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Item 20 Staff Report Santa Clara Bar Association Request for Reimbursement for Rental Dispute Resolution ProgramMEETING DATE: 2/22/00 ITEM NO. � O COUNCIL AGENDA REPORT DATE: February 16, 2000 TO: MAYOR AND TOWN COUNCIL FROM: TOWN MANAGER ?1,3Y..„.. SUBJECT: SANTA CLARA COUNTYBARASSOCIATION)REQUEST FOR REIMBURSEMENT FOR RENTAL DISPUTE RESOi tT I N PROGRAM/ A. DENY REQUEST; OR B. APPROVE REQUEST AND AUTHORIZE TRANSFER OF $10,000.00 FROM THE MANAGER'S CONTINGENCY TO 8010-61030 RECOMMENDATION: That Council deny the Santa Clara County Bar Association's request for reimbursement of arbitration fees incurred in processing a Rental Dispute Resolution Program case. BACKGROUND: In spring 1998, the Town issued requests for proposals to provide Rental Dispute Resolution Program services. The Program provides for a three -step dispute resolution process: conciliation, mediation and arbitration. The Santa Clara Bar Association's proposal was accepted as the lowest of three qualified bids. The Association is payed a monthly fee to provide Program information and referral, process petitions for dispute resolution services, and conduct conciliations. In addition, a fixed amount (approximately $1,870.00) is available to reimburse the Association for contracted mediation and arbitration services. When negotiating with the Bar Association, representatives were confident that the reimbursement limit was fair and reasonable and assured staff that they would use volunteers or their own staff to mediate or arbitrate cases to stay within the contract limits. In October 1998, the Association sent a memo requesting $3,300 to cover the costs of a mediation case it assumed from the previous contractor. Staff discussed the request with Bar Association staff during the ensuing months, each time indicating that any contract increase would require Council approval. In a conversation last March with Christine Burdick, the Association's Executive Director, she said that she would not pursue fee reimbursement; Ms. Burdick stated that the workload had stabilized and the Program could absorb the costs. DISCUSSION: Last November, the Town received a letter from the Bar Association requesting reimbursement of arbitration fees totaling $10,000. These costs were incurred by the Association last fiscal year when it hired David Finch to arbitrate a rental dispute case. The Association argues that this was an exceptionally difficult case due to the large number of participants and the animosity between the parties. It also argues that the arbitration decision was fair and reasoned preventing Town Staff and Council involvement. PREPARED BY: Regina A. Falkn Community Se Director Reviewed by: Attorne N:1csd\tcrpts\bar2.rpt ce Revised: 2/16/00 3:15 PM Reformatted: 7/ 14/99 PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: SANTA CLARA COUNTY BAR ASSOCIATION REQUEST FOR REIMBURSEMENT FOR RENTAL DISPUTE RESOLUTION PROGRAM February 14, 2000 Staff recommends that Council deny the Association's request for reimbursement of FY 1998/99 arbitration expenses of $10,000 over and above the $1,800 contract limit. As arbitration service providers, the Bar could have reasonably assumed that not all arbitrations can be handled in a few hours. The $1,800 was actively negotiated. There is no indication that the Bar Association was pro -active in containing costs when contracting with the arbitrator. Although Staff agrees that the arbitrator's decision was well written, the cost is prohibitive. Since its beginnings in the early 1980's, the Program has never allocated more than a few thousand dollars for mediation/arbitration services. Furthermore, of the ten municipalities we interviewed, two use volunteer panels and the others employ mediators who charge no fee or are paid on a per case basis. (Note: the Association has not requested reimbursement for any mediation/arbitration fees during the first half of the current contract term.) ENVIRONMENTAL ASSESSMENT: Payment to the Bar Association is not a project defined under CEQA, and no further action is required. FISCAL IMPACT: If Council wishes to reimburse the Bar Association, $10,000.00 must be transferred from the Manager's Contingency to 8010-61030. Attachments: 1. February 8 Letter From Regina Falkner, Community Services Director 2. January 27 Letter from Christine Burdick, Santa Clara County Bar Association 3. January 19 Letter from Christine Burdick, Santa Clara County Bar Association 4. January 19 Letter from Regina Falkner, Community Services Department (with attachment) 5. January 6 Letter from Christine Burdick, Santa Clara County Bar Association 6. December 28 Letter from David Knapp, Town Manager 7. November 10 Letter from Christine Burdick, Santa Clara County Bar Association 8. November 4 Letter from Christine Burdick, Santa Clara County Bar Association (with attachment) Distribution: Christine Burdick, Esq. Executive Director, Santa Clara County Bar Association, 4 North Second Street, Suite 400, San Jose, CA 95113 Regular TOWN OF Los GATOS February 8, 2000 Christine Burdick, Esq. Exec. Director Santa Clara County Bar Association 4 North Second Street, Suite 400 San Jose, CA 95113 Dear Christine: Attachment 1 CMS CENTER 110 E. MAIN STREET P.O. Box 949 Los GATOS, CA 95031 I have received your January 27 letter. Our response to all four issues follows. 1. Agreement Amendment We received the agreement amendment back from you on January 31. A certified copy of the executed document is enclosed. If this does not meet your needs, please let me know and we will route a second original for signature. 2. FY 1999/00 Payment We received the Bar Association's corrected invoice on February 2. The invoice is being processed and the check will be issued at the next opportunity which is February 18. As you know, we were not able to process the payments without an agreement extension. 