NORTH CAROLINA BRUNSWICK COUNTY TOWN OF LELAND, NORTH CAROLINA, and H2GO BRUNSWICK REGIONAL WATER & SEWER. Plaintiffs, vs TOWN OF BELVILLE, NORTH CAROLINA. Defendant, TOWN OF LELAND, NORTH CAROLINA Plaintiff'and Cross- Claim Plaintiff vs. TOWN OF BELVILLE, NORTH CAROLINA Defendant and, H2GO BRUNSWICK REGIONAL WATER & SEWER. Cross-Claim Defendant. INTERLOCAL RISK FINANCING FUND. OF NORTH CAROLINA, Jntervenor. IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION FILE NO.: 17-CVS-2243 FIRST AMENDED COMPLAINT FOR DECLARATORY AND. INJUNCTIVE RELIE EXHIBIT Fs Exhibit € - on0001GENERAL AVERMENTS, INTRODUCTION 1. This action arises from an unlawful effort to strip a public entity, H2GO Brunswick Regional Water & Sewer (“H2GO), of its statutory powers and responsibilities, to divest its Current Board of Commissioners (the “Current Board”) of their ability to govern H2GO as required by law, and to subjugate H2GO to the political will and contol of the Town of Belville (“Belville”), 2. Belville and the outgoing majority of H2GO's Board of Commissioners (the “Outgoing Majority”) sought to achieve this result by causing H2GO to execute several contracts and conveyance documents in favor of Belville (the “Putative Agreements”), the intended effect of which was to have H2GO convey the entirety of its assets and debts, including the water and sewer systems (the “Systems”), to Belville and to then have H2GO staff operate and maintain those systems as essentially a subcontractor of Belvitle (collectively, the “Putative Transfer”) 3. Belville and the Outgoing Majority devised the Putative Transfer as a political coup to avoid the results of a Commissioners’ election held on November 7, 2017, following which a majority of H2GO"s Board would oppose the construction of an unnecessary and expensive reverse osmosis water treatment plant (the “RO Plant”) that Belville and the Outgoing, Majority wanted built. Notably, the Putative Agreements purport to require H2GO to cooperate with Belville in making the controversial and unnecessary RO Plant a reality 4, Through a series of non-public communications and without holding 2 public meeting, the Outgoing Majority committed H2GO to negotiating the Putative Transfer with Belville and working with Belville to negotiate and prepare the Putative Agreements prior to November 28, 2017. Exhibit -ooo0025. Then, on November 28, 2017, at the las meeting at which the Outgoing Majority would be in power, the Outgoing Majority adopted a resolution (the “Challenged Resolution”) purporting to authorize the Putative Transfer then immediately signing the Putative Agreements, all of which were drafted by Belville’s attomey, and delivering them to Belville, which countersigned within twenty-four hours. 6. Belville and the Outgoing Majority failed to obtain the requisite prior approvals from H2GO’s bondholder and the North Carolina Local Government Commission (the “LGC”) before voting to authorize the Putative Transfer or executing the Putative Agreements. 7. The Outgoing Majority and Belville nonetheless began transferring H2GO"s rightful property to Belville in a hurried fashion. 8. The Putative Transfer and all of the Putative Agreements are contrary to law because, inter alia: (a) they diminish or discontinue H2GO"s status as a body politic and corporate in violation of North Carolina General Statutes Chapter 130A, Article II, Part 2 without using the statutory procedures that must be used to achieve such an objective: (b) they unlawfully bind future H2GO Boards of Commissioners with respect to the exercise of govemmmental finetions and strip future Boards of their discretion; (c) they fail to comply with N.C. Gen Stat § 130A-55(20) and are oppressive, the result of a manifest abuse of discretion, and/or are in wanton disregard of the public good; (d) they purport to unlawfully transfer H2GO's debt without required preapproval of the LGC and H2GO’s bondholder; and (¢) they are the product of undue influence, constructive fraud, and other inequitable conduct by Belville and certainly are not the product of an arm’ length transaction. void and cannot 9. The Putative Transfer and the Putative Agreements are pull be redeemed. Exhibit € - 00900810. Plaintiffs, the Town of Leland (“Leland”) and H2GO bring this action for declaratory and injunctive relief, secking to enforce North Carolina law, to undo the unlawful Putative Transfer, and to restore H2GO as a body politic and corporate with ownership and control of the Systems and the District's other assets and debts. THE AMENDED COMPLAINT 11. This Amended Complaint is filed to add H2GO as a party plaintiff with respect to the majority of the claims and drop it as a party defendant as to those claims in light of its Current Board being empaneled and aligned with Leland and to assert a cross-claim by Leland against H2GO with respect to the Open meetings Law claim, for which H2GO is a necessary party defendant, 12, This Amended Complaint also is filed to add allegations concerning facts learned since the filing of the Complaint, and to clarify the causes of action, THE PARTIES 13. Leland is an incorporated local government located in Brunswick County and comprises the majority of H2GO’s existing service area. 14, H2GO is a sanitary district, organized and existing pursuant to Chapter 130A of the North Carolina General Statutes. 15. Belville, is an incorporated local government located in Brunswick County. 16. Belville has no sovereign or governmental immunity with respect to the claims asserted herein or, in the alternative, has waived any potential immunity by, inter alia, patticipating in an interlocal government risk pool, Exhibit - 090008JURISDICTION AND VENUE IN THIS COURT 17. The Superior Court of Brunswick County has personal jurisdiction over the parties to this action, as well as the subject matter at issue, 18. Brunswick County, North Carolina is the proper venue for this action. FACTUAL, LE H2GO isa Regional Public Utility, Established by State Law to Provide Water and Sewer ‘Service to the North Brunswick County Area 19, Since well before the present dispute, H2GO has been a water and sewer distriet existing pursuant to Chapter 130A of the North Carolina General Statutes. 20. As of November 28, 2017, H2GO provided water distribution, sewage collection, and wastewater treatment to approximately 10,000 residential and commercial customers in northeast Brunswick County, North Carolina. H2GO"s service boundary inchudes all of Belville, fa majority of Leland, a section of the Town of Navassa, and unincorporated areas outside of these communities, 21, As of November 28, 2017, H2GO owned and operated a public water distribution system consisting of approximately 184 miles of distribution water mains, a 500,000 gallon ground storage tank and boost pump station, a one-million gallon elevated water storage tank, together with fire hydrants, valves, service lines, customer meters, land, easements, rights-of- way, and related facilities (the “H2GO Water System”), 22, As of November 28. 2017, H2GO owned and operated a public sanitary sewer collection system consisting of approximately 157 miles of gravity and pressure sewers, a 400,000 gallon-per-day wastewater treatment plant, a 684.970 gallon-per-day capacity in the Brunswick County Northeast Wastewater Treatment Plant and in partnership with a wastewater transmission system, a collection system together with manholes, lift stations, force mains, Exitst € - 000005valves, air release valves, service taps, service laterals, clean-outs, land, easements, rights-of- way, and related facilities (the “H2GO Sewer System”), 23. On or about July 10, 2012, H2GO adopted a bond order authorizing the issuance of water and sewer system revenue bonds to provide additional funds to finance the H2GO Water System and H2GO Sewer System (the “Bond Order”). 24. The Bond Order authorized an initial bond in aggregate principal amount not to exceed $6,855,000. 25. Upon information and belief, the LGC approved issuance of the Bond Order. 26. H2GO had approximately $16.6 million in capital improvement funds, debt service reserve funds, operating reserves, and customer deposits as of November 28, 2017. 27. H2GO had debt associated with the H2GO Sewer System of approximately $6 million as of November 28, 2017. 