California Legislature—2015–16 Regular Session

Assembly Bill No. 1077

Introduced by Assembly Member Holden

February 27, 2015

An act to amend Section 14305 of the Corporations Code, relating to mutual water companies.

LEGISLATIVE COUNSEL’S DIGEST

AB 1077, as introduced, Holden. Mutual water companies: open meetings.

Under existing law, a mutual water company is defined as a corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for irrigation or domestic purposes that provides in its articles or bylaws that the water shall be sold, distributed, supplied, or delivered only to owners of its shares, as specified.

A mutual water company may be organized under the General Corporation Law or the Nonprofit Mutual Benefit Corporation Law. The Mutual Water Company Open Meeting Act authorizes an eligible person, upon 24 hours advance written notice, to attend meetings of the board of directors of a mutual water company that operates a public water system, except when the board adjourns to, or meets solely in, executive session.

This bill would prohibit a mutual water company from meeting solely in an executive session without holding a meeting. The bill would require a board of directors of a mutual water company to allow an eligible person to personally attend a meeting of the board, if the eligible person gave the board at least 24 hours advance written notice of his or her intent to personally attend the meeting. The bill would require the board to allow an eligible person who was denied attendance at a meeting for failure to provide this notice to be able to attend the meeting by technology that allows the eligible person to hear the meeting and verbally interact with the board, and would further require the board to provide to an eligible person attending a meeting by technology a copy of the documents to be discussed at the meeting, as specified.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 14305 of the Corporations Code is
amended to read:

14305.  

(a) (1) This section shall be known and may be cited
as the Mutual Water Company Open Meeting Act.

(2) This section shall only apply to a mutual water company
that operates a public water system.

(b)  begin delete Any eligible person, upon end delete begin insert (1) end insert begin insert   end insert begin insert A board of directors of a
mutual water company shall allow an eligible person to personally
attend a meeting of the board, if the eligible person gave the board
at least end insert 24 hours advance written notice begin delete , may end delete begin insert of his or her intent
to personally end insert attend begin delete meetings of the board end delete begin insert the meeting. An eligible
person denied attendance at a meeting of the board for failure to
provide this notice shall be able to attend the meeting by
technology that allows the eligible person to hear the meeting and
verbally interact with the board end insert begin insert , including, but not limited to, a
telephone or computer. The board shall provide to an eligible
person attending a meeting by technology, before the meeting
begins, a copy of all documents to be discussed at the meeting. A
board of directors of a mutual water company shall not prohibit
an eligible person from attending a meeting of the board either in
person or by technology in compliance with this paragraph. end insert

begin insert (2) end insert begin insert   end insert begin insert A board end insert of directors of a mutual water begin delete company, except
when the board adjourns to, or meets solely in, end delete begin insert company shall only
meet in executive session during a meeting. A board may prohibit
an eligible person from attending an end insert executive session to consider
litigation, matters relating to the formation of contracts with third
parties, member or shareholder discipline, personnel matters, or
to meet with a member or shareholder, upon the member or
shareholder’s request, regarding the member or shareholder’s
payment of assessments, as specified in Section 14303. begin delete The end delete

begin insert (3) end insert begin insert   end insert begin insert The end insert board of directors of begin delete the end delete begin insert a end insert mutual water company shall
meet in executive session, if requested by a member or shareholder
who may be subject to a fine, penalty, or other form of discipline,
and the member shall be entitled to attend the executive session.
begin delete As specified in paragraph (3) of subdivision (o), an end delete

begin insert (4) end insert begin insert   end insert begin insert An end insert eligible person shall be begin delete entitled end delete begin insert allowed end insert to attend a
teleconference meeting begin insert , as specified in paragraph (3) of
subdivision (o), end insert or the portion of begin delete a end delete begin insert the end insert teleconference meeting that
is open to eligible begin delete persons, and that end delete begin insert persons, without fulfilling the
notice requirement in paragraph (1). The teleconference end insert meeting
or portion of the meeting begin insert that is open to eligible persons end insert shall be
audible to the eligible begin delete persons end delete begin insert person end insert in a location specified in the
notice of the meeting.

