HomeMy WebLinkAboutBerman Devalerio Pease & Tabacco and Pomerantz Haudek Block Grossman & Gross LLP - 2000-04-17i, CITY OF HUN T'INGTON BEACH
2000 MAIN STREET CALIFORNIA 92648
OFFICE OF THE CITY CLERK
LETTER OF TRANSMITTAL OF ITEM APPROVED BY THE CITY COUNCIL/
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
DATE: April 24, 2000
TO: Berman DeValerio Pease & Tabacco, P.C.
425 California Street, Suite 2025
San Francisco CA 94104
AND:
Pomerantz Handek Block Grossman & Gross
100 Park Avenue, 26th Floor
New York NY 10017-5516
Date of Approval: April 17, 2000
ATTENTION: Joseph J. Tabacco, Jr., Partner
ATTENTION: Stanley M. Grossman, Partner
Enclosed for your records is an executed copy of the Binding Mediation Agreement with "Baseball"
Provision between Law Firms and the City of Huntington Beach.
Connie Brockway
City Clerk
Attachments: Action Agenda Page Agreement ✓ Bonds Insurance
RCA Deed Other
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Name 7D6partmefit -/RCA Agreement Insurance Other
Name Department RCA Agreement Insurance Other
Name Department RCA Agreement Insurance Other
Risk Management Dept. Insurance
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1 Telephone: 714.536.5227 )
Council/Agency Meeting Held: y — -00
Deferred/Continued to:
Approved ❑ Conditionally Approved ❑ Denied
p_ City Cle Signature
Council Meeting Date: April 17, 2000
Department ID Number: CA 00-010
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS' Ly
s� ��� a _
SUBMITTED BY: GAIL HUTTON, CITY ATTOR -s.
PREPARED BY: GAIL HUTTON, CITY ATTORNEY Dr'5-p1
SUBJECT: APPROVE BINDING MEDIATION AGREEMENT BETWEEN,ZHE-ArlITY AND
THE POMERANTZ AND TABACCO LAW FIRMS TO RESOLVE FEE DISPUTE
RELATING TO ORANGE COUNTY BANKRUPTCY RECOVl[_=RY>
Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s)
Statement of Issue: Whether to approve the Binding Mediation Agreement _w`ith "Baseball"
Provision . between Law Firms and .the City of Huntington Beach attached hereto as
Attachment No. 1.
Funding Source: Not applicable.
Recommended Action: Approve the Binding Mediation Agreement with "Baseball"
Provision_ b-tween Law Firms and the City of Huntington Beach, and authorize the Mayor to
execute such agreement on behalf of the City and the City Clerk to attest thereon.
Alternative Action(s): Provide further direction to the City Attorney regarding the dispute.
1
iN,PE\AAIg111
h,
Council/Agency Meeting Held: y —`7 —00
Deferred/Continued to:
'Approved ❑ Conditionally Approved ❑ Denied
City Cle Signature
Council Meeting Date: April 17, 2000
Department ID Number: CA 00-010
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SUBMITTED BY: GAIL HUTTON, CITY ATTOR 5
PREPARED BY: GAIL HUTTON, CITY ATTORNEY • N-S-0° -'
SUBJECT: APPROVE BINDING MEDIATION AGREEMENT BETWEEN:-THF.rITY AND
THE POMERANTZ AND TABACCO LAW FIRMS TO RESOLVE FEE DISPUTE
RELATING TO ORANGE COUNTY BANKRUPTCY RECOVERY''
Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s)
Statement of Issue: Whether to approve the Binding Mediation Agreement w ith "Baseball"
Provision - between Law Firms and the City of Huntington Beach attached hereto as
Attachment No. 1.
Funding Source: Not applicable.
Recommended Action: Approve the Binding Mediation Agreement with "Baseball"
Provision, between Law Firms and the City of Huntington Beach, and authorize the Mayor to
execute such agreement on behalf of the City and the City Clerk to attest thereon.
Alternative Action(s): Provide further direction to the City Attorney regarding the dispute.