28. Currently, H2GO purchases all of its finished water from Brunswick County Public Utilities (*BCPU"), which has reliably supplied all of H2GO's potable water needs for over 30 years, The water supplied by BCPU comes from two sources: (a) a 6-million gallon per day treatment plant finishing water from a freshwater well field (the “211 WTP”), and (b) a 24- million gallon per day treatment plant (the “Northwest WTP"), which treats raw water from the Cape Fear River. The Northwest WTP is supplied raw water by the Lower Cape Fear Water & ‘Sewer Authority ‘The Oulgoing Majority Wanted to Build the Ri the Distriet’s Voters Recently Flected an Anti-RO Plant Majority 29, Pursuant to N.C, Gen. Stat. § 130A-50, H2G0 is governed by a Board of five (5) commissioners who are elected by the voters of the district and who must exercise political and governmental authority over the distri. exibt€ - 00000530. H2GO"s Board of Commissioners formerly consisted of the Outgoing Majority (William Browning (“Browning”), Carl Antos (“Antos”), and Ron Jenkins (“Jenkins”) and two other Commissioners (Jeff Gerken (“Gerken”) and Trudy Trombley (“Trombley")) 31. The Outgoing Majority proposed to construct the RO Plant, which consists of, among other components, the water treatment plant, a new well field network, raw water transmission lines, and an RO concentrate discharge line to the Brunswick River (all of which are included in the definition of “RO Plant” herein). 32. The RO Plant, if constructed, would be located in Belville and would withdraw brackish water from an aquifer, convert it to potable water, and discharge the RO concentrate to the Brunswick River. 33. The estimated costs of the RO Plant are approximately $34 million. 34. An election was held on November 7, 2017 for three of the five H2GO commissioners seats (the “Election”) 35. ‘Then-Chairman Browning was not seeking re-election; Commissioners Antos and. Jenkins were up for re-election, and Commissioners Gerken and Trombley were not up for te- election, 36. The key issue in the election was the possible construction of the RO Plant, 37. The voters elected William Beer (“Beer”) and Rodney MeCoy (“MeCoy) and re- elected Mr. Jenkins. 38. Pursuant to N.C. Gen. Sta § 130A-50(e), Mr. Beer took his oath of office on December 4, 2017 and has lawfully served as an H2GO Commissioner since that time. 39. Mr. MeCoy took his oath of office later in December. Exhibit € 00000740. The Current Board has a majority of Commissioners who oppose the RO Plant, comprised of Commissioners Gerken, Trombley, and Beer Belville and the Outgoing Majority Tried to Undermine the Election Results by Transferring T2GO’s Assets and Debts and Tying the Hands of the Current Board with Respect to ‘All Governmental Functions and Discretionary Matters 41, Prior to the Election, Belville and the Outgoing Majority began to have concerns that an anti-RO Plant majority might be elected to the H2GO Board of Commissioners, and they began to search for ways to proceed with the RO Plant anyway. 42. On information and belief, one or more members of the Outgoing Majority ‘communicated with one or more representatives of Belville prior to November 2017 concerning the possibility of transferring H2GO"s Systems to Belville. 43. On information and belief, Mr. Jenkins communicated with one or more Belville representatives in or around early November 2017 concerning the possibility of transferring H2GO’s Systems to Belville. 44, On information and belief, Mr. Antos communicated with one or more Belville representatives in or around early November 2017 concerning the possibility of transferring H2GO’s Systems to Belville. 45. On information and belief, Mr. Browning communicated with one or more Belville representatives shortly after the Election conceming the possibility of transferring H2GO"s Systems to Belville. 46. During the week of November 6, 2017, Mr. Jenkins met with H2GO Executive Director Bob Walker (“Walker”) regarding the possibility of selling or otherwise transferring H2GO"s water and sewer systems to Belville and asked Mr, Walker to investigate whether such a sale or transfer could be accomplished. xn € - 000008,47, Inthe days following November 6, 2017, Belville’s Town Atomey, Jim Eldridge (Eldridge) initiated correspondence or other communications with Mr. Walker, during which Mr. Eldridge asked Mr. Walker for information about H2GO, including the statutes that apply to H2GO operations for the purpose of implementing a transfer strategy. 48. During these communications. Mr. Eldridge specifically indicated that Belville wanted to overcome the election result by acquiring H2GO"s Systems pursuant to N.C. Gen. Stat. § 1604-274, 49, Beginning on or about November 12, 2017, Mr. Eldridge solicited and obtained information from Mr. Walker, including @ sample operational agreement and itemized lists of real and personal property owned by the district, cash assets held, liabilities, contracts, permits, etc. that would need to be included in the Putative Agreements, 50. Belville also arranged for Mr. Walker and another H2GO employee to meet with Belville’s Accountant Clement Goodson, of Goodson & Taylor, P.C., to discuss the logistics of cash asset transfers. 51. Prior to November 28, 2017, Mr. Eldridge prepared or caused to be prepared the Challenged Resolution, Putative Transfer, and Putative Agreements. 52. In preparing or causing to be prepared the Challenged Resolution and the Putative Agreements, Mr. Eldridge did not consult with H2GO"s municipal counsel and dic not inform him of the Outgoing Majority’s and Belville’s plans. notwithstanding that Mr. Eldridge knew the identity of H2GO"s municipal counsel 53. Upon information and belief, Mr. Eldridge excluded H2GO"s municipal attomey from discussions about the Challenged Resolution, Putative Transfer, and Putative Agreements. Exhibt € - 00000854. On information and belief, Mr. Eldridge excluded H2GO"s municipal attorney to avoid any questions about the legality of the Putative Transfer and to avoid any appropriate process that might have the effect of hampering or delaying Belville’s and the Outgoing Majority’s Putative Transfer. 55. Mr. Eldridge communicated directly with the Outgoing Majority and H2GO employees, notwithstanding that he knew or should have known that H2GO was represented by counsel. ‘The Outgoing Maiority Enacted the Unlawful Transfer Resolution. and the Outgoing Majority. ‘utative Agreements 56. ‘The Outgoing Majority was set to have its last Board meeting in power on November 28, 2018. 37. Prior to the November 28, 2017 meeting, the Outgoing Majority and Belville worked to keep their plans to enact the Challenged Resolution and to implement the Putative Transfer a secret. 58. The Putative Transfer was added as an amendment to the H2GO Agenda at the November 28, 2017 meeting itself. Commissioner Antos added it shortly after the meeting was opened under a nebulous and non-descript characterization, requesting that discussion on H2GO “Operations” be added to New Business. 59, The LGC, however, learned of the intent to proceed with the Putative Transfer, and it sought to advise Belville and the Outgoing Majority not to proceed as they planned. 60. Specifically, on November 28, 2017, Sharon Edmunson, Director, Fi ‘Management Section State and Local Government Finance Division of the Department of State ‘Treasurer (“SLGFD”), sent an email to H2GO and Belville stating as follows: xn € -090010SLGFD staff has leamed that the elected officials for H2GO plan to vote tonight on transferring the assets and related debt of the District to the Town of Belville. ‘The debt is secured by system revenues. We cannot confirm that bond counsel for H2GO has been consulted on this plan. We cannot recommend strongly enough that H2GO consult with its bond counsel before taking any action involving its debt or the assets that generate the revenue that supports that debt. Actions such ay those that you are considering may cause the debt to go into a default status, which is surely not your intent. In addition, any transfer of debt will require the approval of the Local Government Conumission before such a transfer can occur. We also recommend that the Town of Belville take the time to consider the full responsibilities of taking on a water and sewer system, including not only the costs and expertise needed to operate the system but the costs and long term commitment to adequately maintaining and eventually replace such a system. We are happy to discuss these issues with you at your convenience. G1. Atthe request of the SLGED, this email was forwarded to Commissioner Gerken, who read this email aloud at the November 28, 2017 H2GO Board of Commissioners meeting prior to the vote being taken on the Challenged Resolution, 62. This admonition did not stop the Outgoing Majority and Belville from pursuing the Putative Transfer, 63. Indefiance of the LGC, the voters, and the law, the Outgoing Majority passed the Challenged Resolution on November 28, 2017, which states! 