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HomeMy WebLinkAboutSunesys, LLC - 2015-06-12 J, CITY OF HUNTINGTON BEACH INTERDEPARTMENTAL COMMUNICATION CONFIDENTIAL LAWYER-CLIENT COTV Ur CATION TO: JOAN FLYNN, City Clerk FROM: MICHAEL GATES, City Attorney DATE: July 14, 2015 SUBJECT: Sunesys, LLC v City of Huntington Beach Case No. 30-2009-00323543 The City Council approved the Settlement Agreement with Sunesys during the June 15, 2015 Closed Session meeting and authorized the City Manager to sign it on behalf of the City. The City Manager and Sunesys have signed the Agreement. Attached is the signed, original Agreement for your files. MIC L GATES Ci ttorney 123271.doc SETTLEMENT AGREEMENT AND MUTUAL RELEASE This Settlement Agreement and Mutual Release (the "Agreement") is made and entered into by and between SUNESYS, LLC, a Delaware limited liability company, successor by merger to SUNESYS, INC , a Pennsylvania corporation ("Sunesys"), and the CITY OF HUNTINGTON BEACH ("City") Sunesys and City are individually referred to as a "Party" and collectively as the "Parties " This Agreement is entered into on June 12, 2015 pursuant to the following terms and conditions RECITALS A On June 10, 2008, Sunesys filed a Notice of Proposed Construction ("NPC") with the Energy Division of the California Public Utilities Commission to install a digital fiber optic communication network between the schools and administrative buildings of the Fountain Valley School District (the "Project") B On July 1 and 2, 2008, the Energy Division of the California Public Utilities Commission issued to Sunesys a Notice To Proceed ("NTP") to install the Proj ect C Chapter 17 64 of the Huntington Beach Municipal Code sets forth the regulations of the City pertaining to undergrounding of utilities, including communications lines like those involved in the Project (the "Undergrounding Ordinance") On July 16, 2008, the City notified Sunesys that pursuant to Section 17 64 050 of the Undergrounding Regulations, all fiber optic lines of the Project must be installed underground and could not be attached to existing utility poles DWT 26852227v1 0089901-000006 D In the case entitled NextG v City of Huntington Beach, U S District Court for the Central District of California, Case No SACV 07-1471 (the "NextG Action"), on March 7, 2008, the Court enjoined the City from enforcing the Undergrounding Ordinance to a project similar to Sunesys' Project F On July 30, 2008, Sunesys notified the City that it would file suit in Federal Court if the City refused to issue permits to attach fiber optic lines to existing utility poles G Pursuant to the Settlement Agreement dated August 19, 2008, the City permitted Sunesys to install its Project As part of the Project, Sunesys attached fiber optic Imes to existing utility poles where available, and where unavailable, undergrounded the Imes The Settlement Agreement preserved the City's authority to enforce its ordinances after Sunesys installed its project within one year after the written decision in the NextG Action H The City appealed the injunctions in the NextG Action The Ninth Circuit vacated the injunctions in September 2008 and remanded the case to the District Court for further proceedings In February 2009, the District Court granted the City's motion for judgment on the pleadings I On September 1, 2009, pursuant to the August 19, 2008 Settlement Agreement, the City of Huntington Beach notified Sunesys that it was choosing to enforce its Undergrounding Ordinance in connection with the Project J On November 30, 2009, Sunesys filed the Complaint entitled, Sunesys, LLC v City of Huntington Beach, Orange County Superior Court Case No 30-2009- DWT 26852227v1 0089901-000006 0032354 (the "Sunesys Action") challenging the validity of the Undergrounding Ordinance K Sunesys could file an application with the California Public Utilities Commission ("Commission") to re-approve the Project, including preempting the City Undergrounding Ordinance L To avoid further litigation in the Sunesys Action or any potential filing with the Commission regarding the Project, the Parties enter into this Settlement Agreement AGREEMENT For and in consideration of the commitments made herein, the City and Sunesys agree as follows 1 Project Approval The Project was installed in 2008 under the August 19, 2008 Settlement Agreement Pursuant to this Agreement, the City consents to the Project remaining in place, as is 2 Sunesys Compliance with City Undergrounding Ordinance Through December 31, 2019 A Sunesys agrees not to challenge the validity of the City's Undergrounding Ordinance in place as of the date of this Agreement, in Court or at the Commission, through December 31, 2019 During this time, Sunesys may propose and apply for additional projects, including those installing aerial cables on existing utility poles, provided that it complies with the City's Undergrounding Ordinance, as applicable Sunesys agrees that the City's current Undergrounding Ordinance requires undergrounding of all telecommunication cables and equipment While this Agreement DWT 26852227v1 0089901-000006 does not prevent Sunesys from seeking a variance or otherwise requesting to install such equipment