Pat Pepper, Brian Weber and Erika Morgan (not pictured) passed a resolution at the May 2 council meeting that bars the city from moving forward with Oakpointe’s attempt at arbitration over a breach of a development agreement. David Linehan, the city’s attorney, said he will move forward in the arbitration proceedings until he received clarification about the resolution. Photo by Ray Still

Oakpointe seeks arbitration with Black Diamond

The developer alleges the council majority – Pat Pepper, Erika Morgan and Brian Weber – have violated the 2011 funding agreement by not maintaining a functioning Master Development Review Team for the developments growing in the city.

While Oakpointe’s Open Public Meetings Act lawsuit against the Black Diamond City Council has hit a lull in action, another potential lawsuit between the developer and City Council members has been brewing in the background.

The dispute is over whether the council has breached the development and funding agreements by not adequately maintaining a Master Development Review Team, which works to oversee Oakpointe’s development work and plans.

Discussions about those agreements and the MDRT has fueled arguments for the past year, culminating in Oakpointe filing for binding arbitration April 24, 2017.

According to the funding agreement, either the city or the developer has the right to “file a lawsuit to enforce the rights and obligations hereunder and/or to enter into non-binding mediation pursuant to RCW 7.07,” reads Section 24 of the document. “Either party may initiate mediation by serving a request on the other party.”

Oakpointe attempted non-binding mediation before arbitration by inviting Mayor Carol Benson and City Council members Pat Pepper, Erika Morgan and Brian Weber — who have formed a council majority for the past year and a half — to a private mediation meeting on March 23.

Council member Janie Edelman said she and Tamie Deady (the council minority) were not invited to the mediation because they’ve repeatedly voted against amending the MDRT contracts.

The council majority did not attend. Benson and Oakpointe agreed on a list of issues to be sent to arbitration.

In an email interview, Pepper said the issue surrounding this mediation wasn’t about being invited and not attending.

“The mayor was trying to sway a vote for her proposed MDRT consulting contracts by dragging a council member into an improper mediation without proper legal representation,” she wrote, referring to the numerous times the council has declined to accept attorney David Linehan’s contract, which Benson has been paying unilaterally through multiple $15,000 contracts. “Worse, behind closed doors with no transparency, the mayor is trying to take away the council’s authority to contract and take away the public’s right to MDRT oversight.”

Pepper reiterated a motion passed by the council majority on March 16, which stated the council will only attend mediation with an attorney approved by the majority vote of the council.

A few days after the mediation meeting, Oakpointe, Benson and Linehan signed a contract for arbitration with Judicial Dispute Resolution’s Steve Scott, who was a former King County Superior Court judge until he retired in 2005.

Under this arbitration contract, any decision reached by Scott would be both binding by law and unappealable, Linehan said.

However, Scott can only settle disputes and answer legal questions, and cannot award damages like a judge can in a typical lawsuit.

The council majority has objected to this arbitration, stating in a brief that “the City Council neither approved an arbitration much less approved the arbitration contract in an open, public meeting… because this is an unauthorized proceeding, it will be a futile gesture and a waste of city funds.”

Additionally, the brief stated Pepper, Morgan and Weber will not accept an arbitration decision because “any arbitration decision reached will violate state law and city code,” and the council members have asked Scott to recuse himself.

At the May 4 City Council meeting, the council majority passed a resolution that prohibits Benson from going forward with arbitration.

However, Pepper also made it clear that the council majority’s legal counsel for arbitration (Jane Koler of Land Use & Property Law, paid for by the city) will still move forward with asking the arbitrator for a deadline extension on a reply brief.

The arbitrator granted Koler the extension, and her reply brief to the arbitration was due Monday, May 8.

Koler could not be reached to confirm that her reply brief was filed.

After the May 4 meeting, Linehan said Benson will continue to move forward with arbitration until he can get clarification about the resolution.

Linehan said because of the extension, Oakpointe’s and Black Diamond’s final briefs are due Friday, May 12, and a decision on arbitration should be made between then and June 1.

Oakpointe representatives declined to comment on why they chose to move forward with arbitration, as opposed to filing a lawsuit, even though their legal counsel has made it clear over the past year that any breach of the Development or Funding agreements would be brought to court.

EVENTS UP TO NOW

A long string of events surrounding MDRT consultants and payment of their bills is what brought the city to this point.

According to Oakpointe, after the development and funding agreements were signed in 2011, four consultants were hired to consult the MDRT: Two branches of Paramatrix, one for surveying services and another for traffic engineering services, RH2 Engineering for civil engineering services, and Perteet for wetland and environmental services.

These five contracts were set to expire in fall 2016, and open-ended contracts were submitted to the City Council to approve in fall of that year, in order for the consultants to continue their work on the MDRT.

Council members Pepper, Morgan and Weber instead directed the city to conduct a Request for Qualifications (RFQ) to search for any other consultants that may be better suited to do the MDRT work.

The council majority also passed 45-day contract extensions, which were denied by Benson.

According to Oakpointe, two RFQs drew no responses other than the existing consultants.

Two other RFQs received new responses, “but these responses were considered unsatisfactory because the applicants had never worked on a complex master planned development before,” Oakpointe’s brief reads.

