Andrew Bassak recalls a visit from Stephen Mayne in February 2008, shortly after the latter joined the San Francisco office of Manatt, Phelps & Phillips. “Have you heard about what’s going on in McCloud?” Mayne asked. “I have a copy of the contract right here,” Bassak replied.
The contract was a deal between the McCloud, Calif., Community Services District and Nestlé Waters North America Inc., a subsidiary of the Swiss food conglomerate that markets bottled water under the Arrowhead brand.
McCloud is a former lumber town of about 1,300 in the shadow of Mount Shasta. Nestlé proposed building a 1 million-square-foot bottling plant, drawing water from three springs that feed the McCloud River and Squaw Valley Creek. Manatt partners Bassak and Mayne knew McCloud well from fishing trips there.
The plant would restore jobs to a town that suffered after its lumber mill closed, but there were problems. The contract called for Nestlé to pay about $115 a day for McCloud’s water, which would be loaded on tractor trailers making as many as 300 trips a day the 500 miles south to Los Angeles. Bassak figured that the 520 million gallons per year contemplated under the contract would mean retail sales of $5.5 million for Nestlé, a markup of about 4,500,000%, qualifying it as the “most one-sided contract I have seen.”
The question turned to what they could do about it. Local opponents of the bottling plant had won a legal round in 2005 when a Siskiyou County judge voided the original contract as creating an entitlement for Nestlé, but an appellate court sided with the company, ruling that the project wasn’t subject to regulation under California environmental law.
Manatt took the case pro bono on behalf of California Trout, a fisheries preservation group, and McCloud citizens and environmental protection advocates who formed the McCloud Watershed Council. The national group Trout Unlimited was also involved. The Manatt lawyers faced a delicate challenge: to forcefully point out the flaws in the contract while attempting to unite a town divided over the proposed plant and simultaneously convincing Nestlé that the project wouldn’t be worth the bad press the litigation could bring.
“All the people in opposition were linked by this project’s threat to their quality of life, but one group was focused on the fisheries part and the McCloud Watershed Council was focused on other elements of the process,” Mayne said. “Everyone had a general goal, but there was not a coherent strategy.”
Bassak identified five tools that could turn the tide in the opponents’ favor: public relations and media; governmental affairs; local economic considerations; water science issues; and legal strategy.
Mayne put together a list of 10 “extraordinary flaws” in the deal, including an allegedly cozy relationship between the company and local officials, and deficiencies in the original environmental impact statement. “The pressure we brought to bear was taking the story and developing the facts from an advocate’s point of view,” Bassak said.
Meanwhile, the tide was turning against that icon of the 1990s, the plastic water bottle. In 2006, the California Legislature passed the Global Warming Solutions Act, an initiative to control greenhouse gases. And in spring 2008, Congress started looking into environmental problems caused by bottled water.
As the community grew more solid in opposition, Nestlé announced in May 2008 that it intended to “scale back” the plant by 60% and conduct scientific studies of the McCloud watershed. The move emboldened the Manatt lawyers to keep up the pressure. In August 2008, Nestlé announced that it would revise the contract. Manatt then orchestrated an advocacy effort detailing environmental and other problems. On Sept. 10, 2009, Nestlé said it was abandoning the project.
Cristin Zeisler, Manatt’s director of pro bono activities, estimated the firm donated about 800 hours to the McCloud case, including support staff, which, including out-of-pocket expenses for travel, computer research and document production, was worth more than $400,000.
Nestlé Waters North America General Counsel Mark Evans would not comment on the work of Mayne and Bassak except to say, “We made our decision [not to pursue the project] based on economics, not because that law firm was involved.”
Did Manatt worry about fighting an international conglomerate that might be in a position to throw some work its way? Not particularly, Bassak said. “Sometimes the best calling card you can leave is to do a good job on the other side of the table,” he said. “People want to hire you because they know what it’s like to face you. We decided that these clients deserved our zealous representation.”
One reward from the McCloud project was working as part of a community-based effort, Bassak said. Or as Mayne said, “Sometimes it takes a village.”
Richard Acello is a freelance journalist in San Diego.