*QUEST
FOR COUNCIL ACA N
MEETING DATE: April 17, 2000
DEPARTMENT ID NUMBER: CA 00-010
Analysis: On March 6, 2000, the City Council authorized the City Attorney to resolve the
fee dispute by way of the proposed Mediation Agreement between the City and (1) Berman
Devalerio Pease and Tabacco and (2) Pomerantz Haudek Block Grossman and Gross LLP,
("The Firms") and set the matter for an impartial mediator selected by the parties according to
the terms contained therein. The dispute concerns the reasonable amount of fees and
expenses due by the City to The Firms for professional services rendered pursuant to a
Professional Services Contract dated February 3, 1995 (the "PSC"). The Law Firms
undertook legal services pursuant to the PSC which included, among other matters, the
preparation and filing of a class-action lawsuit brought against persons and entities believed
to be legally responsible for losses suffered by the City and other municipalities which were
investors or participants in the Investment Pool sponsored by Orange County, California.
By this agreement, the parties seek to fully and finally resolve this fee dispute in the interest
of justice, expediency, and economy by utilizing the binding mediation mechanism set forth
therein. The "Baseball" provision is explained in Exhibit "B", Sections 7 & 8, of the
Agreement
The contemplated mediation is set for May 1, 2000 in order to coincide with the next City
Council Meeting to allow for settlement Authority from the City Council, in closed session, on
that same date. The matter is likewise set for a closed session on April 17, 2000 to provide
an opportunity for further direction from the City Council relating to on -going negotiations
between the parties.
Environmental Status:
Attachment(s):
RCA Author: A. De La Loza
Tabacco Mediation Agreement -2- 4/6/00 12:15 PM
ATTACHMENT 1
BINDING MEDIATION AGREEMENT WITH `BASEBALL" PROVISION
BETWEEN LAW FIRMS AND THE CITY OF HUNTINGTON BEACH
THIS AGREEMENT for binding mediation is made and entered into this 17th day of
April, 2000, by and between the CITY OF HUNTINGTON BEACH, a public body, corporate and
politic, of the State of California, hereinafter referred to as "CITY," and the law firms of (1)
BERMAN DEVALERIO PEASE & TABACCO (as the successor in interest to STAMELL
TABACCO & SCHAGER, concerning all matters relating to the Orange County litigation) with
offices presently located at 425 California Street, Suite 2025, San Francisco, CA 94104, and (2)
POMERANTZ HAUDEK BLOCK GROSSMAN & GROSS LLP 100 Park Avenue, 26`h Floor,
New York, NY 10017-5516, (hereinafter, collectively referred to as the "LAW FIRMS") (the CITY
and the LAW FIRMS are sometimes referred to herein as the "PARTIES"). The PARTIES hereto
recite and agree as follows:
RECITALS
A. The CITY, by vote of the CITY's Council, engaged the services of LAW FIRMS
pursuant to a Professional Services Contract (the "PSC") dated February 3, 1995, a copy of which is
attached hereto as Exhibit A, to pursue all legal remedies available to it, specifically in connection
with the filing of a class action lawsuit relating to the CITY's investments and participation in the
Orange County Investment Pool;
B. The LAW FIRMS undertook legal services pursuant to the PSC which included,
among other matters, the preparation and filing of a class action lawsuit with the CITY named as
the lead plaintiff in the action and which was brought against persons and entities believed to be
legally responsible in whole or in part for losses suffered by the CITY and similarly situated
municipalities and other governmental entities which were investors or participants in the
Investment Pool sponsored by Orange County, California;
C. In May 1995, the CITY elected by a vote of the City Counsel to pursue its claim(s)
through Orange County rather than continue litigating its claim(s) with the LAW FIRMS, thereby
effectively discharging the LAW FIRMS from performing any further legal services pursuant to the
PSC. In late May, 1995, the CITY formally instructed the LAW FIRMS to cease all further work in
connection with the case;
D. The LAW FIRMS incurred fees and expenses under the PSC in connection with
legal services the LAW FIRMS performed on behalf of the CITY. The LAW FIRMS have
previously submitted itemized fee and expense statements to the CITY for its review and
consideration. At the present time, the CITY disputes the amount owing to the LAW FIRMS
which should be paid from the recovery which will be received by the CITY.
Mediation Agreement Page 1 of 4
E. Under the PSC, the CITY agreed in the event of a termination or discharge to pay to
the LAW FIRMS their reasonable attorneys' fees and expenses from any recovery subsequently
obtained by the CITY. It now appearing that the CITY will receive a recovery as contemplated
under the PSC, the issue now to be mediated is the amount of reasonable fees and expenses which
should be paid by the CITY to the LAW FIRMS upon the CITY's receipt of its share of the
recovery proceeds from the Orange County litigation.
