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HomeMy WebLinkAbout06-06-2017 Item 13 Authorize use of Funds for Continuing Litigation Meeting Date: 6/6/2017 FROM: Christine Dietrick, City Attorney SUBJECT: AUTHORIZE USE OF FUNDS FOR CONTINUING LITIGATION RECOMMENDATION Authorize the City Attorney to execute a Third Amendment to the Legal Services Agreement with the law firm of Jarvis, Fay, Doporto & Gibson (Original Agreement dated March 31, 2015) increasing the not to exceed amount from $75,000 to $85,000, for the City’s legal defense in the case of Palacios, et al. v. Nielsen, et al., as authorized by the City Council and reported out of closed session on March 31, 2015. DISCUSSION Background During the City Council Closed Session on March 31, 2015, Council authorized the defense of the City as a party in San Luis Obispo Superior Court Case No. 15CV-0150, Gil Palacios and Micki Howard v. Morten H. Nielsen, Hanne Sandsberg, The City of San Luis Obispo and DOES 1 to 25. That authorization was reported out of closed session in the immediately following open session. Petitioner an original complaint, which it amended in response to the City’s filing of a demurrer, followed by three successive amended complaints. The City prepared, filed and prevailed upon demurrers to each of amended complaints, with the court granting the City’s final demurrer without leave to amend, effectively resulting in the dismissal of the City from the case. Petitioner then filed an appeal before the California Court of Appeal. The administrative record for the appeal has been prepared and lodged, with review pending. Briefing will be complete at the time of Council’s consideration of this request. It is very uncommon to have to file four successful demurrers in a single case, which drove additional costs not anticipated at the outset of this case. At this stage, the City’s outside counsel, Rick Jarvis of firm Jarvis, Fay, Doporto & Gibson, LLP (“Jarvis Fay”), has estimated an additional $5,000 - $10,000 in funding will be required to complete the Court of Appeal stage of litigation. Thus, the City Attorney is requesting Council approval of a contract amendment in an amount not to exceed to $10,000. Current Authorization Request Based on the original proposal rates submitted by Jarvis Fay, and the estimated remaining hours of work, the City Attorney requests that the City Council authorize her to sign a Third Amendment (attachment D) to the original Legal Services Agreement, increasing the contract value to an amount not to exceed $85,000. The additional $10,000 will be encumbered to Jarvis Fay from the surplus funds remaining after the conclusion of the litigation San Luis Obispo Property and Business Owners v. City of San Luis Obispo. Packet Pg 207 13 FISCAL IMPACT With funds available in the 2016-17 fiscal year City Attorney’s budget, there is no impact of this request. ALTERNATIVES 1. Direct funds from another part of the City budget to be used to cover the increase in the agreement amount. 2. Do not authorize signature of the Third Amendment to the Agreement, the consequences of which would be to preclude defense of the City through the appeals stage of litigation. Attachments: a - Second Amendment - Jarvis Fay Palacios b - Council Agenda Report Continued Litgation Funding c - City Manager Report - Palacios Further Funding d - Third Amendment Jarvis Fay Palacios Packet Pg 208 13 SECOND AMENDMENT TO AGREEMENT This Second Amendment to Agreement is made and entered in the City of San Luis Obispo on 2016, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, herein after referred to as City, and JARVIS, FAY, DOPORTO & GIBSON, LLP, a professional corporation, hereinafter referred to as Consultant. WITNES SETH: WHEREAS, on March 31, 2015, the City entered into an Agreement with Consultant for professional legal services for its defense in Palacios, et al. v. Nielsen, et al.; and WHEREAS, work on this matter is not yet complete; and WHEREAS, the parties seek to modify certain provisions of the Agreement between them. NOW, THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows: 1. "Section 1. Term" of the Agreement is modified to increase the "shall not exceed" amount to $75,000. 