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17-0606_BLENHEIM FACILITY MANAGEMENT, LLC_Agenda Report_E18TO: FROM: City of San Juan Capistrano Agenda Report Honorable Mayor and Members of the City Council ;Ken Siegel, City Manager SUBMITTED BY: Jeff Ballinger, City Attorney DATE: June 6, 2017 6/6/2017 E18 SUBJECT: Consideration of a Joint Defense Agreement Regarding Confidential Communications in Connection with a Notice of Intent to Sue Under the Clean Water Act Issued to the City and Blenheim Facility Management by Orange County Coastkeeper RECOMMENDATION: By motion, approve and authorize the City Manager and City Attorney to execute the Joint Defense Agreement with Blenheim Facility Management ("Blenheim"), in substantially the form attached hereto, in connection with the City's receipt of a notice of intent to sue under the Clean Water Act by the Orange County Coastkeeper. EXECUTIVE SUMMARY : On March 31, 2017, Orange County Coastkeeper submitted a notice of intent to sue under the Clean Water Act to the City and Blenheim. The notice was supplemented on May 4, 2017. The notices allege that violations of the Clean Water Act have occurred at Rancho Mission Viejo Riding Park at San Juan Capistrano (''Riding Park"). Blenheim has operated and managed the Riding Park at all times referenced in the notices. The City and Blenheim desire to enter into a Joint Defense Agreement, outlining mutual promises relating to their joint interests in defending against the litigation threatened in the notices. DISCUSSION/ANALYSIS : The City purchased the Riding Park property in 2010. At the time of the purchase and at all times since, Blenheim has managed the Riding Park pursuant to a license (201 0-2013) or management agreement (2014-present). Each license and management agreement contains a provision requiring Blenheim to indemnify, City Council Agenda Report June 6, 2017 Page 2 of 3 defend and hold the City harmless from and against all liabilities, claims, damages, losses and expenses arising out of Blenheim's use of the Property. Based on the claims made in the notices, the City and Blenheim have common legal interests in defending against the allegations in the notices and any lawsuit, if any is filed . The City and Blenheim have, and may assert, joint and/or common defenses, claims and/or cross-claims. Therefore, it is in the City's best interest to cooperate with Blenheim to advance the parties' interests in defending any potential lawsuit. Further, the City and Blenheim may wish to share information in confidence for the purpose of formulating and implementing a joint and/or common defense effort and/or legal strategy in the case. The proposed Joint Defense Agreement acknowledges the mutual interests the City and Blenheim have in any potential litigation, and outlines an agreement regarding the confidentiality of defense materials, indemnification of the City , cost recovery, and other related provisions. FISCAL IMPACT: This agreement supports Blenheim's obligation to defend and indemnify the City in relation to the notices. So, while the agreement does not, by itself, have a fiscal impact, it does re-inforce Blenheim's obligation to ensure that the City's funds are protected in defending the notices and any potential lawsuit. ENVIRONMENTAL IMPACT : Approval of the Joint Defense Agreement is not a "project" for purposes of the California Environmental Quality Act ("CEQA") pursuant to the State CEQA Guidelines (Cal. Code Regs., §§ 15000 et seq.). Approval of the Joint Defense Agreement has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. (State CEQA Guidelines, § 15378(a).) Further, the Joint Defense Agreement constitutes an administrative or organizational activity with no potential to result in direct or indirect physical changes in the environment. (State CEQA Guidelines, § 15378(b)(2), (4), and (5).) PRIOR CITY COUNCIL REVIEW: Not Applicable . PRIOR COMMISSION/COMMITTEE/BOARD REVIEW: Not Applicable . City Council Agenda Report June 6, 2017 Page 3 of 3 NOTIFICATION : Blenheim Facility Management Parks, Recreation, Youth and Senior Services, Trails and Equestrian Commission ATTACHMENT(S) Attachment 1 -Joint Defense Agreement JOINT DEFENSE AGREEMENT This JOINT DEFENSE AGREEMENT ("Agreement") is made and effective this _ day of , 2017 ("Effective Date"), by and among the CITY OF SAN JUAN CAPISTRANO, a California municipal corporation ("City"), and the City's attorneys BEST BEST & KRIEGER LLP, a California limited liability partnership, on the one hand, and BLENHEIM FACILITY MANAGEMENT LLC, a Delaware limited liability company ("BFM'), and BFM's attorneys , a on the other hand (collectively, "Parties," and individually, "Party"). RECITALS WHEREAS, Orange County Coastkeeper ("OCCK'') served a notice of intent to file suit under the Federal Water Pollution Control Act dated March 31, 2017, on the City and BFM and served a supplemental notice on the City and BFM, dated May 4, 2017, which may result in the filing of a lawsuit against the City and/or BFM (collectively, the ''Action"). WHEREAS, the City owns the real property located at 27174 Ortega Highway, San Juan Capistrano, California 92675, known as the Rancho Mission Viejo Riding Parkk at San Juan Capistrano ("Riding Park"). Pursuant to a series of leases, access and use licenses and management agreements (collectively, "Management Agreements") BFM has leased and managed the Riding Park since approximately January 1, 1995. Each Management Agreement since January 1, 2009 has included a requirement that BFM indemnify, defend, and hold the City harmless from and