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  Will We Litigate Point Molate Until it Bankrupts the City?
September 29, 2018

An article at the end of this email from Richmond Confidential is a reasonably accurate summary of Point Molate discussions at this week’s City Council meeting.

Earlier this week, I distributed the transcript of the hearing before Federal Court Judge Gonzales on the motion by the City of Richmond to dismiss the  Point Molate lawsuit brought by SPRAWLDEF et al. Click here for the full transcript.

For those who irresponsibly advocate walking away from the settlement, I offer the following:

  • Damages alleged by Upstream and the Tribe were upwards of $750M
    • $17M for purchase price of Point Molate
    • $17M for development and maintenance costs paid by plaintiffs to date
    • Upstream and the Tribe’s legal fees
    • $750M in lost profits for failure to develop the property

  • Litigation costs at the time of settlement were approximately $300k/month

  • Litigation costs to date for this case are $4.5M

  • Litigation costs if we go to trial would be at least another $2-$2.5M, and does not include appellate costs

  • If Upstream prevailed at trial, the Tribe could refile their request for an Indian Lands Determination, which might be granted in a gambling-friendly Trump administration. We could end up with a casino after all.

  • The principle vulnerability of the City in a lawsuit with Upstream and he Tribe results from the poorly considered actions of former Mayor Gayle McLaughlin, excerpts from the court decision below:

    The Third Amended Complaint (“TAC”) contains plausible allegations that the City violated the implied covenant of good faith and fair dealing by interfering with Appellants' ability to obtain federal approval for the casino, thereby preventing Appellants from satisfying a condition precedent of the LDA.

    The TAC alleges that, beginning in 2009, the City, through Mayor Gayle McLaughlin, contacted the Bureau of Indian Affairs, Contra Costa County, and various public officials including the Governor of the State of California and United States Senator Dianne Feinstein, to encourage them to deny, delay, or otherwise oppose the Tribe's quest to obtain the necessary federal and state approvals for gaming. Appellants allege that this pressure delayed the federal approval process — a condition precedent of the LDA — sufficiently that the City abandoned the project in April 2011 in part because “[w]ithout these Federal approvals, a casino use at Point Molate is not legally permitted.” Resolution No. 23-11 ¶ 5. Appellants further allege that the City's pressure ultimately led the Department of the Interior (“DOI”) to determine in September 2011 that the Point Molate property was not eligible for gaming.

    On April 5, 2011, the City issued Resolution 23-11, determining that a casino use was not allowed at Point Molate. In Resolution 23-11, the City cited the federal government's delay in granting the approvals and the opposition of other government officials as reasons for its denial. Appellants contend that the City acted in bad faith, as the delay in approvals and the opposition of federal officials were induced by the City's own covert lobbying.

    Under the “doctrine of prevention,” if a contracting party interferes with the performance of a condition precedent in a way that the parties did not reasonably contemplate, then the interference is a breach of the implied covenant of good faith and fair dealing, and the interfering party “cannot in any way take advantage of that failure [of the condition precedent].” 13 Williston on Contracts § 39:3 (4th ed.); see also City of Hollister v. Monterey Ins. Co., 81 Cal. Rptr. 3d 72, 100 (Cal. Ct. App. 2008), as modified on denial of reh'g (Aug. 28, 2008). “The implied covenant of good faith and fair dealing requires a promisor to reasonably facilitate the occurrence of a condition precedent by ․ refraining from conduct which would prevent or hinder the occurrence of the condition ․” Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 212 (2d Cir. 2002) (quoting Cauff, Lippman & Co. v. Apogee Fin. Group, Inc., 807 F. Supp. 1007, 1022 (S.D.N.Y. 1992)).

    Appellants allege in the TAC that the parties to the LDA did not contemplate that the City would directly attempt to oppose or interfere with the Tribe's gaming application and Request for a Land Determination. Whether the City is liable for the Mayor's actions depends on whether she acted in her official capacity, which is ordinarily a question of fact better resolved after discovery and not through a Motion for Judgment on the Pleadings. See Farmers Ins. Grp. v. Cty. of Santa Clara, 906 P.2d 440, 458–59 (Cal. 1995).

    The TAC contains some of the alleged interfering communications from Mayor McLaughlin wherein she identifies herself as the Mayor acting on behalf of the City of Richmond. These allegations present an issue of fact concerning whether the Mayor was acting in her official capacity and are sufficient to plead a plausible claim of breach of the implied covenant of good faith attributable to the City. See Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes, 120 Cal. Rptr. 3d 797, 803 (Cal. Ct. App. 2010) (“The Developer established a breach attributable to the Town by evidence of the actions of town officials, acting within their authority.”). Therefore, the City is not entitled to judgment on the pleadings on the theory that it is not responsible for the actions of the Mayor.