3. El Gato Payment The Mayor has agendized your request for February 22, 2000. We will mail a copy of the Council report on February 18, please let us know if you would rather pick it up from our offices. 4. Extraordinary Mediation/Arbitration Cases We have asked the Association to suggest methods of controlling costs. Specifically, we have suggested the Association pay mediators' and arbitrators' fees based on a per case basis; of the ten municipalities interviewed, two use volunteer panels and the others employ mediators who charge no fee or are paid on a per case basis. This would eliminate the potential burden of paying extraordinary fees. Please let me know if you have any questions regarding the above. Sincer gi a� alkner Corn Services Director RAF:kv Enclosure cc: David W. Knapp, Town Manager Orry P. Korb, Town Attorney nAcsdlrentrnedlbar4 INCORPORATED AuGLIST 10, 1887 10111 3 1 1000 Santa Clara County BAR ASSOCJATION January 27, 2000 Regina Falkner Community Services Director 208 E. Main Street Los Gatos, CA 95031 Re: First Amendment to Agreement for Los Gatos Rental Dispute Resolution Services Dear Regina: Attachment 2 I received your letter dated January 19, 2000. Please find enclosed an executed copy of the First Amendment to Agreement for Rental Dispute Resolution Services. I would appreciate receiving a fully executed original of the Amendment as soon as possible. Given our execution of this amendment, I am requesting that the Town pay to the SCCBA the amount due and owing to date, within ten days of the date of this letter. I remain extraordinarily disappointed in the Town's dealings with us as we continue to render uninterrupted quality services to the Town. The SCCBA could immediately withdraw its services based on the Town's current breach of an implied -in -fact contract in its refusal to pay for services rendered in good faith and accepted by the Town. However, we have elected to sign the First Amendment and will continue to render services as agreed because we have been and are committed to the spirit of our original agreement with the Town. It is disappointing that a local government's policies are so inflexible that it is either unable, or unwilling, to deal fairly with an entity providing, in good faith and as agreed, necessary and valuable services to Town residents. I would also appreciate a prompt response from either you or David Knapp regarding our request for the Town Council to review the El Gato reimbursement issue at its February 7, 2000, meeting. As to the issue of extraordinary mediation/arbitration cases, you have our proposed language. As indicated, we believe that this is a policy decision for the Town to make and that it can best be made at the time a case is accepted by us, not after the case is underway. The Town is protected by placing an overall cap on such expenditures. I would welcome a specific written counter proposal by the Town on this issue. Thank you for your prompt response. Sincerely, SANTA C e u e COUNTY BAR ASSOCIATON Christine A. Burdick Executive Director &General Counsel Cc David Knapp, Town Manager Orry Korb, Town Attorney G:1ADR1LosGatosU ettertoRe inaFalknetre-1 4t,4 North Second Street, Suite 400 8 mhdJtilit€e, California 95113 (408) 287-2557 Fax (408) 287-6083 January 19, 2000 David W. Knapp Town Manager P.O. Box 949 Los Gatos, CA 95031 Santa Clat-a County BAR ASSOCIATION Re: El Gato Reimbursement Issue JAM 2 t Attach, ,lent 3 Dear Mr. Knapp: As I indicated to you in my letter of January 6, 2000, the leadership of the Association met to consider whether to pursue the El Gato reimbursement issue any further. As a result of that meeting, I am requesting that this issue be placed on the agenda for the next regular Town Council meeting which I believe is scheduled for February 7, 2000. I would like to appear at that meeting to address the Council directly. Also, I would like to have the Council review the letters I sent to you of November 4, 1999, with attachments, and January 6, 2000. I want to emphasize again that we are extremely disappointed in your response to this issue thus far, and that we strongly believe that the Town, in good faith and fair dealing with the Santa Clara County Bar Association, ought to reconsider its position on this issue. Also, I expect that our payment for the past six months of service provided to the Town of Los Gatos is being forwarded to us promptly, as yesterday was the expiration of the ten days within which we requested payment. I trust that payment for our services to date, and continuing until we reach a conclusion on the contract, will not become an issue for us. Finally, I look forward to a prompt response from you on the overall contract issue. Thank you for your attention to these matters. Sincerely, SANTA CLARA COUNTY BAR ASSOCIATION Christine A. Burdick Executive Director & General Counsel Cc Orry Korb, Town Attorney Regina Falkner, Director of Community Services Steve Blanton, Town Mayor 4 North Second Street. Suite 400 San Jose, California 95113 (408) 287-2557 Fax (408) 287-6083 TOWN OF LOS GATOS Attachment 4 CIVIC CENTER 110 E. MAN STREET P.O. Box 949 Los GATOS, CA 95031 January 19, 2000 Christine Burdick, Esq. Exec. Director Santa Clara County Bar Association 4 North Second Street, Suite 400 San Jose, CA 95113 Dear Ms. Bur At David Knapp's request, I am responding to your January 6, 2000, letter requesting payment. The Town's policy, as you know, is to make payment only when there is a signed agreement in place. To expedite payment, we are enclosing the agreement amendment originally sent to you on August 3, 1999. We have increased the inflation factor to 3.8% as requested in your November 10, 1999, letter to me. Agreement Section ln, part of the Scope of Services, is amended to increase the funds available for mediation/arbitration as proposed in the August 3 original agreement amendment. At your request, we delayed revising the agreement; we had all hoped that a mutually agreeable amendment addressing extraordinary mediation/arbitration cases would be reached in a reasonable time frame. Since this does not