Amended in Senate August 31, 2015

Amended in Senate June 22, 2015

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 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. 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 wouldbegin delete requireend deletebegin insert authorizeend insert 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:

P2    1

SECTION 1.  

The Legislature finds and declares all of the
2following:

3(a) Mutual water companies are nonprofit entities that seek to
4provide quality water service to their residential, commercial,
5municipal, and agricultural shareholders or members, many through
6small water systems and in disadvantaged communities throughout
7the state.

8(b) Since 2013, mutual water companies have made great
9improvements to water quality and service reliability across
10California, as well as to the transparency of their operations and
11finances.

12(c) Mutual water companies have been leaders in promoting
13water conservation and efficiency since the drought emergency in
14California began.

15(d) Mutual water companies serve as the sole water provider in
16their service territories and act in many ways like public agencies,
17and they therefore should take reasonable steps to ensure their
P3    1shareholders and customers have a voice in the operations of the
2company.

3(e) Many mutual water companies have small or no meeting
4facilities, some of which meet in board members’ residences, that
5can safely hold only a limited number of people, and are located
6in remote parts of California that are difficult to access by some
7shareholders and customers of the mutual water company.

8(f) Many small mutual water companies have limited financial
9means and it is important that their financial resources be put to
10efficient use in fulfilling their duty to provide safe and affordable
11water to their shareholders and members.

12(g) Mutual water companies are unique, and unlike large public
13agencies or for-profit utilities, these nonprofit organizations are
14solely responsible to their shareholders and customers and not the
15broader public outside of their service area.

16(h) Given the distinctive operational constraints faced by mutual
17water companies, the Legislature believes that mutual water
18companies should, where economically and technologically
19feasible, have means to provide the greatest shareholder and
20customer access to meetings within these constraints.

21

SEC. 2.  

Section 14305 of the Corporations Code is amended
22to read:

23

14305.  

(a) (1) This section shall be known and may be cited
24as the Mutual Water Company Open Meeting Act.

25(2) This section shall only apply to a mutual water company
26that operates a public water system.

27(b) (1) (A) A board of directors of a mutual water company
28shall allow an eligible person to personally attend a meeting of the
29board, if the eligible person gave the board at least 24 hours
30advance written notice of his or her intent to personally attend the
31meeting.begin delete Notwithstandingend delete

32begin insert(B)end insertbegin insertend insertbegin insertNotwithstandingend insert any other law, the board of directors may
33use teleconferencing to provide any eligible person access to the
34meeting that otherwise would be denied attendance at a meeting
35of the board for failure to provide this notice, or because the
36number of eligible persons having already provided notice of
37attendance exceeds the room capacity of the place of the meeting
38described in the notice issued pursuant to subdivision (f). The
39teleconferenced meeting or proceeding shall comply with this
40section and all other applicable provisions of law relating to a
P4    1specific type of meeting or proceeding conducted by a mutual
2water company. If the board uses teleconferencing, the board shall
3provide to an eligible person attending a meeting by teleconference,
4 before the meeting begins, an electronic copy or photocopy of all
5documents not related to an executive session to be discussed at
6the meeting. A board of directors of a mutual water company shall
7not prohibit an eligible person from attending a meeting of the
8board either inbegin delete personend deletebegin insert person, so long as the eligible person has
9complied with the notice requirement of paragraph (A),end insert
or by
10teleconference except as provided by paragraph (2).begin insert A board of
11directors may allow an eligible person to attend the meeting
12personally in lieu of using teleconferencing pursuant to this
13paragraph.end insert

begin delete

8 14(B)

end delete

15begin insert(C)end insert For purposes of this subdivision, the term “teleconference”
16means, to the extent it is technologically feasible, any electronic
17means, that includes either audio or video or both, that allows an
18eligible person to hear a meeting and verbally interact with the
19board, including, but not limited to, a telephone, cellular telephone
20with speaker phone technology, or computer, or a device using
21internet-based video or audio conference technology.

22(2) A board of directors of a mutual water company shall only
23meet in executive session during a meeting. A board may prohibit
24an eligible person from attending an executive session to consider
25pending or potential litigation, matters relating to the formation
26 of contracts with third parties, including matters relating to the
27potential acquisition of real property or water rights, member or
28shareholder discipline, personnel matters, or to meet with a member
29or shareholder, upon the member or shareholder’s request,
30regarding the member or shareholder’s payment of assessments,
31as specified in Section 14303.

32 (3) The board of directors of a mutual water company shall meet
33in executive session, if requested by a member or shareholder who
34may be subject to a fine, penalty, or other form of discipline, and
35the member shall be entitled to attend the executive session.

