Cal Am fires its first defensive legal volley against the water district in public buyout case.

An effort toward a public takeover of the private water utility California American Water has taken years to get to this point. Activists asked voters to approve a ballot measure to that end in 2005, and it failed. They tried again in 2014, and lost again. They prevailed in 2018 with the passage of Measure J, which compelled the Monterey Peninsula Water Management District to acquire Cal Am's local system “if and when feasible.”

More than five years later, the matter has moved to the courts.

In October 2023, the board of the water district determined that yes, it was feasible—and that it would pursue acquisition of Cal Am's system. Because the utility company had rejected the public district's previous offer of $449 million to buy it, the district would proceed by filing an eminent domain case. 

The district did so in Monterey County Superior Court in December, raising many of the same claims in its voluminous October resolution of necessity, including the projected cost of water, public transparency and continued failures to deliver new water supply projects, including a desalination plant that was approved in 2022 by the California Coastal Commission.

On Feb. 26, Cal Am filed its first response in court. In a demurrer, the company is asking a judge to dismiss the water district's case, arguing that "the district is not legally authorized to provide retail potable water service."

According to court filings, Cal Am and water district representatives spoke over the phone on Feb. 21 seeking a resolution of their differences—but in keeping with their opposing perspectives over the past years, they did not.

Cal Am's motion cites a contentious vote by the Monterey County Local Agency Formation Commission in 2021 to deny the water district's request for "latent powers" in its pursuit of a public takeover. The water district has long sought to overturn LAFCO's vote—a legal question that is now pending before an appeals court—while also arguing latent powers are not a legal requirement for the agency to acquire the Cal Am system. (In an October ruling, Monterey County Superior Court Judge Thomas Wills did not rule on whether or not latent powers are a requirement for the eminent domain proceeding.)

Cal Am's first legal filing also includes a dig at the water district's very identity, taking aim at its name. "In contrast to water districts, which are empowered to deliver water to the end user (e.g., the Santa Clara Valley Water District), the District is, as its name indicates, a 'water management' district. Water management districts are not intended to supply or sell retail water to their inhabitants; they are designed to manage water resources," according to the demurrer, filed by the Los Angeles firm Manatt, Phelps & Phillips LLP.

The first scheduled court appearance is on Tuesday, April 23. A hearing on Cal Am's request to toss the lawsuit is scheduled for Friday, May 3.