary to support the trial court’s order may be implied if
supported by substantial evidence].) More to the point, that
implied finding is unassailably correct because subdivision (f) of
Health and Safety Code section 116687 bars imposing any
liability on the County. Plaintiffs respond that they were
prejudiced by the dismissal of the County because, in their view,
the trial court might not have dismissed the Sativa Water
District if the County had still been a defendant. This argument
is based wholly on speculation. Further, it is squarely refuted by
the analysis in this case, which shows that plaintiffs’ speculation
is wrong: The dismissal of each defendant was inevitable as a
matter of law because the County is immune and the District is
legally nonexistent; plaintiffs’ action was therefore not viable as a
whole.
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DISPOSITION
The judgment is affirmed. The Sativa Water District is
entitled to its costs on appeal.
CERTIFIED FOR PARTIAL PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, Acting P. J.
ASHMANN-GERST
_________________________, J. *
KWAN
* Judge of the Superior Court of Los Angeles County,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
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