In Great Oaks Water Co. v. Water District of Santa Clara, original opinion published March 26, 2015 (opinion on rehearing published August 12, 2015; second opinion on rehearing published December 8, 2015), the Sixth District Court of Appeal reversed a judgment in favor of a water retailer granting a complete refund of a groundwater extraction fee the defendant water district charged the retailer. The refund was granted on the ground that the charge violated both the District Act (the statute under which the water district was created) and Article XIIID of the California Constitution, which imposes procedural and substantive restrictions on fees imposed by public entities. Although the reversal was on other grounds, the appellate court addressed an issue that would arise once the case was remanded: whether the theory on which judgment was entered was reflected in the water retailer's pre-suit claim for damages. The appellate court concluded it was not.
The claim alleged that the water district's fee violated the District Act because the district was overcharging, and because the fees were not being used for an improper purpose. The claim did not give any indication that the water district would be asserting that the fee violated Article XIID of the California Constitution due to alleged procedural errors. The variance was material, because it did not give the district notice of the acts alleged sufficient to permit it to investigate or to evaluate its potential liability and decide whether to settle. In particular, the potential monetary recovery for the acts alleged would be a refund of overcharges, while the potential recovery under the Article XIIID theory of liability would be a complete refund of the fees. The lack of evidence of investigation was irrelevant to this issue; the only relevant evidence was the claim, the complaint, and the allegations of liability in the litigation. Because this was not a defect in the claim, the doctrine of substantial compliance did not apply. The claim did not fairly reflect the Article XIIID theory of liability. The retailer therefore cannot obtain monetary recovery on that theory.
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