1. That the District shall convey the Water and Sewer Systems, and all of its real and personal property including, without limitation, all of the land, facilities, structures, vehicles, equipment, permits, contracts, funds, supplies, and liabilities associated with or required by the Water and Sewer Systems to the Town of Belville (“Belville”): 2. That the District enter into an operating agreement with Belville to operate, maintain, and manage the Town’ s Water and Sewer Systems; and 3. [sic] Authorizes the Executive Director and H2GO Staff to coordinate efforts with the Town of Belville to insure a seamless conveyance of the Water and Sewer Systems, ul Exhibit - 0000114, That the Board Chairman is hereby authorized and directed to sign, on behalf of the District, the following instruments: A. An Agreement to Convey Water and Sewer Systems to Belville; B. An Assignment and Bill of Sale conveying title to the District’s personal property to Belville; C. Warranty deeds conveying title to the District's 38 parcels of real property to Belville: and D. An Agreement for the Operation and Maintenance of Water and Sewer Systems with Belville. 64, The Challenged Resolution acknowledges that it secks to prevent the Current Board from exercising its right and authority to govern H2GO and to prevent 112GO from opposing the RO Plant that Belville and the Outgoing Majority wanted to build, stating: WHEREAS . . . as an inherent element of its long-term Water System plans, the District has been proactively planning and working to construct and operate a new 4.0 million gallon per day RO water treatment plant, and has , and has invested over $6 million and awarded construction contracts exceeding another $8 million in that project to date; WHEREAS, recent events clearly show a risk that the RO project may be terminated by rescinding the related contracts thereby wasting the S14 Million Dollars the District has already invested towards safe, clean, contaminant-free water supplies; WHEREAS, such recent events include: © Commissioner Trombley openly questioning. the need for the District and stating that construction of the RO water treatment plant will likely be stoppe © Commissioner Jeff Gerken stating that he knows a majority of the board, when newly-elected Commissioner Beer is seated in December, “plans to vote to kill the project”; and © Newly elected William Beer, who campaigned on a platform to “stop further construction on the RO plant,” stating that he is working closely with Trombley and Gerken and will seek to “abolish all activities and contracts telated to the reverse osmosis plant{.]” Exit €- 00001265. Immediately alter the November 28, 2017 meeting, then-Commissioner Browning executed the Putative Agreements, and the Outgoing Majority had them quickly delivered to Belville. 66, Upon information and belief, Belville’s Board of Commissioners held open its November 20, 2017 meeting for the purpose of reopening that meeting to “accept” the Putative ‘Transfer and “approve” the Putative Agreements. 67. Belville reopened the November 20, 2017, meeting early on November 29, 2017 and “approved” the Putative Transfer. 68. Upon information and belief, the November 29, 2017 meeting was held at 8 a.m. 69. Upon information and belief, the date and time of the November 29, 2017 meeting was set so as to prevent the possibility of someone obtaining injunctive relief stopping the transfer 70. Immediately after the November 29, 2017 meeting, Belville’s mayor countersigned the Putative Agreements, and Belville had some of them recorded with the Brunswick County Register of Deeds. 71. At the instruction of Belville and the Outgoing Majority, H2GO employees then began working to quickly transfer cash assets and prepare administrative documents. in anticipation of working under the Putative Agreements 72, These rts continued until H2GO received notice of the TRO obtained by Leland on December 1, 2017. 73. Because of Belville’s and the Outgoing Majority's unlawful course of conduct, much of the Putative Transfer had been completed as of that time. enbit € -000013‘The Putative Agreements Destroy H2GO as an Independent Political Entity and Purport 10 Effectively Decapitate its Corporate and Political Leadership 74. The Putative Agreements consist of the following: (A) an Agreement to Convey ‘Water and Sewer Systems (the “Conveyance Agreement”), (B) an Assignment and Bill of Sale (the “Bill of Sale”), (C) an Agreement for the Operation and Maintenance of Water and Sewer Systems (the “Operating Agreement”), and (D) a General Warranty Deed (the “Deed”. 75, These documents are not the result of arms-lengths negotiations. 76. Rather, as indicated above, they were drafted by Belville’s attormey who was properly making an end-run around H2GO's municipal counsel and was improperly communicating directly with H2GO Commissioners and employees. 77. This end-run around H2GO's counsel was made for the express purposes of preventing disclosure of the Putative Transfer and any delay thereof. 78, Further, these documents were not made available to the public, or 0 Commissioners Gerken and Trombley. for review prior to the November 28, 2017 H2GO Board of Commissioners meeting, 79, The Conveyance Agreement and the Operating Agreement include numerous representations and warranties “by H2GO,” many of which are inaccurate, and upon information and belief, they were included by Belville’s attorney to try to prevent H2GO"s Current Board from rescinding the transaction, 80. In other words, Belville, as the drafter of these documents, unlawfully induced H2GO to make these representations and warranties, 81. The Conveyance Agreement provides that: a. H2GO must transfer everything it owns, and all of its related debt, to Belvill. 4 Exhibit E- o000teb, H2GO must subject itself to the Operating Agreement, making H2GO entirely subordinate to Belville as the then-purported-owner of everything that once belonged to H2G0, 82. The transactions set out in the Conveyance Agreement are inextricably intertwined with one another. 83. The Operating Agreement includes the following provisions: a. Article 4, governing the term of the Agreement, which provides that the Operating Agreement will terminate on January 31, 2018 ~a termination date that would allow Belville sufficient time to directly hite H2GO"s employees and leave H2GO an empty shell of an entity with no assets and no employees and would leave 12GO"s elected Board of Commissioners with nothing to govern; b. Section 10.01, governing termination of the Agreement, which states that Belville can terminate the Agreement within thirty days’ notice, but which would leave the assets and debts in the possession of Belville; ©. Section 6.02(B) and other provisions of the Agreement, which purport to permit Bebville, as opposed to H2GO, to govern the District's Systems and to make rate adjustments for water and sewer services; 4. Section 6.01(K), which states that Belville, as opposed to H2GO is “the governing authority with regard to commiting to provide water and sewer services to future customers” €. Section 6.01(P), which purports to require H2GO to obtain Belville’s approval for capital improvements deemed necessary for the operation of the water and sewer systems; Exhibit - 000015£, Section 6.01(Q), which purports to require H2GO to “[alssist [Belville] with seeking financing approval from the [LGC] for the construction of [the RO Plant] and on any renewals of or actions required under the permits and contracts associated with or required for the Town’s [Systems]" »n 6.01(J}, which purports to require H2GO to perform “the Town's g Se obligations under contracts and permits,” presumably including those that are related to the RO Plant; h, Section 6.01(S) which permits H2GO employees to use “the Town’s” property, but provides that “[pJast, current, and fature members of the District's governing board are not licensed nor [sie] permitted to use any Town vehicles or equipment and are expressly not licensed or permitted to enter upon any Town property associated with the Town's Water and Sewer Systems excepting the Town Hall public building’ i. Section 7.02, which purports to require that H2GO forward utility