Birch Hills Golf Course, An Independent Legal Review.

Thankfully, for all of us, Dwight Manley sent a copy of the massive set of documents accompanying the October 1st item to accept title of the BHGC (Brea Hills Golf Course) to his attorney for review.

Richard Montevideo is the Chair of Rutan & Tucker, LLP’s Environmental Law Practice Group since 1992.

The review that follows was provided by him and shared with members of Council and the City Manager prior to last Tuesday’s circus of a Council meeting.

 

 

Property Transfer Document Review

There is a lot to unpack with these documents, but from my initial review of the Settlement Agreement, the AS IS Indemnity Agreement, the Guarantee, the Consolidated Area Easement Agreement and the Environmental CC&Rs, I have the following big picture comments from the perspective of protecting the City’s interest:

  1. For both legal and practical/business reasons, the City should clearly be preparing a formal Phase I Environmental Assessment Report on the Property before taking title to the same. The Phase I Report would provide some legal protection to the City from future enforcement action, and equally important, would consolidate all in one report, a description of the history operations that led to the contamination, a description of the type, levels and media of contamination, the remedial work that was conducted, the residual contamination that remains, and the risks posed by the residual contamination that remains.
  2. For all contamination on the Property, except for essentially contamination caused by Union Oil and that exceeds an existing cleanup standard, the City is indemnifying the seller, including Union Oil. As such, unless this provision is changed, the City should do everything it can to make sure it fully understands the nature and extent of the contamination, meaning conducting a Phase I Report and further evaluating the risks associated with the existing contamination for onsite workers and guests/invitees.
  3. The contaminants of concern at the Property, i.e., PCBs, dioxins, furans, arsenic among others, especially the dioxins, are significant carcinogens and thus the City should have the resulting risks associated with the residual contamination evaluated by a qualified environmental consultant, and presumably a toxicologist/risk assessor. If there is a problem in the future and someone is hurt or claims they are hurt from the contamination, it would be a PR problem for the City, in addition to being a significant legal problem.
  4. Pursuant to H&S code section 25359.7, the seller of the property is required to provide written notice of the existence or potential existence of all hazardous substances it knows or believes exists on the property to the buyer. In this case, I see no evidence of any due diligence disclosures that have been made to the City. Such due diligence reports/disclosures would provide a beginning point for the City to hire an environmental consultant to conduct a Phase I Report.
  5. The protections provided to the City under the various agreements are weak.   Essentially, the City is providing a full release of any all claims under Civil Code 1542, except for among other items, contamination caused by Union Oil that is above current regulatory agency action levels. Thus, if the cleanup standards change in the future, the City is on the hook for addressing the contamination. And in fact, DTSC is currently reviewing and will soon be issuing new guidance/policy on vapor intrusion standards, which may or may not impact the Property, depending on the nature of any volatile organic compounds on the site and their location.
  6. If a problem arises in the future resulting from existing contamination found to exceed existing cleanup standards (which is the only scenario requiring additional work by Union Oil), even then there is no direct remediation covenant that extends to the City. Instead, the City only has a general indemnity to rely upon and will need to show it has suffered some Loss before the general indemnity will kick in. in short, if there is some existing contamination exceeding existing/current cleanup standards, the City will not be able to require Union Oil to clean up the contamination. Normally, in a situation like this, you would negotiate a Remediation Covenant in the Agreement triggering an automatic cleanup obligation.
  7. Stormwater runoff, including dry weather runoff, is a significant issue in California, and golf courses can be big offenders of runoff limits, especially for nitrates, fertilizers, pesticides, etc. From the documentation provided, it is unclear whether the City has hired anyone to evaluate the stormwater runoff compliance issues, but it is clear that the City will be accepting this obligation.
  8. A certain quantity of contamination was buried within the Consolidated area, which then has resulted in a recorded set of Environmental CC&R imposed on this property. The City should make sure that its current and future use of the Consolidated area will not violate these restrictions. This is where again a Phase I Report would be helpful/important.
  9. The AS IS/Indemnity Agreement the City is committing to arbitration and waiving its right to a jury trial.
  10. The “Guarantee” provided by Union Oil is NOT a separate indemnity, but nothing more than Union Oil guarantying the very limited indemnity provided in the AS IS Indemnity agreement.
  11. The Guarantee agreement contains a Confidentiality clause which is unenforceable or otherwise irrelevant in this context when it is being provided for the benefit of a public agency. Either way, it looks bad from the City’s perspective and makes no sense.

I do not know the business/financial benefits of the transaction from the City’s perspective, but from a pure legal and environmental risk perspective, there are a number of issues that the City should take a second look at.

Also note, that the above are the larger issues with the agreements as written, but there are many more. The agreements appear to me to be seller oriented.

A “Reasonable Person” Responds.

I’ve made no attempt to distill Mr. Montevideo’s observations into lay language. As lawyers are apt to say, these remarks are understandable by “any reasonable person” – no reason for me to butt in.