Due to this, the five original consultants’ contracts were brought back to council in January 2017, and were set to expire in two years “to address the Council majority’s concerns regarding the previously submitted opened-ended contracts,” Oakpointe’s brief continues.

These contracts were not approved by the council majority, and Pepper again submitted on March 2, 2017 re-worked contracts that were limited to 45 days, as well as other changes, and moved to re-advertise RFQs for the MDRT.

Andy Williamson, the city’s MDRT and Economic Director, told Pepper and the council majority that the consultants had not agreed to work under a 45-day extension (they had agreed to open-ended and two-year contracts) and that it was likely the RFQ process would take longer than the 45 days the consultants would be allowed to work.

The council approved these revised contracts 3-2, with the council minority voting against the contracts.

While these contracts were being debated in council between the fall 2016 and March 2017, Benson has used her executive powers to unilaterally pay multiple $15,000 contracts with the five consultants to keep them working on the development.

Benson’s use of “serial contracting” has been a hot topic in council, as Pepper, Morgan and Weber have alleged on multiple occasions that serial contracting is an illegal way to get around council approval for long-term contracts.

Benson has also been signing multiple contracts with city attorney David Linehan in the same fashion for close to a year, with the council majority making it clear on many occasions they have not agreed to a contract with Linehan and do not consider him their legal counsel.

QUESTIONS TO BE ANSWERED

Oakpointe's opening arbitration letter by Ray Still on Scribd

Oakpointe is asking Scott to arbitrate two questions that go to the heart of this development dispute.

The first is, “Does the Mayor have the obligation and authority to execute long-term consultant contracts, and to assure payment of consultants, so as to maintain a functioning MDRT?” reads Oakpointe’s brief.

The second is, “Does the City Council have a role in reviewing and selecting the MDRT consultants, or to participate in the MDRT process?”

The developer argues that Benson has the power to execute long-term consultant contracts and the City Council has little to no role in the MDRT makeup or process.

According to Section 3(a) of the Funding Agreement, the MDRT was initially formed by various city staff members plus “necessary consultants as determined in the City’s sole, reasonable discretion after consultation with the developer…. The MDRT composition may be modified by mutual agreement of the parties.”

Because Black Diamond approved of the MDRT when it was initially formed in 2011, both the city and Oakpointe must agree to change the MDRT, Oakpointe alleges.

However, since the council majority has sent out multiple RFQs and refused to sign contracts that neither Oakpointe or the consultants have agreed to, the City Council is in “an anticipatory breach of the Funding Agreement” because the city has not maintained an “efficient and functioning MDRT,” Oakpointe’s brief reads.

Oakpointe also argues that Benson has been signing serial contracts of $15,000 with the MDRT in an attempt to “ensure that the city honors its contractual obligations,” as per her responsibility as mayor.

“While this has, to date, maintained a marginally functioning MDRT, the nature of the MDRT consultant’s work is not amendable to small contracts,” Oakpointe’s brief reads. “When only $15,000 contracts are signed, the result is either MDRT consultants continue forward with work they do not yet have a signed contract to perform, or delayed work when consultant staff pick up and put down the same task each time they bump up against the $15,000 limit and wait for a new contract to be entered.”

IMPROPER ARBITRATION?

Black Diamond Council Arbitration Objection by Ray Still on Scribd

Pepper, Morgan and Weber’s brief focuses on the alleged illegality of the arbitration as well as refuting Oakpointe’s arguments.

According to the council majority, the development and funding agreements do not alter Benson’s executive or the City Council’s legislative powers.

As such, city code and state law “clearly confers on the City Council exclusive, mandatory authority to ‘determine disputes or questions relating to the respective powers or duties of officers,’” their brief reads, quoting Black Diamond Municipal Code 2.08.040 and citing RCW 35A.11.010 and 35A.11.020.

“The mayor and her attorney were without authority to engage an arbitrator to resolve this dispute. The mayor illegally attempts to seize this authority from the City Council and give it to the arbitrator without the slightest legislative authorization,” the brief continues.

Additionally, the arbitration was signed outside a public meeting, and “Washington law demands that contracts binding a city must be approved in an open public meeting.”

As to the questions concerning the Development and Funding agreements, Pepper, Morgan and Weber argue these documents do not give Oakpointe authority to dictate the consultants comprising the MDRT.

Instead, the agreements give the city full discretion to hire consultants, since “‘the parties acknowledge that the city will solely determine the method and manner of hiring and retaining the city staff positions identified on Exhibit C or through the Annual Review,’” their brief continues, quoting Section 2 of the Funding Agreement.

Exhibit C is a list of city staff positions and designations for the MDRT. The list does not include MDRT consultants, as they are not city staff positions.

Additionally, the council majority argues that Oakpointe’s argument that the MDRT can only be changed by mutual agreement is erroneous.

“Were Oakpointe’s argument correct, the Funding Agreement or a supplemental agreement would have specified the names of the staff members and consultants who were to perform city staff review functions for the duration of the development,” the brief reads.

Finally, Pepper, Morgan and Weber allege Oakpointe has failed to provide any evidence of viable claims against the city in the developer’s arbitration brief, as “there is neither a provision in the Funding Agreement nor the Development Agreement that gives Oakpointe the right to dictate the duration of consultant contracts nor to demand that the city renew contracts with specific consultants.”

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