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HomeMy WebLinkAbout11 O.C. BANKRUPTCY 02-07-00 LAW OFFICES OF WOODRUFF~ SPRADLIN & ~ ,RT . of.ss, AG. EN DA MEMORANDUM NO. 11 02-07-00 DIRECT DIAL: (714) 564-2607 DIRECT FAX: (714) 565-2507 E-MAIL: LEJ@WSS-LAW.COM TO' FROM: DATE: RE: Honorable Mayor and Members of the City Council City of Tustin City Attorney February 2, 2000 Orange County Bankruptcy SUMMARY: Recommend adoption of a Resolution authorizing certain actions and execution of documents relating to the final report of the Orange County Bankruptcy and related recovery litigation. RECOMMENDATION' That the City Council adopt a Resolution authorizing certain actions and execution of documents relating to the final report of the Orange County Bankruptcy and related recoVery litigation.. FISCAL IMPACT: The City will receive its final allocation of proceeds from the County Bankruptcy litigation and a share of additional monies, newly located by the County (the "found monies"). DISCUSSION: As you may be aware from press coverage, the final chapters of the Orange County Bankruptcy are being implemented with what appears to be the final Court hearing scheduled for February 2, 2000. At that time, Thomas Hayes will seek to have the Court approve his final report which sets forth all of the settlement and litigation proceeds, together with all of the related earnings and expenses, and the proposed allocation of the net amounts to each of the approximate 200 depositor agencies. A fairly strict procedure and protocol has been established in order for each agency to obtain its funds. We were just advised on Monday, January 24th, that the County is requiring the governing body of each governmental agency to adopt a formal Resolution, indicating its acceptance of a settlement and release relating to the found monies, which have been determined to now exist over and above the settlement 116369\1 Honorable Mayor and Members of the City Council City of Tustin February 2, 2000 Page 2 proceeds, as well as to identify representatives of the agency who are authorized to execute the final documents, and to accept the disbursement check. We have prepared the attached Resolution in a format which is in accord with that requested by Mr. Hayes, as well as the Orange County Investment Pool Committee. It will authorize the City Manager, Finance Director, and City Attorney to execute any and all of the final documents, and will authorize the City Manager, or Finance Director or either of them to accept possession of the disbursement check. Disbursement is contemplated to be made on February 24, 2000. In the absence of having a duly adopted Resolution, we are advised that the disbursement will be withheld until the City adopts such. Therefore, it is recommended that the City Council adopt the attached Resolution so as to be certain that all steps can be made to receive the funds and to allow the Finance Department to coordinate with the City's Treasurer for the placement of an immediate investment, as appropriate. LOIS E. JEFF Attachments: Proposed Resolution Settlement Agreement and Limited Release CC: William A. Huston, City Manager Ronald A. Nault, Finance Director 6369\1 116327\1 1 2 3 4 5 6 7 8 9 10 il 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 RESOLUTION NO. oo-tt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN AUTHORIZING CERTAIN ACTIONS AND EXECUTION OF DOCUMENTS RELATING TO THE FINAL REPORT OF THE ORANGE COUNTY BANKRUPTCY AND RELATED RECOVERY LITIGATION WHEREAS, the City of Tustin is an Option A Pool Participant, as that term is defined in the Second Amended Plan of Adjustment for the County of Orange; and · WHEREAS, on February 2, 2000, Representative Thomas Hayes will seek court approval of the Representative's Final Report, which sets forth all of the settlement and litigation proceeds, together with all of the related earnings and expenses, and the proposed allocation of the net amount to the City; and WHEREAS, the County of Orange and the Option A Pool Participants have agreed that any funds relating to the 'liquidation of the Pools determined later to exist would be distributed one-half (1/2) to the County of Orange, and one-half (1/2) to the Option A Pool Participants; and WHEREAS, additional funds have been determined to exist in the aggregate amount, including interest earned, of $17,884,999.53; and WHEREAS, a Settlement Agreement has been submitted to the City, as an Option A Pool Participant, in order to receive its share of the additional funds; and WHEREAS, the City has been requested to accept the settlement and release; and WHEREAS, the 'City has been further requested to designate certain individuals to execute, on behalf of the City, any and all of the final documents and to accept possession of the settlement proceeds. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, finds, determines and orders as follows: Section 1' That the City hereby accepts Representative Thomas Hayes' Final Report, setting forth all of the settlement and litigation proceeds, together with all related earnings and expenses, and the allocation of the net amount to the City. Section 2: That the City formally accepts the settlement and release, and approves the Settlement Agreement and Limited Release re additional funds. 116327~1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 Section 3: That William Huston, City Manager, Lois E. Jeffrey, City Attorney, and Ronald Nault, Finance Director or any of them, are hereby authorized and directed to execute any and all final documentation on behalf of the City. Section 4: That William Huston, City Manager, and Ronald Nault, Finance Director, or either of them, are hereby authorized and directed to receive all distributions made pursuant to the Final-Report Motion, or any order of the Bankruptcy Court relating thereto; and/or the Joint Motion by the Pool Committee and the County of Orange regarding the division of certain additional funds, or any order of the Bankruptcy Court relating thereto. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin on the__ day of ., 2000. TRACY WORLEY, MAYOR ATTEST: PAMELA STOKER CITY CLERK -2- CITY OF TUSTIN Settlement Agreement and Limited Release This Settlement Agreement and Limited Release (this "Settlement Agreement") is made this day of January, 2000, between the County of Orange (the "County"), the chapter 9 debtor herein, the Official Committee of Investment Pool Partidpants (the "Pool Co~ru-rdttee") ,md eac2~ Option A Pool Participant who has executed a signature page to this Settlement Agreement. This Settlement Agreement is entered into with reference to the following: A. On December 6, 1994 (the "Petition Date"), the County filed its voluntary petition under chapter 9 of the Bankruptcy Code, 11 U.S.C. section 101, et seq. On May 16, 1996, the Bankruptcy Court confirmed the County's Modified Second Amended Plan of AdjuStment (the "Plan"). Capitalized terms not defined herein are intended to have the meanings ascribed to them in the Plan. B. During the County Chapter 9 Case, several agreements were reached concerning the interests and rights of the Option A Pool Partidpants in and to the funds in the Orange County Investment Pool (the "Pool"). First, on May 2, 1995, the Bankruptcy Court approved the Comprehensive Settlement Agreement (the 'CSA'), which provided for, among other things, a distribution from the Pool of a certain portion of each Option A Pool Participants' investment balances as of the Petition Date. C. In addition, on July 18, 1995, the County, the Pool Committee and each of the Option A Pool Partidpants entered into the July 18, 1995 letter agreement (the "Pool Funds Release Agreement"). A copy of the Po01 Funds Release Agreement is attached hereto as Exhibit B. D. on April 23, 1996, the County and the Option A Pool Partidpants abo agreed that any funds relating to the liquidation of the pools determined later to exist would be distributed one-haH to the County and one-half to the Option A Pool Partidpants, and such distribution would decrease the Option A Pool Participants' claims under the Plan accordingly. A copy of the April 23, 1996 letter agreement is attached hereto as Exhibit C. E. Approximately $10.3 million in funds is now held in County Fund 695, av.d approximately $4.5 million in fta-~$ is now held in Co'anty Funds 692 and 694. Together with all interest thereon as calculated and determined by this Settlement Agreement, the aggregate amount of such funds is agreed to be $!7,884,999.53, as of February 23, 2000, and is defined herein as the "Additional Funds." F. Approximately $1.8 million is now held in Fund 693, not including interest, and is defined herein as "Unapportioned Interest." G. The County believes that the Pool Funds Release Agreement controls the disposition of the Additional Funds, and that the Option A Pool Participants have released any claim they might have had to the Additional Funds. The Pool Committee contends, among other things, that the April 23, 1996 letter agreement controls the disposition of the Additional Funds, and that the Additional Funds should be divided equally between the County and the Option A Pool Participants. H. Both the County and the OPtion A Pool Partidpants agree that the distribution of the Additional Funds pursuant to this Settlement Agreement wOuld aVoid the expenditure of resources otherwise needed to litigate the issues. I. Accordingly, the County and the Pool Committee have agreed to treat the Additional Funds as if they were subject to the April 1996 letter agreement, and to treat the Unapportioned Interest in the manner consistent with applicable non- bankrupt~ law, as specified herein. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the parties hereto acknowledges and agrees as follows: 1. The parties agree that the amount of Additional Funds to be distributed shall be $17,884,999.53, which includes all interest and all other claims to such funds, and shall be deemed to be the amount to be distr:vuted, irrespective of the actual amount of interest earned on such funds; provided, however, that if distribution of the Additional Funds is not made on February 24, 2000, interest shall accrue from February 24, 2000, until paid, calculated using simple interest at 5.2% per annum to the date immediately preceding the date of distribution. 2. One-half of the Additional Funds shall be distributed to the County, free and clear of claims, hens or encumbrances. 3. One-half of the Additional Funds shall be distributed to Option A Pool Participants in respect of their Allowed Repayment Claims (Class A-19, C-l, A-20 and · C-2) pursuant to the schedule attached hereto as Exhibit D. If the distribution of Additional Funds is made on February 24, 2000 as anticipated, the amounts specified in Column C of Exhibit D will be distributed in accordance therewith. If the distribution is made on a later date, then the distribution will be made based on the Percentages specified in Column B of Exhibit D. 'In all events, the Allowed Repayment Claims of such Pool Partidpants shall be reduced dollar for dollar in the amount of Additional Funds and further interest after February 23, 2000, if any, distributed to each such Option A Pool PartidPant pursuant to this Settlement Agreement. 4. The Additional Funds distributed to the Option A Pool Partidpants will not be considered Litigation Proceeds as that term is defined in the Plan. Accordingly, the Representative, (who has agreed to distribute the funds at the same time as Litigation Proceeds) shall not be entitled to compensation based on the distribution of Additional Funds. 5. The Unapportioned Interest plus accrued interest thereon will be distribUted based upon the County's 1995-1996 Property Tax Unapportioned Interest allocation. 6. The parties' obligations under this Settlement Agreement are contingent upon the Bankruptcy Court's approval of the motion .to approve the Settlement Agreement and 'all relief sought therein by an order that shall have become a Final Order no later than February 24, 2000, or such later date as the County and the Pool Committee may agree in writing. 7. As a condition to receiving its distribution of Additional Funds, each of Option A Pool Participants who receives a distribution of Additional Funds shall execute this Settlement Agreement and thereby shall release any claims to the Additional Funds, which "Released Claims" are defined to include (a) any and all claims, whether secured, unsecured, priority, 'administrative or otherwise, demands, obligations, liabilities, indebtedness, responsibilities, disputes, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action (whether at law or in equity), debts, sums of money, accounts, compensations, contracts, controversies, promises, damages, costs, rights of offset, losses and expenses, of every type, kind, nature, description or character, known and unknown, whensoever arising occurring at any time up to and through the date hereof, whether known or unknown, suspected or unsuspected, liclujdated or unliquidated, matured or unmatured, fixed or contingent, including but not limited to principal, interest, charges, fees, minimum commissions and other obligations, rights and . . remedies which in any way relate to the Additional Funds, including without limitation the calculation of prindpal and interest thereon. Released Claims do not include any claims that do not in any way relate to the Additional Funds. 8. Each Option A Pool Partidpant and the Pool Committee and each of their .predecessors, successors and assigns (each, a "Releasing Party"), hereby hilly, finally, irrevocably, forever and unconditionally release, discharge and acquit the County and every other Option A Pool Partidpant who receives a portion of the Additional Funds under the Settlement Agreement of and from all Released Claims, except for the rights and obligations under this Settlement Agreement. 