appear to be the case and the Bar Association is now eager to be paid, I suggest that you sign and return the attached agreement amendment. A second amendment can be made after the Association and the Town agree on terms related to extraordinary mediation/arbitration cases. You will recall that the option to execute two agreement amendments, the first of which allows payment to the Association, was offered to the Association a number of times during the last six months. We have reviewed the Association's proposed language related to extraordinary mediation/ arbitration cases. The language proposed to date does not control costs. Instead, it simply notifies the Town that an expensive case is in process; stopping a mediation or arbitration after four hours is not a viable option. As I stated in my last letter, I urge the Association to suggest methods of controlling costs. For example, the Association could pay mediators and arbitrators fees based on a per case basis; of the ten municipalities interviewed, two use volunteer panels and the others employ mediators who charge no fee or are paid on a per case basis. I look forward to discussing other cost containment alternatives with you. Since R 'gina alkne Comm Services Director RAF:kv Enclosure cc: David W. Knapp, Town Manager Orry Korb, Town Attorney N:share\misc\burdick.wpd INCORPORATED AUGUST 10, 1887 \ IOW FIRST AMENDMENT TO AGREEMENT FOR RENTAL DISPUTE RESOLUTION SERVICES BY AND BETWEEN THE TOWN OF LOS GATOS AND THE SANTA CLARA COUNTY BAR ASSOCIATION This Amendment to Agreement, is made and entered into this day of , 2000, and is effective as of the first day of July, 1999, by and between the TOWN OF LOS GATOS, a municipal corporation of the State of California, (hereinafter referred to as "TOWN") and the SANTA CLARA COUNTY BAR ASSOCIATION, engaged in providing Rental Dispute Resolution Services herein called the "CONTRACTOR". Whereas, TOWN and CONTRACTOR executed an Agreement effective on July 1, 1998; and Whereas, TOWN and CONTRACTOR wish to extend the Agreement term to June 30, 2000 as provided for in Section 2 of the Agreement. Now, therefore, the parties hereto agree as follows: 1) to replace Section 1 n as follows: Provide for mediation and arbitration services. First two hours of each session is included within monthly base fee of $2,365.83. Mediation/Arbitration services beyond the two hour standard will be reimbursed at the mediator/arbitrators hourly fee up to a maximum of $1,870.00 for the full term of this Amendment; and 2) to extend the Agreement term to June 30, 2000 as provided for in Section 2 of the Agreement; and 3) to replace Section 6 Compensation as follows: Compensation for Contractor's professional services shall not exceed $30,260.00 as reflected in Exhibit A; and 4) to replace Exhibit A with the attached Exhibit A. 1 The terms and conditions of the July 1, 1998 Agreement shall remain in full force and effect, except as herein expressly amended. In witness whereof, the parties have executed this Amendment to Agreement on the date written above, effective July 1, 1999. David W. Knapp, Town Manager Christine A. Burdick, Executive Director Town of Los Gatos Santa Clara County Bar Association Approved as to Content: Regina A. Falkner Community Services Director Approved as to Form: Orry P. Korb, Town Attorney Al 1'EST: Clerk of the Town of Los Gatos, Los Gatos, California Marian V. Cosgrove, Town Clerk N: csdlren tree dlscc 1 amnd 2 BUDGET LOS GATOS RENTAL DISPUTE RESOLUTION PROGRAM DULY 1, 1999 - JUNE 20, 2000 Description ADR Services ADR Services are described in Agreement Section 1. Scope of Services, pages 1 and 2. Mediator/Arbitrator Mediator/Arbitrator services of up to 2 hours per sessions are included in the monthly base fee of $2,365.83. Mediator/Arbitrator services beyond the two-hour standard will be reimbursed at the mediator/arbitrators rate. Total Project N:csdlrentrned\scc 1 amnd Rate $2,365.83 Reimbursement of mediator/arbitrators hourly fee not to exceed $150.00 per hour. Exhibit A Maximum FY 1999/2000 Payment $28,390.00 $ 1,870.00 $30,260.00 JAN 1 0 2000 January 6, 2000 David W. Knapp Town Manager P.O. Box 949 Los Gatos, CA 95031 Santa Clara County BAR ASSOCIATION Re: Los Gatos Contract -Rent Mediation Program Dear 1\MIr. Knapp: Attachment 5 TOWN MANAGER To: �-...-�-- /. 1Z { tion Ls pep_ f i infosrmatfon, [64 Copy To: +Groot: received your letter of December 28, 1999. I am extremely disappointed with your current recommendation that the Town not reimburse any of the additional arbitration fees in the El Gato case. I was, and remain hopeful, that the Town will ultimately approach this issue, not from a pure legalistic perspective, but from one of good faith and fair dealing for valuable services rendered to the Town in good faith. I want to clarify at this time that I did not at any time make a decision not to pursue reimbursement. In March, 1999, acting on Regina's input, I agreed to wait on my request until we negotiated the 1999/2000 contract. At this time I am discussing with the leadership of the Association what further steps, if any, we wish to pursue regarding this issue. I hcpe to be back with you by the end of next week with further response to that. In the meantime, we request that the Town, within ten days of the date of this letter, pay to the Association the amount owing for six months of services rendered since July 1, 1999. We have continued to render services to the Town over this period without a written contract. in good faith. At this juncture, we think it appropriate and fair that the Town pay for those services. Let me again address the issue of cost containment, which you raise in your letter of December 28, 1999. We submitted a bid on the original request for proposals which we projected as the cost for us to administer the program with the quality and in the manner desired l:y the Town, based on the criteria set forth in the Request for Proposal. The Town Council accepted that proposal. Our first year