The Californer - Court Denies Santa Barbara County's Motion To Dismiss Over Recycling Facility Dispute

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U.S. District Judge Monica Almadani ruled on June 13 that MSB Investors LLC (MSB) can pursue all claims against the County.

SANTA BARBARA, Calif. - Californer -- After a nine-month review, a United States District Judge has denied Santa Barbara County's motion to dismiss a breach of contract lawsuit over a $140 million waste conversion and management facility, allowing the case against the County to proceed.

U.S. District Judge Monica Almadani ruled on June 13 that MSB Investors LLC (MSB) can pursue all claims against the County, including breach of contract, breach of the covenant of good faith and fair dealing, violation of equal protection and retaliation stemming from the ReSource Center project located in Goleta. (MSB Investors, LLC, et al. v. County of Santa Barbara, et al., Case No. 24CV0408, July 23, 2024).

In 2011, the Santa Barbara County Board of Supervisors selected MSB as a preferred partner to build and operate the recycling facility that would decrease trash sent to landfills by separating and selling recyclable commodities and composting organic waste to create renewable energy and soil amendment.

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Because of County delays and errors, construction did not begin until December 2018. Operations finally began in February 2021.

"MSB stood by the County throughout the partnership, even as County-created delays and mistakes piled up. It was 10 years before the facility could finally begin operations," says Barry Cappello, managing partner at Santa Barbara's Cappello & Noël LLP (www.cappellonoel.com) and one of the attorneys representing the plaintiffs.

Part of the partnership contract, according to the complaint, was that the County would assume the risk if revenues were not sufficient to cover the operational costs of the plant. A number of issues, including COVID, created a negative impact on the revenue stream. Instead of honoring the terms of the contract by providing cashflow assistance, in November 2023, the County sent MSB a Notice of Intent to Terminate.

"The notice did not comply with the contract's cure requirements, and the purported bases for the termination were pretextual and irrational. The County literally out of malice, took this contract away from our clients," says Cappello. "This was a huge state-of-the-art facility that our clients designed and built. When MSB realized the County was trying to take over the ReSource Center and make MSB eat the $30+ million it had invested in the project, they were forced to file the lawsuit."

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After MSB's July 23, 2024 lawsuit filing, the County filed a Motion to Dismiss on September 3, 2024. Judge Almadani's June 13 denial to dismiss ruling allows MSB to move forward with all claims in an attempt to recover the damages it says it has incurred because of the County's actions.