16-1115_CITY OF SJC/ STRATUS DEVELOPMENT PARTNERS_D8_Agenda ReportTO :
FROM:
SUBMITTED BY:
DATE :
SUBJECT;
City of San Juan Capistrano
Agenda Report
Honorable Mayor and Members of the City Council
~n Siegel, City Manager
Jeff Ballinger, City Attorney~ 1/A. _for .--:-.0
November 15, 2016
11/15/2016
08
Consideration of a Joint Defense Agreement Regarding
Confidential Communications and Joint Representation in
Connection with the City's Approval of an Addendum to a Mitigated
Negative Declaration, Conditional Use Permit 15-012, Architectural
Control 15-026, Grading Plan Modification 16-008 and a Tree
Removal Permit for a Hotel and Related Uses Via Resolution Nos.
16-09-06-03 through 16-09-07-07, for property located at 31872
Camino Capistrano (APN Nos. 124-160-51, 52 and 37)
RECOMMENDATION:
By motion, approve and authorize the City Manager and City Attorney to execute the
Joint Defense Agreement with Stratus Development Partners LLC, 0 Properties, Inc.,
and Jackson Tidus, in substantially the form attached hereto, in connection with the
City's approval of an addendum to a Mitigated Negative Declaration, Conditional Use
Permit 15-012, Architectural Control 15-026, Grading Plan Modification 16-008 and a
Tree Removal Permit for a Hotel and Related Uses Via Resolution Nos. 16-09-06-03
through 16-09-07-07, for property located at 31872 Camino Capistrano (APN Nos. 124-
160-51, 52 and 37) (Hotel Capistrano by Kimpton).
EXECUTIVE SUMMARY :
On September 6, 2016, the City Council denied an appeal and affirmed the Planning
Commission's adoption of Resolution Nos. 16-09-06-03 through 16-09-07-07, approving
several entitlements relating to the development of a hotel and related uses ("Project")
at 31872 Camino Capistrano. Subsequently, a lawsuit challenging these City actions
has been filed, and the City and the Project applicant now desire to enter into a Joint
Defense Agreement, outlining mutual promises relating to their joint interests in
defending against the litigation.
City Council Agenda Report
November 15, 2016
Page 2 of 12
DISCUSSION/ANALYSIS :
On September 6, 2016, the City Council denied an appeal and affirmed the Planning
Commission's approval of an Addendum to a Mitigated Negative Declaration,
Conditional Use Permit 15-012, Architectural Control 15-026, Grading Plan Modification
16-008 and a Tree Removal Permit for a hotel with 102 rooms, a restaurant, banquet
facilities, swimming pool, spa and related uses ("Project"), via Resolution Nos. 16-09-
06-03 through 16-09-07-07, for property located at 31872 Camino Capistrano (APN
Nos. 124-160-51, 52 and 37).
Subsequently, SPM-Fairfield, LLC, filed a lawsuit entitled SPM-Fairfield, LLC v. City of
San Juan Capistrano et a/. in Orange County Superior Court (Case No. 30-2016-
00878881-CU-TT-CXC). In this lawsuit, the City is the Respondent, and the Project
applicant is the Real Party in Interest.
Based on the claims made in the lawsuit, the City and the Project applicant have
common legal interests in defending against the lawsuit's allegations. The City and the
Project applicant 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 the Project
applicant to advance its interest in defending the lawsuit. Further, the City and the
Project applicant may wish to share information and 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
the Project applicant have in the 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 memorializes the Project applicant's obligation to defend and indemnify
the City for the subject lawsuit. So, while the agreement does not, by itself, have a
fiscal impact, it does re-inforce the Project applicant's obligation to ensure that the City's
funds are not at risk in defending the 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).)
City Council Agenda Report
November 15, 2016
Page 3 of 12
PRIOR CITY COUNCIL REVIEW:
None.
ATTACHM ENT (S):
Attachment 1 -Joint Defense Agreement
JOINT DEFENSE AGREEMENT
This JOINT DEFENSE AGREEMENT ("Agreement") is made and effective this 1st day
of October, 2016 ("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 STRATUS
DEVELOPMENT PARTNERS LLC, a California limited liability company, DAVID WOOD,
an individual, and 0 PROPERTIES, INC., a California corporation (collectively, "Stratus"), and
Stratus's attorneys JACKSON TIDUS, a law corporation on the other hand (collectively,
"Parties," and individually, "Party").
