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Truth and Consequences in Montageville – Part 3.


Why does the City Council trust the Montage developer more than it trusts the people of Beverly Hills?

 In my last column, I discussed the City’s arguments for not disclosing reports from its paid outside experts.  This week I will discuss the City’s refusal to disclose documents that are already in the possession of BOTH the City and the developer.

There are 30 secret documents that consist largely of e-mails between the City’s legal counsel and the developer’s legal counsel.  The only people being kept out of this information loop are the members of the public who might care about an investment of over $50 million of taxpayer funds and property.

With respect to these 30 secret documents, the City can’t argue that the documents would give the developer an advantage, because the developer already has copies.  The City also can’t argue that the deliberative process privilege applies, because the City would have to explain why the developer should have a window on the City’s deliberative process, while the public is shut out.

Instead, the City is arguing that these documents are protected by the attorney-client privilege.  The City’s theory is that the City and the Montage developer share a “common interest” in completing their negotiations to move forward with the project.  Based on such privilege, the City is taking the position that the public has no right to see these documents. 

Incredibly, the City is basically arguing that it and the Montage developer share a “common interest” in making a deal for the project to proceed, and such interest is superior to the City’s “common interest” with the people of Beverly Hills.  To me, this is definitive proof that the City Council is more committed to helping the developer than to being honest with the public.

In its Memorandum of Points and Authorities, the City argues that this matter is governed by a case known as STI Outdoor LLC v. Superior Court, 91 Cal. App. 4th 334 (2001).  In the STI case, a company known as Eller Media Company (“Eller”) was the sole bidder on a request for proposal issued by the Los Angeles County Metropolitan Transportation Authority (the “MTA”).  The MTA’s request for proposal had solicited bids to build pay toilets for the MTA in exchange for rights to advertise along MTA routes.

A competitor of Eller known as “STI” claimed that it had decided not to bid on the project, because it was told that there would be only 35 advertising spaces and that none of the spaces could be seen from the freeway.  However, after STI discovered that Eller was getting “approximately 80 highly desirable above-ground spaces which could be viewed by vehicles traveling along the freeway, and not just by subway users,” STI requested copies of all relevant documents from the MTA.  Such documents included legal memoranda prepared by counsel for both the MTA and Eller. 

Eller and the MTA claimed that these documents were protected by the attorney-client privilege.  The trial court ruled in favor of STI, but the appellate court reversed this ruling and ruled that the documents were indeed protected by the attorney-client privilege.  

The appellate court’s conclusion was as follows:

“Here, the declarations and papers submitted by the MTA and STI establish that Items C and R were documents prepared by counsel which were circulated between two parties bound by an offer and acceptance in contemplation of a binding, detailed License Agreement. Item V was a transmittal letter between the parties discussing the topic of the legal memoranda. The evidence supports the contention that the disclosure of such documents was reasonably necessary to further the interests of both parties in finalizing negotiations for the License Agreement. Accordingly, the trial court erred in finding that the attorney-client privilege was waived.” [emphasis added]

In its Memorandum of Points and Authorities, the Beverly Hills Residential-Business Alliance argues that the STI case is not controlling, because the documents that are being kept secret by the City were exchanged before there was a binding agreement between the City and the Montage developer, and, therefore, the City and the Montage developer are not entitled to claim a joint attorney-client privilege.

In support of its argument, the Alliance has stressed a subsequent case known as Oxy Resources California LLC v. Superior Court, 115 Cal. App. 4th 874 (2004).  In the Oxy case, a company known as Calpine had agreements with a company known as EOG.  Such agreements gave Calpine a right of first refusal to purchase EOG’s interests in a valuable natural gas producing property in Solano County if EOG ever decided to sell such interests. 

Apparently, EOG decided that it wanted to evade its agreements with Calpine so that it could sell its interests to Oxy.  EOG transferred its interests to a newly created affiliate named “Enron Resources, LLC”, then traded its ownership interest in Enron Resources, LLC to Oxy in exchange for interests in one or more different LLCs that owned different oil and gas properties.

Calpine was not happy about EOG’s attempt to avoid honoring Calpine’s right of first refusal to acquire the property.  After trying to resolve the matter with EOG, Calpine sued both EOG and Oxy.  In such lawsuit, Calpine asked the trial court to order EOG and Oxy to produce documents exchanged between EOG and Oxy both before and after their questionable transaction.

According to the appellate court:

“the trial court granted Calpine's motion to compel as to the 172 post-acquisition documents and denied it as to the 30 pre-acquisition documents. [footnote omitted]  The trial court concluded that the pre-acquisition documents are privileged, relying on STI Outdoor v. Superior Court (2001) 91 Cal.App.4th 334 (STI). According to the trial court, [d]ocuments exchanged by parties who have already committed in writing to negotiate a more detailed formal agreement are protected under the 'common interest' theory, as reasonably necessary to further the interests of both parties in finalizing negotiations.”

 The appellate court rejected Oxy’s argument that the STI case was dispositive and remanded the case to the trial court with instructions to review the pre-acquisition documents to determine whether “the information contained in the documents is protected from disclosure by the attorney-client privilege or the work product doctrine”, “then determine whether the disclosures were reasonably necessary to accomplish the purpose for which the parties consulted their attorneys in finalizing the negotiations. Accordingly, we conclude that the trial court abused its discretion in denying Calpine's motion to compel as to the 30 pre-acquisition documents.”

In its Memorandum of Points and Authorities, the City of Beverly Hills totally ignores the Oxy case, even though the City already had a copy of the Alliance’s brief, which argued that the Oxy case is relevant.

In my opinion, the STI case does not apply, because the City did not have a binding agreement with the Montage developer when the documents were created.  I also believe that the STI case was wrongly decided, because the public should have the right to know about public officials making cozy deals with private companies.  The STI case provides a recipe for corruption, by allowing a public agency to conceal communications with a private contractor.  In my opinion, the state legislature can and should enact legislation to require that such communications always be open to the public, to make it more difficult to conceal corruption.

What does it say about our City Council that they are paying tens of thousands of dollars in legal fees to conceal their communications with the Montage developer?  Can anyone imagine a legitimate reason for keeping this information secret?  If you can, please write a letter to the editor to share your insight with the rest of us.

Next week, I plan to summarize my prior analysis regarding the Montage project.  The City Council has scheduled its hearing on the Montage project for July 12th at 6:30 p.m., and has also set aside time to continue this on July 13th, 14th and 15th as necessary.  The plan appears to be to try to get this approved quickly at a time that many residents are on vacation or distracted by other summer activities. 

I would urge my readers to mark these dates on their calendars and plan to attend these meetings to speak out against this project.  In the past, the City Council has backed down when faced with strong opposition, and unless you want traffic to get a lot worse or you think that government corruption is a good thing, you should exercise your right to express your displeasure with the proposed Montage debacle.

Postscript:  as we were going to press on Tuesday afternoon, I learned that on Tuesday morning, the Los Angeles Superior Court ruled that the City must disclose 56 of the 64 disputed documents to the public, including the draft traffic study.  Although I am disappointed about the other 8 documents, this represents a significant victory for the concept of open, honest government.  I will try to provide more details next week, and will report on the secret documents when I am able to get copies.  I would also note that unless the City Council voluntarily releases the 56 documents before its hearings that begin on July 12th, these documents probably will not become public until after such hearings are concluded.   If this happens, it will be clearer than ever before that we have a City Council that cares more about this project than about the public’s right to information.

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