payments and other fees collected from its customers to Belville: J. Article 5, which purports to allow Belville to pay H2GO weekly compensation in an amount that is insufficient to meet H2GO"s needs and which is intended to require H2GO to run to Belville to request every item of funding needed; k. Article 8, which is a “poison pill” indemnification provision that purportedly requires H2GO to indemnify Belville if H2GO breaches the Agreement, including by declaring the unlawful Agreement what it is ~ null and void: 1. Article 11 governing default by, and liquidated damages against, H2GO and which provides: SECTION 11.01, DEFAULT DEFINED. A default of this Agreement shall be deemed to have occurred in the event that: 16 Exhibit € - 000016A. The District fails to perform its obligations hercunder or otherwise materially breaches this Agreement; B. This Agreement is rescinded by the District's governing board prior to the expiration of its term; and/ or C. This Agreement is terminated by the District's governing board without providing the requisite thirty( 30) days’ notice prior to the effective termination date. SECTION 11.02. LIQUIDATED DAMAGES UPON DISTRICT'S DEFAULT. In the event of a default as defined in the preceding section, [Belville] will suffer financial loss if the operation, maintenance, and management of its Water and Sewer Systems is not performed, and the parties recognize and hereby acknowledge the delays, expenses, and difficulties involved in proving the actual loss suffered by [Belville] as a result of any such default. In lieu of requiring such proof, {Belville] and the District agree that the District shall pay [Belville] $9,333.33, as liquidated damages for delays in performance only and not asa penalty, for each day of non-performance commencing on the date on which the default occurred and up to and including the date on which the term of the Agreement expires. The provisions of Section 12.04 herein-shall not limit, delay, toll, or otherwise effect [Belville’s] entitlement to liquidated damages as herein provided. m. Section 1.04, which purports to require future H2GO Boards of Commissioners to cooperate with Belville concerning the Agreement, and to take further actions as are necessary to effectuate the Agreement, n. Section 12.09, which misrepresents that the Agreement is a valid, fully integrated contract; and 0. Other provisions that subordinate E12GO to Belville and impair H2GO's corporate and political powers. 84, The Operating Agreement is an overreaching and adhesive document that makes little or no effort to mask its obvious objective of subduing H2GO as a political and corporate entity 85. The Bill of Sale lists all of H2GO’s assets, real and personal, and all of its debts. 7 Exhibit € -00001786. The Bill of Sale includes the information that Mr. Eldridge obtained by communicating directly with H2GO employees. 87, The Deed purports to transfer H2GO’s real property to Belville. H2GO. Through Its Curent Board. Opposes the Putative Transfer and Believes that the Putative Transfer and the Putative Agreements Are Null and Void 88, The Current Board held an emergency meeting on December 4, 2017. 89. At that meeting, a majority consisting of Commissioners Gerken, Trombley and Beer voted to pass a resolution (the “Corrective Resolution”) declaring the Challenged Resolution and the Putative Agreements null and void. 90. This declaration by the Current Board is based on the majority's recognition that the Challenged Resolution, Putative Transfer, and Putative Agreements are unlawful and manifestly unfair to H2GO"s voters and customers. 91. Belville has failed and refused to acknowledge that H2GO can rescind the Challenged Resolution, the Putative Transfer. and the Putative Agreements and has failed and refused to acknowledge that these documents are invalid, null, and void, 92. For the reasons explained below, the Challenged Resolution, the Putative ‘Transfer, and the Putative Agreements are null and void and should be set aside, in their entirety, by the Court. CAUSES OF ACTION BY BOTH LELAND AND 112GO AGAINST BELVILLE FIRST CLAIM FOR RELIEF (POR A DECLARATION THAT THE CHALLENGED RESOLUTION, PUTATIVE "TRANSFER, AND PUTATIVE AGREEMENTS ARE VOID BECAUSE THEY IMPAIR 12GO AS A BoDy CORPORATE AND POLITIC IN CONTRAVENTION OF N.C. Gen. STAT, CHAPTER 130A, ARTICLE IL, PART 2) {By Leland and H2GO against Belville) 93. Plaintiffs re-allege and incorporate herein by reference the general averments and the allegations of the first through eleventh causes of action as if sct forth fully herein. 18 Exit 00001894, Pursuant to Article Il, Section I of the North Carolina Constitution, the legislative power of the State is vested in the General Assembly, which has the power to bring local governments into existence and to determine the circumstances in which their existence will be diminished or discontinued. 95. H2GO isa focal government, a sanitary district, created by the General Assembly. 96. The General Assembly has mandated (hat a sanitary district, like H2GO “shall be a body politic and corporate.” N.C. Gen. Stat. § 1304-35. It is in this capacity that a sanitary district must act under Chapter 130A, Article I Part 2 97. The General Assembly has provited three procedures for terminating the political and corporate existence of a sanitary district, and transfer is not among them, 98. Rather, the General Assembly has provided that the only methods for undoing the independent political power of a sanitary district, other than by specific action of the legislature, are dissolution, merger, and incorporation, the substantive 99. Belville and the Outgoing Majority could not establi requirements for dissolution, merger, or incorporation of H2GO. 100. Belville and the Outgoing majority also failed to satisfy the procedural requirements for dissolution, merger, or incorporation of H2GO. 101. Perhaps realizing their inability to proceed with such remedies, Belville and the Outgoing Board attempted to use N.C. Gen. Stat. §§ 130-55(20) and 1604-274 to achieve their objectives. 102. These provisions, however, do not grant Belville and the Outgoing Board the right to transfer H2GO out of political and corporate existence, as there is no provision in N.C. Gen. Stat. §§ 130A-S5(20} and 160A-274 for termination of a sanitary district by transfer. 19 Exhibit -000019103. If the Challenged Resolution, Putative sfer and Pulative Agreements are permitted to stand, H2GO will no longer be an independent body politic and corporate, 104. Accordingly, the Challenged Resolution, Putative Transfer and Putative Agreements are null and void; 112GO"s Corrective Resolution should be given full force and effect by the Court, and the Court should declare and adjudge that the Challenged Resolution, Putative Transfer and Putative Agreements are null and void, unenforceable, and of no effect and that Belville must return H2GO"s assets and debts. SECOND CLAIM FOR RELIEF (For A DECLARATION THAT THE CHALLENGED RESOLUTION, PUTATIVE TRANSFER, AND PUTATIVE AGREEMENTS ARE VOID BECAUSE THEY INVOLVE AN IMPROPER TRANSFER OF GOVERNMENT FUNCTIONS) (By Leland and H2GO against Belville) 105. Plaintiffs re-allege and incorporate herein by reference the general averments and the allegations of the first through eleventh causes of action as if set forth fully herein. 106. As a matter of long-standing law in North Carolina, the board of a governmental entity has no power to enter @ contract that forbids a future board of that entity from exercising, its discretion in carrying out governmental functions. 107. All such contracts are null and void as a matter of law 108. The Putative Agreements, drafted by Belville, are contracts that purport to allow a prior H2GO Board to forbid future H2GO Boards, including the Current Board, from exercising, ‘government finetions of the water and sewer district. 