Latest Lawsuit Filed by Coastland

You may have already received your letter from Coastland Corp. regarding its most recent litigation with the County, and how none of the homeowner board members from Ocean Sands or Crown Point would sign the form they wanted us to sign.  Simply, we believe that this ploy is another attempt by Coastland Corp. to get the POAs to help fund their litigation activities.  Both Ocean Sands and Crown Point informed them on numerous occasions that we did not agree with their plans to hire an attorney for the POA’s … but none of us were going to sign a document that Coastland foisted in front of us.  We would also note that Coastland discourteously e-mailed us this request at 5:30 p.m. on Christmas Eve.

In its letter, Coastland acts like it is being magnanimous by covering, at its own expense, the cost of objecting to the OSWSD inclusion in the lawsuit.  Well, Coastland was the party that instigated the lawsuit!  We can surmise that, if the POAs had hired lawyers, the cost of this upcoming hearing would have likely been charged to the POAs.  It is a certainty that the cost of Coastland’s mailing this letter to you – ostensibly to disparage your homeowner representatives – will be another significant cost that the POAs will be burdened with.

Also note that Coastland has created a new e-mail address that appears to be for the POA.  Your homeowner representatives do not have access to this e-mail, so it is really just another Coastland e-mail address.  However, if you agree with us that Coastland will be the sole party responsible should water rates go up, or object to the expense incurred associated with the mailing of this letter, feel free to provide that feedback to that e-mail address.

As always, you may contact your homeowner representatives (and the Governance Committee as a whole), at the following address: admin@OSHOA.org

• Coastland sues Currituck County for monetary damages yet again on issues stemming from 1980’s vintage Settlement Agreement between the parties.

• As the lawsuit involves the water & sewer assets, OSWSD may be brought into the litigation; a money judgement against OSWSD would trigger higher water & sewer bills.  OSWSD has independent counsel.

• Coastland informs Ocean Sands and Crown Point POA’s that Coastland intends to hire an attorney for the POA’s.  Owner board members push back as POA’s don’t have a dog in this race and it is sensed that Coastland might use this as a way to push some of its legal expenses to the POA’s.

On June 17, 2015, Coastland filed another one of a long line of lawsuits against Currituck County and other communities in Corolla.  In brief, Coastland alleges that the County used water-related assets to provide “city water” to Corolla developments other than Ocean Sands in contravention of various Settlement Agreements between Coastland and the county and that this took away Coastland’s competitive advantage and resulted in the diminution in value of its remaining parcels in Ocean Sands.

A brief synopsis of the history follows.  In the 1970’s, Currituck County adopted the “Currituck Plan” which was hailed as a “model for future coastal development that includes respect for natural surroundings.”  This Plan contemplated centralized water and sewer service throughout the Currituck Outer Banks.  Coastland states that, while it agreed to comply with this Plan, the county did not force other developers to comply with it.  Coastland built a water treatment plant, wastewater treatment plant and associated underground piping to provide centralized water and sewer to Ocean Sands.  The water processed in the plant came from freshwater shallow-water wells.   Water that comes from deep-water wells is brackish and must be run through a reverse osmosis plant for “desalinization.”

As part of a 1987 Settlement Agreement between the parties, the County acquired the Ocean Sands’ water assets from Coastland and established a service district, Ocean Sands Water and Sewer District (OSWSD), to provide water and sewer service to Ocean Sands.  Under this Agreement, the County, through OSWSD, was obligated to obtain additional water capacity to the extent necessary to service Ocean Sands as it grew.

In 2002, the County formed SOBWS and acquired the assets of OSWSD, including $1.8 million in cash.  The water plant initially constructed by Coastland was demolished and a new, larger plant was constructed on the west side of Route 12 between the Currituck Club and TimBuck II.  This facility has both a conventional water treatment plant (used for Ocean Sands’ shallow water wells) and a reverse osmosis plant (used for SOBWS’ deep water wells).   In other words, there is one “line” in the plant that serves OSWSD and another “RO” line that serves customers outside of Ocean Sands & Crown Point. The 1987 Settlement Agreement was amended, with one of the new provisions that Coastland would not block an ocean outfall pipe.  An ocean outfall pipe is necessary to the reverse osmosis plant so that the saltwater can be flowed to the ocean.  

