The Core Claims in the Litigation - A Knockout Win for H2GO and Leland.

To understand the decision, you have to understand the claims brought by H2GO and
Leland.  There were core claims and peripheral claims.  The core claims (the first three
causes of action) sought to set aside the transfer of all assets and debts because: (1) it
disempowered H2GO as a corporate and political entity; (2) it transferred H2GO's
governmental functions; and (3) it constituted an abuse of discretion.  The court ruled
overwhelming in Leland's and H2GO's favor on these claims.

In ruling on the major claims, it appeared to me that the Judge was clearly concerned with the
improprieties of the contested transaction. Judge Henry devoted much of the first 54 (out of
68 total) pages of the Order to explaining how bizarre and problematic the transaction was. 
Specifically, the Court ruled that:

1- The agreements, written by Belville' Town Attorney, "clearly demonstrate the intent of the
Town [of Belville] and the former majority of the District Board of Commissions to dismantle
the sanitary district as a body politic and corporate and completely remove all significant
power from the new District Board of Commissioners in contravention of N.C. Gen. Stat.
Chapter 130A, Article II, Part 2 [the statutes governing Sanitary Districts]."  (Opinion p. 32)

2-"[T]he cumulative effect of the resolutions, transfer and operating agreements was to enter
into an agreement which eliminates the district's governmental discretionary power and binds
the commission's successors permanently.  This is contrary to public policy and an unlawful
transfer of governmental functions by the [former] H2GO Board of Commissioners to the
Town of Belville." (Opinion p. 37)

3-There would be "a profound effect of the transfer of the systems and its governance on the
ability of those who reside outside of Belville but within the sanitary district.  They would be
limited to voting for members of the sanitary district commission that does not have the
authority or ability to address their concerns or consider requests for service or expansion of
services.  They would be forced to plead their needs and requests to the Town of Belville
officials who are elected solely by Belville residents. It is not difficult to see the conflicts that
could arise when competing interests for service and development of services, between those
who live in Belville and those who do not, come before the Belville commission."  (Order p.
46)

4-Without H2GO's 29 employees or if any transfer issues arose, "the customers of H2GO
could face interruption and problems with their service.  Presently, the three Belville
employees are untrained and unqualified to undertake this additional workload."  (Order p. 51)

5-"Th[e] acquisition by the Town of Belville will result, according to an email inquiry by
Eldridge, in revenue that exceeded the expenses required to operate and maintain the
system.  This profit would run counter to the ruling in [Supreme Court precedent].  (Order p.
51)

6 - "[I]t was unreasonable for Belville to acquire and operate these water and sewer public
enterprises outside its corporate limits. Such an acquisition would be in violation of Article 16
of Section 160A of the General Statutes, and beyond its statutory authority." (Order p. 52)
7- "[T]he commissioners of both governing boards of H2GO [i.e. former Board of H2GO] and
Belville, acting in concert, failed to act in good faith, and their actions were so clearly
unreasonable as to amount to an oppressive and manifest abuse of their discretion."  (Order
p. 53-54)

The court's ruling on the core claims in the litigation was a knockout win for H2GO and
Leland.  The court conducted a detailed review of the contested transaction and rejected
every argument that Belville advanced to support it.  Anyone who claims otherwise is spinning
the truth.

The Ancillary Claims - A Mixed Bag

There were also ancillary claims that the court only needed to address in detail if H2GO and
Leland did not win the core claims.  The Court devoted only about one-fifth of its total ruling to
these secondary claims.

One set of secondary claims related specifically to the transfer of H2GO's debt to Belville. 
The court set aside this transfer in its ruling on the first three causes of action.  The court was
critical of the bond transfer to Belville, but ultimately decided not to rule for Plaintiffs on the
stand-alone debt-specific claims because: (1) the record, including Bob Walker's testimony,
was unclear about the mechanics of the bond transfer; (2) the bondholder (SunTrust) nor the
local government commission needed to weigh in; and (3) the court's ruling invalidating the
transfer on the first three claims covered the bond transfer. Accordingly, the court dismissed
these debt-specific claims. (Order pp. 54-59)

