Bank of New York Mellon v. City of Richmond, California et al

Filing 60

Declaration of Brian D. Hershman in Support of 59 Opposition/Response to Motion, for Rule 11 Sanctions filed byU.S. Bank National Association. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G)(Related document(s) 59 ) (Hershman, Brian) (Filed on 11/22/2013)

Exhibit A

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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BEFORE THE HONORABLE RICHARD SEEBORG, JUDGE

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BANK OF NEW YORK MELLON,
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as Trustee, et al.,
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Plaintiff,
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v.
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City of Richmond, California,
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et al.,
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Defendant.
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)
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C 13-3664 CRB

San Francisco, California
Friday, November 1, 2013
(30 pages)

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TRANSCRIPT OF PROCEEDINGS
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APPEARANCES:
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For Plaintiffs:
(BNY)

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BY:
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For Plaintiffs:
(U.S. Bank)

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BY:

Mayer Brown LLP
Two Palo Alto Square
Suite 300
3000 El Camino Real
Palo Alto, California 94306
DONALD M. FALK
BRONWYN FITZGERALD POLLOCK
Jones Day
555 South FLower Street
50th Floor
Los Angeles, California 90071
BRIAN D. HERSHMAN
MATTHEW ALEX MARTEL

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For Plaintiffs:
(Wilmington)

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BY:
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Alston & Bird, LLP
333 South Hope Street
16th Floor
Los Angeles, California 90071
MICHAEL E. JOHNSON
WHITNEY CHELGREN

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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APPEARANCES (cont.):

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For Defendants:

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BY:

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Altshuler, Berzon, LLP
177 Post Street
Suite 300
San Francisco, California 94108
STEPHEN P. BERZON
SCOTT ALAN KRONLAND
STACEY M. LEYTON
ERIC PRINCE BROWN

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For Defendants:

BY:

City of Richmond
City Attorney's Office
Post Office Box 4046
Richmond, California 94804
CARLOS AUGUSTO PRIVAT

BY:

Law Offices of William A. Falik
100 Tunnel Road
Berkeley, California 94705
WILLIAM A. FALIK

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For Defendants:
(MRP)

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Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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quite concrete.

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They have done something that is different -- that is

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different from the sort of eminent domain case where someone

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comes in and says, The city has this plan and it's going to

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involve taking our property, and we want to enjoin it.

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want some other kind of relief.

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there's no threat of a suit out here.

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Or, We

And courts will say, Well,

But here there is threat of a suit.

It's really no

different from, in our view, it's no different from a patent

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suit where someone comes in and they say, They've sent us this

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letter that suggests we infringe; we need to know what our

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rights are.

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your Honor, this isn't ripe; we haven't authorized a lawsuit

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yet --

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If the patentee came in and said, Wait a minute,

THE COURT:

Do you have any sense of how many cases

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would be in litigation if I had to monitor every single idea,

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no matter how absurd that idea may be, as presented by a

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legislator to the legislative body?

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Supervisor X, Councilman Y, Member of a Board of the Permanent

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Appeals of B thinks, I think it's a great idea to take over,

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do everything by eminent domain; I think we should just rule

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by eminent domain -- some idea like that -- and proposes some

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legislation to do that, which includes within it that, by the

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way, the eminent domain proceedings will be the ones that will

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be followed in the constitution or the charter or whatever it

In other words,

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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is.

And then in comes a party saying, This piece of

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legislation is so clearly unconstitutional, and so

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threatening, that you ought to jump in, Judge, and do

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something about it.

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filled with lawsuits involving prospective legislation.

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ought to see what the Congress of the United States does.

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ought to see what the Board of Supervisors does.

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talking about San Francisco -- and talk about Sacramento.

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can talk about anything.

Well, our courts -- our courts would be
You
You

And I'm just
You

Any legislator had -- has the right

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to introduce any kind of bill that legislator thinks is a good

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idea.

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recourse to the courts.

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beginning of this process, we could fill the docket from

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morning to night, seven days a week.

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declared to be essential employees, so we'd get to stay open

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all the time =just to deal with prospective litigation.

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And that bill may or may not include within it some

So -- I'm sorry.

And if courts have to jump in at the

We might even be

I mean, I've got to tell you, I have

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actually thought about your argument, and it just to me, seems

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that that's exactly why you have a ripeness doctrine.

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why.

