Court Filings Dispute Allegations Against Golf Course by Water District

Mesquite, NV. Attorneys for Paradise Canyon (Wolf Creek Golf Club) filed for a Motion for Summary Judgment just eight days after filing a Motion to Amend in their May 15, 2018, civil suit (A-18-774539-B) against the Virgin Valley Water District (VVWD). This Motion for Summary Judgement disputes VVWD’s counterclaim filed in September 2018.

The original complaint by Wolf Creek attorneys seeks to halt VVWD’s price increase on golf irrigation water which is about five times more than is currently being paid by Wolf Creek owners.

VVWD’s counterclaim attempts to discredit Wolf Creek, arguing that:

1. Wolf Creek has failed to use effluent available from the City of Mesquite as required by their lease agreement with VVWD;
2. Wolf Creek’s unused lease shares were not put to beneficial use;
3. The owners of Wolf Creek subleased shares leased from the water district.

After taking depositions from Virgin Valley Water District Manager Kevin Brown and Mesquite Irrigation Company (MIC) President Kelby Hughes, Wolf Creek’s attorney, Jeffrey R. Sylvester, amended the original complaint and asks the court to:

1. Declare a fair market rent for Wolf Creek leased water shares necessary to irrigate the Wolf Creek golf course;
2. Add a claim of Breach of Contract [i] arising from VVWD’s recent demand that Wolf Creek pay $1,115.67 per share [up from $250 per share]; (see end-note [i])
3. Add a claim of Breach of the Implied Covenant of Good Faith and Fair Dealing[ii] arising out of VVWD’s recent demand;
4. Add a claim of Abuse of Process[iii] arising out of VVWD’s filing of a Counterclaim for breach of contract that is totally unsupported by admissible evidence.

In both the April 17, 2019 Motion to Amend and the April 23, 2019 Motion for Summary Judgement, Wolf Creek’s attorneys point to a March 18, 2019 deposition of Brown who stated that:

1. VVWD has not suffered any damages resulting from Wolf Creek not utilizing the City of Mesquite’s effluent water;
2. VVWD is not required to prove “beneficial use”of Wolf Creek water until 2022;
3. VVWD has no evidence that Wolf Creek is now or has ever attempted to sublease the water shares to third parties.

In his deposition, Hughes admitted that MIC is not currently undertaking any efforts to require its shareholders (including VVWD) to prove beneficial use of their water shares.

The counterclaim filed by VVWD’s attorney, Jedediah (Bo) Bingham, appears to be a side-show designed to discredit the golf course owners and create the impression in the local press that Wolf Creek is not paying “market price” for irrigation water.

The original litigation concerns an attempt by VVWD board members to:

1. Claw back irrigation shares they leased to Wolf Creek;
2. Lease those shares to the Southern Nevada Water District (SNWA);
3. Increase the price of Wolf Creek irrigation water from $250 to 1,246 per share. (See end-note 1).

Here is the history:

Oct 2, 2014, Brown wrote to Corey Clemetson, an owner of Paradise Canyon LLC, and addressed a June 1, 2011 lease agreement which leased 155 shares of MIC water held by the VVWD to irrigate Wolf Creek at $250 per share. That rate expired in 2019. Brown alleged that 35 shares were unused.

Brown complained that the water district required additional funds for maintenance and capital improvement projects. He said the district has a September 18, 2014 agreement with SNWA to lease MIC shares for $1,246 per share. Brown argued that the VVWD could net $34,860 if the owners of Wolf Creek gave back those shares and the water district leased them to SNWA.

SNWA leases MIC and Bunkerville Irrigation Company (BIC)) shares on the Virgin River, a Colorado River tributary which is part of an Intentionally Created Surplus (ICS) agreement with the Bureau of Reclamation (BoR). Under that agreement, BoR adds MIC and BIC shares (converted to Acre Feet per Month) acquired from the SNWA to their accounting ledger.  In return, SNWA is credited with Colorado River water in an equal amount.

