Sunday, January 23, 2022

Where things stand: New evidence presented in Brunswick County hearing, H2GO case nearing an end

As attorneys thicken the H2GO case file, nearly $1 million in legal costs billed to each party continues to grow. The judge tasked with deciding the case could issue a final ruling prior to its scheduled trial date in April.

After all three parties filed motions for summary judgment, Superior Court Judge Henry spent hours reviewing new evidence introduced by Leland and H2GO in their case against Belville. (Port City Daily photo/Johanna Ferebee)
After all three parties filed motions for summary judgment, Superior Court Judge Henry spent hours reviewing new evidence introduced by Leland and H2GO in their case against Belville. (Port City Daily photo/Johanna Ferebee)

BOLIVIA — Superior Court Judge Charles Henry heard new evidence Thursday at the Brunswick County Courthouse in the long-running H2GO case, including dozens of emails that show how Belville and H2GO managed to transfer nearly $60 million in assets in under 14 hours.

The case appears to be nearing an end. It will determine whether Brunswick Regional Water and H2GO’s $57 million asset transfer to the Town of Belville in November 2017 stands.

Related: Judge orders Belville officials, H2GO’s outgoing board protected from providing testimony

All parties separately filed motions for summary judgment in Brunswick County Superior Court, ahead of a scheduled trial date in April. Judge Henry, assigned to the “exceptional case” under Rule 2.1 of the General Rules of Practice, could rule on all remaining claims via email before then, eliminating the need for a trial.

At the hearing, Henry reigned in attorneys from all parties, limiting co-plaintiffs Leland and H2GO to a two-and-a-half-hour presentation, and Belville to two hours.

“Not to be dictatorial but you have briefed your issues quite well,” Henry told the three parties’ league of attorneys as the hearing began. “Your written word will probably long outlive your spoken word.”

Who’s who: The attorneys

  • Brian Edes – Attorney for H2GO
  • Stephen Coble – Attorney for H2GO
  • Joseph Dowdy – Attorney for Leland
  • Charles Baldwin – Attorney for Belville
  • James Eldridge – Attorney for Belville

Leland and H2GO bear a high burden of proof, according to an order Henry signed in August 2018, to merit their multitude of claims against Belville. And so, with the case wrapping up, the co-plaintiffs wrung out previously-undisclosed details before the court to back up their claims Thursday. But Belville officials said the new evidence carries no legal weight.

Before it began, H2GO’s attorney, Stephen Coble, asked Henry for permission to add an additional table to fit the district and Leland’s growing team of legal aid. (In November 2018, one year after the transfer, all three parties’ legal bills tallied over $760,000).

Catch up on the case: Leland and Belville’s 30-year rivalry is the key to understanding the complex H2GO case

No commissioner testimony

Thursday marked the first public hearing attorneys for H2GO and Leland presented Henry with a trove of emails detailing how the transfer happened. Joseph Dowdy, Leland’s lead attorney in the case, unveiled a string of emails with the subject line “private and confidential” between H2GO Director Bob Walker’s personal email account and James Eldrige, Belville’s town attorney.

Who’s Who: Elected and appointed officials

  • Robert “Bob” Walker – H2GO Executive Director
  • William “Bill” Browning – Former H2GO Commissioner (pro-R/O plant)
  • Carl Antos – Former H2GO Commissioner (pro-R/O plant)
  • Ron Jenkins – Current H2GO Commissioner (pro-R/O plant)
  • William “Bill” Beer – Current H2GO Commissioner (anti-R/O plant)
  • Jeff Gerken – Current H2GO Commissioner (anti-R/O plant)
  • Mike Allen – Belville Mayor
  • Joe Breault – Former Belville Commissioner

Spanning the weeks leading up to and after the transfer, the emails show how Walker and Eldrige fine-tuned the metrics of conveying H2GO’s assets to Belville. Dowdy said somehow — he wasn’t sure how, absent a meeting — a majority of H2GO’s board directed Walker to facilitate the transfer. This majority included two outgoing H2GO commissioners, Bill Browning and Carl Antos, and one current commissioner, Ron Jenkins. In North Carolina, a meeting of more than two elected officials constitutes a quorum, subject to Open Meetings Law.

“How they imbued (Walker) with this authority isn’t clear to me,” Dowdy said at the hearing. “I couldn’t ask the representatives because they wouldn’t testify.”

On Jan. 31, Henry signed a consent agreement — which all parties agreed to — granting H2GO’s outgoing majority, Belville Mayor Mike Allen and former Belville Commissioner Joe Breault legislative testimonial privilege. This precluded Leland and H2GO’s legal team from obtaining the commissioners’ testimony, which likely prompted their reliance on communication records between Walker and Eldridge.

