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HomeMy WebLinkAbout2.0_Tennis Clubhouse Grill Appeal_PA2021-210 CITY OF NEWPORT BEACH PLANNING COMMISSION STAFF REPORT April 21, 2022 Agenda Item No. 2 SUBJECT: Tennis Clubhouse Grill Appeal (PA2021-210) ▪ Minor Use Permit No. UP2021-033 SITE LOCATION: 1602 East Coast Highway APPLICANT: Clubhouse ATP LLC OWNER: Golf Realty Fund LP, Robert O’Hill PLANNER: Liz Westmoreland, Associate Planner 949-644-3234, lwestmoreland@newportbeachca.gov PROJECT SUMMARY The applicant requests a minor use permit to operate the existing lounge area in the Tennis Clubhouse (“clubhouse”) building in conjunction with a Type 41 (On-Sale Beer & Wine – Eating Place) Alcoholic Beverage Control (ABC) License. The business will offer packaged food, light meals, and snacks as an accessory concession to the recreational tennis club. The concession space would primarily serve members and guests of the Tennis Club. No construction, late hours (after 11:00 p.m.), live entertainment, or dancing are proposed. Minor Use Permit No. UP2021-033 was previously approved by the Zoning Administrator on December 16, 2021, and has been appealed to the Planning Commission for review. RECOMMENDATION 1) Conduct a public hearing; 2) Find this project exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 under Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment; and 2) Adopt Resolution No. PC2022-006 affirming, in part the decision of the Zoning Administrator and approving with modifications Minor Use Permit No. UP2021-033 with the attached Findings and Conditions (Attachment No. PC 1). 1 INTENTIONALLY BLANK PAGE2 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 2 VICINITY MAP GENERAL PLAN ZONING LOCATION GENERAL PLAN ZONING CURRENT USE ON-SITE MU-H3/PR (Mixed-Use Horizontal 3/ Parks and Recreation) PC47 (Newport Beach Country Club) Newport Beach Tennis Club NORTH PR (Parks and Recreation); RM (Multiple Residential) PC47 (Newport Beach Country Club); RM (Multiple Residential) Newport Beach Country Club (golf course); Granville residential community SOUTH CO-G (General Commercial Office) PC40 Corporate Plaza West Offices EAST RM (Multiple Residential); CO-G (General Commercial Office) RM (Multiple Residential); OG (Office-General) Granville residential community, offices WEST PR (Parks and Recreation) PC47 (Newport Beach Country Club) Newport Beach Country Club 3 INTENTIONALLY BLANK PAGE4 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 3 INTRODUCTION Project Setting The subject property is located between East Coast Highway, Clubhouse Drive, and Granville Drive within the Newport Center area. The site is adjacent to the Newport Beach Country Club, West Corporate Plaza, and the Granville residential community. The clubhouse space is located within the larger Tennis Club complex, towards the back of the complex abutting the pickleball courts, tennis courts and golf course (refer to Figure 1). The existing parking lot at the front of the site serves the clubhouse as well as the other recreational amenities at the property. The clubhouse has an existing kitchen space to serve light meals and snacks. Alcohol service has been provided at the site in the past, dating back to the 1970s. No construction is proposed within the clubhouse at this time. The clubhouse is considered a concession space and is an accessory use or amenity to the Tennis Club operation. Figure 1 – Location Exhibit 5 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 4 Project Description The applicant requests a minor use permit to operate the existing lounge area in the Tennis Clubhouse building in conjunction with a Type 41 (On-Sale Beer & Wine – Eating Place) Alcoholic Beverage Control (ABC) License. The business will offer packaged food, light meals, and snacks. No construction, late hours (after 11:00 p.m.), live entertainment, or dancing are proposed. The concession space would primarily serve members and guests of the Tennis Club. The minor use permit is required to allow the service of alcohol at the existing clubhouse. Background Zoning Administrator Decision and Appeal The Zoning Administrator heard the project at a public hearing on December 16, 2021. At the close of the hearing, the Zoning Administrator approved Resolution No. ZA2021-086 (Attachment No. PC 3). On January 3, 2022, Fainburg III LLC/Mesa Shopping Center-East LLC, and Mira-Mesa Shopping Center-East LLC filed an appeal of the project with the City Clerk’s Office. Newport Beach City Hall was closed to the public during a portion of the appeal period, and therefore extended to January 3, 2022; thus, the appeal is considered timely. The appeal is included as Attachment No. PC 2. The appellant represents the co-owners of the property. Conduct of Hearing Pursuant to Municipal Code Section 20.64.030.C.3 (Conduct of Hearing), a public hearing on an appeal is conducted “de novo,” meaning that it is a new hearing and the prior decision of the Zoning Administrator to approve the project has no force or effect. The Planning Commission is not bound by the Zoning Administrator’s prior decision or limited to the issues raised by the appeal. DISCUSSION General Plan The General Plan designates the site as MU-H3/PR (Mixed-Use Horizontal 3 and Parks and Recreation). The MU-H3 designation applies to properties located in Newport Center. It provides for the horizontal intermixing of regional commercial office, hotel, multi-family residential and ancillary commercial uses. Within the Tennis Club, residential uses may be developed as single-family units. The PR designation applies to land used or proposed for active public or private recreational use. Permitted uses include parks (both active and passive), golf courses, marina support facilities, aquatic facilities, tennis clubs and courts, private recreation, and similar facilities. 6 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 5 The existing tennis clubhouse establishment is located within the Newport Beach Tennis Club complex along East Coast Highway which provides recreational opportunities to members and guests, consistent with the MU-H3/PR land use designation. The proposed Type 41 ABC License would support the existing tennis club complex, an allowed use within the General Plan Land Use Designations. Zoning The site is located in Planned Community PC47 (Newport Beach Country Club) Zoning District, which includes the Golf Club, Tennis Club, Bungalows and Villas facilities totaling approximately 140 acres1. The subject building (tennis clubhouse) is located within the Tennis Club site of PC47, which was intended to provide for recreational uses such as a tennis clubhouse, tennis shop, restroom and locker facilities, spectator seating areas, etc. Concession uses are allowed by right as an ancillary use to the Tennis Club, and the sale and service of alcohol (until 11:00 p.m.) is allowed subject to the approval of a minor use permit. Parking The eating and drinking establishment in the clubhouse will continue to provide a convenience for tennis club members and guests, and the proposed ABC License will not result in increased demand for parking in the existing surface parking lots. The clubhouse and courts are existing and included in the previously established parking assumptions for the property. Coastal Land Use Plan The project site is located within the Coastal Zone in the MU-H/PR Mixed-Use Horizontal/Parks and Recreation Coastal Land Use designation. The proposed project includes the establishment of a new Type 41 ABC License, with no construction or operational changes that would result in an intensification of use. Therefore, the project is exempt from coastal development permit requirements. The clubhouse is an ancillary use to the existing recreational facility and will continue to be consistent with the Coastal Land Use designation. License Type The applicant is requesting an alcohol license to allow for the onsite sale and consumption of alcoholic beverages within the clubhouse space. The clubhouse includes a small kitchen to make light meals and snacks, and the space will continue to serve as a concession that is ancillary to the primary use of the site as a recreational facility. 1 The Bungalows and Villas were entitled in 2012, through a Development Agreement and have not been constructed to date. 7 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 6 The initial minor use permit application included a request for a Type 57 (On-Sale General) ABC License, which would authorize the sale of beer, wine, and distilled spirits (i.e. liquor) to members and guests only, for consumption on the premises. No food service was required under the Type 57 license type. The applicant recently requested a different ABC license type, a Type 41 (On-Sale Beer & Wine – Eating Place), in lieu of the Type 57 license. The business and overall operation of the space has not changed since the project was heard by the Zoning Administrator, and the proposed Type 41 (On-Sale Beer & Wine – Eating Place) license type is more restrictive than the Type 57 in that the service of food is required and this license would not allow the sale or consumption of distilled spirits. The Type 41 license does not restrict the sale and service of alcohol to members and guests only. Staff has included conditions of approval to prohibit signage for the clubhouse from adjacent roadways to reduce the amount of visibility of the clubhouse space. Further, the location of the clubhouse is at least 200 feet from the parking lot and not visible to the public, thus, the tennis clubhouse would remain as an amenity to the recreational users of the club and the number of potential patrons from the public would be very limited. Although the ABC license type changed since the initial application was filed, the proposed operation of the clubhouse space has not been modified from the original intent. Appeal As stated above, on January 3, 2022, Fainburg III LLC/Mesa Shopping Center-East LLC, and Mira-Mesa Shopping Center-East LLC filed an appeal of the project. The appellant also submitted public comments to the Zoning Administrator for consideration prior to the Zoning Administrator hearing (and subsequent appeal), included herein as Attachment No. PC 6. As stated by the appellant, the ownership interest of the property is divided between various parties and all owners hold their interest as tenants in common. Mesa Shopping Center-East LLC and Mira-Mesa Shopping Center-East LLC collectively own 25 percent of the Tennis Club property and Irv Chase who is a principal of Fainburg III, LLC owns 25 percent of the Tennis Club property. Collectively, the appellant represents a 50 percent ownership interest. Mr. Robert O’Hill, who is the principal of Golf Realty Fund, LP owns a 50 percent interest and he is the managing member of the ownership partnership. The appeal letter and other comments submitted to the City by the appellant relate to a dispute between the ownership interests of the property and an internal disagreement regarding authorization to submit entitlements on behalf of the ownership. In essence, the appellant argues Mr. O’Hill does not have the authority to submit the subject application without their consent. The appellant also requested the Zoning Administrator continue the item for 60 days to allow the other ownership interests to review the application. The 8 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 7 appellant has not expressed specific concerns related to the subject matter of the application or provided comments on the proposed ABC license. The request for a continuance by the appellant was received prior to and at the hearing for the minor use permit. Although the continuance was not granted by the Zoning Administrator, the appellant has had more than 90 days to review the application in its entirety and provide additional comments. Therefore, the appellant has had ample time to comment on the content and conditions of the minor use permit. As of the date this report was written, the appellant has not provided comments as to whether issuance of a minor use permit complies with the General Plan and Zoning Code. Response Section 20.50.040(C) of the Newport Beach Municipal Code (NBMC) authorizes an application to be filed by the owner of the subject property or authorized agent of the owner with the written consent of the property owner. Staff, in consultation with the City Attorney’s Office, finds that the application signed by Mr. Robert O’Hill for the application satisfies NBMC Section 20.50.040(C). Some historical context is necessary in order explain the City’s position. In 2005, Mr. Robert O’Hill submitted an application for redevelopment at the subject property. It is important to note that the application was of a much larger scale than what is being considered in this application. For example, whereas the current application consists of a minor use permit to allow the sale of alcohol as part of an ancillary concession, the prior application involved demolition of existing tennis courts and construction of a new tennis club, courts, villas, bunaglows and other amenities on site. Following submittal of the 2005 application, a complaint for declaratory and injunctive relief was filed by the co-owners challenging Mr. O’Hill’s authority to file the application to redevelop the property. The City was not a party to the litigation, however, Mr. O’Hill’s application was authorized to go forward as the managing owner of the Property and ultimately was approved. In this instance, the application included a signed affidavit from Mr. Robert O’Hill on behalf of Golf Realty Fund, as the Managing Owner. The signed affidavit on the application form states that the person signing the application is the owner of the property and they certify under penalty of perjury that the foregoing statements, answers, and information submitted are in all respects are true and correct to the best of their knowledge and belief. Therefore, the City processed the subject application for the minor use permit. The appellant stated in their appeal letter: “We do not believe the City should be put in the position of having to decide whether Mr. O’ Hill has the legal authority to sign on behalf of the ownership and whether Clubhouse ATP is or is not a tenant of the Tennis Property. These are legal issues which should be resolved between the owners of the Tennis Property or, if necessary, through the legal process”. 9 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 8 Staff agrees with the appellant that the issues discussed in the appeal letter and during the Zoning Administrator hearing are a civil matter and should be handled outside of the entitlement process. Given the precedent that Mr. O’Hill was authorized to apply for, and seek approvals, for a much larger scale project, the City finds the application meets the application submittal requirements in Section 20.50.040(C) of the Newport Beach Municipal Code and anticipate the owners will settle the dispute regarding authority to develop the property outside of the entitlement process. Staff is not suggesting the Planning Commission consider the appellant’s allegation that the application is invalid; that is a matter for the owners to settle privately. The Planning Commission is tasked with evaluating the proposed minor use permit for alcohol service at the existing tennis clubhouse building exclusively as a land use matter. As demonstrated in the attached draft resolution (Attachment No. PC 1), staff believes all of the findings for the minor use permit can be made and the conditions of approval are sufficient to regulate the use. Given that the appellant has raised no objections to the use as of the writing of this report, staff believes the appeal should be denied and the minor use permit approved. Alternatives 1. The Planning Commission may require changes to the project to alleviate any concerns related to the operation of the use or the ability to make the required findings. If the changes are substantial, the item should be continued to a future meeting to allow the applicant to make the necessary adjustments and to allow staff to prepare a revised resolution incorporating new findings and/or conditions. 2. If the Planning Commission believes that there are insufficient facts to support the findings for approval, the Planning Commission may deny the application and provide facts in support of denial, and allow staff to prepare a revised resolution for denial of the project. Environmental Review This project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 under Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment. The Class 1 exemption includes the ongoing use of existing buildings where there is negligible or no expansion of use. The proposed project involves the addition of an ABC License to the existing tennis clubhouse with no other alterations or changes. 10 Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission, April 21, 2022 Page 9 Public Notice Notice of this hearing was published in the Daily Pilot, mailed to all owners of property within 300 feet of the boundaries of the site (excluding intervening rights-of-way and waterways) including the applicant and posted on the subject property at least 10 days before the scheduled meeting, consistent with the provisions of the Municipal Code. Additionally, the item appeared on the agenda for this meeting, which was posted at City Hall and on the City website. Prepared by: Submitted by: ______________________________ Liz Westmoreland, Associate Planner ATTACHMENTS PC 1 Draft Resolution with Findings and Conditions PC 2 Submitted Appeal Form PC 3 Zoning Administrator Resolution No. ZA2021-086 PC 4 December 16, 2021 Zoning Administrator Minutes (Excerpt) PC 5 December 16, 2021 Zoning Administrator Staff Report (without attachments) PC 6 Prior Correspondence PC 7 Police Department Memorandum PC 8 Plans 11 INTENTIONALLY BLANK PAGE12 Attachment No. PC 1 Draft Resolution with Findings and Conditions 13 INTENTIONALLY BLANK PAGE14 RESOLUTION NO. PC2022-006 A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF NEWPORT BEACH, CALIFORNIA, APPROVING MINOR USE PERMIT NO. UP2021-033 TO ADD A TYPE 41 (ON-SALE BEER & WINE – EATING PLACE) ALCOHOL BEVERAGE CONTROL LICENSE TO AN EXISTING TENNIS CLUBHOUSE BUILDING LOCATED AT 1602 EAST COAST HIGHWAY, AND 5 AND 11 CLUBHOUSE DRIVE (PA2021-210) THE PLANNING COMMISSION OF THE CITY OF NEWPORT BEACH HEREBY FINDS AS FOLLOWS: SECTION 1. STATEMENT OF FACTS. 1. An application was filed by Clubhouse ATP LLC (“Applicant”), with respect to property located at 1602 East Coast Highway, 5 and 11 Clubhouse Drive, and legally described as Parcels C and D of Parcel Map No. 2016-151 (“Property”) requesting approval of a minor use permit. 2. The Applicant seeks Minor Use Permit UP2021-033 (“Minor Use Permit”) to operate the existing lounge area in the Property’s tennis clubhouse building in conjunction with a Type 41 (On-Sale Beer & Wine – Eating Place) Alcoholic Beverage Control (“ABC”) License. The business will offer packaged food, light meals, and snacks. No construction, late hours (after 11:00 p.m.), live entertainment, or dancing are proposed. The concession space would primarily serve members and guests of the Tennis Club (“Project”). 3. The Property is designated MU-H3/PR (Mixed-Use Horizontal 3/ Parks and Recreation) by the General Plan Land Use Element and is located within the PC47 (Newport Beach Country Club) Zoning District. 4. The Property is located within the coastal zone. The Coastal Land Use Plan category is MU-H/PR (Mixed-Use Horizontal / Parks and Recreation) and it is located within PC47 (Newport Beach Country Club) Coastal Zone District. The Project includes the establishment of a new Type 41 ABC License, with no construction or operational changes that would result in an intensification of the existing use. Therefore, the Project is exempt from coastal development permitting requirements. 5. A virtual public hearing was held via Zoom on December 16, 2021, at 100 Civic Center Drive, Newport Beach, California. A notice of time, place and purpose of the public hearing was given in accordance with the California Government Code Section 54950 et seq. (“Ralph M. Brown Act”) and Chapter 20.62 (Public Hearings) of the Newport Beach Municipal Code (“NBMC”). Evidence, both written and oral, was presented to, and considered by, the Zoning Administrator at this hearing. The Zoning Administrator approved Resolution No. ZA2021-086. 6. On January 3, 2022, Fainburg III LLC/Mesa Shopping Center-East LLC, and Mira-Mesa Shopping Center-East LLC filed an appeal of the Project with the City Clerk’s Office. 15 Planning Commission Resolution No. PC2022-006 Page 2 of 12 10-18-21 Newport Beach City Hall was closed to the public during a portion of the appeal period, and therefore extended to January 3, 2022. Thus, the appeal is considered timely. 7. A de novo public hearing was held on April 21, 2022 in the City Council Chambers at 100 Civic Center Drive, Newport Beach, California. A notice of time, place and purpose of the hearing was given in accordance with the Ralph M. Brown Act and Chapter 20.62 (Public Hearings) of the NBMC. Evidence, both written and oral, was presented to, and considered by, the Planning Commission at this public hearing. SECTION 2. CALIFORNIA ENVIRONMENTAL QUALITY ACT DETERMINATION. 1. This Project is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Section 15301 under Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment. 2. The Class 1 exemption includes the ongoing use of existing buildings where there is negligible or no expansion of use. The Project involves the addition of the Type 41 ABC License to the Property’s existing tennis clubhouse with no other alterations or changes. SECTION 3. REQUIRED FINDINGS. In accordance with Sections 20.48.030 (Alcohol Sales) and Section 20.52.020(F) (Conditional Use Permits and Minor Use Permits) of the NBMC, the following findings and facts in support of such findings are set forth: Finding: A. The use is consistent with the purpose and intent of Section 20.48.030 (Alcohol Sales of the Zoning Code. Facts in Support of Finding: In finding that the Project is consistent with Section 20.48.030 of the NBMC, the following criteria must be considered: i. The crime rate in the reporting district and adjacent reporting districts as compared to other areas in the City. a. The Property is located in an area the Newport Beach Police Department (“NBPD”) has designated as Reporting District 39 (RD 39), which includes Fashion Island shopping and entertainment district. b. The Part One Crimes (the eight [8] most serious crimes defined by the FBI Uniform Crime Report – homicide, rape, robbery, aggravated assault, burglary, larceny-theft, auto theft, and arson) crime rate in RD 39 is higher than adjacent Reporting Districts RD 43, 38, and 44 and the City overall. 16 Planning Commission Resolution No. PC2022-006 Page 3 of 12 10-18-21 c. The highest volume crime in this area is shoplifting. The highest volume arrests in the area are drug related offenses. DUI, Public Intoxication, and liquor law violations make up 16 percent of arrests in this reporting district. In comparison, the figure for neighboring RD 43 is 17 percent, RD 38 is 23 percent and RD 44 is 18 percent. d. The NBPD has reviewed the Project, provided operating conditions of approval, and has no objection to the addition of the alcoholic beverage license. The operation of the establishment includes the approved floor plan and a closing hour of 11:00 p.m. ii. The number of alcohol-related calls for service, crimes, or arrests in the reporting district and in adjacent reporting districts. a. The total number of alcohol-related calls for service, crimes, or arrests in RD 39 is lower than neighboring reporting districts. The NBPD has reviewed the Project and has no objection. b. There has been one (1) Part One crime reported at the Property in the last reporting cycle and no Part One crime arrests. iii. The proximity of the establishment to residential zoning districts, day care centers, hospitals, park and recreation facilities, places of worship, schools, other similar uses, and any uses that attract minors. a. The eating and drinking establishment is located within the Tennis Club site of PC47, which was intended for recreational uses such as a tennis clubhouse. The Property is not located within close proximity to any day care centers, hospitals, places of worship, schools, or similar uses that attract minors. The Property’s tennis clubhouse building is located within the Tennis Club complex, which is a recreational use open to members and guests of the tennis club. The Property’s tennis club is not open to the public and the tennis clubhouse is anticipated to serve mainly members and guests. The nearest residential uses are behind the tennis courts in the Granville community. Eating and drinking establishments with incidental alcohol service are common in country clubs and tennis clubs, and the proposed change in ABC license type is not anticipated to alter the operational characteristics of the use such that it becomes detrimental to the area. iv. The proximity to other establishments selling alcoholic beverages for either off-site or on- site consumption. a. Currently there are no other establishments that sell alcohol within the tennis club complex. The closest establishment with an alcohol license is the Newport Beach County Club located at 100 Clubhouse Drive. There is no evidence suggesting this use has been detrimental to surrounding properties or the neighborhood. 17 Planning Commission Resolution No. PC2022-006 Page 4 of 12 10-18-21 v. Whether or not the proposed amendment will resolve any current objectionable conditions. a. An eating and drinking establishment with intermittent alcohol service has operated at the Property since 1970 with no operating issues or complaints. b. The Project has been reviewed and conditioned to ensure that the purpose and intent of Section 20.48.030 (Alcohol Sales) of the NBMC is maintained and that a healthy environment for residents and businesses is preserved. The service of alcohol is intended for the convenience of members and guests recreating at the tennis club. Operational conditions of approval recommended by the NBPD relative to the sale of alcoholic beverages will ensure compatibility with the surrounding uses and minimize alcohol related impacts. c. The existing hours of operation of the establishment will minimize the potential effects on land use. The establishment closes by 11:00 p.m., daily, which will ensure the use does not become a late night bar, tavern, or nightclub. d. The establishment is located within the existing tennis club which is developed with recreational uses. Adding the alcohol beverage control license will not alter the existing operation of the tennis club complex but will complement the food service in the Clubhouse and provide a convenience to members and guests. In accordance with Section 20.52.020 (Conditional Use Permits and Minor Use Permits) of the NBMC, the following findings and facts in support of such findings are set forth: Finding: B. The use is consistent with the General Plan and any applicable specific plan. Facts in Support of Finding: 1. The General Plan designates the site as MU-H3/PR (Mixed-Use Horizontal and Parks and Recreation). The MU-H3 designation applies to properties located in Newport Center. It provides for the horizontal intermixing of regional commercial office, hotel, multi-family residential and ancillary commercial uses. Within the Tennis Club, residential uses may be developed as single-family units. The PR designation applies to land used or proposed for active public or private recreational use. Permitted uses include parks (both active and passive), golf courses, marina support facilities, aquatic facilities, tennis clubs and courts, private recreation, and similar facilities. The proposed Type 41 ABC License would support the existing tennis club complex, an allowed use within the General Plan Land Use Designations. 2. The existing tennis clubhouse establishment is located within the Newport Beach Tennis Club complex along East Coast Highway which provides recreational opportunities to members and guests, consistent with the MU-H3/PR land use designation. 3. The Property is not a part of a specific plan area. 18 Planning Commission Resolution No. PC2022-006 Page 5 of 12 10-18-21 Finding: C. The use is allowed within the applicable zoning district and complies with all other applicable provisions of this Zoning Code and the Municipal Code; Facts in Support of Finding: 1. The Property is located in Planned Community PC47 (Newport Beach Country Club) Zoning District, which includes the Golf Club, Tennis Club, Bungalows and Villas facilities totaling approximately 140 acres. The subject building (tennis clubhouse) is located within the Tennis Club site of PC47, which was intended to provide for recreational uses such as a tennis clubhouse, tennis shop, restroom and locker facilities, spectator seating areas, etc. Concession uses are allowed by right as an ancillary use to the Tennis Club, and the sale and service of alcohol (until 11:00 p.m.) is allowed subject to the approval of a Minor Use Permit. 2. The existing establishment operates pursuant to Use Permit No. UP1492C which allows the existing clubhouse lounge to operate with hours from 9:00 a.m. to 11:00 p.m. daily. 3. The use will remain an ancillary eating and drinking establishment for the tennis club complex and the addition of the ABC Type 41 license will not alter or intensify the existing use. Further, there will be no change to the floor area or the hours of operation. Finding: D. The design, location, size, and operating characteristics of the use are compatible with the allowed uses in the vicinity; Facts in Support of Finding: 1. The addition of the alcohol license does not change the operating characteristics of the existing eating and drinking establishment. 2. The eating and drinking establishment will remain complimentary to the other uses and buildings within the tennis club site. The tennis clubhouse will continue to be an ancillary, related use and contribute to the existing operations of the Property’s Tennis Club. 3. The Project will continue to provide a convenience for tennis club members and guests, and the proposed ABC License will not result in increased demand for parking in the existing surface parking lots. Finding: E. The site is physically suitable in terms of design, location, shape, size, operating characteristics, and the provision of public and emergency vehicle (e.g., fire and medical) access and public services and utilities. 19 Planning Commission Resolution No. PC2022-006 Page 6 of 12 10-18-21 Facts in Support of Finding: 1. The Project’s existing eating and drinking establishment within the Newport Beach Tennis Club has proven to be physically suitable in terms of design, location, shape, and size to support the use. The physical characteristics of the site are not changing with the addition of the alcohol license. Alcohol service has existed on the site in the past and would be reinstated as part of this use permit as a convenience to members and their guests. Based on the location of the business and limited operational scale of the concession area, large numbers of patrons from the public (who are not members or guests) are not anticipated. 2. Adequate public and emergency vehicle access, public services, and utilities are provided for on-site. Finding: F. Operation of the use at the location proposed would not be detrimental to the harmonious and orderly growth of the City, nor endanger, jeopardize, or otherwise constitute a hazard to the public convenience, health, interest, safety, or general welfare of persons residing or working in the neighborhood of the proposed use. Facts in Support of Finding: 1. The Project has been reviewed and includes conditions of approval to ensure that potential conflicts with the surrounding land uses are minimized to the greatest extent possible. The operator is required to take reasonable steps to discourage and correct objectionable conditions that constitute a nuisance in parking areas, sidewalks and areas surrounding the subject property and adjacent properties during business hours, if directly related to the patrons of the establishment. 2. The Project’s eating and drinking establishment will continue to service the Newport Beach Tennis Club as a convenience to the tennis club members and guests recreating at the facility. The proposed closing hour of 11:00 p.m. and limited nature of the concession, will limit the potential impacts to the surrounding neighborhood. Further, the Tennis Clubhouse is located in the center of the Tennis Club and away from any residential or sensitive uses. 3. The service of alcohol will continue to complement the principal use of the facility and provide an economic opportunity for the property owner to maintain a successful business in a way which best serves the community. In accordance with Section 20.50.040(C) (Eligibility for Filing) of the NBMC, the following findings and facts in support of such findings are set forth: 20 Planning Commission Resolution No. PC2022-006 Page 7 of 12 10-18-21 Finding: G. An application may only be filed by the owner of the subject property or authorized agent of the owner with the written consent of the property owner. The application shall be signed by the owner of record or by an authorized agent, if written authorization from the owner of record is filed concurrently with the application. Facts in Support of Finding: 1. An affidavit, by the managing owner, authorizing submittal of the application for the Project was included with the application. The managing owner has received land use entitlements for larger scale projects (PA2005-140) than the Project as proposed. The Project complies with the General Plan and applicable provisions of Title 20 (Planning and Zoning) as supported by the findings above. 2. The issues discussed in the appeal letter and during the Zoning Administrator proceedings by the appellant are a civil matter and should be handled outside of the entitlement process. SECTION 4. DECISION. NOW, THEREFORE, BE IT RESOLVED: 1. The Planning Commission of the City of Newport Beach hereby finds the Project is categorically exempt from the California Environmental Quality Act (“CEQA”) pursuant to Section 15301 under Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment. 2. The Planning Commission of the City of Newport Beach hereby approves Minor Use Permit No. UP2021-033, subject to the conditions set forth in Exhibit A, which is attached hereto and incorporated by reference. 3. This action shall become final and effective 14 days following the date this Resolution was adopted unless within such time an appeal or call for review is filed with the City Clerk in accordance with the provisions of Title 20 (Planning and Zoning), of the NBMC. PASSED, APPROVED, AND ADOPTED THIS 21ST DAY OF APRIL, 2022. AYES: NOES: ABSTAIN: ABSENT: 21 Planning Commission Resolution No. PC2022-006 Page 8 of 12 10-18-21 BY:_________________________ Lee Lowrey, Chairman BY:_________________________ Curtis Ellmore, Secretary 22 Planning Commission Resolution No. PC2022-006 Page 9 of 12 10-18-21 EXHIBIT “A” CONDITIONS OF APPROVAL (Project-specific conditions are in italics) Planning Division 1. The development shall be in substantial conformance with the approved site plan floor plans and building elevations stamped and dated with the date of this approval (except as modified by applicable conditions of approval). 2. Minor Use Permit No. UP2021-033 allows the on-site sale and consumption of beer and wine at the tennis club concession with a valid California Department of Alcoholic Beverage Control license. This approval shall not be interpreted to allow a full-service independent restaurant. The tennis clubhouse and associated alcohol service shall remain as an ancillary use to the existing Tennis Club recreational uses. 3. The Project is subject to all applicable City ordinances, policies, and standards, unless specifically waived or modified by the conditions of approval. 4. The Applicant shall comply with all federal, state, and local laws. Material violation of any of those laws in connection with the use may be cause for revocation of this Use Permit. 5. All proposed signs shall be in conformance with the approved Comprehensive Sign Program for the project site and provisions of Chapter 20.42 (Signs) of the Newport Beach Municipal Code. No signs or other forms of advertising for the tennis clubhouse concessions shall be permitted along the adjacent public right-of-way, including but not limited to, East Coast Highway and Granville Drive. 6. Use Permit No. UP2021-033 and shall expire unless exercised within 24 months from the date of approval as specified in Section 20.91.050 of the Newport Beach Municipal Code, unless an extension is otherwise granted. 7. This Minor Use Permit may be modified or revoked by the Planning Commission if determined that the proposed uses or conditions under which it is being operated or maintained is detrimental to the public health, welfare or materially injurious to property or improvements in the vicinity or if the property is operated or maintained so as to constitute a public nuisance. 8. Any change in operational characteristics, expansion in area, or other modification to the approved plans, shall require an amendment to this Use Permit or the processing of a new Use Permit. 9. The site shall not be excessively illuminated based on the luminance recommendations of the Illuminating Engineering Society of North America, or, if in the opinion of the 23 Planning Commission Resolution No. PC2022-006 Page 10 of 12 10-18-21 Director of Community Development, the illumination creates an unacceptable negative impact on surrounding land uses or environmental resources. The Director may order the dimming of light sources or other remediation upon finding that the site is excessively illuminated. 10. Prior to the issuance of a building permit, the applicant shall pay any unpaid administrative costs associated with the processing of this application to the Planning Division. 11. All noise generated by the proposed use shall comply with the provisions of Chapter 10.26 and other applicable noise control requirements of the Newport Beach Municipal Code. The maximum noise shall be limited to no more than depicted below for the specified time periods unless the ambient noise level is higher: Between the hours of 7:00AM and 10:00PM Between the hours of 10:00PM and 7:00AM Location Interior Exterior Interior Exterior Residential Property 45dBA 55dBA 40dBA 50dBA Residential Property located within 100 feet of a commercial property 45dBA 60dBA 45dBA 50dBA Mixed Use Property 45dBA 60dBA 45dBA 50dBA Commercial Property N/A 65dBA N/A 60dBA 12. Should the property be sold or otherwise come under different ownership, any future owners or assignees shall be notified of the conditions of this approval by either the current business owner, property owner or the leasing agent. 13. No outside paging system shall be utilized in conjunction with this establishment. 14. All trash shall be stored within the building or within dumpsters stored in the trash enclosure (three walls and a self-latching gate) or otherwise screened from view of neighboring properties, except when placed for pick-up by refuse collection agencies. The trash enclosure shall have a decorative solid roof for aesthetic and screening purposes. 15. Trash receptacles for patrons shall be conveniently located both inside and outside of the establishment, however, not located on or within any public property or right-of-way. 16. The Applicant shall ensure that the trash dumpsters and/or receptacles are maintained to control odors. This may include the provision of either fully self-contained dumpsters or periodic steam cleaning of the dumpsters, if deemed necessary by the Planning Division. Cleaning and maintenance of trash dumpsters shall be done in compliance with the provisions of Title 14, including all future amendments (including Water Quality related requirements). 17. Deliveries and refuse collection for the facility shall be prohibited between the hours of 10:00 p.m. and 7:00 a.m. on weekdays and Saturdays and between the hours of 10:00 p.m. and 9:00 a.m. on Sundays and Federal holidays, unless otherwise approved by the 24 Planning Commission Resolution No. PC2022-006 Page 11 of 12 10-18-21 Director of Community Development, and may require an amendment to this Use Permit. 18. Storage outside of the building in the front or at the rear of the property shall be prohibited, with the exception of the required trash container enclosure. 19. A Special Events Permit is required for any event or promotional activity outside the normal operational characteristics of the approved use, as conditioned, or that would attract large crowds, involve the sale of alcoholic beverages, include any form of on-site media broadcast, or any other activities as specified in the Newport Beach Municipal Code to require such permits. 20. This approval shall expire and become void unless exercised within 24 months from the actual date of review authority approval, except where an extension of time is approved in compliance with the provisions of Title 20 Planning and Zoning of the Newport Beach Municipal Code. 21. To the fullest extent permitted by law, applicant shall indemnify, defend and hold harmless City, its City Council, its boards and commissions, officials, officers, employees, and agents from and against any and all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including without limitation, attorney’s fees, disbursements and court costs) of every kind and nature whatsoever which may arise from or in any manner relate (directly or indirectly) to City’s approval of Tennis Clubhouse Grill including, but not limited to, Minor Use Permit No. UP2021-033 (PA2021-210). This indemnification shall include, but not be limited to, damages awarded against the City, if any, costs of suit, attorneys' fees, and other expenses incurred in connection with such claim, action, causes of action, suit or proceeding whether incurred by applicant, City, and/or the parties initiating or bringing such proceeding. The applicant shall indemnify the City for all of City's costs, attorneys' fees, and damages which City incurs in enforcing the indemnification provisions set forth in this condition. The applicant shall pay to the City upon demand any amount owed to the City pursuant to the indemnification requirements prescribed in this condition. Building Division 22. If construction is proposed, the applicant is required to obtain all applicable permits from the City’s Building Division and Fire Department. The construction plans must comply with the most recent, City-adopted version of the California Building Code. The construction plans must meet all applicable State Disabilities Access requirements. 25 Planning Commission Resolution No. PC2022-006 Page 12 of 12 10-18-21 Police Department 23. The Applicant shall comply with all federal, state, and local laws, and all conditions of the Alcoholic Beverage License. Material violation of any of those laws or conditions in connection with the use is a violation and may be cause for revocation of the use permit. 24. All owners, managers and employees selling alcoholic beverages shall undergo and successfully complete a certified training program in responsible methods and skills for selling alcoholic beverages within 60 days of hire. This training must be updated every three (3) years regardless of certificate expiration date. The certified program must meet the standards of the certifying/licensing body designated by the State of California. The establishment shall comply with the requirements of this section within 60 days of approval. Records of each owner’s manager’s and employee’s successful completion of the required certified training program shall be maintained on the premises and shall be presented upon request by a representative of the City of Newport Beach. 25. Approval does not permit the premises to operate as a bar, tavern, cocktail lounge or nightclub as defined by the Newport Beach Municipal Code. 26. No alcoholic beverages shall be consumed on any property adjacent to the licensed premises under the control of the licensee. 27. No games or contests requiring or involving the consumption of alcoholic beverages shall be allowed. 28. Any event or activity staged by an outside promoter or entity, where the applicant, operator, owner or his employees or representatives share in any profits, or pay any percentage or commission to a promoter or any other person based upon money collected as a door charge, cover charge or any other form of admission charge is prohibited. 29. The exterior of the business shall be maintained free of litter and graffiti at all times. The owner or operator shall provide for daily removal of trash, litter, and debris from the premises and on all abutting sidewalks within 20 feet of the premises. Graffiti shall be removed within 48 hours of written notice from the City. 30. There shall be no exterior advertising or signs of any kind or type, including advertising directed to the exterior from within, promoting or indicating the availability of alcoholic beverages. Interior displays of alcoholic beverages or signs which are clearly visible to the exterior shall constitute a violation of this condition. 31. Employees shall not be permitted to consume alcohol or be under the influence of alcohol at any time during their shift. 26 Attachment No. PC 2 Submitted Appeal Form 27 INTENTIONALLY BLANK PAGE28 29 30 31 INTENTIONALLY BLANK PAGE32 Attachment No. PC 3 Zoning Administrator Resolution No. ZA2021-086 33 INTENTIONALLY BLANK PAGE34 RESOLUTION NO. ZA2021-086 A RESOLUTION OF THE ZONING ADMINISTRATOR OF THE CITY OF NEWPORT BEACH, CALIFORNIA APPROVING MINOR USE PERMIT NO. UP2021-033 TO ADD A TYPE 57 ALCOHOL BEVERAGE CONTROL (ABC) LICENSE TO AN EXISTING TENNIS CLUBHOUSE BUILDING LOCATED AT 1602 EAST COAST HIGHWAY, 5 AND 11 CLUBHOUSE DRIVE (PA2021-210) THE ZONING ADMINISTRATOR OF THE CITY OF NEWPORT BEACH HEREBY FINDS AS FOLLOWS: SECTION 1. STATEMENT OF FACTS. 1. An application was filed by Clubhouse ATP LLC, with respect to property located at 1602 East Coast Highway, 5 and 11 Clubhouse Drive, and legally described as Parcels C and D of Parcel Map No. 2016-151 requesting approval of a minor use permit. 2. The applicant requests a minor use permit to operate the existing lounge area in the Tennis Clubhouse building in conjunction with a Type 57 (Special On-Sale General) Alcoholic Beverage Control (ABC) License. The Type 57 ABC License would authorize the sale of beer, wine, and distilled spirits to members and guests only for consumption on the premises, among other privileges. No food service is required but the grill will offer packaged food, light meals, and snacks. No construction, late hours (after 11:00 p.m.), live entertainment, or dancing are proposed. 3. The subject property is designated MU-H3/PR (Mixed-Use Horizontal 3/ Parks and Recreation) by the General Plan Land Use Element and is located within the PC47 (Newport Beach Country Club) District. 4. The subject property is located within the coastal zone. The Coastal Land Use Plan category is MU-H/PR (Mixed-Use Horizontal / Parks and Recreation) and it is located within PC47 (Newport Beach Country Club) Coastal Zone District. The proposed project includes the establishment of a new Type 57 ABC License, with no construction or operational changes that would result in an intensification of the existing use. Therefore, the project is exempt from coastal development permit requirements. 5. A public hearing was held on December 16th, 2021 online via Zoom. A notice of time, place and purpose of the hearing was given in accordance with the Newport Beach Municipal Code. Evidence, both written and oral, was presented to, and considered by, the Zoning Administrator at this hearing. SECTION 2. CALIFORNIA ENVIRONMENTAL QUALITY ACT DETERMINATION. This project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 under Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment. 35 Zoning Administrator Resolution No. ZA2021-086 Page 2 of 11 10-18-21 The Class 1 exemption includes the ongoing use of existing buildings where there is negligible or no expansion of use. The proposed project involves the addition of the Type 57 ABC License to the existing tennis clubhouse with no other alterations or changes. SECTION 3. REQUIRED FINDINGS. In accordance with Section 20.48.030 (Alcohol Sales) of the Newport Beach Municipal Code, the following findings and facts in support of such findings are set forth: Finding: A. The use is consistent with the purpose and intent of Section 20.48.030 (Alcohol Sales of the Zoning Code. Facts in Support of Finding: In finding that the proposed use is consistent with Section 20.48.030 of the Zoning Code, the following criteria must be considered: i. The crime rate in the reporting district and adjacent reporting districts as compared to other areas in the City. 1. The subject property is located in Reporting District 39 (RD 39), which includes Fashion Island shopping and entertainment district. 2. The Part One Crimes (Part One Crimes are the eight most serious crimes defined by the FBI Uniform Crime Report – homicide, rape, robbery, aggravated assault, burglary, larceny-theft, auto theft, and arson) crime rate in RD 39 is higher than adjacent Reporting Districts RD 43, 38, and 44 and the City overall. 3. The highest volume crime in this area is shoplifting. The highest volume arrests in the area are drug related offenses. DUI, Public Intoxication, and liquor law violations make up 16 percent of arrests in this reporting district. In comparison, the figure for neighboring RD 43 is 17 percent, RD 38 is 23 percent and RD 44 is 18 percent. 4. The Police Department has reviewed the proposal, provided operating conditions of approval, and has no objection to the addition of the alcoholic beverage license. The operation of the establishment includes the approved floor plan and a closing hour of 11:00 p.m. ii. The numbers of alcohol-related calls for service, crimes, or arrests in the reporting district and in adjacent reporting districts. 1. The total number of alcohol-related calls for service, crimes, or arrests in RD 39 is lower than neighboring reporting districts. The Police Department has reviewed the proposal and has no objection. 36 Zoning Administrator Resolution No. ZA2021-086 Page 3 of 11 10-18-21 2. There has been one Part 1 crime reported at the Tennis Club site in the last reporting cycle and no Part I arrests. iii. The proximity of the establishment to residential zoning districts, day care centers, hospitals, park and recreation facilities, places of worship, schools, other similar uses, and any uses that attract minors. 1. The eating and drinking establishment is located within the Tennis Club site of PC47, which was intended for recreational uses such as a tennis clubhouse. The property is not located within close proximity to any day care centers, hospitals, places of worship, schools, or similar uses that attract minors. The subject tennis clubhouse building is located within the Tennis Club complex, which is a recreational use open to members and guests of the tennis club. The property is not open to the public. The nearest residential uses are behind the tennis courts in the Granville community. Eating and drinking establishments with incidental alcohol service are common in Country Clubs and Tennis Clubs and the proposed change in Alcoholic Beverage Control license type is not anticipated to alter the operational characteristics of the use such that it becomes detrimental to the area. iv. The proximity to other establishments selling alcoholic beverages for either off-site or on- site consumption. 1. Currently there are no other establishments that sell alcohol within the tennis club complex. The closest establishment with an alcohol license is the Newport Beach County Club located at 100 Clubhouse Drive. There is no evidence suggesting this use has been detrimental to surrounding properties or the neighborhood. v. Whether or not the proposed amendment will resolve any current objectionable conditions. 1. An eating and drinking establishment with intermittent alcohol service has operated at the subject property since 1970 with no operating issues or complaints. 2. The project has been reviewed and conditioned to ensure that the purpose and intent of Section 20.48.030 (Alcohol Sales) of the Zoning Code is maintained and that a healthy environment for residents and businesses is preserved. The service of alcohol is intended for the convenience of members and guests recreating at the tennis club. Operational conditions of approval recommended by the Police Department relative to the sale of alcoholic beverages will ensure compatibility with the surrounding uses and minimize alcohol related impacts. 3. The existing hours of operation of the establishment will minimize the potential effects on land use. The establishment closes by 11:00 p.m., daily, which will ensure the use does not become a late night bar, tavern, or nightclub. 