The California Supreme Court handed down a unanimous ruling Monday that limits local governments’ ability to seize private water utilities through eminent domain, finding that courts — not city councils — have the final say on whether a public takeover is truly necessary.
The 7-0 decision sends the case back to a California appeals court and deals a significant blow to the town of Apple Valley, which has been locked in a decade-long legal battle to take over Apple Valley Ranchos Water Company, a privately owned utility serving roughly 65,000 residents in San Bernardino County.
A Decade-Long Fight Over Water Rates
The dispute traces back to 2010, when investment firm Carlyle Infrastructure Partners acquired Apple Valley Ranchos Water Company and significantly raised customer rates. The town of Apple Valley began exploring a public takeover shortly after, approving two resolutions in 2015 to acquire the water system and filing an eminent domain complaint against the utility.
The utility was subsequently sold again — this time from Carlyle to Liberty Utilities, a subsidiary of Algonquin Power & Utilities Corp., which owns private utilities across the United States.
Liberty fought back in San Bernardino Superior Court, arguing Apple Valley had failed to establish the public necessity of the takeover. After a grueling 67-day bench trial, the trial judge agreed with Liberty, ruling the town had not met the legal requirements for eminent domain. Liberty was awarded $13.2 million in attorney’s fees.
A California appeals court then reversed that decision, finding the lower court had failed to give sufficient deference to the town’s own findings and resolutions. Apple Valley appeared to be back on track — until Monday.
What the Supreme Court Decided
In the majority opinion written by Justice Leondra Kruger, the court rejected Apple Valley’s argument that judicial review of eminent domain resolutions should be extremely limited.
“The town of Apple Valley argues that its decision to take the utility is subject to the usual standard governing judicial review of a resolution of necessity — meaning, in effect, that the court can disallow the taking only if it concludes that the town has grossly abused its discretion,” Kruger wrote. “The Court of Appeal accepted this argument. We do not.”
The distinction matters enormously in practice. Under the gross abuse of discretion standard Apple Valley preferred, a court could only block a takeover if it found outright bad faith on the part of the government. Under the standard the Supreme Court adopted, courts can independently weigh the evidence and make their own determination about whether public necessity has actually been established.
“To evaluate a challenge to the taking of privately owned public utility property, the trial court, sitting as trier of fact, must exercise its independent judgment to determine whether the utility owner challenging the taking has rebutted the relevant presumptions and has thus established by a preponderance of the evidence that the taking is not authorized by the eminent domain law,” Kruger wrote.
The court’s ruling hinged on a 1992 California law that specifically allows public utilities to dispute the necessity of government takeovers — a provision the justices found incompatible with the highly deferential standard Apple Valley was seeking.
What Happens to Apple Valley Now
The case returns to the California Court of Appeal, which must now reconsider its earlier ruling under the standard the Supreme Court has established. Apple Valley will effectively have to relitigate whether it can prove public necessity under independent judicial scrutiny rather than the more forgiving abuse of discretion test.
Apple Valley and its attorneys did not respond to requests for comment. Liberty Utilities also did not respond.
Broader Implications for Public Utility Takeovers
The ruling has significant implications beyond Apple Valley. Similar eminent domain fights over utility ownership are playing out across California. In San Francisco, city lawmakers are pursuing their own effort to use eminent domain to take over part of Pacific Gas & Electric’s electrical grid, citing high energy costs and the desire for local control.
Monday’s ruling means any California municipality attempting to seize a private utility will now face rigorous independent judicial review of whether the takeover is truly necessary — not just whether the city council acted in good faith when it approved the resolution.
For private utility companies facing potential government takeover, the decision strengthens their hand in court considerably. For ratepayers and consumer advocates who support public ownership of utilities, it raises the legal bar that local governments must clear before a takeover can proceed.
What Is Eminent Domain?
Eminent domain is the legal power that allows governments to acquire private property for public use, provided they pay fair compensation to the owner. While most commonly associated with land seizures for roads or public buildings, governments have increasingly used eminent domain to attempt takeovers of private utilities, arguing that public ownership would lower costs and improve service for residents.
The legality and scope of such takeovers has been contested in courts across the country. Monday’s California Supreme Court ruling adds a significant new precedent to that debate.
InjuryWatch News will continue tracking this case as it returns to the appeals court.