Another set of secondary claims involved H2GO's argument that, if the transfer documents
were otherwise valid, they should be set aside because they were the result of undue
influence and constructive fraud based on the conduct of Belville's Town Attorney.  The
Court's ruling goes to great lengths to describe this conduct as by my count,  Belville's Town
Attorney's name appears more than thirty-six times in the decision.  This conduct was part of
the basis for declaring the transaction void in the first three causes of action, but the court
decided that the conduct did not give rise to separate, independent claims for undue influence
or constructive fraud.  (Order pp. 60-65)

There were other peripheral claims.  Belville had countersued H2GO, claiming that H2GO's
December 4, 2017 resolutions declaring the contested transaction void was a breach of the
transaction documents and that each to go should be required to pay liquidated damages to
Belville and to pay Bellville's attorneys' fees.  The court determined that Belville's
counterclaims lacked any merit and granted judgment in H2GO's favor on these claims. 
(Order pp. 65-67)

The Possibility of an Appeal

Belville has indicated, through a non-attorney spokesperson, that it might appeal because
part of the decision was decided against Plaintiffs.  That is not a basis for an appeal.  Rather,
Belville would have to show that the judge's decision involved errors of law that prejudiced
Belville.  Essentially, Belville would have to show that the Rule 2.1 judge specially appointed
by the Chief Justice of the North Carolina Supreme Court committed legal errors that caused
the entire decision to be wrong.  That's a high burden here.
If Belville did appeal, then H2GO and Leland would also be entitled to appeal from the parts
of the decision they do not like.  H2GO would certainly file such a cross appeal if Belville
appeals.  Accordingly, an appeal could result in a decision that is even less favorable to
Belville.

Where does this leave the RO Plant?

The judge indicated he was not deciding whether the RO Plant is or is not a good idea.  His
ruling is confined to "whether the acts and procedures followed by the [former] H2GO Board
of Commissioners and the Town of Belville in November and December of 2017, in an attempt
to address these issues, complied with public policy and with the relevant North Carolina
statutory enactments and the decisions handed down by the appellate courts."  In other
words, the question he decided is whether Belville and H2GO could orchestrate a hostile
takeover of H2GO to prevent the new board from weighing in on the RO Plant.  The judge
decided that the answer to this was definitely "no." As you know, I have argued from day one
that this case is not about water quality, rather, it is about democracy and proper government. 
I am gratified the Court saw the case the same way.

The judge's order leaves decisions about the RO Plant to the people of the H2GO Sanitary
District, who act through the H2GO Board.  H2GO, and not Belville, is the "lawful owner" of
the District's property and of decisions about what to do with that property.

What happens next?

The Court left the Preliminary Injunction in place and indicated that it would issue an order
transferring the assets and debt back to H2GO.  Until then the Preliminary Injunction prevents
Belville from using, encumbering, or disposing (wasting away) of H2GO's property.  Belville's
press release refers to certain assets, including customer accounts, as if they belong to
Belville, and it is unclear whether this violates the Preliminary Injunction. Regardless, it
certainly is not reflective of the Court's ruling.

Given the sweeping nature of the ruling, it is unclear whether Belville will return the assets
and debts, regardless of whether it appeals or whether it will force the parties to spend even
more money seeking the return of this property.  It is also unclear whether Belville will resort
to other legal tactics to try to prevent the H2GO Board from exercising power, notwithstanding
the Court's ruling.

The court also deferred ruling on costs and attorneys' fees.  It is possible that H2GO and / or
Leland may ask Belville to pay their costs and attorneys' fees.

As I stated in the Summary Judgment hearing and in our brief, no one would even seriously
consider giving away all of the assets of a city such as the City of Wilmington because they
did not like the results of an election.  The mere thought of something like that is absurd. 
This case could have set a dangerous precedent.  This attempted coup has already costs the
tax payers of Brunswick County far too much time and money.  It is my sincerest hope that
Belville will honor and abide by the Court's ruling and allow all three units of of local
government (H2gO, Leland, and Belville) to put this ugly chapter behind them.
Brian E. Edes
Crossley McIntosh Collier Hanley & Edes, PLLC
Attorneys-at-Law
5002 Randall Parkway
Wilmington, North Carolina 28403