I’ll close by simply saying this, all concerned… Council, Staff, “we the people”, have only a fraction of the facts and information needed to make a prudent decision in this matter.

By failing to admit their error, by not putting on the brakes to give much closer scrutiny to the details and implications of a decision this huge… Council fails us miserably.

10 thoughts on “Birch Hills Golf Course, An Independent Legal Review.

  1. Wow! A lot that any reasonable thinking person could understand and agree with.

    If I was a criminal used car salesman I would have a field day with those sitting on the Council at the time of this transaction. Councils, I thought, had fiduciary responsibilities to their constituency.

    Problem I see here is present council seems to be protecting those who initially made this irresponsible deal. That is hard for me to understand.

  2. Rick. How is it possible Brea spent more on replacing perfectly good chairs ($47,000) or a second Cliffwood study ($23,500) than it spent for any studies on our behalf at Birch Hills?

    Something so dangerous, so forever, and we didn’t even order our own Phase 1? We simply relied on good old Chevron to provide things.

    So we have all of their files? Nope. And don’t get caught up in only the toxic risk. We are stuck with keeping this a golf course – forever!

    It can’t be recontoured, built on, nothing. And soon it will be losing money, and we’re on the hook. This will be a forever stain on Brea and the four that voted for it will have this at the top of their “legacy” when future citizens have to deal with it. Just awful.

  3. Rick, they can put lipstick on a pig, and it is still a pig. They can put a green golf course on top of a wasteland, and it is still a wasteland.

    The Birch Hills GC acquisition is the last chapter of the Unocal Chemical Plant property divestiture. I suppose a mistake on the city’s part was made in the original plan of divestiture in the 1990’s for failure to quantify how clean the wasteland would be before its donation to the city as a public park in lieu of paying park development fees.

    How big was that mistake?

    How many successions of council persons and city staff have come and gone with Chevron being allowed to sell the remainder of the property rezoned for commercial, retail and residential use yet avoid fully cleaning up the wasteland to the point that there are no EPA use restrictions.

    If you kept a scorecard, it would show a rout by Chevron. Saving on not paying park development fees, getting industrial land rezoned to commercial, retail and residential, getting rid of wasteland, and possibly getting a nice corporate income tax deduction for the donation. The acquisition for purposes of obtaining title insurance was stipulated to be about $8.5 million, so with an assumed 20% tax rate, it would be a $2 million tax savings.

    Thanks to you and Dwight again.

  4. I am now wondering what the declared value was for La Floresta and the condos and Union plaza, and what would the park fee even be for that? If the total proceeds or value of said developments is $1,000,000,000, is this even close to what we should have gotten if paid in cash?

  5. Rick,

    Relatively new to Brea and this is my first time commenting here. I really trust and value the information you provide though I don’t always agree with your conclusions.

    Your coverage on the golf course has really opened my eyes and I’m hoping Council will have the guts to admit their failing us here and reverse their rush to judgement. They have ignored you and Dwight and Scott and who knows how many others and trapped us into a very bleak future.

    I am following this on Nextdoor as well but would never post a comment. You have several people there who are obviously out to dispute everything you share. I think they must be following orders from city hall. I see right through them. Don’t let them provoke you into saying something that will let them get you thrown off Nextdoor again.

    Don’t give up, please. There are lot of us counting on you.

    • Kim… a belated welcome to Brea, glad to know you read the blog and are taking an active interest in your community.

      Yes, this is a much larger “story” than most people realize and the long term threats are real. Please, take a moment to write to Council and share your thoughts. Every voice counts.

      I’m trying to mind my Ps & Qs on Nextdoor but sometimes it’s difficult. The droning noise level coming from several of Council’s mouthpieces can get pretty intense, especially when the high priestess of hyperbole, with that perpetual insipid grin, pretends she’s still relevant after all these years.

  6. Based on what I’ve read so far (here and Terri Daxon’s recent OC register article) I don’t understand why the City has not completed a Phase I ESA. Mr. Montevideo describes the reasons succinctly in Point #1. t’s perplexing why the City wouldn’t spend the relatively small amount to have the history of the property all in one document.

    • Joan… It’s beyond me too. No one at city hall has the orbs to admit they’ve made mistake, especially when it one of this magnitude. There were clearly more than enough reasons to put on the brakes and apply the due diligence they should have in the first place. All they needed to do was not sign/file the escrow documents and it would have reset the play clock to zero. They could have done the job we elected them to do.

      Unfortunately, I received a confirmation from Terence Boga, City Attorney, today confirming that, “Escrow closed last week.”

    • To say that the City should have simply relied upon the reports and analysis of Chevron alone, is like saying the City should  have equally relied upon Chevron’s legal analysis in the transaction, and need not have retained its own lawyers to advise the City on the legal issues.

      In short, the City should have retained their own environmental consultant who would look after its interests and advise it accordingly.

Leave a Reply

Your email address will not be published. Required fields are marked *