2. All other terms and conditions of the Agreement, as amended hereby, remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. CITY OF SALT LU1 OBI9PO J. Christ e Dietrick, City Attorney JARVIS, FAY, D OP ORTO & GIB S ON, LLP I By: Rick Jarvis Its: Pch Packet Pg 209 13 FIRST AMENDMENT TO AGREEMENT T is First Amendment to Agreement is made and entered m the City of San Luis Obispo on 2015, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, herein after leferred to as City, and JARVIS, FAY, DOPORTO & GIBSON, LLP, a professional corporation, hereinafter referred to as Consultant. WITNESSETH: WHEREAS, on March 31, 2015, the City entered into an Agreement with Consultant for professional legal services for its defense in Palacios, et al. v. Nielsen, el al.; and WHEREAS, work on this matter is not yet complete, and WHEREAS, the parties seek to modify certain provisions of the Agreement between them. NOW, THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows: 1. "Section 1. Term" of the Agreement is modified to increase the shall not exceed amount to $50,000_ All other terms and conditions of the Agreement, as amended hereby, remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. CITY OF SAN LUIS OBISN y _ C stine Dietrick, Cityttorney g/1-7// 5 JARVIS, FAY, DOPORT fO & GIBSON, LLP By:Lq Rick Jarvis s+' Its Packet Pg 210 13 AGREEMENT 1211 THIS AGREEMENT is made and entered into in the City of San Luis Obispo on M arc 1 2015 by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, referred to as City, and JARVIS, FAY, DOPORTO & GIBSON, LLP, a professional hereinafter referred to as Consultant. WITNESSETH WHEREAS, on July 3, 2013, City requested qualifications and proposals for legal counsel; hereinafter corporation, WHEREAS, pursuant to said request, Consultant submitted a proposal that was accepted by City for said services; and WHEREAS, the City requires professional legal services for its defense in Palacios, et al. v. Nielsen, et al. the "services"). NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows: 1. Term. The term of this Agreement shall be from March 31, 2015 until completion of said services and the total costs for this engagement shall not exceed $25,000 without express written consent signed by both parties. 2. Termination. If, during the term of the contract, the City determines that the Consultant is not faithfully abiding by any term or condition contained herein, the City may notify the Consultant in writing of such defect or failure to perform. This notice must give the Consultant a 10 (ten) calendar day notice of time thereafter in which to perform said work or cure the deficiency. If the Consultant has not performed the work or cured the deficiency within the ten days specified in the notice, such shall constitute a breach of the contract and the City may terminate the contract immediately by written notice to the Consultant to said effect. Thereafter, neither party shall have any further duties, obligations, responsibilities, or rights under the contract except, however, any and all obligations of the Consultant's surety shall remain in full force and effect, and shall not be extinguished, reduced, or in any manner waived by the termination thereof. In said event, the Consultant shall be entitled to the reasonable value of its services performed from the beginning date in which the breach occurs up to the day it received the City's Notice of Termination, minus any offset from such payment representing the City's damages from such breach. Reasonable value" includes fees or charges for goods or services as of the last milestone or task satisfactorily delivered or completed by the Consultant as may be set forth in the Agreement payment schedule; compensation for any other work, services or goods performed or provided by the Consultant shall be based solely on the City's assessment of the value of the work -in -progress in completing the overall workscope. The City reserves the right to delay any such payment until completion or confirmed abandonment of the project, as may be determined in the City's sole discretion, so as to permit a full and complete accounting of costs. In no event, however, shall the Consultant be entitled to receive in excess of the compensation quoted in its proposal. If, at any time during the term of the contract, the City determines that the project is not feasible due to funding shortages or unforeseen circumstances, the City reserves the right to terminate the contract. Consultant will be paid compensation due and payable to the date of termination. Packet Pg 211 13 3. Ability to Perform. The Consultant warrants that it possesses licenses and qualifications necessary to carry out and complete the work hereunder in compliance with any and all applicable federal, state, county, city, and special district laws, ordinances, and regulations. 