On Nov. 7, 2017, Bill Beer, an anti-reverse osmosis plant candidate, was elected by a 19-vote lead, earning the last spot on the ticket behind the election of two pro-reverse osmosis candidates. Dowdy described Beer’s election as the catalyst of the events that followed. In a Nov. 18, 2017 email, Eldridge wrote to Walker the transfer needed to be completed prior to Dec. 19, 2017. According to Dowdy, this was Walker and Eldridge’s interpretation of when Beer could be legally sworn in, and in theory, reverse the transfer since his vote swung the board’s political leaning.

One of many emails presented before the court Thursday. Use of the term "profit" in bullet item three was "unfortunate" in this email sent the day following the November 7, 2017 election, according to James Eldrige's testimony, obtained by Leland's attorney Joseph Dowdy. Note: This particular email was the only email previously entered into the court record prior to Thursday's hearing, in which dozens more were released. (Port City Daily photo/Johanna Ferebee)
One of many emails presented before the court Thursday. Use of the term “profit” in bullet item three was “unfortunate” in this email sent the day following the November 7, 2017 election, according to James Eldrige’s testimony, obtained by Leland’s attorney Joseph Dowdy. Eldrige intended to ensure revenues exceeded expenditures, Dowdy said of Eldridge’s deposition. Note: This particular email was the only email previously entered into the court record prior to Thursday’s hearing, in which dozens more were released. (Port City Daily photo/Johanna Ferebee)

Emails unveiled

On Nov. 18, Eldridge wrote to Walker about the complexities of a requirement. It later ended up in the two parties’ operating agreement. The signed agreement, frozen after Superior Court Judge Thomas Lock’s December 2017 preliminary injunction, bars former, present and future H2GO board members from entering Belville’s property.

“I can just see the paper,” Eldridge wrote. “‘Belville takes over district and blocks new board from using their building.'”

Several hours before the Nov. 28, 2017 meeting in which H2GO’s majority approved the transfer, Eldrige addressed an outgoing commissioners’ second thoughts. Eldrige responded to Walker’s presentation of Antos’ concerns about his liability in voting in favor of the transfer. “[The outgoing majority’s] concern is whether they are stepping over their authority,” Eldrige wrote in an email that day. “We’re all concerned about that.”

H2GO’s attorney on the case, Brian Edes, argued this email exchange, paired with Walker’s testimony, warranted proof that Antos was subject to “undue influence.” Before Eldridge’s comments, Antos wasn’t going to approve the transfer, Edes said. After receiving what Edes characterized as “legal advice” from Eldridge — a claim Belville denies — Antos’ concerns waned. Antos’ “aye” marked the board’s three-vote majority to approve the transfer. Henry, in turn, asked Edes whether Walker’s testimony, a second-hand observation of Antos’ doubts, is sufficient to prove Antos was unduly influenced by Belville. Edes responded he did not “have a confession” from Antos himself. (Nor was he permitted to obtain one).

In a 9 a.m. email on Nov. 28, 2017, Eldrige wrote to Walker, “I am concerned that (Coble) may not sign until he has reviewed the docs which might impede the closing.”

As H2GO’s attorney, Coble did not learn of the transfer until the Nov. 28, 2017 meeting began when Antos added it to the agenda. At the meeting, he said he could not weigh in it because he was not familiar with it.

In a Nov. 17 email, responding to Walker’s update citing he was nearly 50 percent complete with the assignment of the bill of sale, Eldrige foresaw what eventually happened: “In a perfect world the closing should occur during the morning of the 29th to mitigate against injunctive relief being thrown up as a roadblock.”

On Nov. 29, at 8 a.m., Belville reconvened its Nov. 21 meeting — which had been held open — and accepted the transfer. Both Dowdy and Edes allege the meeting was held at 8 a.m. “before the courthouse opened.” The next day, Leland filed a temporary restraining order against H2GO, Belville, H2GO chairman William Browning, vice chairman Ron Jenkins, and secretary Carl Antos, alleging the parties transferred H2GO’s assets illegally.

Summarizing the thread of emails, Dowdy said, “There’s a priority on secrecy over getting this right.” Though present at the hearing as Belville’s counsel, Eldridge did not address the court Thursday.

(As an aside, Dowdy revealed current and then-commissioner Jeff Gerken caught wind of the transfer before it happened. “I’m not sure how,” Dowdy said. Gerken called “the Town of Leland” — Dowdy did not specify who — because he was “upset about it.” Leland’s long-time attorney, John Wessell, then consulted with a University of North Carolina at Chapel Hill School of Government professor about the potential transfer’s legality before the meeting.)