F. In contemplation of the anticipated recovery, the PARTIES hereto in the interest of
justice, expediency, and. economy wish to put into effect the dispute resolution technique set forth
herein in order to fully and finally resolve this matter.
G. The PARTIES hereto desire to resolve any and all disputes concerning the fees
charged by the LAW FIRMS through the use of binding mediation using a baseball dispute
resolution procedure. The baseball procedure will only be invoked if, at the conclusion of the
mediation, no agreement has been reached by the PARTIES concerning the amount of reasonable
fees and expenses payable to the LAW FIRMS by the CITY; and
H. The PARTIES understand that in the context of this agreement that the term
"baseball" means a binding dispute resolution procedure whereby each PARTY provides the
mediator, in writing and in confidence, an exact dollar amount representing the amount which that
PARTY, as applicable, is willing to accept from, or to give to, the other PARTY to settle the
dispute. The mediator shall select only one of the proposals submitted by the PARTIES that, in the
exercise of the mediator's own good faith judgment, is the dollar amount which most fairly resolves
the dispute. The selection of this dollar number shall be binding on all of the PARTIES. The
mediator may not compromise, "split the difference", or otherwise select some dollar number other
than one of the dollar numbers submitted by PARTIES.
AGREEMENT
NOW, THEREFORE, THE PARTIES hereto do agree as follows:
1. The PARTIES hereby agree to select a mediator based on the procedures set forth in
Exhibit B attached hereto;
2. A one -day mediation not exceeding a total length of eight (8) hours shall occur not
later than sixty (60) days following the date of this agreement, with the date/time of this mediation
to coincide with a scheduled closed session of the City Council occurring between 5:00 p.m. and
6:00 p.m.
3. If so desired, each PARTY may submit a mediation brief not exceeding ten (10)
pages to the mediator no later than seven (7) days prior to the scheduled mediation. Briefs
submitted to the mediator shall be served on the opposing PARTY at the same time they are
Mediation Agreement Page 2 of 4
submitted to the mediator. Each party may put on live testimony subject to cross-examination.
4. The exclusive subject matter of the mediation shall concern the amount of fees and
expenses payable to the LAW FIRMS by the CITY under the PSC.
5. Each of the PARTIES (the LAW FIRMS, on one hand, and the CITY, on the other
hand) shall be responsible for paying one-half of the reasonable fees and expenses charged by the
mediator in connection with the mediation contemplated under the terms of this agreement.
6. If by either 6:00 p.m., or following the expiration of eight (8) hours, whichever
occurs later, there has been no agreement reached by the PARTIES resolving the subject matter of
the mediation, then each PARTY shall participate in a binding dispute resolution procedure known
as "Baseball."
7. Using Baseball as a binding dispute resolution procedure, each PARTY shall
provide to the mediator, in a confidential writing, an exact dollar amount representing the amount
which each such PARTY, as applicable, is willing to accept from, or to give to, the other PARTY
to settle the dispute, using the following ground rules:
a. The writings submitted to the mediator by each of the PARTIES
shall not contain any words of condition, qualification, or explication.
b. The writing submitted by the CITY shall be in the following form:
The City of Huntington Beach agrees to pay the Law Firms [insert
dollar amount] in full satisfaction of their claims arising under the
Professional Services Contract.
b. The writing submitted by the LAW FIRMS shall be in the following form:
The law firms of Berman DeValerio Pease & Tabacco and
Pomerantz Haudek Block Grossman & Gross LLP agree, collectively, to
accept [insert dollar amount] from the CITY in full satisfaction of their
claims arising under the Professional Services Contract.
8. Using baseball, as a binding dispute procedure, the PARTIES agree that the
mediator shall follow the following rules:
a. The mediator shall pick either the dollar proposal submitted by the LAW
FIRMS or the dollar proposal submitted by the CITY. The mediator shall not have the
authority to compromise, "split the difference", or select any number other than one of
the two dollar proposals submitted by the PARTIES.
b. Within the time period provided below, The mediator shall select one of
the two dollar proposals submitted by the PARTIES based on the mediator's good faith
consideration of the papers submitted to the mediator, and the presentations made by the
Mediation Agreement Page 3 of 4
PARTIES or their authorized representatives.
