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Defendants In Summit Water Company Lawsuit Ask For The Suit To Be Dismissed

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Defense attorneys have filed a flurry of paperwork in Third District Court this week, in response to a multi-million-dollar lawsuit from the Summit Water Company.

The litigation is aimed at the assets and family members of Summit Water’s late founder, Hy Saunders and his former business partner. Their attorneys are asking, among other things, for the suit to be dismissed—and for the court to order a shareholders meeting for Summit Water.

As we’ve reported, a lawsuit last month asked for nearly $18 million in damages against the Estate of Hy Saunders, who died July 13th, Stuart Knowles and his company, Trilogy Limited.

Summit Water’s litigation contends that Saunders and Knowles dominated the company, since they were the two biggest owners of Class A water shares.

It says that in two cases, the defendants sold assets of Summit Water to the Weber Basin Water District—over 300 shares of water stock in 2010, for about $5 million; and the water treatment plant by East Canyon Creek, sold for $13 million in 2013. In both cases, the suit alleges, the defendants diverted the sales proceeds to themselves rather than the water company.

The formal reply filed this week from defendants, says that in the case of the water stock, those were contributed to Summit Water in the first place by Saunders and Larry Knowles, Stuart’s father.

Concerning the sale of the water treatment plan, the defense says that the sale agreement explicitly noted that the proceeds were to be split between Hy Saunders and Trilogy Limited; and that was also recognized in the Resolution approved by the Board of Directors.

The suit also names Summit’s former attorney John Flitton, and alleges he received inflated legal payments from the defendants. The reply asserts that payments made to Flitton were known to the board of directors.

The attorneys ask for the suit to be dismissed on several technical grounds. They say that the Estate of Hy Saunders can’t be sued as an entity—that the statute of limitations bars action on supposed offenses that took place five and eight years ago; and that Brock Saunders, Hy’s son, should be dismissed as a defendant because he wasn’t on the board of directors at that time.

The defense has also filed a third-party complaint, saying if the court determines they did something wrong, the fault must also be legally allocated among eight current and former board members, and five current and former Summit Water officers. They approved or participated in the sale of the assets.

Meanwhile, separate litigation has been filed by the “Hy and Debra Saunders Family Trust” represented by Debra, and Trilogy.

The two entities say they own over 5,200 shares of Class A stock, but there’s a dispute about whether they can vote their shares at a stockholders meeting.

Earlier this year, before Summit Water’s annual shareholders meeting, the company staff, for a time didn’t send proxies for over 2,600 shares, ruling they were restricted. The Family Trust and Trilogy held a significant amount of those.

The company also allegedly determined that over 3,900 shares, owned by Trilogy and the Family Trust were cancelled. The plaintiffs said this summer, they asked for corporate records about their shares, and for a listing of the company’s other shareholders, but Summit Water did not reply.

The plaintiffs say that the company hasn’t held an annual meeting since 2016, due to lack of a quorum or disputes over voting shares. They want the court to order a Shareholders meeting by no later than September 30th at the company offices, and to rule that they are entitled to vote with the shares that were previously cancelled.

Known for getting all the facts right, as well as his distinctive sign-off, Rick covers Summit County meetings and issues. KPCW snagged him from The Park Record in the '80s, and he's been on air and covering the entire county ever since. He produces the Week In Review podcast, as well a heads the Friday Film Review team.
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