above ground, absent such a variance or exemption, Sunesys shall install the telecommunication lines and equipment underground B The City agrees that pursuant to Public Utilities Code § 7901 1, it will apply the Undergrounding Ordinance to all entities in an equivalent manner C If the City denies a permit for an individual project, Sunesys may challenge the denial in any court or venue of competent jurisdiction Sunesys' challenge of the denial of an individual project shall not be based on the validity of the Undergrounding Ordinance on its face Sunesys agrees not to seek preemption of a denial of a specific application through the Commission D Sunesys further understands that the City has allowed other telephone corporations and communications providers to overlash fiber optic lines to existing lines installed on utility poles in the public right-of-way Without conceding the status of that action, Sunesys agrees that through December 31, 2019, unless the City adopts a new Undergrounding Ordinance, or amends the Undergrounding Ordinance in effect at the time of this Settlement, it will not argue that by allowing other telephone corporations or telecommunications providers to overlash fiber optic lines to existing aerial lines the City has failed to treat Sunesys in an equivalent manner in violation of the Public Utilities Code At the same time, the City agrees to allow Sunesys to overlash fiber optic lines aerially on existing Sunesys or third party lines attached to existing utility poles in the public right-of-way E In Subsections A, B, C, and D above, Sunesys has agreed not to make certain legal claims through December 31, 2019 unless the City"amends"the Undergrounding Ordinance before December 31, 2019 Should the City amend the Ordinance in a manner that DWT 26852227v1 0089901-000006 does not relate to nor has no impact on use of the public right-of-way, or in a fashion immaterial to any Sunesys project, then the waiver remains in effect through December 31, 2019 3 Remove Or Relocate Facilities Sunesys agrees that the Project, and any future facilities Sunesys seeks to install in the City shall be subject to the following removal and relocation obligations a City shall have the right for itself to lay, construct, erect, install, use, operate, repair, replace, remove, relocate or maintain below surface or above surface improvements of any type or description in, upon, along, across, under or over the streets of the City b The City shall have the right to change the grade, width or location of any street, or improve any street in any manner, including but not limited to the laying of any sewer, storm drain, drainage facility, or construct and install any pedestrian tunnel, traffic signal, street lighting facility or other public improvement, provided, however, that nothing hereon is intended to expand or limit the duty of Sunesys to relocate at its expense under the common law applicable to a telephone corporation If such work shall require a change in the position or location of any Sunesys's nodes or fiber-optic cable, Sunesys, at its sole expense, within ninety (90) days after written notice from the Public Works Director, shall commence the work of doing any and all things to effect such change in position or location in conformity with the Public Works Director's written instructions Sunesys shall proceed promptly to complete such required work DWT 26852227v1 0089901-000006 c Sunesys shall comply with any lawful future undergrounding district or project d Irrespective of any other provision of this Agreement, Sunesys' right to construct, maintain, and use the public right-of-way shall be subject at all times to the right of the City, in the exercise of its police power, to require the removal or relocation of Sunesys's facilities at the sole cost and expense of Sunesys, except as the law may otherwise provide e In the event the use of the fiber optic lines installed as part of the Project is discontinued, Sunesys shall promptly notify the Public Works Director of any material discontinuance and remove from the street all such discontinued property, unless the Public Works Director permits such property to be abandoned in place in accordance with the requirements of the Public Works Director (subject to applicable requirements of the Commission) After abandonment, at the option of City, Sunesys shall submit to the Public Works Director, an instrument, reasonably approved by the City and Sunesys, transferring to the City the ownership of such property 4 Overlashin Sunesys shall permit third parties to overlash to Sunesys' aerial lines on just, reasonable and non-discriminatory terms under applicable law Potential overlashing parties may challenge the terms and conditions that Sunesys proposes in any state or federal court or venue of competent jurisdiction, including before the Commission 5 Waiver of Claims The Parties agree to a full release of their claims, as set forth below DWT 26852227v1 0089901-000006 a Except for the obligations of the Parties as set forth in this Agreement, in consideration of the recitals, covenants and agreements set forth in this Agreement, and other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, each