4. Sub -contract Provisions. No portion of the work pertinent to this contract shall be subcontracted without written authorization by the City. Any substitution of sub -consultants must be approved in writing by the City. 5. Contract Assignment. The Consultant shall not assign, transfer, convey or otherwise dispose of the contract, or its right, title or interest, or its power to execute such a contract to any individual or business entity of any kind without the previous written consent of the City. 6. Inspection. The Consultant shall furnish City with every reasonable opportunity for City to ascertain that the services of the Consultant are being performed in accordance with the requirements and intentions of this contract. All work done and all materials furnished, if any, shall be subject to the City's inspection and approval. The inspection of such work shall not relieve Consultant of any of its obligations to fulfill its contract requirements. 7. Conflict of Interest. The Consultant shall disclose any financial, business, or other relationship with the City that may have an impact upon the outcome of this engagement. The Consultant covenants that it presently has no interest, and shall not acquire any interest—direct, indirect or otherwise—that would conflict in any manner or degree with the performance of the work hereunder. The Consultant further covenants that, in the performance of this work, no sub -consultant or person having such an interest shall be employed. The Consultant certifies that no one who has or will have any financial interest in performing this work is an officer or employee of the City. It is hereby expressly agreed that, in the performance of the work hereunder, the Consultant shall at all times be deemed an independent Consultant and not an employee of the City. B. Rebates, Kickbacks or Other Unlawful Consideration. The Consultant warrants that this contract was not obtained or secured through rebates, kickbacks or other unlawful consideration, either promised or paid to any City employee. For breach or violation of the warranty, the City shall have the right in its discretion; to terminate the contract without liability; to pay only for the value of the work actually performed; to deduct from the contract price; or otherwise recover the full amount of such rebate, kickback or other unlawful consideration. Covenant Against Contingent Fees. The Consultant warrants by execution of this contract that no person or selling agency has been employed, or retained, to solicit or secure this contract upon an agreement or understanding, for a commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide established commercial or selling agencies maintained by the Consultant for the purpose of securing business. For breach or violation of this warranty, the City has the right to annul this contract without liability; pay only for the value of the work actually performed, or in its discretion, to deduct from the contract price or consideration, or otherwise recover the full amount of such commission, percentage, brokerage, or contingent fee. 10. Compliance with Laws and Wage Rates. The Consultant shall keep itself fully informed of and shall observe and comply with all applicable state and federal laws and county and City of San Luis Obispo ordinances, regulations and adopted codes during its performance of the work. This includes compliance with prevailing wage rates and their payment in accordance with California Labor Code. For purposed of this paragraph, "construction" includes work performed during the design and preconstruction phases of construction, including but not limited to, inspection and land surveying work. 11. Payment of Taxes. The contract prices shall include full compensation for all taxes that the Consultant is required to pay. Packet Pg 212 13 12. Safety Provisions. The Consultant shall conform to the rules and regulations pertaining to safety established by OSHA and the California Division of Industrial Safety. 13. Immigration Act of 1986. The Consultant warrants on behalf of itself and all sub -consultants engaged for the performance of this work that only persons authorized to work in the United States pursuant to the Immigration Reform and Control Act of 1986 and other applicable laws shall be employed in the performance of the work hereunder. 14. Consultant Non -Discrimination. In the award of subcontracts or in performance of this work, the Consultant agrees that it will not engage in, nor permit such sub -consultants as it may employ, to engage in discrimination in employment of persons on any basis prohibited by State or Federal law. 15. Indemnification for Professional Liability. To the fullest extent permitted by law, the Consultant shall indemnify, protect, defend and hold harmless the City and any and all of its officials, employees and agents ("Indemnified Parties") from and against any and all losses, liabilities, damages, costs and expenses, including attorney's fees and cost which arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Consultant. 16. Insurance. 