109, Indeed, the Putative Agreements were drafted specifically for this purpose. As part of a single, intertwined transaction, they purport to convey all of H2GO's assets and debts to Belville and to impose an Operating Agreement, which, as indicated above, purports to transfer all of H2GO's political, governmental, and discretionary power to Belville, 20 Exit € -o00020110. ‘The Challenged Resolution is void because it commits H2GO to the unlawful Putative Agreements. JIL. Accordingly, the Challenged Resolution, Putative Transfer and Putative Agreements are null and void; H2GO’s Corrective Resolution should be given full force and effect by the Court, and the Court should declare and adjudge that the Challenged Resolution, Putative Transfer and Putative Agreements are null and void, unenforceable, and of no effect and that Belville must return H2GO"s assets and debts. THIRD CLAIM FOR RELIEF (FOR 4 DECLARATION THAT THE CHALLENGED RESOLUTION, PUTATIVE TRANSFER, AND PUTATIVE AGREEMENTS ARE VOID BECAUSE THEY ARE OPPRESSIVE, ‘Tite RESULT OF A MANIFEST ABUSE OF DISCRETION, IN WANTON DISREGARD OF THE PUBLIC GOOD, AND CONTRARY TO N.C. GEN. STAT. § 130A-55 AND N.C. GEN, STAT. CHAPTER 160A, ARTICLE 12) (By Leland and H2GO against Belville) 112. Plaintiffs re-allege and incorporate herein by reference the general averments and the allegations of the first through eleventh causes of action as if'set forth fully herein. 113. Pursuant to N.C. Gen. Stat. §§ 130A-55, H2GO’s authority to dispose of real or personal property belonging to the District is subject to the requirement that H2GO exist as a body politic and corporate. 114, Pursuant to N.C. Gen Stat § 130A-55(20), H2GO"s authority to dispose of real or personal property belonging to the District is limited and must be in accordance with “the procedures prescribed in Article 12 of Chapter 160A of the General Statutes.” 115. Belville and the Outgoing Majority attempted to base the Challenged Resolution, Putative Transfer, and Putative Agreements on N.C. Gen. Stat. § 1604-274, which provides that, “[a}ny governmental unit may. upon such terms and conditions as it deems wise, with or without Exot € - 000021consideration, exchange with, lease to, lease from, sell to, or purchase from any other governmental unit any interest in real or personal property.” 116, The Challenged Resolution, Putative Transfer, and Putative Agreements do not involve any legitimate exchange, lease, sale or purchase any interest in real or personal property. 117, To the extent the Challenged Resolution, Putative Transfer, and Putative Agreements are deemed to involve an exchange, lease or purchase of interest in real or personal property, they are invalid because they are oppressive, the result of a manifest abuse of discretion, and/or are in wanton disregard of the public good ia that, among other things: a. The Challenged Reselution was enacted and the Putative Agreements were signed in bad faith and admittedly for the purposes of implementing the preferences of Belville and the Outgoing Board and of overcoming the will of the voters expressed ina recent election. b. The Challenged Resolution and the Putative Agreements involve a sham transaction. co The Challenged Resolution was enacted and the Putative Agreements were signed without Belville and the Outgoing Board taking reasonable steps to ensure that Belville is able to take on the System, has the Financial wherewithal and expertise needed to operate the System, and has long term commitment needed to adequately maintain and eventually replace the System, 4. The Challenged Resolution was enacted and the Putative Agreements were signed without due consideration for the requirements of H2GO’s bond obligations, without the approval of H2GO's bondholder as required by H2GO"s Bond Order, and without the approval of the LGC as is required by the General Statutes. Exit € - 000022e. The Challenged Resolution was enacted and the Putative Transfer Documents were signed in violation of H2GO"s Bond Order, which requires 100% approval of the bond holders prior to selling or otherwise disposing of the H2GO Systems. £ Upon information and belief, the Challenged Resolution, Putative Transfer and the Putative Agreements are the product of Belville and the Outgoing Board acting in secret, g. The Challenged Resolution was enacted and the Putative Agreements were signed in a hasty manner without due consideration of the important facts and circumstances relevant to a legitimate transfer. 118. The Challenged Resolution, Putative Transfer, and Putative Agreements fail to comply with the requirements of Chapter 160A, Article 12 governing sales, leases and exchanges and donations of personal property to other governmental units or to third-parties. 119, ‘The Challenged Resolution and the Putative Agreements fail to comply with N.C. Gen Stat § 130A-55(20), Article 12 of Chapter 160A of the General Statutes and H2GO"s Bond Order. 120. Accordingly, the Challenged Resolution, Putative ‘Transfer and Putative ‘Agreements are null and void; H2GO"s Corrective Resolution should be given full force and effect by the Court, and the Court should declare and adjudge that the Challenged Resolution, Putative Transfer and Putative Agreements are null and void, unenforceable, and of no effect and that Belville must retum H2GO's assets and debts, Exit -000023,FOURTH CLAIM FOR RELIEF (FOR A DECLARATION THAT THE CHALLENGED RESOLUTION, PUTATIVE TRANSFER, AND PUTATIVE AGREEMENTS ARE VoD BECAUSE THEY INVOLVE. AN ILLEGAL DEBT TRANSFER THAT IS UNAUTHORIZED BY NORTH CAROLINA LAW AND CONTRARY TO H2GO"s Bon Orpen) (By Leland and H2GO against Belville) 121, Plaintiffs re-allege and incorporate herein by reference the general averments a the allegations of the first through eleventh causes of action as if set forth fully herein. 122, The Challenged Resolution and the Putative Transfer Documents purport to authorize the transfer of the H2GO"s debt to Bellville. 123. There is no provision of North Carolina law that permits one local government to transfer its debt to another local government under the cireumstances existing in this case, 124, As is alleged herein H2GO"s bond indebtedness is not transferrable to Belville under H2GO's Bond Order, which provides at Section 2.05 that “[iJn no event will the Bond Registrar transfer the Bond to any person other than a bank, an insurance company or a similar financial institution unless the [LGC] has previously approved such transfer.” 125. Accordingly, the Challenged Resolution, Putative Transfer and Putative Agreements are null and void; H2GO’s Corrective Resolution should be given full force and effect by the Court, and the Court should declare and adjudge that the Challenged Resolution, Putative Transfer and Putative Agreements are null and void, unenforceable, and of no effect and that Belville must return H2GO's assets and debts. FIFTH CLAIM FOR RELIEF (Fon 4 DECLARATION THAT THE CHALLENGED RESOLUTION, PUTATIVE TRANSFER, AND PUTATIVE AGREEMENTS ARE VOID BECAUSE THEY INVOLVE AN ILLEGAL DEBT TRANSFER IN VIOLATION OF H2GO’s BOND ORDER) (By Leland and H2GO against Belville) 126. Plaintiffs re-allege and incorporate herein by reference the general averments and the allegations of the first through eleventh causes of action as if set forth fully herein, 24 Exhibit € - 000024127. H2GO"s Bond Order provides at Section 7.09 that *[H2GO] will not sell, lease or otherwise dispose of the System or any part thereof except as expressly permitted by this Section or as agreed to by 100% of the Holders.” 128. The Bond Order's transfer prohibition applies to the entire H2GO “System,” which is broadly defined in Section 1.02 to include the District's “[cJomplete water and sewer utilities systems, now existing or hereafter constructed or acquired either from the proceeds of the Bonds authorized by this Bond Order or from any other sources and includes ail facilities of any nature or description, real or personal, now or hereafter owned, leased as lessee or used by the District in obtaining, conserving, treating and distributing water for any public or private use or in the collection, treatment, purification or disposal of sewage. 129. Section 7.09 of the Bond Order makes clear that H2GO"s “System” includes machinery, fixtures, apparatus, tools, instruments or other property. 130. Pursuant to the same section, H2GO may “sell or otherwise dispose... of... property forming part of the System” only if H2GO determines that such property is “obsolete or no longer needed for the proper maintenance and operation of the System.” 131, Even then, the proceeds of such disposition must “be deposited in the Revenue Fund or otherwise used to pay or redeem Bonds.” 132, The attempted transfer does not involve the sale or disposition of a portion of the System that has become obsolete or unneeded, and indeed the Outgoing Board made no such findings 133. The “sale price” of $10 to which Belville and the Outgoing Board “agreed” is so minimal that it cannot legitimately be considered “proceeds.” Exhibit € - 000025134, For all of these reasons, the Outgoing Board and Belville needed the prior approval of all of the bondholders for the attempted transfer 135. Belville and the Outgoing Board never obtained the approval of H2GO's bondholder. 