(c) Any matter discussed in executive session shall be generally
noted in the minutes of the immediately following begin delete meeting that is
open to eligible persons. end delete begin insert meeting. end insert

(d) The minutes, minutes proposed for adoption that are marked
to indicate draft status, or a summary of the minutes, of any
meeting of the board of directors of a mutual water company,
conducted on or after January 1, 2014, other than an executive
session, shall be available to eligible persons within 30 days of the
meeting. The minutes, proposed minutes, or summary minutes
shall be provided to any eligible person upon request and upon
reimbursement of the mutual water company’s costs for providing
the minutes.

(e) The pro forma budget required in Section 14306 shall be
available to eligible persons within 30 days of the meeting at which
the budget was adopted. The budget shall be provided to any
eligible person upon request and upon reimbursement of the mutual
water company’s costs.

(f) Unless the bylaws provide for a longer period of notice,
eligible persons shall be given notice of the time and place of a
meeting as defined in subdivision (o), except for an emergency
meeting begin delete or a meeting that will be held solely in executive session end delete begin insert , end insert ,
at least four days prior to the meeting. begin delete Except for an emergency
meeting, eligible persons shall be given notice of the time and
place of a meeting that will be held solely in executive session at
least two days prior to the meeting. end delete Notice shall be given by posting
the notice in a prominent, publicly accessible place or places within
the territory served by the mutual water company and by mail to
any eligible person who had requested notification of board
meetings by mail, at the address requested by the eligible person.
Eligible persons requesting notice by mail shall pay the costs of
reproduction and mailing of the notice in advance. Notice may
also be given by mail, by delivery of the notice to each unit served
by the mutual water company or, with the consent of the eligible
person, by electronic means. The notice shall contain the agenda
for the meeting.

(g) An emergency meeting of the board may be called by the
chief executive officer of the mutual water company, or by any
two members of the board of directors other than the chief
executive officer, if there are circumstances that could not have
been reasonably foreseen which require immediate attention and
possible action by the board, and which of necessity make it
impracticable to provide notice as required by this section.

(h) The board of directors of a mutual water company shall
permit any eligible person to speak at any meeting of the mutual
water company or the board of directors, except for begin delete meetings of
the board held in end delete begin insert an end insert executive begin delete session. end delete begin insert session outside the presence
of eligible persons. end insert A reasonable time limit for all eligible persons
to speak to the board of directors or before a meeting of the mutual
water company shall be established by the board of directors.

(i) (1) Except as described in paragraphs (2) to (4), inclusive,
the board of directors of the mutual water company begin delete may end delete begin insert shall end insert not
discuss or take action on any item at a nonemergency meeting
unless the item was placed on the agenda included in the notice
that was posted and distributed pursuant to subdivision (f). This
subdivision does not prohibit an eligible person who is not a
member of the board from speaking on issues not on the agenda.

(2) Notwithstanding paragraph (1), a member of the board of
directors, mutual water company officers, or a member of the staff
of the mutual water company, may do any of the following:

(A) Briefly respond to statements made or questions posed by
a person speaking at a meeting as described in subdivision (h).

(B) Ask a question for clarification, make a brief announcement,
or make a brief report on his or her own activities, whether in
response to questions posed by an eligible person or based upon
his or her own initiative.

(3) Notwithstanding paragraph (1), the board of directors or a
member of the board of directors, subject to rules or procedures
of the board of directors, may do any of the following:

(A) Provide a reference to, or provide other resources for factual
information to, the mutual water company’s officers or staff.

(B) Request the mutual water company’s officers or staff to
report back to the board of directors at a subsequent meeting
concerning any matter, or take action to direct the mutual water
company’s officers or staff to place a matter of business on a future
agenda.

(C) Direct the mutual water company’s officers or staff to
perform administrative tasks that are necessary to carry out this
subdivision.

(4) (A) Notwithstanding paragraph (1), the board of directors
may take action on any item of business not appearing on the
agenda posted and distributed pursuant to subdivision (f) under
any of the following conditions:

(i) Upon a determination made by a majority of the board of
directors present at the meeting that an emergency situation exists.
An emergency situation exists if there are circumstances that could
not have been reasonably foreseen by the board, that require
immediate attention and possible action by the board, and that, of
necessity, make it impracticable to provide notice.

(ii) Upon a determination made by the board by a vote of
two-thirds of the members present at the meeting, or, if less than
two-thirds of total membership of the board is present at the
meeting, by a unanimous vote of the members present, that there
is a need to take immediate action and that the need for action
came to the attention of the board after the agenda was posted and
distributed pursuant to subdivision (f).

