Response to PMS' Attempt to
Force It's Client to Sign Settlement
Robert S. Coldren, Bar No. 81710
Andrew M. Sussman, Bar No. 112418
HART, KING & COLDREN
A PROFESSIONAL CORPORATION
200 E. Sandpointe, Fourth Floor
Santa Ana, California 92707
Attorneys for Plaintiffs
GERALD M. STEINER and SANDRA J. STEINER
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF ORANGE, CENTRAL JUSTICE CENTER
LOUIS A. DELMONICO, MAUREEN R. DELMONICO, ANDREW L. DELMONICO, SUSAN L. DELMONICO (by LOUIS A. DELMONICO), GREGORY L. DELMONICO (by LOUIS A. DELMONICO) and HELEN BELMONTE,
THE CITY OF ANAHEIM, METROPOLITAN WATER DISTRICT, THE COUNTY OF ORANGE and DOES 1 through 50,
AND RELATED CROSS-ACTIONS.
CASE NO. 718071
Assigned for All Purposes to
Judge TULLY H. SEYMOUR,
MEMORANDUM OF POINTS AND AUTHORITIES OF PLAINTIFFS GERALD M. STEINER AND SANDRA J. STEINER IN OPPOSITION TO OTHER PLAINTIFFS' MOTION FOR INJUNCTIVE RELIEF AND ORDER COMPELLING THEM TO EXECUTE SETTLEMENT AND RELEASE DOCUMENTS OR, ALTERNATIVELY, THAT SAID DOCUMENTS BE DEEMED SIGNED; DECLARATION OF GERALD M. STEINER AND EXHIBITS; OBJECTIONS TO DECLARATION OF WILLIAM E. STONER AND EXHIBITS THERETO
Date: June 10, 1999
Time: 9:30 a.m.
Location: 925 N. Spurgeon Street
Santa Ana, CA 92701-3700
Plaintiffs Gerald M. Steiner and Sandra J. Steiner ("Steiners")
respectfully request that the Court decline to force them to sign settlement documents which would inequitably result in substantial economic detriment to them and which, for numerous reasons, are no more just and reasonable to them than is the purported attorney-client Retainer Agreement which other Plaintiffs and their lawyers, Pillsbury Madison & Sutro LLP ("PMS"), now seek to enforce. Specifically, the Settlement Agreement which PMS and its other clients want Steiners to sign would (i) mandate the Steiners' grant to the City of Anaheim of a permanent "variable easement" (i.e., of indeterminate size) which would result in a taking of a substantial portion of their residential real property without compensation, and (ii) subject the Steiners to potentially years of further protracted litigation against the hundreds of other homeowner plaintiffs over a settlement "pot" which, even if divided up on a pro-rata basis, would result in grotesquely inadequate >compensation to the Steiners for damage to their home and protracted emotional damage, and (iii) temporarily fund a geological hazard abatement district ("GHAD") which will be a permanent financial detriment to the Steiners' home (as well as to the other homes within the GHAD) once the $3.5 million which the settlement would allocate to the GHAD has been drained away through dewatering efforts (which apparently will be required permanently, and will not mitigate against landslide resumption).
Indeed, there is no admissible evidence now before the Court that the Steiners (or anyone else) even signed the Retainer Agreement (Exh. "A" to the moving papers) which PMS and the other Plaintiffs now seek to enforce. The document on its face is conspicuously unexecuted by anyone. Additionally, the motion was not brought on the 20 days' notice for non-summary-judgment motions which this Court has ordered for this case. For these and the other reasons set forth below, the injunction motion should be denied.
2. FACTUAL STATEMENT. This Court's Case Management Order No. 1, filed on June 19, 1995, at Section VII.(C) provides that all motions made in this case "...shall be made on at least twenty (20) days notice..." A true and correct copy of relevant portions of the order is attached as Exhibit "1" and incorporated by this reference; judicial notice of the original in the Court's file is respectfully requested pursuant to Evidence Code §452(d). The present motion was personally served - and presumably filed - on May 26, 1999, only 15 days prior to the June 10, 1999 hearing date. The Steiners are not aware of any subsequent modification of the motion notice portion of the case management order. Accordingly, the motion has been brought on insufficient notice and, for that reason alone, cannot properly be granted.
