Court Opinion

ID: 4193504
Source: CourtListenerOpinion
Date Created: 2017-08-04 20:01:33.07812+00
Date Added: 2024-06-11T07:47:26.797037
License: Public Domain

NOT FOR PUBLICATION                           FILED
                       UNITED STATES COURT OF APPEALS                     AUG 4 2017
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

GUIDIVILLE RANCHERIA OF                         No.    15-15221
CALIFORNIA,
                                                D.C. No. 4:12-cv-01326-YGR
                Plaintiff-Appellant,

UPSTREAM POINT MOLATE, LLC,                     MEMORANDUM

      Plaintiff-Counter-
      Defendant-Appellant,

 v.

UNITED STATES OF AMERICA; RYAN
ZINKE, Secretary of the Interior;
MICHAEL S. BLACK, Acting Assistant
Secretary - Indian Affairs,

                Defendants,

and

CITY OF RICHMOND,

      Defendant-Counter Claimant-
      Appellee.

      
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
GUIDIVILLE RANCHERIA OF                        No.   15-17069
CALIFORNIA,
                                               D.C. No. 4:12-cv-01326-YGR
               Plaintiff-Appellant,

and

UPSTREAM POINT MOLATE, LLC,

      Plaintiff-Counter Defendant,

 v.

UNITED STATES OF AMERICA; RYAN
ZINKE, Secretary of the Interior;
MICHAEL S. BLACK, Acting Assistant
Secretary - Indian Affairs,

               Defendants,

and

CITY OF RICHMOND,

      Defendant-Counter Claimant-
      Appellee.

                    Appeal from the United States District Court
                       for the Northern District of California
                  Yvonne Gonzalez Rogers, District Judge, Presiding

                       Argued and Submitted February 14, 2017
                              San Francisco, California

                                           2
      Before: GOULD and BERZON, Circuit Judges, and GARBIS,** District
Judge.

      This appeal presents a dispute between the City of Richmond, California

(“the City”), a developer, Upstream Point Molate, LLC (“Upstream”), the

Guidiville Band of Pomo Indians (“the Tribe”), and the United States1 in

connection with a proposed development project for Point Molate, the site of a

decommissioned United States Navy fuel depot located on the coast of the City.

      Upstream and the Tribe have sued the City for breach of the Land

Disposition Agreement (“LDA”) between Upstream and the City, as well as for

breach of the implied covenant of good faith and fair dealing. The district court

granted the City’s Motion for Judgment on the Pleadings and dismissed the breach

of contract and bad-faith claims, denied Appellants leave to amend, and awarded

the City legal fees from the Tribe and Upstream. The district court then entered an

      **
          The Honorable Marvin J. Garbis, United States District Judge for the
District of Maryland, sitting by designation.
      1
        The Tribe also asserts federal claims against the United States pertaining to
the denial of approval of federal gaming authorization under the Indian Gaming
Regulatory Act, 25 U.S.C. §§ 2701 et seq. The district court has stayed
proceedings regarding the Tribe’s claim against the United States pending
resolution of the instant appeal.

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amended judgment, finding no just reason for delay pursuant to Federal Rules of

Civil Procedure 54(b). We have jurisdiction under 28 U.S.C. § 1291.

      As discussed herein, we affirm the dismissal of certain of Appellants’

claims, reverse the dismissal of certain of Appellants’ claims, and remand for

further proceedings.

      1. Breach of Implied Covenant of Good Faith and Fair Dealing. The

district court erred in concluding that Appellants failed to plead a plausible claim

of breach of the implied covenant of good faith and fair dealing.

      “Every contract imposes upon each party a duty of good faith and fair

dealing in its performance and its enforcement.” Carma Developers (Cal.), Inc. v.

Marathon Dev. California, Inc., 826 P.2d 710, 726 (Cal. 1992) (quoting

Restatement (Second) of Contracts § 205). “In the case of a discretionary power, it

has been suggested the covenant requires the party holding such power to exercise

it ‘for any purpose within the reasonable contemplation of the parties at the time of

formation — to capture opportunities that were preserved upon entering the

contract, interpreted objectively.’” Id. at 727 (quoting Steven J. Burton, Breach of

Contract and the Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev.

369, 373 (1980)).

                                               4
      The Third Amended Complaint (“TAC”) contains plausible allegations that

the City violated the implied covenant of good faith and fair dealing by interfering

with Appellants’ ability to obtain federal approval for the casino, thereby

preventing Appellants from satisfying a condition precedent of the LDA.

      The TAC alleges that, beginning in 2009, the City, through Mayor Gayle

McLaughlin, contacted the Bureau of Indian Affairs, Contra Costa County, and

various public officials including the Governor of the State of California and

United States Senator Dianne Feinstein, to encourage them to deny, delay, or

otherwise oppose the Tribe’s quest to obtain the necessary federal and state

approvals for gaming. Appellants allege that this pressure delayed the federal

approval process — a condition precedent of the LDA — sufficiently that the City

abandoned the project in April 2011 in part because “[w]ithout these Federal

approvals, a casino use at Point Molate is not legally permitted.” Resolution No.

