Parties in the Mountain Water Co. condemnation case gathered in Missoula County District Court on Monday to discuss attorney's fees and how to tally improvements made to the water system since proceedings began last year.

Outside the courtroom and playing out simultaneously, the Montana Public Service Commission learned that Liberty Utilities Co. had purchased Mountain Water - an unprecedented move made without approval of the state's regulatory board.

"We just found out this morning," PSC spokesman Eric Sell said Monday morning. "Liberty is saying they reserved the right to raise jurisdictional issues. That's them saying we (PSC) don't have jurisdiction over the approval and sale of stock."

By Monday evening, Missoula Mayor John Engen had accused Liberty and The Carlyle Group, the owner of Mountain Water, of "taking inconsistent legal positions." He also said they had treated two Montana District Court judges and the PSC with disrespect. 

"The reality is that the city of Missoula won the condemnation case and has the court order to prove it," Engen said. "The city has the right to take possession of the water system at a price that has been determined in court."

Engen's full statement is included at the end of this story. 

Also on Monday evening, Sell said the PSC had filed a motion before District Judge Leslie Halligan asking her to lift part of a temporary stay issued by the court last month.

Doing so, Sell believes, would give the PSC the flexibility to solicit comments from the city and other parties on the jurisdictional challenge raised by Liberty and its surprise purchase. Liberty is owned by Algonquin Power and Utilities Corp. of Canada.

“It would be a partial lift of the stay,” Sell said. “All the other elements in the stay would remain. It would just allow us to solicit comments on this and hold a work session to try to get to the bottom of this whole situation.”

Earlier in the day, and with much more order, District Judge Karen Townsend held a status conference to set dates in which the city of Missoula and Mountain Water must submit documentation to support their claims for attorney's fees and system improvements.

“Up to the date of the start of the commissioners' hearing, there could have been some additional improvements, and we need to figure out how to account for the figure of those improvements,” Townsend said.

Last week, the city withdrew its appeal over the $88.6 million price a three-member water commission placed on Mountain Water, in effect, establishing it as the utility's official value.

The city also said it would not take possession of the utility until the Montana Supreme Court rules on an appeal filed by Mountain Water and its owner, The Carlyle Group, over necessity.

Last June, Townsend found that public ownership of the water system was more necessary than private, for-profit ownership. By statute, the state's high court must decide the case expeditiously, though no definitive timeline has been set.

With that ruling still pending, Joe Conner, an attorney representing Mountain Water, said the system will remain an operating utility until the city takes possession. He said expenses could grow as additional improvement are made under Mountain Water's ownership.

“We still have obligations to maintain the system and move it forward,” Conner said. “I want to bring up to the court on what happens over the next six months to a year.”

The court will address those expenses once the parties file their figures. Townsend said the parties also must provide documentation for attorney's fees – another issue the court will be tasked to decide.

“I would suggest there needs to be a filing initiated by Mountain Water and Carlyle of what they believe are reasonable attorney's fees and documentation to justify the figures,” Townsend said.

Bill Mercer, representing Carlyle, said the global equity firm would also file a request to receive interest for the water system.

“The award amount that we're entitled to under the law is $88.6 million, but then we'd have a claim for interest on top of the attorney's fees, cost expenses and property-tax allocation,” Mercer told the court. “Are you contemplating that we'd do all that within the 45 day window?”

Townsend said yes.

Harry Schneider, the city's lead attorney in the matter, said case law may dictate what Carlyle is entitled to receive once the final offer of just compensation is set.

“There has been some motion practiced already in the case, followed last year with respect to whether you get interest, post-summons improvements, one or the other, or both,” Schneider said. “I think that would be a contested issue.”

If contested, Townsend said she would set a hearing to decide the matter. Mountain Water has 15 days to submit figures representing any interim improvements made to the water system. It also has 45 days to submit a statement of claim with supporting documentation for attorney's fees.

The city will have a window in which to respond to both claims.

Statement from Mayor Engen:

The company that lost Mountain Water Company (Carlyle) just purported to sell the company to Canada (Algonquin/Liberty). Carlyle’s and Algonquin’s announcement and supposed sale have no legal effect. The reality is that the City of Missoula won the condemnation case and has the court order to prove it. The City has the right to take possession of the water system at a price that has been determined in court.

The Carlyle Group, Algonquin and Liberty are taking inconsistent legal positions. In the process, they have thumbed their noses at two Montana State District Courts (Judge Townsend and Judge Halligan) and the Montana Public Service Commission. Only after Carlyle and Mountain Water lost the water system in court did they pursue this desperate course of action.

Carlyle and Mountain Water have shown a complete disregard for Montana Courts and Montana law, and Algonquin/Liberty appear not to be paying attention. While Carlyle and Mountain Water still think they are above the law, the City expects they and their Canadian friends will continue to lose in Court, and the water system will be in Missoula’s control soon.