4. The establishment is located within the existing tennis club which is developed with recreation uses. Adding the alcohol beverage control license will not alter the existing 37 Zoning Administrator Resolution No. ZA2021-086 Page 4 of 11 10-18-21 operation of the tennis club complex but will complement the food service in the Clubhouse and provide a convenience to members and guests. In accordance with Section 20.52.020 (Conditional Use Permits and Minor Use Permits) of the Newport Beach Municipal Code, the following findings and facts in support of such findings are set forth: Finding: B. The use is consistent with the General Plan and any applicable specific plan; Facts in Support of Finding: 1. The General Plan designates the site as MU-H3/PR (Mixed-Use Horizontal and Parks and Recreation). The MU-H3 designation applies to properties located in Newport Center. It provides for the horizontal intermixing of regional commercial office, hotel, multi-family residential and ancillary commercial uses. Within the Tennis Club, residential uses may be developed as single-family units. The PR designation applies to land used or proposed for active public or private recreational use. Permitted uses include parks (both active and passive), golf courses, marina support facilities, aquatic facilities, tennis clubs and courts, private recreation, and similar facilities. The proposed Type 57 ABC License would support the existing tennis club complex, an allowed use within the General Plan Land Use Designations. 2. The existing tennis clubhouse establishment is located within the Newport Beach tennis club complex along East Coast Highway which provides recreational opportunities to members and guests, consistent with the MU-H3/PR land use designation. 3. The subject property is not a part of a specific plan area. Finding: C. The use is allowed within the applicable zoning district and complies with all other applicable provisions of this Zoning Code and the Municipal Code; Facts in Support of Finding: 1. The site is located in Planned Community PC47 (Newport Beach Country Club) Zoning District, which includes the Golf Club, Tennis Club, Bungalows and Villas facilities totaling approximately 140 acres. The subject building (tennis clubhouse) is located within the Tennis Club site of PC47, which was intended to provide for recreational uses such as a tennis clubhouse, tennis shop, restroom and locker facilities, spectator seating areas, etc. Concession uses are allowed by right as an ancillary use to the Tennis Club, and the sale and service of alcohol (until 11:00 p.m.) is allowed subject to the approval of a minor use permit. 38 Zoning Administrator Resolution No. ZA2021-086 Page 5 of 11 10-18-21 2. The existing establishment operates pursuant to Use Permit No. UP1492C which allowed the existing clubhouse lounge to operate with hours from 9:00 a.m. to 11:00 p.m. daily. 3. The use will remain an ancillary eating and drinking establishment for the tennis club complex and the addition of the ABC Type 57 license will not alter or intensify the existing use. Further, there will be no change to the floor area or the hours of operation. Finding: D. The design, location, size, and operating characteristics of the use are compatible with the allowed uses in the vicinity; Facts in Support of Finding: 1. The addition of the alcohol license does not change the operating characteristics of the existing eating and drinking establishment. 2. The eating and drinking establishment will remain complementary to the other uses and buildings within the tennis club site. The tennis clubhouse will continue to be an ancillary use and contribute to the existing operations of the Tennis Club. 3. The eating and drinking establishment will continue to provide a convenience for tennis club members and guests, and the proposed ABC License will not result in increased demand for parking in the existing surface parking lots. Finding: E. The site is physically suitable in terms of design, location, shape, size, operating characteristics, and the provision of public and emergency vehicle (e.g., fire and medical) access and public services and utilities. Facts in Support of Finding: 1. The existing eating and drinking establishment within the Newport Beach Tennis Club has proven to be physically suitable in terms of design, location, shape, and size to support the use. The physical characteristics of the site are not changing with the addition of the alcohol license. Alcohol service has existed on the site in the past and would be reinstated as part of this use permit for members and their guests only. 2. Adequate public and emergency vehicle access, public services, and utilities are provided for on-site. 39 Zoning Administrator Resolution No. ZA2021-086 Page 6 of 11 10-18-21 Finding: F. Operation of the use at the location proposed would not be detrimental to the harmonious and orderly growth of the City, nor endanger, jeopardize, or otherwise constitute a hazard to the public convenience, health, interest, safety, or general welfare of persons residing or working in the neighborhood of the proposed use. Facts in Support of Finding: 1. The project has been reviewed and includes conditions of approval to ensure that potential conflicts with the surrounding land uses are minimized to the greatest extent possible. The operator is required to take reasonable steps to discourage and correct objectionable conditions that constitute a nuisance in parking areas, sidewalks and areas surrounding the subject property and adjacent properties during business hours, if directly related to the patrons of the establishment. 2. The eating and drinking establishment will continue to service the Newport Beach Tennis Club as a convenience to the tennis club members and guests recreating at the facility. The proposed closing hour of 11:00 p.m. and limited nature of the Type 57 ABC License, which only allows the sales and service to members and guests, will limit the potential impacts to the surrounding neighborhood. Further, the Tennis Clubhouse is located in the center of the Tennis Club and away from any residential or sensitive uses. 3. The service of alcohol will continue to complement the principal use of the facility and provide an economic opportunity for the property owner to maintain a successful business in a way which best serves the community. SECTION 4. DECISION. NOW, THEREFORE, BE IT RESOLVED: 1. The Zoning Administrator of the City of Newport Beach hereby finds this project is categorically exempt from the California Environmental Quality Act pursuant to Section 15301 under Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment. 2. The Zoning Administrator of the City of Newport Beach hereby approves UP2021-033, subject to the conditions set forth in Exhibit A, which is attached hereto and incorporated by reference. 3. This action shall become final and effective 14 days following the date this Resolution was adopted unless within such time an appeal or call for review is filed with the Community Development Director in accordance with the provisions of Title 20 Planning and Zoning, of the Newport Beach Municipal Code. 40 Zoning Administrator Resolution No. ZA2021-086 Page 7 of 11 10-18-21 PASSED, APPROVED, AND ADOPTED THIS 16TH DAY OF DECEMBER, 2021. 41 Zoning Administrator Resolution No. ZA2021-086 Page 8 of 11 10-18-21 EXHIBIT “A” CONDITIONS OF APPROVAL (Project-specific conditions are in italics) Planning Division 1. The development shall be in substantial conformance with the approved site plan, floor plans and building elevations stamped and dated with the date of this approval (except as modified by applicable conditions of approval). 2. The project is subject to all applicable City ordinances, policies, and standards, unless specifically waived or modified by the conditions of approval. 3. The applicant shall comply with all federal, state, and local laws. Material violation of any of those laws in connection with the use may be cause for revocation of this Use Permit. 4. All proposed signs shall be in conformance with the approved Comprehensive Sign Program for the project site and provisions of Chapter 20.42 (Signs) of the Newport Beach Municipal Code. 5. Use Permit No. UP2021-033 and shall expire unless exercised within 24 months from the date of approval as specified in Section 20.91.050 of the Newport Beach Municipal Code, unless an extension is otherwise granted. 6. This Use Permit may be modified or revoked by the Zoning Administrator if determined that the proposed uses or conditions under which it is being operated or maintained is detrimental to the public health, welfare or materially injurious to property or improvements in the vicinity or if the property is operated or maintained so as to constitute a public nuisance. 7. Any change in operational characteristics, expansion in area, or other modification to the approved plans, shall require an amendment to this Use Permit or the processing of a new Use Permit. 8. The site shall not be excessively illuminated based on the luminance recommendations of the Illuminating Engineering Society of North America, or, if in the opinion of the Director of Community Development, the illumination creates an unacceptable negative impact on surrounding land uses or environmental resources. The Director may order the dimming of light sources or other remediation upon finding that the site is excessively illuminated. 9. Prior to the issuance of a building permit, the applicant shall pay any unpaid administrative costs associated with the processing of this application to the Planning Division. 42 Zoning Administrator Resolution No. ZA2021-086 Page 9 of 11 10-18-21 10. All noise generated by the proposed use shall comply with the provisions of Chapter 10.26 and other applicable noise control requirements of the Newport Beach Municipal Code. The maximum noise shall be limited to no more than depicted below for the specified time periods unless the ambient noise level is higher: Between the hours of 7:00AM and 10:00PM Between the hours of 10:00PM and 7:00AM Location Interior Exterior Interior Exterior Residential Property 45dBA 55dBA 40dBA 50dBA Residential Property located within 100 feet of a commercial property 45dBA 60dBA 45dBA 50dBA Mixed Use Property 45dBA 60dBA 45dBA 50dBA Commercial Property N/A 65dBA N/A 60dBA 11. Should the property be sold or otherwise come under different ownership, any future owners or assignees shall be notified of the conditions of this approval by either the current business owner, property owner or the leasing agent. 12. No outside paging system shall be utilized in conjunction with this establishment. 13. All trash shall be stored within the building or within dumpsters stored in the trash enclosure (three walls and a self-latching gate) or otherwise screened from view of neighboring properties, except when placed for pick-up by refuse collection agencies. The trash enclosure shall have a decorative solid roof for aesthetic and screening purposes. 14. Trash receptacles for patrons shall be conveniently located both inside and outside of the establishment, however, not located on or within any public property or right-of-way. 15. The applicant shall ensure that the trash dumpsters and/or receptacles are maintained to control odors. This may include the provision of either fully self-contained dumpsters or periodic steam cleaning of the dumpsters, if deemed necessary by the Planning Division. Cleaning and maintenance of trash dumpsters shall be done in compliance with the provisions of Title 14, including all future amendments (including Water Quality related requirements). 16. Deliveries and refuse collection for the facility shall be prohibited between the hours of 10:00 p.m. and 7:00 a.m. on weekdays and Saturdays and between the hours of 10:00 p.m. and 9:00 a.m. on Sundays and Federal holidays, unless otherwise approved by the Director of Community Development, and may require an amendment to this Use Permit. 17. Storage outside of the building in the front or at the rear of the property shall be prohibited, with the exception of the required trash container enclosure. 18. A Special Events Permit is required for any event or promotional activity outside the normal operational characteristics of the approved use, as conditioned, or that would 43 Zoning Administrator Resolution No. ZA2021-086 Page 10 of 11 10-18-21 attract large crowds, involve the sale of alcoholic beverages, include any form of on-site media broadcast, or any other activities as specified in the Newport Beach Municipal Code to require such permits. 19. This approval shall expire and become void unless exercised within 24 months from the actual date of review authority approval, except where an extension of time is approved in compliance with the provisions of Title 20 Planning and Zoning of the Newport Beach Municipal Code. 20. To the fullest extent permitted by law, applicant shall indemnify, defend and hold harmless City, its City Council, its boards and commissions, officials, officers, employees, and agents from and against any and all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including without limitation, attorney’s fees, disbursements and court costs) of every kind and nature whatsoever which may arise from or in any manner relate (directly or indirectly) to City’s approval of Tennis Clubhouse Grill including, but not limited to, UP2021-033 (PA2021- 210)). This indemnification shall include, but not be limited to, damages awarded against the City, if any, costs of suit, attorneys' fees, and other expenses incurred in connection with such claim, action, causes of action, suit or proceeding whether incurred by applicant, City, and/or the parties initiating or bringing such proceeding. The applicant shall indemnify the City for all of City's costs, attorneys' fees, and damages which City incurs in enforcing the indemnification provisions set forth in this condition. The applicant shall pay to the City upon demand any amount owed to the City pursuant to the indemnification requirements prescribed in this condition. Building Division 21. If construction is proposed, the applicant is required to obtain all applicable permits from the City’s Building Division and Fire Department. The construction plans must comply with the most recent, City-adopted version of the California Building Code. The construction plans must meet all applicable State Disabilities Access requirements. Police Department 22. The applicant shall comply with all federal, state, and local laws, and all conditions of the Alcoholic Beverage License. Material violation of any of those laws or conditions in connection with the use is a violation and may be cause for revocation of the use permit. 23. All owners, managers and employees selling alcoholic beverages shall undergo and successfully complete a certified training program in responsible methods and skills for selling alcoholic beverages within 60 days of hire. This training must be updated every 3 years regardless of certificate expiration date. The certified program must meet the standards of the certifying/licensing body designated by the State of California. The establishment shall comply with the requirements of this section within 60 days of approval. Records of each owner’s manager’s and employee’s successful completion 44 Zoning Administrator Resolution No. ZA2021-086 Page 11 of 11 10-18-21 of the required certified training program shall be maintained on the premises and shall be presented upon request by a representative of the City of Newport Beach. 24. Approval does not permit the premises to operate as a bar, tavern, cocktail lounge or nightclub as defined by the Newport Beach Municipal Code. 25. No alcoholic beverages shall be consumed on any property adjacent to the licensed premises under the control of the licensee. 26. No games or contests requiring or involving the consumption of alcoholic beverages shall be allowed. 27. Any event or activity staged by an outside promoter or entity, where the applicant, operator, owner or his employees or representatives share in any profits, or pay any percentage or commission to a promoter or any other person based upon money collected as a door charge, cover charge or any other form of admission charge is prohibited. 28. The exterior of the business shall be maintained free of litter and graffiti at all times. The owner or operator shall provide for daily removal of trash, litter, and debris from the premises and on all abutting sidewalks within 20 feet of the premises. Graffiti shall be removed within 48 hours of written notice from the City. 29. There shall be no exterior advertising or signs of any kind or type, including advertising directed to the exterior from within, promoting or indicating the availability of alcoholic beverages. Interior displays of alcoholic beverages or signs which are clearly visible to the exterior shall constitute a violation of this condition. 30. Employees shall not be permitted to consume alcohol or be under the influence of alcohol at any time during their shift. 45 INTENTIONALLY BLANK PAGE46 Attachment No. PC 4 December 16, 2021 Zoning Administrator Minutes (Excerpt) 47 INTENTIONALLY BLANK PAGE48 MINUTES OF THE MEETING OF THE NEWPORT BEACH ZONING ADMINISTRATOR 12/16/2021 Page 6 of 9 ITEM NO. 10 El Cholo Limited Term Permit No. XP2021-008 (PA2021-189) Site Location: 3520 East Coast Highway Council District 6 The Zoning Administrator read the project description from the related staff report into the record. In response to the Zoning Administrator’s question, Associate Planner Liz Westmoreland clarified that the existing restaurant operates until 9:00 p.m. and the resolution should be revised to close the expanded outdoor dining patio at 9:00 p.m. daily, as well. Changes to the resolution included updating the hours in Condition of Approval No. 4 and Fact 4 in Support of Finding A. Ms. Westmoreland stated that the business uses an off-site parking lot that meets their use permit requirements. Applicant Ron Salisbury of El Cholo, stated that he had reviewed the draft resolution and agrees with all of the required conditions. The Zoning Administrator opened the public hearing. Seeing that no one from the public wished to comment, the public hearing was closed. The Zoning Administrator revised Condition of Approval No. 1 to remove references to floor plans and building elevations. Action: Approved as Amended ITEM NO. 11 Baja Sharkeez Limited Term Permit No. XP2021-022 and Coastal Development Permit No. CD2021-047 (PA2021-201) Site Location: 114 Mc Fadden Place Council District 1 The Zoning Administrator read the project description from the related staff report into the record. Applicant Ron Newman of Baja Sharkeez stated that he had reviewed the draft resolution and agrees with all of the required conditions. The Zoning Administrator opened the public hearing. Seeing that no one from the public wished to comment, the public hearing was closed. The Zoning Administrator asked that staff revise Section 1 Fact 2 of the resolution to discuss the reduction of the patio from the previous approval, and revise Finding A Fact 2 to state that the existing larger 2,400-square- foot patio has not created issues and operation of the proposed reduced 900-square-foot patio includes appropriate conditions of approval. Lastly, there was an update to Finding F Fact 8 and removal of reference to floor plans and building elevations from Condition of Approval 1, in addition to other minor changes. Action: Approved as Amended ITEM NO. 12 Tennis Clubhouse Grill Minor Use Permit No. UP2021-033 (PA2021-210) Site Location: 1602 East Coast Highway, 5 and 11 Clubhouse Drive Council District 5 Liz Westmoreland, Associate Planner, provided a brief project description stating that the application is for an alcohol license for the existing Tennis Clubhouse building located at the Newport Beach Tennis Club site. The license requested is a Type 57 Alcoholic Beverage Control License which only allows the sale and service of beer, wine, and spirits to members and their guests. There are no late hours proposed past 11:00 p.m., and the business is not a public restaurant. The Police Department has reviewed the project and does not have any objections based on the operational characteristics, hours of operation, and robust conditions included in the resolution. 49 MINUTES OF THE MEETING OF THE NEWPORT BEACH ZONING ADMINISTRATOR 12/16/2021 Page 7 of 9 Ms. Westmoreland addressed written comments from the adjacent community association and added that alcohol service has been present at this site intermittently since the 1970’s. Staff received comments from one of the owners of the site objecting to the use permit at this time. Staff is not aware of any reason that would prohibit the City from proceeding with the hearing. Applicant Pat Rolfes stated that he had reviewed the draft resolution and agrees with all of the required conditions. He described the history of the site and stated that the property was underutilized and now it is a great place for outdoor activities and fundraisers. He described the property as a health and wellness environment and not a bar or lounge. The Zoning Administrator opened the public hearing. One member of the public, Jacob Gonzales, stated that he is counsel for two owners that make up 50 percent of the ownership of the subject property. Mr. Gonzales asks that all of his correspondence to City Attorney Aaron Harp be included in the public record for the use permit application. His clients recently found out about the application and are not familiar with the applicant or project. The application is signed by Mr. O’Hill, and Mr. Gonzales’ clients have not authorized the submittal. He states that his clients have requested a 60-day continuance of this item. The previous request was denied, and he requests a continuance again. He states that Mr. O’Hill did not have authority to sign the use permit application on behalf of all of the owners. He asks that the City state the basis that Mr. O’Hill and the applicant are authorized to sign and submit the application. In response to the Zoning Administrator’s inquiry regarding concerns with the request for alcohol service itself, Mr. Gonzales replied that he had briefly reviewed the report, but he is waiting for Mr. O Hill to provide more information on the application. The Zoning Administrator closed the public hearing. Ms. Westmoreland stated that there is an appeal process available to the commenter. Staff is not aware of any reasons that would prohibit the City from proceeding. The owner has signed the affidavit on the application form. The Zoning Administrator stated that the application is straight forward, and that alcohol service is typical for similar sporting facilities. There has been alcohol service in the past and this new use permit would make that allowance clear moving forward. The Police Department has reviewed and applied a number of conditions that would address the concerns by neighbors. The ownership issue is a private issue, and based on input from staff and the City Attorney’s office, it would not be appropriate to delay this application. Action: Approved ITEM NO. 13 Gordon Preschool Minor Use Permit No. UP2021-040 (PA2021-244) Site Location: 1126 Goldenrod Avenue Council District 6 David Lee, Associate Planner, provided a brief project description stating that the request is for a minor use permit to increase the capacity of an existing child day care home from an occupancy of 8 to 14. Mr. Lee described the project site and stated that there are no physical changes to the residence proposed. The hours of operation requested are from 9:00 a.m. to 1:00 p.m., Monday through Friday. The applicant possesses a license with the California Department of Social Services. Mr. Lee summarized a letter of support which was submitted to the Zoning Administrator but not previously included in the record. Applicant Jacqui Gordon of Gordon Preschool stated that she had reviewed the draft resolution and agrees with all of the required conditions. Ms. Gordon also added further details about the day care center, including the surrounding neighborhood and parking situation. 50 Attachment No. PC 5 December 16, 2021 Zoning Administrator Staff Report (without attachments) 51 INTENTIONALLY BLANK PAGE52 CITY OF NEWPORT BEACH ZONING ADMINISTRATOR STAFF REPORT December 16, 2021 Agenda Item No. 12 SUBJECT: Tennis Clubhouse Grill (PA2021-210) ▪Minor Use Permit No. UP2021-033 SITE LOCATION: 1602 East Coast Highway, 5 and 11 Clubhouse Drive APPLICANT: Clubhouse ATP LLC OWNER: Golf Realty Fund PLANNER: Liz Westmoreland, Associate Planner lwestmoreland@newportbeachca.gov or 949-644-3234 LAND USE AND ZONING •General Plan Land Use Plan Category: MU-H3/PR (Mixed-Use Horizontal 3/ Parks and Recreation) •Zoning District: PC47 (Newport Beach Country Club) •Coastal Land Use Plan Category: MU-H/PR Mixed-Use Horizontal / Parks And Recreation •Coastal Zoning District: PC47 (Newport Beach Country Club) PROJECT SUMMARY Request for a minor use permit to operate the existing lounge area in the Tennis Clubhouse building in conjunction with a Type 57 (Special On-Sale General) Alcoholic Beverage Control (ABC) License. The Type 57 ABC License would authorize the sale of beer, wine, and distilled spirits to members and guests only for consumption on the premises, among other privileges. No food service is required but the grill will offer packaged food, light meals, and snacks. No construction is proposed at this time. Allowed hours of operation are between 9:00 a.m. to 11:00 p.m, daily. No late hours (after 11:00 p.m.), live entertainment, or dancing are proposed. RECOMMENDATION 1)Conduct a public hearing; 2)Find this project exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 under Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment; and 3)Adopt Draft Zoning Administrator Resolution No. _ approving Minor Use Permit No. UP2021-033 (Attachment No. ZA 1). 53 Tennis Clubhouse Grill (PA2021-210) Zoning Administrator, December 16, 2021 Page 2 Tmplt: 10/18/21 DISCUSSION •The site is located in Planned Community PC47 (Newport Beach Country Club) Zoning District, which includes the Golf Club, Tennis Club, Bungalows and Villas facilities totaling approximately 140 acres. The subject building (tennis clubhouse) is located within the Tennis Club site of PC47, which was intended to provide for recreational uses such as a tennis clubhouse, tennis shop, restroom and locker facilities, spectator seating areas, etc. Concession uses are allowed by right as an ancillary use to the Tennis Club, and the sale and service of alcohol (until 11:00 p.m.) is allowed subject to the approval of a minor use permit. •The proposed project includes the establishment of a new Type 57 ABC License, with no construction or operational changes that would result in an intensification of use. Therefore, the project is exempt from coastal development permit requirements. •The eating and drinking establishment will continue to provide a convenience for tennis club members and guests, and the proposed ABC License will not result in increased demand for parking in the existing surface parking lots. •The project has been reviewed and includes conditions of approval to ensure that potential conflicts with the surrounding land uses are minimized to the greatest extent possible. The operator is required to take reasonable steps to discourage and correct objectionable conditions that constitute a nuisance in parking areas, sidewalks and areas surrounding the subject property and adjacent properties during business hours, if directly related to the patrons of the establishment. •The service of alcohol will continue to complement the principal use of the facility and provide an economic opportunity for the property owner to maintain a successful business in a way which best serves the community. ENVIRONMENTAL REVIEW This project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 under Class Class 1 (Existing Facilities) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to have a significant effect on the environment. The Class 1 exemption includes the ongoing use of existing buildings where there is negligible or no expansion of use. The proposed project involves the addition of the Type 57 ABC License to the existing tennis clubhouse with no other alterations or changes. 54 Tennis Clubhouse Grill (PA2021-210) Zoning Administrator, December 16, 2021 Page 3 Tmplt: 10/18/21 PUBLIC NOTICE Notice of this application was published in the Daily Pilot, mailed to all owners of property within 300 feet of the boundaries of the site (excluding intervening rights-of-way and waterways), including the applicant, and posted on the subject property at least 10 days before the scheduled hearing, consistent with the provisions of the Municipal Code. Additionally, the item appeared on the agenda for this meeting, which was posted at City Hall and on the City website. APPEAL PERIOD: An appeal or call for review may be filed with the Director of Community Development within 14 days following the date of action. For additional information on filing an appeal, contact the Planning Division at 949-644-3200. Prepared by: ______________________________ Liz Westmoreland, Associate Planner law Attachments: ZA 1 Draft Resolution ZA 2 Vicinity Map ZA 3 Project Plans 55 INTENTIONALLY BLANK PAGE56 Attachment No. PC 6 Prior Correspondence 57 INTENTIONALLY BLANK PAGE58 December 13, 2021 Zoning Administrator Community Development Department City of Newport Beach CDD@newportbeachca.gov Ref. #: 11684 RE: The Granville Community Association Tennis Clubhouse Grill Minor Use Permit No. UP2021-033 Comments in Opposition to Permit Dear Zoning Administrator: The Tinnelly Law Group serves as general counsel to the Granville Community Association, a California common interest development comprised of 68 units and well over 100 residents (“Association”). In that capacity, the undersigned has been directed to contact you in connection with Minor Use Permit No. UP2021-033 (PA2021-210) (“Permit”), which will be considered at the December 16, 2021, Zoning Administrator Meeting. In particular, the Permit will authorize the Tennis Clubhouse Grill (“Tennis Club”) to sell “beer, wine and distilled spirits to members and guests…for consumption on the premises….” The Board of Directors (“Board”), on behalf of the Association, opposes the issuance of the Permit and respectfully requests that the Zoning Administrator deny same. The Association is gravely concerned that the sale, distribution and consumption of alcoholic beverages at the Tennis Club will endanger the health and safety of residents and guests entering and exiting the community. It is without doubt that alcohol impairs one’s ability to safely operate a vehicle.1 It is also obvious that the intersection between the Tennis Club and Granville Drive is dangerous (e.g., high speed traffic entering from Civic Center Dr., minimal site lines, etc.). Given the location of the Tennis Club relative to the Association, it is almost certain that serving alcoholic beverages to the patrons of the Tennis Club will increase the number of accidents. Sadly, the likely victims of these accidents will be the residents and guests of the Granville community. 1 According to the Centers for Disease Control and Prevention, in 2016, 10,497 people died in alcohol-impaired driving crashes, accounting for 28% of all traffic-related deaths in the United States. (CDC, Impaired Driving: Get the Facts, https://www.cdc.gov/transportationsafety/impaired_driving/impaired-drv_factsheet.html#:~:text=At%20all%20levels %20of%20blood,people%20than%20for%20older%20people.&text=Among%20drivers%20with%20BAC%20levels,ye ars%20of%20age%20(27%25) (last accessed December 13, 2021).) The statistics for all impaired driving accidents is more sobering. ORANGE COUNTY 27101 Puerta Real Suite 250 Mission Viejo, CA 92691 949.588.0866 LOS ANGELES 633 West Fifth Street Suite 2600 Los Angeles, CA 90071 213.805.7285 RIVERSIDE COUNTY 74-710 Highway 111 Suite 102Palm Desert, CA 92260 760.862.9835 SAN DIEGO 5927 Balfour Court Suite 102 Carlsbad, CA 92008 760.862.9835 SAN FRANCISCO BAY AREA 951 Mariners Island Blvd. Suite 300 San Mateo, CA 94404 650.425.9444 TINNELLY LAW GROUP A Professional Corporation tinnellylaw.com 27101 Puerta Real – Suite 250 Mission Viejo, CA 92691 P: 949.588.0866 F: 949.588.5993 matt@tinnellylaw.com Via Electronic Mail Only Zoning Administrator - December 16, 2021 Item No. 12a Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 59 Zoning Administrator December 13, 2021 Page 2 of 2 11684/146050 TINNELLY LAW GROUP A Professional Corporation 27101 Puerta Real, Suite 250 | Mission Viejo, CA 92691 With the foregoing in mind, we respectfully request that the Zoning Administrator deny issuing the Permit. We thank you for your consideration. MTP:ba Very truly yours, TINNELLY LAW GROUP MATTHEW T. PLAXTON, ESQ. Zoning Administrator - December 16, 2021 Item No. 12a Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 60 From:jacob gonzales To:CDD Cc:jacob gonzales Subject:FW: Tennis Property City MUP Date:December 15, 2021 1:33:25 PM Attachments:image003.png2021.03.26 Notice of Entry of Judgment (conformed).pdf [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Please see email below and attachment replying directly to Ms. Westmoreland today(12/15/21) at 11:35 AM and copying Mr. Campbell and Mr. Schneider, in response to Ms.Westmoreland’s email of 12/14/21 at 2:00 PM. Please include this email as part of the recordon MUP No. UP2021-033 (PA2021-210). Thank you. From: Elliot Feuerstein <elliot.feuerstein@gmail.com> Sent: Wednesday, December 15, 2021 11:35 AMTo: Westmoreland, Liz <LWestmoreland@newportbeachca.gov>Cc: robert ohill <ROH@golfrealtyfund.com>; Irving M. <irvingmchase@gmail.com>; RyanChase <ryanlylechase@gmail.com>; brett feuerstein <brett@mesacenters.com>; jacobgonzales <jgonzales@jcg-law.com>; Yoder, Michael <myoder@omm.com>; Campbell, Jim<JCampbell@newportbeachca.gov>; Schneider, Matthew<MSchneider@newportbeachca.gov>; Elliot Feuerstein <elliot.feuerstein@gmail.com>Subject: Re: Tennis Property City MUP Dear Ms. Westmoreland – Thank you for your email below. We agree the City should not get involved in internalconflicts or disagreements between the owners of the Tennis Property. We are trying to avoidputting the City in such a difficult position which is why we requested that the hearing on theproposed use permit for the Tennis Property be delayed for 60 days to give us a reasonableopportunity to gather information and understand what exactly is happening at the TennisProperty (as we just learned about the application for the use permit late last week) and to tryto work it out with Mr. O Hill. We also recognize that the issue of an owner’s authority to sign on behalf of other owners is alegal issue, one that the City should not be deciding, and is not as black and white as Mr. OHill may be representing it to be. It is our understanding that Mr. O Hill has submitted to theCity in the past, and most recently within the past six months or so, an arbitration award fromalmost ten years ago issued by Judge Haley Fromholz (Ret.) in March 2013, and that page 9 ofthat award says Mr. O Hill can process certain few remaining discretionary entitlements for Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 61 his master plan at the Tennis Property. To be clear, page 9 of the Fromholz award states as follows: “O Hill had been activelypursuing the discretionary entitlements for nearly fifteen years. Voters approved the general amendment and the only remaining entitlements were the development standards such asheight limits, landscaping, vehicle access, and parking. Thus, very little remained to complete the NBCC Plan.” (Underline added.) Page 4 of that award also states: “Currently, thedevelopment standards for the NBCC Land such as height limits, landscaping, vehicle access, and parking, are still undetermined. The development standards are the final discretionaryentitlements for the NBCC Land.” (Underline added.) Judge Fromholz explained his reason for allowing O Hill to finish processing the limited remaining discretionary entitlements onthe basis that there was little left for O Hill to complete and that we waited too long to object. We are not waiting to object this time. In the owners most recent arbitration with Justice Jeffrey King (Ret.)—where Mr. O Hill suedus in an attempt to force us to proceed with the development of his master plan, and in which the arbitrator denied all of Mr. O Hill’s claims against us and found in favor of us on ourcross-claims against him, and awarded us over $2,300,000 for our attorneys’ fees and costs which Mr. O Hill had to reimburse us—Mr. O Hill represented over and over again that as ofNovember 2018 he had finished processing the few remaining discretionary entitlements that the Fromholz award allowed him to process. Indeed, in the Final Award issued by JusticeKing on April 8, 2020, a copy of which is attached (and which was confirmed and entered as a Judgment on March 26, 2021, in Orange County Superior Court Case No. 30-2020-01159790-CU-PA-CJC), Justice King says at page 5, footnote 3, of his Final Award that as of November 2018 that Mr. O Hill had completed his discretionary entitlements: “Judge Fromholz states at page 4 of his decision, “‘[c]urrently, thedevelopment standards for the NBCC Land such as height limits, landscaping, vehicle access and parking are still undetermined. The development standardsare the final discretionary entitlements for the NBCC Land. Proceedings are continuing to be held before the City to determine the development standards.’To a reader it somewhat leaves the impression that he believed the process of entitlements was near completion. Entitlements were not completed until aboutfive and one-half years later.” (Justice King Final Award at p. 5, fn. 3, underline added.) Justice King also states in his Final Award at page 10 as follows: “The master plan has three elements: there are 27 bungalows, 5 villas and thetennis club/spa. The tennis/spa building is an amenity for the bungalows and villas. The entity. By November 2018 he had: the Newport Beach Country Club Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 62 Planned Community text, a zone change, site plan approval, state WaterQuality Control Board approval, grading plan, storm drain plan, dry utility plans and street improvement plans, through plan check. They had all theentitlement approvals necessary to do the ‘bake-off.’” (Id. at 10, underline added.) Thus, we have informed Mr. O Hill in writing on multiple occasions that any right he believeshe had to process the few remaining discretionary entitlements under the Fromholz award had run its course as of November 2018 when he finished processing his discretionaryentitlements, that the Fromholz award does not support entitlements/plans he may presently be processing with the City, and that he does not have our consent—express or implied—to seekentitlements/plans for the Tennis Property. For the record, we object to the City’s position that “Mr. O Hill is authorized to sign the [minor use permit] application on behalf of the ownership” – and it is our belief that Mr. OHill does not have the authority to sign documents on behalf of the entire ownership that he may have submitted to the City since he completed his discretionary entitlements in November2018. But again, our desire is to not put the City in the position of having to weigh-in on that issue – which from our perspective is not an issue on which the City Community DevelopmentDepartment should be weighing-in. Also, we view the issuance of a liquor license at the Tennis Property as a material issue, and we need a reasonable opportunity to understand as co-owners of the Tennis Property our potential exposure and liability should alcohol be permitted to be sold and/or consumed there. Thus, we once more renew our request that the City delaythe hearing on the proposed use permit for the Tennis Property for 60 days to give us a reasonable opportunity to gather information (including the information requested in my initialemail to you of December 10, 2021) and to try to resolve the issue with Mr. O Hill. Your prompt response is appreciated. Please let us know the City’s response to our renewed request to continue the hearing for 60-days as soon as possible. Thank you. Elliot Feuerstein on behalf of co-owners Mesa Shopping Center-East LLC and Mira MesaShopping Center-West LLC and Irv Chase (copied) on behalf of co-owner The Fainbarg III, LP On Tue, Dec 14, 2021 at 2:00 PM Westmoreland, Liz<LWestmoreland@newportbeachca.gov> wrote: Good Afternoon Mr. Feuerstein, Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 63 Thank you for your comments on the proposed Minor Use Permit for the Tennis ClubhouseGrill. Please note that alcohol service in this zoning district (PC47 - Newport Beach Country Club) requires a minor use permit as there are no late hours proposed (after 11:00p.m.). Based on previous planning applications and interactions related to the property, our understanding is that Mr. O Hill is authorized to sign the application on behalf of theownership. If there are any current internal conflicts or disagreements regarding this topic, they would need to be resolved outside of the entitlement process. Please contact me if you have any additional questions or concerns regarding theapplication. Thank you, <!--[if !vml]--> <!--[endif]-->LIZ WESTMORELAND Community Development Department Associate Planner lwestmoreland@newportbeachca.gov 949-644-3234 CITY OF NEWPORT BEACH 100 Civic Center Drive, First Floor Bay B, Newport Beach, California 92660 | newportbeachca.gov From: Elliot Feuerstein <elliot.feuerstein@gmail.com> Sent: December 10, 2021 4:41 PM Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 64 To: Westmoreland, Liz <LWestmoreland@newportbeachca.gov>Cc: Murillo, Jaime <JMurillo@newportbeachca.gov>; robert ohill <ROH@golfrealtyfund.com>; Irving M. <irvingmchase@gmail.com>; Ryan Chase<ryanlylechase@gmail.com>; brett feuerstein <brett@mesacenters.com>; jacob gonzales <jgonzales@jcg-law.com>; Yoder, Michael <myoder@omm.com>; Elliot Feuerstein<elliot.feuerstein@gmail.com>Subject: Tennis Property City MUP [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Hello Ms. Westmoreland – I write to you regarding the Tennis Clubhouse Grill Minor Use Permit No. UP2021-033(PA2021-210), for 1602 East Coast Highway in Newport Beach also referred to as 5 and/or 11 Clubhouse Drive (hereinafter the “Tennis Property”), which is on calendar for a ZoningAdministrator hearing on December 16, 2021, at 10:00 AM. I am a principal of Mesa Shopping Center-East LLC and Mira Mesa Shopping Center-West LLC which collectively own 25% of the Tennis Property. Copied on this email is my co-owner Irv Chase who is a principal of The Fainbarg III, LP, which also owns 25% of the Tennis Property. Together we hold a 50% ownership interest in the Tennis Property. Theother owner in the Tennis Property is Golf Realty Fund, LP ("GRF"), whose principal is Robert O Hill, which owns a 50% interest. All owners hold their interests as tenants incommon. We write because we just learned a couple of days ago of MUP No. UP2021-033 (PA2021- 210), and that the entity Clubhouse ATP, LLC is the named applicant on the application tothe City, signed solely by GRF as the owner of the Tennis Property. The application to obtain a use permit for the Tennis Property has been submitted without our knowledge orconsent. It is our understanding that all owners are required to sign a use permit application – we did not sign the application nor were we asked to do so by GRF. It is also ourunderstanding the City typically processes use permits involving alcohol use as a conditional use permit (CUP) – and this is being processed as an MUP. We ask that the City please provide us with copies of all documents in its possessionrelating to the application for MUP No. UP2021-033 (PA2021-210). We also ask that the City please take MUP No. UP2021-033 (PA2021-210) off-calendar and not hold the hearingon December 16, 2021, and not reset the hearing for at least 60 days to give us a reasonable opportunity to review the information requested above in advance of a hearing and so we Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 65 can, as 50% of the ownership of the Tennis Property, meaningfully participate in such ahearing. If you have questions or would like to discuss any of the above, please do not hesitate to call me (C: 619.548.2007, O: 858.271.4682) or Mr. Chase (C: 949.584.8700; O: 949.722.7400). Thank you. Elliot Feuerstein on behalf of co-owners Mesa Shopping Center-East LLC and Mira MesaShopping Center-West LLC and Irv Chase (copied) on behalf of co-owner The Fainbarg III, LP -- Elliot Feuerstein 8294 Mira Mesa Blvd San Diego, CA 92126 858-271-4682 858-271-5161 Fax elliot.feuerstein@gmail.com This message, together with any attachments, may contain material that is confidential and/or privileged for the sole use of the intended recipient. Any review, reliance ordistribution by others or forwarding without express permission is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies. -- Elliot Feuerstein 8294 Mira Mesa Blvd Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 66 San Diego, CA 92126 858-271-4682 858-271-5161 Fax elliot.feuerstein@gmail.com This message, together with any attachments, may contain material that is confidential and/or privileged for the sole use of the intended recipient. Any review, reliance or distribution byothers or forwarding without express permission is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies. Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 67 NOTICE OF ENTRY OF JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JACOB C. GONZALES (SBN 235555) jgonzales@jcg-law.com jcg | law 23 Corporate Plaza Drive, Suite 150 Newport Beach, California 92660-7901 Telephone: +1 949 313 8545 MICHAEL YODER (SBN 83059) myoder@omm.com O’MELVENY & MYERS LLP 610 Newport Center Drive 17ᵗʰ Floor Newport Beach, California 92660-6429 Telephone: +1 949 823 6900 Facsimile: +1 949 823 6994 Attorneys for Petitioners MESA SHOPPING CENTER-EAST, LLC MIRA MESA SHOPPING CENTER-WEST, LLC and FAINBARG III, LP SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE MESA SHOPPING CENTER-EAST, LLC, a California limited liability company; MIRA MESA SHOPPING CENTER-WEST, LLC, a California limited liability company; and FAINBARG III, LP, a California limited partnership, Petitioners, v. GOLF REALTY FUND LP, a California limited partnership fka O HILL PROPERTIES, a California limited partnership, Respondent. Case No. 30-2020-01159790-CU-PA-CJC Assigned to Hon. Layne H. Melzer, Dept. C-12 NOTICE OF ENTRY OF JUDGMENT Electronically Filed by Superior Court of California, County of Orange, 03/29/2021 04:20:00 PM. 30-2020-01159790-CU-PA-CJC - ROA # 37 - DAVID H. YAMASAKI, Clerk of the Court By e Clerk, Deputy Clerk. Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 68 - 2 - NOTICE OF ENTRY OF JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TO ALL PARTIES AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE Judgment in the above-captioned action was entered and filed on March 25, 2021. A true and correct copy of the Judgment is attached as Exhibit A. Dated: March 26, 2021 JACOB C. GONZALES jcg | law By: Jacob C. Gonzales Attorney for Petitioners Mesa Shopping Center-East LLC, Mira Mesa Shopping Center-West LLC, and Fainbarg III LP Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 69 Exhibit A Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 70 FILED SUPERIOR COURT OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUSTICE CENTER MAR 2 5 2021 DAVID H. YAMASAKI, Cleric of the Court BY: DEPUTY JACOB C. GONZALES (SBN 235555) jgonzAles@jcg-law.com jcg I law 23 Corporate Plaza Drive, Suite 150 Newport Beach, California 92660-7901 Telephone: +1 949 313 8545 MICHAEL YODER (SBN 83059) myoder@omm.com O'MELVENY & MYERS LLP 610 Newport Center Drive 17th Floor Newport Beach, California 92660-6429 Telephone: +1 949 823 6900 Facsimile: +1 949 823 6994 Attorneys for Petitioners MESA SHOPPING CENTER-EAST, LLC MIRA MESA SHOPPING CENTER-WEST, LLC and FAINBARG III, LP SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE MESA SHOPPING CENTER-EAST, LLC, a California limited liability company; MIRA MESA SHOPPING CENTER-WEST, LLC, a California limited liability company; and FAINBARG III, LP, a California limited partnership, Petitioners, V. GOLF REALTY FUND LP, a California limited partnership &a 0 HILL PROPERTIES, a California limited partnership, Respondent. Case No. 30-2020-01159790-CU-PA-CJC [ E/frED] JUDGMENT [PROPOSED] JUDGMENT Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 71 I The Court, having granted, pursuant to California Code of Civil Procedure section 1285, Petitioners Mesa Shopping Center-East LLC, Mira Mesa Shopping Center-West LLC, and Fainbarg III LP's (collectively, "Petitioners" or "Co-Owners") Petition to Confirm Arbitration Award (the "Petition to Confirm") against Respondent Golf Realty Fund, LP ("Respondent" or "GRF"), hereby ORDERS, ADJUDGES and DECREES that: 1. The Final Award issued by Arbitrator Hon. Jeffrey King (Ret.) (the "Final Award") in the arbitration of Golf Realty Fund, LP v. Mira Mesa Shopping Center-East, LLP, et aL, JAMS Ref. No. 1200053406 (the "Arbitration"), fully and finally adjudicates the parties' claims in the Arbitration regarding that certain "Agreement Between Real Property Owners — Balboa Bay Racquet Club" of March 8, 1994 (the "OIC Agreement") for the approximate 6.9 acre Newport Beach tennis club property (the "Tennis Property"), the legal description of which is set forth in Exhibit A to the OIC Agreement as follows: Parcel 1: That portion of Block 93 of Irvine's Subdivision in the City of Newport Beach, County of Orange, State of California, as per Map recorded in Book 1 Page 88 of Miscellaneous Maps in the Office of the County Recorder of said County described as follows: Lot A as shown on that certain Parcel Map filed October 10, 1967 in Book 10 Page 20 of Parcel Maps in the Office of the County Recorder of said County, and Parcels 1, 2 and 3 as shown on that certain Parcel Map filed February 11, 1977 in Book 92 Pages 13 and 14 of Parcel Maps, in the Office of the County Recorder of said County. Parcel 2: As easement for ingress and egress over the most Southerly 190.00 feet of Parcel 1, in the City of Newport Beach, County of Orange, State of California, as shown on that certain Parcel Map filed October 10, 1967 in Book 10 Page 20 of Parcel Maps, in the Office of the County Recorder of said County. 2. Pursuant to the Final Award: (a) Co-Owners have not already consented under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part - 2 - [PROPOSED] JUDGMENT Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 72 of GRF's three element plan to entitle the Tennis Property for (I) five single-family residences, (2) a hotel consisting of twenty-seven units, and (3) a new tennis clubhouse with seven tennis courts and a spa facility (the "Master Plan"); (b) Co-Owners are not estopped from withholding their consent under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of GRF's Master Plan, and, in particular, to the January 22, 2019 letter of intent executed by Hal M. Sears on behalf of NBC Villas, LLC, to purchase a portion of the Tennis Property (the "Sears/Patterson Offer"); (c) Neither Co-Owners nor GRF have the duty to consent to a sale of the Tennis Property or portions thereof. Under the OIC Agreement any owner has the unfettered right to refuse for any reason, to voluntarily sell the Tennis Property or any portion thereof; (d) Co-Owners have no duty to consent to the Sears/Patterson Offer; (e) Relative to the leasing of the Tennis Property or portions thereof, no owner may refuse to lease the Tennis Property or portions thereof for an objectively unreasonable reason; and (0 Co-Owners' present refusal to consent to the leasing and construction of improvements on the Tennis Property and/or portions thereof, is not objectively unreasonable, and as such, Co-Owners do not presently have a duty to consent under the OIC Agreement to the development of GRF's Master Plan; 3. Judgment is hereby entered in favor of Petitioners, and against Respondent, in conformity with the Final Award, a true and correct copy of which is attached hereto as Exhibit A and by this reference fully incorporated herein. //// //// - 3 - [PROPOSED] JUDGMENT Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 73 4. Petitioners may seek costs and fees incurred in costs and motion for attorneys' fees. Dated: March II, 2021 y memorandum of Hong dge La H. Izer J e of the Superior Court - 4 - [PROPOSED] JUDGMENT Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 74 Exhibit A Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 75 JAMS ARBITRATION 1200053406 Golf Realty Fund, LP Claimant, And Mesa Shopping Center- East, LLP; Mira Mesa Shopping Center and Fainbarg Trust Dated April 19, 1982, Respondents. FINAL AWARD Counsel: Paul B. George Esq. Lane Powell 601 SW Second Ave. Suite 2100 Portland, OR 97204 Phone 503-778-2100 georgeplaneposell.com Parties Represented: Golf Realty Fund LP Lauren A. Deeb Esq. Nelson Mullins 19191 S. Vermont Ave Torrance, CA 90502 Phone 949-760-1121 lauren.deeb@nelsonmullins.com Parties Represented: Golf Realty Fund LP // Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 76 Michael G. Yoder Esq. O'Melveny & Meyers LLP 610 Newport Center Dr. Suite 1700 Newport Beach, CA 92660 Phone: 949-760-9600 mvoderantnm.com Parties Represented: Fainbarg Trust Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC Jacob Gonzales Esq. Weintraub Tobin 23 Corporate Plaza Dr. Suite 200 Newport Beach, CA 92660 Phone 949-760-0204 gwaldron@weintraub.com ieonzalesAweintraub.com Parties Represented: Fainbarg Trust Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC Arbitrator: Jeffrey King JAMS 3800 Concours Dr. Suite 320 Ontario, Ca. 91764 Phone: 909-884-6684 Jking.jamsadr@gmail.com Place of Arbitration Hearing: Orange, CA Date of Interim Award: August 26, 2019 Date of Final Award: April 8, 2020 This matter was tried in Arbitration for a total of thirteen days. It was submitted on July 23, 2019.1 I. Testimony was taken March 12 —19, 2019 and May 7 —14, 2019. The Hearing on the Motion for Attorneys' Fees and Costs occurred on March 25, 2020. 