A call by a group of residents and shareholders for an East Palo Alto-based water company to hold an election for all five board members has morphed into a lawsuit after the directors last year refused the request.
Irene Laudeman, an East Palo Alto resident who, by proxy, holds 43 percent of the company shares, filed a lawsuit Tuesday against the company, alleging that the board of directors violated water company bylaws last September by not holding an election for all board members.
The Palo Alto Park Mutual Water Company is a mutual water company that distributes well water to roughly 680 households and is private but owned by the shareholders, who are the property owners within the company's district. Shares are distributed based on how much property an owner has.
The company's bylaws state that elections for new directors must be held every three years.
According to the lawsuit, three of the board members had last been elected three years prior, and two had been appointed to fill vacancies on the board. Yet during the annual shareholders' meeting on Sept. 23, 2017, the agenda indicated that only two board members would be up for election.
When shareholders asked early in the meeting which two board members were up for election, and why all five would not be, the "incumbent leadership insisted that (1) the meeting could not continue unless they agreed to the agenda stating that only two members would be elected, (2) that no amendments to the agenda could be made until after the agenda was adopted, and, paradoxically, (3) once the agenda was adopted, no amendments could be made," according to the lawsuit.
Efforts to assert the right to elect a new board were, the suit claims, "simply ignored."
Laudeman has requested a court order to require that board elections be held, with specific instructions as to what the election meeting's agenda will say, who may conduct the meeting, and what type of notice must be given, with a request that the meeting be held Saturday, April 14, at noon at the company's executive office at 2190 Addison Ave. in East Palo Alto.
Attendees at last September's meeting said that after the meeting went on for about six and a half hours without the requested election, the incumbent board, which had hired its own private security for the meeting, adjourned the meeting, called the East Palo Alto police and asked shareholders to leave the premises. Further requests by the group to hold elections did not receive a response.
The group filed the suit Tuesday, with pro bono assistance from the Palo Alto law firm Mayer Brown.
Water company manager Katherine Loudd could not be reached for comment in person, or by phone or email by press time.
How "Neighbors for Better Water" started
The chaos of the board meeting did little to allay the ongoing concerns that had given rise to shareholders' calls for new leadership in the first place.
According to the lawsuit document, Laudeman and other shareholders had long-running concerns "with the current management and operations of the Company."
Last summer, board challenger Shannon Pekary helped organize a neighborhood meeting to talk about what residents might be able to do to better deal with the water company. Pekary has had his own problems with being over-billed by the water company, and has just learned he won a small-claims case against it.
The Almanac has spoken with several people who say they believe they have been charged unfairly large and arbitrary "impact" or "assessment" fees.
Pekary, Laudeman, and a cohort of other neighborhood residents, who took on the title "Neighbors for Better Water," eventually decided that a number of their concerns with the water company management might be addressed by electing a new board. They established their own slate of five members to run: Pekary, Norman Picker Jr., Delphine Hill, Ramiro Macias and Kumar Chaudhari.
Over the following month or two leading up to the September meeting, members of "Neighbors for Better Water" went door to door, canvassing the households in the service area to collect signed proxy for which would allow proxy holders to act or vote on their behalf at the meeting.
Problems to address
In a press statement, the group says it is calling for a recall of the current board over concerns with water quality and "that the current management, which has been in place over 20 years, is unable to keep up with the demand created by the growth in the area."
Since January 2014, the company has been cited by the State Water Resources Control Board for elevated levels of iron, manganese and coliform, the group said.
Board challenger Norm Picker noted in the statement, "Our rough estimate is that 90 percent of area residents do not drink the water."
In an interview, Laudeman said she has lived in the area served by the water company for about 18 years, and has always had to treat the water for hardness. In the last five years or so, she said, her water pressure would sporadically disappear, and she doesn't know whether that's due to routine flushing of the pipes or pump failures, she said.
"There is no transparency whatsoever as to what's happening with things," she said.
According to a water company report, estimates for needed repairs to the company's water system add up to about $2.8 million. In a December 2017 report to the State Water Resources Control Board, the company reported it had no timeline for making those capital improvements but is seeking funding.
Board challengers also cited concerns about family ties between the management, board and staff of the water company. Chaudhari said it was "common knowledge" that "the people who are supervising the employees are the employees."
Specifically, he said, the company manager, Loudd, has announced she plans to retire, and that her daughter, Niambi Lincoln, will be taking over as the water company's manager. Loudd's son, Jabari, also reportedly works at the water company.
Chaudhari said that while he was canvassing the area, it didn't take much to convince people to sign the proxy for supporting the new board slate.
"It really wasn't our hard work that did it," he said. "It was that so many people were united against what is going on."
A court hearing on the lawsuit is scheduled for March 28.