Amended in Assembly April 7, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 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 amended, 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.begin insert The bill would require notice of a meeting to be given to an eligible person at least 5 business days prior to the meetings.end insert 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 noticebegin insert, or because the number of eligible persons having already provided notice of attendance exceeds the room capacity of the place of the meeting,end insert 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:

P2    1

SECTION 1.  

Section 14305 of the Corporations Code is
2amended to read:

3

14305.  

(a) (1) This section shall be known and may be cited
4as the Mutual Water Company Open Meeting Act.

5(2) This section shall only apply to a mutual water company
6that operates a public water system.

7(b) (1) A board of directors of a mutual water company shall
8allow an eligible person to personally attend a meeting of the board,
9if the eligible person gave the board at least 24 hours advance
10written notice of his or her intent to personally attend the meeting.
11An eligible person denied attendance at a meeting of the board for
12failure to provide this noticebegin insert, or because the number of eligible
13persons having already provided notice of attendance exceeds the
14room capacity of the place of the meeting described in the notice
15issued pursuant to subdivision (f),end insert
shall be able to attend the
16meeting by technology that allows the eligible person to hear the
17meeting and verbally interact with the board, including, but not
18limited to, a telephone or computer. The board shall provide to an
19eligible person attending a meeting by technology, before the
20meeting begins, a copy of all documents to be discussed at the
21meeting. A board of directors of a mutual water company shall
22not prohibit an eligible person from attending a meeting of the
23board either in person or by technology in compliance with this
24paragraph.

P3    1(2) A board of directors of a mutual water company shall only
2meet in executive session during a meeting. A board may prohibit
3an eligible person from attending an executive session to consider
4litigation, matters relating to the formation of contracts with third
5parties, member or shareholder discipline, personnel matters, or
6to meet with a member or shareholder, upon the member or
7shareholder’s request, regarding the member or shareholder’s
8payment of assessments, as specified in Section 14303.

9 (3) The board of directors of a mutual water company shall meet
10in executive session, if requested by a member or shareholder who
11may be subject to a fine, penalty, or other form of discipline, and
12the member shall be entitled to attend the executive session.

13(4) An eligible person shall be allowed to attend a teleconference
14meeting, as specified in paragraph (3) of subdivision (o), or the
15portion of the teleconference meeting that is open to eligible
16persons, without fulfilling the notice requirement in paragraph (1).
17The teleconference meeting or portion of the meeting that is open
18to eligible persons shall be audible to the eligible person in a
19location specified in the notice of the meeting.

20(c) Any matter discussed in executive session shall be generally
21noted in the minutes of the immediately following meeting.

22(d) The minutes, minutes proposed for adoption that are marked
23to indicate draft status, or a summary of the minutes, of any
24meeting of the board of directors of a mutual water company,
25conducted on or after January 1, 2014, other than an executive
26session, shall be available to eligible persons within 30 days of the
27meeting. The minutes, proposed minutes, or summary minutes
28shall be provided to any eligible person upon request and upon
29reimbursement of the mutual water company’s costs for providing
30the minutes.

31(e) The pro forma budget required in Section 14306 shall be
32available to eligible persons within 30 days of the meeting at which
33the budget was adopted. The budget shall be provided to any
34eligible person upon request and upon reimbursement of the mutual
35water company’s costs.

36(f) Unless the bylaws provide for a longer period of notice,
37eligible persons shall be given notice of the time and place of a
38meeting as defined in subdivision (o), except for an emergency
39meeting,, at leastbegin delete fourend deletebegin insert five businessend insert days prior to the meeting.
40 Notice shall be given by posting the notice in a prominent, publicly
P4    1accessible place or places within the territory served by the mutual
2water company and by mail to any eligible person who had
3requested notification of board meetings by mail, at the address
4requested by the eligible person. Eligible persons requesting notice
5by mail shall pay the costs of reproduction and mailing of the
6notice in advance. Notice may also be given by mail, by delivery
7of the notice to each unit served by the mutual water company or,
8with the consent of the eligible person, by electronic means. The
9notice shall contain the agenda for the meeting.

10(g) An emergency meeting of the board may be called by the
11chief executive officer of the mutual water company, or by any
12two members of the board of directors other than the chief
13executive officer, if there are circumstances that could not have
14been reasonably foreseen which require immediate attention and
15possible action by the board, and which of necessity make it
16impracticable to provide notice as required by this section.

17(h) The board of directors of a mutual water company shall
18permit any eligible person to speak at any meeting of the mutual
19water company or the board of directors, except for an executive
20session outside the presence of eligible persons. A reasonable time
21limit for all eligible persons to speak to the board of directors or
22before a meeting of the mutual water company shall be established
23by the board of directors.

24(i) (1) Except as described in paragraphs (2) to (4), inclusive,
25the board of directors of the mutual water company shall not
26discuss or take action on any item at a nonemergency meeting
27unless the item was placed on the agenda included in the notice
28that was posted and distributed pursuant to subdivision (f). This
29subdivision does not prohibit an eligible person who is not a
30member of the board from speaking on issues not on the agenda.

31(2) Notwithstanding paragraph (1), a member of the board of
32directors, mutual water company officers, or a member of the staff
33of the mutual water company, may do any of the following:

34(A) Briefly respond to statements made or questions posed by
35a person speaking at a meeting as described in subdivision (h).

36(B) Ask a question for clarification, make a brief announcement,
37or make a brief report on his or her own activities, whether in
38response to questions posed by an eligible person or based upon
39his or her own initiative.

P5    1(3) Notwithstanding paragraph (1), the board of directors or a
2member of the board of directors, subject to rules or procedures
3of the board of directors, may do any of the following:

4(A) Provide a reference to, or provide other resources for factual
5information to, the mutual water company’s officers or staff.

