Court of Appeal Strengthens Protections for Water and Wastewater Rates
On June 2, 2026, the California Court of Appeal certified for publication its opinion in Hiller v. Marin Municipal Water District. This decision reinforces the powerful preclusive effect of California's Validation Statutes, which Senate Bill (SB) 323 made applicable to water and wastewater rates. Best Best & Krieger LLP (BBK) represented Marin Municipal Water District, the prevailing party, in this case.
A. SB 323 Establishes Mechanisms to Challenge Water and Wastewater Rates
Proposition 218 imposes substantive and procedural limits on new and increased water and wastewater rates. However, it does not specify how ratepayers can challenge those rates in court. To that end, the Legislature enacted SB 323 in 2021, adding Government Code section 53759. Section 53759 provides three important protections for rates adopted on and after January 1, 2022:
- First, it establishes a 120-day statute of limitations for challenges to water and wastewater rates, provided the Proposition 218 notice informs ratepayers of the limitations period.
- Second, it authorizes agencies to validate water and wastewater rates under California's Validation Statutes. Through a validation action, an agency may obtain a court judgment confirming the validity of its rates. Interested parties may participate by answering the validation complaint or filing a reverse-validation action within the statutory deadline. A final validation judgment bars future challenges to the validated rates.
- Third, it requires ratepayers challenging water or wastewater rates to proceed through a reverse-validation action.
B. The District Adopts and Validates Its Rates
The District adopted increased rates for water service in 2023. Prior to adopting its rates, the District conducted significant public outreach, with more than 12 public meetings and workshops leading up to the public hearing. After adopting its rates, the District promptly filed a validation action under SB 323’s new authority. The District strictly complied with the Validation Statutes. After filing its complaint, the District published summons in the newspaper three times, as required by statute and as directed by the Superior Court. No interested party appeared by the statutory deadline, and the Superior Court entered judgment validating the rates upon application by the District based on the District’s evidentiary record.
After the statutory response deadline had passed, a ratepayer filed a petition for writ of mandate challenging the same rates. The District demurred, arguing that the validation judgment barred the claims. The trial court agreed and sustained the demurrer without leave to amend.
C. Court of Appeal Rejects the Ratepayer’s Challenge
The Court of Appeal affirmed the trial court’s ruling. The Opinion specifically noted the District’s public outreach and procedural compliance with the Validation Statutes. The Court concluded that the ratepayer had two options: file a reverse-validation action or appear in the District's validation action. Because she did neither, she could not challenge the validated rates.
The ratepayer raised several arguments, including that (1) Government Code section 53759 unconstitutionally conflicted with Proposition 218, and (2) the District violated due process by failing to provide personal notice of the validation action after she submitted a government claim. The Court rejected both arguments.
The Court held that the Validation Statutes do not alter Proposition 218's substantive or procedural protections. Instead, they provide the procedures for enforcing those rights. Because Proposition 218 does not prescribe a method for challenging rates, the Legislature may establish reasonable procedures governing such claims, and such procedures are not unconstitutional so long as they do not conflict with Proposition 218’s text. The decision reinforces the Legislature's authority to impose procedural requirements and limitations on rate challenges.
The Court also focused on the substance of the ratepayer’s claims rather than their label. Although the ratepayer framed her lawsuit as a challenge to ongoing charges and asserted mandamus and constitutional theories, the practical effect of the lawsuit was to invalidate a rate ordinance that had already been validated. The Court therefore treated the lawsuit as an impermissible collateral attack on the validated rates.
Finally, the Court rejected the ratepayer’s due process claim, concluding that the District satisfied the notice requirements of the Validation Statutes through publication of summons. No special or personal notice was required, even though the ratepayer filed a Government Claim and was represented by counsel.
D. Takeaways for Public Agencies
Hiller strengthens the statutory protections available to public agencies that adopt water and wastewater rates under Proposition 218. The decision confirms the validity of procedural safeguards such as statutes of limitation, validation and reverse-validation requirements, and, by extension, administrative exhaustion requirements.
Hiller also serves as a reminder that successful rate-setting requires both substantive compliance and procedural strategy. The District conducted significant outreach, developed a strong evidentiary record, and carefully complied with each requirement of the Validation Statutes. This background was important for the District’s ultimate success. As such, public agencies should work closely with legal counsel to develop a strong evidentiary record, outreach strategy, and consider and implement available procedural tools to protect and defend their rate structures.
For questions on this decision or for more information, please contact Lutfi Kharuf or Evelyn Blanco.