The photocopy of the purported PMS/Steiners Retainer Agreement attached as Exhibit "A" to the moving papers contains no signatures by the Steiners or anyone else, and nothing in the Declaration of William E. Stoner of PMS, purporting to authenticate the document, states that either of the Steiners even signed it; rather, the declaration merely contains the unsubstantiated conclusion that the document is "the Retainer Agreement between [PMS] and [Steiners]." The Stoner Declaration contains no foundation for any personal knowledge by Mr. Stoner that the Steiners (or any other plaintiff) signed the Retainer Agreement (or the Settlement Documents, copies of which now before the court are also unexecuted); see also, Steiners' attached Objections to the Stoner Declaration. Moreover, there is no admissible evidence offered to substantiate Moving Parties' recital of any of the numerous other procedural or substantive facts set forth in the moving points and authorities' factual statement Those evidentiary defects alone (like the notice defect) should dispose of the injunction issue. Moving Parties bear the burden of proof by admissible evidence that the Steiners are parties to the Retainer Agreement they seek to enforce. That burden is not met here.
/ / /
Assuming arguendo, however, that before the hearing some admissible evidence is timely introduced establishing that the Steiners had signed any such agreement, the unseemly and patently improper spectacle of PMS seeking relief on behalf of some of its clients against the Steiners while PMS still represented the Steiners or any time thereafter in connection with this case further counsels strongly in favor of denial without needing to reach the merits. The injunction motion was filed and personally served on the Steiners by PMS or about May 26, 1999, while PMS still represented the Steiners; the Substitution of Attorney whereby PMS ceased to be Steiners' counsel was not filed and served until June 1, 1999. PMS's acting against the Steiners and their legal and economic interests in this manner is prima facie as improper as if PMS were to represent the Steiners against the interests of PMS's other homeowner plaintiff clients. Even if the conflict waiver set forth in the purported Retainer Agreement (Ex. "A" to moving papers, p. 1) was found to be somehow binding on the Steiners, that provision fails to disclose any conflict of the types now presented here. Nothing in the Retainer Agreement discloses to the Steiners, or to any PMS client in this case, that if there is a disagreement among any plaintiffs concerning the case, PMS will represent any of them against any of the others. The Steiners have not consented, and do not consent, to that representation. The "unclean hands" of PMS and its clients mitigate strongly against the injunctive relief they now seek.
Regardless, the terms of the proposed Settlement Documents which the Moving Parties seek to force the Steiners to sign (like the Retainer Agreement itself) are inherently unfair and inequitable to Steiners and, therefore, not subject to specific performance against the Steiners. Essentially, the Settlement Agreement (Group Exhibit "B" to moving papers, first document) requires payments aggregating $15.5 million by Defendant City of Anaheim and/or other settling Defendants and/or their insurance carriers, of which $12 million is to be allocated to Plaintiffs and held in an interest-bearing trust account, and $3.5 million allocated for the initial funding of a Geological Hazard Abatement District ("GHAD") encompassing the homes of Steiners and the 400+ other Plaintiffs, regardless of whether or not their homes were or are directly affected by the continuing Anaheim Hills landslide. Under Public Resources Code §26500 et seq., the GHAD would have the ongoing responsibility for dewatering the hill where Plaintiffs' homes are located, in an apparently permanent attempt to try to abate the resumption of the landslide which led to this litigation; however, the GHAD does not have the responsibility, power or funding to take any action to mitigate against the landslide's resumption. To make matters worse, the combination of the GHAD's lack of funding or authority to make mitigation efforts and the Settlement Agreement's waiver of future claims against the City of Anaheim and other defendants together guarantee that no defendant would ever be responsible to pay for such mitigation, the expenses of which presumably would be borne by the homeowners, including the Steiners, in perpetuity.
Once the $3.5 million from the settlement allocated to the GHAD has been expended, however, the Steiners' home (like those of the others within the GHAD boundaries) will be compelled through the taxation process to indefinitely fund the GHAD's future operations. Specifically, Public Resources Code §26570 provides that a GHAD is a political subdivision of the state; Public Resources Code §26571 subjects properties within a GHAD's boundaries like the Steiners' home to special assessments to fund GHAD operations; Public Resources Code §26650-51 vests the GHAD with the power to levy and collect those assessments from such properties. Such assessments are inevitable because $3.5 million will not suffice to pay for the GHAD dewatering well drilling, operation, oversight and maintenance expenses for more than a relatively brief period of time, whereas the need for the GHAD area to be dewatered will continue indefinitely. The Retainer Agreement does not disclose the possibility of any settlement of this lawsuit creating such a horrendous and permanent economic detriment to the Steiner home or, indeed, that any potential settlement could have any such negative impact on the Steiners.
