Las Vegas, NV. In less than 10-minutes, a Las Vegas Judge put the Covenant of Good Faith and Fair dealing by the Virgin Valley Water Board (VVWB) into a future juries’ hands in a case involving their questionable water pricing strategies.
On Monday, Las Vegas District Court Judge Timothy Williams ruled against Attorney Jedidiah (Bo) Bingham’s claim that the Virgin Valley Water Board (VVWB) had absolute discretion to set water rates. They must comply with Nevada’s Covenant and Good Faith law, the Judge said.
Monday’s pre-trial motion hearing was the latest in the two-year 9-month old civil cases (No. A-18-774539-B) brought by the Mesquites’ Wolf Creek golf course owners. The owners seek legal adjustments from an attempt by the VVWB to raise their river water irrigation rates from $250 per share to originally $1,246 [i] per share but now reduced to $1,115.00 per share.
Monday’s hearing was a continuation of Bingham’s attempt to eliminate the covenant and good faith argument before an upcoming Jury began on February 26. On Monday, as he did in February, Bingham attempted to convince Judge Williams that the water Boards’ absolute discretion overrides any consideration of good faith and fair dealings. And he again tried to argue that “everyone pays” the $1,115 per share market rate. “It is undisputed,” the water board attorney said. “Everyone agrees it is the rate,” he argued. Bingham’s market rate refers to the Southern Nevada Water Authority (SNWA) rate that pays Virgin River water shareholders for irrigation water.
Note: SNWA pays the rate under the condition that the shareholder stops using the water for its original purpose and lets it flow freely downriver to Lake Mead. At that point, SNWA takes a domestic water “credit” for an adjusted amount. That conversion makes the water more valuable to SNWA than highly polluted river water pumped for local irrigation purposes.
According to Jeffery Sylvester, acting for the golf course owners, the SNWA and the local rate are two different market rates.
Sylvester told the Judge that Bingham’s statements that everyone paid the rate were misleading. Not everyone paid the $1,115.00 rate, Sylvester said. And he pointed out that the Mesquites Conestoga Golf course only pays $650 for irrigation water.
At that point, Bingham attempted to interrupt Sylvester. Judge Williams was having none of that. He politely told the attorneys that there is a time and place for counter-arguments but not at that point.
And Sylvester argued the rate was not the issue at hand. The motion issue dealt strictly with applying the Covenant and Good Faith law to temper absolute destruction. The SNWA rate is a matter of fact for the Jury to consider, Sylvester said.
Sylvester pointed to Bingham’s statement that other water was available to irrigate the Wolf Creek Golf Course. “Bingham does not tell you where or when,” Sylvester told the Judge, adding that other golf courses have effluent.
Note: On February 2, Judge Williams rejected a plea by Bingham to consider effluent in this case, noting that the “conduct” of Water Board officials” has resulted in a waiver of such condition. Therefore, the failure to use available recycled or effluent water was an immaterial provision under the lease.”
Further, Sylvester added on Monday. “There is no evidence that the Wolf Creek owners can lease 150 shares not already committed.” “They cannot,” he added, pointing out that the VVWB is a monopoly as it relates to irrigation water.
Sylvester told the Judge that Bingham was cherry-picking case law and plagiarizing a law review to make his absolute discretion case. He pointed to Bingham’s case law findings and argued that they supported the convenient and good-faith argument, not the absolute discretion case.
Bingham attempted to reverse himself when they agreed during the February hearing that the Covenant and Good Faith argument applied to the VVWB as a government activity. He now changed by saying that Nevada’s open meeting law was enough to satisfy the covenant and good faith argument, Sylvester said.
Sylvester pointed to Bingham’s previous statement as a reversal of the February agreement made before the Judge. “What he is now saying,” Sylvester argued, is that Covenant cannot apply because the Board satisfies the open meeting law. “He can’t have it both ways,” Sylvester said.
Sylvester argues that the irrigation water contract between the water board and the golf course is illusionary. The Board is trying to claw back what they claim is unused water from the golf course owners and lease those shares to SNWA for a profit. When the owners balked, the water board engaged in a blitzkrieg operation pushing out several false claims, the Attorney said.
The contract provided a rate in perpetuity, Sylvester told the Judge. What the Board is saying is that they can set the rate at $10,000 or $5,000. “If true,” he said, the right to renew in perpetuity is illusionary since they can price the water out of reach for the irrigators.
Sylvester told the Judge that the VVWB lacks Public Utility Commission (PUC) rate reviews. Therefore, he noted, the only option to temper their absolute discretion argument is a civil case.
Bingham had argued that “we” (Bingham, Snow, and Caldwell) could not find support for the Wolf Creek argument. However, Sylvester pointed to case law in 29 states, saying that the granting of sole and absolute discretion comes with it discretion. And that is not unique to open price term cases such as this, in which the Covenant and Good Faith argument tempers, he said.. Further, he pointed to 14 other states requiring Good Faith limits.
“All that is being asked is their discretion be tempered,” Sylvester said. “This is a question of fact if they did or did not use discretion,” he added. “To hold otherwise,” he told the Judge, “would go where the busses do not run.” “No other Nevada court has done that;” he said, adding that “the Covenant applies to all contracts despite the open meeting law.”
Following Sylvester’s arguments, Judge Williams said that “at the end of the day it appears to be a straightforward issue: does the Covenant apply under Nevada law? “I have to say yes, it does without question any decision otherwise would invite error.
At 9:30 a.m. on April 5, Judge Williams will hear another motion argument in this case. This one is dealing with a sub-lease of irrigation water by the owners of Wolf Creek.
Finally, the Judge suggested that the Jury trial initially scheduled for July may be rescheduled for September or October, depending on the COVID crisis.
