SANTA ANA, Calif. (CN) - San Juan Capistrano overcharged residents millions of dollars for water and when it was caught at it, offered refunds of only 20 percent of the overcharges, a class action claims in state court.
Lead plaintiff Hootan Daneshmand sued the City of San Juan Capistrano on Friday in Orange County Superior Court, claiming the city's refund program offers less than 20 percent of the overcharges.
Daneshmand says an Orange County court and a California appeals court found that San Juan Capistrano had illegally created a tiered rate system that did not account for customers' water use or actual cost of consumption.
He says the random increase of water rates violated Proposition 218, the Right to Vote on Taxes Act, a constitutional amendment passed by California voters in 1996.
The Fourth District Court of Appeal in California concluded the city had violated the state constitution by sending customers inflated bills for more than five years between 2010 and 2015, according to the complaint.
But the city has kept its overcharges and interest on the overcharges, Daneshmand says.
Though San Juan Capistrano promised it would pay refunds in July 2015, its program was "nothing more than a continuance of its illegal conduct," according to the complaint.
San Juan Capistrano "failed to disclose that its water rates were charged in violation of state law and failed to disclose that the 'refund' it was offering included less than 20 percent of the overcharges," the lawsuit states.
It claims that thousands of residents did not receive a refund notice, and that the city told the 11,000 who did that if they accepted the refund they would have to sign a release relinquishing the right to collect the hidden overcharges.
The city's "attempt to escape the consequences of its illegal conduct by accounting sleight of hand should be rejected," the complaints states, adding that the city has "doubled down on its illicit conduct."
The residents seek refunds with interest and damages for breach of contract, breach of faith, money had and received, and negligence.
They are represented by Niall McCarthy of Cotchett, Pitre & McCarthy in Burlingame.
San Juan Capistrano did not immediately respond to an emailed request for comment on Tuesday.