CLEARLAKE>>> On behalf of the city of Clearlake, Downey Brand LLP has filed a lawsuit dated June 10, 2024 against the Highlands Mutual Water Company. According to a press release sent on June 11, the city is trying to obtain records and secure a new legal election for board members.
The city’s complaint stems from a demand made via letter on April 10 2024 asking “(1) to demand the Company hold a new shareholder meeting and board election; (2) to obtain or inspect certain records under Corporations Code sections 213, 1501, 1600, 1601, 14305, and 14306; and (3) to advise the Company of potential improper conduct by certain directors.” The demand continues explaining how the city disagrees with their voting policy hinging on the necessity of having a water connection and had discovered “that 147 proxy ballots were returned undelivered to the company. According to company staff, those ballots were sent to physical addresses of individuals who only receive mail via a post office box.” Due to such circumstance the city of Clearlake believes the current board must be re-elected and current by laws be verified and reconsidered.
This demand letter also requested documents including the company’s annual reports for the last five years; the company’s annual budgets for the last five years, and also the “Share Register” and list of shareholder names and addresses. The demand gave Highlands Mutual thirty days to respond. Without receiving a response, the city has moved forward in filing their litigious complaint.
This filing comes just four days after the city council meeting on Thursday where many members of the public spoke on behalf of this issue, pushing the meeting to after 10 p.m.
Highlands Mutual Water Company responded with their own press release, calling the lawsuit “frivolous” claiming it is the city’s second attempt at over taking the company. The release continues “City Hall claims that they can manage the water system better than our seasoned experts who have competently run it for decades. The city already faces challenges in maintaining the basic services it is responsible for.” Highlands believes the City is attempting to fill board positions with City Council members “who would force the residents who own Highlands Mutual Water Company to subsidize hook-up fees for investors of new developments.” Current board members include Mark Coats, Robert Kraft, Jessica Chernoh, Kathryn Davis and Rachelle Sapeta who altogether received 217 votes out of the company’s approximately 3000 connections, according to the law suit.
The city of Clearlake press release also notes that it itself is the “largest shareholder in it’s service territory” and therefore has a legal right to obtain the information the are seeking. Mayor David Claffey shared “The council believes more transparency is needed and felt we had no other course of action than to file a lawsuit on behalf of the public.”