cost allocation report for administration of the program indicates that our projection was accurate, with the exception of the extraordinary case of El Gato. The costs of administering the program are well contained as originally proposed. _ With respect to the 1999/2000 contract, I set forth contract language to address the issue of extraordinary costs in my letter to you of November 4, 1999. Please reference, in particular, page 2, paragraph 7, of that Letter. Our proposed contract amendment addresses the concern for both of us at this point, which is to contain and manage the costs of extraordinary cases. The proposed language puts that decision clearly where it ought to be, with the Town. The decision about how to deal with cases beyond those contemplated by the regular contract is a policy decision G. \A DR\LosGatosldavidknapplct2. doc 4 North Second Street, Suite 400 San Jose, California 95113 (408) 287-2557 Fax (408) 287-6083 that should be made by the Town. The burden of such extraordinary cases and potential costs should not be shifted to the administering agency by requiring that we now reduce the costs of administering the contract to a level below that agreed upon in our original contract. I look forward to hearing from you. If there is any information that you need to expedite the processing of payment to us for the past six months, please do not hesitate to contact me. Sincerely, SANTA CLARA COUNTY BAR ASSOCIATION i ee A. Burdick Executive Director & General Counsel Cc: Regina A. Falkner, Community Services Director Orry P. Korb, Town Attorney Encl. G ADR`.I.usGatos,davidknapplct2 doc Attachment 6 TOWN OF Los GATOS Civic CENTER 110 E. MAIN STREET P.O. Box 949 Los GATos, CA 95031 December 28, 1999 Christine Burdick, Esq. Exec. Director Santa Clara County Bar Association 4 North Second Street, Suite 400 San Jose, CA 95113 Dear Ms. Burdick: I have received your request for reimbursement of $10,000 in arbitration fees related to the El Gato case. After careful consideration, I regret that I cannot justify payment of additional fees five and one-half times greater than the contractually stated limit. In your letter you reference your October, 1998 request for funds to offset mediation expenses for the same case. At Regina's request, both Orry and I reviewed that letter shortly after it was received. Orry has advised me that article XI, section 10 of the California Constitution prohibits the Town from granting extra compensation for services previously rendered. Regina told me that she shared with you our inability to increase compensation to the SCCBA without Council authorization. Furthermore, because the SCCBA was awarded the contract for tenant/landlord services in a bidding process, staff 's recommendation would be to deny the request. Her tie notes indicated that you thought the overall workload was leveling off and savings in program operation costs would offset the mediation expenses. This expectation was borne out. Based on 1998/99 reports, the total number of mediations and arbitrations held was with the expected range. The number of phone calls estimated at 2,000 per year was substantially lower at 1,177. The decision not to pursue reimbursement was a choice on your agency's part. We certainly agree with your desire that the program operate smoothly. In the 19 years that the program has been in place, we have had good service from arbitrators paid on flat fees. I know of only two instances in which the Town Attorney was required to defend a decision and we prevailed in both cases. We have contacted other agencies to determine their ranges of fees. Although the tenant/landlord program operations vary, none of the people with whom we spoke recalled having paid more than $2,000 for any single case. Some programs used trained volunteers, however, most pay a flat rate which is negotiated for lengthy cases. INCORPORATED AUGUST 10, 1887 Christine Burdick, Esq. Exec. Director December 28, 1999 Page Two Your agency proceeded with hiring an arbitrator at $150/hour, presumably without a cap, knowing the contractual limits and the staffs desire to stick to that contract. I agree that the fiscal year 1999/00 contract amendment should address payments in lengthy and difficult cases such as the El Gato case. However, there must be some method of cost containment. Any such arrangement should involve our pre -approval. I look forward to receiving your thoughts on this issue. Sincerely, DAVID W. KNAPP TOWN MANAGER D WK: raf: kv cc: Poiregina A. Falkner, Community Services Director Orry P. Korb, Town Attorney N:1csd\regina\sccba.wpd NOV 1 2 11g November 10, 1999 Regina Falkner Community Services Director Town of Los Gatos P.O. Box 949 Los Gatos, CA 95031 Santa Clara County V BAR ASSOCIATION Re: 1999-2000 Rental Dispute Resolution Contract Dear Regina: Attachment 7 We reviewed the First Amendment to Agreement for Rental Dispute Resolution Services and have some suggestions. First, however, we have one question. On the first page, item number one says, "to replace Section In as follows..." However, we saw no section In in the 1998-1999 contract. Please advise us whether the intent is to replace some other section, or simply to add the proposed language to the existing contract. We suggest a change to the proposed 3 % consumer price index (CPI) increase. While we agree that CPI is the appropriate increase, we do not think 3 percent is the appropriate amount. We contacted the Bureau of Labor Statistics to inquire of the current CPI rate. They informed us that in June of 1999, the CPI was 3.8 percent, whole in August, the CPI was 4 percent. The Bureau only issues the CPI change every other month, and the October change will not be available for approximately two weeks. Since the contract period began in July, and CPI for July is not available, it seems appropriate to use either the June or August CPI amounts of 3.8 or 4 percent. We are proposing one addition to the contract. We think it is important that the contract include