Before August of 2017, the City’s control over Point Molate was looking pretty good. The City had prevailed in a hearing before Judge Yvonne Gonzalez Rogers in the United States District Court for the Northern District of California, in the lawsuit by Guidiville Rancheria of California, Upstream Point Molate, LLC, and the United States of America (Acting Secretary of the Interior Michael S. Black), challenging the City of Richmond’s decision to withdraw from the Land Disposition Agreement.

For a short time before that, the City was the unencumbered owner of Point Molate with full discretion as to its future.

Then, On August 4, 2017, the United States Court of Appeals for the Ninth Circuit reversed part of Judge Yvonne Gonzales Rogers’ decision and remanded the case back to the United States District Court for the Northern District of California. The reversal was largely based on the Court of Appeals’ finding that the City of Richmond had likely breached the implied covenant of good faith and fair dealing. (“The district court erred in concluding that Appellants failed to plead a plausible claim of breach of the implied covenant of good faith and fair dealing.”)

The Court of Appeals Went on to explain the breach, focusing on the actions of Mayor Gayle McLaughlin to covertly lobby federal officials in an effort to undermine a previous agreement:

“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Carma Developers (Cal.), Inc. v. Marathon Dev. California, Inc., 826 P.2d 710, 726 (Cal. 1992) (quoting Restatement (Second) of Contracts § 205). “In the case of a discretionary power, it has been suggested the covenant requires the party holding such power to exercise it ‘for any purpose within the reasonable contemplation of the parties at the time of formation — to capture opportunities that were preserved upon entering the contract, interpreted objectively.’” Id. at 727 (quoting Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev. 369, 373 (1980)).

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 Case: 15-15221, 08/04/2017, ID: 10533519, DktEntry: 47-1, Page 6 of 12 7 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.

We also disagree with the district court’s conclusion that the waiver provision in the Sixth Amendment to the LDA precluded a claim based on the Mayor’s actions. That Amendment, executed May 18, 2010, states,

“[N]o event of default under the LDA exists as of [May 18, 2010], and that no event has occurred which, with the passage of time or the giving of notice, or both, would constitute an event of default.”

Sixth Amendment to the LDA, § 5.

However, to the extent that there may have been a waiver of default claims, the waiver would not apply to the alleged actions causing defaults after May 18, 2010. At least two of the Mayor’s allegedly improper actions, as well as the City’s disapproval of the casino project, occurred after May 18, 2010.2 Therefore, the City is not entitled to judgment on the pleadings by virtue of the waiver provision in the Sixth Amendment. (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.)

We therefore conclude that the TAC states a plausible claim that, by preventing the occurrence of the condition precedent and relying partially on the non-occurrence to deny the casino project and avoid carrying out the purpose of the LDA, the City breached the implied covenant of good faith and fair dealing when it promulgated Resolution 23-11 and discontinued consideration of a casino use for Point Molate.

For the foregoing reasons:

1. We reverse the district court’s grant of the Motion for Judgment on the Pleadings and remand the case for further proceedings regarding whether the City violated the LDA by interfering with the Tribe’s ability to fulfill a condition precedent.
2. We affirm the district court’s dismissal of the express breach of contract claims.
3. We reverse the district court’s order denying leave to amend the Proposed Fourth Amended Complaint. Appellants may file the Proposed Fourth Amended Complaint.
4. The district court’s amended judgment is vacated and the case is remanded for further proceedings consistent herewith, including consideration of a legal fee award against the Tribe.

Between August 2017 and April of 2018, the City Council made several unsuccessful settlement offers in order to move on and exchange certainty for uncertainty. See “Setback for City of Richmond in Point Molate Litigation,” August 4, 2017.

Then, in April of 2018, the City of Richmond participated in a mandatory settlement conference in the United States District Court, Northern District of California, reaching a settlement agreement later that day, with Judge Yvonne Gonzales Rogers eventually signing the judgment recognizing the agreement. Representing the City at the settlement conference were two members of the RPA, Ben Choi and Ada Recinos, and myself. Later the City Council approved the agreement in both closed and open sessions.

Almost immediately, Gayle McLaughlin began defending her actions that caused the City to lose control of Point Molate, and she began a crusade to undo the settlement agreement that only intensified when she was reelected and rejoined the City Council in 2019..

Gayle and her RPA City Council majority have embraced the arguments of plaintiffs in two lawsuits challenging the entitlements eventually approved by the Richmond City Council and, as a City Council member, Gayle is once again breaching both the terms of the Development Agreement (DA) and Disposition and Development Agreement (DDA) as well as the implied covenant of good faith and fair dealing.

Along with the rest of us, Gayle is required to appear in federal court, in person, before Judge Yvonne Gonzalez Rogers on December 1, 2021, and testify under oath about her actions to undermine the Point Molate DA and DDA.

According to an article in the Mercury News, McLaughlin will, “welcome the opportunity to testify on this matter and clarify the truth for the judge and others.” I’m sure Judge Gonzalez Rogers is looking forward to Gayle’s clarifications and being educated about the truth.