23-11 ¶ 5. Appellants further allege that the City’s pressure ultimately led the

Department of the Interior (“DOI”) to determine in September 2011 that the Point

Molate property was not eligible for gaming.

       On April 5, 2011, the City issued Resolution 23-11, determining that a

casino use was not allowed at Point Molate. In Resolution 23-11, the City cited the

federal government’s delay in granting the approvals and the opposition of other

                                               5
government officials as reasons for its denial. Appellants contend that the City

acted in bad faith, as the delay in approvals and the opposition of federal officials

were induced by the City’s own covert lobbying.

      Under the “doctrine of prevention,” if a contracting party interferes with the

performance of a condition precedent in a way that the parties did not reasonably

contemplate, then the interference is a breach of the implied covenant of good faith

and fair dealing, and the interfering party “cannot in any way take advantage of

that failure [of the condition precedent].” 13 Williston on Contracts § 39:3 (4th

ed.); see also City of Hollister v. Monterey Ins. Co., 81 Cal. Rptr. 3d 72, 100 (Cal.

Ct. App. 2008), as modified on denial of reh’g (Aug. 28, 2008). “The implied

covenant of good faith and fair dealing requires a promisor to reasonably facilitate

the occurrence of a condition precedent by . . . refraining from conduct which

would prevent or hinder the occurrence of the condition . . . .” Westerbeke Corp. v.

Daihatsu Motor Co., 304 F.3d 200, 212 (2d Cir. 2002) (quoting Cauff, Lippman &

Co. v. Apogee Fin. Group, Inc., 807 F. Supp. 1007, 1022 (S.D.N.Y. 1992)).

      Appellants allege in the TAC that the parties to the LDA did not contemplate

that the City would directly attempt to oppose or interfere with the Tribe’s gaming

application and Request for a Land Determination. Whether the City is liable for

the Mayor’s actions depends on whether she acted in her official capacity, which is

                                               6
ordinarily a question of fact better resolved after discovery and not through a

Motion for Judgment on the Pleadings. See Farmers Ins. Grp. v. Cty. of Santa

Clara, 906 P.2d 440, 458–59 (Cal. 1995).

      The TAC contains some of the alleged interfering communications from

Mayor McLaughlin wherein she identifies herself as the Mayor acting on behalf of

the City of Richmond. These allegations present an issue of fact concerning

whether the Mayor was acting in her official capacity and are sufficient to plead a

plausible claim of breach of the implied covenant of good faith attributable to the

City. See Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes,

120 Cal. Rptr. 3d 797, 803 (Cal. Ct. App. 2010) (“The Developer established a

breach attributable to the Town by evidence of the actions of town officials, acting

within their authority.”). Therefore, the City is not entitled to judgment on the

pleadings on the theory that it is not responsible for the actions of the Mayor.

      We also disagree with the district court’s conclusion that the waiver

provision in the Sixth Amendment to the LDA precluded a claim based on the

Mayor’s actions. That Amendment, executed May 18, 2010, states,

      “[N]o event of default under the LDA exists as of [May 18, 2010],
      and that no event has occurred which, with the passage of time or the
      giving of notice, or both, would constitute an event of default.”

Sixth Amendment to the LDA, § 5.

                                               7
      However, to the extent that there may have been a waiver of default claims,

the waiver would not apply to the alleged actions causing defaults after May 18,

2010. At least two of the Mayor’s allegedly improper actions, as well as the City’s

disapproval of the casino project, occurred after May 18, 2010.2 Therefore, the

City is not entitled to judgment on the pleadings by virtue of the waiver provision

in the Sixth Amendment.

      We therefore conclude that the TAC states a plausible claim that, by

preventing the occurrence of the condition precedent and relying partially on the

non-occurrence to deny the casino project and avoid carrying out the purpose of

the LDA, the City breached the implied covenant of good faith and fair dealing

when it promulgated Resolution 23-11 and discontinued consideration of a casino

use for Point Molate.

      2
        Specifically, these included a June 1, 2010 letter to several U.S. Senators
lobbying them to deny the Tribe’s application, and an August 15, 2010 speech at a
conference of the United States Representatives regarding Indian Gaming, where
Appellants allege that “Mayor McLaughlin in her official capacity of Mayor,
expressly advanced the City’s position the Tribe’s Land Determination Request
should be denied . . . .” TAC ¶¶ 63-64.