a provision to protect both the Town of Los Gatos and the Santa Clara County Bar Association (SCCBA) from unpredictable costs associated with extraordinary cases (such as the El Gato case). For this reason, we are submitting for your review the following proposed addition to the 1999-2000 ontract: There shall be a four-hour limit on all mediations and arbitrations. If the hearing officer decides more time is necessary to resolve the dispute, the officer will so advise the SCCBA. The SCCBA will then advise the Town of Los Gatos of the hearing officer' s opinion, and the Town will decide if it wishes to finance additional hearing time. If the Town decides additional hearing time is necessary, the Town will authorize the additional time and amount to be expended. The decision of whether or not to allocate additional resources to a particular case is a policy decision best left to the Town. Only the Town can assess the public relations impact of cutting off or extending services, and only the Town can decide whether to 4 North Second Street, Suite 400 San Jose, California 95113 (408) 287-2557 Fax (408) 287-6083 invest more money early on, or risk the possibility of continued conflict and future litigation. For example, additional money invested early in the dispute resolution process could lead to improved landlord -tenant relations, greater satisfaction with both the dispute resolution process and the result, fewer cases being litigated, and perhaps even fewer cases requiring dispute resolution services. However, the Town must determine what weight to give these and other concerns. The decision to grant or deny additional services will likely impact the Town's finances and public relations. Consequently, we believe the Town is the appropriate entity to assess its priorities, determine appropriate service levels, and control such extraordinary expenses. The amount of the 1998-1999 contract was based on approximately five to eight mediations and arbitrations each year with each taking an average of two hours. In fact, those projections were accurate and covered our expenses, except for the El Gato case. Consequently, the amount proposed for the 1999-2000 year should cover our expenses, unless there are unforeseen and extraordinary cases. In that eventuality, the above amendment should safeguard both the Town and the SCCBA. We suggest the Town hold in reserve $10,000, for additional hearing time in extraordinary cases, in the event the Town decides to authorize additional time. The SCCBA intends to continue to keep costs as low as possible. The neutrals on our panel give two hours for each hearing pro-bono. After working at no charge for two hours, they charge only $150 per hour, which is less than half of the market rate. (We have received inquiries from non -attorney mediators who have declined to participate on our panel due to the low hourly rate.) Additionally, some of our neutrals give more than two hours at no charge. In the Bonnie View mobile home case, for example, the arbitrator worked on a pro-bono basis for more than ten hours. In addition to keeping costs down, we provide excellent services beyond those required under the contract. We have participated in analyzing and drafting both the rent control ordinance and regulations, and are presently participating in subcommittee meetings regarding revising the mobile home ordinance. The conciliations, mediations and arbitrations have resolved the disputes so that the Town has not had to defend any decision in court. This has saved the Town time, money and unwelcome media coverage. The SCCBA has two attorneys who administer the rental dispute resolution program. Landlords and tenants alike have communicated a higher level of confidence in the program because an attorney answers their questions. Having attorney administrators enhances the credibility of the program, and by extension, the Town. Additionally, the attorney who handles the conciliations is a trained mediator. We return telephone calls within the same day, and often within the hour. Finally, we are planning a landlord - tenant educational series to take place in the year 2000. In administering the rental dispute resolution program, the SCCBA has kept expenses to a minimum while providing a consistently high level of service to the Town. We believe our proposed amendment will further both of these goals of quality and economy. \`SCL02,DOCS\ADRLosGatos OOcontract kt doc 2 Additionally, the amendment leaves the Town with the policy decisions of when, whether, and under what circumstances, to allocate additional time and resources to extraordinary cases. Please contact us if you have any questions. We look forward to promptly signing a mutually beneficial contract and continuing our service to the Town of Los Gatos. Sincerely, SANTA CLARA COUNTY BAR ASSOC. Christine Burdick Executive Director & General Counsel Cc. Orry P. Korb, Town Attorney «SCL02\DOCS1ADR'tLosGatos\OOcontract let dot 3 NOV - 8 tggg November 4, 1999 David W. Knapp Town Manager P.O. Box 949 Los Gatos, CA 95031 Santa Clara Count BAR ASSOCIATION RE: Reimbursement for the "El Gato" case, file number 98-013 Dear Mr. Knapp: Attachment 8 The Santa Clara County Bar Association (SCCBA), the contracting entity for the administration of the Los Gatos Rental Dispute Resolution Program, requests reimbursement of $10,000 in arbitrator fees paid to the arbitrator, David Finch, in file number 98-013, the case known as El Gato. In June of 1998, the SCCBA submitted a proposal to administer the Los Gatos Rental Dispute Resolution Program. The amount of compensation requested was based on the representation by the Town regarding the number of mediations and arbitrations with the average length being two hours. When the SCCBA began to administer the program, it inherited several cases from its predecessor. Among those was El Gato, an exceptionally challenging case involving 25 tenants, a property management corporation and attorneys. The SCCBA initially spent