6(B) Request the mutual water company’s officers or staff to
7report back to the board of directors at a subsequent meeting
8concerning any matter, or take action to direct the mutual water
9company’s officers or staff to place a matter of business on a future
10agenda.

11(C) Direct the mutual water company’s officers or staff to
12perform administrative tasks that are necessary to carry out this
13subdivision.

14(4) (A) Notwithstanding paragraph (1), the board of directors
15may take action on any item of business not appearing on the
16agenda posted and distributed pursuant to subdivision (f) under
17any of the following conditions:

18(i) Upon a determination made by a majority of the board of
19directors present at the meeting that an emergency situation exists.
20An emergency situation exists if there are circumstances that could
21not have been reasonably foreseen by the board, that require
22immediate attention and possible action by the board, and that, of
23necessity, make it impracticable to provide notice.

24(ii) Upon a determination made by the board by a vote of
25two-thirds of the members present at the meeting, or, if less than
26two-thirds of total membership of the board is present at the
27meeting, by a unanimous vote of the members present, that there
28is a need to take immediate action and that the need for action
29came to the attention of the board after the agenda was posted and
30distributed pursuant to subdivision (f).

31(iii) The item appeared on an agenda that was posted and
32distributed pursuant to subdivision (f) for a prior meeting of the
33board of directors that occurred not more than 30 calendar days
34before the date that action is taken on the item and, at the prior
35meeting, action on the item was continued to the meeting at which
36the action is taken.

37(B) Before discussing any item pursuant to this paragraph, the
38board of directors shall openly identify the item to the members
39in attendance at the meeting.

P6    1(j) (1) Notwithstanding any other law, the board of directors
2shall not take action on any item of business outside of a meeting.

3(2) (A) Notwithstanding any other provision of law, the board
4of directors shall not conduct a meeting via a series of electronic
5transmissions, including, but not limited to, electronic mail, except
6as specified in subparagraph (B).

7(B) Electronic transmissions may be used as a method of
8conducting an emergency meeting if all members of the board,
9individually or collectively, consent in writing to that action, and
10if the written consent or consents are filed with the minutes of the
11meeting of the board. These written consents may be transmitted
12electronically.

13(k) (1) An eligible person may bring a civil action for
14declaratory or equitable relief for a violation of this section by a
15mutual water company for which he or she is defined as an eligible
16person for a judicial determination that an action taken by the board
17is null and void under this section.

18(2) Prior to the commencement of an action pursuant to
19paragraph (1), the eligible person shall make a demand on the
20board to cure or correct the action alleged to be taken in violation
21of this section. The demand shall be in writing, and submitted
22within 90 days from the date the action was taken. The demand
23shall state the challenged action of the board and the nature of the
24alleged violation.

25(3) Within 30 days of receipt of the demand, the board shall
26cure or correct the challenged action and inform the demanding
27party in writing of its actions to cure or correct, or inform the
28demanding party in writing of its decision not to cure or correct
29the challenged action.

30(4) Within 15 days of receipt of the written notice of the board’s
31decision to cure or correct or not to cure or correct, or within 15
32days of the expiration of the 30-day period to cure or correct,
33whichever is earlier, the demanding party shall commence the
34action pursuant to paragraph (1). If the demanding party fails to
35commence the action pursuant to paragraph (1), that party shall
36be barred from commencing the action thereafter.

37(l) A board action that is alleged to have been taken in violation
38of this section shall not be determined to be void if the action taken
39was in substantial compliance with this section.

P7    1(m) The fact that the board of directors of a mutual water
2company takes subsequent action to cure or correct an action taken
3pursuant to this section shall not be construed as, or admissible as
4evidence of, a violation of this section.

5(n) An eligible person who prevails in a civil action to enforce
6his or her rights pursuant to this section shall be entitled to
7reasonable attorney’s fees and court costs. A prevailing mutual
8water company shall not recover any costs, unless the court finds
9the action to be frivolous, unreasonable, or without foundation.

10(o) As used in this section:

11(1) “Eligible person” means a person who is any of the
12following:

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

14(B) A person who is an occupant, pursuant to a lease or a rental
15agreement, of commercial space or a dwelling unit to which the
16mutual water company sells, distributes, supplies, or delivers
17drinking water.

18(C) An elected official of a city or county who represents people
19who receive drinking water directly from the mutual water
20company on a retail basis.

21(D) Any other person eligible to participate in the mutual water
22company’s meetings under provisions of the company’s articles
23or bylaws.

24(2) “Item of business” means any action within the authority of
25the board, except those actions that the board has validly delegated
26to any other person or persons, officer of the mutual water
27company, or committee of the board comprising less than a
28majority of the directors.

29(3) “Meeting” means either of the following:

30(A) A congregation of a majority of the members of the board
31at the same time and place to hear, discuss, or deliberate upon any
32item of business that is within the authority of the board.

33(B) A teleconference in which a majority of the members of the
34board, in different locations, are connected by electronic means,
35through audio or video or both. A teleconference meeting shall be
36conducted in a manner that protects the rights of members of the
37mutual water company and otherwise complies with the
38requirements of this title. The notice of the teleconference meeting
39shall identify at least one physical location so that members of the
40mutual water company may attend and at least one member of the
P8    1board of directors or a person designated by the board shall be
2present at that location. Participation by board members in a
3teleconference meeting constitutes presence at that meeting as long
4as all board members participating in the meeting are able to hear
5one another and members of the mutual water company speaking
6on matters before the board.

7(4) “Mutual water company” means a mutual water company,
8as defined in Section 14300, that operates a public water system,
9as defined in Section 14300.5.



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