RECITALS
WHEREAS, SPM-FAIRFIELD, LLC, a California limited liability company
("Petitioner") filed a lawsuit entitled SPM-F AIRFIELD, LLC, a California limited liability
company, v. CITY OF SAN JUAN CAPISTRANO, a California public entity, and Does 1
through 10, inclusive; DAVID WOOD, an individual, STRATUS DEVELOPMENT
PARTNERS, LLC, a California limited liability company, and 0 PROPERTIES, INC., a
California corporation, in the Superior Court of the State of California for the County of Orange,
bearing Case No. 30-2016-00878881-CU-TT-CXC ("Action"). City is the respondent and
Stratus is the Real-Party-in-Interest in the above-named Action.
WHEREAS, on September 6, 2016, the City Council denied an appeal and affirmed the
Planning Commission's approval of an Addendum to a Mitigated Negative Declaration,
Conditional Use Permit 15-012, Architectural Control 15-026, Grading Plan Modification 16-
008 and a Tree Removal Permit for a hotel with 102 rooms, a restaurant, banquet facilities,
swimming pool, spa and related uses ("Project"), via Resolution Nos . 16-09-06-03 through 16-
09-07-07, for property located at 31872 Camino Capistrano (APN Nos. 124-160-51, 52 and 3 7)
("Property").
WHEREAS, based on the claims made by Petitioner in the Action, and in light of Project
condition of approval number 4, City and Stratus have concluded they have common legal
interests in defending against Petitioner'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 Petitioner in the Action, City and
Stratus 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".
61147.80004\29325933. 6
ATTACHMENT 1
WHEREAS, City and Stratus 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.
WHEREAS, City, on the one hand, and Stratus, 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 Stratus 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 Stratus'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
Stratus'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 Stratus'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.
61147.80004\29325933. 6 2
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
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 Stratus 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.
61147.80004\29325933. 6 3
2. Defense of City in Action
A. Stratus 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
attorneys' fees and costs in defending the Action shall be reimbursed by Stratus 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 Stratus redacted to
preserve confidential information; and, (v) no cost in excess of $500 shall be incurred without
Stratus's prior written approval.
C. Counsel for Stratus 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 Stratus, 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 Stratus's consent to any settlement.
Stratus shall secure the City's consent to any settlement. Such consent shall not be umeasonably
withheld by either Party.
3. Cost Recovery Account. The City has established a cost recovery account
against which staff, City consultant, and City Attorney time were charged for entitlement work
undertaken on the Project. As of the Effective Date of this Agreement, the cost recovery account
has an outstanding negative balance. Within five (5) business days of the execution of this
Agreement, Stratus shall remit payment to the City sufficient to bring the balance on the
Project's cost recovery account to zero.
4. [RESERVED].
5. 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.
61147.80004\29325933. 6 4
6. 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.
7. 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
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.
8. No Joint Venture. This Agreement does not form a joint venture or
partnership by or among the Parties.
9. Amendment. No part of this Agreement may be modified , altered, amended,
waived , or changed without the express written consent of the Parties hereto .
10. 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:
Stratus
Attn : David Wood
Stratus Development Partners
17 Corporate Plaza Drive, Suite 200
Newport Beach, CA 92660
Phone: (949) 294-6990
Fax:
Attn: Steve Oedekerk
0 Properties
26162 Calle Roberto
San Juan Capistrano, CA 92675
61147.80004\29325933. 6 5
City
Attn : Ben Siegel, City Manager
San Juan Capistrano City Hall
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Phone: (949) 493-1171
Fax: (949) 488-3874
Phone: (949) 441-07 41
Fax:
Stratus's Attorneys
Attn: Michael L. Tidus, Esq.
Jackson Tidus
2030 Main Street, Suite 1200
Irvine, CA 92614
Phone: (949) 752-8585
Fax: (949) 752-0597
City Attorney
Attn: Jeffrey S. Ballinger, Esq.
Best Best & Krieger
655 West Broadway
15th Floor
San Diego, CA 92101
Phone: (619) 525-1343
Fax: (619) 233-6118
11. 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.
12. 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.
13. 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.
14. 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.
15. Severability. If any proviSIOn of this Agreement is found invalid or
unenforceable, the balance of this Agreement shall remain in full force and effect.
16. 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.
17. 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.
61147.80004\29325933. 6 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
STRATUS DEVELOPMENT PARTNERS
LLC, a California limited liability company
By: David Wood
Manager
0 PROPERTIES, INC., a California corporation
By: Steve Oedekerk
61147.80004\29325933. 6 7
BEST BEST & KRIEGER LLP
By: JeffreyS. Ballinger
JACKSON TIDUS, a law corporation
By: Michael L. Tidus