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do with a patent litigation, where one party can do something

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and one party is threatening something, and I understand

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that's -- that is arguably, you know, something that a court

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might want to intervene in, and declaratory relief is

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always -- is so prospective anyway by its nature, by its

Exactly

And while you can cabin together a set of facts like you

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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nature, but that doesn't mean that all declaratory relief is

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the same thing.

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And what I've tried to say is, when you involve the

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legislative process, it becomes a different animal.

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there are any number of things which are uncertain about the

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legislative process that are not necessarily uncertain about

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the -- what I call the private party process.

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implications are quite different.

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Because

And the

I don't for a moment quarrel with your factual scenario

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that letters have been sent out and that people are concerned

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about their homes and the lenders are concerned about the

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integrity of their loans, which have been collateralized or

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sold or whatever happens to these things.

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there is uncertainty.

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that's a correct representation.

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certain amount of uncertainty about it, but that doesn't mean

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this, given the scenario, given the requirements, that the

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Court, at this juncture, jumps in.

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MR. FALK:

I'm certain that

I'll grant you that.

I'm certain

There is -- there may be a

Your Honor, I think there are distinctions

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here.

You do have a threat to sue.

You have a threat to sue

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that was authorized as part of the -- that was essentially

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authorized when they agreed to turn things over to MRP and

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work with MRP to carry out this plan.

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were not only authorized, but they were confirmed.

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same people that would have to vote to sue in order to go

Those threats to sue

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

The very

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forward with the program voted not to take those letters off

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the table.

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this would be a very different case.

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distinguishing characteristic, and it's a very important

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distinguishing characteristic.

Which would, of course -- without that threat,
But that is a

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The other thing is that they -- the city and MRP have

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tried to make this all about some challenge to a legislative

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act, the resolution of necessity.

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here is the power to carry out their threat of litigation.

What we're talking about
In

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the Santa Cruz case that they cite, talking about resolution

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of necessity, it differentiates between a challenge to the

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resolution of necessity, which has lots of problems if you're

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trying to enjoin one of those, and a challenge to the power to

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take.

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property, they can pass anything they want.

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to say that -- they can pass, you know, they can pass any

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ordinance they want.

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unconstitutional.

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on some legislation.

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ruling on, and what is fully concrete, is the

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unconstitutionality and unlawfulness of the threat, threatened

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litigation that they are using right now to try to get, to the

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extent that our trustees and the other trustees can come to

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the table, which is limited, but to the extent that they can,

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they're using this threat of litigation coercively, and that

And the power to take, the power to go in and take our
We're not trying

It may be constitutional,

We're not trying to get an advance ruling
What we're trying to get an advance

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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is the, at least on some of these claims, there is nothing

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that the resolution of necessity is going to tell us about the

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situs of these loans that isn't fully concrete now.

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as ripe as it's going to be.

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We think the same applies to the purpose aspect.

That is

They can

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say whatever they want but there's plenty of context here and

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plenty of record that would -- that makes clear that the

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essential elements that would make the -- this a matter of

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private use rather than public use, the fact that it's

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essentially dividing up the banks' property and giving it --

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dividing it between MRP and some Richmond @ voters, that is

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not going to change.

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change what they say, but that issue isn't going to change.

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They may change some things, they can

The situs, though, is very, very clear, and that just

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can't change.

And that, in light of this threat of litigation

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which could be determined and could be nipped in the bud, as

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in our view it should be, is completely ripe.

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threatened litigation, this would be a very different case.

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But they have, and they've refused to withdraw that threat.

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MR. KRONLAND:

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THE COURT:

If they hadn't

Scott Kronland for the defendants.

So that's the issue.

It's different.

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You have your letters out there.

You're threatening

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litigation that's very real, and therefore they should be able

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to argue for declaratory relief because of that distinction.

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How that distinguishes it from the other proceedings we've
Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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had, I'm not sure it distinguishes -- it may be now there's a

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different argument that's being advanced -- I'm not sure that

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argument couldn't have been advanced the last time around, but

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it wasn't.

Not to the extent that they've advanced it anyway.

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MR. FALK:

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THE COURT:

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New argument.

We weren't here, your Honor.
They weren't here.

There we go.

MR. KRONLAND:

New day.

New lawyer.

Okay.

Putting aside the other case, which

didn't involve declaratory relief claims and involved the same

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letters, I think your Honor's right, that the issue here is

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that legislative action is different.

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threat depends upon legislative action, before it could be

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carried out, you don't have a ripe case.