36(4) An eligible person shall be entitled to attend a teleconference
37meeting, as specified in paragraph (3) of subdivision (o), or the
38portion of the teleconference meeting that is open to eligible
39persons, and shall be entitled to attend with or without fulfilling
40the notice requirement in paragraph (1). The teleconference meeting
P5    1or portion of the meeting that is open to eligible persons shall be
2audible to the eligible person in a location specified in the notice
3of the meeting.

4(c) Any matter discussed in executive session shall be generally
5noted in the minutes of the meeting at which the executive session
6occurred.

7(d) The minutes, minutes proposed for adoption that are marked
8to indicate draft status, or a summary of the minutes, of any
9meeting of the board of directors of a mutual water company,
10conducted on or after January 1, 2014, other than an executive
11session, shall be available to eligible persons within 30 days of the
12meeting. The minutes, proposed minutes, or summary minutes
13shall be provided to any eligible person upon request and upon
14reimbursement of the mutual water company’s costs for providing
15the minutes.

16(e) The pro forma budget required in Section 14306 shall be
17available to eligible persons within 30 days of the meeting at which
18the budget was adopted. The budget shall be provided to any
19eligible person upon request and upon reimbursement of the mutual
20water company’s costs.

21(f) Unless the bylaws provide for a longer period of notice,
22eligible persons shall be given notice of the time and place of a
23meeting as defined in subdivision (o), except for an emergency
24meeting, at least four days prior to the meeting. Notice shall be
25given by posting the notice in a prominent, publicly accessible
26place or places within the territory served by the mutual water
27company and by mail to any eligible person who had requested
28notification of board meetings by mail, at the address requested
29by the eligible person. Eligible persons requesting notice by mail
30shall pay the costs of reproduction and mailing of the notice in
31advance. Notice may also be given by mail, by delivery of the
32notice to each unit served by the mutual water company, or, with
33the consent of the eligible person, by electronic means. The notice
34shall contain the agenda for the meeting.

35(g) An emergency meeting of the board may be called by the
36chief executive officer of the mutual water company, or by any
37two members of the board of directors other than the chief
38executive officer, if there are circumstances that could not have
39been reasonably foreseen which require immediate attention and
P6    1possible action by the board, and which of necessity make it
2impracticable to provide notice as required by this section.

3(h) The board of directors of a mutual water company shall
4permit any eligible person to speak at any meeting of the mutual
5water company or the board of directors, except for any portion
6of a meeting that is held in executive session outside the presence
7of eligible persons. A reasonable time limit for all eligible persons
8to speak to the board of directors or before a meeting of the mutual
9water company shall be established by the board of directors.

10(i) (1) Except as described in paragraphs (2) to (4), inclusive,
11the board of directors of the mutual water company shall not
12discuss or take action on any item at a nonemergency meeting
13unless the item was placed on the agenda included in the notice
14that was posted and distributed pursuant to subdivision (f). This
15subdivision does not prohibit an eligible person who is not a
16member of the board from speaking on issues not on the agenda.

17(2) Notwithstanding paragraph (1), a member of the board of
18directors, mutual water company officers, or a member of the staff
19of the mutual water company, may do any of the following:

20(A) Briefly respond to statements made or questions posed by
21a person speaking at a meeting as described in subdivision (h).

22(B) Ask a question for clarification, make an announcement, or
23make a brief report on his or her own activities, whether in response
24to questions posed by an eligible person or based upon his or her
25own initiative.

26(3) Notwithstanding paragraph (1), the board of directors or a
27member of the board of directors, subject to rules or procedures
28of the board of directors, may do any of the following:

29(A) Provide a reference to, or provide other resources for factual
30information to, the mutual water company’s officers or staff.

31(B) Request the mutual water company’s officers or staff to
32report back to the board of directors at a subsequent meeting
33concerning any matter, or take action to direct the mutual water
34company’s officers or staff to place a matter of business on a future
35agenda.

36(C) Direct the mutual water company’s officers or staff to
37perform administrative tasks that are necessary to carry out this
38subdivision.

39(4) (A) Notwithstanding paragraph (1), the board of directors
40may take action on any item of business not appearing on the
P7    1agenda posted and distributed pursuant to subdivision (f) under
2any of the following conditions:

3(i) Upon a determination made by a majority of the board of
4directors present at the meeting that an emergency situation exists.
5An emergency situation exists if there are circumstances that could
6not have been reasonably foreseen by the board, that require
7immediate attention and possible action by the board, and that, of
8necessity, make it impracticable to provide notice.

