REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Delegation of Authority to Executive Director and Stadium Authority Counsel to Negotiate and Execute Allocation Agreement with Various 49ers Entities and Insurance Carriers Relating to Proceeds from Their Settlement with Howard Needles Tammen & Bergendoff
Report
COUNCIL PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium; Enhance Community Engagement and Transparency
BACKGROUND
In 2016, a class action lawsuit was filed by Plaintiffs Priscilla and Abdul Nevarez against the City, Stadium Authority and various 49ers entities (including the Management Company and the Stadium Company) alleging that the Stadium, its parking lots, and the surrounding public rights of way contained ADA accessibility defects. The case was settled in 2019 for approximately $38.5 million, which was comprised of approximately $25 million damages to the members of the class, plus approximately $13.5 million in attorney’s fees paid to the plaintiffs’ law firms. This settlement was funded in full by the 49ers and three insurance carriers (Indian Harbor Insurance Company, North American Capacity Insurance Company, and Starr Indemnity and Liability Company). In addition, they paid for the costs and attorney’s fees associated with defending the City, Stadium Authority and 49ers defendants in the litigation. The City and Stadium Authority were not required to contribute financially to this settlement. This settlement figure does not include the costs of doing the remedial construction work at the stadium site and in the surrounding areas.
DISCUSSION
The 49ers and the three insurance companies thereafter pursued financial contribution from the architecture firm that designed the Stadium, Howard Needles Tammen & Bergendoff (“HNTB”) on the grounds that defects in the design work led to the ADA violations and subsequent liability to the plaintiffs. One aspect of the handling of the case against HNTB is a determination of how any proceeds from the eventual resolution of the HNTB litigation will be split amongst the parties who contributed to the Nevarez settlement (the 49ers and the insurance carriers). The split of such settlement proceeds shall be memorialized in an Allocation Agreement signed by the insured parties and the insurance carriers. The Stadium Authority has not been involved in this litigation, staff therefore has no details regarding the terms of the proposed settlement between the 49ers, the insurance carriers, and HNTB.
While the Stadium Authority did not financially contribute to the Nevarez settlement, and therefore did not participate in pursuing reimbursement from HNTB, the Stadium Authority is an insured party under the policies at issue (i.e., the policies under which the settlement payments and defense costs were paid). Accordingly, the insurance carriers have asked that the Stadium Authority ratify an allocation of percentage of recovery as between the 49ers and the three insurance carriers. The Stadium Authority has no financial stake in this allocation agreement, but should as an insured party, cooperate with its carrier(s) in resolving the dispute.
An additional benefit to the Stadium Authority of the resolution of this HNTB matter is that it forecloses potential future litigation over the payment of plaintiffs’ attorneys fees as well as defense costs and fees incurred in defending against the allegations relating to the defects in the public rights of way (“prow”). This prow issue was litigated along with the rest of the ADA violations by the Nevarez plaintiffs, but these defects in the prow were not caused by faulty architecture or construction of the stadium structure. Upon conclusion of the Nevarez litigation, the question of whether or not the City and Stadium Authority would have to contribute financially towards the plaintiffs’ fees and costs that dealt solely with the prow defects, and/or the costs of defense relating to same, was reserved until such time as the HNTB litigation was favorably concluded. It appears that a favorable conclusion is imminent; the insurance carriers would release the Stadium Authority from any claims related to the Nevarez case and the 49ers entities likewise would agree to waive any such claims for reimbursement.
Allocation of the costs of remediation within the Stadium structure and the Main Lot as between the 49ers entities and Stadium Authority (and likely some contribution from the design-builder Turner Devcon Joint Venture, and their subcontractors) is not affected by the allocation of the HNTB settlement proceeds. That issue remains outstanding.
Because the City and Stadium Authority are not part of the existing litigation and do not anticipate any litigation, there are no closed session exceptions for consideration of this item. The Executive Director and Stadium Authority Counsel seek authority to negotiate and execute an Allocation Agreement that would include the following parties: Forty Niners Football Company LLC, Forty Niners Stadium Management Company LLC, Forty Niners SC Stadium Company LLC, Forty Niners Stadium LLC, Indian Harbor Insurance Company, North American Capacity Insurance Company, and Starr Indemnity & Liability Company. Such terms will consist of ratifying an allocation of percentage of recovery from HNTB as between the 49ers and the three insurance carriers and insurance carriers’ release of the Stadium Authority from any claims related to the Nevarez case and waiver of any such claims for reimbursement against the Stadium Authority from the 49ers entities.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
There is no fiscal impact other than staff time.
COORDINATION
This report has been coordinated between the Stadium Authority Counsel’s Office and the Executive Director’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Approve delegation of authority to the Executive Director and Stadium Authority Counsel to negotiate and execute an Allocation Agreement regarding proceeds from a settlement with HNTB that would include the following parties: Forty Niners Football Company LLC, Forty Niners Stadium Management Company LLC, Forty Niners SC Stadium Company LLC, Forty Niners Stadium LLC, Indian Harbor Insurance Company, North American Capacity Insurance Company, and Starr Indemnity & Liability Company.
Staff
Reviewed by: Steve Ngo, Interim Stadium Authority Counsel
Approved by: Rajeev Batra, Executive Director