against all liabilities, claims, damages, losses and expenses of any nature whatsoever, including attorneys' fees, arising out of BFM' s use of the Riding Park or otherwise arising out ofthe acts or omissions ofBFM. WHEREAS, based on the claims made by OCCK in the Action, and in light of BFM' s role in using and managing the Riding Park, City and BFM have concluded they have common legal interests in defending against OCCK's allegations in the Action, and have and may assert joint and/or common defenses, common claims and/or cross-claims in the Action, and it is in their best interests, and consistent with the law, to cooperate with each other to advance such joint and/or common defenses, claims and/or cross-complaints in the Action without waiving any privilege. WHEREAS, as a result of the claims asserted by OCCK in the Action, City and BFM desire to share information (including, but not limited to, documents, factual material, mental impressions, memoranda, reports, attorney work product, and other confidential or privileged information) and confidence for the purpose of formulating and implementing a joint and/or common defense effort and/or legal strategy in the Action. Such information, when shared between the Parties under this Agreement, and whether oral or in writing, is referred to herein as "Defense Materials". WHEREAS, City and BFM believe it is appropriate that the undersigned law firms communicate and exchange information, which may include confidential attorney-client communications, work product, and other information that is protected from disclosure to third parties by applicable privileges, doctrines and/or immunities. 61147.20013\29796983.1 1 ATTACHMENT 1 WHEREAS, City, on the one hand, and BFM, on the other hand, wish to continue to pursue their separate, but common, interests with respect to the Action and to preserve to the maximum extent possible the attorney-client, work product or other applicable privileges, doctrines, and immunities that they may have, and to participate in this Agreement without diminishing such privileges, doctrines or immunities in any way. WHEREAS, the City and BFM have considered both the advantages and disadvantages of this Agreement, and acknowledge that the provisions of this Agreement do not override the obligation of their respective attorneys to represent them zealously and to preserve and protect client confidences and secrets. AGREEMENT Based upon the foregoing recitals, which are true and correct and incorporated herein by reference, and in consideration of the mutual promises of the Parties, it is hereby agreed as follows: 1. Confidentiality of Defense Materials. A. In defense of the Action, the Parties may exchange or disclose Defense Materials in furtherance of the City's and BFM's common interests. Defense Materials, and all work performed under this Agreement, and communications amongst the Parties or amongst counsel in connection with the representations of their respective clients, shall be conducted and protected pursuant to the attorney-client, work product, joint defense and/or common interest doctrine recognized by the laws of the State of California and the United States of America. Defense Materials shall be used by the Parties solely for the preparation of the City's and BFM's respective defenses. Neither the Defense Materials nor the information contained therein may be used for any other purpose. Defense Materials may be provided to consultants, investigators, experts, stenographic and clerical personnel, and other persons solely for the purpose of furthering the City's and BFM's mutual interests in the Action. All such persons shall be specifically notified by the Party disclosing the Defense Materials that the Defense Materials and the information contained therein are confidential, subject to the terms of this Agreement and, as applicable, privileged. B. Unless expressly stated in writing to the contrary, all communications between the Parties concerning the Action are confidential and are protected from disclosure to any entity or individual who is not a party to this Agreement ("Third Party") by the joint-defense and/or common interest privilege, the attorney-client privilege, and the work product doctrine. The Party in receipt of any Defense Materials shall not disclose the Defense Materials or any of the information therein to any Third Party without the prior written consent of the Party who disclosed the Defense Materials in the first instance. Such consent may be obtained in writing from that Party's attorney. C. Any unauthorized disclosure of Defense Materials to any Third Party shall be subject to a joint defense privilege by the other Parties to this Agreement and shall not constitute a waiver of any otherwise available privilege. Any Party shall have the right to seek injunctive relief to prevent a threatened disclosure of confidential materials produced pursuant to 61147.20013\29796983.1 2 this Agreement, if such disclosure would violate the terms of this Agreement. All Parties agree that there is no adequate remedy at law for a disclosure in violation of this Agreement. D. If another person or entity requests or demands, by subpoena or otherwise, any Defense Materials, the Party from whom such material is requested or demanded shall immediately notify the other Parties. In addition, the Party from whom Defense Materials are requested or demanded shall, prior to production of the Defense Materials, assert all applicable rights and privileges and shall take all reasonable steps to assure that all other Parties have an opportunity