136, The Bond Order also provides: “In no event will the Bond Registrar transfer the Bond to any person other than a bank, an insurance company or a similar financial institution unless the [GC] has previously approved such transfer.” 137. The Outgoing Board purported to transfer the Bond to Belville without prior approval of the LGC. 138, Belville’s and the Outgoing Board's unauthorized activities violate the Bond Order and create a risk to Leland that its water and sewer rates will inerease. 139. Compliance with the Bond Order is requited by Chapter 159 of the North Carolina General Statutes. 140. Accordingly, the Challenged Resolution, Putative Transfer and Putative Agreements are null and void; H2GO"s Corrective Resolution should be given full force and effect by the Court, and the Court should decfare and adjudge that the Challenged Resolution, Putaiive Transfer and Putative Agreements are null and void, unenforceable, and of no effect and that Belville must return H2GO's assets and debts. SIXTH CLAIM FOR RELIEF (For A DECLARATION THAT THE CHALLENGED RESOLUTION, PUTATIVE TRANSFER, AND PUTATIVE AGREEMENTS ARE VotD BECAUSE THEY INVOLVE AN ILLEGAL Dept TRANSFER IN ‘VIOLATION OF N.C. GEN. STAT. CHAPTER 159, ARTICLE 5) (By Leland and H2GO against Belville) 141. Plaintiffs re-allege and incorporate herein by reference the general averments and the allegations of the first through eleventh causes of action as if'set forth fully herein, Exot € - 000028142. It is unclear what provision(s), if any, of North Carolina General Statutes Chapter 159 (Local Government Finance), Belville and the Outgoing Board purported to rely upon as a bisis for their putative debt transfer, but to the extent they purported to rely upon, or the transaction is deemed covered by, Article 5 (Local Government Revenue Bonds), their putative transfer violates that Article, 143, Specifically, the Putative Transfer violates several provisions of Article 5, including, inter alia, those designated below. 144, The Putative Transfer violates N.C. Gen. Stat, § 159-83(a), which provides that the powers to transfer assets are subject to the provisions of applicable revenue bond orders. 145, As indicated hevein, the Putative Transfer violates H2GO"s Revenue Bond Order: 146, The Putative Transfer violates N.C. Gen. Stat. § 159-83(b), which requires that “{alny contract, agreement, lease, deed, covenant, or other instrument or document evidencing an agreement or covenant between bondholders or any public ageney and the State ora municipality suing revenue bonds with respect to any of the powers conferred in this section [including transfers of capital improvement projects] shall be approved by the [LGC].” 147, Belville and the Outgoing Board failed to obtain the prior approval of the LGC as required by Jaw. 148, The Challenged Resolution, Putative Transfer, and Putative Agreements violate N.C. Gen. Stat. § 159-93, which provides that, so long as a revenue bond is in effect for a municipality, the State of North Carolina will not limit or alter the tights vested in the municipality at the time of issuance of the bonds or notes to establish, maintain, revise, charge, and collect such rates, fees, rentals, tolls, and other charges for the use, services, facilities. and commodities of or furnished by the revenue bond project in connection with which the bonds or notes, or bonds or notes refimded by the bonds or notes, were issued as shall produce revenues at least sufficient with other available funds to 7 xnist - 000027meet the expense of maintenance and operation of and renewal and replacements to such project, including reserves therefor. to pay when due the principal interest, and redemption premiums (if any) of the bonds or notes, and to fulfill the terms of any agreements made with the bondholders or noteholders, nor will the State in any way impair the rights and remedies of the bondholders or noteholders until the bonds or notes and all costs and expenses in connection with any action or proceedings by or on behalf of the bondholders or notcholders, are fully paid, met, and discharged. 149. The Challenged Resolution, Putative Transfer, and Putative Agreements violate this provision because they diminish H2GO's enumerated powers and place them in Belville pursuant to the Operating Agreement and because they violate the Bond Order. 150. The Challenged Resolution, Putative Transfer, and Putative Agreements also violate N.C. Gen, Stat.’§ 159-96(a), which provides that “a utility or public service enterprise . if financed wholly or partially by revenue bonds issued . . . . shall be owned or operated by the municipality for its own use and for the use of public and private consumers residing within its corporate limits” and N.C. Gen. Stat. § 159-96(d), which provides that municipalities could acquire sewage collection and disposal systems and water supply and distribution systems located within and without the corporate limits of such municipalities and finance such acquisition with revenue bonds” or “own, maintain and operate such acquired systems, enlarge and improve such acquired systems and finance the enlargement and improvement of such acquired systems with revenue bonds” only if they acquired such systems “during the calendar year ending December 31, 1989.” 151. Most of H2GO’s customers and most of the facilities comprising the Systems are not located within Belville, such that Belville could not acquire H2GO's debt. 152. Accordingly, the Challenged Resolution, Putative Transfer and Putative ‘Agreements are null and void; H2GOs Corrective Resolution should be given full force and effect by the Court, and the Court should declare and adjudge that the Challenged Resolution, 28, Exibit - 000028Putative Transfer and Putative Agreements are null and void, unenforceable, and of no effect and that Belville must return H2GO"s assets and debts, (For 4 DECLARATION THAT TH CHALLENGED RESOLUTION, PUTATIVE TRANSFER, AND PUTATIVE AGREEMENTS ARE VOID BECAUSE THEY INVOLVE. AN ILLEGAL DEBT TRANSFER IN VIOLATION OF N.C. GEN. STAT. CHAPTER 159, ARTICLE 8) (By Leland and H2GO against Belville) 153. Plaintiff’ re-all and incorporate herein by reference the general averments and the allegations of the first through eleventh causes of action as if set forth fully herein. 154, To the extent Belville and the Outgoing Board purport to rely upon, or the transaction is deemed covered by, Article 8 of N.C. Gen, Stat, Chapter 159 (Financing ‘Agreements and Other Financing Arrangements), the Challenged Resolution, Putative Transfer, and Putative Agreements violate that Article also, 155. As a result of the Challenged Resolution, Putative Transfer, and Putative Agrements, Belville is incurring indebtedness and is contractually obligating itself to pay 12GO’s bond indebtedness, apparently without issuing new revenue bonds. 156. Indeed, Belville cannot obtain new revenue bonds to finance the Systems or any improvements thereto because the Systems are significantly outside of Belville’s corporate limits. 157. ‘The Challenged Resolution, Putative Transfer, and Putative Agreements thus wolve a contract under N.C. Gen. Stat, § 159-148(a) because: a. The term of the bond extends more than five years; bb. The Putative Agreements obligate a new party, Belville, to pay sums of money to another; Exhibit 000020¢. Obligates Belville for the full term of the contract in an amount in excess of $500,000: 4. Obligates Belville to pay regardless of whethier system revenues are sufficient , which by implication, requires Belville to pay the bond indebtedness by levying taxes, if necessary. to honor Belville’s contractual obligations. 158. N.C. Gen. Stat, § 159-153(a\(1) provides that LGC approval is required before a unit of local government may incur indebtedness. 159. Under the circumstances alleged herein, the LGC would be unable to approve the Putative Transfer. 160. As indicated above, H2GO"s Bond Order also provides that “[i}n no event will the Bond Registrar transfer the Bond to any person other than a bank, an insurance company or & similar financial institution unless the [LGC] has previously approved such transfer.” 161. N.C. Gen, Stat. § 159-149 provides that, “[bJefore executing a contract subject to this Article, the governing board of the contracting unit shall file an application for Commission approval of the contract with the secretary of the Commission.” 