C. Within five (5) days following his receipt of the dollar proposals from
both PARTIES, the mediator shall cause to be transmitted by both facsimile and first
class mail to the PARTIES at their respective facsimile numbers and addresses a written
and dated communication indicating his/her selection of either the proposal submitted
by the CITY or the proposal submitted by the LAW FIRMS.
9. Within thirty (30) days following the date of the mediator's written communication
selecting one of the two proposals, the CITY shall transmit such dollar amount by check or wire to
BERMAN DEVALERIO PEASE & TABACCO for the full amount of all fees and expenses
determined to be owing to both LAW FIRMS.
10. The PARTIES agree that, except in the case of fraud, collusion, or a material non -
disclosed conflict -of -interest, the decision of the mediator hereunder is non -litigable, non -
appealable and non -reviewable.
IN WITNESS WHEREOF, the PARTIES hereto have caused this Agreement to be
executed by and through their authorized officers the day, month and year first above written.
BE[ DEVALERIO,IEASE &
T CCO, P.C. /
�i1SY..r�7i7■��
Sheet, Suite 2025
CA 94104
PDMERANTZ HAUDEK BLOCK
GROSSMAN & GROSS
By: � �r
Starry . Gr ssman, Partner
100 Park Avenue, 26`h Floor
New York, N.Y. 10017-5516
REVIEWED AND APPROVED:
City Agministrator
CITY OF HUNTINGTON BEACH, a
municipal corporation of the State of
California
ATTEST:
44w. .
City Clerk ,
APPROVED AS TO FORM:
lit —City Attorney 4 - 1 c - 9'
INITIATED AND APPROVED:
( ity Attorney / 4-1 a
Mediation Agreement Page 4 of 4
EXHIBIT #A
�
PROFESSIONAL SERVICES CONTRACT BETWEEN
THE CITY OF HUNTINGTON BEACH AND
STAMELL, TABACCO, & SCHAGER FOR
LEGAL SERVICES/CLASS ACTION LAWSUIT
THIS AGREEMENT is made and entered into this (0�day of February, 1995, by and
between the CITY OF HUNTINGTON BEACH, a public body, corporate and politic, of the State
of California, hereinafter referred to as "CITY," and STAMELL, TABACCO, & SCHAGER.
hereinafter referred to as "CONTRACTOR," with offices at 235 Montgomery Street, Suite 2510,
San Francisco, CA 94104. The CONTRACTOR and the law firm of POMERANTZ HAUDEK
BLOCK & GROSSMAN, 100 Park Avenue, New York, NY 10017-5516, as referred to in
Exhibit "A" hereto are hereinafter collectively referred to as the "Law Firms".
WHEREAS, CITY desires to engage the services of CONTRACTOR to pursue all legal
remedies available to it, specifically in connection with the filing of a class action lawsuit relating
to the CITY'S investments and participation in the Orange County Investment Pool, and
The provisions of HBMC Chapter 3.03 relating to procurement of professional service
contracts has been complied with; and
CONTRACTOR, has been selected to perform said services,
NOW, THEREFORE, it is agreed by CITY and CONTRACTOR as follows:
1. WORK STATEMENT
CONTRACTOR shall provide all services as described in CONTRACTOR'S proposal
letter, dated December 1994 (Exhibit "A"), which is. attached hereto and incorporated into this
Agreement by this reference. Said services shall sometimes hereinafter be referred to as
"PROJECT."
Professional Services Contract Page 1 of 7
CONTRACTOR hereby designated Joseph J. Tabacco, Jr., who shall represent it and be
its sole contact and agent in all consultations with CITY during the performance of this
Agreement.
2. CITY STAFF ASSISTANCE
CITY shall assign a staff coordinator to work directly with CONTRACTOR in the
performance of this Agreement.
3. COMPENSATION
A. The CONTRACTOR is undertaking this engagement on a fully contingent
basis which will apply to either a class or individual action.
