Late Tuesday the City Council was expected to finalize agreements with the law firm Orrick, Herrington & Sutcliffe and with Piper Jaffray, an internationally recognized financial consulting firm. The Review will post news from Tuesday's regularly scheduled City Council meeting Wednesday morning on hmbreview.com.
The consulting firepower comes on the heels of a nearly $37 million judgment filed against the city in the decades-long Beachwood case. Keenan has indicated that he is willing to negotiate some unspecified settlement with the city but said that all such bets would be off if the city followed through with an appeal.
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U.S. District Judge Vaughn Walker ruled late last month that the city was guilty of inverse condemnation of a nearly 25-acre tract off of Highway 1 after bungling a storm drain project, creating wetlands on Keenan's property. Any appeal would go to the 9th U.S. Circuit Court of Appeals in San Francisco.
An appeal could prove expensive. The city may have to post a bond to proceed and the amount is at Walker's discretion, according to Mayor Bonnie McClung. She said such bonds are usually required, and the lowest estimates put the required amount at 10 percent of the judgment, or about $3.7 million.
"We'd have to borrow money for that," said McClung.
The City Council and top staff met in lengthy closed sessions on Dec. 7 and again on Dec. 12 to receive "invaluable, free advice and information" from four legal firms and Piper Jaffray - all of them angling to represent the city, according to a staff report. The meetings were part of several weeks' worth of mostly closed proceedings in the wake of the judgment. The presentations from the law firms and the financial consultant were conducted at no cost to the city, McClung said.
The plaintiff - technically Keenan Family Trusts trustee Joyce Yamagiwa - filed a document with the court Dec. 12 to indicate an understanding of the judgment. The court must now officially complete the filing before the clock begins to tick on Half Moon Bay's window for appeal. According to Knox, the city will have 10 days from the filing to complete post-trial motions and 30 days from Walker's subsequent rulings on the motions in which to appeal.
Piper Jaffray estimates its total cost to the city over the next year at about $22,500, depending on the nature of any bond requirements the city may incur through appeal and the length of service required. In a letter from Knox to City Manager Marcia Raines, he listed his hourly fee at $705. He noted that others from the firm may be involved as well and that rates for 2008 could be adjusted upward.
City officials did not seem to suffer from sticker shock - even as the city faces the ruinous judgment that is nearly four times its annual budget.
"The way I look at it is we're bringing in a top-notch, highly technical firm that will give us the best advice," said Councilman John Muller. "When you bring in firms of this caliber it allows you to go head to head with the same kind of people." Muller noted that Keenan had assembled a formidable legal team as well.
City officials say that an appeal is not yet certain. But Keenan said Friday that he expected nothing short of a legal fight over money in the coming months.
And it was clear that Knox is preparing for appeal as well. A letter written to City Manager Marcia Raines reads in part: "Our services will include filing and prosecution of an appeal to the United States Court of Appeals for the 9th Circuit Court of the decision of the United States District Court in the case, potential settlement negotiations with the plaintiff, potential financing of any such settlement, and other general assistance in resolving this matter for the City. ...We understand that the city would like us to bring the firm's resources in litigation, finance, negotiations, legislative and public affairs, insolvency and bankruptcy and real estate to bear on this problem."
Potential solutions are sticky for the city. Officials say they have nowhere near enough money or easily liquidated assets to pay Keenan outright. He has said he would be interested in discussing development rights elsewhere, but that would likely cause a new firestorm among local residents. The city could dissolve and turn the entire mess over to the county.
Muller said that would never happen.
"There's no way we're going to give the town away," said Muller, a lifelong resident and local farmer. "We're Half Moon Bay people."
Muller said city officials have needed time since the decision to deliberate. The new hires are the next step and intended to arm the city for future talks, he added.
"We've been on the defensive for two weeks, we've been looking pretty bad," said Muller of his fellow city officials. "But we've had to, we just can't make a snap decision on this."
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BEACHWOOD DEVELOPMENTS
• Dec. 12: Keenan files notice that he understands judgment.
• Tuesday: City Council set to hire appellate firm Orrick, Herrington & Sutcliffe, as well as the financial advising firm of Piper Jaffray.
• Judge signs off: U.S. District Judge Vaughn Walker must complete Keenan's Dec. 12 filing.
• 10 days: City must file post-trial motions within 10 business days of Walker's action.
• Appeal window: If the city chooses to appeal, it has 30 days from the date of Walker's rulings on its post-trial motions.
• News from Tuesday's meeting: Will be posted Wednesday on the Review's Web site, hmbreview.com.
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