2 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 77 By way of their Supplemental Demand for Arbitration, filed on March 13, 2019, Claimant Golf Realty Fund, LP, aka 0 Hill Properties seek the following determinations pursuant to Declaratory Relief: (1) Co-owners, by their past actions and conduct, have consented to, are estopped from consenting to, and/or have waived their right to oppose the NBCC Master Plan for the Tennis Club Property as envisioned by the NBCC Master Plan; (2) Co-owners have a duty to consent to the development of the NBCC Master Plan; (3) Co-owners do not have the unfettered right to refuse consent to the completion of the NBCC Master Plan as entitled; (4) Co- owners are required to exercise their consent rights in good faith and not to act in an objectively unreasonable manner; (5) Co-owners are required to complete the NBCC Master Plan for the Tennis Club Property; and, (6) Co-owners' refusal to consent to the Patterson Homes Offer for the Villa sub-area, the lease for the tennis club/spa sub-area and the future lease of the bungalow sub-area is objectively unreasonable and/or done in bad faith. Respondents, Mesa Shopping Center-East, LLC, Mesa Shopping Center-West, LLC and The Fainbarg Trust dated April 19, 1982, an intervivos trust, have set forth various defenses and seek the following determinations by way of their March 18, 2019 Counterclaim for Declaratory Relief: (1) Co-owners have not already consented to the sale, lease or improvement of the Tennis Property as part of 0 Hill's Master Plan, and in particular the Sears/Patterson Offer; (2) Co- owners are not estopped from withholding their consent under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of 0 Hill's Master Plan, and in particular the Sears/Patterson offer; and, (3) Co-owners have no duty to consent under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of 0 Hill's Master Plan, and in particular, to the Sears/Patterson Offer. Witnesses testifying at the Arbitration were: Robert 0 Hill, Iry Chase, Elliot Feuerstein, Hal Sears, Sean Abdali, Kory Kramer, Leland Stearns, Bruce Baltin, Rosemary Garcia and Alan Reay. Numerous Exhibits were admitted into Evidence. From a factual point of view this Opinion summarizes the testimony of Robert 0 Hill, RV Chase and Elliot Feuerstein; the Opinion attempts to organize the facts on a topic by topic basis, as to the salient issues presented.2 The testimony of the other witnesses is not summarized, in 2 While the testimony is organized and segmented into various issues, it is clear that most of the testimony is also relevant to the other issues discussed in this Opinion. 3 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 78 that while relevant to the issues presented, is not necessary for the ultimate disposition of the present matter. I. RES JUDICATA The starting point for any discussion of the present matter is the Res Judicata effect on the issues presented here, if any, of Judge Fromholtz' May 20, 2013 "Final Award." The issue was previously ruled on in this matter, on June 27, 2018. After hearing the evidence in the present matter, I have revisited the issue and my ruling is the same. In that this Opinion represents my final opinion on the first phase of the present litigation, I will restate the ruling herein with a few minor changes. "Collateral estoppel is one of two aspects of the doctrine of res judicata. In its narrowest form, res judicata " 'precludes parties or their privies from relitigating a cause of action finally resolved in a prior proceeding."' But res judicata also includes a broader principle, commonly termed collateral estoppel, under which an issue "necessarily decided in prior litigation may be conclusively determined as against the parties thereto or their privies in a subsequent lawsuit on a different cause of action." (Citations). "Thus, res judicata does not merely bar relitigation of identical claims or causes of action," instead, in its collateral estoppel aspect, the doctrine may also preclude a party to prior litigation from redisputing issues therein decided against him, even when those issues bear on different claims raised in a later case." (Vandenberg v. Superior Court (1999) 21 Ca1.4th 815, 828.) "Not only does the issue litigated have to be identical, no aspect of what was decided in the previous proceeding can be left to conjecture. Evidence extrinsic to the judgment roll may be used to ascertain which issues were determined in the original action." (Bronco Wine . Frank Logoluso Farms (1989) 214 Cal. App.3d 699, 709) Here, what was litigated, determined and necessarily decided in the prior arbitration, was that by way of acquiescence, and/or estoppel the Co-owners consented to the processing of development plans with land use changes up through and including the obtaining of entitlements. The issue of co-owners consenting to any specific plan and/or sale of the property or portions thereof was not litigated and not necessarily decided. 4 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 79 In the Fromholtz matter, Co-owners' February 2011 Claim stated causes of action for Breach of Fiduciary Duty, Breach of Contract and Conversion. The gist of the Claim was that the Managing Owner, without the consent of the Co-owners processed plans to entitle, rezone and/or develop the property. It was contended that the Managing Owner failed to account and improperly spent money for purposes of entitlements, rezoning and redevelopment of the property. The Claim went no further. The Managing Owner's response was that he informed the Co-owners of his intent to seek discretionary entitlements; they agreed and encouraged the planning and seeking of entitlements. None of the pleadings addressed the issue of the Managing Owner being allowed to sell the property or portions thereof, or that the Co-owners consented (either by acquiescence or estoppel) to said sale. Further, in viewing the Closing Briefs, they addressed the Managing Owner's authority to seek governmental approval for plans and entitlements and whether the expenditures of the Managing Owner were wasteful and unauthorized.3 As such nothing more or less was decided by Judge Fromholtz than.....by way of acquiescence, and/or estoppel the Co-owners consented to the processing of development plans with land use changes up through and including the obtaining of entitlements. He did not decide that any of the tenants in common had to follow-through with development consistent therewith. The next issue is whether by their conduct, the Co-owners in some fashion have consented to the proposed present development and "Bake-off' sale by the Managing Owner (or are otherwise estopped from withholding their consent to it). I think not. II. CONSENT, WAIVER AND/OR ESTOPPEL (a.) Testimony of Managing Owner 3 Judge Fromholtz states at page 4 of his decision, "Murrently, the development standards for the NBCC Land such as height limits, landscaping, vehicle access and parking are still undetermined. The development standards are the final discretionary entitlements for the NBCC Land. Proceedings are continuing to be held before the City to determine the development standards." To a reader it somewhat leaves the impression that he believed the process of entitlements was near completion. Entitlements were not completed until about five and one-half years later. 5 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 80 The Managing Owner testified in the 1995-1996 timeframe the co-owners were supportive of the land use changes. He discussed with them the General Plan Amendment and zone changes; they were in favor of getting the entitlements. He discussed putting Villas on both the tennis and golf property. They discussed selling some of the property in fee. Both co- owners wanted to buy the Villa area themselves. The co-owners never objected to the bungalow concept and never raised any objections or told the Managing Owner to stop what he was doing. In late 2007 and early 2008 Iry Chase and Elliot Feuerstein began getting involved in the project from the Co-owners' standpoint. In 2007, Mr. Chase and Mr. Feuerstein expressed some concern relative to the lack of third party offers for all three components of the master plan. They also asked for information relative to the deals the Managing Owner was negotiating. In October of 2007 the George Jones appraisal was done. It dealt with hypothetical land uses and revealed that a strictly residential use of the property would have a value 4 times that of the Managing Owner's Master Planned development. In 2008 Mr. 0 Hill received a letter from Mr. Chase, indicating that the development plan did not maximize the value of the property and the Co-owners did not support it. They wanted more residential and a reduction of the tennis club development costs. Both Mr. Feuerstein and Mr. Chase started expressing reservations relative to the feasibility of the bungalows. They wanted to increase the residential component and reduce the tennis club development construction costs. They were seeking a comprehensive plan for development and sale. During the early stages of the approval process, Mr. Chase and Mr. Feuerstein would appear at Planning Commission and City Council meetings opposing approval of the master plan. During the 2010 time, 0 Hill explained on a number of occasions that after approval the Co-owners could go back and try to get more residential. In 2011 the Co-owners sued the Managing Owner to enjoin him from proceeding further with the development plan. The Fromholtz decision was issued in May of 2013. In June of 2014 the Co-owners sent a letter indicating that they disagreed with the project and the Managing Owner's continued spending of joint money on the project. In 2014 he indicated to them that he had no obligation or desire to start over on the discretionary entitlement 6 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 81 process even if it made good business sense. In this time frame discussions began about him purchasing the Co-owners interests. In 2016 they informed the Managing Owner that any prior consent implied from the Fromholtz decision had run its course and that there was no need to continue to spend joint ownership money on the project unless and until a financially sound comprehensive plan for development was put together. In 2017 he was encouraged by the Co-owners to engage with IBC as it relates to the purchase of the property for $28 million. In 2018 they also wrote objecting to the duration of the proposed tennis club lease and the inclusion of capital improvements for the tennis club. In a February 2019 letter, the Co-owners indicated to the Managing Owner that over the years they had made several requests for the actual rent that a bungalow operator would be paying. Since the February 20, 2008 letter the Co-owners have never changed their position that the plan did not maximize the value of the property. They have never been supportive of the plan. They have always asked to explore the possibility of adding more residential. (b)Testimony of Iry Chase He became involved in the property in late 2006 early 2007. In March 2007 he remembers a discussion about the master plan. After he and Mr. Feuerstein became involved they were asking questions about the economics of the Plan. In 2007 they asked for a timeline and projected milestones as it relates to the development; they were not provided one. He started asking questions about financial feasibility. He and Mr. Feuerstein were more interested in getting costs and income before they asked for an appraisal. Within a year of his involvement he decided he did not want the Managing Owner to obtain the entitlements. In February 2008 the Co-owners sent a "stop letter." He wanted the Managing Owner to stop seeking entitlements altogether. He appeared at Planning Commission meetings and City Council meetings in an attempt to stop the project. They sued the Managing Owner when he refused to stop seeking entitlements; they tried to get an injunction. He did not want the entitlements obtained. In the 2014 time frame he went out to see various people and companies as to whether they might have some interest in the property. Mr. Feurerstein talked with the Lennar Group and the Olson Company; there was no follow-up from either. 7 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 82 (c.) Testimony of Elliot Feuerstein He has been involved with the property almost from the inception. They understood back in 2002 that the Managing Owner was trying to up-zone the property and was generally exploring some development opportunities. He was supportive of the up-zoning. In the early 2000's they were thinking that it would be primarily residential. In about October 2006 he became aware that some of the units were to be sold. At that time he started having concerns in that the Managing Owner indicated that the ground rent for the bungalows would be around $2 million per year. He started wondering how 27 bungalows could generate $2 million in ground rent per year and how the sale of the Villas could generate $10 million. When the projected ground rent dropped to $1.284 million he began to lose confidence and believed the information they were getting was not reliable. In 2007 they were following up by seeking information, which they did not get. They were trying to get information about a bungalow operator, because in their mind the bungalow operator was the anchor tenant. In February 2008 he instructed the Managing Owner to stop. When the 2008 letter was sent it was not his intention that he would never approve any further work to entitle the property or that he would not ultimately agree to a sale or lease. They filed a lawsuit for an injunction in February 2011. After 2013 he spoke to the Olson Company and Lennar Group about whether they were interested in the property. Neither demonstrated any interest. (d.) Discussion The Managing Owner, suggests these facts support a conclusion that the Co-owners consented to the NBCC Master Plan development as proposed by the Managing Owner, waived any opposition thereto or that they are otherwise estopped from not consenting to the development of the NBCC Master Plan. It is clear from the above facts that the present Co-owners have not consented to the NBCC development. They have opposed it since 2008 and in essence have not given an inch in their opposition. Even the Managing Owner testified that the Co-owners have always been in opposition and have not consented to the Plan or the development. To have consent, there must be an "approval of what is done or proposed by another." (Webster 's Collegiate Dictionary, 10th Ed., 1997) The Co-owners have not approved of the Managing Owner's plan or the development thereof. 8 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 83 "Waiver" is also not present. As discussed infra, under the "Agreement Between Real Property Owners," the co-owners have the unfettered right not to consent to the sale of the Tennis Property, or portions thereof. They have the further right to withhold their consent to lease the subject property, so long as the withholding of consent is not objectively unreasonable. " 'Waiver is the intentional relinquishment of a known right after full knowledge of the facts' (citation). The burden is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation,... The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right.' Thus 'California courts will find waiver when a party intentionally relinquishes a right or when that party's acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.' (Citations)" (Old Republic Insurance Co. v. FSR Brokerage (2000) 80 Cal. App.4th 666, 678.) As demonstrated by the above facts, at no time did the Co-owners either expressly or by their conduct intentionally relinquish their right to object to the development of the Managing Owner's Master Plan. Since the inception of the plan they have voiced their opposition and have conducted themselves consistent therewith. "The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he....led another to believe a particular circumstance to be true and to rely upon such belief to his detriment. The elements of the doctrine are that (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury." (Strong v. County of Santa Cruz (1975) 15 Ca1.3d 720, 724-725) Here, there are no facts to suggest that the Co-owners acted in such a way so as to lead the Managing Owner to the impression that they were on-board with the NBCC Master Plan and the development thereof. 9 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 84 III. RIGHTS AND OBLIGATIONS UNDER THE OPERATING AGREEMENT Moving beyond the past conduct of the parties and their predecessors, the issue becomes what are the rights and obligations of the parties under the March 8, 1994 "Agreement Between Real Property Owners Balboa Bay Club Racquet Club," and more specifically whether the Co- owners must consent to the development proposed by the Managing Partner. (a.) History and Status of the NBCC Master Plan The Managing Owner testified when they acquired the tennis and golf property it was zoned recreational open space. They needed to get approval of the City of Newport Beach and the Coastal Commission for land use change. The city wide vote as to amending the General Plan was in November of 2006. Thereafter he needed get the project entitled, which encompassed getting all the approvals from the various governmental agencies and quasi- governmental agencies. From 2002 to 2006 he met with many groups to try to persuade them of the merits of the General Plan Amendment, Zone change and the Master Plan for the property. He got the whole thing approved by promising many groups various things. When he met with the tennis members he promised them that the tennis facility would stay and they would get a new clubhouse and spa. The Tennis Property was one of many geographical areas addressed in the 2006 General Plan Amendment. The planned community district text was approved by the City in 2012. The master plan has three elements: there are 27 bungalows, 5 villas and the tennis club/spa. The tennis/spa building is an amenity for the bungalows and villas. The entity operating the fitness facility and spa would be the hotel bungalow tenant. While initially, the developer of the villas was to pay for the tennis clubhouse the Managing Owner is now hoping to get the hotel developer of the bungalows to build or pay for the tennis clubhouse. He doesn't think of the bungalow property as an anchor tenant. He has tried to market all three together however, only in the context of having the Co-owners sell their entire interest. By November 2018 he had: the Newport Beach Country Club Planned Community text, a zone change, site plan approval, state Water Quality Control Board approval, grading plan, storm drain plan, dry utility plans and street improvement plans, through plan check. They had all the entitlement approvals necessary to do the "bake-off." 10 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 85 (b.) Discussion From the evidence the proposed and entitled development consists of the sale of 5 lots for the construction of "Villas," the construction of a new Tennis and Spa Club with the reduction of some tennis courts and the construction of 27 separate "Bungalows" which are to be primarily a Hotel (although they could be rented on a long term basis). The above uses have been represented to various governmental entities and marketed by the Managing Owner as a "Master Plan." Throughout the Arbitration the evidence demonstrated that from a conceptual standpoint, the development of all three uses are interrelated. The "Bungalows," which will be land leased by the general partners to a hotel operator, is the primary money maker of the "Master Plan." The sale of the "Villa" lots is to obtain not only money for the general partners but also a commitment from the purchaser of the "Villa" lots to construct a new Tennis and Spa Club as well as construct the infrastructure for the entire "Master Planned" property. Lastly, the Tennis and Spa Club will be ground leased by the Owners; it is not only to be self-sufficient as a tennis club and spa, but also as an amenity for the hotel "Bungalow" guests. With the above understanding of the proposed development I now turn to the rights and obligations of the parties under the 1994 agreement and more specifically to whether the Co- owners must consent to the above development. (c.) Owners' Understanding of the Agreement The Managing Owner testified that he approached Allan about the tennis and the golf property. Allan introduced him to Arnold. Both Allan and he loved ground leases. Golf Realty fund owns a 50% tenant in common interest in the tennis property. He testified that under the terms of the agreement there must be a super majority vote to sell the property and there must be majority approval to put in capital improvements. Under the agreement each owner must consent to any grant of a leasehold interest. (At another point he testified that only a majority needed to agree as it relates to a lease.) Under the sale provision section 4B, for an owner to be compelled to sell his interest there must be a vote of at least 70%. He bought his interest in the tennis property for investment; the recitals in the OIC agreement say that the property was acquired partially for investment. He has taken the position consistently that he has the right to refuse to sell his interest and has consistently told the Co- 11 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 86 owners such. He concurs with the notion that the Co-owners have the same right not to sell the villa area, tenths and spa area as well as the bungalow area. He has not gotten consent from the Co-owners to use ownership funds for the tennis clubhouse spa area. He has not got written consent to use the proceeds from the sale of the villa sub-area to construct a tennis clubhouse and spa building. He believes if a ground lessee of the bungalow area is required to pay money relative to the construction of the tennis spa club, it would require Co-owners consent. Iry Chase testified that he thinks it's absolutely reasonable that if the managing owner does not wish to sell he does not need to sell; it is his decision. It has always been their goal to have long-term ground leases. (d) Discussion "'A contract must be "interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting" (Civ. Code, § 1636), and where, as here, the contract is in writing, "the intention ... is to be ascertained from the writing alone, if possible ...." (Civ. Code, § 1639.)"' (Roden v. Bergen Brunswig Corp. (2003) 107 Cal.App.4th 620, 625.) The interpretation of a contract is a question of law. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) The interpretation must be "'fair and reasonable, not leading to absurd conclusions.'" (Kashmiri v. Regents of University of California (2007) 156 Cal.App.4th 809, 842.) A contract must be interpreted so as to be "lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (Civ. Code, § 1643.) "The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." (Id., § 1641.) "A contract may be explained by reference to the . .. matter to which it relates." (Id., § 1647.) As to the present dispute, the following are among the relevant contract provisions: Recitals "A. The Owners desire to own, lease, manage, maintain, refinance, encumber and hold for investment, as tenants in common, that certain real property comprising approximately 6.099 acres with improvements thereon..." 12 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 87 "B. The Owners have discussed the co-ownership of the Property...it is in the best interest of each Owner that the holding of the Property be governed by an agreement which defines the rights and duties of each Owner in the form of this Agreement." Provision 1. "Agreement as Tenants in Common. The owners agree to hold title to the Property as tenants in common to own, manage, maintain, lease, finance, refinance, and/or hold the Property for investment in accordance with the terms of this Agreement. The Owners may conduct such other activities with respect to the Property as are related to or compatible with the ownership of real estate. Subject to the provisions of the Agreement, each Owner retains the right to deal with his Interest in the Property...as each owner sees fit." Provision 4, subdivision (b). "Financing, Refinancing, Sale and Leasing. The Managing Owner shall list the Property for sale and convey or otherwise transfer the Property if such transaction is approved by seventy percent (70%) or more of the ownership Interests in the Property...." Provision 5, subdivision (a)"Limitation of Owners. Each Owner hereby irrevocably waives any and all rights that such Owner may withdraw from the terms of this Agreement, maintain an action for the partition of the Property (unless 65% or more of the Interests in the Property join or consent to such action), or otherwise force a sale of the Property during the term hereof, except as expressly provided herein." Here the testimony and evidence support the conclusion that the contracting parties were sophisticated in the area of real estate investment. From the contract itself, it is clear that the parties intended for the Managing Owner to be the individual with the most say so. He was responsible for the day to day activities of the tenancy in common and no major decision such as "sale" of the property or investment in capital improvements could be made without his concurrence. The parties also wished to preserve the independence of each owner to deal with its Interest in the Property as such Owner sees fit, "subject to the [remaining] provisions of the Agreement." While preserving some independence, Provision 5, subdivision (a) in essence says that none of the tenants in common can withdraw from the tenancy and no one without the Managing Owner's concurrence can bring an end to the tenancy by filing a Partition Action. As a result of these provisions and manifestations of intent by the contracting parties, the parties find themselves at an impasse — the Managing Owner with 50% interest wants one thing and the Co-Owners with a combined 50% interest do not want that. 13 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 88 Co-Owners' counsel suggests that because "each Owner retains the right to deal with his Interest in the Property...as each owner sees fit;" that by agreement the parties bargained for an impasse, and it is what it is. Counsel argues that the Co-owners have the unfettered right not to agree to any proposed development of the Managing Owner's. In support of this Co-Owners rely primarily on Wolf v. Walt Disney Pictures & Television (2008) 162 Cal. App.4th 1107, and Third Story Music, Inc., v. Waits (1996) 41 Cal. App.46 798, for the proposition that when "sole discretion" is contractually vested in an individual and the contract is otherwise supported by consideration, the exercise of that discretion is contemplated by the parties and courts will not imply some other term such as good faith or commercial reasonableness, into the Contract. The Managing Owner submits that based on Kendall v. Ernest Pestana, Inc. (1985) 40 Ca1.3d 488, the implied covenant of good faith and fair dealing must be implied into the contract and as such the Co-Owners need to have a good faith reason for not agreeing to the Managing Owner's proposed development. In that the Co-owners allegedly do not have a good faith reason for not going along with the Managing Owner's proposed development, they should not only be found in breach of contract, but be forced to move forward with the sale of the "Villas" as a result of the "Bake-off sale." I find myself somewhat in the middle of these two opposed views. Initially, the agreement provides for the owners to "own, manage, maintain, lease, finance, refinance, and/or hold the Property for investment." This is the purpose of the agreement. There is no reference to "sale." Second, Provision 4, subdivision (b) is a "forced sale" provision, not a provision dealing with a voluntary or consensual sale. The provision provides, "Nile Managing Owner shall list the Property for sale and convey or otherwise transfer the Property if such transaction is approved by seventy percent (70%) or more of the ownership Interests in the Property...." (Emphasis Added.) If the provision was intended to deal with a voluntary or consensual sale, the provision would be written in a manner similar to "the Managing Owner may not list the Property for sale and convey or otherwise transfer the Property unless such transaction is approved by seventy percent (70%) or more of the ownership Interests in the Property..." Or, "the Managing Owner may list the property for sale only if the transaction is approved by 70% of the owners." As the provision is written it imposes a mandatory duty on the Managing Owner to sell the property if 70% of the ownership interest wants the property sold. If the provision was intended to proscribe the ability of the managing owner to sell the 14 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 89 property, it would have been written using limiting language, such as "may not list" or "may list only if' the language would be more permissive in nature. This distinction is important as it relates to the intent of the parties. When the parties entered into the agreement, they did not evidence an intent to sell the property. The property was being purchased for investment purposes, or as sometimes referred to in the arbitration as a "coupon clipper." The only provision as to "sale" is that the managing owner "shall" sell when 70% of the interests force him to do so. As such, when considering whether to imply the covenant of good faith into the agreement as it relates to the voluntary or consensual "sale" of the property, one would not do so, because there is no provision in the agreement dealing with the voluntary "sale" of the property. This is consistent with the intent of the parties to hold the property for investment. We then turn to Provision 1, which indicates "subject to the provisions of the Agreement, each Owner retains the right to deal with his Interest in the Property...as each owner sees fit." Reading this provision in conjunction with the notion that the property is being held for investment, and the fact that there is no provision providing for the sale of the real property other than a forced sale, the provision can be interpreted in no way other than to allow for the unfettered right of an owner not to consent to a sale. In that the sale of the property is not provided for other than by way of forced sale, it (the sale) is not "subject to the provisions of the Agreement," because it is not provided for. In that it is not provided for, then each owner may do with his interest "as he (she) sees fit, with no restrictions.4 There need be no good faith reason for not agreeing to sell the property. Such is not the case however, when dealing with "owning, managing, maintaining, leasing, financing, refinancing, and/or holding the Property for investment," (referenced in the "Purpose" of the Agreement and in Provision 1 of the Agreement). An owner's ability to do "as he sees fit" is modified by and is subject to the provisions of the agreement. In that owning, managing, maintaining, leasing, financing, refinancing, and/or holding the property are provisions of the agreement, the owner cannot do "as he sees fit." If he could, then the purpose 4 With such a construction, each individual owner has the unfettered right not to voluntarily consent to a sale for whatever reason the individual owner has. As such, the Managing Owner has the unfettered right not to consent to the sale of the property, because he played tennis there as a kid. 15 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 90 of the contract would be totally destroyed.5 Thus, as to those activities provided for in the Purpose of the Agreement and in Provision 1, there must be implied into the Agreement, a promise that each owner will exercise his discretion in good faith. The above construction is in my mind ascertained from the writing alone and gives effect to the mutual intention of the parties. It considers the whole of the contract and gives effect to each provision. Lastly, it is consistent with the matter to which it relates, to hold property for purposes of investment. Further, as demonstrated by the testimony of the Managing Owner and Iry Chase, both individuals testified that they believe each Co-owner has the right not to consent to a sale of the property. The Managing Owner testified that at the time of the agreement both he and Allen loved ground leases. And while at one point the Managing Owner did testify that it took a super- majority to sell the property, at another point he testified that Provision 4 (B) dealt with compelling an owner to sell his interest. The above construction is also consistent with Wolf v. Walt Disney Pictures & Television (2008) 162 Cal. App.4th 1107, Third Story Music, Inc., v. Waits (1996) 41 Cal. App.4`11 798 and Carma Developers v. Marathon Development California, Inc. (1992) 2 Ca1.4th 343. In Wolf supra, Disney acquired the rights to Roger Rabbit in exchange for providing plaintiff a portion of the "Gross Receipts" from Disney's monetization of Roger Rabbit. Disney thereafter entered into agreements with various entities allowing said entities to "exploit" Roger Rabbit characters in exchange for the company's agreement to promote the Roger Rabbit franchise; there was no monetary compensation involved in the agreements. Plaintiff contended, that such agreements were in violation of the underlying contract between plaintiff and Disney, in that Disney breached an implied covenant of fair dealing by entering into agreements in which plaintiff received no financial benefit. In denying plaintiffs claim, the Court relied upon an express provision of the underlying contract which provided, "[Disney] shall not be under any obligation to exercise any of the rights granted to Purchaser hereunder; and any and all said rights may be assigned by [Disney], and/or licenses may be granted by [Disney] with respect thereto, as [Disney] may see fit." (Wolf, supra, at p. 1121, footnote 7.) 5 For example, the Managing Owner may decide he does not want to do anything with the property and it becomes fallow. 16 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 91 "It has long been recognized in California every contract contains an implied covenant of good faith and fair dealing that "neither party will do anything which will injure the right of the other to receive the benefits of the agreement.' (citations) The covenant is 'read into contracts `in order to protect the express covenants or promises of the contract. "However, the implied covenant will only be recognized to further the contract's purpose; it will not be read into a contract to prohibit a party from doing that which is expressly permitted by the agreement itself' (Id, at p. 1120) "[I]f the express purpose of the contract is to grant unfettered discretion, and the contract is otherwise supported by adequate consideration, then the conduct is, by definition, within the reasonable expectation of the parties and 'can never violate an implied covenant of good faith and fair dealing." (Citation.) (Id, at p. 1121)6 Here, the purpose of the Contract is set forth in Recital A; "The Owners desire to own, lease, manage, maintain, refinance, encumber and hold for investment... [the property.]" Nothing in this Recital or Provision 1 references the "selling" of the property. Thus, each tenant in common can deal with their respective interests in the property as they see fit, relative to the sale of the property. The agreement gives them unfettered discretion. This unfettered discretion however does not apply when dealing with issues of leasing, managing, maintaining refinancing, encumbering and holding for investment. The parties expressly agreed to do these certain things with the property. Thus the implied covenant will be read into the agreement to protect these express promises. Provision 1, even provides that the discretion to do as one sees fit, is subject to the provisions of the agreement; the provisions of the agreement provide for the leasing of the property, thus the parties contemplated that unfettered discretion would not apply in such an instance. As stated in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, "The covenant of good faith and fair dealing was developed in the contract arena and is aimed at making effective the agreement's promises." (at p. 683) " [T]he courts employ the good faith doctrine to effectuate the intentions of the parties, or to protect their reasonable expectations.' " (at p. 684) 6 " 'The general rule regarding the covenant of good faith is plainly subject to the exception that the parties may, by express provisions of the contract, grant the right to engage in the very acts and conduct which would otherwise have been forbidden by an implied covenant of good faith and fair dealing. This is in accord with the general principle that, in interpreting a contract 'an implication should not be made when the contrary is indicated in clear and express words.' (citation)" (Third Story Music, Inc. it Waits (1995) 41 Cal. App.4'h 798, 803.) 17 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 92 As indicated in Carma Developers, supra, at p. 373, "It is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract....[T]he implied covenant of good faith is read into contracts 'in order to protect the express covenants or promises of the contract,.."(Citation)" Here, one of the express promises of the contract and a purpose for the contract is to hold the property to lease. As such the implied covenant of good faith is implied into the agreement, relative to this function. (See, Foley, supra, at p. 684, "As to the scope of the covenant, "the precise nature and extent of the duty imposed by such an implied promise will depend on the contractual purpose.' (citation)" The nature of the implied covenant, is that in exercising discretion, the discretion must not be exercised with "subjective faith or objective unreasonableness." (See, Wolf, supra, at p. 1124.) In a commercial setting the objective test is the more appropriate standard to be applied. (Storek & Storek, Inc. v. Citicorp (2002) 100 Cal. App.4th 44) Thus, in looking at the present facts, because the Managing Owner's present proposal involves the sale of the Villa sub-area to Sears/Patterson, the co-owners have the unfettered right not to consent to the sale. Also, the co-owners' refusal to agree with the Managing Owner's overall development and lease of the bungalow and the tennis club sub-areas, is not "objectively unreasonable." IV. ALTERNATIVES AND GOOD FAITH REASONS (a) Managing Owner's Testimony As a 50% owner he believes he has a duty to be reasonable and fair to the Co-owners. As managing owner it is his understanding that the Co-owners expect him to consider potential uses of the tennis property. He should be looking for alternatives that make good business sense. In considering alternatives that make good business sense, he would want to have meaningful information about the potential return on investment. He believes getting the entitlements and PC text added enormous value to the property. There was never a goal to sell the property once entitlements were obtained. He believes the tennis property is a unique property and has good income producing potential. The largest component of the expected future revenue is the bungalow area. The bungalows are important to maximize the income. It would be his goal to have the bungalow 18 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 93 area as a coupon clipper. He thinks he can get the bungalow people to pay for the clubhouse and spa. The tennis clubhouse and spa is an amenity for the bungalows. The bungalow tenant would be responsible for cost overruns of the tennis clubhouse. He believes he can obtain $50,000 a month in ground rent from a hotel developer and/or operator. Two of his reasons for not changing the Master Plan is that he made certain promises to stakeholders relative to obtaining entitlements and he wants to avoid infighting among his heirs and therefore wants a coupon clipper. A long-term ground lease could address his family reasons. Personal reasons could potentially be addressed by a long-term ground lease. A long-term ground lease could potentially address his business concerns as well. In 2016 he told the Co-owners he intended to retain WD Land for a bake-off sale. In 2016 he started the drop box and started dealing with Tom Doyle. There was a drop box in 2018 for the bake-off. He has not found a builder willing to build five custom homes. The Sears letter of intent is the first written offer provided to the Co-owners. The only other offer was from Nexus, a Texas development company; they wanted to buy out the Co-owners' interest. Nexus is a hotel developer and it wanted to develop the bungalows, but also wanted an ownership interest. Throughout the process the Co-owners have wanted more residential both in the area of the bungalows as well as where the tennis court area. Between 2008 and 2011 the Co-owners never gave him alternative plans. In 2010 he received a letter from the Co-owners attorney indicating the Co-owners felt that the Managing Owner should do something other than the NBCC master plan. The Co-owners have indicated that they do not believe the bungalows are feasible. The Coastal Commission made it clear that an all residential use was not going to be approved. For more residential they would have to start the general plan amendment process all over. In 2014 he believed that groups would oppose an effort to change to residential density on the tennis club property; that remains his belief as of today. Moving to all residential would not be feasible due to exactions and the fact that it would take many years and a lot of money for purposes of attempting to get approval. All residential is not feasible. (The Jones' appraisal of $42.5 million does not take into account exaction fees.) It would be a mistake at this time to change things around. In the past the Co-owners did not understand the economics of the master plan and thought it was unfeasible. 19 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 94 (b.) Iry Chase's Testimony There are three elements to the project and they are all interrelated; he wants to see the financials for all three elements of the property at one time. He wants to know how the parts of the project interrelate. He will not approve the sale of the villas unless the bungalow's finances and development pencil out. He will not approve the lease to Mr. Abdali unless the other parts work; he wants to look at the economics of the entire project. He has not been presented with offers for all three elements globally. The most important would be a letter of intent from a bungalow tenant and to globally see how everything fits together in order to evaluate it, as opposed to piecemeal approach. All of the parts are interrelated. He has refused to allow the sale of the villas. In terms of the sale there needs more information about the purchaser. He wants an independent certified public accountant for purposes of determining the purchaser's financial credibility. He has to be convinced that they have the financial wherewithal to purchase the property, cover shortfalls and be responsible for everything getting done. He wants more value for his investment; putting more residential property would be one element of that. He believes the entitlement process for more residential would take probably one year. The opposition in the community would be nonexistent. In February 2019 they indicated to the Managing Owner that a project with more residential units will create more value for all of the owners. He believes the initial zone change raised the value but the master plan has lowered the value because it is too specific and too complicated for developers to come in and develop. He believes the process has been backwards; that's why the property is worthless. When he looked at the 2007 Jones' appraisal and compared all of the hypothetical uses there were great differences. After the appraisal they asked the Managing Owner to explore adding more residential; he responded by indicating that no other project could be approved. He did not deal with Abdali and Sears after November of 2018 because of the threat of being sued for interference. In the Jones appraisal the Managing Owner's plan was about 25% of the value of other potential uses. 20 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 95 (a) Elliot Feuerstein Testimony This is a prime location in Newport Beach and there should be a lot of interest in building. The price could be a lot higher if a builder is not locked into a plan. To properly evaluate the bungalows they need a letter to from an actual operator. In the vein of "alternatives and good faith reasons," I chose to somewhat segregate testimony relative to IBC, the Tennis facility and what I characterize as "Changing Landscape." Each have a particular relevance in determining whether the Co-owners' refusal to consent to the Managing Owner's proposed development, is objectively unreasonable. (d.) IBC (I) Managing Owner's Testimony He has told Pacific Hospitality over the years that Golf Realty has no interest in selling its interest; it has been his consistent position throughout. He has indicated to the Co-owners that Pacific Hospitality was not interested in being a bungalow operator but would be interested in buying Co-owners 50% interest. Back in 2007 he proposed a lease to IBC, which was then under different ownership. At that time they were not interested in operating the bungalows. In May of 2017 he received a letter of intent from IBC expressing an interest in buying the property for $28 million. He met with IBC about buying out the Co-owners interest. IBC wanted control if they were to do so; he made it clear that as Managing Owner he would have control from a business point of view. In November 2018 he contacted IBC at the request of the Co-owners; in this general time frame the Co-owners shared with him that IBC was willing to negotiate a long-term lease which would include the addition of 25 condominiums. He has made no effort to inquire of IBC as it relates to a long-term ground lease. He thought it would be counterproductive because he has promised Mr. Abdali that he could operate the tennis club. Another reason is that he made promises to the tennis club members that the tennis club would be saved. In a January 2019 letter it was indicated by IBC that they did not have an interest in piecemeal participation in the tennis property. They further indicated that as experienced hotel owners and operators they did not believe the bungalow hotel pro forma made sense. 21 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 96 IBC has sort of indicated to him that the operator of the bungalows could use the restaurant facilities at the golf club. IBC would be a logical operator for the bungalows. IBC wants to reduce the tennis courts to free land for use as apartments. (2) In, Chase Testimony As it relates to the IBC offer the Managing Owner objected IBC's first right of refusal and an extension of the ground lease on the country club. The Co-owners told the Managing Owner that IBC would D-Link those two requests. The Managing Owner's response was that there was no reason to contact IBC because no other project could be approved other than his. He also said he had made promises to various tennis club stakeholders and the tennis club had to be part of the project. (3) Elliot Feuerstein Testimony After reaching out to Lennar the Co-owners contacted IBC because they were at an impasse with the Managing Owner and thought it may be a way out of the problem. In May of 2017 he believed IBC may have been interested in a long term ground lease and he asked the Managing Owner to explore it. He understands that IBC is still interested in ground leasing the property. IBC has not participated further because of the letter from Paul George. The Managing Owner has said that Pacific Hospitality would be a logical operator. (e) Tennis Club and Spa (1) Managing Owner Testimony The tennis facility is about 40 years old and has 24 courts. In 2007 IBC leased and operated the tenths club; their lease was to expire in a few years. Sean Abdali is the principal of Grand Slam Tennis. He took over the tenths facility sometime in 2014; he took possession without a lease and is still operating the tennis club without a lease. He pays $7,000 a month in rent. Grand Slam wanted a 20 year lease and agreed to pay the property taxes. The Managing Owner has indicated to Mr. Abdali that he could operate the club for 20 to 25 years. Recently, the Managing Owner and Mr. Abdali have signed a 12 year lease. The lease that has been signed by the Managing Owner and Mr. Abdali indicates that the landlord will use reasonable commercial efforts to cause the planned improvements of the new tennis club. All of the commitments have been without the Co-owners' consent. The Co-owners have not signed the lease. They have indicated that they will not consent to the piecemeal division and sale of the property. He made a commitment that he was going to save the tennis club. 22 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 97 Part of the personal reasons for him not being interested in selling his fee interest, is that he has fond memories of learning to play tennis on those courts. He has indicated to the Co- owners that their desire to sell the tennis courts is a non-starter. (2) In, Chase Testimony He's aware that Grand Slam Tennis is willing to enter into a lease and pay the property taxes. The proposed lease is at a base rent of $12,000 per month. He has refused to enter into a lease with Grand Slam Tennis. He has refused to execute a lease that will allow Grand Slam to lease a newly constructed facility. The Managing Owner, in response to the Co-owners' February 2019 inquiries, did not provide a comprehensive verifiable cost estimate for the tennis clubhouse spa facility. They were willing to sign a tennis club lease at the end of 2018 with the changes and markups they made. The Managing Owner would not agree to sign the lease as marked up. They wanted flexibility as it relates to a short-term lease so that the rest of the property was not limited. (3) Elliot Feuerstein Testimony They did not sign the lease with Grand Slam tennis because they did not want to commit to the three-phase development project until they understood how it would all work together. He felt back in 2016 that going along with tennis facility was a segue into the master plan. In addition the proposed lease indicated that the landlord shall use its best efforts to cause improvements in the tennis spa facility. 69 Changing Landscape (1) Managing Owner's Testimony In November of 2006 he thought there would be $2,400,000 in annual land rent from the bungalows and the tennis club spa. In February 2007 he indicated that the annual rent would be $1,284,000. It's possible he told the Co-owners that the bungalow projections were a moving target. Later the estimates for the ground rent for the bungalows moved substantially lower. In 2007 he indicated or suggested the sale of the villa sub-area for $10 million. The purchaser of the villas was also to put in site improvements for the bungalow sub-area and build out the tennis club spa facility. The estimated cost of building the tennis clubhouse and spa building was $2 million. In the summer of 2016 the cost of constructing the shell for the tennis clubhouse and building was $2.6 million. He believes now the building cost for the tennis clubhouse and spa would be about $3 million. 