‘Smoking gun’ letter turns up in utility’s lawsuit
April 2, 2013 — Last month United States District Court Judge Morrison C. England dismissed a motion for summary judgment filed by the Lassen Municipal Utility District in its civil case filed against Kinross Gold U.S.A., Inc. and Lassen Gold Mining, Inc. (Hayden Hill).
While the court denied the motion, it acknowledged some of the district’s defenses remain as questions of fact. The court also granted the district’s request for summary adjudication as to the defendant’s laches defense, which was unopposed. A laches defense is one in which a party alleges it has been harmed by a delay in the proceeding.
Cassandra Ferrannini, an attorney with Downey Brand, the Sacramento law firm representing the utility district, said it’s her firm’s policy not comment on on-going litigation, but she said it has accomplished some of its goals.
The utility district asked the court to set aside the power line purchase and return its ownership to Hayden Hill. The power line’s owner will have to spend perhaps hundreds of thousands of dollars to dismantle and remove it.
In the court documents, the publicly owned utility district that provides electricity to Susanville and portions of Lassen County alleges Frank Cady, its former general manager, purchased the power line that was to be removed for $65,000 without authorization by its board of directors. The district also alleges Cady’s purchase violated the Municipal Utilities Act and the Brown Act.
While the utility district’s case hangs on the assertion Cady purchased the line without authorization by the district’s board of directors — a claim Cady denies — attorneys from Hayden Hill asked the court to accept into evidence a June 11, 2009 letter written by the district’s former general manager Ray Luhring to the Willow Creek Landowners Association acknowledging the district’s purchase of the power line by Cady about 18 months earlier.
Luhring resigned unexpectedly in March 2011, and although he gave the district 60-days notice, it released him almost immediately. The district appointed Luhring acting general manager after it fired Cady on Jan. 3, 2008. The board hired Luhring as general manager in April 2008.
According to the court file, Luhring wrote, “The Lassen Municipal Utility District concluded a purchase and sale agreement for the existing de-energized 69 kV line previously owned by Lassen Gold Mining in December of 2007.The line was purchased, along with easements for the line to the extent they were owned by Lassen Gold Mining, by the district for a total price of $65,000. In addition, the district spent considerable funds to retain outside counsel to aid in this purchase process.”
Surprise Valley Electric also confirmed its willingness to supply electricity to the homeowners through the line once the district amended the reclamation plan and conditional use permit. Despite pleas from Cady and the district, the Lassen County Board of Supervisors did not amend the reclamation plan and use permit requiring the line be taken down after the gold mine closed.
The court noted, “There is no hint in this letter, written some two-and-a-half years after Frank Cady entered into the agreement on the district’s behalf, that the purchase was not properly sanctioned by the board. Indeed, as late as October of 2009, the district was still trying to make use of the Hayden Hill line … (The district’s) board of directors did not adopt a resolution finding that Cady had entered into (the) PSA without authority until more than two years later when, on Dec. 22, 2009, it passed a resolution disclaiming any approval or other ratification with respect to Cady’s Dec. 17, 2007 execution of the agreement.”
Smoking gun evidence
According to attorneys for Hayden Hill, Luhring’s letter is “smoking gun evidence” the district “believed it had validly purchased the power line for some 18 months after the purchase and sales agreement had been executed. Therefore, according to the defendants, the letter is key in showing that (the) plaintiff, at the very least, had ratified the project and cannot now claim that the sale is null and void because it was not properly authorized … Luhring’s letter discusses the disputed utility line purchase that underlies this litigation.”
Hayden Hill attorneys also allege the letter was not revealed during a pre-lawsuit Public Records Act request or during the discovery process in which the board declared “any responsive records had already been turned over by way of the Public Records Act request.”
According to Hayden Hill’s attorneys, copies of the letter were also sent to the late Harold Garner, then general counsel for the district, and Dave Folce, the district’s director of electrical operations.
“Plaintiff should have retained the letter in three separate locations:” the Hayden Hill attorneys wrote, “the files not only of Mr. Luhring, but also of Mr. Garner and Mr. Folce. Nevertheless, defendants’ pre-lawsuit Public Records Act requests failed to reveal a single copy of the letter. Nor was the letter produced in response to the defendants’ post-filing requests for documents.”
The letter finally surfaced after a declaration by Charles Hays, Surprise Valley’s general manager, on Sept. 19, 2012 — more than two months after the district had filed its request for summary judgment.
The judge granted Hayden Hills’ request to have the letter entered into evidence in the case.
Morrison wrote the utility district’s request for summary judgment “fails on several levels … Factual questions remain in any event as to whether Frank Cady’s execution of (the) PSA on plaintiffs' behalf was unauthorized in the first place under either the Brown Act or the Municipal Utility Act. Even if Cady did lack the requisite authority, however, questions of fact are still present with respect to the availability of ratification and/or equitable estoppel defenses. Those defenses, which cannot be ruled out given the evidence before the court, could preclude plaintiff from attempting to void the PSA at this juncture and therefore make summary judgment inappropriate.”
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