Amended in Assembly May 18, 2015

Amended in Assembly April 28, 2015

Amended in Assembly April 7, 2015

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 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. The bill would require notice of a meeting to be given to an eligible person at least 4 days prior to the meetings. 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, or because the number of eligible persons having already provided notice of attendance exceeds the room capacity of the place of the meeting, to attend the meeting by teleconference, and would further require the board to provide to an eligible person attending a meeting by teleconference 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.  

The Legislature finds and declares all of the
following:

(a) Mutual water companies are nonprofit entities that seek to
provide quality water service to their residential, commercial,
begin delete municipal end delete begin insert municipal, end insert and agricultural shareholders or members,
many through small water systems and in disadvantaged
communities throughout the state.

(b) Since 2013, mutual water companies have made great
improvements to water quality and service reliability across
California, as well as to the transparency of their operations and
finances.

(c) Mutual water companies have been leaders in promoting
water conservation and efficiency since the drought emergency in
California began.

(d) Mutual water companies serve as the sole water provider in
their service territories and act in many ways like public agencies,
and they therefore should take reasonable steps to ensure their
shareholders and customers have a voice in the operations of the
company.

(e) Many mutual water companies have small or no meeting
facilities, some of which meet in board members’ residences, that
can safely hold only a limited number of people, and are located
in remote parts of California that are difficult to access by some
shareholders and customers of the mutual water company.

(f) Many small mutual water companies have limited financial
means and it is important that their financial resources be put to
efficient use in fulfilling their duty to provide safe and affordable
water to their shareholders and members.

(g) Mutual water companies are unique, and unlike large public
agencies or for-profit utilities, these nonprofit organizations are
solely responsible to their shareholders and customers and not the
broader public outside of their service area.

(h) Given the distinctive operational constraints faced by mutual
water companies, the Legislature believes that mutual water
companies should, where economically and technologically
feasible, have means to provide the greatest shareholder and
customer access to meetings within these constraints.

SEC. 2.  

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) (1) (A) 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 24 hours
advance written notice of his or her intent to personally attend the
meeting. Notwithstanding any other law, the board of directors
may use teleconferencing for the benefit of any eligible person
denied attendance at a meeting of the board for failure to provide
this notice, or because the number of eligible persons having
already provided notice of attendance exceeds the room capacity
of the place of the meeting described in the notice issued pursuant
to subdivision (f). The teleconferenced meeting or proceeding shall
comply with this section and all other applicable provisions of law
relating to a specific type of meeting or proceeding conducted by
a mutual water company. If the board uses teleconferencing, the
board shall provide to an eligible person attending a meeting by
teleconference, before the meeting begins, an electronic copy or
photocopy of all documents not related to an executive session to
be discussed at the begin delete meeting, or within 24 hours after the conclusion
of the meeting if it is not feasible for the board of directors to
provide photocopied or electronically scanned copies before the
meeting begins. end delete begin insert meeting end insert begin insert . end insert 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.

begin delete

(B) Any eligible person who attends a meeting by teleconference
as provided in this subdivision shall identify themselves and any
other persons present with them who are able to hear the board
meeting as soon as practicable after they have joined the meeting.
Any eligible person attending a meeting by teleconference shall
ensure that no one who is not an eligible person is able to hear or
participate in that meeting, and shall comply with any time limits
for speaking established pursuant to subdivision (h). If it is
subsequently discovered that someone who is not an eligible person
listened to the board meeting with the knowledge of the eligible
person, that eligible person shall forfeit his or her right to
participate in future board meetings by teleconference upon the
board finding a violation following a disciplinary hearing.

end delete begin delete

(C)

end delete

begin insert (B) end insert  For purposes of this subdivision, the term “teleconference”
means, to the extent it is technologically feasible, any electronic
means, that includes either audio or video or both, that allows an
eligible person to hear a meeting and verbally interact with the
board, including, but not limited to, a telephone, cellular telephone
with speaker phone technology, or computer, or a device using
internet-based video or audio conference technology.

(2) A board of directors of a mutual water company shall only
meet in executive session during a meeting. A board may prohibit
an eligible person from attending an executive session to consider
pending or potential litigation, matters relating to the formation
of contracts with third parties, including matters relating to the
potential acquisition of real property or water rights, 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.

(3) The board of directors of a 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.

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

(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
begin delete meeting end delete begin insert meeting, end insert at least four days prior to the meeting. 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 begin delete company end delete
begin insert company, end insert 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 any portion
of a meeting that is held in executive session outside the presence
of eligible persons. 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 shall 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 an 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. The 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. begin delete Nothing in this subparagraph requires
the notice of a meeting to disclose the use of teleconferencing if
the use of teleconferencing is approved by the board pursuant to
paragraph (1) of subdivision (b). end delete

(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.