23 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 98 In 2016 the minimum bid price for the villas with a requirement to build tennis spa building was $6 million. Sears letter of intent initially expressed an amount for the villas as $6 million with an additional $1 million placed in escrow toward the cost of constructing among other things the new clubhouse and spa building. Subsequently the proposed purchasers withdrew the $1 million deposit into escrow and offered to transfer lot 5 back to the seller. Given this it is his plan to include lot five in the ground lease to the hotel developer along with the bungalow subarea. (2) In/ Chase Testimony In the early years the ground rent for the bungalow tenant was going to be $2 million and the sale of the villas $10 million. In 2007 the projected ground rent for the bungalow was reduced from $2 million per year to $1.28 million. He understands the proposed lease for the bungalows at the present time is $600,000 a year. Originally the buyer of villas was to place money into escrow to build the tennis clubhouse spa building. (3) Elliot Feuerstein Testimony In September 2016 the Managing Owner indicated that they were going to get a minimum bid of $6 million for the villas with a requirement that the purchaser build the tennis spa building. He thought $6 million was considerably less than $10 million. Further, it seemed to him that if the homebuilder was paying for the tennis spa building they were going to be paid less for the land. As for the sale of the villas and the construction of the tennis spa building it went from a $2.5 million in escrow, to a $1 million set aside, to no set aside but giving back a villa lot. (g) Discussion By way of the pleadings and the issues as framed by the parties, I am to construe the Agreement and determine under the present facts whether the Co-owners' refusal to consent to the proposed lease of the bungalow sub-area and the lease of the tennis facility is objectively unreasonable. In viewing the issue of objective unreasonableness, the NBCC Master Plan (perhaps more a specific plan) has been presented to all as "a package." There is a clear inter-relationship and perhaps inter-dependence between the bungalows, the tennis/spa facility and the villas. As originally conceived, the villas would provide the basic infra-structure for the development as 24 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 99 well as the construction of a new tennis spa facility. From the evidence, the bungalows were and are perceived to be the long-term money maker, anchor or primary "coupon clipper." Relative to the bungalows, there has not been a serious overture from any hotel developer or operator. While IBC has perhaps expressed some interest, they appear to be unwilling to move forward under the conditions suggested by the Managing Owner. Further, over the years the anticipated ground rent from the bungalows has gone from over an annual $2 million to $1.24 million to $600,000. These facts in of themselves, are sufficient to conclude that the Co- owners reticence to move forward is not objectively unreasonable. And while not discussed in the factual portion of this opinion, it seemed that the underpinning of Mr. Baltin's testimony, was somewhat problematic. The comparable boutique hotels used by him, all seemed to be full- service facilities with dining and a bar. Here, there was no testimony that clientele of the bungalows had access to a full service dining area or bar. There further was no evidence as to how the bungalow clientele would access the tennis club/spa should they be under separate operating agreements. In sum, given the fact that the bungalow feature of the NBCC Master Plan is as unsettled as it is, the Co-owners refusal to move forward with the Plan and its development is not objectively unreasonable. As for the tennis club/spa, from the evidence it is not only to be self-sufficient but also serve as an amenity for the bungalows. The Co-owners' concern relative to a long-term lease with Mr. Abdali, without consideration for how the facility will interface with a yet unknown hotel operator, cannot be viewed as objectively unreasonable. Further, the commitment in the proposed lease to a new tennis club structure without construction funding, appears somewhat beyond the expectation of the parties and the purpose of the tenancy in common. (The Managing Owner indicated that the bungalow developer or operator would pay for the construction.) As earlier discussed, the Co-owners' refusal to move forward with the sale of the villas does not need to be rationalized under the concept of good faith. They have the unfettered right to refuse to sell any portion of the property. This aside however, the initial projections for the sale of the villa lots was $10 million. It recent years the projection has been $6 million with the purchaser of the villa lots contributing substantial funds for the construction of the new tennis/spa facility. In Mr. Sears initial offer of $6 million, he was willing to deposit into escrow an additional $1 million for the construction of the facility. More recently, he has withdrawn that 25 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 100 offer, and indicated that he would deed-back lot 5 to the ownership, which the Managing Owner expects would become part of the bungalow deal. Without the funding for the tennis club/spa being provided by way of the bungalow operator, in conjunction with the long-term lease to Mr. Abdali with a quasi-commitment to upgrade the tennis facility at the expense of a bungalow operator who is presently unknown, there exists reasons which are not objectively unreasonable, for the Co-owners to refuse to move forward with development of the NBCC Master Plan. V. ATTORNEYS' FEES AND COSTS Co-owners were the prevailing party. In the defense of this matter they incurred and paid substantial attorneys' fees and costs.? By way of Motion, they seek reimbursement for $2,230,384.41 in attorneys' fees and $315,602.24 in costs. The Operating Agreement provides, "Section 27. Should any dispute arise between the parties hereto or their legal representatives, successors or assigns concerning any provision of this Agreement or the rights and duties of any person in relation thereto, the party prevailing in such dispute shall be entitled, in addition to such other relief that may be granted, to reasonable attorneys fees and legal costs in connection with such dispute." Here, there is no dispute that the Co-owners are entitled to attorneys' fees and legal costs. As variously set forth in PLMC Group v. Drexler (2000) 22 Ca1.4th 1084, 1094-1096, "Reasonable attorney's fees shall be fixed by the court. This requirement reflects the legislative purpose to establish uniform treatment of fee recoveries in actions on contracts containing attorney fee provisions. (Citation) [The amount to be awarded in attorney's fees is left to the sound discretion of the trial court.].) As we have explained: The experienced trial judge is the best judge of the value of professional services rendered in his court. (Citation) The trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony. (Citation) "The fee setting inquiry in California ordinarily begins with the "lodestar." i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. California courts 7 Co-owners also maintained a Counter Claim for Declaratory Relief. 26 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 101 have consistently held that a computation of time spent on a case and the reasonable value of that time is fundamental to a determination of an appropriate attorneys' fee award. (Citation) "The reasonable hourly rate is that prevailing in the community for similar work. (Citation) The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. (Citation.) "The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. (Citation)-8 The necessity for the litigation is also a factor to be considered. (EnPalm LLC v. Teiler Family Trust (2008) 162 Cal. App.4th 770, 774) I would first like to discuss the "necessity" for the litigation. After the Fromholtz decision there continued to be some pushback by the Co-owners including the "2016 Stop Letter." There was however no evidence of active conduct by the Co-owners' with any governmental entity to interfere with the entitlement process. The claim filed by the Managing Owner in the present Arbitration sought damages for interference as well as, or in the alternative, damages for lost profits for the Co-owners' refusal to go along with the Managing Owner's project. The basic position taken by the Managing Owner by way of pleading and moving forward was that the Fromholtz Award gave the Managing owner full authority to entitle and commercialize the subject property accordingly. In June of 2018, I issued a Ruling as to the Collateral Estoppel/Res Judicata effect of the Fromholtz Award. As stated, "[Were, what was litigated, determined and necessarily decided in the prior arbitration, was that by way of acquiescence, and/or estoppel the Co-owners consented to the processing of development plans and land use changes up through and including the obtaining of entitlements. The issue of co-owners consenting to any specific plan and/or sale of the property or portions thereof was not litigated and not necessarily decided." In my mind, that Ruling should have caused the Managing owner to press either the "pause" or "stop" button as to his efforts to claim that the Fromholtz decision encompassed a finding that the Co-owners consented to a specific plan and that he had the right to 8 The preceding is a compilation of direct quotes found at pages 1094-1095 of the PLMC Opinion. Internal quotations and citations have been omitted. 27 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 102 commercialize that plan. It was a Ruling from which the Managing owner should rightfully have stepped back, and questioned exactly where he was going with the present Arbitration. Instead, the Managing Owner continued forward. He argued that the present Co-owners had acquiesced or were estopped from not consenting to the specific plan and the commercialization thereof, or in the alternative were not demonstrating good faith in their refusal to consent to the plan and commercialization thereof, and as such was entitled to damages. As to the issue of acquiescence and/or estoppel, the evidence was overwhelming that the Co-owners did not acquiesce to the overall plan. Mr. O'Hill even testified that since a February 20, 2008 letter, the Co-owners have never changed their position that the plan did not maximize the value of the property and they have never been supportive of the plan. This state of the facts was well within the knowledge of the Managing Owner in the mid-2018 time frame. And, as to the issue of the Co-owners withholding their consent to sell as not being in good faith, the "Interim Award's" finding on that issue was strongly suggested in the March 2018 ruling on the Motion to Bifurcate wherein I indicated, "Based on the above interpretation of Provision 4 (b), the implied covenant of good faith and fair dealing and/or commercial reasonableness relative to Co-owners' refusal to sell the property would not be implied into the contract in derogation of the 70% ownership threshold."9 As such, there were very clear indications in March and June of 2018 of where this was going on the two dispositive legal issues. A very large percentage of all of the attorney's fees and costs were incurred thereafter.19 Lodestar I would first like to address the hourly rates of Mr. Gonzales and Mr. Yoder. Mr. Gonzales' hourly rate was $475 an hour and Mr. Yoder's approximately $1,060 an hour. Both attorneys declared that the fees are reasonable for the community, given their legal knowledge, experience and training. While their declarations may or may not have conflated the considerations of a reasonable hourly rate in the community with the additional considerations 9 The decision did indicate that the Ruling was not law of the case. Additionally, the Interim Award dealt with the issue of the interrelationship between the consent to sell and good faith in a slightly different manner, however with the exact same resolution. It has been relatively clear from the beginning that the sale of the Villas was integral to the building of the tennis club and the provision of infrastructure for the bungalows. As early as March of 2018, resolution of that specific issue appeared to be going contrary to the Managing Owner's position. I° While the above discussion does not relate directly to the award of attorneys' fees, it does in many ways help explain the number of hours expended by Co-owners' counsel. 28 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 103 including their experience and expertise, I have absolutely no problem with their hourly rates. Their advocacy was excellent. Throughout the proceeding, counsel were very well prepared on each of the legal issues presented. The written law and motion was concise, to the point, and well put together. Their preparation for the examination of witnesses was apparent. The examination of witnesses, including the Managing Owner and Mr. Baltin, was excellent. I have been involved in the legal field for a number of years, and over the course of this matter I observed, frankly from both sides, some of the strongest advocacy I have seen. I have reviewed the Declarations of Kim Karelis in detail numerous times. I simply find his analysis unavailing. It truly can be summed up with one statement: "He did not participate in the proceedings and did not observe what I observed." His basic opinions are found at pages 11, 12 and 14 of his Declaration. Using the 2018 Real Rate Report data he characterizes, a very broad range of subject matters, including Real Estate -Non-Litigation, Real Estate Commercial Litigation and Real Estate: Land Use/Zoning/Restrictive Covenants as the barometer for Attorneys Fees; he thereafter concludes at page 12, lines 21 — 23, "[g] iving counsel the benefit of the doubt, and in consideration of the fact that the word 'zoning' appears quite frequently in their bills, 1 believe the higher rates for this latter category are appropriate." (Emphasis Added.) At page 15, after considering the size of O'Melveny & Meyers, he then opines that a reasonable hourly fee for Mr. Yoder is $663 an hour. First, the case had little to do with zoning. The issue of zoning was relevant to the extent that Mr. O'Hill testified that given the sensitivity of the geographical area, it will be extremely difficult if not impossible to acquire a more intensive land use. Second, while I understand that firm size may be relevant to what firm's charge, in my mind it has little relevance in terms of the reasonable value of an attorney's services rendered. Further, I would think it extremely difficult to opine as Mr. Karelis did, that Mr. Yoder should bill for his services consistent with the Third Quartile (the data point being 75%) and that Mr. Gonzalez should bill at the "median rate of attorneys similarly situated} I now look to the time billed in the handling of this matter. II As to Mr Yoder's hourly rate, a Declaration from a member of the American College of Trial Lawyers might have been helpful. 29 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 104 'The trial court did not abuse its discretion in accepting defense counsel's computation of attorney hours as hours reasonably spent working on the case. It is well established that `California courts do not require detailed time records, and trial courts have discretion to award fees based on declarations of counsel describing the work they have done and the court's own view of the number of hours reasonably spent.' [Citations.] "Because time records are not required under California law ..., there is no required level of detail that counsel must achieve. See, PLMC Group, supra, ['We do not want 'a [trial] court, in setting an attorney's fees, [to] become enmeshed in a meticulous analysis of every detailed facet of the professional representation. It ... is not our intention that the inquiry into the adequacy of the fee assume massive proportions, perhaps dwarfing the case in chief.' (Citations)" See, e.g., ... Jaramillo v. County of Orange (2011) 200 Cal. App.4th 811, 830 (noting that records included very general descriptions, eg., 'trial prep,"TIC- Cliene); (Citation; [declaration stating time spent on various activities])'. (Citation)" (Seyers Properties III, Inc. v. Rankin (2014) 226 Cal. App.4th 691, 698-699) Here, the billing invoices were provided to Respondent. Mr. Karelis takes exception to the billing under the overall umbrella that the party seeking attorney's fees from a non-client has a heightened duty to provide by clear and convincing evidence detailed records of time and services. For this he relies on Hensley v. Eckerhart (1983) 461 U.S. 424. I believe the case is inapposite. First, I have found no California authority indicating that the party seeking attorneys' fees under the provisions of a contract, has a heightened duty to which the clear and convincing evidence standard applies. Second, Hensley deals with a fee shifting statute. (42 U.S.C. Section 1988.) Here we are not dealing with a fee shifting statute. In the present case, the hours were charged to the clients (Co-owners) and according to the supporting Declarations, the bills have been paid by the clients. As acknowledged in Mr. Karelis' Declaration, Hensley provides, "A claim for legal services presented by the prevailing party to the losing party pursuant to Section 1988 presents quite a different situation from a bill that a lawyer presents to his own client. In the latter case, the attorney and client have presumably built up a relationship of mutual trust and respect; the client has confidence that his lawyer has exercised the appropriate 'billing judgment,' and unless challenged by the client, the billing does not need the kind of extensive documentation necessary for a payment under Section 1988. The statute requires the losing party in a civil rights action to bear the cost of his 30 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 105 adversary's attorney and there is, of course, no relationship of trust and confidence between the adverse parties." (id. 440-441) (Emphasis Added.) The present bills were sent by Respondents' counsel to Respondents in a relationship of trust and confidence. The bills sought payment from a client for counsels' time on an hourly basis. I am sure there existed an expectation that the bills would be paid; and I am relatively sure there were no assurances to the Co-owners that they would prevail, or that if they did not, the attorneys would refund the money paid. And, the bills have in fact been paid. Hensley, supra, has absolutely zero applicability except perhaps in favor of Respondents by negative implication. An attorney owes a duty of honesty and loyalty to his or her client. The attorney has an obligation to bill his or her client honestly, with the utmost scrutiny and accountability. It is within this context that the present attorneys' fees were accrued, billed and paid. Mr. Karelis' Declaration then identifies six areas in which the invoices should be cut, including but not limited to: block billing, excessively billed work, vague descriptions and duplicative work. I have looked at many of the descriptions that are characterized as vague and do not find them so. Mr. Karelis then, on many of the categories randomly selects a percentage number by which the total billings should be reduced. For example, on invoices which he believed were excessive, he reduced them by 50%. There is no explanation as to a methodology in arriving at 50% as opposed to 90% or 10%.I2 In the final analysis, I do not find Mr. Karelis' opinions, of any great assistance. Costs "Contractual arbitration allows the parties to an arbitration agreement to define the powers of the arbitrator, as opposed to judicial arbitration in which the arbitrator's powers are defined by operation of law. Contractual arbitration proceedings may also be regulated by the arbitration rules, by the parties' contract, and/or by other provisions of law regulating such nonjudicial arbitration. 12 Similar to Mr. Karelis, I can view some of the hours billed and think the allotment high. For example, the amount of time devoted to picking an arbitrator seems high. However, when considering the significance of the case, I can well see spending many hours inquiring in the legal community as to others' experiences with any given prospective arbitrator. As to those prospective arbitrators who have published and unpublished Opinions, viewing said Opinions would not only be permissible, but a prudent expenditure of time. Further, as practicing lawyers, we all know that whatever legal task is at hand, it typically takes markedly more time to complete than we think it should. In the present matter there was a voluminous pre-arbitration record. To summarize, synthesize, and cogently present and use that record takes a great deal of time. All of the work-product of Respondents' counsel was right on the mark; to have it be so, requires endless hours of preparation. 31 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 106 "Because contractual arbitration is a matter of contract, the parties to an arbitration agreement are free to delineate the governing procedure." (Century City Medical Plaza v. Sperling, Isaacs & Eisenberg (2001) 86 Cal. App.4th 865, 875.) As referenced supra, Section 27 provides, "Should any dispute arise between the parties hereto or their legal representatives, successors or assigns concerning any provision of this Agreement or the rights and duties of any person in relation thereto, the party prevailing in such dispute shall be entitled, in addition to such other relief that may be granted, to reasonable attorneys fees and legal costs in connection with such dispute." (Emphasis Added.) The provision as to "legal costs," is clearly ambiguous. It does not say "costs as allowed by law," nor does it simply say "costs." In that the provision uses the word "legal," I believe the better interpretation is that the parties intended to allow costs as provided and allowed by law. I will therefore award costs pursuant to Code of Civil Procedure, Section 1033.5. Total Reimbursement to Co-owners After reviewing the billings and the Declarations submitted in support of and in opposition to the Award of Attorneys' Fees and Costs, Co-owners are entitled to recover attorneys' fees in the amount Of $2,157,461.05. Pursuant to Code of Civil Procedure, Section 1033.5, costs are awarded in the amount of $165,563.97. VI. DISPOSITION 1. Each of Claimant's (Managing Owner's) prayers for Declaratory Judgment are denied. 2. As for Respondents' (Co-owners') prayers for Declaratory Judgment, the Judgment is as follows; (a) Co-owners have not already consented under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of 0 Hill's Master Plan, and in particular, to the Sears/Patterson Offer. (b) Co-owners are not estopped from withholding their consent under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tenths Property as part of 0 Hill's Master Plan, and in particular, to the Sears/Patterson Offer. 32 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 107 (c) Neither Co-owners nor the Managing Owner have the duty to consent to a sale of the Tennis Property or portions thereof. Under the 1994 "Agreement Between Real Property Owners," any owner has the unfettered right to refuse for any reason, to voluntarily sell (as opposed to a forced sale as provided for in Provision 4 (b) of the agreement) the Tennis Property or any portion thereof (d) The Co-owners have no duty to consent to the Sears/Patterson offer. (d) Relative to the leasing of the Tennis Property or portions thereof, no owner may refuse to lease said property or portions thereof for an objectively unreasonable reason. (e) The Co-owners' present refusal to consent to the leasing and construction of improvements on the Tennis Property and/or portions thereof, is not objectively unreasonable, and as such, the Co-owners do not presently have a duty to consent under the OIC Agreement to the development of 0 Hill's Master Plan. 3. Respondents are awarded $2,157,461.05 for reimbursement of attorneys' fees. 4. Pursuant to Code of Civil Procedure, Respondents are awarded $165,563.97 in costs. Dated: April 8, 2020 /s/ Jeffrey King Hon. Jeffrey King (Ret.) Arbitrator 33 Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 108 PROOF OF SERVICE BY E-Mail Re: Golf Realty Fund, a California Limited Partnership vs. Mesa Shopping Center-East LLC, a Limited Liability Company, et al. Reference No. 1200053406 I, Steven McChristy, not a party to the within action, hereby declare that on April 09, 2020, I served the attached Final Award on the parties in the within action by electronic mail at Sherman Oaks, CALIFORNIA, addressed as follows: Paul B. George Esq. Lane Powell PC 601 SW Second Ave. Suite 2100 Portland, OR 97204-3158 Phone: 503-778-2100 georgep@lanepowell.com Parties Represented: Golf Realty Fund LP Michael G. Yoder Esq. O'Melveny & Myers LLP 610 Newport Center Dr. Suite 1700 Newport Beach, CA 92660 Phone: 949-823-6900 myoder@omm.com Parties Represented: Fainbarg Trust Dated April 19, 1982 Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC Jacob Gonzales Esq. Weintraub Tobin 23 Corporate Plaza Dr. Suite 200 Newport Beach, CA 92660 Phone: 949-760-0204 jgonzales@weintraub.com Parties Represented: Fainbarg Trust Dated April 19, 1982 Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC Lauren A. Deeb Esq. Nelson Mullins 19191 S Vermont Ave Torrance, CA 90502 Phone: 424-221-7400 lauren.deeb@nelsonmullins.com Parties Represented: Golf Realty Fund LP I declare under penalty of perjury the foregoing to be true and correct. Executed at Sherman Oaks, CALIFORNIA on April 09, 2020. Att.tia inc.rik/Cutt- Steven McChristy JAMS SMcChristy@jamsadr.com Zoning Administrator - December 16, 2021 Item No. 12b Additional Materials Received Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 109 From:jacob gonzales To:CDD Cc:jacob gonzales Subject:FW: Tennis Property City MUP Date:December 16, 2021 9:02:08 AM [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Please see the email chain below between me and City Attorney Aaron Harp from yesterday between 4:05 PM and 6:18 PM regarding the application for MUP No. UP2021-033 (PA2021-210). I ask that this email chain please be included as part of the record on MUP No. UP2021-033 (PA2021- 210). Thank you. From: Harp, Aaron <aharp@newportbeachca.gov> Sent: Wednesday, December 15, 2021 6:18 PM To: jacob gonzales <jgonzales@jcg-law.com> Cc: Michael Cho (mcho@ptwww.com) <mcho@ptwww.com>; myoder@omm.com; Summerhill, Yolanda <YSummerhill@newportbeachca.gov> Subject: Re: Tennis Property City MUP Hi Jacob, I believe this line of cases supports the ability of Mr. O’Hill to execute the application. Every situatIon is different but the broader principals in these cases support moving forward with the application I understand that you do not agree and you should feel free to take whatever action you believe is appropriate. As mentioned in my original email, this matter will be moving forward tomorrow. Thank you, Sent from my iPhone On Dec 15, 2021, at 6:04 PM, jacob gonzales <jgonzales@jcg-law.com> wrote:  [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Aaron – I appreciate you sending this along. I’m having a hard time understanding how the Shell Oil Company v. City and County of San Francisco (1983) 139 Cal.App.3d 917 applies to the pending use permit application for the Tennis Property. In Shell it was determined Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 110 that a long-term lessee had the standing to apply for a conditional use permit: “The subject lease expressly provides that the lessee has the right to use the property as a service station —and for no other purpose—for the term of the lease. In that context, Shell Oil is the owner of the exclusive right to use the property for such purpose and thereby is entitled to seek the necessary permit in order to carry out the agreed purpose of the lease. Accordingly, we conclude that Shell Oil has standing as an owner to apply for a conditional use permit.” Id. at 921. I do not follow how Shell supports or explains the City’s position that Mr. O Hill has the authority to sign the use permit on behalf of my clients – who are 50% owners. Mr. O Hill is not a long-term lessee of the Tennis Property; he is a co-owner with my clients. The use permit applicant, Clubhouse ATP, is not a long-term lessee of the Tennis Property. Indeed, my clients are not aware of any lease with Clubhouse ATP for the Tennis Property, as they have never been asked to sign any such lease and up until late last week had not heard of Clubhouse ATP. Section 3 of the owners in common agreement for the Tennis Property states that each owner must consent in writing to the grant of a leasehold interest for the Tennis Property: “The Owners acknowledge and agree that...any leasehold interest [in the Tennis Property]... may be granted, conveyed or so encumbered by the execution of the applicable instrument by each Owner.” (Underline added.) Presently, there is no written lease in place for the Tennis Property signed by my clients. Has Mr. O Hill provided the City with a written lease with Clubhouse ATP for the Tennis Property? Thank you. From: Harp, Aaron <aharp@newportbeachca.gov> Sent: Wednesday, December 15, 2021 5:28 PM To: jacob gonzales <jgonzales@jcg-law.com> Cc: Michael Cho (mcho@ptwww.com) <mcho@ptwww.com>; myoder@omm.com; Summerhill, Yolanda <YSummerhill@newportbeachca.gov> Subject: Re: Tennis Property City MUP Good evening, The primary case that is on point is the Shell Oil case referenced in the attached memorandum. Thank you, From: jacob gonzales <jgonzales@jcg-law.com> Sent: Wednesday, December 15, 2021 4:46 PM To: Harp, Aaron <aharp@newportbeachca.gov> Cc: Michael Cho (mcho@ptwww.com) <mcho@ptwww.com>; myoder@omm.com <myoder@omm.com>; Summerhill, Yolanda <YSummerhill@newportbeachca.gov>; jacob gonzales <jgonzales@jcg-law.com> Subject: RE: Tennis Property City MUP Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 111 [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. I think I understand you to be saying you won’t have time to share that case law with me before the Zoning Administrator hearing tomorrow at 10 AM. Regardless, it would be helpful to understand, even after tomorrow morning’s hearing, the City’s basis for the opinion or understanding that Mr. O Hill has the authority to sign the use permit on behalf of my clients. Would you please share with me that basis (and case law) within the next couple of days when you have time? Thank you. From: Harp, Aaron <aharp@newportbeachca.gov> Sent: Wednesday, December 15, 2021 4:40 PM To: jacob gonzales <jgonzales@jcg-law.com> Cc: Michael Cho (mcho@ptwww.com) <mcho@ptwww.com>; myoder@omm.com; Summerhill, Yolanda <YSummerhill@newportbeachca.gov> Subject: Re: Tennis Property City MUP There is case law on point but I will not have time to pull it for you. Thanks again, Sent from my iPhone On Dec 15, 2021, at 4:35 PM, jacob gonzales <jgonzales@jcg-law.com> wrote:  [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Aaron – Thanks for getting back to me. Can you please share the basis for the City’s opinion or understanding that Mr. O Hill has the authority to sign the use permit on behalf of my clients? Thank you again. From: Harp, Aaron <aharp@newportbeachca.gov> Sent: Wednesday, December 15, 2021 4:11 PM To: jacob gonzales <jgonzales@jcg-law.com> Cc: Michael Cho (mcho@ptwww.com) <mcho@ptwww.com>; myoder@omm.com; Summerhill, Yolanda Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 112 <YSummerhill@newportbeachca.gov> Subject: Re: Tennis Property City MUP Good afternoon, It is our opinion that Mr. O’Hill has authority to sign the application and we plan to move forward with hearing tomorrow. Thank you, Aaron Harp. Sent from my iPhone On Dec 15, 2021, at 4:05 PM, jacob gonzales <jgonzales@jcg-law.com> wrote:  [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Mr. Harp – This follows-up the voicemail I left you this morning. As you may recall from a prior conversation with Mr. Yoder a couple of years ago, we represent the Feuerstein and Fainbarg families’ combined 50% interest in the Tennis Property at 1602 East Coast Highway. I am forwarding along the email Elliot Feuerstein sent to Ms. Westmoreland, copying Mr. Campbell and Mr. Schneider as well as Mr. O Hill, this morning at 11:35 AM objecting to the application for use permit No. UP2021-033 (PA2021-210), on the basis that Mr. O Hill and Golf Realty Fund did not have the authority to sign the application on behalf of the entire Tennis Property ownership. Also, Mr. Feuerstein has made a renewed request for a continuance of the hearing tomorrow, as he and Mr. Chase just learned of the use permit application last week - it was filed by Mr. O Hill and the entity Clubhouse ATP without my clients’ knowledge or consent. Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 113 We continue to not want to put the City in the position of having to decide whether Mr. O Hill had the authority to sign the use the permit application on behalf of the entire of the ownership—which we view as a legal issue that we don’t believe the City should be deciding, particularly, when it’s being contested by my clients—and are asking for the continuance to give my clients a reasonable opportunity to gather information and understand what exactly is happening at the Tennis Property, and to try to work it out with Mr. O Hill. We hope to hear from you. Thank you. From: Elliot Feuerstein <elliot.feuerstein@gmail.com> Sent: Wednesday, December 15, 2021 11:35 AM To: Westmoreland, Liz <LWestmoreland@newportbeachca.gov> Cc: robert ohill <ROH@golfrealtyfund.com>; Irving M. <irvingmchase@gmail.com>; Ryan Chase <ryanlylechase@gmail.com>; brett feuerstein <brett@mesacenters.com>; jacob gonzales <jgonzales@jcg- law.com>; Yoder, Michael <myoder@omm.com>; Campbell, Jim <JCampbell@newportbeachca.gov>; Schneider, Matthew <MSchneider@newportbeachca.gov>; Elliot Feuerstein <elliot.feuerstein@gmail.com> Subject: Re: Tennis Property City MUP Dear Ms. Westmoreland – Thank you for your email below. We agree the City should not get involved in internal conflicts or disagreements between the owners of the Tennis Property. We are trying to avoid putting the City in such a difficult position which is why we requested that the hearing on the proposed use permit for the Tennis Property be delayed for 60 days to give us a reasonable opportunity to gather information and understand what exactly is happening at the Tennis Property (as we just learned about the application for the use permit late last week) and to try to work it out with Mr. O Hill. We also recognize that the issue of an owner’s authority to sign on behalf of other owners is a legal issue, one that the City should not be deciding, and is not as black and white as Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 114 Mr. O Hill may be representing it to be. It is our understanding that Mr. O Hill has submitted to the City in the past, and most recently within the past six months or so, an arbitration award from almost ten years ago issued by Judge Haley Fromholz (Ret.) in March 2013, and that page 9 of that award says Mr. O Hill can process certain few remaining discretionary entitlements for his master plan at the Tennis Property. To be clear, page 9 of the Fromholz award states as follows: “O Hill had been actively pursuing the discretionary entitlements for nearly fifteen years. Voters approved the general amendment and the only remaining entitlements were the development standards such as height limits, landscaping, vehicle access, and parking. Thus, very little remained to complete the NBCC Plan.” (Underline added.) Page 4 of that award also states: “Currently, the development standards for the NBCC Land such as height limits, landscaping, vehicle access, and parking, are still undetermined. The development standards are the final discretionary entitlements for the NBCC Land.” (Underline added.) Judge Fromholz explained his reason for allowing O Hill to finish processing the limited remaining discretionary entitlements on the basis that there was little left for O Hill to complete and that we waited too long to object. We are not waiting to object this time. In the owners most recent arbitration with Justice Jeffrey King (Ret.)—where Mr. O Hill sued us in an attempt to force us to proceed with the development of his master plan, and in which the arbitrator denied all of Mr. O Hill’s claims against us and found in favor of us on our cross-claims against him, and awarded us over $2,300,000 for our attorneys’ fees and costs which Mr. O Hill had to reimburse us—Mr. O Hill represented over and over again that as of November 2018 he had finished processing the few remaining discretionary entitlements that the Fromholz award allowed him to process. Indeed, in the Final Award issued by Justice King on April 8, 2020, a copy of which is attached (and which was confirmed and entered as a Judgment on March 26, 2021, in Orange County Superior Court Case No. 30-2020-01159790-CU-PA-CJC), Justice King says at page 5, footnote 3, of his Final Award that as of November 2018 that Mr. O Hill had completed his discretionary entitlements: Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 115 “Judge Fromholz states at page 4 of his decision, “‘[c]urrently, the development standards for the NBCC Land such as height limits, landscaping, vehicle access and parking are still undetermined. The development standards are the final discretionary entitlements for the NBCC Land. Proceedings are continuing to be held before the City to determine the development standards.’ To a reader it somewhat leaves the impression that he believed the process of entitlements was near completion. Entitlements were not completed until about five and one-half years later.” (Justice King Final Award at p. 5, fn. 3, underline added.) Justice King also states in his Final Award at page 10 as follows: “The master plan has three elements: there are 27 bungalows, 5 villas and the tennis club/spa. The tennis/spa building is an amenity for the bungalows and villas. The entity. By November 2018 he had: the Newport Beach Country Club Planned Community text, a zone change, site plan approval, state Water Quality Control Board approval, grading plan, storm drain plan, dry utility plans and street improvement plans, through plan check. They had all the entitlement approvals necessary to do the ‘bake-off.’” (Id. at 10, underline added.) Thus, we have informed Mr. O Hill in writing on multiple occasions that any right he believes he had to process the few remaining discretionary entitlements under the Fromholz award had run its course as of November 2018 when he finished processing his discretionary entitlements, that the Fromholz award does not support entitlements/plans he may presently be processing with the City, and that he does not have our consent—express or implied—to seek entitlements/plans for the Tennis Property. Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 116 For the record, we object to the City’s position that “Mr. O Hill is authorized to sign the [minor use permit] application on behalf of the ownership” – and it is our belief that Mr. O Hill does not have the authority to sign documents on behalf of the entire ownership that he may have submitted to the City since he completed his discretionary entitlements in November 2018. But again, our desire is to not put the City in the position of having to weigh-in on that issue – which from our perspective is not an issue on which the City Community Development Department should be weighing- in. Also, we view the issuance of a liquor license at the Tennis Property as a material issue, and we need a reasonable opportunity to understand as co-owners of the Tennis Property our potential exposure and liability should alcohol be permitted to be sold and/or consumed there. Thus, we once more renew our request that the City delay the hearing on the proposed use permit for the Tennis Property for 60 days to give us a reasonable opportunity to gather information (including the information requested in my initial email to you of December 10, 2021) and to try to resolve the issue with Mr. O Hill. Your prompt response is appreciated. Please let us know the City’s response to our renewed request to continue the hearing for 60-days as soon as possible. Thank you. Elliot Feuerstein on behalf of co-owners Mesa Shopping Center-East LLC and Mira Mesa Shopping Center-West LLC and Irv Chase (copied) on behalf of co-owner The Fainbarg III, LP On Tue, Dec 14, 2021 at 2:00 PM Westmoreland, Liz <LWestmoreland@newportbeachca.gov> wrote: Good Afternoon Mr. Feuerstein, Thank you for your comments on the proposed Minor Use Permit for the Tennis Clubhouse Grill. Please note that alcohol service in this zoning district (PC47 - Newport Beach Country Club) requires a minor use permit as there are no late hours proposed (after 11:00 p.m.). Based on previous planning applications and interactions related to the property, our understanding is that Mr. O Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 117 Hill is authorized to sign the application on behalf of the ownership. If there are any current internal conflicts or disagreements regarding this topic, they would need to be resolved outside of the entitlement process. Please contact me if you have any additional questions or concerns regarding the application. Thank you, LIZ WESTMORELAND Community Development Department Associate Planner lwestmoreland@newportbeachca.gov 949-644-3234 CITY OF NEWPORT BEACH 100 Civic Center Drive, First Floor Bay B, Newport Beach,California 92660 | newportbeachca.gov From: Elliot Feuerstein <elliot.feuerstein@gmail.com> Sent: December 10, 2021 4:41 PM To: Westmoreland, Liz <LWestmoreland@newportbeachca.gov> Cc: Murillo, Jaime <JMurillo@newportbeachca.gov>; robert ohill <ROH@golfrealtyfund.com>; Irving M. <irvingmchase@gmail.com>; Ryan Chase <ryanlylechase@gmail.com>; brett feuerstein <brett@mesacenters.com>; jacob gonzales <jgonzales@jcg-law.com>; Yoder, Michael <myoder@omm.com>; Elliot Feuerstein <elliot.feuerstein@gmail.com> Subject: Tennis Property City MUP [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Hello Ms. Westmoreland – I write to you regarding the Tennis Clubhouse Grill Minor Use Permit No. UP2021-033 (PA2021-210), for 1602 East Coast Highway in Newport Beach also referred to as 5 and/or 11 Clubhouse Drive (hereinafter the “Tennis Property”), which is on calendar for a Zoning Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 118 Administrator hearing on December 16, 2021, at 10:00 AM. I am a principal of Mesa Shopping Center-East LLC and Mira Mesa Shopping Center-West LLC which collectively own 25% of the Tennis Property. Copied on this email is my co-owner Irv Chase who is a principal of The Fainbarg III, LP, which also owns 25% of the Tennis Property. Together we hold a 50% ownership interest in the Tennis Property. The other owner in the Tennis Property is Golf Realty Fund, LP ("GRF"), whose principal is Robert O Hill, which owns a 50% interest. All owners hold their interests as tenants in common. We write because we just learned a couple of days ago of MUP No. UP2021-033 (PA2021-210), and that the entity Clubhouse ATP, LLC is the named applicant on the application to the City, signed solely by GRF as the owner of the Tennis Property. The application to obtain a use permit for the Tennis Property has been submitted without our knowledge or consent. It is our understanding that all owners are required to sign a use permit application – we did not sign the application nor were we asked to do so by GRF. It is also our understanding the City typically processes use permits involving alcohol use as a conditional use permit (CUP) – and this is being processed as an MUP. We ask that the City please provide us with copies of all documents in its possession relating to the application for MUP No. UP2021-033 (PA2021-210). We also ask that the City please take MUP No. UP2021-033 (PA2021-210) off- calendar and not hold the hearing on December 16, 2021, and not reset the hearing for at least 60 days to give us a reasonable opportunity to review the information requested above in advance of a hearing and so we can, as 50% of the ownership of the Tennis Property, meaningfully participate in such a hearing. If you have questions or would like to discuss any of the above, please do not hesitate to call me (C: 619.548.2007, O: 858.271.4682) or Mr. Chase (C: 949.584.8700; O: 949.722.7400). Thank you. Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 119 Elliot Feuerstein on behalf of co-owners Mesa Shopping Center-East LLC and Mira Mesa Shopping Center-West LLC and Irv Chase (copied) on behalf of co-owner The Fainbarg III, LP -- Elliot Feuerstein 8294 Mira Mesa Blvd San Diego, CA 92126 858-271-4682 858-271-5161 Fax elliot.feuerstein@gmail.com This message, together with any attachments, may contain material that is confidential and/or privileged for the sole use of the intended recipient. Any review, reliance or distribution by others or forwarding without express permission is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies. -- Elliot Feuerstein 8294 Mira Mesa Blvd San Diego, CA 92126 858-271-4682 858-271-5161 Fax elliot.feuerstein@gmail.com This message, together with any attachments, may contain material that is confidential and/or privileged for the sole use of the intended recipient. Any review, reliance or distribution by others or forwarding without express permission is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies. Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 120 From:Westmoreland, Liz To:Lee, Amanda Subject:FW: City of N.B. - signed Letter re Project PA 2021-210 Date:December 16, 2021 7:11:50 PM Attachments:City of N.B. - signed Letter re Project PA 2021-210.pdf Please see email below. The original email appears to have been sent to the wrong email address. -----Original Message-----From: pmchrist@earthlink.net <pmchrist@earthlink.net>Sent: December 16, 2021 7:01 PMTo: Westmoreland, Liz <LWestmoreland@newportbeachca.gov>Subject: City of N.B. - signed Letter re Project PA 2021-210 [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the contentis safe. Hello, Ms. Westmoreland. I am re-sending this email as I am not sure it arrived prior to the meeting on Dec. 16, 2021. Hello Ms. Westmoreland, Attached is a letter from the Granville Community Association Noise Abatement Committee regarding the subjectProject Application. I apologize for not forwarding this earlier but insufficient time was available due to late delivery of the city notice. More time was definitely needed to reply to the city Notice. Please contact me at 949-212-8426 with any questions or comments that you may have. Cordially,Paul Christ Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210) 121 Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210)122 Zoning Administrator - December 16, 2021 Item No. 12c Additional Materials Received After Deadline Tennis Clubhouse Grill Minor Use Permit (PA2021-210)123 INTENTIONALLY BLANK PAGE124 Attachment No. PC 7 Police Department Memorandum 125 INTENTIONALLY BLANK PAGE126 NEWPORT BEACH POLICE DEPARTMENT DETECTIVE DIVISION MEMORANDUM TO: Liz Westmoreland, Associate Planner FROM: Wendy Joe, Police Civilian Investigator DATE: March 31, 2022 SUBJECT: Tennis Club Lounge 1602 East Coast Highway PA2021-210 At your request, the Police Department has reviewed the project application for the Tennis Club Lounge located at 1602 East Coast Highway, Newport Beach. The applicant has requested a minor use permit with a Type 41 (On Sale Beer and Wine) ABC License. The lounge area that currently serves concessions at this location would continue to serve small snacks and light meals with areas for seating. The facility would not be open to the public and no construction is proposed in the space. No late hours are proposed (after 11:00 p.m.). Statistical Data and Public Convenience or Necessity Attached is a summary report compiled by Newport Beach Police Department (NBPD) Crime Analyst, Kristi Kondo, which provides detailed statistical information related to alcohol establishments in and around the applicant’s proposed place of business at 1602 East Coast Highway. Business and Professions Code §23958.4 finds “undue concentration” for an applicant premises in two ways: 20% higher crime (with an alcohol nexus) in a Reporting District as compared to the City-wide average, or an over saturation of alcohol licenses in a census tract compared to the county. Crime Statistics The Police Department divides the City into areas referred to as Reporting Districts. This allows the Police Department to compile statistical data, as well as better communicate officer locations while policing. The proposed applicant location is within Reporting District (RD) 39 which encompasses the Fashion Island shopping and entertainment district. The RD is square in shape, bordered by Jamboree on the west, San Joaquin Hills Road on the north, MacArthur to the east, and Coast Hwy to the south. Per Business and Professions Code §23958.4, the Police Department is required to report offenses of criminal homicide, forcible rape, robbery, aggravated assault, burglary, larceny, theft, 127 Tennis Club PA2021-210 2 and motor vehicle theft (all Part I crimes), combined with all arrests for other crimes, both felonies and misdemeanors (except traffic citations) to the Department of Alcoholic Beverage Control (ABC). These figures make up the “Crime Count” which is indicated on the attached statistical data form. This reporting district is reported to ABC as a high crime area as compared to other Reporting Districts in the City. The RD’s Crime Count is 390, 179% over the City-wide crime count average of 140. Since this area has a 20% or greater number of reported crimes than the average number of reported crimes as determined from all crime reporting districts within the City, the area is found to have undue concentration. In comparison, neighboring RD 43 is 61% below the City- wide average, RD 38 is 53% below, and RD 44 (Corona Del Mar Village is 119% above the City- wide average. The highest volume crime in this area is shoplift. The highest volume arrests in the area are drug related offenses. DUI, Public Intoxication, and liquor law violations make up 16% of arrests in this reporting district. In comparison, the figure for neighboring RD 43 is 17%, RD 38 is 23% and RD 44 is 18%. This location meets the legal criteria for undue concentration pertaining to crime (B&P §23958.4). Alcohol License Statistics The standard which ABC utilizes to identify an area over-saturated with alcohol licenses is outlined in Business and Professions Code §23958.4. A reporting district is classified as having “undue concentration” when there is a higher retail license to resident ratio than that of the county. The applicant premise is located within census tract 0630.8. This census tract has an approximate population of 2,408 residents with 60 active on-sale alcohol licenses. That is a per capita ratio of 1 on-sale license for every 40 residents. Per the Business and Professions code, we compare this per capita ratio to Orange County’s off-sale per capita ratio of 1 license for every 618 residents. This location meets the legal criteria for undue concentration pertaining to alcohol licenses (B&P §23958.4). Discussion and Recommendations The Police Department has no concerns with the application. Although the applicant location has undue concentration, the area is a planned entertainment district with few residences. The crime in the neighborhood is largely due to thefts in and around the mall area. The following or similar conditions would be appropriate for the business: 1. The applicant shall comply with all federal, state, and local laws, and all conditions of the Alcoholic Beverage License. Material violation of any of those laws or conditions in connection with the use is a violation and may be cause for revocation of the use permit. 128 Tennis Club PA2021-210 3 2. All owners, managers and employees selling alcoholic beverages shall undergo and successfully complete a certified training program in responsible methods and skills for selling alcoholic beverages within 60 days of hire. This training must be updated every 3 years regardless of certificate expiration date. The certified program must meet the standards of the certifying/licensing body designated by the State of California. Records of each owner’s manager’s and employee’s successful completion of the required certified training program shall be maintained on the premises and shall be presented upon request by a representative of the City of Newport Beach. 3. Approval does not permit the premises to operate as a bar, tavern, cocktail lounge or nightclub as defined by the Newport Beach Municipal Code. 4. No alcoholic beverages shall be consumed on any property adjacent to the licensed premises under the control of the licensee. 5. No games or contests requiring or involving the consumption of alcoholic beverages shall be allowed. 6. Any event or activity staged by an outside promoter or entity, where the applicant, operator, owner or his employees or representatives share in any profits, or pay any percentage or commission to a promoter or any other person based upon money collected as a door charge, cover charge or any other form of admission charge is prohibited. 7. The exterior of the business shall be maintained free of litter and graffiti at all times. The owner or operator shall provide for daily removal of trash, litter, and debris from the premises and on all abutting sidewalks within 20 feet of the premises. Graffiti shall be removed within 48 hours of written notice from the City. 8. There shall be no exterior advertising or signs of any kind or type, including advertising directed to the exterior from within, promoting or indicating the availability of alcoholic beverages. Interior displays of alcoholic beverages or signs which are clearly visible to the exterior shall constitute a violation of this condition. 9. Employees shall not be permitted to consume alcohol or be under the influence of alcohol at any time during their shift. 10. The operator of the establishment shall be responsible for the control of noise generated by the subject facility. All noise generated by the proposed use shall comply with the provisions of Chapter 10.26 and other applicable noise control requirements of the Newport Beach Municipal Code. If you have any questions as to the content of this memorandum, please contact Investigator Wendy Joe at (949) 644-3705 or wjoe@nbpd.org. Wendy Joe Police Civilian Investigator, Special Investigations Unit 129 130 Attachment No. PC 8 Plans 131 INTENTIONALLY BLANK PAGE132 PA2021-210Attachment No. PC 8 - Plans133 PA2021-210Attachment No. PC 8 - Plans134 PA2021-210Attachment No. PC 8 - Plans135 PA2021-210Attachment No. PC 8 - Plans136 PA2021-210 Attachment No. PC 8 - Plans 137 PA2021-210Attachment No. PC 8 - Plans138 PA2021-210Attachment No. PC 8 - Plans139 PA2021-210Attachment No. PC 8 - Plans140 From:Westmoreland, Liz To:Rodriguez, Clarivel; Lee, Amanda Subject:FW: April 21, 2022 - Planning Commission Staff Report and Agenda – PA2021-210 Date:April 14, 2022 4:37:54 PM Attachments:image003.png City of Newport Beach - April 14, 2022.pdf Rental Agreement.pdf Please see additional materials below and attached from the applicant for PA2021-210. From: Patrick Rolfes <patrolfes@gmail.com> Sent: April 14, 2022 7:40 AM To: Westmoreland, Liz <LWestmoreland@newportbeachca.gov> Cc: Robert O’Hill <roh@ohill.com>; Sean Bollettieri-Abdali <sean@nbcctennis.com> Subject: Re: April 21, 2022 - Planning Commission Staff Report and Agenda – PA2021-210 [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Liz, Thank you for the information. I am looking forward to the Planning Commission hearing at 6:30pm Thursday, April 21st. Also, attached is a new rental agreement for your files and letter for you and the Planning Commision to review. Please feel free to contact me if you have any questions or concerns. Thank you, Pat Rolfes 714-323-2739 On Wed, Apr 13, 2022 at 4:51 PM Westmoreland, Liz <LWestmoreland@newportbeachca.gov> wrote: Good Afternoon Pat, Below you will find a link to the Planning Commission information page where the agendaand staff report for the next scheduled meeting will be posted. The agenda and report aretypically posted to the website on Friday of this week between 4:00 p.m. and 5:00 p.m. Additionally, the agenda and reports are usually delivered to Commissioners Fridayafternoon, so please give the Commissioners the courtesy and opportunity to read the reportbefore you contact them (if you feel a need to). Please contact me if you have any questions,concerns, or thoughts about staff’s recommendation and/or meeting procedures. Lastly,please let me know if you have any special requests regarding your presentation. See you atthe meeting. Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Here is the link: http://www.newportbeachca.gov/index.aspx?page=1325 Thank you, LIZ WESTMORELAND Community Development Department Associate Planner lwestmoreland@newportbeachca.gov 949-644-3234 CITY OF NEWPORT BEACH 100 Civic Center Drive, First Floor Bay B, Newport Beach, California 92660 | newportbeachca.gov Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) April 14, 2022 Ms. Liz Westmoreland City of Newport Beach Re: Sales of Alcohol Letter at the Tennis Clubhouse and New Lease/Licensing Agreement Dear Liz, I’m looking forward to the Planning Commission meeting on the 21st. My sincere hope is that the ongoing land battle with the Managing Owner and his partners don’t continue to delay this process and cause more work for the city and business interruption for our small business. Fingers crossed. Mr. O Hill has requested we have a new agreement in place for the Clubhouse Grill at TTC. This agreement is to rent the space and approval of operations, including the selling of beer and wine.I wanted to get you this agreement for your files. Also, it has come to my attention that the Clubhouse Grill sold some alcohol without a permit from the ABC from February 1st through the 20th. This was an unintentional mistake.As you know, I contracted the Delta Varent of COVID-19. What you may not know is all of the health issues I suffered from contracting that deadly virus. It started with Congestive Heart Failure and Atrial Fibrillation. It then manifested itself into long-haul inflammation, which among other things made the disks in my neck, C2 through C7, swell up to the point of putting so much pressure on my spinal cord that my entire nervous system was shutting down and basically turning me into a parapaligic. I lost 95% dexterity in my right hand and 80% in my left, both arms and legs went numb, the gait of my walk was extremely crippled, my feet were riddled with nerve pain, in fact, my entire body was in pain from the nerve damage. I got to a point that I couldn’t walk without assistance. It was a terrifying experience. Finally, after a long four months of dealing with my heart issue and my nervous system progressively failing, a specialist identified that I had severe spinal cord compression. Basically my spinal cord was so pinched from my bulging disks that it couldn’t function. That doctor called me and told me to immediately go to the emergency room, where the head of neurosurgery, Dr. Stiner, was waiting for me. This was Saturday, January 29th, the same day as the Grand Opening Celebration of the Clubhouse Grill. I was admitted into the hospital that afternoon and had emergency Posterior Cervical Laminectomy and Fusion surgery (Link:https://youtu.be/ZYtRmq-rZL ) to remove the bone structure in the back of my neck from C2 through C7 and fuse C3, C4, C5 and C6 on Sunday morning, January 30th at 7am (see below pictures). It was a major 7 hour surgery and needless to say, I missed the celebration of the Clubhouse Grill’s opening. After my surgery I had multiple complications with my recovery, extending my hospital stay from a projected 2 days to 8 days. Once home, I was basically in bed, nonmobile for most of the month of February. I was heavily medicated and was restricted to only basic required activities, like: eating, sleeping and relieving myself. I wanted to communicate my health issues not to look for your sympathy, but to shed light as to one element Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) of a chain of circumstances as to why my staff mistakenly served alcohol without a catering license/permit. On February 22nd, I was informed that the Clubhouse Grill served beer, wine and spirits. As soon as I was informed about this, I called my son, who was working at the restaurant, and told him to remove all alcohol from the property immediately, which he did. I then met with my entire staff and questioned why alcohol was served during this period of time. They told me that they believed that the Clubhouse Grill was approved to do so because: the required neighborhood mailing was accomplished, the mandatory posting of the ABC notice to sell alcohol was accomplished and removed, we originally received an approval letter from the City of Newport Beach for the required Minor Conditional Use Permit and we served alcohol (see below), including a champagne toast, at the Grand Opening Celebration, a celebration that I helped plan before my diagnosis and emergency surgery. I sincerely apologize and take full responsibility for the Clubhouse Grill selling beer, wine and spirits without the proper permit during this defined window of time. I never had any intent of doing anything incorrectly or illegal. I have invested a lot of time and money to achieve a City of Newport Beach Minor Conditional Use Permit and an ABC license for almost a year now and I hope you realize that in no way would I purposefully do anything to jeopardize that or my reputation in the community. Additionally, I have a long standing history of legally acquiring ABC event permits, including the one for the Clubhouse Grill’s Grand Opening Celebration on January 29th (see below). Lastly, I will take it upon myself to also inform the ABC on this matter. I take my responsibilities very seriously and even though I feel there are extenuating circumstances for the Clubhouse Grill making this mistake, I will be completely transparent with them. Sincerely, Patrick J. Rolfes Clubhouse ATP LLC cc: Robert O Hill Sean Bollettieri-Abdali Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2a - Additional Materials Received After Printing Tennis Clubhouse Grill Appeal (PA2021-210) Mira Mesa Shopping Center - West, LLC 8294 Mira Mesa Blvd. San Diego, California 92126 Office (858) 271-4682 Fax (858) 271-5161 April 18, 2022 City of Newport Beach 100 Civic Center Drive P.O. Box 1768 Newport Beach, CA 92658-8915 Re: April 21, 2022, Planning Commission Agenda, Public Hearing Item #2 Appeal of Zoning Administrator’s December 16, 2021 Approval of Use Permit Application for Project File No. PA2021-210, Activity No. UP2021-033 Dear Honorable Planning Commissioners – We hold a 50% ownership interest in the 5 and 11 Clubhouse Drive (a/k/a 1602 East Coast Highway) in Newport Beach (hereinafter referred to as the “Tennis Property”). Mesa Shopping Center-East LLC and Mira Mesa Shopping Center-West LLC collectively own 25% of the Tennis Property, and The Fainbarg III, LP owns 25% of the Tennis Property (hereinafter the “Co- Owners”). The other owner in the Tennis Property is Golf Realty Fund, LP (“GRF”), whose principal is Robert O Hill, which owns a 50% interest. All owners hold their interests as tenants in common. On January 3, 2022, we submitted our appeal of the Zoning Administrator’s December 16, 2021, decision to approve the use permit for an alcohol license for the Tennis Property submitted by Clubhouse ATP (“Clubhouse”) and GRF. We provide the below comments to supplement our January 3 appeal and to update the Commissioners on events since its submission. 1. Clubhouse and GRF Do Not Have Authority to Apply for the Use Permit Without Co-Owners’ Consent, and an Arbitration for a Judicial Determination So Stating Has Been Initiated The Tennis Property owners—i.e., GRF and Co-Owners—are parties to an Owners in Common Agreement (or “OIC Agreement”) for the Tennis Property, entered into in March 1994.1 Our understanding of section 3 of the OIC Agreement is that any right to tenancy at the Tennis Property must be in writing signed by all owners: “The Owners acknowledge and agree that...any leasehold interest [in the Tennis Property] ... may be granted, conveyed or so encumbered by the execution of the applicable instrument by each Owner.” OIC Agreement § 3 (underline added). Thus, we were surprised to learn that GRF had allowed Clubhouse to start a restaurant at the Tennis Property without our knowledge and without obtaining our written consent as provided under section 3 of the OIC Agreement, and that Clubhouse was applying for the use permit for an alcohol license at the Tennis Property, and GRF had executed the application for the use permit purportedly on behalf of the Tennis Property owners also without our knowledge or consent. We 1 A copy of the OIC Agreement is attached as Exhibit A to the Arbitration Demand, and a copy of the Arbitration Demand is enclosed with this correspondence as Exhibit 1. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 2 of 12 do not believe, under the OIC Agreement, that Clubhouse has a right to tenancy at the Tennis Property (nor the right to seek a use permit there), nor does GRF have the authority to sign the use permit application on behalf of the owners. On March 25, 2022, we commenced an arbitration proceeding against GRF—JAMS Reference No. 5200000090 (the “Pending Arbitration”)—which seeks, among other things, (1) a legal determination and declaration that a tenancy at the Tennis Property could not be conveyed to Clubhouse without our written agreement, which GRF did not and does not have, and (2) that GRF did not, and does not, have the authority to sign and submit the use permit application on behalf of the Tennis Property ownership, and before it could do so GRF was required to get our consent (which it did not have), and that the use permit application must be withdrawn by GRF and not resubmitted until and unless it has our written consent to do so. A copy of the Arbitration Demand for the Pending Arbitration is enclosed as Exhibit 1. Further, on April 8, 2022, we commenced a related, ancillary Court proceeding against GRF—Orange County Superior Court Case No. 30-2022-01253955-CU-MC-NJC (the “Pending Litigation”)—which seeks, among other things, a temporary restraining order and an injunction restraining GRF until resolution of the Pending Arbitration from taking further action (1) processing the use permit with the City without Co-Owners’ consent, and (2) purporting to convey a leasehold interest in or right to tenancy at the Tennis Property to Clubhouse without Co-Owners’ consent. A copy of the Injunctive Relief Complaint for the Pending Litigation (sans exhibits) is enclosed as Exhibit 2. We view the matter of Clubhouse’s lack of a right to tenancy at the Tennis Property and that Clubhouse and GRF could not apply for and seek the minor use permit from the City without our consent, which has not been given, as legal issues to be resolved in the Pending Arbitration and Pending Litigation between the Tennis Property owners. We ask the City to please not take action and to defer proceeding on the use permit application for an alcohol license until the Pending Arbitration and Pending Litigation are resolved. We will promptly notify the City when those matters are concluded. 2. Clubhouse Does Not Seem to Be Qualified to Hold a Use Permit for an Alcohol License In February 2022, to our surprise, we were alerted that the restaurant Clubhouse seemingly operates at the Tennis Property—the Clubhouse Grill—had apparently been selling alcohol while Clubhouse’s application for a use permit with the City and its application for a liquor license with the ABC were both pending but no permit or liquor license had been obtained to allow for the sale of alcohol.2 Selling alcohol without a license or permit would seem to be at odds with the requirement that an applicant be qualified to hold a liquor license.3 See, e.g., Cal. Bus. Prof. Code 2 It is our understanding that, pursuant to Newport Beach Municipal Code (NBMC) section 20.64.030- B.1.a., a use permit approval by the Zoning Administrator that is appealed has no force or effect as of the day the appeal is filed. 3 On April 6, 2022, we submitted a written protest to Clubhouse’s application for a liquor license with the ABC. A copy of the April 6, 2022, protest (sans enclosures) is enclosed as Exhibit 3. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 3 of 12 §§ 23300, 23301 (requires a license before selling alcohol and a violation is a misdemeanor); Cal. Bus. Prof. Code § 23958 (In reviewing an application for a liquor license, “the department shall make a thorough investigation to determine whether the applicant and the premises for which a license is applied qualify for a license... and shall investigate all matters connected therewith which may affect the public welfare and morals. The department shall deny an application for a license or for a transfer of a license if either the applicant or the premises for which a license is applied do not qualify for a license under this division.”); see also J. Gebauer, et al., 3 Cal. Jur. 3d. Alcoholic Beverages (March 2022 Update) § 58 (“In determining whether the granting of a license will be contrary to public welfare or morals, the Department may consider the applicant’s integrity as shown by his or her previous business experience, the kind of business to be conducted on the licensed premises, the probable manner in which it will be conducted, the type of guests and the probability that their consumption of alcoholic beverages will be moderate, and the nature of any protest made to the issuance of the license.”). //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// //// Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 4 of 12 Below are pictures of alcohol being sold at the Clubhouse Grill on February 8, 2022: Picture of the cooler at Clubhouse Grill on Tuesday, February 8, 2022, stocked with beer, martini glasses, and beer taps. Picture of Indian Pale Ale (IPA) draft beer purchased on tap at Clubhouse Grill on Tuesday, February 8, 2022. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 5 of 12 Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday, February 13, 2022: Picture of the bar at Clubhouse Grill on Sunday, February 13, 2022, stocked with alcohol. Picture of receipt from Clubhouse Grill showing IPA draft beer purchased on Tuesday, February 8, 2022, for $7.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 6 of 12 Picture of bartender at Clubhouse Grill on Sunday, February 13, 2022, mixing and selling a Bloody Mary with Titos Vodka. Picture of Bloody Mary with Titos Vodka purchased at Clubhouse Grill on Sunday, February 13, 2022. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 7 of 12 Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday, February 20, 2022: Picture of Clubhouse Grill mixed drink specials on Sunday, February 20, 2022, including an Espresso Martini and Skinny Margarita. Picture of receipt from Clubhouse Grill showing Bloody Mary with Titos Vodka purchased on Sunday, February 13, 2022, for $12.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 8 of 12 Picture of bartender at Clubhouse Grill on Sunday, February 20, 2022, preparing and selling a mixed drink with Titos Vodka. Picture of receipt from Clubhouse Grill showing a mixed drink with Titos Vodka purchased on Sunday, February 20, 2022 for $12.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 9 of 12 On February 22, 2022, we emailed Mr. O Hill on behalf of GRF a letter, copying Mr. Rolfes on behalf of Clubhouse and Sean Abdali on behalf of Grand Slam Tennis (“GST”, who is the current operator of the tennis club at the Tennis Property), asking that the sale of alcohol at the Tennis Property without a license or permit immediately stop; a copy of our February 22, 2022, letter is enclosed as Exhibit 4. It is our understanding, however, that even after our February 22, 2022, letter was sent, that alcohol continued to be sold at the Tennis Property without a license or permit – sometimes openly, but also apparently secretly in an acknowledgment that alcohol should not have been sold.4 For example, we understand that on March 1, 2022, Clubhouse tried to covertly sell beer and wine to customers by pouring such drinks into a cup or glass when ordered, and instead of the receipt actually showing the beer or wine for which the customer had paid and been served the receipt erroneously, and surreptitiously, showed a charge for a different item such as a soda. We further understand that on March 19, 2022, and even though it apparently did not have a permit or license to do so, Clubhouse sold wristbands to a taco bar it set up at the restaurant for $25, which included “beer, seltzer or house wine.” 4 Although we support the idea obtaining a liquor license that would allow for the sale of alcohol at the tennis property, we want to ensure when alcohol is sold it is done under a proper lease with a qualified operator who is licensed to do so. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 10 of 12 Below are pictures of alcohol being sold at the Clubhouse Grill on Saturday, March 19, 2022, as part of the taco bar lunch buffet: Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 11 of 12 On April 13, 2022, we sent GRF a letter asking to be provided copies of any permit or license that authorized the sale of alcohol at the Tennis Property on February 8, 13 and 20, 2022, and March 1 and 19, 2022. To date, no such permits or licenses have been provided to us. In light of the above, we question whether Clubhouse is qualified to hold a liquor license at the Tennis Property. 3. The Prior Type 57 License Sought by Clubhouse is Not in Substantial Conformance with the New Type 41 License Being Sought, and Clubhouse Should First File a New Use Permit Application for a Type 41 License, Comply with Such Procedures, and Seek Zoning Administrator Approval It is our understanding that Clubhouse is currently seeking a Type 41 liquor license, but when its application for a use permit with the City Zoning Administrator was heard in December 2021, Clubhouse was seeking a Type 57 license. Since a Type 41 license is very different—and not in substantial conformance with—a Type 57 license, it would seem that Clubhouse should be made to start the process over and first seek Zoning Administrator approval of a use permit in conjunction with a Type 41 license before proceeding with review by the Planning Commission. The Zoning Administrator’s Resolution No. ZA2021-86 dated December 16, 2021, makes clear that Clubhouse sought, and the Zoning Administrator approved, a minor use permit in conjunction with a Type 57 ABC License: The applicant requests a minor use permit to operate the existing lounge area in the Tennis Clubhouse building in conjunction with a Type 57 (Special On-Sale General) Alcoholic Beverage Control (ABC) License. The Type 57 ABC License would authorize the sale of beer, wine, and distilled spirits to members and guests only for consumption on the premises, among other privileges. See City Resolution No. ZA2021-86, Sec. 1, No. 2 (emphasis added). The ABC defines a Type 57 license consistent with how the Zoning Administrator’s City Resolution No. ZA2021-86 defined it: “Authorizes the sale of beer, wine and distilled spirits, to members and guests only, for consumption on the premises where sold.”5 (Emphasis added.) Conversely, the ABC defines a Type 41 License as authorizing only beer and wine to be sold to the general public (not just members or guests) for consumption on or off premises.6 Although the Zoning Administrator approved a use permit to be used in conjunction with a Type 57 license, it is our understanding that on February 23, 2022, the ABC sent Clubhouse a letter notifying it that the application for the Type 57 license had been withdrawn; a copy of the ABC’s February 23, 2022, letter is enclosed as Exhibit 5. We further understand that after the withdrawal of the Type 57 license, Clubhouse submitted a new application to the ABC for a separate Type 41 license, and the use permit before the Planning Commission is being sought in 5 See: https://www.abc.ca.gov/licensing/license-types/. 6 Ibid. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit 1 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MICHAEL YODER (SBN 83059) myoder@omm.com O’MELVENY & MYERS LLP 610 Newport Center Drive 17ᵗʰ Floor Newport Beach, California 92660-6429 Telephone: +1 949 823 6900 Facsimile: +1 949 823 6994 JACOB C. GONZALES (SBN 235555) jgonzales@jcg-law.com jcg | law 23 Corporate Plaza Drive, Suite 150 Newport Beach, California 92660-7901 Telephone: +1 949 313 8545 Attorneys for Claimants MESA SHOPPING CENTER-EAST, LLC MIRA MESA SHOPPING CENTER-WEST, LLC and FAINBARG III, LP JUDICIAL ARBITRATION AND MEDIATION SERVICES ARBITRATION PROCEEDING – ORANGE COUNTY OFFICE MESA SHOPPING CENTER-EAST, LLC, a California limited liability company; MIRA MESA SHOPPING CENTER-WEST, LLC, a California limited liability company; and FAINBARG III, LP, a California limited partnership, Claimants, v. GOLF REALTY FUND LP, a California limited partnership fka O HILL PROPERTIES, a California limited partnership, Respondent. JAMS Case No. 5200000090 CLAIMANTS’ DEMAND FOR ARBITRATION AND STATEMENT OF CLAIMS FOR: (1)DECLARATORY ANDINJUNCTIVE RELIEF;(2)BREACH OF CONTRACT;(3)BREACH OF THE COVENANT OFGOOD FAITH AND FAIRDEALING;(4)ACCOUNTING; AND(5)DECLARATORY RELIEF Claimants Mesa Shopping Center-East, LLC, Mira Mesa Shopping Center-West, LLC, and Fainbarg III, LP (collectively “Co-Owners” or “Claimants”), hereby allege as follows: //// Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 2 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION 1. The parties, tenant in common owners of the approximate 7-acre Newport Beach tennis club property commonly known as 1602 E. Coast Highway, Newport Beach, CA 92660 (the “Tennis Property”), are no strangers to arbitration. This action marks their fifth such proceeding. In 2013, Respondent obtained an arbitration award that allowed him to complete a few remaining discretionary entitlements, which he had been pursuing for almost 15 years, for his so-called “master plan” to redevelop the Tennis Property. In 2020, Co-Owners obtained an arbitration award finding they had not consented, and were not required to consent, to Respondent’s master plan to redevelop the Tennis Property. It was also established at the 2020 arbitration that Respondent had finished processing the few remaining discretionary entitlements for his master plan. Thus, any right Respondent had under the 2013 award to process his discretionary entitlements had run its course. 2. Co-Owners were surprised to learn in late November 2021 that Respondent was applying for new entitlements for the Tennis Property without their knowledge or consent. Respondent submitted new entitlement applications to the City of Newport Beach (the “City”) over Co-Owners’ instructions that he did not have their consent—express or implied—to process any more entitlements or to spend ownership funds doing so. Respondent concealed from Co- Owners that he had submitted new applications, and when Co-Owners finally learned of the new entitlement applications, they made multiple requests to Respondent in writing to stop and to provide them with information about his entitlement applications. Respondent ignored Co- Owners’ requests. 3. Co-Owners also learned in December 2021 that Respondent had allowed a new operator to start a restaurant at the Tennis Property without obtaining the Co-Owners’ consent as required under the parties’ written agreement for the Property, and that Respondent had submitted a liquor license application purportedly on behalf of the Property ownership along with that operator without notifying Co-Owners. Co-Owners then discovered in February 2022 that alcohol was being sold at the Tennis Property without a liquor license. Co-Owners asked Respondent in writing for basic information about the new operator at the Tennis Property, including to be Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 3 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 provided any purported lease with the operator, and that Respondent stop the unlawful sale of alcohol. Respondent ignored their request for information and Co-Owners are informed and believe, and thereon allege, that alcohol continues to be sold at the Tennis Property without a license. 4. Respondent is ignoring Co-Owners’ rights and his duties to them by treating the Tennis Property as though it is his to do with as he pleases. Respondent has spent significant ownership funds while failing to respond to Co-Owners’ requests for basic information and running afoul of his limited duties as managing owner. Rather than cooperate and seek to work toward a consensus with Co-Owners, Respondent is attempting to present them with a fait accompli for his development project for the Tennis Property while exposing them to real liability by placing an operator at the Property without Co-Owners’ consent and allowing that operator to unlawfully sell alcohol. Co-Owners bring this arbitration to remove Respondent as managing owner or, alternatively, to enjoin him from further breaches of his agreement with Co-Owners. II. THE PARTIES 5. Claimant Mesa Shopping Center-East, LLC (“Mesa East”), is a California limited liability company with its principal place of business in the City of San Diego. 6. Claimant Mira Mesa Shopping Center-West, LLC (“Mesa West”), is a California limited liability company with its principal place of business in the City of San Diego. 7. Claimant Fainbarg III, LP (“Fainbarg III”), is a California limited partnership with its principal place of business in the City of Costa Mesa. 8. Co-Owners are informed and believe, and thereon allege, that Respondent Golf Realty Fund, LP (“GRF” or “Respondent”), is a California limited partnership, which is managed by Robert O Hill, with its principal place of business in the City of Newport Beach. III. VENUE AND JURISDICTION 9. This action stems from the Agreement Between Real Property Owners – Balboa Bay Club Racquet Club of March 8, 1994 (the “OIC Agreement”), for the Tennis Property, the legal description of which is set forth in Exhibit A to the OIC Agreement. Exhibit A attached hereto is a copy of the OIC Agreement. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 4 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10. Section 26 of the OIC Agreement states: “All disputes arising under this agreement will be resolved by submission to arbitration at the Orange County offices of Judicial Arbitration & Mediation Services Inc. (‘JAMS’) for binding arbitration. The parties may agree on a retired judge from the JAMS panel. If they are unable to agree, JAMS will provide a list of three available judges and each party may strike one. The remaining judge will serve as the arbitrator at the arbitration hearing.... Nothing in this paragraph shall in any way limit or otherwise restrict a party’s right or ability to obtain injunctive relief or appointment of a receiver through the Court system.” 11. Pursuant to the OIC Agreement, the claims set forth in this Arbitration Demand are subject to arbitration before a retired judge at JAMS in the County of Orange. Co-Owners reserve the right to obtain injunctive relief through the Court system as provided in Section 26. IV. GENERAL ALLEGATIONS A. Tenant in Common Ownership of the Tennis Property 12. In around 1994, the parties acquired the Tennis Property. Tenant in common ownership in the Tennis Property is apportioned as follows: • Claimant Fainbarg III has a 25% interest, • Claimant Mesa East has a 15% interest, • Claimant Mesa West has a 10% interest, and • Respondent has a 50% interest. 13. The parties also co-own (as tenants in common) the adjacent Newport Beach Country Club located at One Clubhouse Drive, Newport Beach, CA 92660 (f/k/a 1600 E. Pacific Coast Highway, Newport Beach, CA 92660) (the “Golf Property”). Pursuant to the Agreement Between Real Property Owners – Newport Beach Country Club of September 30, 1992, the terms of which are almost identical to the OIC Agreement, tenant in common ownership in the Golf Property is apportioned the same as the ownership in the Tennis Property. 14. Under two essentially identical agreements, for years O Hill Properties, now known as Golf Realty Fund, both controlled by Robert O Hill (hereinafter referred to as “O Hill”), acted as the managing owner, under limited powers, for the tenant in common owners of Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 5 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the Tennis and Golf Properties. As both Properties were under long-term triple net leases to tenants, the fundamental job of O Hill was to collect rents, pay the minimal expenses associated with overseeing the Properties, and then pay distributions to all the tenant in common owners. 15. The OIC Agreement provides the managing owner with only limited authority over the Tennis Property, as most decisions are reserved to the tenant in common owners or require at least a majority vote. For example, before O Hill (as the managing owner) could make a material expenditure for a capital improvement at the Tennis Property he must first obtain the written consent of at least one of the Co-Owners. See OIC Agreement § 7(d). Similarly, any conveyance of an interest in the Tennis Property, including a leasehold interest, must be in a writing signed by all the owners. Id. § 3. Aside from the limited powers given to the managing owner to collect rents and pay ordinary expenses, the OIC Agreement expressly provides that each tenant in common owner retains the right to deal with his interest in the Tennis Property as such owner sees fit. Id. § 1. B. History of Problems with O Hill’s Management 1. Past Problems with Tennis Property 16. Early on, in the 1990s, O Hill explored ways to redevelop the Tennis Property. He sought to rezone the Tennis Property from open space recreational to a mixed use, which would allow commercial and residential development. Co-Owners were supportive of O Hill’s initial efforts to obtain an upzoning of the Tennis Property from open space to mixed use and had no objection to his use of limited ownership funds for that purpose. O Hill developed several ideas for possible site plans but spent relatively modest amounts of ownership funds doing so. 17. In around 2007, however, O Hill started spending considerable amounts of ownership funds, prompting Co-Owners to begin asking questions and requesting information to better understand both what O Hill planned, and the underlying economics of a possible Tennis Property redevelopment. O Hill only reluctantly turned over information for his development plan for the Tennis Property, which O Hill referred to as his “Master Plan,” which involved obtaining discretionary entitlements for the Tennis Property for the following three specific uses: 5 single family residential units (referred to as the villas), 7 tennis courts with a new tennis clubhouse/spa Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 6 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 building, and a hotel with 27 rooms (referred to as the bungalows). 18. Within a year or so of initiating their fact-finding process, it became apparent to Co-Owners that O Hill’s proposed Master Plan did not maximize the Tennis Property’s value for all the tenant in common owners, or that O Hill at least had not provided Co-Owners with meaningful information to support his proposed Master Plan’s economics. It was also apparent that O Hill’s Master Plan was really about his personal interests in developing the Tennis Property even though those interests were not shared by Co-Owners, and he was pursuing those interests at Co-Owners’ expense. On February 20, 2008, Co-Owners asked O Hill in writing to stop – formally objecting to his further processing discretionary entitlements for his Master Plan. Rather than stop, O Hill ramped up his spending of ownership funds on his discretionary entitlements for his proposed Master Plan. 2. 2011-13 Arbitration with Judge Fromholz 19. In April 2011, the Co-Owners commenced a JAMS arbitration proceeding with Hon. Judge Hayley Fromholz (Ret.) to enjoin O Hill from further processing his discretionary entitlements for his Master Plan. Judge Fromholz issued his decision in May 2013. Exhibit B attached hereto is a true and correct copy of Judge Fromholz’ May 17, 2013, Final Award. 20. Judge Fromholz found the OIC Agreement did not expressly give O Hill (as managing owner) expansive powers, and that the Agreement was ambiguous in that it neither clearly authorized nor restricted O Hill from pursuing the discretionary entitlements for his Master Plan: “The Agreements do not expressly give the Managing Owner expansive powers. For example, Recital C of the Agreements states merely that the ‘Owners ... believe it necessary and appropriate to have one Owner be the managing Owner for purposes of accounting and administration.” (Fromholz Award at 8, underline added.) 21. In addition to finding the OIC Agreement was ambiguous, Judge Fromholz concluded that Co-Owners had sat on the sidelines and waited too long to protest the few remaining discretionary entitlements O Hill was processing for his Master Plan. Judge Fromholz found that O Hill could finish the limited work left to complete the discretionary entitlements for his Master Plan since he had purportedly been pursuing them for almost 15 years and very little Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 7 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 remained for O Hill to do (hereinafter, “2012 Discretionary Entitlements”): “At the time that [Co-Owners] voiced their objection in February 2008, O Hill had been actively pursuing the discretionary entitlements for nearly fifteen years. Voters approved the general amendment and the only remaining [discretionary] entitlements were the development standards such as height limits, landscaping, vehicle access, and parking. Thus, very little remained to complete the NBCC Plan.” (Id. at 9, underline added.) 22. Judge Fromholz found that, as of May 2013, the only items that remained for O Hill to complete his 2012 Discretionary Entitlements were ministerial development standards: “Currently, the development standards for the NBCC Land such as height limits, landscaping, vehicle access, and parking, are still undetermined. The development standards are the final discretionary entitlements for the NBCC Land. Proceedings are continuing to be held before the City to determine the development standards.” (Id. at 4, underline added.) 3. 2015-16 Arbitration with Justice Sonenshine 23. Following the conclusion of the parties’ arbitration with Judge Fromholz, and for almost two years, Co-Owners made multiple written requests to O Hill asking to be provided meaningful information about his 2012 Entitlements and Master Plan. O Hill ignored Co-Owners’ requests. Thus, in April 2015, Co-Owners initiated another arbitration against O Hill, this time with the Hon. Justice Sheila Prell Sonenshine (Ret.), to obtain an order allowing them to access information concerning the work-product resulting from the hundreds of thousands of dollars of ownership funds spent by O Hill on his 2012 Discretionary Entitlements and Master Plan, and to enforce their contractual right to have an audit performed concerning those expenditures. 24. In August 2016, Co-Owners prevailed in the parties’ arbitration with Justice Sonenshine and obtained the audit they were seeking, information concerning O Hill’s expenditure of ownership funds on his Master Plan and O Hill’s stipulation to provide annual written status and financial reports as required under section 7 of the OIC Agreement. Justice Sonenshine also awarded Co-Owners their attorneys’ fees and costs as the prevailing parties. 4. 2017-20 Arbitration with Justice King 25. In 2017, O Hill sued Co-Owners seeking to force them to go along with the Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 8 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 development of his 2012 Discretionary Entitlements and Master Plan – i.e., the construction of a 27-room hotel, 5 villa residences, and a new tennis clubhouse and 7 courts. In March and May 2019, an evidentiary hearing was held with the Hon. Justice Jeffrey King (Ret.) at JAMS, and on April 8, 2020, Justice King issued his Final Award. Exhibit C attached hereto is a true and correct copy of Justice King’s April 8, 2020 Final Award, which was confirmed and entered as a Judgment on March 26, 2021, in Orange County Superior Court Case No. 30-2020-01159790- CU-PA-CJC. 26. By his Final Award, Justice King denied all of O Hill’s claims against the Co- Owners and found in favor of the Co-Owners on all of their cross-claims against O Hill, determining, among other things, that: • Co-owners had not already consented, were not estopped from withholding their consent, and had no duty to consent, under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of O Hill’s 2012 Discretionary Entitlements and Master Plan. • Under the OIC Agreement each owner has the unfettered right to refuse for any reason to sell its interest the Tennis Property or any portion thereof. • Relative to the leasing of the Tennis Property or portions thereof, no owner may refuse to lease the Tennis Property or portions thereof for an objectively unreasonable reason. • The Co-owners’ refusal to consent to the sale or lease of, or construction of improvements on, the Tennis Property as part of O Hill’s 2012 Discretionary Entitlements and Master Plan was not objectively unreasonable. (Justice King Final Award at 32-33.) 27. Also, O Hill acknowledged in the arbitration with Justice King that as of November 2018, he had completed his 2012 Discretionary Entitlements (which, in 2013, Judge Fromholz said he could finish processing since very little remained to complete them). Indeed, Justice King made it a point to say in his Final Award that O Hill had finally completed his 2012 Discretionary Entitlements: Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 9 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Judge Fromholz states at page 4 of his decision, “[c]urrently, the development standards for the NBCC Land such as height limits, landscaping, vehicle access and parking are still undetermined. The development standards are the final discretionary entitlements for the NBCC Land. Proceedings are continuing to be held before the City to determine the development standards.” To a reader it somewhat leaves the impression that he believed the process of entitlements was near completion. Entitlements were not completed until about five and one-half years later. (King Final Award at 5, fn. 3, emphasis added.) * * * * The master plan has three elements: there are 27 bungalows, 5 villas and the tennis club/spa. The tennis/spa building is an amenity for the bungalows and villas. The entity. By November 2018 he had: the Newport Beach Country Club Planned Community text, a zone change, site plan approval, state Water Quality Control Board approval, grading plan, storm drain plan, dry utility plans and street improvement plans, through plan check. They had all the entitlement approvals necessary to do the “bake- off. (Id. at 10, underline added.) 28. Thus, any right O Hill had to process his few remaining 2012 Discretionary Entitlements under Judge Fromholz’ award had run its course as of November 2018. C. Ongoing Issues with O Hill’s Management 1. In November 2021, Co-Owners Learned O Hill Was Applying for and Processing New Entitlements for the Tennis Property with the City 29. Co-Owners prevailed in the 2015-16 arbitration with Justice Sonenshine because O Hill was spending significant ownership funds on his Master Plan while refusing to provide Co-Owners with information about such expenditures. Co-Owners prevailed in the 2017-2020 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 10 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 arbitration with Justice King because, after O Hill had finally completed his 2012 Discretionary Entitlements, it was determined that under the OIC Agreement O Hill could not compel Co- Owners to go along with the development of the Tennis Property as part of O Hill’s Master Plan, and Co-Owners were not estopped from, nor being unreasonable, in withholding their consent to O Hill’s Master Plan. 30. After Justice King issued his Final Award, Co-Owners sent O Hill a series of letters on November 13, 2019, June 9, 2020 and July 28, 2020, putting him on notice that any right he had to process his few remaining 2012 Discretionary Entitlements under Judge Fromholz’ 2013 award (since O Hill had completed them) had run its course and that award did not support O Hill processing new entitlements for the Tennis Property, that he did not have Co- Owners’ consent to seek new entitlements and that he was not to spend ownership funds doing so. 31. Yet, in November 2021, Co-Owners discovered that O Hill, without their knowledge or consent and over their objections, was seeking City approval for a new project he had devised without Co-Owners’ input, which, Co-Owners are informed and believe, and thereon allege, would significantly change his Master Plan by, without limitation, increasing the number of hotel rooms from 27 to 41 (hereinafter the “2021 Project”). 32. Co-Owners are further informed and believe, and thereon allege, that for his 2021 Project, O Hill is applying for and processing, or that he intends to apply for and process, with the City, the following new entitlements for the Tennis Property: General plan amendment, PC text amendment, development agreement amendment, amendment to tract map, major site development review amendment, limited term permit amendment, coastal development permit amendment, traffic study and compliance with CEQA (hereinafter “New 2021 Entitlements”). Exhibit D attached hereto are copies of O Hill’s Community Development Planning Permit Application that Co-Owners are informed and believe, and thereon allege, O Hill submitted to the City in November 2021 and the NBCC Tennis Property Entitlement Amendment & Project Description that Co-Owners are informed and believe, and thereon allege, O Hill submitted to the City in February 2022. 33. On November 23, 2021, Co-Owners sent O Hill a letter expressing surprise that he Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 11 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 was processing his New 2021 Entitlements and reminding O Hill that he did not have their consent to process any more entitlements for the Tennis Property and was not to spend ownership funds doing so. Co-Owners asked O Hill in writing to stop, and to provide them with copies of the submittals he made to the City for his 2021 Project and his New 2021 Entitlements as well as for meaningful economic data he believed supported his 2021 Project. O Hill ignored Co- Owners’ requests. 34. On December 6, 2021, Co-Owners sent O Hill another letter again asking to be provided the information requested in their November 23 letter regarding his 2021 Project and his New 2021 Entitlements, and that he stop processing his New Entitlements. O Hill again ignored Co-Owners’ requests. 35. On January 21, 2022, Co-Owners again sent O Hill a letter asking that he provide them with copies of his submissions to the City for his 2021 Project and New 2021 Entitlements, and that he stop processing his New Entitlements. O Hill once more ignored Co-Owners’ requests. 36. O Hill has refused to comply with Co-Owners’ requests that he provide them with copies of his submittals to the City regarding his 2021 Project and his New 2021 Entitlements, and that he stop processing his New Entitlements, and it is clear that O Hill will only comply if ordered to do so and enjoined from taking further action in connection with his New 2021 Entitlements and from spending ownership funds on them. 2. In December 2021, Co-Owners Learned O Hill Is Processing a Liquor License for a Tenant at the Tennis Property He Never Disclosed 37. In October 2014, Grand Slam Tennis and its manager Sean Abdali (hereinafter collectively “Abdali”), started operating the tennis club at the Tennis Property without a written lease, apparently based upon a purported oral month-to-month agreement with O Hill calling for a $7,000 monthly license fee. Co-Owners are informed and believe, and thereon allege, the purported month-to-month arrangement with Abdali continues today, and the fee/rent Abdali is paying is well below market. 38. When Co-Owners learned Abdali was operating the tennis club, they asked O Hill Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 12 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to get a basic written lease in place with Abdali that would provide for the monthly rent to be paid, length of the term, and Abdali’s obligation to pay the property taxes and maintain liability insurance covering all the owners. In response to Co-Owners’ request for a basic written lease with Abdali, O Hill apparently purported to promise Abdali, without Co-Owners’ knowledge or consent, that he could operate the tennis club for 25 years. 39. At the arbitration with Justice King, O Hill testified that he intentionally did not involve Co-Owners when making purported promises to Abdali regarding the tennis club, nor did O Hill seek Co-Owners’ approval before making such purported promises. Abdali testified Co- Owners never made any promises to him, and that he knew he needed Co-Owners to sign (as owners) any lease for the tennis club. 40. As part of the arbitration with Justice King, O Hill sought a declaration that Co- Owners had to sign a 22-year proposed lease with Abdali that O Hill had prepared and given to Abdali without Co-Owners’ knowledge or consent. Yet, O Hill also testified at the arbitration that “[u]nder the [OIC] agreement each owner must consent to any grant of a leasehold interest” and that “a majority [of owners] must agree as it relates to a lease.” (King Final Award at 11.) O Hill’s testimony is consistent with section 3 of the OIC Agreement, stating: “The Owners acknowledge and agree that...any leasehold interest [in the Tennis Property] ... may be granted, conveyed or so encumbered by the execution of the applicable instrument by each Owner.” (Underline added.) 41. Justice King denied O Hill’s claim, and agreed with Co-Owners, finding that Co- Owners had acted reasonably in declining to sign the proposed lease O Hill negotiated with Abdali. (King Final Award at 25-26.) 42. After Justice King issued his Final Award, Co-Owners sent O Hill letters on June 9, 2020, and July 28, 2020, again asking that he get a basic written lease in place for the tennis club setting forth the tennis club operator’s obligations to pay rent, taxes and insurance, and with a reasonable lease term in the range of one to three years. O Hill ignored Co-Owners’ requests. 43. In late November 2021, Co-Owners learned from reviewing the tennis club website (https://thetennisclubnb.com) that the club had 31 new pickleball courts. Apparently, several of the tennis courts at the club had been converted to pickleball courts, but O Hill had not Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 13 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 informed Co-Owners about the new pickleball courts. Thus, on November 23, 2021, Co-Owners once again sent O Hill a letter asking (1) for an update on the status of a basic, straightforward written lease with Abdali, and (2) for an accounting of the tennis club’s operations so they could understand how the 31 new pickleball courts at the club were impacting its membership and revenues. O Hill ignored Co-Owners’ requests. 44. On or about December 8, 2021, Co-Owners learned that without their knowledge or consent, a liquor license application was being processed for the Tennis Property with the City, and that the applicant for the liquor license was Clubhouse ATP, LLC—an entity Co-Owners had not heard of—and the application had been executed by O Hill on behalf of the Tennis Property ownership. Co-Owners are informed and believe, and thereon allege, that Exhibit E attached hereto is a copy of an application for a liquor license at the Tennis Property submitted by O Hill and Clubhouse ATP to the City on or about August 8, 2021. 45. Co-Owners also learned that Clubhouse ATP was, concurrent with its application with the City, also applying for a liquor license with the California Department of Alcoholic Beverage Control (“ABC”). Exhibit F attached hereto is a copy of an ABC website printout of December 9, 2021, showing Clubhouse ATP’s pending application for a liquor license. 46. On December 10, 2021, Co-Owners sent O Hill a letter expressing surprise that Clubhouse ATP (an entity about which he had not informed them) and O Hill were seeking a liquor license for the Tennis Property. Co-Owners were concerned about, among other things, potential exposure and liability as property owners should alcohol be sold at the Tennis Property. Co-Owners asked O Hill to halt the liquor license application until they could understand what protections against liability and exposure would be in place, including insurance, along with asking O Hill to provide them with copies of the submittals made to the City and ABC as part of the use permit and liquor license applications as well as any purported lease agreement made with Clubhouse ATP for the Tennis Property. O Hill ignored Co-Owners’ requests. 47. On December 16, 2021, the City Zoning Administrator approved O Hill’s and Clubhouse ATP’s use permit application for a liquor license at the Tennis Property. In response to the Co-Owners’ objections, including that O Hill did not have the authority to sign the use permit Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 14 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 application on behalf of the ownership, the Zoning Administrator informed Co-Owners that it viewed their objections as pertaining to matters between the Tennis Property’s owners in which the City did not want to get involved. The City also told Co-Owners they should take whatever action they believed appropriate to stop O Hill from proceeding with the use permit application. Co-Owners are informed and believe, and thereon allege, that as a condition for the Zoning Administrator agreeing to approve the use permit application, the City required O Hill to sign an agreement to indemnify and defend the City against any legal challenges to the use permit. 48. On January 3, 2022, Co-Owners filed an appeal of the Zoning Administrator’s approval of the use permit for a liquor license, and informed the City of their intent to commence this arbitration seeking, among other things, a legal determination and declaration that O Hill did not, and does not, have the authority to sign and submit the use permit application for a liquor license on behalf of the Tennis Property ownership, and before he could do so he was required to get the Co-Owners’ consent (which he did not have). Pursuant to Newport Beach Municipal Code (NBMC) section 20.64.030-B.1.a., a use permit approval by the City Zoning Administrator that is appealed has no force or effect as of the day the appeal is filed. 49. At the time of the submission of this Arbitration Demand to JAMS, Co-Owners’ appeal of the Zoning Administrator’s approval of the use permit had not yet been heard by the City’s Planning Commission. 50. Because O Hill refused to respond to—let alone acknowledge—Co-Owners’ requests for information about Clubhouse ATP, including their requests for copies of the submittals to the City and ABC for the use permit and liquor license O Hill and Clubhouse ATP were seeking along with any purported lease agreement with Clubhouse ATP, Co-Owners submitted a public records request to the City for documents relating to the use permit. In January 2022, the City produced responsive documents, including correspondence involving O Hill, that made it apparent that O Hill had purported to convey a leasehold interest in the tennis property to Clubhouse ATP, or he allowed Abdali to do so, without Co-Owners’ knowledge or written consent as required under section 3 of the OIC Agreement. For example, the City produced the following: (a) November 10, 2021, email from Patrick Rolfes of Clubhouse ATP to Liz Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 15 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Westmoreland at the City regarding the use permit, stating: “We subleased the space on July 7, 2021 and we are hopeful we can get through this process so we can start doing business.” (b) November 18, 2021, email from Liz Westmoreland at the City to O Hill stating that if the City grants the use permit and the ABC issues the liquor license to Clubhouse ATP that “it will be on the applicant [i.e., Clubhouse ATP] to comply with his private agreements including lease terms, etc.” O Hill responded on November 19, 2021, saying: “Understood.” 51. Co-Owners are also informed and believe, and thereon allege, that as part of the application for a liquor license at the Tennis Property that a written agreement was submitted to the ABC purporting to show Clubhouse ATP had a right to tenancy at the Tennis Property. Again, any such agreement purporting to convey a leasehold interest to Clubhouse ATP was made without Co- Owners’ knowledge or consent and in violation of their rights under the OIC Agreement. 3. In February 2022, Co-Owners Learned O Hill Was Allowing Alcohol to Be Sold at the Tennis Property Without a License 52. The Alcoholic Beverage Control Act requires an establishment to be licensed before it can sell alcohol and any person violating the statute is guilty of a misdemeanor. Cal. Bus. Prof. Code §§ 23300, 23301. 