Political existence

Dowdy’s narrative centered on Belville’s “inconsistent” reading of a “constellation of statutes.” The most commonly-referenced statute, §160A-274, permits sanitary districts to sell its real or personal property to another governmental unit.

In his closing statements, Edes — named Leland’s town attorney in September 2018 –focused heavily on whether H2GO continues to exist without its assets.

§160A-274 states a district can convey “any interest in real or personal property,” not “all” property, Edes said. Dowdy said there is no evidence this is a “death-by-giveaway statute.”

Edes argued the statutes do not permit a sanitary district, through a transfer, to liquidate itself out of political existence. The disenfranchisement of nearly 90 percent of H2GO’s customers, approximately 22,500 people, is up for the court to decide, he said. Without viable political representation, Edes said, Belville’s potential ratepayers, most of which live outside the town’s limits, would have no political recourse.

Throughout the hearing, Edes and Dowdy referenced several maps (similar to the map shown below). The maps show the relative size of Belville compared to its political rival, Leland, and the district it could soon officially govern.

“This is a David and Goliath story,” Edes said. “After this transaction, Belville acquires — for free essentially — $67 million in assets, $16 million in cash.”

At two square miles, Belville’s new governing area would include a 25 square mile district, Edes said. Charles Baldwin, Belville’s attorney, agreed the transaction was “extraordinary,” but countered Edes’ point, stating the law doesn’t discriminate on the size of a municipality.

A map of each group's political and service boundaries can explain why the H2GO case arose. In green, Belville's approximate corporate limits. In pink, Leland's approximate corporate limits. Shaded in grey, Brunswick Regional Water and Sewer H2GO's approximate service boundary. (Port City Daily graphic/ Johanna Ferebee, Courtesy Google Maps, Brunswick Regional Water and Sewer H2GO)
A map of each group’s political and service boundaries can help explain why the H2GO case arose. In dark green, Belville’s approximate corporate limits. In pink, Leland’s approximate corporate limits. Shaded in grey, Brunswick Regional Water and Sewer H2GO’s approximate service boundary. (Port City Daily graphic/ Johanna Ferebee, Courtesy Google Maps, Brunswick Regional Water and Sewer H2GO)

Belville’s case

In an August 2018 order, Henry dismissed two claims against Belville. The order states that in future hearings, the burden of proof would rest on the co-plaintiffs. (This explains why Belville was granted less time to present its case). Leland must “overcome the presumption of legality afforded to public officials,” Henry wrote in the order, and prove Belville and H2GO’s outgoing board’s actions were “clearly unreasonable” and “oppressive.”

Baldwin, on multiple occasions, contended the co-plaintiffs had not met the burden of proof in arguing its various claims. “This would be the first case to ever undue a transaction between to governmental bodies,” he said at the hearing.

Countering Edes’ claim that H2GO would be rendered politically meaningless, Baldwin claimed: “the entity of H2GO would continue to exist and would have all the powers of before and after.”

“The transfer of assets does not make it a merger, does not make it a dissolution, does not make it anything else other than a transfer of assets,” Baldwin said.

Accusations of secrecy did not reveal any violation of law, Baldwin said. He asserted revealing proposed contractural arrangments before they were completed “would not be good business practice,” nor is it “commonly done.” The emails, Baldwin said, are simply arm’s length discussions between the parties– meaning each party acted independently. “There wasn’t any direct contact,” he said.

“In summary, there’s a lot of sound and fury here. None of which amount to any legal issue,” Baldwin said.

Mike McGill, the Belville spokesperson whose contract transferred from H2GO in 2017, said the new revelations signify nothing.

“Leland and H2GO’s arguments today were based on hypotheticals, speculation, and their obviously prejudiced views of the facts,” McGill wrote in a statement after the hearing. “And this case will be decided on the facts.”

McGill added, “The participants in the transfer properly carried out their duties under the law.”

Citing public health concerns, which hit the Cape Fear region in the summer of 2017 following a StarNews report of toxin-tainted water, Baldwin said officials were acting within their legal authority in orchestrating the transfer.

“The fundamental premise of this transaction was not secrecy,” Baldwin said. “Much of how we got here today is an interaction of local politics.”

Belville's team exits the Brunswick County Courthouse during a recess for a hearing in the H2GO case Thursday. (Port City Daily photo/Johanna Ferebee)
Belville’s team exits the Brunswick County Courthouse during a recess for a hearing in the H2GO case Thursday. (Port City Daily photo/Johanna Ferebee)

Send tips and comments to Johanna Ferebee at johanna@localvoicemedia.com

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