The Settlement Agreement also guarantees that it will not end litigation for the Steiners; rather, it expressly (i) contemplates that $12 million of the aggregate settlement sum be paid into a PMS trust account, and (ii) requires arbitration among the 400+ homeowner plaintiffs to determine which of them will receive what amounts from whatever portion of the $12 million sum is left after PMS has collected its attorney's fees (presumably between roughly $3 million and $4 million, pursuant to the contingency fee provision of the Retainer Agreement which PMS alleges here) and previously-unreimbursed advanced costs and/or expenses of litigation, and after the homeowners have been reimbursed for lawsuit expenses they have advanced. In other words, the Settlement Agreement, read in conjunction with the Retainer Agreement, only guarantees payment of some sum certain without additional litigation to PMS, and not to any of the homeowners (including Steiners), each of whom will be forced to hire additional counsel and pay arbitrator and/or expert fees while the resulting settlement sum allocation arbitration nightmare plods endlessly forward.
Further, assuming arguendo that approximately $8-9 million (i.e. $12 million in settlement sums allocated to plaintiffs, less estimated $3-4 million to PMS in contingency fees and costs) in anticipated homeowner plaintiff net settlement proceeds is divided among the 400+ homeowner plaintiffs on a pro-rata basis, that distribution would leave Steiners with a net settlement amount of approximately $40,000 - patently inadequate compensation for actual damage to their home which before the landslide was worth at least $1.1 million, and which now is appraised at barely $50,000, and effectively no compensation for the horrific emotional distress they endured during many months following the landslide when they were ordered out of their home by the police and effectively forced to live in a warehouse near their business before they could find a suitable place to live. Although a plaintiff contemplating litigation may reasonably be expected to understand that a settlement sum may involve less than full compensation, the Retainer Agreement does not disclose to the Steiners that their total monetary compensation from a settlement might be as little as 4% of their net economic harm, as the Moving Parties now want to force the Steiners to accept.
Finally, the Settlement Agreement is particularly burdensome and unfair to the Steiners because it would require the Steiners to execute a document which would impress a permanent "variable easement" on their property for GHAD access to wells drilled there pursuant to a temporary easement (which expired in April, 1996). The Settlement Agreement does not compensate the Steiners for the loss of functional use of a substantial amount of the usable portion of their property (as noted with particularity in Mr. Steiners' attached declaration) where the easement is to be located. In this regard, the Settlement Agreement uniquely impacts the Steiners, who are not aware of other homeowners who will suffer such a "taking" of usable land from the settlement. The Retainer Agreement does not disclose that any potential settlement might result in such an uncompensated taking of property. As argued below, the Moving Plaintiffs have not even alleged, much less established, that the Settlement Agreement they seek to enforce is fair, just and equitable to the Steiners, as is their burden; rather, the above facts render the Settlement Agreement unfair, unjust and inequitable to the Steiners. Under these circumstances, even without the "inadequate notice" and PMS conflict issues this motion presents, the Court's equity powers cannot properly be exercised to permanently deprive the Steiners of their right to seek reasonable compensation (or, at least, a settlement or trial result which will not result in indefinite future litigation and a permanent net negative economic result to them) through the efforts of unconflicted counsel.
3. LEGAL DISCUSSION.
A. The Injunction Motion Cannot Be Granted It Because was Not Brought on Proper Notice.
"Case Management Order No. 1" for this lawsuit mandates 20 days' notice of motions other than summary judgment motions. The present motion was brought on only 15 days' notice. In the absence of any subsequent order modifying or vacating this portion of that Case Management Order, the present motion was brought on inadequate notice. For that reason alone, the motion should not even be considered, much less granted.
B. There is No Legal or Equitable Basis to Compel the Steiners' Specific Performance of the PMS Retainer Agreement Because There is No Admissible Evidence that the Steiners Are Parties to It. The only evidence Moving Parties proffer is support of their motion is the declaration of PMS' attorney, Mr. Stoner, and unsigned copies of the retainer agreement and settlement documents which Moving Parties want the Steiners to sign. The copy of the retainer agreement offered in evidence, is not signed by the Steiners or anyone else. Mr. Stoner neither declares that the Steiners signed it nor provides any foundational facts that would render him competent to do so. Moving Parties bear the burden of proving that the Steiners signed the Retainer Agreement which they want the court to enforce against the Steiners. Evid. Code §500. They have not met that burden. On that basis alone, the requested injunction cannot properly issue, and the motion should be denied.