53. In February 2022, Co-Owners were surprised to learn alcohol was being sold at the Tennis Property without a liquor license apparently at a restaurant called the Clubhouse Grill being operated by Clubhouse ATP. O Hill had failed to inform Co-Owners a restaurant was open and operating at the Tennis Property, let alone selling alcohol without a license. //// //// //// //// //// //// Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 16 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 54. Below are pictures of alcohol being sold at the Clubhouse Grill on February 8, 2022: Picture of the cooler at Clubhouse Grill on Tuesday, February 8, 2022, stocked with beer, martini glasses, and beer taps. Picture of Indian Pale Ale (IPA) draft beer purchased on tap at Clubhouse Grill on Tuesday, February 8, 2022. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 17 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 55. Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday, February 13, 2022: Picture of the bar at Clubhouse Grill on Sunday, February 13, 2022, stocked with alcohol. Picture of receipt from Clubhouse Grill showing IPA draft beer purchased on Tuesday, February 8, 2022, for $7.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 18 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Picture of bartender at Clubhouse Grill on Sunday, February 13, 2022, mixing and selling a Bloody Mary with Titos Vodka. Picture of Bloody Mary with Titos Vodka purchased at Clubhouse Grill on Sunday, February 13, 2022. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 19 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 56. Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday, February 20, 2022: Picture of Clubhouse Grill mixed drink specials on Sunday, February 20, 2022, including an Espresso Martini and Skinny Margarita. Picture of receipt from Clubhouse Grill showing Bloody Mary with Titos Vodka purchased on Sunday, February 13, 2022, for $12.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 20 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Picture of bartender at Clubhouse Grill on Sunday, February 20, 2022, preparing and selling a mixed drink with Titos Vodka. Picture of receipt from Clubhouse Grill showing a mixed drink with Titos Vodka purchased on Sunday, February 20, 2022 for $12.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 21 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 57. On February 22, 2022, Co-Owners sent O Hill (as managing owner) a letter asking that he take whatever action necessary to cause anyone unlawfully selling alcohol at the Tennis Property—including Clubhouse ATP and Abdali—to immediately cease and desist doing so. Co- Owners expressed to O Hill that in addition to exposing them to substantial financial liability by allowing alcohol to be sold at the Tennis Property, selling alcohol without a license was a crime. 58. On March 3, 2022, O Hill responded to Co-Owners’ February 22, 2022, letter. He did not agree to stop the unlawful sale of alcohol at the Tennis Property nor deny it was taking place. Rather, O Hill somewhat bewilderingly stated that alcohol had been served at the Tennis Property “at tournaments and special events with a special catering permit for over 50 years” and that a “special permit” had been obtained by the Orange County Youth Sports Foundation for a January 29, 2022, event at the Tennis Property. 59. Co-Owners are informed and believe, and thereon allege, that even after O Hill received Co-Owners’ February 22, 2022, cease and desist letter, alcohol continues to be sold at the Tennis Property without a liquor license and, thus, unlawfully. 4. In January 2022, O Hill Recommenced His Efforts to Interfere with Co- Owners’ Exploration of a Tennis Property Redevelopment Opportunity 60. In the past, when Co-Owners have tried to explore redevelopment opportunities for the Tennis Property, O Hill has taken the position that his Master Plan is the only project that could get approved and any alternative opportunities were unworkable and not worth considering. O Hill’s modus operandi is to hijack the process by not only refusing to cooperate in exploring redevelopment alternatives to his Master Plan but to block their fair consideration by attempting to manufacture community opposition to any such alternative project. 61. For example, in 2012 and unbeknownst to Co-Owners, O Hill hired the Chatten Brown law firm to file a lawsuit against the City in the name of the no-growth group “Friends of Good Planning”, seeking to enjoin the City from processing the adjacent Golf Property tenant’s plan to construct a new $40 million clubhouse because it was at odds with O Hill’s Master Plan and despite the fact that the Golf Property lease plainly gave that right to the tenant. In March 2012, O Hill attended a City Council meeting and represented that he was in no way supporting or Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 22 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 sponsoring the Friends of Good Planning lawsuit. In March 2017, Chatten Brown sued O Hill personally for unpaid legal fees it had incurred at his direction for the Friends of Good Planning lawsuit in 2012. In June 2017, O Hill paid Chatten Brown $15,000 using Tennis Property ownership funds to settle that lawsuit – without informing Co-Owners. 62. In 2019, upon learning that Co-Owners were trying to obtain a redevelopment proposal for the Tennis Property from the ownership group operating the adjacent Golf Property, O Hill and Abdali (the tennis club operator) launched the website savethetennisclub.org seeking to spread misinformation about the potential redevelopment project and circulating a petition opposing it. Their website called out the Co-Owners’ principals by name, Elliot Feuerstein and Irv Chase, claiming they “want to upend the General Plan approved by the voters of Newport Beach and eliminate the Tennis Club and the promised enhancements all together.” 63. Thus, on January 5, 2021, when Co-Owners learned the City was updating its Housing Element to address the state mandate for more housing and was accepting proposals for projects that may help meet the housing need, and that Ryan Co. (an established developer) was interested in entering into a long-term ground lease for the Tennis Property and constructing a multifamily redevelopment project there that could pay the owners millions in rent each year, Co- Owners sent O Hill a letter asking that he have an open mind, and to not interfere, as they attempted to meaningfully explore a lease proposal with Ryan Co. 64. On January 19, 2021, Co-Owners sent O Hill a copy of a letter they informed him they intended to send to the City letting it know they were in discussion with a few developers interested in redeveloping the Tennis Property and these projects would seem to be good candidates for participation in the City’s Housing Element Update, and Co-Owners hoped to share details about the projects with the City soon and to start exploratory discussions. O Hill did not object to Co-Owners sending their letter to the City. 65. On December 6, 2021, Co-Owners sent O Hill a letter letting him know they had negotiated and were in the process of drafting a proposed lease with Ryan Co. and expected to be able to share that lease with him for discussion within 30-60 days. Co-Owners also restated their request to O Hill that he not interfere with their efforts to secure a lease proposal from Ryan Co. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 23 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 66. On or about January 13, 2022, Co-Owners learned that a petition was being circulated at the tennis club and to its members to drum-up opposition to a Ryan Co. project at the Tennis Property. Co-Owners are informed and believe, and thereon allege, that petition was generated by the current tennis club operator Abdali and O Hill, or at least with O Hill’s knowledge. Exhibit G attached hereto is a copy of the Petition to Stop the Massive Development Proposed to Replace the Tennis Club at Newport Beach. 67. Co-Owners also learned of a new website—savethetennisclub.com/tennis-club/— further seeking to solicit opposition to Ryan Co. which Co-Owners are informed and believe, and thereon allege, was generated by Abdali and O Hill, or with O Hill’s knowledge. Exhibit H attached hereto is a copy of the savethetennisclub.com/tennis-club/ webpage. This is the same type of interference O Hill and Abdali engaged in 2019 when they created the website savethetenniclub.org upon learning of Co-Owners’ efforts to solicit a proposal for a long-term ground lease for the Tennis Property from the operators of the adjacent Golf Property. 68. On January 21, 2022, Co-Owners sent O Hill a letter stating that the petition being circulated at the tennis club and the savethetennisclub.com website opposing Co-Owners’ efforts regarding Ryan Co., which at that point merely consisted of obtaining a proposal, were acts of interference that needed to stop, and if it was shown that O Hill was involved as Co-Owners suspected that his conduct constituted a breach of his fiduciary duties and raised questions about his suitability to act as managing owner. Co-Owners asked that O Hill stop his efforts to incite opposition to a potential Ryan Co. project and that he instruct Abdali in writing to do the same. 69. On January 28, 2022, O Hill responded claiming to have no knowledge of the savethetennisclub.com website, but also saying he would not instruct Abdali to stop with his efforts to drum-up opposition to a potential Ryan Co. project, while taking an “I told you so” position and saying he was not surprised activists were mobilizing to oppose the project – at the same time conceding he had discussed the Ryan Co. project with those activists. O Hill’s behavior once more shows the lengths he will go to prevent any consideration of alternatives to his Master Plan. //// //// Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 24 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IV. CO-OWNERS’ ARBITRATION CLAIMS AGAINST O HILL FIRST CLAIM FOR RELIEF (Declaratory and Injunctive Relief) 70. Co-Owners incorporate by reference as though set forth in full, each and all the allegations set forth in Paragraphs 1 through 69, above. 71. Despite Co-Owners’ November 23, 2021, December 6, 2021, and January 21, 2022, letters asking O Hill to confirm in writing he had stopped processing his New 2021 Entitlements, and Co-Owners’ December 10, 2021, letter to O Hill asking that he stop processing the use permit for a liquor license at the Tennis Property, O Hill has failed to acknowledge the requests in Co- Owners’ letters and continues to process such applications. As such, Co-Owners bring this arbitration to seek a legal determination and declaration that O Hill does not, and did not, have the authority to process his New 2021 Entitlements or the use permit for a liquor license. 72. An actual controversy has arisen and now exists between Co-Owners and O Hill concerning their respective rights and obligations under the OIC Agreement. Co-Owners contend that in November 2018 O Hill finished processing his few remaining 2012 Discretionary Entitlements, and, thus, any right he had to process his Discretionary Entitlements ran its course and O Hill cannot continue to spend ownership money further entitling his already fully entitled Master Plan – especially since he cannot compel Co-Owners to consent to his Master Plan as Justice King determined, and that he was required to disclose any new entitlements or development plan to Co-Owners (and to continue to provide them with meaningful information regarding the same) and to obtain their consent before he could spend ownership funds and process his New 2021 Entitlements and the use permit for a liquor license at the Tennis Property, and that he does not have the Co-Owners’ consent to seek them. 73. An additional actual controversy has arisen and now exists between Co-Owners and O Hill under the OIC Agreement, in that Co-Owners are informed and believe, and thereon allege, that O Hill is purporting to convey a leasehold interest in the Tennis Property, or is allowing Abdali to do so with O Hill’s knowledge, including to Clubhouse ATP, without Co- Owners’ knowledge or written consent as required under section 3 of the OIC Agreement. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 25 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 74. Further, after Co-Owners sent O Hill their February 22, 2022 cease and desist letter to stop the unlawful sale of alcohol at the Tennis Property, Co-Owners are informed and believe, and thereon allege, that alcohol continues to be sold at the Tennis Property without a liquor license. Thus, an additional actual controversy has arisen and now exists between Co- Owners and O Hill, and Co-Owners also seek a legal determination and declaration that O Hill must take any and all action necessary to cause anyone unlawfully selling alcohol at the Tennis Property to immediately cease and desist doing so. 75. Because of the urgency and importance of the issues presented by the parties’ dispute, it is necessary and appropriate for the Arbitrator to resolve this dispute by issuing a declaration determining the respective rights and obligations of the parties with respect to the OIC Agreement. 76. Co-Owners have no adequate remedy at law and will suffer irreparable damage unless O Hill is enjoined from further taking the action identified herein. Co-Owners therefore seek a temporary restraining order, preliminary injunction and permanent injunction restraining O Hill, and agents, representatives, successors and assigns, from taking any further action in connection with the conduct identified herein. SECOND CLAIM FOR RELIEF (Breach of the OIC Agreement) 77. Co-Owners incorporate by reference as though set forth in full, each and all the allegations set forth in Paragraphs 1 through 76, above. 78. Recital C of the OIC Agreement states that O Hill’s limited purpose as managing owner concerns accounting and administration duties, and section 7—specifying O Hill’s limited authority under the OIC Agreement as managing owner—does not authorize O Hill to process entitlements for the Tennis Property. O Hill breached the OIC Agreement by processing, and spending ownership funds processing, his New 2021 Entitlements and the use permit for the liquor license without Co-Owners’ knowledge or consent. Co-Owners learned about O Hill processing his New Entitlements and use permit with the City in November and December 2021, and despite Co-Owners’ express written objections, and in breach of the OIC Agreement, O Hill Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 26 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 has persisted in processing them. 79. Section 3 of the OIC Agreement states that any conveyance of a leasehold interest in the Tennis Property must be in a writing signed by all the owners. Id. § 3. Co-Owners are also informed and believe, and thereon allege, that, in breach of section 3 of the OIC Agreement, O Hill has purported to convey a leasehold interest in the Tennis Property without Co-Owners’ knowledge or consent, including to Clubhouse ATP. 80. Section 7 of the OIC Agreement sets forth the duties of the managing owner, and section 7(e) provides that the managing owner is paid “an asset management fee” for performing those duties. Co-Owners are informed and believe, and thereon allege, that O Hill breached section 7 of the OIC Agreement by allowing alcohol to be sold at the Tennis Property without a liquor license and, thus, unlawfully and/or is being grossly negligent in performing his duties as managing owner by not preventing the unlawful sale of alcohol there. 81. Co-Owners have performed their obligations under the OIC Agreement except those which they have been excused or prevented from performing. 82. As a direct and proximate result of O Hill’s breaches of the OIC Agreement, Co- Owners have suffered, and will continue to suffer, direct and foreseeable damages, including but not limited to, O Hill’s improper and unauthorized expenditure of material sums of ownership money, in an amount to be determined at the arbitration hearing. THIRD CLAIM FOR RELIEF (Breach of Implied Covenant of Good Faith and Fair Dealing) 83. Co-Owners incorporate by reference as though set forth in full, each and all the allegations set forth in Paragraphs 1 through 82, above. 84. The OIC Agreement is subject to an implied covenant of good faith and fair dealing that all parties would act in good faith and with reasonable efforts to perform their contractual duties—both explicit and fairly implied—and not to impair the rights of other parties to receive the rights, benefits, and reasonable expectations under the Agreement. 85. O Hill breached the implied covenant of good faith and fair dealing by: (a) processing his New 2021 Entitlements and use permit with the City and Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 27 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 spending ownership funds doing so without Co-Owners’ consent; (b) purporting to convey a leasehold interest in the Tennis Property—or allowing Abdali to do so with his knowledge, including to Clubhouse ATP—without Co-Owners’ consent; (c) interfering with Co-Owners’ efforts to obtain a lease proposal from Ryan Co.; and (d) allowing alcohol to be sold at the Tennis Property without a liquor license. 86. Co-Owners have performed their obligations under the OIC Agreement except those which they have been excused or prevented from performing. 87. O Hill’s failure to act in good faith has denied Co-Owners the full benefit of their bargain under the OIC Agreement. 88. As a result of O Hill’s breach of the covenant of good faith and fair dealing, Co- Owners have suffered, and will continue to suffer, direct and foreseeable damages, in an amount to be determined at the arbitration hearing. FOURTH CLAIM FOR RELIEF (Accounting) 89. Co-Owners incorporate by reference as though set forth in full, each and all the allegations set forth in Paragraphs 1 through 88, above. 90. Co-Owners are unaware of the exact amount of ownership funds spent by O Hill on his New 2021 Entitlements or the use permit for a liquor license at the Tennis Property. The information necessary to ascertain those amounts is strictly within O Hill’s control. Accordingly, Co-Owners seeks a forensic accounting of those amounts. 91. Co-Owners are unaware of the financial impact the new pickleball courts (see paragraph 41 above) have had on the tennis club’s operation, and whether Clubhouse ATP or any other purported tenant is paying to, or sharing with, O Hill any income being generated by or at the tennis club other than the monthly rent O Hill reflects on the distribution summaries he provides to Co-Owners. The information necessary to ascertain those amounts is strictly within O Hill’s control. Accordingly, Co-Owners seek a forensic accounting of those amounts and the Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 28 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 tennis club’s operations. FIFTH CLAIM FOR RELIEF (Declaratory Relief) 92. Co-Owners incorporate by reference as though set forth in full, each and all the allegations set forth in Paragraphs 1 through 91, above. 93. Section 7(b) of the OIC Agreement provides that the owners of a majority of ownership interests in the Tennis Property not owned by the managing owner may elect to remove the managing owner for “cause” and appoint a new managing owner. Section 7(b) defines “cause” as “fraud, gross negligence or material default of a material obligation by Managing Owner.” 94. An actual controversy has arisen and now exists between Co-Owners and O Hill concerning their respective rights and obligations under the OIC Agreement. Co-Owners are informed and believe, and based thereon allege, that cause exists, including based on O Hill’s conduct alleged herein, to remove him as managing owner under the OIC Agreement. 95. Co-Owners have no adequate remedy at law and will suffer irreparable damage unless O Hill is enjoined from taking any further action purportedly on the basis that he is the managing owner. Co-Owners therefore seek a temporary restraining order, preliminary injunction and permanent injunction restraining O Hill, and his agents, representatives, successors and assigns, from taking any further action as the managing owner (including prohibiting him from spending Tennis Property funds, submitting entitlement applications purportedly on behalf of the Tennis Property owners, or purporting to convey a leasehold interest in the Tennis Property), and that O Hill and any other person or entity (including NBCC Land or NBCC L&I) with possession, custody or control of property of, or records relating to, the Tennis Property (including any bank account(s) and/or books and records), shall by personal service or otherwise fully cooperate with and assist the succeeding managing owner in taking and maintaining possession, custody, or control of such property and records and immediately transfer or deliver them to the succeeding managing owner. //// Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 29 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WHEREFORE, Co-Owners pray for an Arbitrator’s Award on their claims as follows: ON THE FIRST CLAIM FOR DECLARATORY AND INJUNCTIVE RELIEF 1. For a determination and declaration that O Hill was required to disclose to and obtain Co-Owners’ consent before he could spend ownership funds on and process his New 2021 Entitlements and the use permit for a liquor license, and that he does not have the Co-Owners’ consent to seek his New 2021 Entitlements or the use permit for a liquor license and he must halt their processing and withdraw them from the City. 2. For a temporary restraining order, preliminary injunction and permanent injunction restraining O Hill, and his agents, representatives, successors and assigns, from taking any further action processing his New 2021 Entitlements or the use permit for a liquor license, or spending ownership funds thereon, without first obtaining the consent of one or more of the Co-Owners. 3. For a determination and declaration that, under section 3 of the OIC Agreement, O Hill was required to disclose to Co-Owners and obtain their written consent prior to purporting to convey a leasehold interest in the Tennis Property, including to Clubhouse ATP. 4. For a temporary restraining order, preliminary injunction and permanent injunction restraining O Hill, and his agents, representatives, successors and assigns, from taking any further action purporting to convey a leasehold interest in the Tennis Property, including to Clubhouse ATP. 5. For a determination and declaration that O Hill must take any and all action necessary to cause anyone unlawfully selling alcohol at the Tennis Property to immediately cease and desist doing so. 6. For a temporary restraining order, preliminary injunction and permanent injunction restraining O Hill, and his agents, representatives, successors and assigns, and any alleged tenant or licensee to whom O Hill has purported to convey a tenancy or other right to occupy or operate at the Tennis Property, from engaging in the unlawful sale of alcohol at the Tennis Property without a liquor license. //// //// Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) - 30 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ON THE SECOND AND THIRD CLAIMS FOR BREACH OF CONTRACT AND BREACH OF THE IMPLIED COVENANT 7. For damages in an amount to be proven at trial. ON THE FOURTH CLAIM FOR AN ACCOUNTING 8. For a forensic accounting (1) of the exact amount of ownership funds spent by O Hill on the 2021 Project, 2021 New Entitlements and the use permit for a liquor license at the Tennis Property, and (2) of the tennis club’s operations and revenues. ON THE FIFTH CLAIM FOR DECLARATORY RELIEF 9. For a determination and declaration that cause exists under the OIC Agreement to remove O Hill as managing owner. 10. For a temporary restraining order, preliminary injunction and permanent injunction restraining O Hill, and his agents, representatives, successors and assigns, from taking any further action purportedly on the basis as managing owner (including prohibiting him from spending Tennis Property funds, submitting entitlement applications purportedly on behalf of the Tennis Property owners, or purporting to convey a leasehold interest in the Tennis Property), and that O Hill and any other person or entity (including NBCC Land or NBCC L&I) with possession, custody or control of property of, or records relating to, the Tennis Property (including any bank account(s) and/or books and records), shall by personal service or otherwise fully cooperate with and assist the succeeding managing owner in taking and maintaining possession, custody, or control of such property and records and immediately transfer or deliver them to the succeeding managing owner. ON ALL CLAIMS: 11. For attorneys’ fees incurred in this action pursuant to section 27 of the OIC Agreement. 12. For costs of suit and out-of-pocket expenses. 13. For such other relief as the Arbitrator deems just and proper. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) -31 - ARBITRATION DEMAND AND STATEMENT OF CLAIMS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: March 25, 2022 MICHAEL YODER O’MELVENY & MYERS LLP JACOB C. GONZALES jcg | law By: Jacob C. Gonzales Attorneys for Co-Owners/Claimants Mesa Shopping Center-East LLC, Mira Mesa Shopping Center-West LLC, and Fainbarg III LP Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit A Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) RECORDING REQUBSTBD BY AND · WHEN RECORDED RETURN TO: 0 Hill Properties One Upper Newport Plaza Newport Beach, CA 92660 (Space Above for Recorder's Use) AGREEMENTBETWEENREALPROPERTYOWNERS BALBOA BAY CLUB RACQUET CLUB Newport Beach, California This Agreement Be~een Real Property Owners ("Agreement") is entered i•~to by and between O Hill Properties, a califomia limited partnership ("O Hil111), The Fainbarg Trust dated April 19, 1982 ("TFI'"), Mesa Shopping Center-East, a California general partnership (Mesa-East), Mira Mesa Shopping Center-West, a California general partnership ("Mira Mesa- West"), and Newport Beach Country Club, a California limited partnership ("NBCC Ltd"). 0 Hill, TFT, Mesa-East, Mira Mesa-West, and NBCC Ltd are sometimes referred to singularly as an "Owner" or "party" or collectively as the "Owners" or 11parties". RECITALS A. The Owners desire to own, lease, manage, maintain, refinance, encumber and hold for investment, as tenants in common, that certain real property comprising approximately 6.099 acres with improvements thereon, commonly identified as Balboa Bay Club Racquet Club located at 1602 East Pacific Coast Highway, in Newport Beach, California and legally described in Exhibit "Au attached (the •Property"). :B. The Owners have discussed the co-ownership of the Property and have concluded that to avoid conveyancing and ownership problems created by death, marital or other dissolution, bankruptcy or insolvency, disputes and the like, it is in the best interest of each Owner that the holding of the Property be governed by an agreement which defines the rights and duties of each Owner in the form of this Agreement. C. 1:he Owners also believe it necessary and appropriate to have one Owner be the managing Owner for purposes of accounting and administration. 6/10/9:¼ Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) NOW, THEREFORE, in consideration of the foregoing Recitals and the conditions and covenants hereinafter contained, the Owners hereby agree as follows: l. AGREEMENT AS TENANTS IN COMMON. The Owners agree to hold title to the Property as tenants in common to own> manage, maintain, lease, finance, refinance, and/or hold the Properly for investment in accordance with the terms of this Agreement. The Owners may conduct such other activities with respe.ct to the Property as are related to or compatible with the ownership of real estate. Subject to the provisions of this Agreement, each Owner retains the right to deal with his Inter~t in the Property (as defined in Section 3 below) as such Owner sees fit. 2. TERM. This Agreement shall become effective on the acquisition of the Property by the Owners, and shall continue thereafter until terminated pursuant to Section 13 below. 3. TITLE TO THE PROPERTY; CONVEYANCES AND LIENS. Concurrently with the recordation hereof, title to the Property shall be acquired by, and in the name of, the Owners as their interests appear in Exhibit "B" attached (each an "Interest") and shall thereafter be held in the name of the Owners as tenants in common. The Owners acknowledge and agree that the Property, or any interest therein, including any leasehold interest, any deed of trust granted or other encumbrances or liens placed thereon, may be granted, conveyed or so encumbered by the execution of the applicable instrument by each Owner, or if an Owner is obligated to convey, lease or encumber its interest in accordance with the terms of Section 4 of this Agreement and fails to do so within the time limits set forth herein, by the Managing Owner and the Additional Owner (both as defined in Section 7 below) in accordance with the powers of attorney granted to the Managing Owner and the Additional Owner as described in Section 7(c) below. Such conveyance or encumbrance by the.Managing Owner and the Additional Owner under such powers of attorney shall be binding upon each Owner. 4. FINANCING, REFlNANCINGS, SALE AND LEASING. (a) The Owners acknowledge that concurrently with the acquisition of the Property, the Owners shall place financing on the Property which may have a balloon payment at the due date thereof (the "Acquisition Financing"). Each Owner acknowledges that there will be refinancings of the Acquisition Financing from time to time. The Managing Owner shall have the right to obtain such refinancing for the Property on then market rates and terms. F.a.~h Owner shall have a duty to fully cooperate and not interfere or impede, in any manner, -2- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) in such refinancings including but not limited to signing appropriate documentation (e.g. notes, deeds of trust, assignments of rents and le.ases, guarantees and the like) within ten (10) days after being requested to do so by Managing Owner. Each Owner shall be responsible for its respective share, as determined by its pro rata ownership Interest in the Property, of the payments of principal and interest and other costs owing under the Acquisition Financing and refinancings. The Acquisition Financing and refinancings, however, may be a joint and several obligation of the Owners. Refinancing' shall only be permitted within two (2) years of the due date of the financing which then encumbers the Property and the amount shall not materially exceed the remaining principal balance of the then existing loan balance plus · refinancing related costs, unless the new loan is non-recourse to the Owners and is approved by sixty-five percent (65 %) or more of the ownership Interests in the Property. (b) The Managing Owner shall list the Property for sale and convey or otherwise transfer the Property if such transaction is approved by seventy percent (70%) or more of the ownership Interests in the Property. Each Owner shall have a duty to fully cooperate and not interfere or impede in any manner with such sale approved by seventy percent (70%) or more of the ownership Interests in the Property, including but not limited to the signing of a grant deed, sale agreements, assignment of leases and escrow instructions within ten (10) days after being requested to do so by Managing Owner. Any Owner who desires an exchange of its equity in the Property under Section 1031 of the Internal Revenue Code shall have the right to arrange for such exchange of its undivided ownership Interest~ provided that under no circumstances shall the inability of any Owner to consummate such an exchange delay the sale of the Property. The other Owners, at no cost or expense shall cooperate in such exchange, however, no Owner shall be required to take title to an exchange or other property as a part of such duty to cooperate. (c) Managing Owner may amend, terminate or extend the ground lease of tp.e Property only with the prior written consent of the Owners of a majority of the ownership Interests in the Property. Each Owner shall execute any such amendment, termination or extension approved by a majority of the ownership Interests in the Property within ten (10) days after being requested to do so by Managing Owner. (d) Any Owner who has a duty to execute any refinancing, sale or lease documentation and fails or refuses to do so shall be liable for all costs, liabilities, damages, claims and expenses including attorney's fees and legal costs which results to the other Owners from such failure or refusal. 5. LIMITATION OF OWNERS. Each Owner shall be subject to the following limitations: Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) (a) Each Owner hereby irrevocably waives any and all rights that such Owner may have to withdraw from the terms of this Agreement, maintain an action for the partition of the Property (unless Owners of 6S % or more of the Interests in the Property join or consent to such action), or otherwise force a sale of the Property during the tenn hereof,. except as expressly provided herein. (b) No Owner shall be entitled to interest on such Owner's contribution toward the purchase of the Property. No Owner shall have the right to withdraw or reduce such Owner's contribution toward the purchase of the Property. No Owner shall have the right to demand property other than cash in return for such Owner's contribution toward the purchase of the Property. No Owner shall have priority over any other Owner either as to the . return of contributions toward the purchase of the Property or as to other distributions. 6. CASH CALLS. Each Owner shall pay (i) such Owner's share of losses and negative cash flow necessary to cover the costs of owning the Property in proportion to such Owner's respec~ve Interest in the Property and (ii) any involuntary lien which encumbers an Owner's Interest (such as a tax, judgment or execution lien or an attachment) (a "Cash Call"). If an Owner fails to pay its Cash Call within twenty (20) days from the date set for such payment in a written notice that such amount must be paid from the Managing Owner (or any other Owner if the Managing Owner fails to send out a written notice when such Cash Call is necessary), such failure shall automatically constitute a granting by such Owner (a "Defaulting Owner") to the other Owners of the following alternative options in addition to all other remedies available at law: (i) the other Owners may advance the Defaulting Owner's re.quired Cash Call, in the proportions agreed upon by such other Owners, and absent such an agreement, in the proportion which the Interest of an Owner desiring to make such advance bears to the Interests of all Owners desiring to make such advance, and the Defaulting Owner shall convey (or if necessary1 the Managing Owner and any Additional Owner under the powers of attorney granted in Section 7(c) below shall convey) by grant deed a portion of Defaulting Owner's Interest in the Property in the proportion in which such advance bears to the Defaulting Owner's equity in the Property (the "Transferred Portion"). The determination of e.quity in the Property shall be based upon a ten percent (10%) capitalization rate of the preceding twelve (12) months net operating income, less the Defaulting Owner's prorata share of liens entered into by, or which encumber the Interests of, all of the Owners (the "Collective Liens") and outstanding or reasonably projected extraordinary expenses for the next one (1) year period. The Defaulting ~er shall remove liens from the title to the Transferred Portion so that the Transferred Portion conveyed to the Owners making such advance shall be free and clear of liens (except the Collective Liens), If the Defaulting Owner is unable to -4- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) deliver free and clear title to the Transferred Portion, the other Owners may purchase, at the same price paid for the Transferred Portion so much of the Interest of the Defaulting Owner (the "Additional Portion") so that enough cash is generated to allow for the delivery of the Transferred Portion and the Additional Portion by the Defaulting Owner to the other Owne~s free and clear. If the Property is not subject to a long term ground lease or long term ground leases (of if any such leases are then in default beyond any curative period), the equity in the Property of the Defaulting Owner shall be 90 % of the appraised value of the entire Property subject to all non monetary encumbrances thereof, based upon the highest and best use reasonably available for the Property, as determined by an independent MAI appraiser selected by a majority of the ownership Interests owned by the Non Defaulting Owners (the cost of which appraisal shall be charged to the Defaulting Owner) times the percentage Interest of the Defaulting Owner in the Property, and the Defaulting Owner1 s prorata share of the Collective Liens shall be subtracted therefrom; (ii) the other Owners may admit an additional owner upon the terms and conditions of this Agreement, which additional owner shall advance the Defaulting Owner1 s required Cash Call and receive a portion of the Defaulting Owner's Interest in the Property on the same basis as preceding subparagraph {i); (iii) the Managing Owner may borrow in the name of or on behalf of the Defaulting Owner the amount of the Cash Call and pledge or otherwise encumber the Interest in the Property of the Defaulting Owner to secure the loan, or (iv) the 0th.er Owners may advance to the Defaulting Owner the amount of such unpaid Cash Call owing by Defaulting Owner in which case a Promissory Note shall be executed by Defaulting Owner in'favor of the other Owners who have advanced the Cash Call of the Defaulting Owner, a copy of which Promissory Note is attached. as Exhibit "C" hereto and incorporated herein by this reference ("Promissory Note"). At the. election of the Owners who make an advance to the Defaulting Owner, the Promissory Note shall be secured by a deed of trust upon the Defaulting Owner's entire interest in the Property, and the Defaulting Owner shall execute all documents reasonably necessary to effectuate such encumbrance. If an expense, loss or damages are incurred by the Owners as the result of a Defaulting Owner not making a Cash Call on or before the date set for the Cash Call in the written notice sent out by the Managing Owner (or the other Owners, as applicable), the Defaulting Owner shall immediately pay such expense or loss in addition to any other damages caused by such failure. 7. MANAGING OWNER. (a) The Owners hereby appoint O Hill and its successors and assigns as Managing Owner. The duties of Managing Owner shall be as follows: (i) Managing Owner shall perform all of the duties of Managing Owner -5- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) as set forth in this Agreement. (ii) Managing Owner is authorized to take actions which are consistent with the terms of this Agreement, to carry out this Agreement including but not limited to the right to hire and/or retain on behalf of the Owners accountants, lawyers, appraisers, mortgage brokers, insurance agents and consultants which Managing Owner deems appropriate in its reasonable discretion. (iii) Managing Owner shall approve and coordinate the payment of the expenses of the ownership of the Property. (iv) Managing Owner shall maintain the books and records of the · Owners at the principal business office of Managing Owner. (v) Managing Owner shall have a fiduciary duty to prepare a written status and financial report for the Property and provide copies to each Owner within ninety (90) days after request from another Owner, and within seventy-five (75) days after the end of each calendar year. (b) The Owners of a majority of the ownership Interests in the Property shall have the right to select a new Managing Owner in place of O Hill, its successors and assigns if Robert O Hill is no longer the person primarily responsible for the overall management of the entity which constitutes the Managing Owner. In the event a Managing Owner sefis its entire interest in the Property or resigns as Managing Owner, the Owners by election of the Owners who own a majority of the Interests in the Property shall appoint a new Managing Owner. At any time, Managing Owner may be removed with cause by the written election of the Owners of a majority of the ownership Interests in the Property not owned by the Managing Owner, and a new Managing Owner shall be appointed by the Owners who own a majority of the ownership Interests in the Property. The votes cast by the Managing Owner in favor of a new Managing Owner may not be cast for the removed Managing Owner or any transferee of the removed Managing Owner's interests, If the removed Managing Owner does not vote to appoint a new Managing Owner within ten (10) days of being requested to do so by the other Owners, then the new Managing Owner shall be appointed by Owners of a majority of the ownership Interests in the Property not owned by Managing Owner. Such resignation or removal, and the new appointment shall be recorded in the office of the Orange County Recorder. In the event there is no Managing Owner, all actions of the Owners with respect to the Property shall require the unanimous written consent of the Owners, "Cause" as used -herein shall mean fraud, gross negligence or a material default of a material obligation by Managing Owner. The reasons for removal of a Managing Owner shall be material and specifically stated in the written notice of removal. (c) Managing Owner is hereby appointed as attorney in fact for each Owner for the purpose of ta1dng all actions which are approved in writing by the requisite percentage -6- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) of ownership Interests in the Property or which the Managing Owner is otherwise allowed or authorized to take hereunder, including execution of deeds, deeds of trusts, notes, assignment of leases, assignments of rents and leases, guarantees, lease amendments, extensions or terminati.ons, all in the name, place and stead and on behalf of each Owner with the same . validity and effect as if such Owner had executed same. Each Owner specifically agrees to be bound by all actions validly taken under such power of attorney. This power of attorney is coupled with an interest and is irrevocable. Each Owner also hereby appoints each other Owner as attorney in fact for such Owner for purposes of acting as an ad_ditional signatory to any action undertaken by Managing Owner pursuant to the provisions of Section 4 hereof, and of the power of attorney granted Managing Owner herein (each, an "Additional Owner"). ( d) Except for the protection of the Property or in the case of an emergency, no material sums shall be expended for capital improvements without the prior written consent of Owners who hold a majority of the Interests in the Property. (e) As compensation for the duties of Managing Owner under this Agreement, Managing Owner shall be reimbursed reasonable out of pocket costs incurred and paid to unaffiliated third parties and shall receive an asset management fee which shall be equal to one-half percent (½ % ) of the gross receipts from the operations of the Property, payable monthly. Managing Owner may deduct such amounts due Managing Owner or third parties from revenue received from the.Property, but shall identify amounts charged to the Owners, on at least a quarterly basis. (f) The Managing Owner shall not have the right to retain _couns~l at the Owner• s expense for a dispute between the Owners, unless the dispute results from i breach or default under the terms of this Agreement by an Owner or the Owners, other than the Managing owner. 8. DISTRIBUTIONS. Distributions of cash to the Owners shall be made as follows: (a) Cash from operations shall be distributed to the Owners .in accordance with their respective Interests in the Property on a monthly basis; provided, however, that the Managing Owner shall be entitled to maintain reasonable reserves for any future anticipated expenditures related to the ownership of the Property . . (b) Refinancing proceeds shall be distributed to the Owners in accordance with their respective Interests in the Property; provided, however, the Managing Owner shall be entitled to retain on behalf of the Owners the following refinancing proceeds: (i) such portion of the refinancing proceeds as the Owners of a majority of the Interests in the Property deem necessary for capital improvements to the Property, and (ii) such portion of the refinancing proceeds as may be necessary to establish reasonable reserves for anticipated future -7- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) expenditures of the Owners. (c) Net proceeds from the sale of the Property shall be distributed to the Owners in accordance with their respective Interests in the Property. Net proceeds from the sale of the Property sha1I be define.cl as the gross proceeds from the sale of the Property, less (i) all costs associated with such sale, (ii) payment of any encumbrance against the Property· (unless assumed by the buyer with seller released from liability thereon), (iii) payment of any other expenses related to ownership of the Property, and (iv) reasonable reserves for the payment of any future expenses related to the Property anticipated by the Managing Owner, during the one (1) year following the sale of the Property. The Managing Owner shall account for and distribute such reserve to the Owners within one (1) year following the sale of the Property, except to the extent that such reserve is still required to be maintained for a specific, then readily identifiable reasonably anticipated future expense. In the· event the Managing Owner retains such reserves for a period in excess of 12 months for such specific purpose, such reserve shall be accounted for and distributed as soon as reasonably possible following satisfaction or elimination of the obligation for which the reserve was created. (d) Notwithstanding Section 8(a), Section 8(b) and Section 8(c) to the contrary, (i) cash that would otherwise be distributed to an Owner shall instead be distributed to the other Owners to the extent provided in the Promissory Note, or to otherwise discharge all obligations of a Defaulting Owner under Section 6 above and (ii) the reserves retained under Section 8(a), Section 8(b) and Section 8(c) above shall not exceed $100,000 in the aggregate, without the prior written consent of the Owners of a majority of the Interests in the ~~-. 9. BOOKS AND RECORDS. Such books of account and records as are maintained by or for the Property shall be kept at the principal business office of the Managing Owner and be open to inspection by any Owner or accredited representative of any Owner, at a reasonable time upon reasonable advance notice. Each Owner shall have the right to make a separate audit of such books and records of the Property at such Owner's own expense; provided, however, if the audit is requested by Owners of at least fifty percent (50 % ) of the Interests in the Property, the audit shall be at the expense of all of the Owners. 10. CONTINUATION. The banlauptcy, foreclosure, tax lien, attachment or execution of judgment or other involuntary lien, insanity, disability, distribution, death or dissolution of or against an Owner shall not terminate the effects of this Agreement. Upon such an occurrence, the Interest in the Property of such Owner shall become vested in the guardian, administrator, executor, trustee, other legal representative or person or entity · entitled to the Interest in the Property of such Owner, who shall acquire all of the rights and -8- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) obligations provided in this Agreement and shall be subject to and bound by all of the terms and conditions of this Agreement; provided, however, in the case of involuntary liens, attachments, judgments or executions that such legal representative or person or entity shall be entitled only to receive distributions ori account of such Inte~t in the Property as provided for in Section 8 above and shall have no management or other decision making authority. 11. INCOME TAX CONSEQUENCES. Each Owner acknowledges that the tax consequences of an investment in the Property is a matter upon which such Owner's own personal tax adviser must conclude. Each Owner shall bear the income tax consequences of such.Owner's interest in the Property, which may be different than (i) such Owner's pro rata share of the purchase price of the Property as a result of the effects of a .carryover basis in the Property, or (ii) such Owner's actual share of the cash distributions from the Property. 12. . TENANCY IN COMM:ON -NOT A PARTNERSHIP. Each Owner agrees that the Ownership of the Property is a tenancy in common and not a partnership. Each Owner agrees to remain excluded from all of the provisions of Subchapter K of Chapter 1 of the Internal Revenue Code of 1986, as amended. Each Owner hereby covenants and agrees that each Owner shall report on such Owner's respective Federal and State income tax return, such Owner's respective share of items of income, deduction and credit which results from holding of its Interest in the Property, in a manner consistent with a tenancy in common commencing with the taxable year of the acquisition of the Property. No Owner sh~l notify the Commissioner of Internal Revenue (the "Commissioner") that such Owner desires that the Owners be treated as a partnership and that Subchapter K of the Code applies. Each Owner hereby agrees to indemnify and hold each other Owner free and harmless from all cost, liability, tax consequence and expense, including attomeys fees, which results from any Owner so notifying the Commissioner. 13. TERMINATION. This Agreement shall be immediately terminated upon the happening of any of the following events: (a) The sale or other disposition of all of the Property. (b) The unanimous decision of the Owners that this Agreement be terminated, in which event the Owners shall hold the Property as tenants in common and shall be governed by the laws of the S~te of California. (c) The purchase by one Owner of all the Interests of the other Owners in the Property. -9- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 14. OPTION TO PURCHASE. (a) If an Owner desires to sell its Interest in the Property or a portion of its Interest in the Property, 0 Hill and its successors, as consideration for its role in the acquisition of the Property, shall have a first right to purchase all or a portion of such Inter~st in the Property. A selling Owner shall notify O Hill in writing of the portion of the Interest selling Owner desires to sell and selling Owner's desired price for such Interest. O Hill shall have thirty (30) days from the date it receives proper written notice to notify selling Owner that it will purchase all or a specific portion of the Interest being offered for sale by selling Owner. 0 Rill and selling Owner shall meet and try to agree on a purchase price. If, after thirty (30) days, 0 Hill and selling Owner are unable to agree on a purchase price then, at their expense, each will retain an MAI appraiser to appraise the entire Property without discount for partial ownership subject to all non monetary encumbrances thereof, including but not limited to any ground lease of the Property, based upon the highest and best use reasonably available for the Property. Such appraisals shall be completed within sixty (60) days and exchanged between the parties. If the values of the two MAI appraisals are within five percent (5%) of each other, using the larger number as the denominator, the appraised value of the entire Property shall be an average of the two appraisals, less three percent (3 % ) . If the two MAI appraisals are not within five percent (5 % ) of each other then the two (2) designated appraisers shall agree upon and retain a third appraiser who will be given the completed appraisals and all appropriate back-up valuing infonnation and such third appraiser shall first attemp~ to mediate a compromise value between the three (3) appraisers. If the compromise value cannot be reached between the three (3) appraisers within thirty (30) days then -the third appraiser shall reach a conclusion as to value (which shall be not less than the lower of the two (2) appraisals, and no greater than the higher of the two appraisals) and the two closest conclusions as to value shall be averaged and the average, less three percent (3%) shall be deemed the appraised value of the entire Property. The purchase price shall be such appraised value times the ownership Interest percentage being sold, less the selling Owner's prorata share of any Collective Liens. The purchase shall be completed on or before one hundred and twenty (120) days after the purchase price is finally determined. The Interest being sold shall be delivered free and clear of all liens (except the Collective Liens). Any Interest of the · selling Owner not purchased by O Hill may be purchased on the same basis by the other Owners. Such other Owners shall elect to purchase such interest within ten (10) days after being advised in writing of the amount of the above determine.cl purchase price. If the other Owners elect to purchase in the aggregate more than the Interest being offered, each Owner may purchase the portion of the Interest so offered as agreed upon by the other Owners desiring to purchase a portion of the offered Interest, and absent an agreement reached between them, each may purchase a percentage of the remainder of ·the Interest which the . -10.- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) amount offered to be purchased by an Owner bears to the amount offered to be purchased by all Owners, but not less than that portion of the remainder of the Interest offered which the then Interest of such Owner bears to the then Interests of all Owners electing to purchase such remainder. Any interest not purchased by an Owner may be sold to a third party reasonably approved by the Managing Owner. If such sale does not occur within one (1) year after the purchase price is determined, the sale shall again be subject to the above provision. (b) The following transfers ("Permitted Transferee") shall not be subject to the provisions of Section 14(a) above: (i) A transfer to any lineal descendent of a current trustee or general partner of one of the Owners;· (il) A transfer to a· trust for the benefit of any lineal descendent of a current trustee or current general partner of any of the Owners; (iii) A transfer to any successor trustee or distribution to a beneficiary, where one of the current Owners is a trust; and (iv) A transfer to any partner or group of partners who consist of one of the current existing partners of an Owner, where such Owner is a partnership: (c) The rights of O Hill and its successors under Section 14(a) above shall expire upon the sale of the Interest of O Hill to a person or entity in which O Hill, or a Permitted Transferee of O Hill, has no interest. 15. NOTICES. All notices under this Agreement must be in writing and shall be deemed to have been duly given if delivered personaJly or mailed, postage prepaid, by certified United States mail, return receipt requested, addressed to the Owner to be notified. Such notice shall be deemed to have been given as of the date.so delivered, if delivered in person, or upon deposit thereof in the United States mail. For the purposes of notice, the addresses of the Owners until changed as hereinafter provided, shall be as set forth in Exhibit "B" attached hereto. Each Owner shall have the right to ?hange the address to which notice to such Owner is to be given by giving written notice thereof to all other Owners. Managing Owner shall maintain a current list of each recognired Owner of the Property (as described in Section 19 below), and the address and percentage interest owned by each such Owner. Managing Owner shall provide such information to any Owner upon written request to do so. 16. UNENFORCEABLE TERMS. In the event that any provision of this Agreement shall be unenforceable or inoperative as a matter of law, the remaining provisions shall remain in full force and effect. 17. TIME 0}~ ESSENCE. Time is the essence of this Agreement and the -11- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) provisions rontained herein and each and every provision hereof. 18. AMENDMENTS. This Agreement may be amended. only by a written amendment signed by all Owners whose signatures shall be notarized and recorded in the County of Orange. Any ainendment or modification of this Agreement shall be dated, and if any conflict arises between the provisions of said amendment or modification and provisions · incorporated in earlier documents, the most recent provisions shall be controlling. 19. BINDING EFFECT. This Agreement shall inure to the benefit of and shall be binding upon the Property and the Owners and their respective heirs, successors, legal representatives and assigns. Each subsequent Owner of a portion of the Property shall be bound by the provisions hereof as if such subsequent Owner had assumed this Agreement. No subsequent Owner need be recognized as such until such subsequent Owner has given each other Owner written notice of the acquisition of such interest in the Property by such subsequent Owner pursuant to the notice provisions of Section 15 above, which each Owner and each subsequent Owner agrees to do or cause to be done. 20. ENTIRE AGREEMENT. This Agre-ement contains the entire agreement between the Owners and supersedes any prior or concurrent written or oral agreement between said parties concerning the subject matter containe<l herein. There are no representations, agreements, arrangements or understandings, oral or written, between or among the Owners· relating to the subject matter contained in this Agreement, which are not fully expressed herein. 21. GENDER. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons, entity or entities may require. 22. CAPTION HEADINGS. Captions at the beginning of each numbered Section of the Agreement are solely for the convenience of the parties and shall not be deemed part of the context of this Agreement. 23. NEGOTIATED TRANSACTION. The provisions of this Agreement were · negotiated by all of the parties hereto and said Agreement shall be deemed to have been drafted by all of the parties thereto. 24. FURTHER ASSURANCES. Each Owner hereby agrees to promptly sign any -12- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) additional instruments or documents which are necessary or appropriate to cany out the intent and purpose of this Agreement. 25. SPOUSES. Some of the Owners are married and may in the future take titl~ to an Interest in the Property with their respective spouses (the "Married Owners"). For the protection of the remaining Owners, any interest in the Property held by Married owners shall be deemed to be held by the husband, as to an undivided one-half (½) interest and by the wife, as to an undivided one-half(½) interest. For the purpose of voting upon any issue upon which the Owners may vote pursuant to the terms and conditions of this Agreement, the husband and wife shall each be deemed to own an undivided one-half(½) interest in the interest of such Married Owners. Each Married Owner acknowledges and agrees that he/she shall do nothing to impede or impair the rights of the other Owners in an attempt to gain leverage upon his/her spouse. In the event an Owner takes title to an Interest in the Property solely in their name, they shall obtain and record a quitclaim deed from their respective spouses so that the Owner in whose name the Interest in the Property 1s held shall have the right, power and authority to deal with the Property alone and without the consent of his/her spouse. In the event that any such Owner fails to obtain such quitclaim deed and damages result to the remaining Owners, such Owner who so fails to obtain such quitclaim deed shall be liable for the resulting damages. 26. ARBITRATION OF DISPUTES: ALL DISPUTES ARISING UNDER THIS AGREEMENT WILL BE RESOLVED BY SUBMISSION TO ARBITRATION AT THE ORANGE COUNTY OFFICES OF JUDICIAL ARBITRATION & MEDIATION SERVICES, INC. ("JAMS") FOR BINDING ARBITRATION. THE PARTIES MAY AGREE ON A RETIRED JUDGE FROM THE JAMS PANEL. IF THEY ARE UNABLE TO AGREE, JAMS Wll.,L PROVIDE A LIST OF THREE AVAIL.ABLE JUDGF.S AND EACH PARTY MAY STRIKE ONE. THE REMAINING JUDGE WILL SERVE AS THE ARBITRATOR AT THE ARBITRATION HEARING. THE PARTIES AGREE THAT ARBITRATION MUST BB INITIATED WITHIN ONE YEAR AFTER THE CLAIMED BREACH OCCURRED AND THAT THE FAILURE TO INITIATE ARBITRATION WITHIN THE ONE~ YEAR PERIOD CONSTITUTE.S AN ABSOLUTE BAR TO THE INSTITUTION OF ANY NEW PROCEEDINGS. THE AGGRIEVED PARTY CAN INlTIATB ARBITRATION BY SENDlliG WRITTEN NOTICE OF AN INTENTION TO ARBITRATE BY REGISTERED OR CBRTIF1BD MAlL TO THE OTHER PARTY AND TO JAMS. THE NOTICE MUST CONTAIN A DESCRIPTION OF THE DIS];>UTE, THE AMOUNT INVOLVED, AND THE REMEDY SOUGHT. IF AND WHEN A DEMAND FOR ARBITRATION IS MADE BY EITHER PARTY, THE PARTIES AGREE TO -13- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) BXBCUTE A SUBMISSION AGREEMENT, PROVIDED BY JAMS, SETTING FORTH THE RIGHTS OF THE PARTIES IF THE CASE IS ARBITRATED AND THE RULES AND ;E>ROCEDURES TO BE FOLLOWED AT THE ARBITRATION HEARING. TIIE ARBITRATOR SHALL, AT THE MOTION OF A PARTY, PERMIT AND ORDER sue~ DISCOVERY ON THE PART OF SUCH PARTY AS HE DETERMINES TO BE REASONABLE AND APPROPRIATE TO THE DISPUTE BEFORE HIM. NOTWITHSTANDING THE ABOVE, AT LEAST TWO WEEKS PRIOR TO THE ARBITRATION, EACH PARTY MUST MAKE A FULL DISCLOSURE TO THE OTHER PARTY OF (i) ALL DOCUMENTS TO BE PRESENTED BY SUCH PARTY AND (ii) ANY WITNESSES TO BE CALLED BY SUCH PARTY. NOTHING-IN THIS PARAGRAPH SHALL IN ANY WAY LIMIT OR OTHERWISE RESTRICT A PARTY'S RIGIIT OR ABILITY TO OBTAIN INJUNCTIVE RELIEF OR APPOINTMENT OF A RECEIVER THROUGH THE COURT SYSTEM. NOTICE: BY INmALING IN THE SPACE BELOW YOU ARE AGREEING TO HA VE ANY DISPUTE ARISING OUT OF THE MATIERS INCLUDED IN THE" ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GMNG UP ANY RIGHTS YOU MIGHT POSSESS TO HA VE THE DISPUTE LITIGATED IN COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, EXCEPT AS PROVIDED HEREIN, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTIIORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO TIIlS ARBITRATION PROVISION IS VOLUNTARY. WE HA VE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. OHill: [~ TFT: ~1 [St:-- ] Mesa:-East: [ li~l [ ~t l Mira Mesa-West [ alf,e ] [ ~ '.:¼-1 NBCC Ltd: f ~ 27. COST OF ENFORCEMENT._ Should any dispute arise between the parties hereto or their legal representatives, successors or assigns concerning any provision of this -14- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Agreement or the rights and duties of any person in relation thereto, the party prevailing in such dispute shall be entitled, in addition to such other relief that may be granted, to reasonable attorneys fees and legal costs in connection with such dispute. For purposes of this Paragraph, a dispute shall include, but not be limited to, an arbitration proceeding or a coul'.f, action for injunctive relief. 28. GOVERNING LAW. This Agreement shall be governed by the laws of the State of California and the venue for any dispute shall be Orange County, California. EXECUTED as of March ~ ~994, at Newport Beach, California. OWJ1ers: 0 Hill Properties, a California limited paitnership By:/~~ Robert O · 1, its General Partner The Fainbarg Trust, dated April 19, 1982 By: ~ ~,-, ,woXu.. Allan Fain ~ stee Newport Beach Country Club, a California limited partnership By: o Hill Properties, a California limited partnership Its General Partner By:~~ Ro ert General Partner -15- Mesa Shopping Center-East A California General Partnership By:G-..tu)~.~ Arnold D. Feuerstein Managing General Partner By: ~:p' ,,;£, Elliot Feuerstem Managing General Partner . Mira Mesa Shopping Center•West A California General Partnership By:Q oQ"'E;.~ Arnold D. Feuerstein Managing General Partner By: <z,~ ~ ~ Elliot Feuerstein Managing General Partner Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) STATE OF CALIFORNIA COUNTY OF ORANGE On Z14:1tA-Cf, /79{ . before me a Notary Public in and for said County and State, personally appeared Robert O Hill. personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which person acted, executed the instrument. . WITNESS my band and official seal. STATE OF CALIFORNIA COUNTY OF ORANGE • YVONNE N. RLTCHOT f CO~~ #OS558S :.e Nowy P11bli1>Callrorn1a s'; ORANG!: COUNTY f -My comm. expires FcB 09,19Q6 C 0 ♦ 4 b O b ¢ ♦ $ C 4 On 22'1.~ '9 /9~t/. before me a Notary Public in and for said County and State, personally appeared Allan Fainb~, prsonally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which person acted, executed the instrument. · WITNESS my hand and official seal. +_l aeoesr ·• VVONNE N, RITCKOT COMM. fl9555a6 2 Notary Publio-Callllllnla ~ ORANGIS COUNTY M/ comm. explr~ FEB 09, 1996 -Hi- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) STATE OF CALIFORNIA COUNTY OF ORANGE On Ill~ 9. /99{ , before me a Notary Public in and for said County and State, personally appeared Robert d Hill, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me tbathe executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which person acted, executed the instrument • . WITNESS my hand and official seal. STATE OF CALIFORNIA COUNTY OF ORANGE On ~ £, l9~r/ • before me a Notary Public in and for said County and State, personally appeared Arnold D. Feuerstein, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by bis signature on the instrument the person, or the entity upon behalf of which person acted, executed the instrument. WITNESS my hand and official seal. 4;.J£:.~✓~~ Notary Public in and for said County and State STATE OF CALIFORNIA COUNTY OF ORANGE ) ) ) OFFICIAL SEAL . Priscilla Hanvelt TARY PUBllC-CALIFORNIA PRll'ICJF'AL OFFICE IN ORANGE COUNTY My Commlision Expires June JO 1994 On ~.,.,,. J: / ? 7' y, before me a Notary Public in and for said County and State, personally appeared Elliot Feuerstein, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrUment and acknowledged to me that he executed the same in his authorized capacity. and that by his signature on the instrument the person, or the entity upon behalf of which person acted, executed µte instrument. WITNESS my hand and official seal. ~~~~~ Notary Public in and for said County and State -17- OFFICJAL SEAL ;'M. Priscilla Hanveft OTAAY PU8tlCCAUFORNIA PRINCIPAL OFFICE ti; •"' OR,\NCli: COUNTY MJ Commission Elipircs Juno 10, 1994 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) STATE OF CALIFORNIA ) ) COUNTY OF ORANGE ) On __ ,....... _____ _, before me a Notary Public in and for said County and State, personally appeared Arnold D. Feuerstein, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signatt:ire on the instrument the person, or the entity upon behalf of which person acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for said County and State STATE OF CALIFORNIA ) ) COUNTY OF ORANGE ) On ---,,-=,,.,.,---=----=--~ before me a Notary Public in and for said County and State, personally apperu:oo Elliot Feuerstein, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which person acted, executed the instrument. WITNESS my band and official seal. Notary Public in and for said County and State -18- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) EXHIBIT "A" LEGAL DESCRIPTION OF THE PROPERTY Parcel 1: That portion of Block 93 of Irvine's Subdivision in the City of Newport Beach, County of Orange, State of California, as per Map recorded in Book 1 Page 88 of Miscellaneous Maps in the Office of the County Recorder of said County described as follows: Lot A as shown on that certain Parcel Map filed October 10, 1967 in B':)Ok 10 Page 20 of Parcel Maps in the Office of the County Recorder of said County, and Parcels 1, 2 and 3 as shown on that certain Parcel Map filed February 11, 1977 in Book 92 Pages 13 and 14 of Parcel Maps, in the Office of the County Recorder of said County. Parcel 2: As easement for ingress and egress over the most Southerly 190.00 feet of Parcel 1, in the City of Newport Beach, County of Orange, State of California, as shown on that certain Parcel Map filed October 10, 1967 in Book 10 Page 20 of Parcel Maps, in the Office of the County Recorder of said County. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) EXHIBIT ftBII OWNERSHIP INfEREST IN THE PROPERTY Name and Address of Owner Allan and Sara Fainbarg, Trustees of The Fainbarg Trust dated April 19, 1982 890 W. Baker Costa Mesa, CA 92626 Mesa Shopping Center-East c/o Arnold Feuerstein 2293 W. Ball Road Anaheim,· CA 92805 Mira Mesa Shopping Center-West c/o Arnold Feuerstein 2293 W. Ball Road Anaheim, CA 92805 With a copy of any notices to: Mesa Shopping Center-East c/o Elliot Feuerstein 8294 Mira Mesa Blvd. San Diego, CA 92126 Newport Beach Country Club One Upper Newport Plaza Newport Beach, CA 92660 Attn: Robert O Hill 0 Hill Properties One Upper Newport Plaza Newport Beach, CA 92660 Attn: Robert O Hill Interest in Property 25% 15% 10% 25% 25% Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) PROMISSORY NOTE $ _____ _ Newport Beach, California FOR VALUE RECEIVED, __________ ("Maker") hereby promises to pay to , or order ("Holder"), at ___________________ _. or such other place or places as may be designated by Holder from time to time, the sum of __________ _ ($ ____ ...,, payable as specified herein. This Promissory Note ("Note") shall bear interest at the prime commercial lending rate of Bank of America, plus two and one half percent (2½ %) per annum but not to exceed the maximum rate allowed by law. This Note shall be due and payable on or before the date which is two (2) years from the date of this Note. Maker and Holder intend that this Note shall be recourse to Maker. However, it is Maker's and Holder's intention that Holder's first recourse shall be against the proceeds that would be otherwise payable to Maker as a result of Maker's ownership of an undivided __ % interest in certain real property commonly known as The Newport Beach Country Club, and legally defined in any Deed of Trust with Assignment of Rents encumbering such real property as security for this Note ("Property"). As a credit against sums owed by Maker to Holder, Holder shall be entitled to receive 100% of the cash distributions which would otherwise be distributed to Maker as a result of its ownership interest in the Property, up to an aggregate sum equal to the principal amount of this Note ($ ____ ~ plus accrued interest. · Maker hereby agrees to pay all costs and expenses, including reasonable attorneys fees, incurred by Holder and arising out of or related to the collection of any amounts due hereunder or the enforcement of any rights provided for herein, or in any other instrument now or hereafter securing Maker's obligations under this Note, whether or not suit is filed. Maker waives all rights of set-off, deduction and counter claim with respect to this Note. Any amount which Maker contends are owed by Holder shall be sought by independent action. To the extent permitted by applicable law, the defense of any statute of limitations is hereby waived by Maker. This Note shall be governed by and construed in accordance with the laws of the State of California. This Note is secured by a Deed of Trust with Assignment of Rents, encumbering Maker's ownership interest in the Property, executed by Maker for the benefit of Holder. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit B Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) JAMS ARBITRATION MESA SHOPPING CENTER-EAST, LLC; a JAMS Case No. 1200045004 California limited liability company; MIRA MESA SHOPPING CENTER-WEST, LLC; a California limited liability company; and THE F AINBARG TRUST DATED APRIL 19, 1982, an intervivos FINAL A WARD trust) Claimants, vs. ROBERTO HILL, an individual; GOLF REALTY FUND LP, a California limited partnership fYk/a NEWPORT BEACH COUNTRY CLUB, a California limited partnership; 0 HILL CAPITAL, a California limited partnership f/k/ a O HILL PROPERTIES, a California limited partnership; and DOES 1 to 50, inclusive, Respondents. Counsel: Gary A. Waldron, Esq. John S. Olson, Esq. WALDRON & BRAGG, LLP 23 Corporate Plaza Dr., Suite 200 Newport Beach, CA 92660 Tel.: (949) 760-0204 Fax; (949) 760-2507 .Counsel for Claimants Alan J. Kessel, Esq. Vikki L. Vander Woude, Esq. BAKER & HOSTETLER LLP 600 Anton Blvd., Suite 900 Costa Mesa, CA 92626-7221 Tel.: (714) 754-6600 Fax: (714) 754-6611 Counsel for Respondents Paul B. George, Esq. LANE POWELL PC 601 SW Second Ave., Suite 2100 Portland, OR 97204-3158 Tel: (503) 778-2100 Fax: (503) 778-2200 Counsel for Respondents Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Arbitrator: Hon. Haley J. Fromholz (Ret.) JAMS 707 Wilshire Boulevard Los Angeles, California 90017 Tel.: (213) 253-9711 Fax: (213) 620-0100 Place of Arbitration: Los Angeles, California Date of Interim Award: March 4, 2013 The undersigned arbitrator, having been designated in accordance with the Agreement Between Real Property Owners dated September 22, 1993 and the Agreement Between Real Property Owners dated March 8, 1994 (together, the "Agreements"), having examined the submissions, proof and allegations of the parties finds, concludes, and issues this Interim Award as follows: I. Introduction and Procedural Summary Allan Feuerstein ("Allan") is a principal of claimants Mesa Shopping Center-East, LLC and Mira Mesa Shopping Center-West, LLC (the "Feuerstein Entities"). Arnold Fainbarg ("Arnold") is a beneficiary of claimant The Fainbarg Family Trust dated April 19, 1982 (the ~'Fainbarg Trust"). (The Feuerstein Entities and the Fainbarg Trust are sometimes collectively referred to herein as "Claimants"). Respondent Robert O Hill ("O Hill") is the principal of respondents GolfRealtyFund, LP and O Hill Capital (collectively, "O Hill"). In 1993 and 1994, 0 Hill, Allan, and Arnold, together, purchased two parcels ofland referred to as the Newport Beach Country Club Land ("NBCC Land"). 0 Hill owns 50% of the NBCC Land, and Arnold and Allan each own 25%. Pursuant to the Agreements, 0 Hill is the Managing Owner of the NBCC Land. For fifteen years, 0 Hill actively sought to redevelop the NBCC Land by seeking discretionary entitlements from the City of Newport Beach (the "City") to change the NBCC Land from open space-recreational use to mixed use that would allow for the construction of residences, a boutique hotel, and a larger golf clubhouse. During this time, Allan and Arnold were passive investors in the NBCC Land. In February 2008, Claimants objected, for the first time, to O Hill's efforts to pursue discretionary entitlements for the NBCC Land. Despite Claimants' objection, 0 Hill continued his efforts to obtain the entitlements. In June 2010, Claimants demanded that O Hill cease and desist all efforts to seek discretionary entitlements, contending that he did not have authority to do so over their objection, or to use the funds of NBCC Land for the entitlement efforts. 1 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Claimants seek to recover their share of the funds expended by O Hill on behalf of the NBCC Land since February 2008 to present. On February 24, 2011, Claimants filed a motion for a preliminary injunction in the Orange County Superior Court seeking to enjoin O Hill from spending any funds of NBCC Land to obtain governmental planning approvals for the NBCC Land and from promoting or advocating for such approvals before any governmental agency. The motion was denied. On April 14, 2011, Claimants submitted a Demand for Arbitration. On August 15, 2011, by a written "Notice of Termination of Robert O Hill" (the "Notice of Termination''), Claimants purported to terminate and remove O Hill as the Managing Owner of the NBCC Land for "cause" under the Agreements. On August 29,201 I, 0 Hill submitted his Response to Claimants' Demand for Arbitration and Notice of Counterclaims. 0 Hill contends Claimants have interfered with the entitlement process undertaken on behalf of the NBCC Land by O Hill. He seeks his share of the funds expended on behalf of NBCC Land to obtain the discretionary entitlements and the loss of value to the NBCC Land as a result of Claimants' interference. 0 Hill also seeks a declaration that there was no "cause" to terminate him as Managing Owner, and therefore, the Notice of Termination was invalid. 0 Hill also asserts a claim for aiding and abetting breach of fiduciary duty against Elliot Feuerstein ("Elliot"), Allan's son, and Irving Chase ("Irving"), Arnold's son- in-law for their role in Allan and Arnold's objection to the NBCC Plan. On September 9, 2011, Claimants submitted their response to Respondents' Notice of Counterclaims. The arbitration hearing was conducted October 29, 30, and 31, 2012 and November 1, 2, 6, 7, 15, and 16, 2012. Each side offered documentary evidence at the hearing and such evidence was admitted as set forth in the transcript. Each side also called witnesses and cross-examined opposing witnesses. At the conclusion of the presentation of evidence, and after the parties stated they had no further evidence to offer, the Arbitrator asked for post-hearing briefs. The filing of post-hearing briefs and authorities was completed on January 11, 2013. The following is a statement of those facts found by the Arbitrator to be true and necessary to the Award. To the extent this recitation differs from any party's position, that is the result of detenninations as to credibility and relevance, burden of proof considerations, and the weighing of the evidence both oral and written. A. The Agreements In 1992, 0 Hill was approached by The Irvine Company ("TIC") regarding a number of leased fee properties that TIC was interested in selling, including the NBCC Land, which consists of two adjacent parcels located in Newport Beach at 1600 Pacific Coast Highway (the "Golf Club Property") and 1602 Pacific Coast Highway (the "Tennis Club Property") (together, the ''NBCC Land"). At the time, the NBCC Land was designated by the City's General Plan as 2 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) "Open Space-Residential," with a private golf club and tennis club as the allowed and existing uses. 0 Hill presented the opportunity to purchase the NBCC Land to Allan, who then introduced O Hill to Arnold. Allan and Arnold are sophisticated real estate investors and developers. The parties purchased the NBCC Land as tenants in common with identical ownership interests on both parcels such that the Feuerstein Entities (Arnold) owns 25%, the Fainbarg Trust (Fainbarg) owns 25%, and Golf Realty (0 Hill) owns 50%. The parties entered the two identical "Agreements Between Real Property Owners" (the "Agreement") relating to each Property. Pursuant to the Agreements, the parties appointed 0 Hill the Managing Owner of the NBCC Land. Section 7(a) of the Agreements sets forth the duties of the Managing Owner. Section 7(a)(ii) authorizes the Managing Owner "to take actions which are consistent with the terms of the Agreement, to carry out this Agreement including but not limited to the right to hire and/or retain on behalf of the Owners accountants, lawyers, appraisers, mortgage brokers, insurance agents and consultants which Managing Owner deems appropriate in its reasonable discretion." Section 7(a)(iii) authorizes the Managing Owner to approve and coordinate payment of the ownership of the NBCC Land. Section 7(a)(i:v) requires the Managing Owner to maintain the books and records of the Owners. Section 7(a)(v) provides that the Managing O\X.rner shall have a fiduciary duty to provide the Owners written status and financial reports relating to the NBCC Land within 90 days after a request from an Owner, or within 75 days after the end of each calendar· year. Section 7(b) of the Agreements provides that the Owners of a majority of the ownership interests in the NBCC Land may elect to remove the Managing Owner for "cause," and appoint a new Managing Owner. Section 7(b) defines "cause" as "fraud, gross negligence or material default of a material obligation by Managing Owner." Section 7( d) provides that "no material sums shall be expended for capital improvements without the prior written consent of Owners who hold a majority of the Interests in the [NBCC Land]." In 1993, the owners entered into a long-term lease with the Newport Beach Country Club, Inc. (currently operated as International Bay Clubs, Inc. ["IBC"]), to use the Golf Club Property as a golf club facility. The lease generates approximately $186,000 of rental income per month on a triple net basis. Since the parties' acquisition of the NBCC Land, the Tennis Club Property has been used as a tennis club facility and is currently leased on a short-term basis for approximately $8,000 per month. B. 0 Hill's Management of the NBCC Land In 1993, with Allan's and Arnold's knowledge, one checking account was opened for both parcels under the name "NBCC Land" (the "NBCC Account"). From 1993 to date, all income generated from both parcels has been deposited into, and all expenses associated with both parcels have been paid from, the NBCC Account. Additionally, from 1993 to date, all 3 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) owner distributions have been paid from the NBCC Account. From 1993 to date, 0 Hill has provided Allan, Arnold, and their accountant the Monthly Distribution Summaries and Annual Financial Statements for the NBCC Land that have reflected that all expenses had been paid from the NBCC Account. In 1993, 0 Hill informed Allan and Arnold of his intention to seek discretionary entitlements from the City to change the NBCC Land from "Open Space" to a Planned Community District and also seek a general plan amendment that would change the NBCC Land from recreational open space to a general plan and zoning designation that would allow other uses for the NBCC Land including single family residences, a boutique hotel, a larger golf clubhouse, and fewer tennis courts (the "NBCC Plan"). During the arbitration, Allan and Arnold conceded that they were aware of and consented to O Hill's NBCC Plan. From 1993 to 2008, 0 Hill undertook efforts to obtain discretionary entitlements for the NBCC Land including but not limited to submitting applications to the City for the NBCC Plan, meeting with and obtaining input from officials from the City, the California Coastal Commission, TIC, consultants, founding golf club members, tennis members, the Irvine Terrace homeowners and others. His efforts also included participation in public workshops, and planning commission and City Council meetings. In 2006, voters approved a general plan amendment for the NBCC Land that allowed for an increase in the size of the existing golf clubhouse on the Golf Club Property and changed the designation and permitted uses of the Tennis Club Property from "Open Space-Recreational" to mixed use, which now allows for single family residences, a hotel with auxiliary uses, and a private tennis club. Currently, the development standards for the NBCC Land such as height limits, landscaping, vehicle access, and parking, are still undetermined. The development standards are the final discretionary entitlements for the NBCC Land. Proceedings are continuing to be held before the City to determine the development standards. C. In 2008, Allan and Arnold Objected to O Hill's Efforts to Obtain Discretionary Entitlements From the time that the parties purchased the NBCC Land in 1993 through approximately 2008, 0 Hill dealt almost exclusively with Allan and Arnold regarding the NBCC Land. 0 Hill kept Allan and Arnold updated on the status of the entitlement process through meetings, letters, and monthly income and expense statements, and yearly financial statements. Additionally, since 1995, the profit and loss statements generated by O Hill and given to Arnold and Allan attached the general ledger that showed the amounts that NBCC Land had paid each month to consultants, engineers, attorneys, and others for planning and entitlement work for the NBCC Land. Over the years, Allan and Arnold's accountant also visited O Hill's offices to audit the books and records for the NBCC Land. In 2008, Elliot, Arnold's son, and Irving, Allan's son-in-law, became involved vi'ith the NBCC Land on behalf of Arnold and Allan. In February 2008, on behalf of Arnold and Allan, Elliot and Irving wrote to O Hill informing him that they objected to the NBCC Plan because they did not believe the plan maximized the value of the NBCC Land. This was the first time Claimants objected to the NBCC Plan. 4 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Despite Claimants' objection, 0 Hill continued his efforts to obtain discretionary entitlements by, among other tltings, submitting to the City applications relating to the development standards, a lot line adjustment form, and phasing plans, and entering into a contract for the preparation of construction drawings for the NBCC Plan. On July 23, 2010, Claimants sent O Hill a letter demanding that he cease and desist all further action relating to the NBCC Plan on the grounds that he allegedly did not have authority under the Agreements to seek the discretionary entitlements or to spend NBCC Land funds to do so. 0 Hill refused to stop his efforts to obtain the discretionary entitlements. D. The Claims and Counterclaims Based on the foregoing facts, Claimants assert causes of action against O Hill for breach of fiduciary duty, breach of contract, and conversion. On August 15, 2011, after filing the Demand for Arbitration, Claimants executed the Notice of Termination, purporting to terminate and remove O Hill as the Managing Owner for "cause" under the Agreements, and to appoint Irving as the new Managing Owner. Since then, Claimants have stated orally and in writing to the City, lBC, the Coastal Commission, and others, that O Hill no longer has authority to act on behalf of the NBCC Land owners. As a result, 0 Hill asserts counterclaims against Claimants for breach of contract, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and declaratory relief regarding the validity of the Notice of Termination. 0 Hill also asserts a counterclaim against Elliot and Irving for aiding and abetting Arnold and Allan's alleged breach of fiduciary duty. A. III. Analvsis Claimants' Causes of Action Against O Hill 1. The Limitations Period of the Agreements Apply to Claimants' Causes of Action Section 26 of the Agreements provides that: "THE PARTIES AGREE THAT ARBITRATION MUST BE INITIATED WITHIN ONE YEAR AFTER THE CLAIMED BREACH OCCURRED AND THAT THE FAILURE TO INITIATE ARBITRATION WITHIN THE ONE -YEAR PERIOD CONSTITUTES AN ABSOLUTE BAR TO THE INSTITUTION OF ANY NEW PROCEEDINGS." (emphasis original). Claimants allege that they knew of O Hill's alleged breaches of the Agreements as early as February 2008, when Claimants notified O Hill, in writing, that they objected to the NBCC Plan but O Hill continued with the NBCC Plan over their objection. However, Claimants did not seek to enjoin O Hill until February 2011 and did not file their Demand for Arbitration until April 14, 2011. 0 Hill asserts that Claimants' causes of action are absolutely barred or limited in scope by the shortened limitations period in the Agreements. Claimants assert several arguments that the shortened limitations period in the Agreements does not or should not apply. Because of the 5 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) significance of the shortened limitations period to Claimants' causes of action, this issue is addressed first. As set forth below, the Arbitrator is not persuaded by Claimants' arguments and finds that the limitations period of the Agreements is applicable to Claimants' causes of action. First, relying on the decision of Charnay v. Cobert, 145 Cal.App.4th 170 (2006), Claimants assert that the limitations period in the Agreements is unenforceable because the Agreements are not straightforward, single contracts. The law is well-settled that an agreement for a shorter limitations period than otherwise provided by statute is enforceable, provided it is reasonable. Id. at 183. Indeed, the California Supreme Court has long held, "[i]t is a well-settled proposition oflaw that the parties to a contract may stipulate therein for a period oflimitation, shorter than that fixed by the statute of limitations, and that such stipulation violates no principle of public policy, provided the period fixed be not so unreasonable as to show imposition or undue advantage in some way." Beeson v. Schloss, 183 Cal. 618, 622-623 (1920); see also Tebbets v. Fidelity & Casualty Co., 155 Cal. 137, 139 (1909) (statute oflimitations is a personal right that can be waived or shortened). Contrary to Claimants' assertion, the Agreements are not complex. Rather, they are relatively short and straight-forward. Moreover, Claimants are sophisticated real estate investors and developers, who were able to understand the terms of the Agreements. Even if the Agreements were complex, it does not appear that a complex transaction renders a shortened limitations period unenforceable. As noted by Claimants, the court in Charnay observed that agreements to shorten limitations periods have not been recognized outside the context of straightforward transactions. However, this observation no long appears accurate. For example, in Zalkindv. Ceradyne, Inc., 194 Cal.App.4th 1010, 1030 (2011), the court of appeal enforced a shortened limitations period in an asset purchase agreement for the sale and purchase of stock that was to be registered for public trade. The Zalkind court held the shortened limitations period was enforceable, and therefore, barred the plaintiffs' claims. Therefore, even if the Arbitrator were persuaded that the Agreements were complex, complexity alone would not render the shortened limitations period unenforceable. Second, Claimants' contention that they were not aware of the one-year limitations period because it was "buried" on page 13 of the Agreements is not credible. The shortened limitations period in the Agreements is found within the arbitration provision of Section 26. The entire provision is capitalized to highlight and emphasize its importance. More importantly, the parties separately initialed the arbitration provision on page 15 expressly indicating that they had read and understood the provision. Additionally, Claimants quote the arbitration provision in their Demand for Arbitration. Therefore, their assertion that they were unaware of the shortened limitations period is not believable. Third, Claimants argue that the shortened limitations period should not be enforced because O Hill allegedly concealed his alleged improper use of NBCC Land funds after Claimants had objected to the NBCC Plan in February 2008. As discussed below, the Arbitrator does not find that O Hill concealed any alleged wrongdoing from Claimants. Moreover, Claimants' argument misses the point. By Claimants' own admission, they were aware, as early as February 2008, that O Hill had allegedly breached the Agreements. Therefore, it was 6 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) incumbent upon them to timely pursue their rights and remedies within the time provided by the Agreements. Fourth, Claimants argue O Hill should be equitably estopped from asserting the shortened limitations period because O Hill allegedly induced them not to pursue their remedies while the parties engaged in mediation in March 2009. A defendant may be estopped to invoke the statute oflimitations where there has been some conduct by the defendant, relied on by the plaintiff, which induces the belated filing of the action. Holdgrafer v. Unocal Corp., 160 Cal.App.4th 907, 925-926 (2008). However, as a general rule, equitable estoppel involves the defendant engaging in some wrongful conduct or misrepresenting some fact that bears on the necessity of bringing a timely action. Hinton v. Nmi Pac. Enters., 5 F.3d 391, 396-397 (9th Cir. 1993). Equitable tolling is a fact intensive issue that is determined based upon evidence. Transport Ins. Co. v. TIG Ins. Co., 202 Cal.App.4th 984, 1012 (2012). Here, other than O Hill's agreement to mediate, Claimants presented no evidence showing that he engaged in any wrongful conduct or made any misrepresentation that related to the necessity of Claimants bringing a timely claim for arbitration. Therefore, Claimants have failed to show that their claims were equitably tolled in March 2009. Fifth, Claimants argue that every time that O Hill continued to spend NBCC Land funds allegedly in violation of the Agreements, a new breach occurred thereby triggering a new limitations period. Thus, according to Claimants, if the shortened limitations period applies, it should not bar their claims for breaches occurring within one year from the filing of their motion for preliminary injunction in February 2011, or at the latest, the submission of the Demand for Arbitration on April 14, 2011. The arbitration provision clearly states that an arbitration must be initiated within one year after the alleged breach occurred. Although Claimants' motion for preliminary injunction was based on the same facts that form the basis of their causes of action in this arbitration, it is the initiation of the arbitration that stops the running of the limitations period, not the filing of a motion for preliminary injunction. Accordingly, Claimants' causes of action are not barred in their entirety but rather are limited to any breaches that may have occurred one year before the Demand for Arbitration was filed on April 14,201 L 2. CJaimants Failed to Establish that O Hill Breached His Duties Claimants causes of action for breach of fiduciary duty and breach of contract are based on the same alleged facts; namely, that O Hill breached his duties by: (a) unilaterally pursuing the NBCC Plan without the written consent of the majority of the co-owners; (b) unilaterally pursuing the NBCC Plan over the express objections of the co-owners; (c) improperly diverting proceeds from the income generated from the NBCC Land for his own benefit to pursue the unauthorized and disapproved NBCC Plan; and ( d) failing and refusing to provide the appropriate accounting and financial records to enable Claimants to ascertain the financial status of the NBCC Land. Therefore, the evidence relating to both of these claims will be addressed together. 7 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) As an initial matter, Claimants are correct that, in general, tenants in common stand in a fiduciary relationship with each other. However, they provide no authority that the acts about which they complain, with the exception of O Hill's financial reporting obligations set forth in Section 7(a)(v), are fiduciary obligations rather than contractual obligations. Section 7(a)(v) expressly provides that the Managing Owner shall have a fiduciary duty to provide financial information to the co-owners. In contrast, the Agreements do not designate any other fiduciary obligations owed by the Managing Owner. The fact that the Agreements designate the Managing Owner's financial reporting obligations as his sole fiduciary obligation, negates any inference that the parties also intended other obligations to be fiduciary in nature when they were not designated as such. White v. Western Title Ins. Co., 40 Cal.3d 870, 881-882, fu. 4 (1985) (the familiar maxim, expressio unius est exclusio alterius unius est exclusio alterius [the inclusion of one thing implies exclusion of others], applies to contract interpretation). Accordingly, the Arbitrator finds that, with the exception of O Hill's financial reporting duties under Section 7(a)(v), Claimants did not establish that the duties set forth above were fiduciary duties as opposed to contractual obligations. a. Oaimants Failed to Establish that O Hill Exceeded His Authority as Managing Owner Claimants assert that the Agreements provide very limited authority to the Managing Owner to, essentially, collect rents and pay ordinary expenses. They assert that O Hill was required to obtain the approval of the majority of the owners for anything beyond this limited authority. Significantly, neither Arnold nor Allan testified at the Arbitration. Therefore, the only evidence regarding the parties' intention is found in the Agreements themselves and O Hill's conduct as the Managing Owner. The Agreements do not expressly give the Managing Owner expansive powers. For example, Recital C of the Agreements states merely that the "Owners ... believe it necessary and appropriate to have one Owner be the managing Owner for purposes of accounting and administration." Section 7, which sets forth the Managing Owners duties, and authorizes the Managing Owner to take actions consistent with the Agreements including the right to hire consultants which the Managing Owner deems appropriate under his reasonable discretion. Therefore, the Agreement is ambiguous in that it neither clearly authorizes nor restricts O Hill from pursuing the discretionary entitlements for the NBCC Land. Accordingly, 0 Hill's conduct as the Managing Owner must be considered. "[W]hen the parties perform under a contract, without objection or dispute, they are fulfilling their understanding of the terms of the contract." Employers Reinsurance Co. v. Superior Court, 161 Cal.App.4th 906, 922 (2008). The course of performance doctrine is thus premised on the assumption that one party's response to another party's action is probative of their understanding of the contract terms. Additionally, the construction given to a contract by the parties before any controversy has arisen as to its meaning will, when reasonable, be adopted and enforced by the courts. Crestview Cemetry Assn. v. Dieden, 54 Cal.2d 744, 744, 753-754 8 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) (1960). "'[A]ctions speak louder than words' ... When the parties to a contract perform under it and demonstrate by their conduct that they knew what they were talking about the courts should enforce that intent." Id. at 754. From 1993 through 2008, Allan and Arnold were passive owners of the NBCC Land. The evidence showed that, during this time, 0 Hill kept Claimants adequately informed about his actions with regard to the NBCC Plan. In fact, Claimants admitted that they were aware of his efforts to obtain the discretionary entitlements and to pursue the NBCC Plan. Importantly, Claimants presented no evidence that they ever objected to O Hill's NBCC Plan at any time before February 2008. Therefore, the evidence establishes that they acquiesced in O Hill's efforts to obtain the discretionary entitlements for the NBCC Land. Their acquiescence and failure to object for nearly fifteen years shows that they understood that O Hill had the authority to seek the discretionary entitlements. As a result, Claimants are now estopped from asserting 0 Hill did not have the authority to seek the discretionary entitlements for the NBCC Land. Despite Claimants' awareness of, and consent to, of the NBCC Plan from 1993 through 2008, they assert O Hill exceeded his authority as the Managing Owner by continuing to seek the entitlements and pursue the NBCC Plan after they voiced their objection in February 2008. "One is not permitted to stand by while another develops property in which he claims an interest, and then if the property proves valuable, assert a claim thereto, and if it does not prove valuable, be willing that the losses incurred in the exploration be borne by the opposite party." Lundgren v. Lundren, 245 Cal.App.2d 582, 592 (1966); see also Holt v. County of Monterey, 128 Cal.App.3d 797 (1982) (refusing to set aside development plan where plaintiff had known of proposed development plan, unreasonably delayed for more than two and half years before instituting proceedings, and developers relied to their detriment on the adoption of the plan). At the time that Claimants voiced their objection in February 2008, 0 Hill had been actively pursuing the discretionary entitlements for nearly fifteen years. Voters approved the general amendment and the only remaining entitlements were the development standards such as height limits, landscaping, vehicle access, and parking. Thus, very little remained to complete the NBCC Plan. Significantly, 0 Hill owns 50% of the NBCC Land. Thus, he was not simply using Claimants' money to pursue the entitlements. Rather, he contributed double the amount that each Claimant contributed to the entitlement process. To require O Hill to abandon the entitlement process and forfeit the progress made up to that time would cause significantly more harm to O Hill than to Claimants. Thus, 0 Hill was not required to abandon the NBCC Plan in 2008. i. 0 Hill Did Not Misrepresent His Ownership Interest in the NBCC Land to the City Claimants assert that O Hill exceeded the scope of his authority as the Managing Owner by submitting applications and other documents to the City without signatures of all the Co~ Owners, and signing as the "Ownert thereby giving the misimpression to the City that he was the sole owner the NBCC Land. Contrary to Claimants' argument, the evidence showed that the City was aware of the identities of all the owners of the NBCC Land. In fact, in 2006, 9 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Claimants' attorney informed the City that O Hill was the "sole point of contact" for the NBCC Land owners with regard to a potential condemnation proceeding. After this dispute arose, Elliot and Irving wrote to the City demanding that it cease and desist further processing of the NBCC Plan because O Hill had submitted the applications without Claimants' signatures. Importantly, the City refused Claimants' demand explaining that pursuant to the municipal code, the application "required the signature of an owner not all owners of the property.'' This evidence strongly rebuts Claimants' argument that O Hill was required to submit the application with all owners' signatures. Claimants failed to address this evidence. Accordingly, the Arbitrator finds that O Hill did not exceed his authority or misrepresent his ownership in the NBC Land to the City in connection with the entitlement process. ii. 0 Hill Did Not Exceed His Authority By Obiecting to IBC's Clubhouse Plan In 2008, the long-term leaseholder of the Golf Club Property, IBC; submitted a plan to the City for approval of a different golf clubhouse and parking lot than was reflected on the NBCC Plan. IBC's plan provided for a much larger clubhouse in a style that was inconsistent with the style reflected in the NBCC Plan. 0 Hill objected to the City regarding IBC's plan. Claimants assert that O Hill had no authority as the Managing Owner to approve or disapprove of IBC' s plan or to spend any NBCC Land funds to do so. As Claimants concede, the lease with IBC provides that each owner of the Golf Club Property was a Landlord to IBC, and had the individual right, as a Landlord, to approve or disapprove of the IBC's improvement plans. Therefore, by the terms of the Lease, 0 Hill had the authority to object to IBC's improvement plans. 0 Hill cannot be deemed to have exceeded his authority under the Agreements by exercising a right expressly provided by the lease. b. The Funds Expended for the NBCC Plan Were Not Capital Improvements Requiring Prior Written Consent of the Co-Owners Section 7(d) of the Agreements provides that "no material sums shall be expended for capital improvements without the prior written consent of the Owners who hold a majority of the Interests in the Property." Claimants argue the discretionary entitlements are capital improvements and the amounts spent on the entitlements were material. Therefore, they argue 0 Hill was required to obtain their prior written consent to use any NBCC Land funds to pursue the entitlements. According to Claimants, 0 Hill breached Section 7(d) of the Agreements by failing to obtain their prior written consent. The Arbitrator disagrees. A capital improvement typically involves the construction or addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property's overall value or increases its useful life. Although the discretionary entitlements would allow for capital improvements to be made to the NBCC Land, the entitlements themselves do not constitute capital improvements. Therefore, 0 Hill was not required to obtain Claimants' prior written consent to expend NBCC Land funds for the discretionary entitlement process. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) c. 0 Hill Fulfilled His Financial Reporting Requirements Section 7(a)(v) of the Agreements provides that the "Managing Owner shall have a fiduciary duty to prepare a written status and financial report for the Propert[ies] and provide copies to each Owner within ninety (90) days after request from another Owner, and within seventy-five (75) days after the end of each calendar year." The evidence showed that beginning in 1993 and continuing through 2011, 0 Hill provided Claimants monthly and annual distribution summaries reflecting all revenue and expenses broken down by category and which showed the amounts paid by NBCC Land every month to consultants, engineers, architects, attorneys, and others for planning and the entitlement process. Additionally, Claimants' accountant was given access to the books and records throughout the years and found no irregularities except for one that was promptly corrected. Therefore, 0 Hill adequately fulfilled his financial reporting duties under the Agreements. Claimants also assert that O Hill failed to fulfill his financial reporting duties because he utilized only one checking account, the NBCC Account, for the two parcels. Claimants assert that because each of the Agreements was separate and related to separate parcels, 0 Hill was required to keep the finances of the parcels separate. Despite Claimants' argument, the evidence showed that when the Properties were acquired, the NBCC Account was opened for both parcels. All revenue from both parcels was deposited into, and all expenses were paid from, the NBCC Account. The evidence showed that Claimants knew about the NBCC Account from the beginning and did not raise any objection to using it for both parcels. Therefore, the Arbitrator finds that Claimants acquiesced in, and waived any objection to, 0 Hill's use of one checking account for both parcels. d. 0 Hill Has Not Engaged In Waste Claimants contend that the $2 million of NBCC Land funds spent by O Hill on the discretionary entitlements for the NBCC Plan were unauthorized and wasteful. As discussed above, 0 Hill's alleged breaches occurring before April 14, 2010 are barred by the shortened limitations period in the Agreements. As further discussed above, with regard to the funds expended by O Hill after April 14, 2010, the Arbitrator finds that he was authorized to expend NBCC Land funds to continue pursuing the NBCC Plan as a result of Claimants' acquiescence to his efforts to pursue the NBCC Plan. Additionally, 0 Hill was not required to abandon the NBCC Plan after Claimants' objection in February 2008 and thereby forfeit the fruits of his labor up to that time. The Arbitrator also finds that Claimants failed to show fuat O Hill's expenditure of NBCC Land funds was wasteful. Claimants' position with regard to whether or not the NBCC Plan increased the value of the NBCC Land was inconsistent. On the one hand, they concede that the entitlements added tremendous value to the NBCC Land but nonetheless assert that they should not have to contribute to the funds that were used to obtain the entitlements. On the other hand, they assert that the entitlements did not increase the value of the NBCC Land enough, and therefore, they should be entitled to a return of some or all of their share of the funds expended on the entitlements. Notwithstanding Claimants' inconsistent positions, the evidence they presented to try to show waste was speculative and unconvincing. 