    2.   Specifically, these included a June 1, 2010 letter to several U.S. Senators lobbying them to deny the Tribe's application, and an August 15, 2010 speech at a conference of the United States Representatives regarding Indian Gaming, where Appellants allege that “Mayor McLaughlin in her official capacity of Mayor, expressly advanced the City's position the Tribe's Land Determination Request should be denied ․” TAC ¶¶ 63-64.

  • If we won at trial, Upstream and the Tribe would appeal.
  • Upstream and the Tribe filed their complaint in 2012.  The City won dismissal on the pleadings, but the Ninth Circuit reversed in part and remanded to the trial court.

  • Discovery included production of hundreds of thousands of pages of documents by the City and a couple depositions, including one full-day deposition of Gayle McLaughlin and request for a second day.

  • Upstream had noticed the deposition of at least 5 additional witnesses, including Nat Bates, Mayor Butt, Bill Lindsay, Bruce Goodmiller, and Maria Viramontes

  • Upstream also sought to file a motion for summary judgment, which would have required additional legal costs and resources to oppose.

  • Our judge ordered the parties to a mandatory settlement conference with Magistrate Judge Spero.

  • The settlement conference took place for a full day on February 6, 2018.  Richmond City Planners Mitchell and Velasco, Mayor Butt, Councilmembers Recinos and Choi, Rachel Sommovilla, and outside counsel attended for the City.  Less than a quorum of the City Council was present.  Magistrate Spero admonished the conference participants that the content and discussions of the settlement conference were confidential.

  • At the conclusion of the settlement conference, the parties agreed to a tentative settlement in principle, with the qualification that the City Council must vote on settlement approval before the City could agree to the settlement.

  • That evening, February 6, 2018, City Council held a special closed session, in which it considered the tentative agreement and voted on it.  The tentative agreement was ultimately approved; all parties understood that this approval was only for the tentative agreement.  There was not yet a final settlement to be approved, since the parties needed to further negotiate details, draft the agreement, and have it entered by the Court.

  • The next closed session was scheduled for February 20, 2018.  Discussion of the litigation was agendized for that time. 

  • The parties continued to negotiate, with the supervision of Magistrate Spero, until March 20, 2018.  Closed session on March 20 included discussion of the Upstream litigation as an agenda item.  At closed session, City Council voted to approve the settlement. 

  • The settlement was not final until entry of the judgment by the Court.  The parties understood that entry of the judgment as submitted was a material term of the settlement.  Judge Gonzalez Rogers entered judgment on April 12, 2018.

  • On April 17, 2018, at the next calendared open session, the settlement was agendized and discussed publicly. 

  • The judgment confirmed that the City paid nothing to settle the case, which was a significant concession by Upstream and the Tribe.  

  • As a compromise, the City agreed to entry of the judgment, which provides:  “Discretionary City Approvals shall allow for a minimum of 670 residential units and further the goals of the Point Molate Reuse Plan, including preservation of open space and rehabilitation of the Core Historic District (including Building 6).”  (Judgment ¶ 8.)  The judgment further provides:  “The Parties acknowledge, and the Court expressly finds and orders, that this Judgment is not an approval of a project, and the City is responsible for compliance with all federal, state and local laws, regulations, and permits, relating to the Property, including compliance with CEQA. This finding and order may be asserted by the Parties as a bar to any suit challenging the validity of this Judgment.”  (Id. ¶ 37.) 

  • The City retains discretion regarding whether to grant “Discretionary City Approvals.”  The City also retains its discretion as to design, location, and density for such housing.  The judgment did not approve of any development project or a developer.  The judgment states that “the Court anticipates and expects that the City will receive and consider input from the public with respect to the future development of Point Molate.” 

  • If the City does not provide “Discretionary City Approvals” for 670 housing units within 24 months, there are consequences to the City: Upstream and the Tribe could choose to sue the City for breach of the settlement agreement in addition to restarting the prior litigation against the City, and the City could be in contempt of Court.  If the City does not sell certain parcels of Point Molate within 48 months of the Judgment, it must sell those parcels to Upstream and the Tribe for $100/parcel. 

Richmond Confidential

Calling it a ‘sick pig,’ residents urge reopening of Point Molate settlement

Richmond resident Juan Reardon holds a sign protesting the Point Molate settlement outside City Hall on Tuesday, Sept. 25. Reardon later called the deal between the city and developers a
Richmond resident Juan Reardon holds a sign protesting the Point Molate settlement outside City Hall on Tuesday, Sept. 25. Reardon later called the deal between the city and developers a "sick pig" during public comment at the City Council meeting.

By Barbara HarveyPosted September 28, 2018 4:16 pm

Audible gasps spread through the Richmond City Council meeting on Tuesday when it was announced that nearly 50 people had signed up to speak during the public comment period, most about the city’s most valuable piece of shoreline that is once again the subject of tense debate.

The gasps foreshadowed some colorful comments from the residents who blasted city officials about how they approved a settlement agreement for the prized shoreline, known as Point Molate.