(1) Legal fees shall be paid only in the event of a recovery on behalf
of the CITY and/or for similarly situated municipalities and/or governmental entities, as follows:
(a) for any recovery up to $25 million, (a) twenty percent (20%)
of such recovery, if such recovery is obtained before the commencement of any trial and
(b) thirty percent (30%) of such recovery, if such recovery is obtained after commencement of
any trial;
(b) if any recovery exceeds $25 million but is less than
$50 million, an additional fifteen percent (15%) of such excess amount, regardless of the stage
of the proceedings; and
(c) if any recovery equals or exceeds $50 million, an additional
ten percent (10%) on such excess amount, regardless of the stage of the proceedings.
(2) Any and all out-of-pocket expenses and costs shall be advanced by
the Law Firms and recouped only from defendants or out of any recovery obtained on behalf of
the CITY and/or similarly situated municipalities and/or governmental entities. To the extent
Professional Services Contract Page 2 of 7
permitted by applicable rules of ethics, Law Firms shall not seek recovery of such out-of-pocket
expenses and costs from the CITY.
B. In the event a court certifies the contemplated class action, all legal fees
and expenses shall be subject to court approval and the arrangements reflected in paragraph 3.A
above shall only be expressions of what the parties to this retainer believe to be fair and
reasonable compensation and reimbursement arrangements.
C. CITY acknowledges that the Law Firms have made no representations or
guarantees as to the outcome or the amounts recoverable in connection with any services to be
rendered pursuant to this retainer.
D. Nothing in this Retainer .Agreement precludes. the Law Firms from
representing any other municipal entity on a class or individual basis, in connection with any
claim arising out of investments or participation in the Investment Pool.
E. It is the intent of the CONTRACTOR and the Law Firms that any fees paid
and expenses reimbursed to them shall be shared pro rata in proportion to each Class Member's
loss share including CITY's share.
4. EXTRA WORK
In the event CITY requires additional services not included in Exhibit "A" or changes in
the scope of services described in Exhibit "A," CONTRACTOR will undertake such work after
receiving written authorization from CITY. Additional compensation for such extra work shall
be allowed only if the prior written approval of CITY is obtained.
Professional Services Contract Page 3 of 7
5. INSURANCE WAIVERS
By execution and approval of this Agreement, the CITY hereby waives the CITY'S
insurance requirements as adopted by resolution or ordinance of the City Counsel, except .the
requirement for professional liability insurance as evidenced.
6. PROFESSIONAL LIABILITY INSURANCE
The Law Firms shall show proof of a professional liability insurance policy which will
cover the work performed by them hereunder. Said policy shall provide coverage for the Law
Firm's professional liability in an amount not less than $500,000 per claim. A claims made
policy shall be acceptable.
7. INDEPENDENT CONTRACTOR
The Law Firms are and shall be, acting at all times in the performance of this Agreement
as independent contractors, and the Law Firms shall secure at their expense, and be responsible
for any and all payments of all taxes, social security, state disability insurance compensation,
unemployment compensation and other payroll deductions for the Law Firms and the partners,
agents, and employees and all business licenses, if any, in connection with the services to be
performed hereunder.
8. TERMINATION OF AGREEMENT
All work required hereunder shall be performed in accordance with the highest standards
of the legal professional. CITY may terminate CONTRACTOR'S services hereunder at any time
with or without cause, and whether or not PROJECT is fully complete. Any termination of this
Agreement by CITY shall be made in writing through the City Attorney's office, notice of which
shall be delivered to CONTRACTOR as provided herein. Such discharge shall not terminate the
Professional Services Contract Page 4 of 7
•
E
CITY4S obligation to pay the Law Firms for reasonable attorneys' fees and expenses from any
recovery subsequently obtained by the CITY.
9. . ASSIGNMENT AND SUBCONTRACTING
This Agreement is a personal service contract and the supervisory work hereunder shall
not be delegated by the Law Firms to any person or entity without the consent of CITY.
10. CITY EMPLOYEES AND OFFICIALS
CONTRACTOR shall employ no CITY official nor any regular CITY employee in the
work performed pursuant to this Agreement. No officer or employee of CITY shall have any
financial interest in this Agreement in violation of the applicable provisions of the California
Government Code.
11. NOTICES
Any notices or special instructions required to be given in writing under this Agreement
shall be given either by personal delivery to CONTRACTOR'S agent (as designed in Section 1
hereinabove) or to the City Attorney, as the situation shall warrant, or by enclosing the same in
a sealed envelope, postage prepaid, and depositing the same in the United States Postal Services,
addressed as follows:
TO CITY:
Gail Hutton, Esq., City Attorney
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
12. IMMIGRATION
TO CONTRACTOR:
Joseph J. Tabacco, Jr.