over a month attempting conciliation, getting the parties to appoint three representatives to make the case more manageable and narrowing the issues. However, the parties were so polarized, distrustful, and hostile, they could not even reach agreement after ten hours of mediation. At the conclusion of the mediation, the SCCBA contacted the Town of Los Gatos, via Regina Faulkner, seeking reimbursement of the extraordinary mediation fees of $3,300. (See attached memo from Elizabeth Strickland, former program administrator, dated October 6, 1998.) There was no resolution of that request at that time. The case was then assigned to arbitration, and a difficult and lengthy arbitration ensued which required 6 arbitration hearings to ensure that the 19 residents, in particular, had the opportunity to present witnesses and evidence on the 7 different substantive issues. The case became high profile with the tenant representative contacting the press, the City Council, and our office repeatedly during the course of the arbitration. I informed Regina Faulkner of the status of the case both orally and in writing. (See attached memo dated January 19, 1999.) In March of 1999, Regina Faulkner and I met and discussed a variety of issues regarding the Rental Dispute Resolution Program, including the mediation and arbitration fees in the El Gato case. A resolution was not reached, as the total amount of fees was not known since the arbitration had not concluded. Ms. Faulkner and 1 agreed to wait on the request for additional funds, until the arbitration concluded and the contract came due for renewal. Through an unintended misunderstanding on both sides, the request for 'Furth Sr(nold ',IIcf .5inlr 100 San Jrr,c.(:alilurnra'r'rl1 1 111H1 2H7 25-'7 Fax 1.108) 287 additional monies did not arise again until the new 1999-2000 contract was forwarded to the SCCBA in September 1999. At that time, we agreed to finalize the new contract and address this request as a separate matter. The Town of Los Gatos has received enormous benefits from the high level of professionalism and competency in the SCCBA administration of the El Gato case. The tenants, although at some points angry and distrusting, ultimately were satisfied that they had been given the opportunity to be heard, to discuss their grievances, and to present their case. This was due not only to the skill of the arbitrator, but also to the manner in which the SCCBA handled the myriad aspects of administering the case, including many conversations with angry, frustrated parties, attorneys, the press, scheduling challenges, document collection and distribution to parties, to name just a few. The process itself was successful, as was the ultimate result. The decision written by arbitrator David Finch was thorough, clear, well reasoned and researched. It satisfied all parties and prevented the conflicts from escalating into expensive and protracted litigation that would have cost the Town both time and money. This is a tangible financial benefit to the Town. Further, the manner in which the SCCBA administered El Gato, and the ultimate resolution of the dispute, kept a difficult case from exploding into an even larger public relations problem. Had the arbitration not successfully resolved the dispute, the conflict would have continued in Town council meetings, in the courts and in the press. That this did not happen has benefited the Town and resulted in improved public relations. Though not as tangible as money saved, good public relations are perhaps no less important. Given the potentially explosive nature of this case, and given our commitment to delivering appropriate service for the Town, we believe that the management of and level of service in this case was warranted. The SCCBA provided a very high level of service in the El Gato case, consistent with the overall administration of the Los Gatos Rental Dispute Resolution Program. We will continue to provide excellent service, which will continue to benefit the Town. However, we are very concerned to find ourselves in the untenable position of suffering a $10,000 loss for having provided services, which have so clearly benefited the Town. While the Town may not feel it is contractually obligated to reimburse us that amount, certainly there is a moral and ethical obligation to pay for services received in this extraordinary case. To do otherwise would substantially benefit the Town beyond that contemplated by either of the parties. We are proposing for the 1999-2000 contract an addition, which will protect both the Town and the SCCBA in these extraordinary cases. We are proposing the following: (1) That there be a four hour limit on all mediations and arbitrations; (2) That if the mediator or arbitrator decides more time is necessary to resolve the dispute, the neutral will so advise the SCCBA; (3) That the SCCBA will then advise the Town of Los Gatos of the neutral' s opinion; (4) That the Town will decide if it wishes to pay for the IM0t ti AUk 1„}<,a1n 1.1 , 1 t r, r hlct dew additional hearing time; (5) That if the Town decides additional hearing time is necessary, the Town will authorize the additional amount to be expended. As noted, this safeguards both the SCCBA and the Town from unexpected and unanticipated costs. Additionally, it places with the Town, the policy decision of what level of service the Town wishes to provide and fund in these atypical cases. Only the Town can assess the public relations impact of cutting off or extending services, and only the Town can decide whether to invest more money early on, or risk the possibility of continued conflict and future litigation. The above proposal maintains costs in typical cases at the level that experience has shown is appropriate; in complex cases, the proposal allows the Town to assess its priorities, determine appropriate service levels, and control expenses as the Town deems appropriate. Further, the proposal should prevent situations similar to the present one in which