By Shawn Raymundo

A Superior Court judge recently ruled in favor of the city of San Juan Capistrano, as the plaintiffs in a class action lawsuit seeking millions in water rate refunds have been barred from moving the case forward.

In the 12-page “proposed statement of decision” released on March 28, the Orange County court states that the plaintiffs’ claims are “barred by the Claims Act” and that the city owed only refunds for bills that were overcharged between August 2013 and July 2014.

The lawsuit stemmed from the city’s 2015 approval to issue refunds to customers who overpaid for water under San Juan’s previous tiered water rates, which the Fourth District Court of Appeals had affirmed as unconstitutional in April 2015.

According to the city, more than $2.7 million in refunds had been issued to the more than 6,500 customers who participated in the voluntary refund program back in 2015. Residents who filed a claim with the city by Oct. 1, 2015 were reimbursed for the rates they had been overcharged between Aug. 28, 2013 and July 1, 2014.

The plaintiffs—Hootan Daneshmand, Lauri McIntosh and Brian Montgomery—argued that they were entitled to a larger refund with reimbursements covering water rates accrued from February 2010 to July 2015, The Capistrano Dispatch previously reported.

The Capistrano Taxpayers Association (CTA) sued the city in August 2012 over the validity of the city’s previous water rates, arguing that the rates weren’t proportional to service costs as mandated under Proposition 218—the statewide initiative voters passed in 1996.

A trial court found that the “city failed to provide sufficient evidence to establish that the rates comported with Proposition 218” and ruled in favor of the CTA in 2013. The appeals court later upheld the initial ruling, prompting the city to settle with CTA in May 2015.

In the summer of 2015, the city approved the launch of its repayment program, setting aside $4.1 million in order to fund the endeavor. The city required that all claims be submitted by Oct. 1, 2015.

The repayment would cover overcharged billings between Aug. 28, 2013 and July 1, 2014. Nearly 13,000 refund notices were sent out to ratepayers, according to the latest court decision.

The court also notes that under the Claims Act, “a party suing the city must present a claim to the city within one year of the accrual of the alleged cause of action.” The city has argued that claims for overcharges “accrued no later than the due date for the last bill sent out for water service under the tiered system.”

The final bill covering water services under the previous tiered rates was for June 2014 and was due Aug. 19, 2014, making the one-year deadline Aug. 19, 2015.

According to the decision, the plaintiffs have alternatively argued that the overcharges didn’t actually accrue until the appeals court decision, the settlement agreement with the CTA, and the refund program announcement had all occurred in 2015.

The court sided with the city, stating that it had the “better argument on this issue.”

“Any contention that class members were not aware of their potential claims until they learned of the Court of Appeal decision and/or received notice of the Refund Program falls short of the mark in light of Plaintiffs’ withdrawal of their potential argument asserting delayed discovery,” the decision stated.

“Of course, given the trial court’s decision in 2013, there certainly was information available that would put a reasonable person on inquiry notice of their potential claims,” the court ruling stated.

As of press time, the law firm representing the plaintiffs had not returned calls for comment on whether the decision will be appealed.

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