Richmond resident Juan Reardon denounced as a “sick pig” the settlement the city had reached with a would-be developer of Point Molate. He declared that Mayor Tom Butt was “becoming the worst mayor Richmond’s ever had.”

“We are not buying sick pigs, Tom. And no amount of lipstick will help,” he said, addressing the mayor.

The city appears to be on the back foot in the aftermath of a judge earlier this month allowing a lawsuit to proceed that challenges a settlement city officials reached with a developer. U.S. District Judge Yvonne Gonzalez Rogers accused the city of a lack of transparency in the process as she refused the city’s motion to dismiss the residents’ lawsuit. The settlement agreement in dispute would allow hundreds of housing units to be built on Point Molate.

Residents like Reardon came to the meeting hoping that the judge’s refusal to dismiss the lawsuit would open up discussion on the controversial settlement once again, thereby giving them the public process they’ve been demanding for months.

The settlement at the center of the dispute was the result of a years-long legal battle between the city and developers who had sought to build a casino at Point Molate. Richmond voters rejected the proposed casino in an advisory referendum vote in 2010.

The developers, in turn, sued the city. Both parties eventually agreed to a settlement in April. A group of residents has challenged this settlement in court, suggesting the process of reaching the agreement was not transparent.

Earlier in the week, it had appeared that Butt would bring up the settlement agreement for the council to discuss again and vote on publicly. But that didn’t happen.

An item placed on the agenda by Butt had called for the council to “approve the Point Molate settlement agreement,” this time in a public vote. The previous vote was held out of the eyesight of the public, in closed session.

That agenda item was later revised to call for the council to “consider whether to publicly reaffirm the Point Molate settlement.”

But by Tuesday evening, shortly before the council was scheduled to meet, the item was removed entirely from the agenda, prompting much speculation from opponents of the settlement agreement.

Richmond resident David Helvarg, co-chair of the Point Molate Alliance, a group that opposes the settlement plan, said he believed the agenda item was pulled because some council members may be apprehensive about re-affirming their previous votes.

“I think that he may have been unsure if he actually has the council votes in the public as opposed to behind closed doors,” Helvarg said.

“He knew that people are mobilizing for this, and he didn’t want to confront public opposition. I think he’d rather sneak it through on a quiet council evening,” Helvarg said.

“But I don’t think there’s going to be a quiet council evening between now and the elections. This is an expanding issue that’s going to become an election issue.”

In a later interview, Butt offered a different explanation for his decision not to put the settlement on the agenda for the evening. He said he had originally placed the item on the agenda as a way of addressing complaints that the council erred when it approved the settlement behind closed doors. But feedback from residents made him change his mind, he said.

Butt said that in the days leading up to the council meeting, he had received emails from residents that implied that placing the debate on the agenda wouldn’t end the litigation.

“So I thought, ‘What’s the point? Why go through all of the time and effort re-voting on it in public session if it’s not going to go satisfy these guys?’” Butt said.

Despite the settlement agreement’s absence from the agenda, it figured prominently at the meeting where dozens of Richmond residents shared their concerns during public comment.

Several activists, some of whom are involved in the lawsuit against the city, took shots at the city’s handling of the settlement. The urged council members to reject the plan to build housing on the shoreline.

Richmond resident Charles Smith called the proposed housing “a deathtrap,” noting its proximity to the Chevron refinery and the limited roadways in and out of the area.

“Shame on the city council for voting for this,” Smith said, receiving applause from attendees.

Several speakers decried the housing plans as a pathway to gentrification, noting that the development would primarily benefit the wealthy, and that housing is desperately needed in Richmond’s urban core—not on the shoreline.

Other speakers focused on the potential environmental impact that housing would have on Point Molate, which is home to eelgrass beds vital to the region’s habitat.

Butt sat stone-faced through public comment and did not address residents.

Butt later disputed several of the points made by residents, including the critique that the housing would primarily benefit wealthy homeowners. Butt noted that the eventual developers would either have to designate a number of units as affordable housing or pay the city in-lieu fees, which the city would use to build affordable housing.

However, Butt also added that he isn’t opposed to the idea of the development attracting high-income buyers, saying that, “frankly, we could use more rich people in Richmond.”

A court hearing on the residents’ lawsuit that had been scheduled for Sept. 24 was postponed in order to give both parties time to consider any potential developments that occurred during the council meeting.

Butt said he may put a vote on the Point Molate settlement agreement back on the city council agenda in the coming weeks.
Robert Cheasty, executive director of Citizens for East Shore Parks, a local nonprofit that was among the groups that filed the suit, said that for now, the fight will head back to court. But he expressed disappointment in the continuing lack of public process.

“What I thought would have been great tonight would be to have a real discussion on Point Molate and Richmond City planning,” Cheasty said. “But the mayor didn’t want that.”