to assert all applicable rights and privileges, prior to production. E. The City and BFM acknowledge that information known to one of them need not be shared with the other, and that each is entitled to communicate and share information with the other as that Party sees fit. F. To the extent that any of the Parties communicated with each other concerning the defense of the Action prior to the Effective Date, such communication and any other correspondence, exchanges or disclosures among the Parties have been made to further the common defense of the Action and in full expectation that all such communications would remain confidential and protected from unauthorized disclosure, and such communications now constitute Defense Materials subject to the terms of this Agreement. G. This Agreement shall not restrict any Party from using in any manner or disclosing information which (a) was or becomes publicly available without breach of the obligation of confidentiality provided in this Agreement, or (b) was or is discovered independently by the receiving Party. However, the fact of communication by one Party to another Party of such documents or information shall be privileged pursuant to the joint defense and/or common interest privilege, and any attorney-client privilege, work product doctrine or immunity shall not be lost, but shall be protected by the joint defense and/or common interest privilege. H. Defense Materials made under this Agreement shall continue to be confidential and subject to the privileges described herein even if adversity of interest may subsequently be discerned or arise between or amongst any of the Parties to this Agreement. I. In the event that a Party to this Agreement is dismissed from the Action by reasons of settlement, decision, judgment or otherwise, such Party and its counsel shall not be relieved of its obligations under this Agreement with regard to the treatment of the Defense Materials. At all times after a Party has been dismissed from the Action, the Agreement shall be applicable to all Defense Materials. 2. Defense of City in Action A. BFM shall indemnify and pay for the reasonable cost of defense (with counsel as provided herein) the City, its officials (appointed or elected), officers, employees, agents, departments, agencies, and instrumentalities thereof in the Action. B. Counsel for the City shall be JeffreyS. Ballinger, James Gilpin and Alisha M. Winterswyk of Best Best & Krieger LLP (the "City Attorney"). The City's reasonable 61147.20013\29796983.1 3 attorneys' fees and costs in defending the Action shall be reimbursed by BFM as follows: (i) defense obligation to start as of October 1, 20 16; (ii) a separate billing file for litigation shall be opened by the City Attorney; (iii) the time shall be billed in 0.1 hour increments; (iv) City's attorneys' fees and costs shall be invoiced monthly with a statement to BFM redacted to preserve confidential information; and, (v) no cost in excess of $500 shall be incurred without BFM's prior written approval. Notwithstanding the foregoing, BFM's reimbursement shall be conditioned upon the City's cooperation with BFM in the Action and joint defense of the Project. C. Counsel for BFM and the City Attorney for the City shall reasonably cooperate with each other in connection with their respective investigations and the Action. City and City Attorney shall provide BFM, its consultants, investigators, experts, and counsel, access to the City's public files and documents upon request during normal business hours. D. Each Party shall communicate promptly to the other Party any offers received for the settlement of the Action. City shall secure BFM's consent to any settlement. BFM shall secure the City's consent to any settlement. Such consent shall not be umeasonably withheld by either Party. 3. No Admission of Liability or Waiver. This Agreement is not an admission of liability or fault of any Party in reference to any alleged or asserted facts, legal contentions and occurrences that are now or might be alleged with respect to any threatened or asserted claims associated with or in any way related to the Action. Neither this Agreement, nor any information contained in or submitted under this Agreement, nor any action taken by any Party pursuant to this Agreement, shall constitute, be interpreted, construed, or used as evidence of any admission of liability, law, or fact, waiver of any right or defense, nor as an estoppel, against any Party by any other Party or by any Third Party. The Parties further acknowledge that all future discussions between the Parties concerning the resolution of the Action shall be considered settlement discussions protected under California Evidence Code section 1152, except for public hearings and/or public documents regarding the Action. 4. No Third Party Beneficiary. Except as specifically provided herein, nothing in this Agreement shall waive, release, or otherwise affect any right, claim, defense, interest, or cause of action that any Party may have with respect to any Third Party. This Agreement is not intended for the benefit of any Third Party and shall not be enforceable by any party who is not a Party. 