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::: COMMUNITY NEWS 1997 RMA newsletter outlined key points of controversial lawsuit settlement • Pop-up window: Click for a four-year archive of development coverage -- news, maps, photos and morePublished Sunday, January 9, 2005 At the request of RanchoMurieta.com, the Rancho Murieta Association on Friday provided a copy of the following June 1997 newsletter article, summarizing the RMA's position on a lawsuit settlement. The article was written by then-RMA Director John Merchant for "RMA News," which was distributed to the community. At about the time this document was distributed in 1997, Merchant and members of the public exchanged comments on the topic at an RMA meeting that was videotaped and broadcast on Channel 5. Members of the Rancho Murieta Development Concerned Citizens Committee, which opposes current development plans, recently obtained a copy of the videotape and have asked the RMA to rebroadcast it for the perspective it provides on the community's development history. The RMA is considering whether to do that.
In his article, Merchant deals with the possibility that future developers might not annex to the RMA and he writes that the RMA has no legal authority to prevent that. He says the 1997 Letter Agreement, which provided for the parks to be deeded to the RMA, ensures "If a new developer does not annex to our association, RMA is guaranteed access to park locations that are owned by RMA inside other association areas within the boundaries of Rancho Murieta." The full Letter Agreement document was not made public until December 2002. When it was, there was an outcry about the settlement, including the provision allowing un-annexed development to use the parks if the developer contributed to the Parks Fund and new homeowners contributed toward RMA maintenance costs for the parks. In his article, Merchant writes that the 1997 RMA board believed this cost-sharing would "make annexation of new developments into RMA more attractive to new developers." The Letter Agreement "ends all litigation between RMA/MTI and the PTF," Merchant writes. He explains what the litigation was about in the first place and describes the reasoning that led to the settlement agreement. He lists and explains the terms of the agreement. Merchant also states that, while the Letter Agreement is legally binding, it will be superseded by "a formal settlement agreement which will more clearly define the provisions in the letter." When the Letter Agreement document was made public in 2002, RMA board members used it to explain why they had been negotiating with the developers on terms for final-phase development of the community, what came to be called the Mutual Benefit Agreement. Michael Schieberl, then president of the RMA board, said the Mutual Benefit Agreement improved terms of the Letter Agreement from the RMA's perspective. And without the Mutual Benefit Agreement, terms of the Letter Agreement would have been imposed by the courts, he said. The Mutual Benefit Agreement, negotiated for three years and signed by the RMA and PTF in 2003, has become the formal recorded settlement. What follows is the full text of the 1997 article. RMA
News PTF
Lawsuit Summary On May 21, 1997, the Rancho Murieta Board of Directors signed a letter of agreement with the Pension Trust Fund for Operating Engineers (PTF). Murieta Townhomes, Inc. (MTI) was also a participant in this agreement. These three organizations will now prepare a formal settlement agreement which will more clearly define the provisions in the letter which I will explain below. The settlement agreement as it exists, however, is a legal and binding document. This agreement ends all litigation between RMA/MTI and the PTF. On July 17, 1996, RMA/MTI sued PTF. This suit contended that several illegalities occurred in the sale of Rancho Murieta by the Pension Trust Fund to Jack Anderson. Our lawsuit contends that the sale was, in fact, a fraudulent one. PTF started the foreclosure on Anderson in 1993 for non-payment of a $44,000,000 note. RMA filed a lien against the Anderson properties for approximately $600,000 in delinquent association payments not made by Anderson/RMPI. Because of our low position in this foreclosure proceeding, we could anticipate no financial restitution from the sale of the property. Because we felt PTF had acted improperly, we sued PPTF to recover the delinquent association payments and damages. The July 1996 suit filed by RMA was the result of a legal study commissioned by RMA/MTI in October 1995. A total of $30,000 was invested to determine if the suit had merit and was, in fact, a case which could be won in a court of law. Several attorneys, some of which had been deeply involved in the RMCC lawsuit, worked on the case. During this investigation, our attorneys began to have a working dialogue with PTF and indicated that a settlement with the PTF might be possible. Several meetings were held in which the concept of a "global