Stamell, Tabacco, & Schager
235 Montgomery Street, Suite 2510
San Francisco, CA 94104
CONTRACTOR shall be responsible for full compliance with the immigration and
naturalization laws of the United States Code regarding employment verification.
Professional Services Contract Page 5 of 7
.13. LEGAL SERVICES SUBCONTRACTING PROHIBITED
CONTRACTOR and CITY agree that CITY is not liable for payment of any subcontractor
. work involving legal services, and that such legal service's are expressly outside the scope of
services contemplated hereunder. CONTRACTOR understands that pursuant to Huntington
Beach City Charter § 309, the City Attorney is the exclusive legal counsel for CITY, and CITY
shall not be liable for payment of any legal services. expenses incurred by CONTRACTOR,
unless specifically authorized in writing by the City Attorney. This paragraph does not apply to
the CONTRACTOR'S retention of POMERANTZ HAUDEK BLOCK & GROSSMAN, as
described herein and in the attached Exhibit A.
14. CLAIMS AGAINST THE CITY
This Agreement pertains only to the affirmative claims that the CITY and/or similarly
situated municipalities and government entities may have against persons or entities other than
Orange County arising out of investments and participation in the Orange County Investment
Pool and does not cover claims asserted against the CITY or similarly situated municipalities and
government entities.
Page 6 of 7
parties.
�VMIL1:91A
The foregoing and Exhibit "A" attached hereto set forth the entire Agreement between the
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by and through their authorized officers the day, month and year first above written.
CONTRACTOR: CITY OF HUNTINGTON BEACH, a
municipal corporation of the State of
S TAMELL, TABACCOzPer
R California
By
J sep J. T accMayor
tgomertstreet, Suite 2510 ATTEST:
cisco, CA 94104
G� .A
City Clerk
7/3/yS
APPROVED AS TO FORM:
itp Attorney
-7-95
REVIEWED AND APPROVED: INITIATED AND APPROVED:
�-s z -I
City Adl iinistrator City Attorney
ORANGBRETAINER.AGM
Professional Services Contract Page 7 of 7
•
EXHIBIT A
PROPOSAL FOR LEGAL SERVICES
The primary focus of the Law Firms' assignment is to commence and prosecute to
conclusion, a class action, against persons and entities believed to be legally responsible in whole
or in part for losses suffered by the City of Huntington Beach ("City") and similarly situated
municipalities and other governmental entities which were investors or participants in the
Investment Pool sponsored by Orange County, California ("Investment Pool").
The putative class action would be brought on behalf of the City of Huntington Beach as
class representative for a Class of Investment Pool participants which, at a minimum, will include
the thirty-seven municipalities which were participants or investors in the Investment Pool. The
action will most likely allege violations of both federal and state securities and common law
against investment advisors and brokerage houses and certain individuals with responsibility for
investment decisions. In addition, it may also allege violations of state constitutional and
statutorily imposed restrictions on the type of investments that can be made by public funds.
The class action would be independent of any action the City has or may pursue against
Orange County directly on a trust or other theory. It is specifically understood that the Law
Firms are not authorized by this agreement to name Orange County as a defendant in any action
brought by or on behalf of the City. In addition, because of the automatic stay imposed by the
bankruptcy filing, Orange County, absent leave of court, cannot be named as a defendant in the
action we contemplate filing. The Law Firms specifically agree that they will not seek fees
arising from the City's recovery through any plan of adjustment as established in the Orange
County Bankruptcy proceeding.
EXHIBIT A
•
Before we commence the class action, we will need to obtain some essential information
from the City concerning, among other things, the following: the circumstances which resulted
in its initial investment in the Investment Pool; the amount, number, and timing of subsequent
investments in the Investment Pool, if any; the sources of the funds that were invested in the
Investment Pool (i.e, reserve funds, money raised from bond offerings, etc.); all communications
that the City received or had with anyone, including Robert L. Citron and Matthew Raabe,
concerning the Investment Pool, the nature of the securities in which funds were invested,
potential investment risks, the nature of the investment strategy used, including the use of
leveraged transactions, any losses incurred, and any liquidity issues; any written reports that the
City received concerning the Pool, including any annual or monthly reports; and the nature and
extent of the injuries of the City, above and beyond the approximately $43 million of its funds
that remain frozen as a result of the County's bankruptcy filing, such as any cutting of its budget
or any public programs, or any detrimental impact on its credit.