9(ii) Upon a determination made by the board by a vote of
10two-thirds of the members present at the meeting, or, if less than
11two-thirds of total membership of the board is present at the
12meeting, by a unanimous vote of the members present, that there
13is a need to take immediate action and that the need for action
14came to the attention of the board after the agenda was posted and
15distributed pursuant to subdivision (f).

16(iii) The item appeared on an agenda that was posted and
17distributed pursuant to subdivision (f) for a prior meeting of the
18board of directors that occurred not more than 30 calendar days
19before the date that action is taken on the item and, at the prior
20meeting, action on the item was continued to the meeting at which
21the action is taken.

22(B) Before discussing any item pursuant to this paragraph, the
23board of directors shall openly identify the item to the members
24in attendance at the meeting.

25(j) (1) Notwithstanding any other law, the board of directors
26shall not take action on any item of business outside of a meeting.

27(2) (A) Notwithstanding any other provision of law, the board
28of directors shall not conduct a meeting via a series of electronic
29transmissions, including, but not limited to, electronic mail, except
30as specified in subparagraph (B).

31(B) Electronic transmissions may be used as a method of
32conducting an emergency meeting if all members of the board,
33individually or collectively, consent in writing to that action, and
34if the written consent or consents are filed with the minutes of the
35meeting of the board. These written consents may be transmitted
36electronically.

37(k) (1) An eligible person may bring a civil action for
38declaratory or equitable relief for a violation of this section by a
39mutual water company for which he or she is defined as an eligible
P8    1person for a judicial determination that an action taken by the board
2is null and void under this section.

3(2) Prior to the commencement of an action pursuant to
4paragraph (1), the eligible person shall make a demand on the
5board to cure or correct the action alleged to be taken in violation
6of this section. The demand shall be in writing, and submitted
7within 90 days from the date the action was taken. The demand
8shall state the challenged action of the board and the nature of the
9alleged violation.

10(3) Within 30 days of receipt of the demand, the board shall
11cure or correct the challenged action and inform the demanding
12party in writing of its actions to cure or correct, or inform the
13demanding party in writing of its decision not to cure or correct
14the challenged action.

15(4) Within 15 days of receipt of the written notice of the board’s
16decision to cure or correct or not to cure or correct, or within 15
17days of the expiration of the 30-day period to cure or correct,
18whichever is earlier, the demanding party shall commence the
19action pursuant to paragraph (1). If the demanding party fails to
20commence the action pursuant to paragraph (1), that party shall
21be barred from commencing the action thereafter.

22(l) A board action that is alleged to have been taken in violation
23of this section shall not be determined to be void if the action taken
24was in substantial compliance with this section.

25(m) The fact that the board of directors of a mutual water
26company takes subsequent action to cure or correct an action taken
27pursuant to this section shall not be construed as, or admissible as
28evidence of, a violation of this section.

29(n) An eligible person who prevails in a civil action to enforce
30his or her rights pursuant to this section shall be entitled to
31reasonable attorney’s fees and court costs. A prevailing mutual
32water company shall not recover any costs, unless the court finds
33the action to be frivolous, unreasonable, or without foundation.

34(o) As used in this section:

35(1) “Eligible person” means a person who is any of the
36following:

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

38(B) A person who is an occupant, pursuant to a lease or a rental
39agreement, of commercial space or a dwelling unit to which the
P9    1mutual water company sells, distributes, supplies, or delivers
2drinking water.

3(C) An elected official of a city or county who represents people
4who receive drinking water directly from the mutual water
5company on a retail basis.

6(D) Any other person eligible to participate in the mutual water
7company’s meetings under provisions of the company’s articles
8or bylaws.

9(2) “Item of business” means any action within the authority of
10the board, except those actions that the board has validly delegated
11to any other person or persons, officer of the mutual water
12company, or committee of the board comprising less than a
13majority of the directors.

14(3) “Meeting” means either of the following:

15(A) A congregation of a majority of the members of the board
16at the same time and place to hear, discuss, or deliberate upon any
17item of business that is within the authority of the board.

18(B) A teleconference in which a majority of the members of the
19board, in different locations, are connected by electronic means,
20through audio or video or both. A teleconference meeting shall be
21conducted in a manner that protects the rights of members of the
22mutual water company and otherwise complies with the
23requirements of this title. The notice of the teleconference meeting
24shall identify at least one physical location so that members of the
25mutual water company may attend and at least one member of the
26board of directors or a person designated by the board shall be
27present at that location. Participation by board members in a
28teleconference meeting constitutes presence at that meeting as long
29as all board members participating in the meeting are able to hear
30one another and members of the mutual water company speaking
31on matters before the board.

32(4) “Mutual water company” means a mutual water company,
33as defined in Section 14300, that operates a public water system,
34as defined in Section 14300.5.



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