the SCCBA makes that judgment, but then is left potentially absorbing the entire financial burden for a case, despite the fact that it is the Town and the residents of Los Gatos who have benefited. While this proposal should make the contract more legally equitable for the 1999-2000 term, it does not address the inequities created by the El Gato case. We believe the fair and just way to address these inequities is for Los Gatos to reimburse the SCCBA $10,000 in arbitrator fees. The SCCBA will absorb the extraordinary cost of the lengthy mediation. We understand we are requesting extraordinary funding, but believe it is warranted given the set of unusual, unexpected circumstances of the El Gato case and given the high level of service provided in that case. Please do not hesitate to contact me to discuss this further, or if you have any questions. Also, I am happy to, and would want the opportunity to, address the Town Council personally on this matter, if the issue needs to be resolved by them. I look forward to a prompt resolution of this issue, and to continued good relations as we administer the Rental Dispute Resolution Program. Sincerely, TA CLARA COUNTY BAR ASSOC. e A. Bur•'ck Executive Director & General Counsel Encl. Cc. Orry Korb, Town Attorney Regina Faulkner, Community Services Director ti( 1,12 IX)('S ANH 14,6ai,n 1:1 r,,,t, iamodn bt 3 MEMORANDUM DATE: October 6, 1998 TO: Regina Falkner FROM: Elizabeth Strickland RE: Los Gatos Rental Dispute Resolution Program Funding Per our conversation of September 17, 1998, the Santa Clara County Bar Association (SCCBA) submits the following request for additional funding for the Los Gatos Rental Dispute Resolution (LGRDR) Program. This request is based on the extraordinary circumstances involved in handling the dispute between the residents and owners of the El Gato Penthouse Apartments. We are requesting additional funding in the amount of $3,300.00 to cover the cost of mediating the case. The case has been forwarded to arbitration, and will be heard on October 14, 1998. This request is based on the extraordinary circumstances surrounding this case; the large number of people involved, the significant level of hostility between the parties, and the extensive amount of work (which is the basis of the dispute) undertaken at the property site, along with the fact that this case originated under the Information & Referral (I & R) contract. These factors have combined to produce an extremely difficult situation, requiring a high degree of skill and a significant input of time and effort on the part of the mediator and the program staff. The mediator devoted in excess of 19 hours to this case, spending time in conference with tenants and owners, with 10.5 hours going into the mediation alone. We do not expect this type of case to occur with any regularity. We believe that this is an exceptional situation, and as such, ask that the Town of Los Gatos approve additional funding to the LGRDR to cover the mediation cost of $3,300.00. The contract between the SCCBA and the Town of Los Gatos is based largely on an estimated annual caseload for the Program of 20 petitions filed, 14 conciliations performed, 6 mediations and 4 arbitrations. This estimated annual case load is listed in a draft of the final Agreement, in Section 1, Subsection c. This estimate did not take into account the cases which would be transferred from I & R. When SCCBA assumed the administration of this program I & R on July 1, 1998, 11 cases were transferred from I & R. One case had been pending in conciliation since September 1997, 9 months previous. We received 1 case that was filed in January 1998; 1 in February; 1 in March; & 1 in April; 3 from May; and 3 from June. All should at least have gone to mediation by the time we received them. Only one, however, had been mediated; the remainder were still pending as conciliations. We have taken the time and made the necessary efforts to resolve these cases from I & R as well as cases that have been opened after we assumed the administration of the program. We were able to resolve five as conciliations, 3 went to mediation, one to arbitration, and two are still actively conciliating. To date, in part as a result of these holdover cases from I & R, we have already met some of our annual obligations, or have come very close to meeting these estimates in the first two months of our administration of the program. Since the inception of the contract on July 1, 1998, we have accepted 16 G:\ADR\LOSGATOS\REGINAMEMO.DOC petitions, performed conciliations for 14 cases, and sent three cases to mediation and one case to arbitration. We have participated in advertising efforts, drafted informational letters to be distributed to all landlords in the Town. We have become knowledgeable in a short time on Los Gatos Rent Control Ordinance, and reviewed the ordinance's applications to various situations with Town Attorney Orry Korb. We receive a high volume of calls from residents and landlords with a variety of questions and concerns, and have repeatedly been thanked for our quick responsiveness and assistance. This extraordinary funding request is not made to support what we view as our original and ongoing obligation under the contract, but rather to request the Town to pay for a pre-existing obligation under the contract with I & R. We attempted to resolve, and hoped this case would be resolved through renewed conciliation when we received the case from I & R. We believe I & R should have had the case conciliated or mediated under their contract by the end of June. However, as noted, this case along with the others transferred to SCCBA were not timely processed. We are assuming the burden of the other ten cases and simply request the Town of Los Gatos assist in this unusual circumstance by allocating the additional sum requested for the El Gato Penthouse case. We appreciate the opportunity to work with Los Gatos, and express again our commitment to administering the program in the most effective manner, serving the residents and property owners of the Town. We look forward to our ongoing relationship with the Town of Los Gatos. 