C. Specific Performance of the Retainer Agreement Cannot Be Had Against the Steiners Because the Settlement Provision of the PMS Retainer Agreement and the Settlement Agreement Itself Are Inherently Unfair and Inequitable as to Steiners; Regardless, Moving Parties Have Adequate Remedies At Law Mitigating Against Any Injunctive Relief. Specific performance is a purely equitable remedy. Schaefer v. United Bank & Trust Co. (1930) 104 Cal.App. 635, 641, 286 P. 723. Its scope, however, is limited by statute. "An injunction cannot be granted . . . to prevent the breach of a contract the performance of which would not be specifically enforced . . ." Civil Code Section 3423(e); Code of Civil Procedure Section 526(b)(5); Thayer Plymouth Center, Inc. v. Chrysler Motors Corp. (1967) 255 Cal.App.2d 300, 304, 63 Cal.Rptr. 148. As Moving Parties acknowledge, the present motion, although couched as one for injunctive relief, in reality seeks the Steiners' specific performance of the PMS Retainer Agreement's provision purportedly requiring Steiners to accede to any settlement agreement to which 66% of the other homeowner Plaintiffs have agreed.
With respect to specific performance, Civil Code Section 3391 provides in pertinent part:
Specific performance cannot be enforced against a party to a contract in any of the following cases:
(1) If he has not received an adequate consideration for the contract.
(2) If it is not, as to him, just and reasonable.
(3) If his assent was obtained by the misrepresentation, concealment, circumvention, or unfair practices of any party to whom performance would become due under the contract...
(4) If his assent was given under the influence of mistake, misapprehension, or surprise . . .(Emphasis added.) With respect to the "adequate consideration" issue, the Court of Appeal held in Berkeley Lawn Bowling Club v. City of Berkeley (1974) 92 Cal.App.3d 280, 116 Cal.Rptr. 762:
A challenge based on [lack of adequate consideration] must be considered in view of the entire circumstances (citation omitted), including the object to be obtained by the contract and the relationship of the parties and must be determined as of the time the contract was made.
The burden of pleading and proving the adequacy of consideration for a contract to be specifically performed is on the party seeking specific performance. Dennis v. Overholtzer (1960) 178 Cal.App.2d 766, 3 Cal.Rptr. 193. A complaint for specific performance of a contract (and presumably, in the present context, a motion for the same relief) must allege facts showing that the consideration for the contract was adequate, and that the contract was just and reasonable as to the parties against whom performance is sought. Young v. Matthew Turner Co. (1914) 168 Cal. 671, 143 P. 1029.
As held in Haidopolous v. Wollett (1935) 5 Cal.App.2d 229, 42 P.2d 1056, ". . . unless the contract is perfectly fair, equal and just in its terms and its circumstances, a court of equity will incontinently (sic) refuse to specifically enforce it." (Emphasis added.) As further emphasized in Jacklich v. Baer (1943) 57 Cal.App.2d 684, 135 P.2d 179:
Equity will not lend its aid to enforce contracts which upon their face are so manifestly harsh and oppressive as to shock the conscience; it must be affirmatively shown that such contracts are fair and just . . . the relief itself must not be harsh and oppressive . . . specific performance will always be refused when a contract itself is unfair, one-sided, unconscionable, or affected by any other such inequitable feature, and when specific enforcement would be oppressive upon the defendant, or would prevent the enjoyment of his own rights, or would work manifest injustice . . . No matter how sufficient legally, any contract, to be entitled to specific performance, must be fair, just and reasonable in all its terms or parts and reasonable in its surrounding circumstances." (Emphasis added.)
The facts set forth above and confirmed by Mr. Steiner's declaration clarify the inherent unfairness, unreasonableness and unconscionability of the proposed settlement agreement and PMS retainer agreement as to the Steiners (the only parties as to whom the agreement's lack of fairness properly can be assessed for specific performance adjudication purposes). It further confirms that the Retainer Agreement is the product of Movants' "concealment" and "unfair practices," and the Steiners' "mistake, misapprehension or surprise." As to the Steiners, the Settlement Agreement's inherent unfairness and unconscionability is obvious. If entered into, the Steiners would forever surrender their rights to seek full compensation for loss of their $1.1 million dollar home and attendant emotional distress; in exchange, they would receive (i) the further legal and economic detriments to their home of a variable easement on a significant portion of their property and the impressment of a GHAD which would result in a permanent tax assessment for GHAD dewatering, (ii) the permanent insulation from liability as to the City of Anaheim and all other remaining Defendants against claims for lack of mitigation against the landslide, and (iii) endless litigation with more than 400 other homeowners over a woefully inadequate settlement "pot."