9. Waiver of Statutory_ Benefits. The parties intend that .the foregoing releases shall be effective as a flail and final accord and satisfaction of Released Claims, and each of the parties hereby agrees, represents and warrants that the matters released herein are not limited to matters which are known or disclosed. In this connection, each Releasing Party hereby 'agrees, represents and warrants that it realizes and acknowledges that (a) factual matters now existing and unknown to it may have given or may hereafter give rise to Released Claims which are presently unknown, unsuspected, unliquidated, unmatured and/or contingent, (b) such Released Claims may be unknown, unsuspected, unliquidated, unmatured and/or contingent due to ignorance, oversight, error, negligence or otherwise, and (c) if such Released Claims had been known, suspected, liquidated, matured and/or unconditional, such party's decision to enter into this release may have been materially affected. Each Releasing Party further agrees, represents and warrants that this release has been negotiated and agreed upon in view of these realizations. Nevertheless, each Releasing Party hereby intends to release, discharge, and acquit the County of and from any such unknown, unsuspected, unliquidated, unmatured and/or c°ntingent Released Claims which are in any way set forth in or related to the matters identified hereinabove. EACH RELEASING PARTY HEREBY EXPLICITLY WAIVES ALL RIGHTS Lfl'qDER AND ANY BENEFITS OF ANY COMMON LAW OR STATUTORY RULE OR PRINCIPLE WITH RESPECT TO THE RELEASE OF SUCH CLAIMS, INCLUDING, WITHOUT LIMITATION, SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH PROVIDES AS FOLLOWS: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETI'LE~~ WITH THE' DEBTOR. EACH RELEASING PARTY AGREES THAT NO SUCH COMMON LAW OR STATUTORY RULE OR PRINCIPLE, INCLUDING SECTION 1542 OF THE CALIFORNLA CIVIL CODE, SHALL AFFECT THE VALIDITY OR SCOPE ORANY OTHER ASPECT OF THIS RELEASE. 13. Further Assurances. From trine to thne, at ti-~e request of any party hereto and without further consideration, the other parties will execute and deliver to such requesting party such documents and take such other action as such requesting party may reasonably request in order to consummate more effectively the releases contemplated hereby. 11. No Assigrtment. Each Releasing Party agrees, represents, and warrants that it has not voluntarily, by operation of law or otherwise, assigned, conveyed, transferred or encumbered, either directly or indirectly, in whole or in part, any right to or interest in any of the Released Claims. 12. Choice of Law; Severabili .ty. This Settlement Agreement shall be governed by and construed in accordance with the laws of the State of California as applied to agreements among parties resident therein. Whenever possible, each provision of this Settlement Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Settlement Agreement shall be prohibited by or invalid under applicable law, such pr. ovision shall be ineffective only to the extent of such t~'ohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Settlement Agreement. 13. Advice of Counsel. Each party has had advice of independent counsel of its own choosing in negotiations for and the preparation of this Settlement Agreement, has read this Settlement Agreement in full and final form, and has had this Settlement Agreement fully explained to it to its satisfaction. 14. No Third Party. Beneficiaries. This Settlement Agreement is executed for the benefit of the parties hereto, and no other person, corporation, partnership, individual or other entity not a party to this Settlement Agreement shall have any rights herein as a third party beneficiary or otherwise, except to the extent expressly and specifically provided herein. 15. Counterparts. This Settlement Agreement may be executed in duplicates and counterparts, which', taken together, will be deemed and serve as an original. In addition, the parties agree that their authorized representatives may bind them to the terms of this Settlement Agreement with signatures exchanged by fax, and each duplicate faxed signature copy shall be deemed to be an original of this Settlement Agreement. 16. Entire Agreement. This is the entire Settlement Agreement between the parties with respect to this matter. There are no other agreements or understandings, written or oral, express or implied. IN WITNESS WHEREOF, the parties have caused this Settlement Agreement to be executed and delivered by their duly authorized representatives. Dated: January · , 2000 PILLSBURY, MADISON & SUTRO By: Patrick C. Shea Attorneys for Official Committee of Investment Pool Participants Dated: January __, 2000 OFFICIAL COMMTITEE OF · INVESTMENT POOL PARTICIPANTS By: Name: Its: Dated: January _.~ 2000 HENNIGAN, MERCER & BENNETT By: John L. Amsden Reorganization Counsel for the County Dated: January __, 2000 THE COUNTY OF ORANGE By: Name: Its: Agreed and Acknowledged: February __~ 2000 APPROVED AS TO FORM: Lois ._,. Je~ff~ 0 City Attorney OPTION A POOL PARTICIPANT Name: By: William A. Huston I~: City Manaqer