Party to this Agreement hereby irrevocably and unconditionally mutually releases and forever discharges each other and each of their respective trusts, trustees, successors, assigns, executors and administrators, agents, employees, representatives, attorneys, principals, affiliates, and all persons acting by, through, under or in concert with any of them, or any of them, of and from any and all claims, demands, actions, causes of action, suits, liens, debts, obligations, promises, agreements, costs, damages, liabilities, and judgments of any kind, nature, or amount whether in law or equity, whether known or unknown, anticipated or unanticipated, liquidated or unliquidated, including any and all claimed or unclaimed compensatory damages, consequential damages, interest, costs, expenses and fees (including reasonable or actual attorneys' fees), ansing from or related to the events as described in the Sunesys Action b To effect a full and complete release as described above, the Parties expressly waive and relinquish all rights and benefits afforded to them by Section 1542 of the Civil Code of the State of California, and do so understanding and acknowledging the significance and consequence of such specific waiver of Section 1542 Section 1542 of the Civil Code of the State of California provides as follows DWT 26852227v1 0089901-000006 "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor" Thus, notwithstanding the provisions of Civil Code Section 1542, and for the purpose of implementing a full and complete release and discharge of the Parties, the Parties expressly acknowledge that this Agreement is intended to include in its effect, without limitation, all claims which they do not know or suspect to exist in their favor at the time of execution hereof, and this Agreement contemplates the extinguishment of any such claims The Parties warrant that they have each read this Agreement, including this waiver of California Civil Code Section 1542, and that they understand the Agreement and the Section 1542 waiver, and so freely and knowingly enter into this Agreement The Parties each acknowledge that it may hereafter discover facts different from or in addition to those it knows or now believes to be true with respect to the matters released or described in this Agreement, and they agree that the releases and agreements notwithstanding any later discovery of any such different or additional facts The Parties each hereby assumes any and all risk of any mistake in connection with the true facts involved in the matters, disputes, or controversies described herein or with regard to any facts which are now unknown to them relating thereto c The Parties agree that after full execution by the Parties, Sunesys shall dismiss the Sunesys Action with prejudice, and both Parties agree to waive any claims for attorney fees or costs DWT 26852227v1 0089901-000006 d Each Party shall each bear its own costs and expenses, including attorneys' fees, including those incurred in connection with the Sunesys Action, or the negotiation and execution of this Agreement 6 No Admission of Liability This Agreement is intended to be a compromise of disputed claims by all Parties Nothing in this Agreement shall be construed to be an admission of liability by any Party with respect to any of the issues raised in any of the proceedings specified in this Agreement 7 Agreement Binding on Related Parties This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, assigns, officers, directors, principals, employees, subsidiaries, parent entities, affiliated agents and corporations, attorneys, and representatives 8 Governing Law This Agreement shall be construed in accordance with, and all disputes governed by, the laws of the State of California, except as specifically provided for in this Agreement 9 Construction of this Agreement Any rule of construction to the effect that any ambiguity is to be resolved against the drafting party shall not be applied to the interpretation of this Agreement 10 Amendment or Breach of Agreement No breach of any provision of this Agreement can be waived unless it is in writing Waiver of any one breach shall not be deemed to be a waiver of any other breach of the same or any other provision hereof This Agreement may be amended only by a written agreement executed by all of the Parties 11 Entire This Agreement, and the attached exhibits, contains the entire agreement between the Parties respecting the subject matter of this Agreement and supersedes all DWT 26852227v1 0089901-000006 prior understandings and agreements whether oral or in writing between the parties respecting the subject matter hereof 12 Counterpart Signatures This Agreement may be executed in counterparts Facsimile signatures shall be deemed to be as effective as originals for the purposes of this stipulation Dated Jull 0, 2015 CITY OF HUNTINGTON BEACH By _ FVIVILSON, City Manager Approved as to Form Dated JAY 4, 2015 By ICHAEL E ATES, City Attorney Dated June , 2015 SUNESYS, LLC, a Delaware limited liability company By [NaYn G.v r [Title] '1 ,r,$,kj- Approved as to Form Dated June (1, 2015 DAVIS WRIGHT TREMAINE LLP By_ T SCOTT THOMPSON, ESQ DWT 26852227v1 0089901-000006 ECEIVF ® JUN 5 2015