A class action as contemplated here requires that a court make a determination that the
case is suitable for class action treatment. A court's inquiry focuses on the nature of the common
claims, the number of class members, the superiority of proceeding as a class versus numerous
individual or consolidated individual actions, the typicality of the named plaintiff to the other
members of the proposed class, and- the adequacy of the plaintiff and its counsel to represent
itself and all members of the Class. Typically, the recovery afforded the class plaintiff can be
no different or greater that the benefits to all class members. However, the costs and fees of
such litigation are borne in proportion to each class member's recovery so that the class plaintiff
incurs no greater burden.
Under the California Rules of Ethics, we are permitted to represent the City on a
contingent fee arrangement. Further, we are permitted to advance all of the expense of the
EXHIBIT A - 2 -
litigation, without regard to the City's ultimate responsibility for such costs. However, as in all
litigation, you should be aware that in the event the case is unsuccessful, defendants may be
entitled to an award of certain costs. as provided in the federal rules as the prevailing party and
there is a split of authority as to whether the Law Firms can agree to indemnify the City in the
unlikely event of such an award of costs. To the extent permitted by the Rules of Ethics, the
Law Firms, as part of their agreement, further agree to indemnify the City for such costs assessed
as long as there is no determination that the City through its actions was culpable for such costs
being incurred such as through the failure to cooperate regarding discovery.
With regard to discovery, the City, in addition to many class members, will .no doubt be
subject to requests for documents and may have to provide depositions of one or more of its
officials who had communications with the administrators of the Investment Pool. It is unlikely
that this burden will be significantly greater whether or not the City is a named plaintiff because
of the relatively large sums of money involved in the case and the relatively few class members,
i.e. other cities. If the City is a named plaintiff, we will be able to more directly control the flow
and timing of such discovery to minimize any disruption to the City. Obviously, our focus will
be to obtain all necessary discovery from the defendants and third parties.
If the case can be resolved through settlement, we anticipate that the City will play an
active advisory role in such negotiations. However, unlike an individual action, once a case is
certified as a class action, the approval or disapproval of any one plaintiff or class member is not
absolutely essential and it is the Court which must pass on the adequacy of any settlement under
the Federal Rules of Civil Procedure. Obviously, as a practical matter, the City's input in any
settlement process will be very critical and it is difficult to envision a situation where the Law
Firms would not fully advocate the views of the City in any settlement negotiations.
EXHIBIT A - 3 -
Concerning the payment of fees and expenses, in addition to the conditions set forth in
the Contract, the following considerations apply. Because the case will be brought as a class
action, any award of fees and expenses to plaintiffs' counsel from any recovery must be made
by a court following application and a fairness hearing. However, we agree, subject to court
approval, that as counsel for the City and the Class that we will not seek an award of fees in
excess of the percentages specified in the Contract
With regard to the City's share of such fees and expenses, we envision that any such
award will be paid from an overall settlement fund in which the City and all class members
would share pro rasa to their respective claims. On the premise that the City's maximum
expected recovery from this litigation is in the range of $10 million, we would agree to limit our
fees and costs to a. maximum of $2.5 million of the City's share of such recovery. This is
consistent with the fee structure set forth -in the Contract but is a further assurance by the Law
Firms that the City will only bear its proportionate share of any such fees awarded. Further, no
fee shall be sought by the Law Firms from recoveries obtained by the City directly from funds
held by the Investment Pool. In the event the case is not certified to proceed as a class action,
it is specifically understood that the same terms and conditions as set forth in this Contract and
the Exhibit shall also govern the Law Firm's representation of the City.
ORANGMEXH-A.AGM
EXHIBIT A - 4 -
EXHIBIT #B.