In fact, SNWA  cannot claw back Wolf Creek, Conestoga or Palms golf course shares and then lease them to the SNWA. Such leases violate current ICS accounting procedures and potentially provisions of the 1927 Virgin Valley Water Decree which originally granted the shares to pioneer settlers.

Nonetheless, on Jan 23, 2015, Brown told Clemetson that VVWD was counting on additional income from the clawed back shares from Wolf Creek for leasing to SNWA. Brown said that “one of our board members wants to move the discussion along and would like to meet with you in the next two to three weeks to put the issue on the February 17, 2015 board meeting agenda.”

On Feb 2, 2015, Clemetson wrote to Brown referring to a previous proposal whereby VVWD proposed to “sell” MIC shares held by VVWD to Wolf Creek to offset VVWD maintenance and capital outlay costs. Clemetson said that his bank would not approve such a purchase. He also declined an offer to meet with board members Rich Bowler and Barbara Ellestad to discuss the matter.

Ignoring the regulatory and decree limitations on Oct 18, 2017, VVWD board members Nephi Julien, Ben Davis, Richard Bowler, Barbara Ellestad, and Travis Anderson wrote to Clemetson. They claimed that VVWD’s lease with Wolf Creek must be “promptly amended,” so that 45 “unused” shares could be returned to the District for leasing to SNWA. These board members claimed VVWD was losing out on $44,842.50 in lease income because the 45 shares were not returned.

In fact, VVWD was not losing that money because the water district could not lease those clawed back shares to SNWA.

On Nov 6, 2017, Colby Pellegrino, Director for Marketing Resources for SNWA, replied to an email from VVWD hydrologist Aaron Bunker with copies to Mesquite resident Kraig Hafen and Brown.  Pellegrino told Bunker, et al., that SNWA does not contemplate leasing [clawed back golf course water] every month and they “would need further consultation among MIC, VVWD, the golf courses, to determine if a suitable arrangement could be reached to lease shares every month.”

Ms. Pellegrino continued: “Said another way, limiting the golf courses to the number of shares needed to meet their annual requirements has the potential to directly impact SNWA’s ICS credits.”

On Aug 9, 2018, Pellegrino told Brown that SNWA had received VVWD’s offer to lease golf clawed back to golf course shares of water. Pellegrino again reminded Brown that “SNWA has consistently maintained that accounting impediments and Virgin River decree issues would prevent SNWA from leasing the shares VVWD believes are unused and available for lease.”

On April 19, 2018, Greg Walch, attorney for SNWA, emailed Bingham and told him that “decreed rights owned by MIC only have annual and not monthly flow-rates limitations.” Walch said, “That leads us to the conclusion that we would be unable to use the 50 shares clawed back from the Conestoga Golf Course without amending the agreement with Conestoga to comply with ICS monthly accounting requirements.”

During a March 6, 2019 VVWD board meeting, Brown said that staff had a meeting scheduled in April 2019 with the person responsible for overseeing the BoR’s ICS program to see about the possibility of considering other alternatives than SNWA for Virgin River water.

In other words, written evidence being presented to the court by Wolf Creek, supplemented by depositions of Kevin Brown and Kelby Hughes, does not support the Virgin Valley Water District’s original claim that the district is losing money due to an agreement it has with the Southern Nevada Water District.

The Motion for Summary Judgment will be heard by Judge Timothy C. Williams of the Eighth Judicial District Court in Las Vegas on May 29, 2019, at 9:30 a.m.

End-note:

[i] On March 6, 2019, the Virgin Valley Water District board held a special meeting. At that meeting all five members voted to reduce the rate at which they would lease their shares in the Mesquite Irrigation Company (MIC) to the Southern Nevada Water Authority (SNWA) from the 2014 rate of $1,246 to $1,115.67 effective in Fiscal Year 2020. This was done to coincide with the lease rate charged by non-district MIC shareholders in their agreements with the SNWA.