                                              8
      2. Breach of Express Terms of Contract. Appellants also claim that the

City breached the express terms of § 2.8 of the LDA,3 which states:

      If it is determined that the development of Indian gaming uses on the
      Property is not commercially feasible or not legally permitted, the
      Developer may purchase and lease the Property without any
      involvement by any Native American tribe, and, prior to the Closing
      Date, the Developer and the City shall negotiate exclusively in good
      faith for a period not to exceed one hundred twenty (120) days with
      respect to an alternative development proposal.

LDA § 2.8 (emphasis added).
      We agree with the district court that the TAC’s allegations regarding breach

of express terms of contract were conclusory and unsupported by any specific

allegations. Appellants, however, should have been permitted to augment these

allegations in a Fourth Amended Complaint.

      3. Leave to Amend. The district court abused its discretion in denying

Appellants’ motion for leave to file the Proposed Fourth Amended Complaint

(“FAC”). In the Proposed FAC, Appellants added non-conclusory, factual

allegations regarding the 120-day negotiation period. Appellants’ new allegations

      3
        Appellants also contend that the City violated the Sixth Amendment to the
LDA by failing to give “equal consideration to each project alternative identified in
the [Final Environmental Impact Report].” Sixth Amendment to the LDA, § 3(c).
Since Appellants did not raise this issue in the district court or in the TAC, it will
not herein be considered.

                                              9
plausibly state that the City was merely going through the motions of negotiating.

The Proposed FAC states that City representatives would come to negotiation

meetings only “to listen,” that the City repeatedly failed to respond to Upstream’s

substantive questions concerning the City’s goals or preferences for the project,

and that during the negotiation period the City filed a lawsuit against Upstream

seeking declaratory relief that it had no further obligations under the LDA,

including Section 2.8.4 FAC ¶¶ 89–90, 94–95, 98, 106–07.

       While the City was contractually free to reject Upstream’s proposal, the

City’s mere attendance at meetings and correspondence with Upstream is not per

se good faith negotiation. See Placentia Fire Fighters v. City of Placentia, 129
Cal. Rptr. 126, 136 (Cal. Ct. App. 1976) (“Consequently, to sit at a bargaining

table, or to sit almost forever, or to make concessions here and there, could be the

very means by which to conceal a purposeful strategy to make bargaining futile or

fail.”).

       4
             Upstream also alleges that, unlike past negotiations over LDA
amendments, the City’s attorneys attended the meetings instead of the City Council
members, and that in every other project considered by the City during the same
time period, the City issued a Statement of Overriding Consideration or Mitigated
Negative Declaration to approve the project despite findings of adverse negative
impacts. FAC ¶¶ 115, 120.

                                              10
      When taken in a light most favorable to Appellants, the TAC plausibly

alleges that the City did not negotiate in good faith. Accordingly, the Order

Denying Leave to Amend is reversed, and Upstream may file the Proposed FAC.

      4. Attorneys’ Fees. In light of the reversal of the district court’s dismissal,

the district court’s order on attorneys’ fees is vacated. However, we conclude that

the district court correctly determined that the Tribe waived its sovereign immunity

and would not be exempt from a future attorneys’ fees award.

      The Tribe asked, as part of its requested relief, that the district court grant

“[a]n award of damages against the City of Richmond for . . . cost of suit,

including reasonable attorneys[’] fees and costs as permitted by law.” TAC at 38.

Thus, attorneys’ fees was one of the issues that the Tribe expressly requested the

district court to resolve and put under its jurisdiction. Cf. Rupp v. Omaha Indian

Tribe, 45 F.3d 1241, 1245 (8th Cir. 1995) (finding that the Tribe had waived

sovereign immunity as to counterclaims when it “affirmatively requested the

district court to resolve the ownership of the disputed land by asking the

defendants to assert any [claims] they may have in the disputed lands”).

      Once the Tribe consented to federal court jurisdiction over the attorneys’

fees issue, it was bound by the district court’s determination under California law,

which applies to the Tribe as it would to any other third-party beneficiary. See Cal.

                                               11
Civ. Code, § 1717; Real Prop. Servs. Corp. v. City of Pasadena, 30 Cal. Rptr. 2d
536, 541 (Cal. Ct. App. 1994).

      For the foregoing reasons:

       1. We reverse the district court’s grant of the Motion for Judgment on the
          Pleadings and remand the case for further proceedings regarding
          whether the City violated the LDA by interfering with the Tribe’s ability
          to fulfill a condition precedent.
       2. We affirm the district court’s dismissal of the express breach of contract
          claims.
       3. We reverse the district court’s order denying leave to amend the
          Proposed Fourth Amended Complaint. Appellants may file the
          Proposed Fourth Amended Complaint.
       4. The district court’s amended judgment is vacated and the case is
          remanded for further proceedings consistent herewith, including
          consideration of a legal fee award against the Tribe.

      The parties shall bear their own costs on appeal.

      AFFIRMED in part, REVERSED in part, and REMANDED.

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