16.1 Professional Errors and Omissions Insurance. The Consultant shall obtain and maintain in full force and effect at all times Professional Errors and Omissions Liability Insurance. Such insurance shall provide coverage in an amount not less than one million dollars ($1,000,000) per occurrence. The insurance policy required under this paragraph shall be endorsed to state that coverage shall not be suspended, voided, cancelled, reduced in coverage, or in limits, except after thirty (30) days prior written notice, by certified mail return receipt requested, given to the City. 16.2 Workers Compensation Insurance. The Consultant shall obtain and maintain workers compensation insurance in accordance with section 3700 of the California Labor Code. 17. Non -Exclusive Contract. The City reserves the right to contract for the services listed in this proposal from other consultants during the contract term. 18. Consultant Invoices and Payment. The Consultant shall deliver a monthly invoice to the City, itemized by project work phase or, in the case of on-call contracts, by project title. Invoice must include a breakdown of hours billed and miscellaneous charges and any sub -consultant invoices, similarly broken down, as supporting detail. For on-call services, the City will pay and the Consultant shall receive compensation as agreed to on a project by project basis. Hourly rates include direct salary costs, employee benefits, overhead and fee. The City's payment terms are 30 days from the receipt of an original invoice. 19. Agreement Parties. City: City Attorney's Office Consultant: Jarvis, Fay, Doporto & Gibson, LLP City of San Luis Obispo 492 Ninth Street 990 Palm Street Suite 310 San Luis Obispo, CA 93401 Oakland, CA 94607 All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as shown above. 20. Incorporation by Reference. City Request for Proposal and Consultant's proposal are hereby incorporated in and made a part of this Agreement. 3 Packet Pg 213 13 21. Amendments. Any amendment, modification or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Attorney. 22. Working Out of Scope. If, at any time during the project, the Consultant is directed to do work by persons other than the City Attorney and the Consultant believes that the work is outside of the scope of the original contract, the Consultant shall inform the City Attorney immediately. If the City Attorney and Consultant both agree that the work is outside of the project scope and is necessary to the successful completion of the project, then a fee will be established for such work based on Consultant's hourly billing rates or a lump sum price agreed upon between the City and the Consultant. Any extra work performed by Consultant without prior written approval from the City Attorney shall be at Consultant's own expense. 23. Complete Agreement. This written agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral agreement, understanding or representation be binding upon the parties hereto. For and in consideration of the payments and agreements hereinbefore mentioned to be made and performed by City, Consultant agrees with City to do everything required by this Agreement, the said specification and incorporated documents. 24. Authority to Execute Agreement. Both executing this agreement on behalf of each execute Agreements for such party. City and Consultant do covenant that each individual party is a person duly authorized and empowered to IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. CITY OF SAN LUIS OSI_SPO: Christine Dietrick, City Attorney 44 JARVIS, FAY, DOPORTO & GIBSON, LLP: y. ra r v j's Its: FGtY-+Ke p- Packet Pg 214 13 Meeting Date: 5/17/2016 FROM: Christine Dietrick, City Attorney SUBJECT: AUTHORIZE USE OF FUNDS FOR CONTINUING LITIGATION RECOMMENDATION Authorize the City Attorney to execute a Second Amendment to the Legal Services Agreement with the law firm of Jarvis, Fay, Doporto (Original Agreement dated March 31, 2015; First Amendment dated August 17, 2015) increasing the not to exceed amount from $50,000 to $75,000, for the City’s legal defense in the case of Palacios, et al. v. Nielsen, et al., as authorized by the City Council and reported out of closed session on March 31, 2015. DISCUSSION Background During the City Council Closed Session on March 31, 2015, Council authorized the defense of the City as a party in San Luis Obispo Superior Court Case No. 15CV-0150, Gil Palacios and Micki Howard v. Morten H. Nielsen, Hanne Sandsberg, The City of San Luis Obispo and DOES 1 to 25. That authorization was reported out of closed session in the immediately following open session. Due to lack of available resources in the City Attorney’s office to take on another in-house litigation matter, the City Attorney retained Rick Jarvis of Jarvis, Fay, Doporto