settlement" was discussed in which all claims between RMA, MTI, CSD, and the PTF might be resolved. Simultaneously, a dialogue was occurring between the RMA Board and the financial representatives of the PTF. PTF began to ask RMA what it should contribute in consideration for the resolution of the lawsuit. Several ideas were discussed, but it became apparent as time went on that PTF planned to drag RMA through a complicated and lengthy legal process that offered little possibility of a cash settlement. This is not unlike the tactics employed in the country club proceedings. We believed PTF would settle, but would vigorously resist a cash settlement which might create a "financial footnote" which would be reported to their membership. Any hope of a cash reimbursement settlement rested with a trial victory and subsequent damages award by the court. The statute of limitations on this entire process was about to expire when the lawsuit was filed. Upon filing, the RMA Board had to decide to contract with our attorneys to litigate the lawsuit or to seek resolution outside of the courtroom. Ultimately, the entire board felt it in the best interests of the Association to pursue an alternative settlement. There were many reasons. Here are some of them: 1. We viewed ourselves
as a small force waging war against a large army. We do not possess
the legal and financial resources to pursue a protracted suit. PTF,
however, has access to millions of dollars and countless staff attorneys. 2.We perceived that there would be little community support for a protracted lawsuit. With a fully funded budget, the only way to support this action would have been a special membership assessment or a continuing series of special membership assessments. The Board felt that the fees to pursue the case would be $250,000. Fees and liabilities for legal costs could have exceeded $400,000 if we had lost the case. 3. Some of us did not feel we had a airtight case. I detected a reluctance in our attorneys to field this case on a strictly contingency basis. This led me (and other board members) to suspect that the case was a not a "slam dunk" as had been originally presented to us. 4. Many of us felt it was time to come out from under the cloud of litigation that has besieged the community for 15 years. Without resolution of RMA, CSD and RMCC litigation, future development inside the gates of Rancho Murieta is doubtful. In March 1997, we were presented with the settlement agreement which was negotiated by the RMA board and signed in May. Here is what we will receive as a result of this agreement: 1. RMA will receive ownership to a total of 65 acres of park property. Twenty-six acres of this property is presently owned by CSD. RMA will obtain this 26-acre parcel in a "three way swap". PTF will deed CSD a parcel that PTF now owns. This parcel is located next to the CSD building on Jackson Highway. CSD will simultaneously deed RMA its 26 acres. This parcel (Stonehouse) is the property on which we are currently constructing our community park. The Stonehouse location also houses the maintenance yard now occupied by RMA. We have leased the maintenance yard from CSD in past years and this lease has since expired. RMA would have been forced to purchase the maintenance yard property from CSD if RMA wished to remain at this location. RMA was negotiating this purchase with CSD and the cost to buy the property was anticipated to be $60,000. The cost to lease the park location (which is also part of this 26 acres) are $12,000 over the ten-year life of the park lease. The costs to move the maintenance yard from the Stonehouse location are over $100,000. Thus, there is a great deal of value (over $72,000) to RMA in this portion of the transaction. There was also a concern that RMA and the Park Fund would be investing a six-figure sum in a park that was being built on leased land. 2. The other park parcels comprising the remaining 39 acres will be transferred to us upon completion of the PTF/RMPI foreclosure proceedings. These parcels would have been deeded to the association in the future, as new build-out occurred inside Rancho Murieta. (A map is available at the RMA office depicting these locations.) We have insisted on early title to insure that the properties will be owned (controlled) by us and that the parcel locations are pre-established. 3. The Parks Agreement
will also be modified by the settlement agreement. Conceivably,
future development by new developers may occur in Rancho Murieta. This settlement agreement will take place only if a successful foreclosure on Anderson is executed by the PTF. Should this not occur, we have reserved the right to reopen the lawsuit and we would make an alternative decision as to how to proceed. The RMA Board has acted in its capacity as association representatives and approved this agreement. We feel this represents the best course of action for the community. We invite your questions and comments.
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