(iii) The item appeared on an agenda that was posted and
distributed pursuant to subdivision (f) for a prior meeting of the
board of directors that occurred not more than 30 calendar days
before the date that action is taken on the item and, at the prior
meeting, action on the item was continued to the meeting at which
the action is taken.

(B) Before discussing any item pursuant to this paragraph, the
board of directors shall openly identify the item to the members
in attendance at the meeting.

(j) (1) Notwithstanding any other law, the board of directors
shall not take action on any item of business outside of a meeting.

(2) (A) Notwithstanding any other provision of law, the board
of directors shall not conduct a meeting via a series of electronic
transmissions, including, but not limited to, electronic mail, except
as specified in subparagraph (B).

(B) Electronic transmissions may be used as a method of
conducting an emergency meeting if all members of the board,
individually or collectively, consent in writing to that action, and
if the written consent or consents are filed with the minutes of the
meeting of the board. These written consents may be transmitted
electronically.

(k) (1) An eligible person may bring a civil action for
declaratory or equitable relief for a violation of this section by a
mutual water company for which he or she is defined as an eligible
person for a judicial determination that an action taken by the board
is null and void under this section.

(2) Prior to the commencement of an action pursuant to
paragraph (1), the eligible person shall make a demand on the
board to cure or correct the action alleged to be taken in violation
of this section. The demand shall be in writing, and submitted
within 90 days from the date the action was taken. The demand
shall state the challenged action of the board and the nature of the
alleged violation.

(3) Within 30 days of receipt of the demand, the board shall
cure or correct the challenged action and inform the demanding
party in writing of its actions to cure or correct, or inform the
demanding party in writing of its decision not to cure or correct
the challenged action.

(4) Within 15 days of receipt of the written notice of the board’s
decision to cure or correct or not to cure or correct, or within 15
days of the expiration of the 30-day period to cure or correct,
whichever is earlier, the demanding party shall commence the
action pursuant to paragraph (1). If the demanding party fails to
commence the action pursuant to paragraph (1), that party shall
be barred from commencing the action thereafter.

(l) A board action that is alleged to have been taken in violation
of this section shall not be determined to be void if the action taken
was in substantial compliance with this section.

(m) The fact that the board of directors of a mutual water
company takes subsequent action to cure or correct an action taken
pursuant to this section shall not be construed as, or admissible as
evidence of, a violation of this section.

(n) An eligible person who prevails in a civil action to enforce
his or her rights pursuant to this section shall be entitled to
reasonable attorney’s fees and court costs. A prevailing mutual
water company shall not recover any costs, unless the court finds
the action to be frivolous, unreasonable, or without foundation.

(o) As used in this section:

(1) “Eligible person” means a person who is any of the
following:

(A) A shareholder or member of the mutual water company.

(B) A person who is an occupant, pursuant to a lease or a rental
agreement, of commercial space or a dwelling unit to which the
mutual water company sells, distributes, supplies, or delivers
drinking water.

(C) An elected official of a city or county who represents people
who receive drinking water directly from the mutual water
company on a retail basis.

(D) Any other person eligible to participate in the mutual water
company’s meetings under provisions of the company’s articles
or bylaws.

(2) “Item of business” means any action within the authority of
the board, except those actions that the board has validly delegated
to any other person or persons, officer of the mutual water
company, or committee of the board comprising less than a
majority of the directors.

(3) “Meeting” means either of the following:

(A) A congregation of a majority of the members of the board
at the same time and place to hear, discuss, or deliberate upon any
item of business that is within the authority of the board.

(B) A teleconference in which a majority of the members of the
board, in different locations, are connected by electronic means,
through audio or video or both. A teleconference meeting shall be
conducted in a manner that protects the rights of members of the
mutual water company and otherwise complies with the
requirements of this title. begin delete Except for a meeting that will be held
solely in executive session, the end delete begin insert The end insert notice of the teleconference
meeting shall identify at least one physical location so that
members of the mutual water company may attend and at least
one member of the board of directors or a person designated by
the board shall be present at that location. Participation by board
members in a teleconference meeting constitutes presence at that
meeting as long as all board members participating in the meeting
are able to hear one another and members of the mutual water
company speaking on matters before the board.

(4) “Mutual water company” means a mutual water company,
as defined in Section 14300, that operates a public water system,
as defined in Section 14300.5.