162, Pursuant to N.C. Gen, Stat. § 159-149, any contract for which no approval is requested or received is void and local government officials are prohibited from making any payments of money thereunder. 163. Accordingly, the Challenged Resolution, Putative Transfer and Putative Agreements are null and void; H2GO"s Corrective Resolution should be given full force and effect by the Court, and the Court should declare and adjudge that the Challenged Resolution, Putative Transfer and Putative Agreements are null and void, unenforceable, and of no effect and that Belville must return H2GO"s assets and debts. Exist € - 000030,EIGHTH CLAIM FOR RELIEF (FOR PRELIMINARY AND PERMANENT INJUNCTIVE RELIEF, INCLUDING MANDATORY INJUNCTIVE RELIEF) (By Leland and H2GO against Belville) 164. Plaintiff’ re-allege and incorporate herein by reference the general averments and the allegations of the first through eleventh causes of action as if set forth fully herei 165, Leland further re-alleges and incorporates herein by reference its prior motion for TRO and request for Preliminary Injunction, which were set out in the original Complaint filed December 1, 2017, and the terms of the TRO and Preliminary Injunction entered by the Court. 166. The actions of Defendant Belville described herein will cause irreparable harm to Leland and H2GO because, among other things, the Putative Transfer, if allowed to stand in contravention of the law: ‘a. Would cause H2GO to cease to exist as an independent body politic and corporate, as is requited by the North Carolina General Statutes. would deprive H2GO"s Board of Commissioners of the ability to exercise their statutory responsibilities, and would deprive Leland, as a customer of H2GO and a freeholder in the district, of the system of sanitary district governance guaranteed by lavy; b. Would strip the elected representation of the voting residents currently within the sanitary district, in that, inter alia, Belville’s Board of Commissioners, which was elected with approximately 136 votes, would then regulate the water and sewer of the residents within the District, including Leland and its residents, other municipalities, and much of, unincorporated Brunswick County, who will have io representation or recourse on the administration or operation of the Systems: Exmobit € 000081cc. Would require the construction of the controversial and unnecessary RO Plant to move forward, which, once complete, cannot be undone, and the cost of which would result in increased water and sewer rates for H2GO"s customers, including Leland and its residents; d. Would create a substantial risk that H2GO’s debt will go into a default status and/or that LGC intervention is necessary to address H2GO"s debt, each of which could also increase water and sewer rates; e. Would impair Leland’s ability to pursue economic development that depends on additional or changed water and sewer usage by placing the decision making concerning water and sewer issues in the conttol of another municipality and an entity that is not accountable to Leland: f. Are the result of the Outgoing Board’s and Belville’s failures to follow legally- required processes and procedures, which have deprived Leland and the rest of the public of the opportunity to meaningfully object and to oppose the Challenged Resolution, Putative ‘Transfer, and Putative Agreements prior to their passage and execution; g. Are the result of undue influence, constructive fraud, and other inequitable conduct by Belville; and h. Would prevent H2GO from fully meeting the needs of current and future customers. 167. Plaintiffs have no adequate remedy at law. Damages will be insufficient to remedy the harm to Plaintiffs. 168. Based on the forgoing facts. Plaintiffs are entitled to preliminary and permanent injunctive relief, including mandatory injunctive relief, pursuant to N.C. Gen. Stat § 1A-1, Rule 65 that: Exhibit € - 000082a. Prohibits Belville from completing the Putative Transfer, eng: actions of inactions in furtherance of the Putative Transfer, enforeing the oppressive and unlawful Putative Agreements or any provisions thereof, or engaging in any conduct that violates the Preliminary Injunction already entered in this case; b. Mandates that Belville take all steps necessary to return legal and equitable title and possession of the assets and debis that it received as part of the Putative Transfer. CLAIMS BY ONLY H2GO AGAINST BELVILLE NINTH CLAIM FOR RELIEF (LINDUE INFLUENCE) (By H2GO against Belvile) 169. H2GO re-alleges and incorporates herein by reference the general averments and the allegations of the first through eleventh causes of action as if set forth fully herein. 170, Following the Election, H2GO was subject to undue influence from Belville because, inter alia, the Outgoing Majority valued transferring the Systems to Belville above the political and corporate interests of H2GO and because Belville and the Outgoing Maj worked to avoid H2GO obtaining the advice of its municipal counsel or the public conceming the Putative Transfer. 171, Under these circumstances, Belville possessed an opportunity to exert influence over H2GO's affairs. 172. Belville's conduct evinced an intent to exert undue influence by, inter alia: (a) having its Town Attorney improperly communicate directly with H2GO Commissioners and employees to facilitate the Putative Transfer, (b) intentionally excluding H2GO's municipal counsel fiom reviewing, considering or offering advice regarding the Putative Transfer or the Putative Agreements, and (c) drafting the Challenged Resolution and Putative Agreements, Exhibit € - 000083173. The result obtained, the Putative Transfer, is indicative of undue influence in that the Putative Agreements set out @ transaction that is unlawful and oppressive to H2GO, undoes H2GO as body politic and corporate, and undermines the will of H2GO's voters, 174. The result obtained is not an arms-length transaction. 175, As a result of Belville’s undue influence, the Challenged Resolution, Putative Transfer, and Putative Transfer Documents should be set aside and deemed unenforceable in their entirety TENTH CLAIM FOR RELIEF (BREACH OF FIDUCIARY DUTY, CONSTRUCTIVE FRAUD, AND CONSTRUCTIVE TRUST) (By H2GO against Belville) 176. H2GO re-alleges and incorporates herein by reference the general averments and the allegations of the first through eleventh causes of action as if set forth fully herein, 177. By having its ‘Town Attomey give advice to H2GO"s Outgoing Board and H2G0's employees, draft the Challenged Resolution and Putative Agreements, and exclude H2GO’s municipal counsel from the discussions concesning the Challenged Resolution, Putative Transfer and Putative Agreements, Belville assumed a fiduciary duty to act in the best interest of the H2GO conceming the transaction. 178. _Belville breached that duty by failing to act in good faith and with due regard for H2GO"s interests. 179. Specifically, as indicated herein, Belville drafted documents that purport to transfer H2GO out of existence, that decapitate its political and corporate leadership, and that would render ita shell-entity that is meaningless and obsolete, 180, The Putative Agreemetns are oppressive, unfair, contrary to law, an abuse of the public trust and entirely unfair to H2GO"s interests and that of its customers. Exhibit - 00024181, Belville conferred benefits upon itself in the Putative Transfer. including ownership of 182, As a result of Belville’s breach of fiduciary duty and constructive fraud, the Putative Transfer Documents should be set aside and deemed unenforceable in their entirety. 183, Further, to the extent necessary, Belville should be deemed to hold the transferred assets and debt in constructive trust for the benefit of H2GO until they are retumed or transferred back to H2GO. ELEVENTH CLAIM FOR RELIEF (Quer Tris) (By H2GO against Belville) 184, H2G0 re-alleges and incorporates herein by reference the general averments and. the allegations of the first through eleventh causes of action as if set forth Fully herein. 