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you don't do something, I'm going to go to Congress and I'm

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going to ask them to pass a law, the issue whether the law

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would be constitutional or not is not ripe.

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When the supposed

If someone says, If

And here, it's not the threat of litigation.

In order to

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exercise eminent domain power, under California law, you'd

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have to adopt a resolution of necessity, which is a

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legislative act.

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you'd have to have a noticed public hearing, the purpose of

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which is to provide information about whether you should adopt

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a resolution of necessity.

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resolution of necessity; there's been no hearing about whether

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to adopt a resolution of necessity; there's been no notice of

Before you can do that under California law,

And here, there's been no

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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the setting of such a hearing.

So it's entirely speculative

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in the meaning of Article III as to whether any injury would

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ever occur.

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legislative action, as opposed to, you know, private party

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patent threat, there's not a single case that they have cited

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or we can find in which a federal court has ever adjudicated

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whether legislative action would be valid if it were adopted.

And when the speculation is because of

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And in the New Orleans case, which is 100 percent directly

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on point, in which someone came to the Supreme Court and said,

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A city council is going to adopt an ordinance, I know it's

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going to happen, it's going to be blatantly unconstitutional,

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they've done it before, the Supreme Court dismissed the case

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for lack of jurisdiction.

Said the Court shouldn't interfere

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by any order, in any mode.

And they said, when it would be

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ripe, the quote was, When the city council shall pass an

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ordinance that violates the plaintiff's rights, they can come

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to federal court.

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to the contrary that allows declaratory relief in advance of

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the formal legislative action that would allegedly violate the

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plaintiff's rights.

And until -- since then, not a single case

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So I don't think that there could be a clearer case of

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lack of standing and ripeness than one in which the harm could

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only occur if the legislature does something that it hasn't

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done.

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THE COURT:

Well, I think counsel's argument, as I

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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understand it, is -- you're both right and wrong.

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say, Of course, we're very concerned about the ultimate harm

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that would occur if these proceedings proceeded.

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fact, if eminent domain proceeded.

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terrible.

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doesn't mean that because the horrible thing has yet to occur,

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that something harmful is not occurring right now.

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saying that -- as I understand it -- he's saying, The very --

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the fact is that the city has notified, as I understand it,

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notified individuals or homeowners that their house may be

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subject to these proceedings -- is that correct?

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seen the letter; I don't know what's actually gone out.
MR. FALK:

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That is, in

Yes, that would be

That would be very harmful.

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He would

But he says, But that

And he's

I haven't

that they propose to take.

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THE COURT:

Notified the trustees of all the loans

And that's the harm -- and that's a harm

in and of itself that makes it ripe for determination.
MR. FALK:

Notification with the threat of

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litigation.

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property all the time without threats of litigation.

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things go wrong --

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I mean, the city's engaged in negotiations over

THE COURT:

And when

Your cue card is coming up (referring to

Mr. Johnson).
MR. FALK:

Right.

As my co-plaintiff's counsel

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points out, we are being asked to evaluate and accept offers.

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We're talking about something that's very present, and is
Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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backed up by this threat of litigation.

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litigation wasn't there, well then, the issue of the

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constitutionality of their acquisition, extraterritorial

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property, you know, wouldn't be ripe.

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THE COURT:

If the threat of

But the point about the threat of

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litigation, as I understand counsel, is that that doesn't

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become a real threat unless it's authorized by the council.

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That is to say, they have to first have a finding of

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necessity.

And that can't occur before a public hearing.

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we haven't had a public hearing on that.

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the public hearing is to try to convince, one way or the

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other, the council members either to enact the rule of

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necessity or not.

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process.

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And

an idea that is being proposed and considered.

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And the purpose of

And so that's part of the legislative

And until that occurs, it becomes nothing more than

And so that sort of takes me back full circle to where I

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was at the beginning.

There are a lot of ideas out there.

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You may have three votes or four votes for the idea.

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until -- but if the requirement is five votes for the idea,

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then you don't have that yet.

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in because three or four out of seven think it's a great idea,

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we would be tied up -- we could get -- an example would be

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legislation in which there are -- you could get legislation

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with, if you had almost everybody in Congress cosponsoring it

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and authoring it -- and I've seen those things not pass,

But

And if the courts have to weigh

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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interestingly enough.

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then it comes on for a vote, or it never comes up, too

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embarrassing or whatever.

