In Plata v. City of San Jose, published February 2, 2022, the Fourth District Court of Appeal, Division 3 affirmed in part and reversed in part a judgment entered after a bench decision. The plaintiffs, property owners within the defendant city's water district, presented a claim for damages in November 2013 accusing the district of violating Proposition 218 (which requires that revenues obtained from water fees are not used for any purpose aside from that for which the charge was received) by transferring revenue from water fees to the city's general fund in the 2013-2014 fiscal year. After the claim was rejected, the plaintiffs brought a class action suit seeking declaratory and injunctive relief under Proposition 218, as well as recovery of the amounts overpaid. The plaintiffs presented an additional claim covering the 2014-2015 fiscal year, and filed an amended and supplemental complaint folding in that claim. Two weeks before trial, the parties filed a joint pretrial statement in which the plaintiffs seemingly introduced a new issue: whether the City's use of tiered water rates violated article XIIID, section 6 of the California Constitution. The city moved to decertify the class, on the ground that the tiered rates issue destroyed the community of interest among class members. It also asserted in motions in limine that the tiered rates theory had never been mentioned in the plaintiffs' claims or their pleadings. After a bench trial, the court found that claims accruing more than a year before the November 2013. It found the plaintiffs' claim adequate to give notice to the city that its rate structure was being questioned. It found that the tiered rate structure did not comply with Proposition 218, but that it was unable to award the plaintiffs any relief because they did not show individualized harm. It also granted the city's motion to decertify the class. It denied the plaintiffs' claims that late fees the district charged were covered by Proposition 218. Both the plaintiffs and the city appealed.
The appellate court's majority ruled that the trial court had abused its discretion in ruling that the claim was broad enough to encompass the tiered rate cause of action. Each cause of action must be fairly reflected in a claim. The Government Claims Act requires a clear factual structuring of claims. While claims can be broad in scope, there is a point where the scope is too broad to provide the entity the notice necessary to feasibly and timely investigate the claim. Plaintiffs need not include every factual detail in their claim. But they must give the public entity enough information to understand the claim's basic factual underpinnings. The line between causes of action fairly reflected in or absent from a claim is highly context-dependent. The question is whether the new facts are sufficiently related to those alleged in the claim. Here, since rates are a broad subject, the allegation that the rate money was being used for the wrong purposes and making up for it by inflating rates did not give notice that the plaintiffs were alleging that the rate system tiers were illegal. The tiered rates challenge ws therefore a whole new litigation frontier, raising new issues and requiring different evidence. Further, the plaintiffs' pleading and discovery responses indicated that they seemingly did not understand the tier structure to be at issue until just before trial. That was too late to comply with the letter or spirit of the Government Claims Act. Clarity on the issues is especially important in Proposition 218 issues, because the burden is on the government to show compliance with the law's requirements. The government cannot do this if claimants are not specific. The court therefore abused its discretion in permitting the plaintiffs to assert liability on an entirely different state of facts. The error mooted the plaintiffs' belief they should have been provided relief on the claim. The appellate court affirmed the trial court's ruling that the issues in the action were limited to alleged violations taking place within a year of the claims' accrual. Although the plaintiffs' expert alleged that there was a continuing violation because allegedly illegally obtained funds remained in the city's funds, the opposing expert's testimony provided substantial evidence supporting the court's finding otherwise. Finally, the trial court properly concluded that the late fees the city collected were not water fees within the meaning of Proposition 218.
A concurring and dissenting justice opined that because the claim implicated water rates, it was broad enough to put the city on notice that its rating system was being challenged.