185, H2GO is the true and rightful owner of the Land (the “Land”) conveyed in the Deed. 186. Belville is improperly asserting an ownership interest in the Land which is adverse to H2GO’s title, estate or interest, 187. Belville’s Conveyance Agreement, Bill of Sale, and Deed are creating 2 cloud on H2GO's tite to the Land and any attachments, fixtures of appurtenances thereon, 188. Justice and equity require an order quieting title the Land in H2GO. exhib €- 000085AND AGAINST BELVILLE AND CROSS-CLAIM BY LELAND. H2GO ~ H2GO DOES NOT JOIN IN BRINGING THIS CLAIM AIM BY L AGAIN: TWELFTH CLAIM FOR RELIEF -and- FIRST CROSS-CLAIM (For 4 DECLARATION THAT THE OUTGOING BOARD VioLaTeD THE NORTH CAROLINA OPEN MEETINGS LAW AND THAT THE CHALLENGED RESOLUTION, PUTATIVE, TRANSFER, AND PUTATIVE AGREEMENTS SHOULD BE DEEMED NULL AND Vorp AS 4 RESULT) (By Leland against H2GO and Belville) 189, Leland re-alleges and incorporates herein by reference the foregoing and the following paragraphs of the Amended Complaint 190. Pursuant to N.C. Gen. Stat, §§ 143-318.9, 318.10(a) and 318.12, public bodies are prohibited from conducting official meetings unless the meetings are properly noticed and open to the public, 191. H2GO isa public body pursuant to N.C. Gen. Stat. § 143-318.10(b). 192. Pursuant to N.C, Gen, Stat, § 143-318.10(d), an “official meeting” includes “a meeting, assembly, or gathering together at any time or place or the simultaneous communication by conference telephone or other electronic means of a majority of the members of a public body for the purpose of conducting hearings, participating in deliberations, or voting upon or otherwise transacting the public business within the jurisdiction, real or apparent, of the public body. 193. Pursuant to N.C. Gen, Stat. § 143-318.10(¢), an ial meeting” can also include an “informal assembly or gathering together of the members of a public body” that is called or held to evade the spirit and purposes of [the Open Meetings Law].” 194, Upon information and belief, the Outgoing Board violated the open meetings laws, inter alia, by a, Adopting plans to: (i) transfer H2GO out of existence as an independent political and corporate entity and to tie the hands of future boards with respect (o the exercise of 36 xn - 000036governmental and discretionary fianetions, including whether to proceed with the RO Plant, and (ii) finalize and implement this transfer on an expedited basis that would minimize the ability of any objectors to challenge or disrupt their scheme before it was accomplished b, Holding meetings, including meetings with H2GO's Executive Director, at which. the Outgoing Majority deliberated and voted on the plan to investigate, negotiate, proceed with, document, and keep the Putative Transfer secret; ¢, Delegating decision-making responsibilities that were the province of the Board and which needed to be handled at an open meeting to H2GO"s Executive Director; d. Holding one or more non-public meetings, assemblies, gatherings, or communications to deliberate, vote upon, or otherwise transact business conceming the Challenged Resolution, Putative Transfer, and the Putative Agreements. ©. Considering, deliberating and deciding matters that were required to be addressed in open meetings in nonpublic meetings; f. Considering, deliberating and deciding matters in ways and by methods designed to evade the purpose and spirit of the North Carolina Open Meetings Law; and/or g. Having no meeting. when their deliberation, consideration, and decision of these issues was required to be done at a public meeting, 195. The Outgoing Majority’s wrongful actions include meeting with Mr. Walker between November 6 and November 11. 2017 to discuss selling H2GO's assets to Belville, and instructing him to work with Mr. Pliridge to negotiate and facilitate a transfer and to assist in the preparation of drafis of the Putative Agreements 10 be adopted and approved by the Outgoing Majority at H2GO"s November 28, 2017 Board of Commissioners’ mecting. Mr. Walker confirming his instructions from the Outgoing Majority to Mr, Eldridge on November 12, 2017. Exot 000087196. Belville is a proper defendant as a party which will be impacted by a declaration that the Outgoing Board’s unlawful conduct is null and void. Justice and equity require that Belville be denied the benefits of the transaction because Belville was complicit in the Outgoing Majority’s unlawful conduct 197, Accordingly, the Challenged Resolution, Putative Transfer and Putative Agreements are null and void; H2GO"s Corrective Resolution should be given full force and effect by the Courl, and the Court should declare and adjudge that the Challenged Resolution, Putative Transfer and Putative Agreements are null and void, unenforceable, and of no effect and. that Belville must return H2GO's assets and debts, PRAYER FOR RELIEF 1. For the first through eighth causes of action, Plaintiff and H2GO respectfully pray that the Court grant them the following relief: a. Enter judgment in favor of Plaintiffs Leland and H2GO against Belville with respect to each such cause of action; b. Declare that the Challenged Resolution, Putative Transfer, and Putative Agreements are unlawful, void and of no effect: ¢. Maintain the Preliminary Injunction entered by the Court in place pending resohution of this litigation: d. Grant permanent injunctive relief, including mandatory injunctive relief, to Plaintiffs as requested herein; €. Direct that the public records reflect that H2GO is the lawful owner of all assets, and debts involved in the Putative Transfer and Putative Agreements, f Tax Belville with Plaintiffs’ attomeys* fees and litigation expenses. as allowed by 38 Ext € 000088any provision of law, including without limitation, N.C. Gen, Stat. § 6-21.75 g. Allow Plaintiffs such and other further relief as to the court deems just and proper. 2. For the ninth through eleventh causes of action, H2GO respectfully prays that the Court grant it the following relief: a. Enter judgment in favor of H2GO against Belville with respect to each such cause of action; b. Declare that the Challenged Resolution, Putative Transfer, and Putative Agreements are unlawful, void and of no effect: c. Maintain the Preliminary Injunction entered by the Court in place pending resolution of this litigation; d. Grant permanent injunctive relief, including mandatory injunctive relief, to Plaintiff'as requested herein: e. Direct that the public records reflect that H2GO is the lawful owner of all assets and debts involved in the Putative Transfer and Putative Agreements, £ Tax Defendants with H2GOs attorneys’ fees and litigation expenses, as allowed by any provision of law, including without limitation, N.C. Gen, Stat, § 6-21.7. and g. Allow Plaintiff such and other further relief as to the court seems just and proper. 3. For the twellth causes of action and first eross-claim. Leland (but not H2GO) respectfully prays that the Court grant it the following relief a. Declare that the Outgoing Board violated the North Carolina Open Meetings Law; b. Enter judgment in favor of Leland and against H2GO and Belville with respect to this cause of action Extsbit€ -o00038©. Declare that the Challenged Resolution, Putative Transfer, and Putative ‘Agreements are unlawful. void and of no effect: 4. Maintain the Preliminary Injunction entered by the Court in place pending resolution of this litigation: e. Grant permanent injunctive relief including mandatory injunctive relief, to Plaintiff as requested herein: £. Direct that the public records reflect that H2GO is the lawful owner of all assets, and debts involved in the Putative Transfer and Putative Agreements g. Tax Defenda ts with Leland’s attomeys’ fees and litigation expenses, as allowed by law, and h. Allow Plaintiff such and other further relief as to the court seems just and proper. [SIGNATURES FOLLOW ON NEXT PAGE] 40 wnt € - 000040Respectfully submitted, as to the General Averments and the First through Eighth and ‘Twelftta Causes of Action and First Cro im, this_ day of 2018, ‘TOWN OF LELAND, NORTH CAROLINA, By Counsel, Joseph 8. Dowdy (NC Bar # 31941) Todd 8. Roessler (NC Bar #28046) Phillip A. Harris, Jr, (NC Bar #39740) KILPATRICK TOWNSEND & STOCKTON LLP 4208 Six Forks Road, Suite 1400 Raleigh, NC 27609 Phone: (919) 420-1700 Fax: (919) 420-1800 IDowdy@KilpatrickTownsend.com TRoessler@KilpatrickTownsend.com Pllarris@KilpatrickTownsend.com Attorneys for Plaintiff Town of Leland, North Carolina A Exist €-000041Respectfully submitted, as to the as to the General Averments and the First through Eleventh Causes of Action, this day of __, 2018. H2GO_ BRUNSWICK REGIONAL WATER AND SEWER. By Couns Brian E, Edes (NC Bar # 25415) CROSSLEY MCINTOSH COLLIER HANLEY & EDES, PLLC Attomeys-al-Law 5002 Randall Parkway Wilmington, NC 28403 Phone: (910) 762-9711 Fax: (910) 256-0310 briane@emelawfirm.com Attorney for Plaintiff H12GO Brunswick Regional Water & Sewer Exhibit - 000082