So it doesn't become the law

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because it's not enacted.

It's real in the sense that, Oh,

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all the people that are necessary to vote for it have said

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they're going to vote for it, but they don't.

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vote never takes place.

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Sure, I'll sign on, I'll sign on, and

Because the

So I'm just saying that that's the way the -- that makes
the legislative process so different and so unique.
And there's a whole nother thing that goes on around here

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which is that courts are supposed to give deference to the

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legislative process proceeding the way a legislative process

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is at least intended to proceed, which is public discourse.

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This is not -- what I do is not public discourse.

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court acting, based upon the Court's judgment, as to what

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should be done.

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public, but it's not public discourse.

But it's not public discourse.

It's a

It's done in

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But the legislative process embodies public discourse.

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And for the court to jump in because it is concerned that, if

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enacted, something would cause some unconstitutional harm, or

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concerned that the threat of harm is sufficient to then

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warrant intervention while the discourse is occurring, is very

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unusual.

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your proposition.

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Counsel says there isn't a single case supporting

MR. FALK:

There also isn't a single case supporting

Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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the proposition a palpable threat of litigation is

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insufficient to make a declaratory judgment action ripe.

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issues he's talking about are not the same.

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domain cases say there's been no threat of litigation, where

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in some other piece of the process here -- and this is

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different for that reason, and they have had votes -- granted,

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yes, there's another vote to come, but they've had the vote to

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say go forward.

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stand behind it, by a super-majority.

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different from any of the other cases.

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The

Even the eminent

And yes, what you did, the threat is fine, we
Those are quite

Yes, this is a case that -- I mean, I will be very candid

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with the Court:

This is falling between the pure legislation

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cases and the pure threat of litigation cases.

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this case.

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necessity or an ordinance.

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current present threat of litigation that -- of

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unconstitutional litigation.

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endorsed by the council.

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to bring the action, but this is about as -- this is as

20

imminent as pretty much any other threatened litigation.

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have a record here.

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by Councilman So-and-so.

But it is not an effort to enjoin a resolution of
It is an effort to address a

And the threats have been

Yeah, they have to take another vote

You

It's not like this has just been proposed

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THE COURT:

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MR. KRONLAND:

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No question,

I understand.

We have a record.

I would just comment that what the

letter actually says, which is in the record, is, We'd like to
Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]

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response they offer but maybe they don't have the power to

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take it -- we don't think they have the power to take it.

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They may not have the power to acquire it at all.

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At a minimum, we would ask, if the Court is going to

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dismiss, it be with leave to amend for us to ask for a

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declaration as to situs of the property to see whether the

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offers or the threats --

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THE COURT:

You're talking about the situs of the

property in terms of whether, since it's a mortgage, whether
it follows the debtor?

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MR. FALK:

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THE COURT:

Whether it follows --

Exactly.
By the way, those may or may not be

13

complicated issues, but I don't have to get into any of that

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at this point.

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Okay.

I may never have to get into that.

I think I understand the arguments.

I will take a

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look -- I'll go back, at your suggestion, take a look at

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Exhibit F; take a look at the brochure that is attached.

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MR. KRONLAND:

I have to correct one thing:

The

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statement they didn't have to include the brochure.

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they did.

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possibility eminent domain might be exercised in the future,

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and it's the standard brochure on the League of Cities

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website.

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brochure.

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Actually,

California law requires the brochure when there's a

So actually, they did have to include that, the

MR. FALK:

If they want to threaten action, they did.

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Official Reporter - USDC [phone]

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THE COURT:

Well, if they want to proceed -- okay.

Anyway, thank you very much.

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as soon as I can.

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I will try to get this out

It will certainly be out by next week.

Okay?
Thank you, your Honor.

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MR. FALK:

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MR. KRONLAND:

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MR. JOHNSON:

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THE COURT:

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Thank you.
Thank you.

Thank you, appreciate it.

(Adjourned)
oOo

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CERTIFICATE OF REPORTER

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I, Connie Kuhl, Official Reporter for the United
States Court, Northern District of California, hereby certify
that the foregoing proceedings were reported by me, a
certified shorthand reporter, and were thereafter transcribed
under my direction into written form.

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SS:// Connie Kuhl___________________________

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Connie Kuhl, RMR, CRR
Tuesday, November 5, 2013

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Connie Kuhl, Certified Realtime Reporter
Official Reporter - USDC [phone]