EXHIBIT B
TO BINDING MEDIATION AGREEMENT WITH "BASEBALL" PROVISION
BETWEEN LAW FIRMS AND THE CITY OF HUNTINGTON BEACH
PROCEDURES FOR SELECTING A MEDIATOR
BERMAN DEVALERIO PEASE & TABACCO and POMERANTZ HAUDEK
BLOCK GROSSMAN & GROSS LLP (hereinafter, collectively referred to as the "LAW
FIRMS") and the CITY OF HUNTINGTON BEACH, a public body, corporate and politic,
of the State of California, hereinafter referred.to as "CITY," (the CITY and the LAW
FIRMS are sometimes referred to herein as the "PARTIES") agree to the following
procedures for the selection of a mediator and the location of the mediation:
1) The PARTIES agree on the use of JAMS Endispute ("JAMS") as the organization
sponsoring the mediation contemplated under the binding mediation agreement.
2) The mediation shall last not more than two consecutive days described under the
mediation agreement and shall not exceed a total of eight (8) hours for both days
combined.
3) The PARTIES agree that the case administrator at JAMS shall select a list -of four
names of JAMS mediators sitting in Los Angeles County, Orange County, and San
Francisco County.
(a) The list of four mediators selected for each County by the JAMS case
administrator shall not include the name of any mediator who has ever performed
alternative dispute resolution services for the PARTIES. Each PARTY shall
promptly notify the case administrator in any instance where a proposed mediator
has ever performed alternative dispute resolution services within the past five years
for such PARTY including, but not limited to, mediation or arbitration. Upon
receipt of any such notification, the JAMS case administrator shall promptly supply
a new name to the appropriate list so that there is a total of four proposed names for
each of the three Counties.
(b) Upon approval of the binding mediation agreement by the CITY Council,
and within two business days following the date of notification of selection of the
location for the mediation as described below, the PARTIES shall use the following
procedure to select a mediator and shall complete the process within a 24 hour
period following when the first rejection is made:
(i) If either San Francisco or Los Angeles County is selected as
the location for the mediation (see below), the CITY shall
have the first opportunity to reject, and shall reject, one the
four proposed mediators. Thereafter, the LAW FIRMS will
reject one of the three remaining proposed mediators. The
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CITY will then reject one of the two remaining proposed
mediators. The remaining mediator shall be the agreed -upon
mediator selected by the PARTIES to conduct the binding
mediation.
(ii) If Orange County is selected as the location for the
mediation, the LAW FIRMS shall have the first opportunity
to reject, and shall reject, one of the four proposed mediators.,
Thereafter, the CITY will reject one of the three remaining
proposed mediators. Thereafter, the LAW FIRMS will reject
one of the two remaining proposed mediators. The
remaining mediator shall be the agreed -upon mediator
selected by the PARTIES to conduct the binding mediation.
(c) Prior to the selection of the proposed mediator, neither PARTY, nor
a representative/agent of a PARTY, will communicate with any of the four
proposed mediators selected by the case administrator for each County.
4) (a) The mediation will take place in either San Francisco County, Orange.
County, or Los Angeles County. The location of the mediation shall be selected
following approval of the mediation agreement by the CITY and its Council
according to the procedure set forth below.
(b) If the -parties are unable to agree on a location, the parties agree that the case
administrator at JAMS supervising this case shall conduct, or arrange for, a random
drawing of one of the three locations by writing each location on a separate slip of
paper and drawing, or arranging for. the drawing, of the location (the "location
drawing")
(b) Either PARTY or both PARTIES may notify the case administrator of their
inability to agree on a location and request the case administrator to engage in a
random location drawing. Such notification by either one PARTY or both
PARTIES will trigger the location drawing by the case administrator. Promptly
following receipt of notification for a location drawing, the case administrator shall
promptly send a notice via facsimile to the PARTIES notifying the PARTIES 1
concerning the date, time, and location of the location drawing. The date of the
location drawing shall not be less than two business days, nor more than five
business days, from the date of the notice sent by the case administrator to the
PARTIES.
(c) Each PARTY or both PARTIES may, at its/their option, observe the location
drawing or rely on the case administrator to conduct_ a fair and impartial location
drawing.
(d) If either the PARTIES agree on San Francisco County, or the case
administrator selects San Francisco County, as the location for the mediation
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contemplated under the binding mediation agreement, then the LAW FIRMS shall
pay the reasonable travel, food and lodging costs for one attorney from the CITY, or
representing the CITY, to travel to San Francisco for the purpose of participating in
the mediation.
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EXHIBIT B
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