The ocean outfall pipe was laid through Ocean Sands (buried underground) and the RO line in the plant was completed in 2005.  In April, 2005, SOBWS commenced providing centrally-treated water to Ocean Hill, Whalehead, Corolla Village and Spindrift with water coming from the RO line.  This water comes from the reverse osmosis plant.  Ocean Sands water is provided primarily from the conventional water plant.  The parties disagree as to whether Ocean Sands water supply has ever been supplemented with reverse osmosis water.

Coastland has filed a claim for Inverse Condemnation, alleging that its natural resources – i.e., shallow-well water and the land on which the ocean outfall pipe was laid – were taken by the county without just compensation and that Coastland was also damaged by the resulting diminution in value of its Ocean Sands property.  Coastland’s complaint states that it never gave permission for the construction of the ocean outfall pipe.   Inverse Condemnation is a legal theory relating to taking of property by a governmental agency which so greatly damages the use of a parcel of real property that it is the equivalent of condemnation of the entire property.   Coastland had previously brought an Inverse Condemnation action against the county in 1984 claiming that the County’s land use regulations constituted a “taking” of Coastland’s property.  The U.S. Fourth Circuit Court of Appeals found that Coastland had not established the material facts necessary to establish that there was a taking of property without just compensation and dismissed Coastland’s motion for summary judgement.  This led to the 1987 Settlement Agreement.  As an editorial comment (solely the view of the author), it appears that anytime someone looks so much as sideways at any of Coastland’s property, Coastland claims that their property rights were infringed and so they must be compensated.

In the current suit, Coastland also alleges a breach of the 1987 Settlement Agreement in that the County agreed not to impair Coastland’s natural resources and that in laying the ocean outfall pipe and other actions the County breached this obligation.  The County believes that Coastland is incorrect in its reading of the 1987 Settlement Agreement.

The County’s Answer to the Complaint basically states that:

1. Coastland’s allegation that Ocean Sands did not need the RO plant to supplement potable water requirements is incorrect;  
2. Coastland’s interpretation of the 1987 Settlement Agreement is off base;
3. Coastland’s allegations don’t satisfy the requirements for an Inverse Condemnation action;;
4. Coastland failed to join a Necessary Party, the OSWSD, which owns and manages the assets which are the subject matter of Coastland’s claims; and
5. Coastland’s action barred by the Statute of Limitations and other legal defenses all roughly noting that the facts have existed for 15 years and Coastland unreasonably delayed its suit.

Based on the various Settlement Agreements between the parties, arbitration is required before the case goes to trial.   We have heard that the selection of an arbitrator has been unduly delayed due to Coastland’s recalcitrance.  In addition, the county has filed a motion to join OSWSD into the lawsuit so that the matter can be settled with all parties involved for once and for all.  This motion will be heard at the end of January.

A note of particular relevance to Ocean Sands homeowners — Because there is the possibility of a money judgement against OSWSD Coastland sent an e-mail to the owner members of the Ocean Sands and Crown Point POAs which said Coastland believes the POAs need representation in this matter so Coastland was going to hire a lawyer to represent the POA’s and sit in on OSWSD Advisory Board meetings and conference calls, among other things.   This stemmed from the fact that the County Attorney had started joining regular OSWSD conference calls; however, the County Attorney was participating solely to instruct County employees participating the calls on matters of attorney-client privilege.  OSWSD has retained independent counsel.

Your owner members strenuously objected to this on the following grounds:  (1) POA’s will never be a party to this lawsuit and would have no standing to get involved; (2)  as such, while individual homeowners would suffer higher water rates should Coastland get a money judgement against OSWSD, the POA’s will never suffer a liability; and (3) Coastland’s announcement that it was going to hire counsel for the POAs appeared to be nothing more than a ruse to foist a portion of its litigation expenses on the POAs.   Separately, we have expressed the view that if Coastland does manage to extract a “pound of flesh” from OSWSD people won’t view the county as the “bad guy”; rather, homeowners will be looking at the party that extracted the money.