The PMS Retainer Agreement itself is equally unfair and oppressive to the Steiners because it fails to disclose to them that PMS would overtly act on behalf of its other clients against Steiners while representing Steiners if their respective interests (or the interests of Steiners and PMS) conflicted in the future during this action. It does not disclose that any potential settlement of this lawsuit might be as absurdly and unfairly one-sided against the Steiners as now, or that there ever might be circumstances under which the Steiners could be forced to accept a settlement which would at best compensate them for approximately 4% of their economic loss, or which would disproportionally burden their property with easements and tax assessments, or which would not result in the mitigation of the ongoing landslide. These failures to disclose, as well as the terms of the settlement as applied to the Steiners, make the Retainer Agreement's purported conflict waiver and settlement acquiescence provisions unfair to the Steiners and therefore not enforceable in equity. Specifically, Rule 3-310 of the Rules of Professional Conduct provides:
(A) For purposes of this rule: (1) "Disclosure" means informing the client or former client of the relevant circumstances and of the actual and of the actual and reasonably foreseeable adverse consequences to the client or former client;
(2) "Informed written consent" means the client's or former client's written agreement to the representation following written disclosure;...
(C) A member shall not, without the informed written consent of each client:
(1) accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or
(2) accept or continue representation of more than one client in a manner in which the interests of the clients actually conflict... (Emphasis added.)
The required level of disclosure is that which is necessary to permit the client's free and intelligent consent. Anderson v. Eaton (1930) 211 Cal. 113, 293 P. 788. A lawyer must disclose all facts and circumstances which, in the judgment of a lawyer of ordinary skill and capacity, are necessary to enable his client to make free and intelligent decisions regarding the subject matter of the representation. Ishmael v. Millington (1966) 241 Cal.App.2d 520, 528, 50 Cal.Rptr. 592. When the conflict relates to an ongoing representation, the "facts" disclosed should include a discussion of the detriment to which the conflict exposes the client and the possible need for different representation by independent counsel. Id. at n. 3.
Here, the "multiple representation" paragraph of the PMS retainer agreement (at p. 1) woefully fails to meet these standards. It does not advise the Steiners of the "actual and reasonably foreseeable adverse consequences" to them from a proposed settlement agreement like one presented here which would so adversely and disproportionately affect them.
Finally, it does not disclose that if in the future Steiners declined to sign an inequitable settlement agreement, PMS would represent its own interests (or that of any other Plaintiff) against Steiners while still Steiners' counsel of record or otherwise!
The record is devoid of any informed written consent - or indeed any consent - by the Steiners to the settlement. Even if such consent were found, the agreement remains unfair and inequitable to the Steiners. Accordingly, it is not enforceable against the Steiners. D. The Injunction Motion Should Be Denied Because There Is No Multiplicity of Actions to Prevent, Moving Parties Have Adequate Legal Remedies, and the Movants' Unclean Hands Would Render an Injunction Improper.
Moving Parties' contention that an injunction is required to prevent a multiplicity of actions makes little sense because there is only one action which will go forward if the case is not settled - the present consolidated action (trial of which, the Steiners understand, actually commenced in August, 1998 before recessing to allow settlement discussions to take place.) On the other hand, granting the injunction will result in interminable legal proceedings among the homeowners as to their pro-rata shares of the settlement sum.
Moving Parties' argument that they lack adequate legal remedies if the injunction is denied is equally meritless. If the injunction is denied, either (i) some new settlement agreement may be entered into satisfying the Steiners' concerns, or (ii) some new settlement agreement may be entered into among Moving Parties and Defendants, leaving the Steiners to try their case, or (iii) all Plaintiffs may decide to resume trial, and go forward and, potentially, obtain a judgment in a greater amount then is presently offered and without the impressment of the GHAD on their homes. Each is an adequate legal remedy. Fear of trying a case which has already begun to be tried does not establish lack of an adequate legal remedy.
Finally, the unclean hands of PMS evidenced by the Retainer Agreement itself and PMS's continuing representation of Moving Parties (and PMS's own interests) adverse to the Steiners render an injunction improper. The unclean hands doctrine bars equitable relief when, as here, "the inequitable conduct occurred in a transaction directly related to the matter before the Court and affects the equitable relationship between the litigants." California Satellite Systems, Inc. v. Nichols (1985) 170 Cal.App.3d 56, 70, 216 Cal.Rptr. 180. For each of the foregoing reasons, specific performance of the Retainer Agreement cannot properly be granted; therefore, the injunction motion should be denied.
Dated: June ____, 1999 HART, KING & COLDREN
By:____________________________________ Robert S.Coldren Andrew M. Sussman Attorneys for Plaintiffs
The Final Chapter?... 1,000 Attorneys Attack 1 Landslide Victim Just Say No Formation of GHAD Resolution #99R-31 Notice of Vacancy GHAD "Benefit Area" Map Landslide DAMAGE Map