to defend the City. The initial estimated defense costs were anticipated to be within the City Manager’s contracting authority and the Community Development Department had available budget to cover the expenses. Thus, with City Manager authorization, the City Attorney signed a Legal Services Agreement (Attachment A) for Jarvis, Fay, Doporto’s work on this matter and $25,000 was encumbered to the law firm from the Community Development Department budget. The City filed a demurrer to the original complaint to which the petitioner (plaintiff) responded by filing an Amended Complaint prior to hearing on the first demurrer. A second demurrer to the amended complaint addressing new issues then had to be prepared, resulting in greater costs than were forecast and the need for an amendment to the legal services agreement. A First Amendment to the Agreement (Attachment B) was authorized via City Manager Report in August 2015 (Attachment C), which increased the cap to $50,000. The City’s second demurrer was heard and granted, but the court granted leave to amend the First Amended complaint. The petitioner filed a Second Amended (third) Complaint, to which the City also drafted and filed a demurrer and which the court again granted after hearing, but with yet another opportunity to amend. On April 27, after a continuance at the request of the petitioner, a brief hearing on April 13, 2016 and a brief continuance to accommodate the transition of the file to a new Judge who had to review the past history of the case, the Court heard and granted the City’s fourth demurrer in this case. This last grant of the City’s demurrer was without leave to amend, effectively resulting in the dismissal of the City from the case. As of the date of this report, the case is still within the appeals deadlines for the petitioner to seek review before the California Court of Appeal and the City does not know Packet Pg 215 13 whether the petitioner intends to appeal. Unfortunately, the final costs associated with the unanticipated multiple demurrer brief and hearing preparation have driven legal costs exceeding the current contract amount and the City Manager’s approval authority. Thus, the City Attorney is requesting Council approval of a contract amendment to address final costs to date that will exceed the current contract cap by an anticipated $5,000-$10,000 and to provide funding to oppose any appeal that may follow. Current Authorization Request Based on the original proposal rates submitted by Jarvis, Fay, Doporto and the estimated remaining hours of work, the City Council is asked to authorize the City Attorney to sign a Second Amendment (attachment D) to the original Legal Services Agreement increasing the contract value to an amount not to exceed amount $75,000. The additional $25,000 will be encumbered to Jarvis Fay from the Contract Services line of the City Attorney budget to cover costs through the conclusion of the litigation. FISCAL IMPACT The City Attorney Department received $50,000 for Contract Services as part of the 2015-2017 Financial Plan Development Services Staffing, Contract Services and CDD Reorganization SOPC for additional legal services support (Attachment E). The first $25,000 of the SOPC funds was already encumbered to Jarvis Fay in August 2015 for use in this matter. The remaining $25,000 from the SOPC would be encumbered now to cover the amendment. Staff is hopeful that additional costs will be limited to costs through the April 27, 2016 hearing and preparation of the final order and that the matter will conclude far under the amended limit, in which case the remaining funds will be released for use on other development related legal matters. ALTERNATIVES 1. Direct funds from another part of the City budget to be used to cover the increase in the agreement amount. 2. Do not authorize signature of the Second Amendment to the Agreement, the consequences of which would be to preclude final payment for legal services required to complete the City’s defense in this matter. Attachments: a - Agreement.Jarvis Fay.Palacios b - First Amend.Agreement.Jarvis Fay.Palacios c - CMR - Palacios further funding - 2015 08 14 d - Second Amend.Agreement.Jarvis Fay.Palacios e - 2015-17 SOPC Dev Services Staffing and Contract Services Packet Pg 216 13 City of San Luis Obispo, City Manager Report August 5, 2015 Final City Manager Approval Approver Name Date Approved City Administration Michael Codron August 14, 2015 Reviewer Routing List Reviewer Name Date Reviewed City Attorney JCD 8/5/2015 Finance & Information Technology mwP 8/7 Community Development Department Djj 08/07 FROM: J. Christine Dietrick Jcd 8/5/15 SUBJECT: Further Funding for Litigation Defense in Palacios v. Nielsen, et al. Recommendation: 