5. No Creation of Attorney-Client Relationship. Nothing in this Agreement is intended to create an attorney-client relationship between any attorney and anyone other than the Party who is a client of that attorney. The fact that an attorney has entered into or agreed to be bound by this Agreement shall not in any way preclude that attorney from advocating any interest of the Party who is his or her client that may be adverse to any other Party, and shall not be used as a basis for seeking to disqualify any counsel from representing the Party who is a client of that attorney in any proceeding. It is further understood that the obligations of this Agreement might, in the future, create a potential or actual conflict of interest such that one Party shall not be able to cross-examine another Party in this Action or in other proceedings through the use of Defense Materials, unless such materials were also obtained from independent sources not subject to this Agreement, and even though cross-examination through the use of such Defense Materials may be in the Party's interest. The rights and obligations under this paragraph 6114 7 .20013\29796983.1 4 shall survive the termination of this Agreement and shall continue to bind each Party after that Party's withdrawal from this Agreement or dismissal from the Action or other proceedings, and after termination of this Agreement. 6. No Joint Venture. This Agreement does not form a joint venture or partnership by or among the Parties. 7. Amendment. No part of this Agreement may be modified, altered, amended, waived, or changed without the express written consent of the Parties hereto . 8. Notice. All notices under this Agreement must be in writing. Notice is given either (i) when delivered in person to the person or company intended named below, or (ii) when sent via reputable overnight courier (such as Federal Express), addressed by name and addressed to the party or persons intended, as follows, until such time as a party gives notice of a change of address in accordance with the terms of this section: BFM Attn: ------------------------ Blenheim Facility Management Corporate Phone: BFM's Attorneys Attn: City Attn: Ben Siegel, City Manager San Juan Capistrano City Hall 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Phone: (949)493-1171 City Attorney Attn: JeffreyS. Ballinger, Esq. Best Best & Krieger 655 West Broadway 15th Floor San Diego, CA 921 01 Phone: (619) 525-1343 9. Default. In the event that there is a default by either party to this Agreement (the "Defaulting Party") with respect to any of the provisions of this Agreement, the other party (the "Non-Defaulting Party") shall give the Defaulting Party written notice of such default in accordance with the above provisions. After receipt of such written notice, the Defaulting Party shall have fifteen (15) days in which to cure any monetary default and thirty (30) days in which to cure any non-monetary default. The Defaulting Party shall have such extended periods as may be required beyond the thirty (30) day cure period to cure any non-monetary default if the nature of the cure is such that it reasonably requires more than thirty (30) days to cure, and Defaulting Party commences the cure within the third (30) day period and thereafter continuously and diligently pursues the cure to completion. The Non-Defaulting Party may not maintain any action or effect any remedies for default against the Defaulting Party unless and until the Defaulting Party has failed to cure the same within the time periods provided in this Section. 6114 7.20013\29796983.1 5 10. Assignment. This Agreement shall not be assigned by either Party, either in whole or in part, without the prior written consent of the non-assigning Party. Any assignment or purported assignment of this Agreement without the prior written consent of the non-assigning Party will be deemed void and of no force or effect. 11. Interpretation. The Parties hereto have negotiated this Agreement at arm's length and have been advised by their respective attorneys, and no provision contained herein shall be construed against any Party. 12. Authority to Execute. The individuals executing this Agreement each represent and warrant that they have the legal power, right and actual authority to bind their respective Parties to the terms and conditions hereof. 13. Counterparts. The Parties may execute duplicate originals (counterparts) of the Agreement or any other documents that they are required to sign or furnish pursuant to the Agreement. 14. Severability. If any provlSlon of this Agreement is found invalid or unenforceable, the balance of this Agreement shall remain in full force and effect. 15. Term. This Agreement shall terminate as to all Parties on the date on which the earlier of the following events occurs: entry of final judgment in the Action; dismissal of all causes of action as to all Parties in the Action; settlement of the Action as to each and every Party (the "Termination Date"). Any Party may terminate this Agreement effective upon written notice of termination to all other Parties. After termination, the Parties shall continue to preserve the confidentiality of all Defense Materials and this Agreement, in the manner set forth herein. 16. Entire Agreement. As of the Effective Date, no other agreements, express or implied, have been made by the parties to this Agreement concerning the subject matter herein. All prior and contemporaneous conversations, negotiations and possible or alleged agreements concerning the subject matter herein are merged and integrated in this Agreement. [Signatures on Following Page] 61147.20013\29796983.1 6 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date. CITY OF SAN JUAN CAPISTRANO By: Ben Siegel City Manager ATTEST: By: Maria Morris, CMC City Clerk BEST BEST & KRIEGER LLP By: JeffreyS. Ballinger BLENHEIM FACILITY MANAGEMENT LLC, [LAW FIRM NAME] a Delaware limited liability company By: By: Title: 61147.20013\29796983.1 7