As trial nears, attorney says Mountain Water owes clients $11M (December 18, 2015)

An attorney representing a group of Missoula developers dropped a courtroom bombshell Friday that could shake up the Mountain Water Co. trial and change the price the city would pay to own its drinking water system.

Attorneys with the city of Missoula and The Carlyle Group gathered before Missoula County District Judge Karen Townsend on Friday to discuss issues relating to jury selection heading into the January trial.

While there, attorney Robert Bell approached the bench, saying Mountain Water owed his 23 clients more than $11 million – money the utility has accepted to make upfront improvements before refunding the costs over time.

Unless there are additional developments over the weekend, Bell said, his clients plan to file a motion to intervene in the case by Dec. 22, the deadline set by the court heading into the trial.

One of my clients is sitting down today to sign and write a check for yet another advance to Mountain Water for $750,000, Bell told the court. Until today, we were not aware that Mountain Water opposed payment to these individuals to pay out these contracts.

As a matter of practice, Bell said, developers and government bodies often front Mountain Water’s cost to extend water mains to service new projects. The utility refunds the money over time and refers to the practice as funded by others improvements.

While his clients are owed $11 million, Bell said, the total cost owed by Mountain Water to local developers stands at roughly $23 million. He said Missoula County alone holds 19 contracts with the utility and could become a party in the case.

Before the valuation trial, the city and Mountain Water tussled over how these refunds would be handled, Bell said. There appears to have been no resolution.

Bell said it was assumed throughout the valuation proceedings that the city would honor the contracts when it took control of Mountain Water, or that the obligation would be taken from the final condemnation award.

The city has asked to assume the contracts when – and if – it takes ownership of the system, though it would expect an offset in return. That could reduce Mountain Water’s $88.6 million valuation figure by roughly $23 million.

In some form, the county may very well, on its own behalf, decide it needs an opportunity to present its position to the court, Bell said. The court’s ruling on the subject directly affects many local business people and taxpayers. It’s only fair they be given an opportunity to weigh in.


Natasha Jones, representing the city of Missoula, told the court the city was willing to assume the contractual obligations as successor to the water system. That offset, she said, would be taken from the final valuation figure.

Discovery of the unpaid contracts, Jones said, prompted the city to meet Thursday night’s deadline to appeal the $88.6 million valuation figure.

The city is very concerned about its citizens and whether they’ll be left out in the cold upon payments of the condemnation proceedings, Jones said. It’s the city’s position that we would assume … those contracts and ensure our local people are protected. We’ve been willing to give assurances the defendants have not been able to give.

Bill Mercer, an attorney representing The Carlyle Group, and Joe Conner, representing Mountain Water, both objected to Bell’s statements at Friday’s proceedings.

They said Bell and his clients weren’t a party in the case. They said he hadn’t properly motioned the court to intervene, though Bell said his clients had just learned of the issue.

It’s entirely inappropriate to present the perception – the allegation – that Mountain Water is not fulfilling or attempting to fulfill its contracts, Conner said. There are no defaults. We’re simply a defendant in a condemnation action.

Conner said he had not seen the city’s motion to assume the contractual obligations, nor had he seen any suggested credit amount.

He said the city has known of the issue for weeks.

At the last minute, we’re getting this motion, Conner said. There can’t be any implication at this stage that Mountain Water has breached any of its agreements. That’s not the case. We’re a defendant in a hostile takeover.

Townsend made no immediate decision on the issue, though Jones urged the court to act quickly.

It’s a significant issue that could really drive where we’re headed in the case, said Jones. It’s very important we get this issue resolved quickly and in advance of the jury trial.

Source: Martin Kidston, The Missoulian