1. Authorize the City Attorney to execute an Amendment to the Legal Services Agreement with the law firm of Jarvis, Fay, Doporto (Original Agreement dated March 31, 2015) increasing the not to exceed amount from $25,000 to $50,000, for the City’s legal defense in the case of Palacios, et al. v. Nielsen, et al., as authorized by the City Council and reported out of closed session on March 31, 2015. Summary of Authorization During the City Council Closed Session on March 31, 2015, Council authorized the defense of the City as a party in San Luis Obispo Superior Court Case No. 15CV-0150, Gil Palacios and Micki Howard v. Morten H. Nielsen, Hanne Sandsberg, The City of San Luis Obispo and DOES 1 to 25. That authorization was reported out of closed session in the immediately following open session. Due to lack of available resources in the City Attorney’s office to take on another in-house litigation matter, the City Attorney solicited proposals from two law firms on our current on-call list, both of which have significant land use, building, and writ experience and have performed well for the City in the past. Burke, Williams & Sorensen and Jarvis, Fay, Doporto provided defense proposals and cost estimates. Based on the preliminary case analyses provided by the two firms (on confidential file in the City Attorney’s office), the City Attorney concluded that Jarvis, Fay, Doporto had the more directly applicable litigation expertise for this case and retained that firm. The initial estimated defense costs were anticipated to be within the City Manager’s contracting authority and the Community Development Department had available budget to cover the expenses. Thus, with City Manager authorization, the City Attorney signed a Legal Services Packet Pg 217 13 Litigation Defense Contract Amendment Page 2 Agreement for Jarvis, Fay, Doporto’s work on this matter and $25,000 was encumbered to the law firm from the Community Development Department budget. Due to an Amended Complaint being filed prior to hearing on the first demurrer and the resulting need to prepare a second demurrer addressing new issues, costs are now close to hitting the total $25,000 cap in the current contract (approximately $19,500 through June). Additional work was required to finish the demurrer, analyze the opposition, brief and revise the reply, and argue the demurrer at hearing. The City received a favorable ruling on August 5, but the Plaintiff was granted leave to amend the complaint one additional time within the next 30 days. Based on the original proposal rates submitted by Jarvis, Fay, Doporto and the estimated remaining hours of work, the City Manager is asked to authorize the City Attorney to sign an Amendment to the original Legal Services Agreement adjusting the contract value not to exceed $50,000. The additional $25,000 will be encumbered to Jarvis Fay from the Contract Services line of the City Attorney budget to cover costs through the conclusion of the litigation. This will come out of the $50,000 the City Attorney Department received for Contract Services as part of the 2015-2017 Financial Plan Development Services Staffing, Contract Services and CDD Reorganization SOPC for additional legal services support. We are hopeful that the matter will conclude far under the new limit, in which case we will release the remaining encumbrance for use on other development related legal matters. Attachment: 1. 2015 03 31 - signed LSA - Jarvis Fay.pdf 2. 2015 08 - Jarvis Fay - Amendment to Agreement.docx Packet Pg 218 13 THIRD AMENDMENT TO AGREEMENT This Third Amendment to Agreement is made and entered in the City of San Luis Obispo on ___________, 2017, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, herein after referred to as City, and JARVIS, FAY, DOPORTO & GIBSON, LLP, a professional corporation, hereinafter referred to as Consultant. W I T N E S S E T H: WHEREAS, on March 31, 2015, the City entered into an Agreement with Consultant for professional legal services for its defense in Palacios, et al. v. Nielsen, et al.; and WHEREAS, work on this matter is not yet complete; and WHEREAS, the parties seek to modify certain provisions of the Agreement between them. NOW, THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows: 1. “Section 1. Term” of the Agreement is modified to increase the shall not exceed amount to $85,000. 2. All other terms and conditions of the Agreement, as amended hereby, remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. CITY OF SAN LUIS OBISPO By:________________________________ J. Christine Dietrick, City Attorney JARVIS, FAY, DOPORTO & GIBSON, LLP By: ________________________________ Rick Jarvis Its: Packet Pg 219 13 Page intentionally left blank. Packet Pg 220 13