2 memorandum Date: 1/19/99 To: Regina Faulkner From: Chris Burdick RE: El Gato Penthouse Arbitration I am pleased to respond to your request for a overview of the case history of the El Gato Penthouse rent dispute. This case has been particularly contentious between the parties; involves several representative on both the tenant and landlord sides; involves multiple issues which neither side has been able to reach any agreement on despite extensive involvement in conciliation and mediation; and involves a significant number of documents presented on behalf of both sides. That information is provided to you to give you some sense of the complications we have faced in managing the process and procedures for this case. That combined with our attempt to provide both sides ample opportunity to submit materials, have time to select mediators and arbitrators and consider the schedules of numerous individuals in processing each phase of this case. In short, the case history is as follows. Petition for Conciliation: Filed with I & R in late May. I & R conducted an early conciliation which did not address all the issues or include all the tenants. Nothing further was attempted by I & R. Tenant Group Formed: Tenants spent much of late June and July determing who would join the Petition. Tenants selected three individuals, primary to be Dick Porter, to represent them. SCCBA Assumes Administration/Conciliation Phase: SCCBA assumed administration of the Los Gatos program in July, 1998. I & R forwarded to SCCBA in early July the El Gato case. SCCBA Administrator begins a series of phone calls and meetings with the tenants representatives through the month of July providing information, direction, clarification of issues and receiving documentation. Conciliation was conducted in late July and early August by the SCCBA administrator through a series of meetings and phone calls with the EL Gato tenant representatives and Vasona Management representatives which included Killian Byrne and their attorney Fenn Horton. The conciliation ultimately failed to bring complete resolution to the issues and the parties requested mediation. 1/19/99 lemorandum: El Gato Penthouse Arbitratic 2 Mediation Phase: The mediation took place over an eleven hour period on August 17, 1998, and August 24, 1998. Additional negotiations by telephone, correspondence, FAX, exchanges of information, and review of documents took an additional eight hours. The mediation process concluded when the last document requested from the residents was received on September 8, 1998. The mediator submitted an impasse report on September 15, 1998. Arbitration Phase I: A Request for Arbitration was filed by Vasona Management on September 21, 1998. The parties were provided notice of choice of arbitrators and given until October 14, 1998, to select an arbitrator of choice. The tenants made their selection on October 14, 1998, and notice of the arbitrator assigned was provided on that date. An arbitration date was scheduled for November 17, 1998. Both sides were requested to submit any further documentation on or before November 10, 1998, so that the documentation could be provided to both sides and the arbitrator prior to the hearing. A series of disputes about submission and requests for documents ensued resulting in neither side submitting timely documentation. On November 17, 1998, the assigned arbitrator determined at the outset of the hearing that he did not have the specific qualifications to serve as the arbitrator. The parties decided not to stipulate to proceeding with the arbitration and each side agreed to have a new arbitrator assigned and schedule a new hearing date. Arbitration Phase II: El Gato Penthouse's primary representative, Dick Porter, informed me that he would be unavailable during late November. On December 2, 1998, the parties were provided with three additional names of arbitrators. Vasona Management informed me of their selection in early December. In early December, both Porter and Vasona advised that they would not be available for the arbitration in December. In mid -December, Vasona's attorney, Fenn Horton, advised me that due to his trial schedule in January, he would not be available for the arbitration until mid -February. Dick Porter as a result of a series of absences in December and in order to respond to Porter's inquiries asking for more information on each of the arbitrators and given the holidays, did not provide the tenants selection until January 15, 1998. The arbitrator was finalized on January 19, 1998, and the parties were provided a series of available dates to set the arbitration: February 8, 9, 10, 12, 15 and 16. I have asked each side to provide me the dates among those they are available by January 22, 1998. Current Status: We have attempted to give due consideration to the time, concerns and requests of each side in this matter, including, accommodating Vasona Management's attorney's schedule. We did not attempt to set the arbitration in December at the request of both parties; we agreed at the request of the attorney for Vasona not to schedule the arbitration for January and informed Dick Porter, the tenant's representative of that. We have provided each side an opportunity to have access to the documentation filed thus far. I again offered that to Mr. Porter on January 19, 1998. We will provide formal notice of the arbitration date in February by the end of this week and again request that any additional documentation be provided ten days prior to the arbitration. I intend to inform the parties that no extensions of any deadlines will be given at this juncture. We have made every possible and reasonable attempt to expedite the resolution of this difficult dispute. I would be pleased to respond to any further inquiries you may have. G:\ADR\LosGatos\EI Gato\statusmemoregfauik.doc