11 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 3. Claimants Failed to Establish Conversion Claimants assert that O Hill failed to distribute their share of the profits received from the NBCC Land because he used those profits to pursue the discretionary entitlements. Therefore, according to Claimants, 0 Hill has engaged in conversion. Conversion is defined to be an act of willful interference with personal property, done without lawful justification, by which any person entitled thereto is deprived of the use and possession of the personal property. de Vries v. Brumback, 53 Cal.2d 643, 647 (1960). Money may be the subject of a conversion action only when the money can be described or identified as specific property since conversion deals with interference with property. Shahood v. Cavin, 154 Cal.App.2d 745~ 748 (1957). Where the money involved cannot be specifically identified, the proper action is in contract or for debt. Baxter v. King, 81 Cal.App. 192, 194 (1927). Claimants' cause of action for conversion fails for several reasons. First, as discussed above, Claimants failed to establish that O Hill engaged in any wrongdoing given their acquiescence to his efforts to obtain the discretionary entitlements. Second, Claimants fail to identify a specific sum of money to which they were entitled but were deprived. Instead, they assert that were deprived of a flow of income from the NBCC Land. Third, 0 Hill did not expend NBCC Land funds for his own use to the exclusion of Claimants. Rather, he used NBCC Land funds for the benefit of all the owners. B. 0 Hill's Counterclaims Against Claimants, Elliot, and Irving On August 15, 2011, after filing the Demand for Arbitration, Claimants executed the Notice of Termination, purporting to terminate and remove O Hill as the Managing Owner for "cause,"' and to appoint Irving as the new Managing Owner. Since then, Claimants have stated orally and in writing to the City, IBC, the Coastal Commission, and others, that O Hill no longer has authority to act on behalf of the NBCC Land owners. As a result, 0 Hill asserts counterclaims against Claimants for breach of contract, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and declaratory relief. 0 Hill also asserts a counterclaim against Elliot and Irving for aiding and abetting Arnold's and Allan's alleged breach of fiduciary duty. 1. No "Cause" Existed to Terminate and Remove O Hill as the Managing Owner, Therefore, the Notice of Termination Is Void Section 7(b) of the Agreements provide that "[a]t any time, Managing Owner may be removed with cause by the written election of the Owners of a majority of the ownership Interests in the Property not owned by the Managing Owner ... " Section 7 (b) defines "cause" as "fraud, gross negligence, or a material default of a material obligation by Managing Owner." Claimants assert that "cause" existed for the tennination and removal of O Hill as the Managing Owner because he materially defaulted on a material obligation under the Agreements. Claimants contend that the facts that form the basis for their claims against O Hill> as discussed above, constitute a material default by O Hill under the Agreements. As discussed above, Claimants failed to establish that O Hill breached any fiduciary or contractual duty owed 12 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) to Claimants. Therefore, Claimants failed to establish that O Hill materially defaulted on a material obligation under the Agreements. Claimants also assert that O Hill engaged in fraud by allegedly misrepresenting his ownership of the NBCC Land to the City in connection with the entitlement process. As discussed above, 0 Hill did not misrepresent that he was the sole owner of the NBCC Land to the City. Therefore, Claimants failed to establish that he engaged in fraud. Claimants further assert that O Hill engaged in gross negligence by intentionally wasting Claimants' money in knowing violation of their rights under the Agreements. Again, as discussed above, Claimants failed to establish that O Hill engaged in any wrongdoing in light of their acquiescence. They also failed to establish that the funds he expended to obtain the discretionary entitlements amounted to waste. Based on the foregoing, no "cause" existed for Claimants to terminate and remove O Hill as the Managing Owner. Accordingly, the Notice of Termination is invalid and void. 2. 0 Hill Failed to Establish His Claims for Breach of Breach of Contract, Breach of Fiduciarv Duty, Breach of the Implied Covenant of Good Faith and Fair Dealing against Claimants or His Claim for Aiding and Abetting against Elliot And Irving 0 Hill asserts that Claimants have breached their fiduciary and contractual duties under the Agreements by (a) falsely informing the City that O Hill was no longer the Managing Owner; (b) appearing before the City to voice their objection to the NBCC Plan; (c) negotiating with IBC; and (d) surreptitiously agreeing to something that benefits them and damages the NBCC Land. 0 Hill asserts that Elliot and Irving aided and abetted Claimants' alleged breach of fiduciary duty by giving substantial assistance or, encouragement, or both, to Claimants to breach their fiduciary duties to O Hill. 0 Hill posits two alternative theories of damages. Significantly, however, he did not present any evidence of damage ifhe had prevailed on Claimants' causes of action against him. By defeating Claimants' causes of action, as set forth above, any award as to O Hill's damage claim would be too speculative but is also moot. Therefore, 0 Hill cannot establish his counterclaims against Claimants, Elliot, and Irving because he has failed to show that he has suffered any damage. IV. Conclusion 1. Claimants failed to establish that O Hill breached his fiduciary duties to Claimants for the reasons set forth above. 2. Claimants failed to establish that O Hill breached the Agreements for the reasons set forth above. 3. Claimants failed to establish conversion by O Hill for the reasons set forth above. 13 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 4. 0 Hill established that no "cause" existed for Claimants' purported termination and removal of him as the Managing Owner of the NBCC Land for the reasons set forth above. Accordingly, the Notice of Termination js invalid and void. 5. 0 Hill failed to establish his claims for breach of contract, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing against Claimants or his claim for aiding and abetting against Elliot and Irving for the reason set forth above. V. Attorneys Fees and Costs 0 Hill is the prevailing party. Paragraph 27 of The Agreement provides that prevailing party in a dispute such as this/' ... shall be entitled , in addition to such other relief that may be granted, to reasonable attorneys fees and legal costs in connection with such dispute.'' 0 Hill seeks attorneys fees of$1,077,098.30. Claimants argue that $268,527.07 of that total should be disallowed because the fees are attributable to a separate action, in the Orange County Superior Court. The Arbitrator agrees, the claim should be presented to the Court that entertained the litigation, who would be in a better position to decide how much, if any, fees and costs would be reasonable. Claimants also argue that $80,857.12 should be disallowed to account for the fact that OHill lost on a number of his affirmative claims, even though he prevailed on Claimants' claims. The arbitrator agrees with Claimants, and that sum is disallowed. Claimants also request that fees be disallowed on three other grounds: overstaffing, excessive billing rate for Ms. Vander Woude and excessive paralegal time. Those requests are denied for lack of factual support. The Arbitrator finds OHill's claim for attorneys fees, net of the two allowed deductions, to be reasonable in the amount of$727,714.11. OHill seeks reimbursement of costs of suit in the amount of$237,084.57. Included are expert fees in the amount of $111,179.62. The Agreement provides that the matter is to be governed by California law. Within California law, Code of Civil Procedure Section 1033.5 identifies the types of costs that can be awarded post-trial or post-arbitration. Expert fees are not included in that section. No reason appears why the Arbitrator should exercise discretion to depart from the law; especially because the expert testimony was not central to the result. The fees are disallowed. Claimants also challenge filing fees, travel expenses, cost of hearing transcripts and cost of photo copying as not allowable under the law. OHill does not present a counter argument, and these costs are disallowed in the amount of$42,703.16. Accordingly, of the total claim for cost reimbursement of$237,084.57, $153,882.78 is disallowed, and the sum of$83,201.79 is awarded. 14 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) VI. Award 1. Claimants shall have no recovery against OHill. 2. OHill shall recover from Claimants $727,714.11 in attorneys fees and $83,201.79 in costs for a total of $810,915.90. 3. This Award resolves all claims between the parties submitted for decision in this proceeding. DATED: May 17, 2013 H.(;l;J:;i~ Ar'l:htrator 15 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) PROOF OF SERVICE BY EMAIL & U.S. MAIL Re: Mesa Shopping Center-East, LLC, et al. vs. 0 Hill, Robert, et al. Reference No. 1200045004 I, Andy Katz, not a party to the within action, hereby declare that on May 20, 2013 I served the attached FINAL A WARD on the parties in the within action by Email and by depositing true copies thereof enclosed in sealed envelopes with postage thereon fully prepaid, in the United States Mail, at Los Angeles, CALIFORNIA, addressed as follows: Alan J. Kessel Esq. Vikki Vander Woude Esq. Baker & Hostetler LLP 600 Anton Blvd. Suite 900 Costa Mesa, CA 92626 Phone: 714-754-6600 akessel@bakerlaw.com vvanderwoude@bakerlaw.com Parties Represented: Golf Realty Fund LP Newport Beach Country Club, LP 0 Hill Capital 0 Hill Properties Robert O Hill Gary A. Waldron Esq. John S. Olson Esq. Waldron & Bragg, LLP 23 Corporate Plaza Dr. Suite 200 Newport Beach, CA 92660 Phone: 949-760-0204 gwaldron@waldronbragg.com jolson@waldronolson.com Parties Represented; Mesa Shopping Center-East, LLC Paul B. George Esq. Lane Powell PC 601 SW Second Ave. Suite 2100 Portland, OR 97204-3158 Phone: 503-778-2100 georgep@Ianepowe11.com Parties Represented: Golf Realty Fund LP Newport Beach Country Club, LP 0 Hill Capital 0 Hill Properties Robe1i O Hill I declare under penalty of perjury the foregoing to be true and correct. Executed at Los Angeles, Andy Katz akatz@jamsadr.c m Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit C Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 1 JAMS ARBITRATION 1200053406 Golf Realty Fund, LP Claimant, And Mesa Shopping Center- East, LLP; Mira Mesa Shopping Center and Fainbarg Trust Dated April 19, 1982, Respondents. _____________________________________________________________________________ FINAL AWARD Counsel: Paul B. George Esq. Lane Powell 601 SW Second Ave. Suite 2100 Portland, OR 97204 Phone 503-778-2100 georgep@laneposell.com Parties Represented: Golf Realty Fund LP Lauren A. Deeb Esq. Nelson Mullins 19191 S. Vermont Ave Torrance, CA 90502 Phone 949-760-1121 lauren.deeb@nelsonmullins.com Parties Represented: Golf Realty Fund LP // Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 2 Michael G. Yoder Esq. O’Melveny & Meyers LLP 610 Newport Center Dr. Suite 1700 Newport Beach, CA 92660 Phone: 949-760-9600 myoder@omm.com Parties Represented: Fainbarg Trust Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC Jacob Gonzales Esq. Weintraub Tobin 23 Corporate Plaza Dr. Suite 200 Newport Beach, CA 92660 Phone 949-760-0204 gwaldron@weintraub.com jgonzales@weintraub.com Parties Represented: Fainbarg Trust Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC Arbitrator: Jeffrey King JAMS 3800 Concours Dr. Suite 320 Ontario, Ca. 91764 Phone: 909-884-6684 Jking.jamsadr@gmail.com Place of Arbitration Hearing: Orange, CA Date of Interim Award: August 26, 2019 Date of Final Award: April 8, 2020 This matter was tried in Arbitration for a total of thirteen days. It was submitted on July 23, 2019.1 1. Testimony was taken March 12 – 19, 2019 and May 7 – 14, 2019. The Hearing on the Motion for Attorneys’ Fees and Costs occurred on March 25, 2020. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 3 By way of their Supplemental Demand for Arbitration, filed on March 13, 2019, Claimant Golf Realty Fund, LP, aka O Hill Properties seek the following determinations pursuant to Declaratory Relief: (1) Co-owners, by their past actions and conduct, have consented to, are estopped from consenting to, and/or have waived their right to oppose the NBCC Master Plan for the Tennis Club Property as envisioned by the NBCC Master Plan; (2) Co-owners have a duty to consent to the development of the NBCC Master Plan; (3) Co-owners do not have the unfettered right to refuse consent to the completion of the NBCC Master Plan as entitled; (4) Co- owners are required to exercise their consent rights in good faith and not to act in an objectively unreasonable manner; (5) Co-owners are required to complete the NBCC Master Plan for the Tennis Club Property; and, (6) Co-owners’ refusal to consent to the Patterson Homes Offer for the Villa sub-area, the lease for the tennis club/spa sub-area and the future lease of the bungalow sub-area is objectively unreasonable and/or done in bad faith. Respondents, Mesa Shopping Center-East, LLC, Mesa Shopping Center-West, LLC and The Fainbarg Trust dated April 19, 1982, an intervivos trust, have set forth various defenses and seek the following determinations by way of their March 18, 2019 Counterclaim for Declaratory Relief: (1) Co-owners have not already consented to the sale, lease or improvement of the Tennis Property as part of O Hill’s Master Plan, and in particular the Sears/Patterson Offer; (2) Co- owners are not estopped from withholding their consent under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of O Hill’s Master Plan, and in particular the Sears/Patterson offer; and, (3) Co-owners have no duty to consent under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of O Hill’s Master Plan, and in particular, to the Sears/Patterson Offer. Witnesses testifying at the Arbitration were: Robert O Hill, Irv Chase, Elliot Feuerstein, Hal Sears, Sean Abdali, Kory Kramer, Leland Stearns, Bruce Baltin, Rosemary Garcia and Alan Reay. Numerous Exhibits were admitted into Evidence. From a factual point of view this Opinion summarizes the testimony of Robert O Hill, Irv Chase and Elliot Feuerstein; the Opinion attempts to organize the facts on a topic by topic basis, as to the salient issues presented.2 The testimony of the other witnesses is not summarized, in 2 While the testimony is organized and segmented into various issues, it is clear that most of the testimony is also relevant to the other issues discussed in this Opinion. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 4 that while relevant to the issues presented, is not necessary for the ultimate disposition of the present matter. I. RES JUDICATA The starting point for any discussion of the present matter is the Res Judicata effect on the issues presented here, if any, of Judge Fromholtz’ May 20, 2013 “Final Award.” The issue was previously ruled on in this matter, on June 27, 2018. After hearing the evidence in the present matter, I have revisited the issue and my ruling is the same. In that this Opinion represents my final opinion on the first phase of the present litigation, I will restate the ruling herein with a few minor changes. “Collateral estoppel is one of two aspects of the doctrine of res judicata. In its narrowest form, res judicata “ ‘precludes parties or their privies from relitigating a cause of action finally resolved in a prior proceeding.”’ But res judicata also includes a broader principle, commonly termed collateral estoppel, under which an issue “necessarily decided in prior litigation may be conclusively determined as against the parties thereto or their privies in a subsequent lawsuit on a different cause of action.’’ (Citations). “Thus, res judicata does not merely bar relitigation of identical claims or causes of action,” instead, in its collateral estoppel aspect, the doctrine may also preclude a party to prior litigation from redisputing issues therein decided against him, even when those issues bear on different claims raised in a later case.” (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 828.) “Not only does the issue litigated have to be identical, no aspect of what was decided in the previous proceeding can be left to conjecture. Evidence extrinsic to the judgment roll may be used to ascertain which issues were determined in the original action.” (Bronco Wine . Frank Logoluso Farms (1989) 214 Cal. App.3d 699, 709) Here, what was litigated, determined and necessarily decided in the prior arbitration, was that by way of acquiescence, and/or estoppel the Co-owners consented to the processing of development plans with land use changes up through and including the obtaining of entitlements. The issue of co-owners consenting to any specific plan and/or sale of the property or portions thereof was not litigated and not necessarily decided. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 5 In the Fromholtz matter, Co-owners’ February 2011 Claim stated causes of action for Breach of Fiduciary Duty, Breach of Contract and Conversion. The gist of the Claim was that the Managing Owner, without the consent of the Co-owners processed plans to entitle, rezone and/or develop the property. It was contended that the Managing Owner failed to account and improperly spent money for purposes of entitlements, rezoning and redevelopment of the property. The Claim went no further. The Managing Owner’s response was that he informed the Co-owners of his intent to seek discretionary entitlements; they agreed and encouraged the planning and seeking of entitlements. None of the pleadings addressed the issue of the Managing Owner being allowed to sell the property or portions thereof, or that the Co-owners consented (either by acquiescence or estoppel) to said sale. Further, in viewing the Closing Briefs, they addressed the Managing Owner’s authority to seek governmental approval for plans and entitlements and whether the expenditures of the Managing Owner were wasteful and unauthorized.3 As such nothing more or less was decided by Judge Fromholtz than…..by way of acquiescence, and/or estoppel the Co-owners consented to the processing of development plans with land use changes up through and including the obtaining of entitlements. He did not decide that any of the tenants in common had to follow-through with development consistent therewith. The next issue is whether by their conduct, the Co-owners in some fashion have consented to the proposed present development and “Bake-off” sale by the Managing Owner (or are otherwise estopped from withholding their consent to it). I think not. II. CONSENT, WAIVER AND/OR ESTOPPEL (a.) Testimony of Managing Owner 3 Judge Fromholtz states at page 4 of his decision, “[c]urrently, the development standards for the NBCC Land such as height limits, landscaping, vehicle access and parking are still undetermined. The development standards are the final discretionary entitlements for the NBCC Land. Proceedings are continuing to be held before the City to determine the development standards.” To a reader it somewhat leaves the impression that he believed the process of entitlements was near completion. Entitlements were not completed until about five and one-half years later. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 6 The Managing Owner testified in the 1995-1996 timeframe the co-owners were supportive of the land use changes. He discussed with them the General Plan Amendment and zone changes; they were in favor of getting the entitlements. He discussed putting Villas on both the tennis and golf property. They discussed selling some of the property in fee. Both co- owners wanted to buy the Villa area themselves. The co-owners never objected to the bungalow concept and never raised any objections or told the Managing Owner to stop what he was doing. In late 2007 and early 2008 Irv Chase and Elliot Feuerstein began getting involved in the project from the Co-owners’ standpoint. In 2007, Mr. Chase and Mr. Feuerstein expressed some concern relative to the lack of third party offers for all three components of the master plan. They also asked for information relative to the deals the Managing Owner was negotiating. In October of 2007 the George Jones appraisal was done. It dealt with hypothetical land uses and revealed that a strictly residential use of the property would have a value 4 times that of the Managing Owner’s Master Planned development. In 2008 Mr. O Hill received a letter from Mr. Chase, indicating that the development plan did not maximize the value of the property and the Co-owners did not support it. They wanted more residential and a reduction of the tennis club development costs. Both Mr. Feuerstein and Mr. Chase started expressing reservations relative to the feasibility of the bungalows. They wanted to increase the residential component and reduce the tennis club development construction costs. They were seeking a comprehensive plan for development and sale. During the early stages of the approval process, Mr. Chase and Mr. Feuerstein would appear at Planning Commission and City Council meetings opposing approval of the master plan. During the 2010 time, O Hill explained on a number of occasions that after approval the Co-owners could go back and try to get more residential. In 2011 the Co-owners sued the Managing Owner to enjoin him from proceeding further with the development plan. The Fromholtz decision was issued in May of 2013. In June of 2014 the Co-owners sent a letter indicating that they disagreed with the project and the Managing Owner’s continued spending of joint money on the project. In 2014 he indicated to them that he had no obligation or desire to start over on the discretionary entitlement Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 7 process even if it made good business sense. In this time frame discussions began about him purchasing the Co-owners interests. In 2016 they informed the Managing Owner that any prior consent implied from the Fromholtz decision had run its course and that there was no need to continue to spend joint ownership money on the project unless and until a financially sound comprehensive plan for development was put together. In 2017 he was encouraged by the Co-owners to engage with IBC as it relates to the purchase of the property for $28 million. In 2018 they also wrote objecting to the duration of the proposed tennis club lease and the inclusion of capital improvements for the tennis club. In a February 2019 letter, the Co-owners indicated to the Managing Owner that over the years they had made several requests for the actual rent that a bungalow operator would be paying. Since the February 20, 2008 letter the Co-owners have never changed their position that the plan did not maximize the value of the property. They have never been supportive of the plan. They have always asked to explore the possibility of adding more residential. (b.)Testimony of Irv Chase He became involved in the property in late 2006 early 2007. In March 2007 he remembers a discussion about the master plan. After he and Mr. Feuerstein became involved they were asking questions about the economics of the Plan. In 2007 they asked for a timeline and projected milestones as it relates to the development; they were not provided one. He started asking questions about financial feasibility. He and Mr. Feuerstein were more interested in getting costs and income before they asked for an appraisal. Within a year of his involvement he decided he did not want the Managing Owner to obtain the entitlements. In February 2008 the Co-owners sent a “stop letter.” He wanted the Managing Owner to stop seeking entitlements altogether. He appeared at Planning Commission meetings and City Council meetings in an attempt to stop the project. They sued the Managing Owner when he refused to stop seeking entitlements; they tried to get an injunction. He did not want the entitlements obtained. In the 2014 time frame he went out to see various people and companies as to whether they might have some interest in the property. Mr. Feurerstein talked with the Lennar Group and the Olson Company; there was no follow-up from either. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 8 (c.) Testimony of Elliot Feuerstein He has been involved with the property almost from the inception. They understood back in 2002 that the Managing Owner was trying to up-zone the property and was generally exploring some development opportunities. He was supportive of the up-zoning. In the early 2000’s they were thinking that it would be primarily residential. In about October 2006 he became aware that some of the units were to be sold. At that time he started having concerns in that the Managing Owner indicated that the ground rent for the bungalows would be around $2 million per year. He started wondering how 27 bungalows could generate $2 million in ground rent per year and how the sale of the Villas could generate $10 million. When the projected ground rent dropped to $1.284 million he began to lose confidence and believed the information they were getting was not reliable. In 2007 they were following up by seeking information, which they did not get. They were trying to get information about a bungalow operator, because in their mind the bungalow operator was the anchor tenant. In February 2008 he instructed the Managing Owner to stop. When the 2008 letter was sent it was not his intention that he would never approve any further work to entitle the property or that he would not ultimately agree to a sale or lease. They filed a lawsuit for an injunction in February 2011. After 2013 he spoke to the Olson Company and Lennar Group about whether they were interested in the property. Neither demonstrated any interest. (d.) Discussion The Managing Owner, suggests these facts support a conclusion that the Co-owners consented to the NBCC Master Plan development as proposed by the Managing Owner, waived any opposition thereto or that they are otherwise estopped from not consenting to the development of the NBCC Master Plan. It is clear from the above facts that the present Co-owners have not consented to the NBCC development. They have opposed it since 2008 and in essence have not given an inch in their opposition. Even the Managing Owner testified that the Co-owners have always been in opposition and have not consented to the Plan or the development. To have consent, there must be an “approval of what is done or proposed by another.” (Webster’s Collegiate Dictionary, 10th Ed., 1997) The Co-owners have not approved of the Managing Owner’s plan or the development thereof. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 9 “Waiver” is also not present. As discussed infra, under the “Agreement Between Real Property Owners,” the co-owners have the unfettered right not to consent to the sale of the Tennis Property, or portions thereof. They have the further right to withhold their consent to lease the subject property, so long as the withholding of consent is not objectively unreasonable. “ ‘Waiver is the intentional relinquishment of a known right after full knowledge of the facts’ (citation). The burden is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation,… The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right.’ Thus ‘California courts will find waiver when a party intentionally relinquishes a right or when that party’s acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.’ (Citations)” (Old Republic Insurance Co. v. FSR Brokerage (2000) 80 Cal. App.4th 666, 678.) As demonstrated by the above facts, at no time did the Co-owners either expressly or by their conduct intentionally relinquish their right to object to the development of the Managing Owner’s Master Plan. Since the inception of the plan they have voiced their opposition and have conducted themselves consistent therewith. “The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he….led another to believe a particular circumstance to be true and to rely upon such belief to his detriment. The elements of the doctrine are that (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.” (Strong v. County of Santa Cruz (1975) 15 Cal.3d 720, 724-725) Here, there are no facts to suggest that the Co-owners acted in such a way so as to lead the Managing Owner to the impression that they were on-board with the NBCC Master Plan and the development thereof. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 10 III. RIGHTS AND OBLIGATIONS UNDER THE OPERATING AGREEMENT Moving beyond the past conduct of the parties and their predecessors, the issue becomes what are the rights and obligations of the parties under the March 8, 1994 “Agreement Between Real Property Owners Balboa Bay Club Racquet Club,” and more specifically whether the Co- owners must consent to the development proposed by the Managing Partner. (a.) History and Status of the NBCC Master Plan The Managing Owner testified when they acquired the tennis and golf property it was zoned recreational open space. They needed to get approval of the City of Newport Beach and the Coastal Commission for land use change. The city wide vote as to amending the General Plan was in November of 2006. Thereafter he needed get the project entitled, which encompassed getting all the approvals from the various governmental agencies and quasi- governmental agencies. From 2002 to 2006 he met with many groups to try to persuade them of the merits of the General Plan Amendment, Zone change and the Master Plan for the property. He got the whole thing approved by promising many groups various things. When he met with the tennis members he promised them that the tennis facility would stay and they would get a new clubhouse and spa. The Tennis Property was one of many geographical areas addressed in the 2006 General Plan Amendment. The planned community district text was approved by the City in 2012. The master plan has three elements: there are 27 bungalows, 5 villas and the tennis club/spa. The tennis/spa building is an amenity for the bungalows and villas. The entity operating the fitness facility and spa would be the hotel bungalow tenant. While initially, the developer of the villas was to pay for the tennis clubhouse the Managing Owner is now hoping to get the hotel developer of the bungalows to build or pay for the tennis clubhouse. He doesn’t think of the bungalow property as an anchor tenant. He has tried to market all three together however, only in the context of having the Co-owners sell their entire interest. By November 2018 he had: the Newport Beach Country Club Planned Community text, a zone change, site plan approval, state Water Quality Control Board approval, grading plan, storm drain plan, dry utility plans and street improvement plans, through plan check. They had all the entitlement approvals necessary to do the “bake-off.” Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 11 (b.) Discussion From the evidence the proposed and entitled development consists of the sale of 5 lots for the construction of “Villas,” the construction of a new Tennis and Spa Club with the reduction of some tennis courts and the construction of 27 separate “Bungalows” which are to be primarily a Hotel (although they could be rented on a long term basis). The above uses have been represented to various governmental entities and marketed by the Managing Owner as a “Master Plan.” Throughout the Arbitration the evidence demonstrated that from a conceptual standpoint, the development of all three uses are interrelated. The “Bungalows,” which will be land leased by the general partners to a hotel operator, is the primary money maker of the “Master Plan.” The sale of the “Villa” lots is to obtain not only money for the general partners but also a commitment from the purchaser of the “Villa” lots to construct a new Tennis and Spa Club as well as construct the infrastructure for the entire “Master Planned” property. Lastly, the Tennis and Spa Club will be ground leased by the Owners; it is not only to be self-sufficient as a tennis club and spa, but also as an amenity for the hotel “Bungalow” guests. With the above understanding of the proposed development I now turn to the rights and obligations of the parties under the 1994 agreement and more specifically to whether the Co- owners must consent to the above development. (c.) Owners’ Understanding of the Agreement The Managing Owner testified that he approached Allan about the tennis and the golf property. Allan introduced him to Arnold. Both Allan and he loved ground leases. Golf Realty fund owns a 50% tenant in common interest in the tennis property. He testified that under the terms of the agreement there must be a super majority vote to sell the property and there must be majority approval to put in capital improvements. Under the agreement each owner must consent to any grant of a leasehold interest. (At another point he testified that only a majority needed to agree as it relates to a lease.) Under the sale provision section 4B, for an owner to be compelled to sell his interest there must be a vote of at least 70%. He bought his interest in the tennis property for investment; the recitals in the OIC agreement say that the property was acquired partially for investment. He has taken the position consistently that he has the right to refuse to sell his interest and has consistently told the Co- Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 12 owners such. He concurs with the notion that the Co-owners have the same right not to sell the villa area, tennis and spa area as well as the bungalow area. He has not gotten consent from the Co-owners to use ownership funds for the tennis clubhouse spa area. He has not got written consent to use the proceeds from the sale of the villa sub-area to construct a tennis clubhouse and spa building. He believes if a ground lessee of the bungalow area is required to pay money relative to the construction of the tennis spa club, it would require Co-owners consent. Irv Chase testified that he thinks it’s absolutely reasonable that if the managing owner does not wish to sell he does not need to sell; it is his decision. It has always been their goal to have long-term ground leases. (d) Discussion “‘A contract must be “interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting” (Civ. Code, § 1636), and where, as here, the contract is in writing, “the intention . . . is to be ascertained from the writing alone, if possible . . . .” (Civ. Code, § 1639.)’” (Roden v. Bergen Brunswig Corp. (2003) 107 Cal.App.4th 620, 625.) The interpretation of a contract is a question of law. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) The interpretation must be “‘fair and reasonable, not leading to absurd conclusions.’” (Kashmiri v. Regents of University of California (2007) 156 Cal.App.4th 809, 842.) A contract must be interpreted so as to be “lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.” (Civ. Code, § 1643.) “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” (Id., § 1641.) “A contract may be explained by reference to the . . . matter to which it relates.” (Id., § 1647.) As to the present dispute, the following are among the relevant contract provisions: Recitals “A. The Owners desire to own, lease, manage, maintain, refinance, encumber and hold for investment, as tenants in common, that certain real property comprising approximately 6.099 acres with improvements thereon…” Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 13 “B. The Owners have discussed the co-ownership of the Property…it is in the best interest of each Owner that the holding of the Property be governed by an agreement which defines the rights and duties of each Owner in the form of this Agreement.” Provision 1. “Agreement as Tenants in Common. The owners agree to hold title to the Property as tenants in common to own, manage, maintain, lease, finance, refinance, and/or hold the Property for investment in accordance with the terms of this Agreement. The Owners may conduct such other activities with respect to the Property as are related to or compatible with the ownership of real estate. Subject to the provisions of the Agreement, each Owner retains the right to deal with his Interest in the Property…as each owner sees fit.” Provision 4, subdivision (b). “Financing, Refinancing, Sale and Leasing. The Managing Owner shall list the Property for sale and convey or otherwise transfer the Property if such transaction is approved by seventy percent (70%) or more of the ownership Interests in the Property….” Provision 5, subdivision (a) “Limitation of Owners. Each Owner hereby irrevocably waives any and all rights that such Owner may withdraw from the terms of this Agreement, maintain an action for the partition of the Property (unless 65% or more of the Interests in the Property join or consent to such action), or otherwise force a sale of the Property during the term hereof, except as expressly provided herein.” Here the testimony and evidence support the conclusion that the contracting parties were sophisticated in the area of real estate investment. From the contract itself, it is clear that the parties intended for the Managing Owner to be the individual with the most say so. He was responsible for the day to day activities of the tenancy in common and no major decision such as “sale” of the property or investment in capital improvements could be made without his concurrence. The parties also wished to preserve the independence of each owner to deal with its Interest in the Property as such Owner sees fit, “subject to the [remaining] provisions of the Agreement.” While preserving some independence, Provision 5, subdivision (a) in essence says that none of the tenants in common can withdraw from the tenancy and no one without the Managing Owner’s concurrence can bring an end to the tenancy by filing a Partition Action. As a result of these provisions and manifestations of intent by the contracting parties, the parties find themselves at an impasse – the Managing Owner with 50% interest wants one thing and the Co-Owners with a combined 50% interest do not want that. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 14 Co-Owners’ counsel suggests that because “each Owner retains the right to deal with his Interest in the Property…as each owner sees fit;” that by agreement the parties bargained for an impasse, and it is what it is. Counsel argues that the Co-owners have the unfettered right not to agree to any proposed development of the Managing Owner’s. In support of this Co-Owners rely primarily on Wolf v. Walt Disney Pictures & Television (2008) 162 Cal. App.4th 1107, and Third Story Music, Inc., v. Waits (1996) 41 Cal. App.4th 798, for the proposition that when “sole discretion” is contractually vested in an individual and the contract is otherwise supported by consideration, the exercise of that discretion is contemplated by the parties and courts will not imply some other term such as good faith or commercial reasonableness, into the Contract. The Managing Owner submits that based on Kendall v. Ernest Pestana, Inc. (1985) 40 Cal.3d 488, the implied covenant of good faith and fair dealing must be implied into the contract and as such the Co-Owners need to have a good faith reason for not agreeing to the Managing Owner’s proposed development. In that the Co-owners allegedly do not have a good faith reason for not going along with the Managing Owner’s proposed development, they should not only be found in breach of contract, but be forced to move forward with the sale of the “Villas” as a result of the “Bake-off sale.” I find myself somewhat in the middle of these two opposed views. Initially, the agreement provides for the owners to “own, manage, maintain, lease, finance, refinance, and/or hold the Property for investment.” This is the purpose of the agreement. There is no reference to “sale.” Second, Provision 4, subdivision (b) is a “forced sale” provision, not a provision dealing with a voluntary or consensual sale. The provision provides, “[t]he Managing Owner shall list the Property for sale and convey or otherwise transfer the Property if such transaction is approved by seventy percent (70%) or more of the ownership Interests in the Property….” (Emphasis Added.) If the provision was intended to deal with a voluntary or consensual sale, the provision would be written in a manner similar to “the Managing Owner may not list the Property for sale and convey or otherwise transfer the Property unless such transaction is approved by seventy percent (70%) or more of the ownership Interests in the Property…” Or, “the Managing Owner may list the property for sale only if the transaction is approved by 70% of the owners.” As the provision is written it imposes a mandatory duty on the Managing Owner to sell the property if 70% of the ownership interest wants the property sold. If the provision was intended to proscribe the ability of the managing owner to sell the Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 15 property, it would have been written using limiting language, such as “may not list” or “may list only if” the language would be more permissive in nature. This distinction is important as it relates to the intent of the parties. When the parties entered into the agreement, they did not evidence an intent to sell the property. The property was being purchased for investment purposes, or as sometimes referred to in the arbitration as a “coupon clipper.” The only provision as to “sale” is that the managing owner “shall” sell when 70% of the interests force him to do so. As such, when considering whether to imply the covenant of good faith into the agreement as it relates to the voluntary or consensual “sale” of the property, one would not do so, because there is no provision in the agreement dealing with the voluntary “sale” of the property. This is consistent with the intent of the parties to hold the property for investment. We then turn to Provision 1, which indicates “subject to the provisions of the Agreement, each Owner retains the right to deal with his Interest in the Property…as each owner sees fit.” Reading this provision in conjunction with the notion that the property is being held for investment, and the fact that there is no provision providing for the sale of the real property other than a forced sale, the provision can be interpreted in no way other than to allow for the unfettered right of an owner not to consent to a sale. In that the sale of the property is not provided for other than by way of forced sale, it (the sale) is not “subject to the provisions of the Agreement,” because it is not provided for. In that it is not provided for, then each owner may do with his interest “as he (she) sees fit, with no restrictions.4 There need be no good faith reason for not agreeing to sell the property. Such is not the case however, when dealing with “owning, managing, maintaining, leasing, financing, refinancing, and/or holding the Property for investment,” (referenced in the “Purpose” of the Agreement and in Provision 1 of the Agreement). An owner’s ability to do “as he sees fit” is modified by and is subject to the provisions of the agreement. In that owning, managing, maintaining, leasing, financing, refinancing, and/or holding the property are provisions of the agreement, the owner cannot do “as he sees fit.” If he could, then the purpose 4 With such a construction, each individual owner has the unfettered right not to voluntarily consent to a sale for whatever reason the individual owner has. As such, the Managing Owner has the unfettered right not to consent to the sale of the property, because he played tennis there as a kid. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 16 of the contract would be totally destroyed.5 Thus, as to those activities provided for in the Purpose of the Agreement and in Provision 1, there must be implied into the Agreement, a promise that each owner will exercise his discretion in good faith. The above construction is in my mind ascertained from the writing alone and gives effect to the mutual intention of the parties. It considers the whole of the contract and gives effect to each provision. Lastly, it is consistent with the matter to which it relates, to hold property for purposes of investment. Further, as demonstrated by the testimony of the Managing Owner and Irv Chase, both individuals testified that they believe each Co-owner has the right not to consent to a sale of the property. The Managing Owner testified that at the time of the agreement both he and Allen loved ground leases. And while at one point the Managing Owner did testify that it took a super- majority to sell the property, at another point he testified that Provision 4 (B) dealt with compelling an owner to sell his interest. The above construction is also consistent with Wolf v. Walt Disney Pictures & Television (2008) 162 Cal. App.4th 1107, Third Story Music, Inc., v. Waits (1996) 41 Cal. App.4th 798 and Carma Developers v. Marathon Development California, Inc. (1992) 2 Cal.4th 343. In Wolf, supra, Disney acquired the rights to Roger Rabbit in exchange for providing plaintiff a portion of the “Gross Receipts” from Disney’s monetization of Roger Rabbit. Disney thereafter entered into agreements with various entities allowing said entities to “exploit” Roger Rabbit characters in exchange for the company’s agreement to promote the Roger Rabbit franchise; there was no monetary compensation involved in the agreements. Plaintiff contended, that such agreements were in violation of the underlying contract between plaintiff and Disney, in that Disney breached an implied covenant of fair dealing by entering into agreements in which plaintiff received no financial benefit. In denying plaintiff’s claim, the Court relied upon an express provision of the underlying contract which provided, “[Disney] shall not be under any obligation to exercise any of the rights granted to Purchaser hereunder; and any and all said rights may be assigned by [Disney], and/or licenses may be granted by [Disney] with respect thereto, as [Disney] may see fit.” (Wolf, supra, at p. 1121, footnote 7.) 5 For example, the Managing Owner may decide he does not want to do anything with the property and it becomes fallow. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 17 “It has long been recognized in California every contract contains an implied covenant of good faith and fair dealing that ‘ ’neither party will do anything which will injure the right of the other to receive the benefits of the agreement.’ ’ (citations) The covenant is ‘read into contracts ‘in order to protect the express covenants or promises of the contract. “However, the implied covenant will only be recognized to further the contract’s purpose; it will not be read into a contract to prohibit a party from doing that which is expressly permitted by the agreement itself” (Id, at p. 1120) “[I]f the express purpose of the contract is to grant unfettered discretion, and the contract is otherwise supported by adequate consideration, then the conduct is, by definition, within the reasonable expectation of the parties and ‘can never violate an implied covenant of good faith and fair dealing.” (Citation.) (Id, at p. 1121)6 Here, the purpose of the Contract is set forth in Recital A; “The Owners desire to own, lease, manage, maintain, refinance, encumber and hold for investment…[the property.]” Nothing in this Recital or Provision 1 references the “selling” of the property. Thus, each tenant in common can deal with their respective interests in the property as they see fit, relative to the sale of the property. The agreement gives them unfettered discretion. This unfettered discretion however does not apply when dealing with issues of leasing, managing, maintaining refinancing, encumbering and holding for investment. The parties expressly agreed to do these certain things with the property. Thus the implied covenant will be read into the agreement to protect these express promises. Provision 1, even provides that the discretion to do as one sees fit, is subject to the provisions of the agreement; the provisions of the agreement provide for the leasing of the property, thus the parties contemplated that unfettered discretion would not apply in such an instance. As stated in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, “The covenant of good faith and fair dealing was developed in the contract arena and is aimed at making effective the agreement’s promises.” (at p. 683) “ ‘[T]he courts employ the good faith doctrine to effectuate the intentions of the parties, or to protect their reasonable expectations.’ “ (at p. 684) 6 “ ‘The general rule regarding the covenant of good faith is plainly subject to the exception that the parties may, by express provisions of the contract, grant the right to engage in the very acts and conduct which would otherwise have been forbidden by an implied covenant of good faith and fair dealing. This is in accord with the general principle that, in interpreting a contract ‘an implication should not be made when the contrary is indicated in clear and express words.’ (citation)” (Third Story Music, Inc. v. Waits (1995) 41 Cal. App.4th 798, 803.) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 18 As indicated in Carma Developers, supra, at p. 373, “It is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract….[T]he implied covenant of good faith is read into contracts ‘in order to protect the express covenants or promises of the contract,..”(Citation)” Here, one of the express promises of the contract and a purpose for the contract is to hold the property to lease. As such the implied covenant of good faith is implied into the agreement, relative to this function. (See, Foley, supra, at p. 684, “As to the scope of the covenant, ‘ ‘the precise nature and extent of the duty imposed by such an implied promise will depend on the contractual purpose.’ ‘ (citation)” The nature of the implied covenant, is that in exercising discretion, the discretion must not be exercised with “subjective faith or objective unreasonableness.” (See, Wolf, supra, at p. 1124.) In a commercial setting the objective test is the more appropriate standard to be applied. (Storek & Storek, Inc. v. Citicorp (2002) 100 Cal. App.4th 44) Thus, in looking at the present facts, because the Managing Owner’s present proposal involves the sale of the Villa sub-area to Sears/Patterson, the co-owners have the unfettered right not to consent to the sale. Also, the co-owners’ refusal to agree with the Managing Owner’s overall development and lease of the bungalow and the tennis club sub-areas, is not “objectively unreasonable.” IV. ALTERNATIVES AND GOOD FAITH REASONS (a) Managing Owner’s Testimony As a 50% owner he believes he has a duty to be reasonable and fair to the Co-owners. As managing owner it is his understanding that the Co-owners expect him to consider potential uses of the tennis property. He should be looking for alternatives that make good business sense. In considering alternatives that make good business sense, he would want to have meaningful information about the potential return on investment. He believes getting the entitlements and PC text added enormous value to the property. There was never a goal to sell the property once entitlements were obtained. He believes the tennis property is a unique property and has good income producing potential. The largest component of the expected future revenue is the bungalow area. The bungalows are important to maximize the income. It would be his goal to have the bungalow Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 19 area as a coupon clipper. He thinks he can get the bungalow people to pay for the clubhouse and spa. The tennis clubhouse and spa is an amenity for the bungalows. The bungalow tenant would be responsible for cost overruns of the tennis clubhouse. He believes he can obtain $50,000 a month in ground rent from a hotel developer and/or operator. Two of his reasons for not changing the Master Plan is that he made certain promises to stakeholders relative to obtaining entitlements and he wants to avoid infighting among his heirs and therefore wants a coupon clipper. A long-term ground lease could address his family reasons. Personal reasons could potentially be addressed by a long-term ground lease. A long-term ground lease could potentially address his business concerns as well. In 2016 he told the Co-owners he intended to retain WD Land for a bake-off sale. In 2016 he started the drop box and started dealing with Tom Doyle. There was a drop box in 2018 for the bake-off. He has not found a builder willing to build five custom homes. The Sears letter of intent is the first written offer provided to the Co-owners. The only other offer was from Nexus, a Texas development company; they wanted to buy out the Co-owners’ interest. Nexus is a hotel developer and it wanted to develop the bungalows, but also wanted an ownership interest. Throughout the process the Co-owners have wanted more residential both in the area of the bungalows as well as where the tennis court area. Between 2008 and 2011 the Co-owners never gave him alternative plans. In 2010 he received a letter from the Co-owners attorney indicating the Co-owners felt that the Managing Owner should do something other than the NBCC master plan. The Co-owners have indicated that they do not believe the bungalows are feasible. The Coastal Commission made it clear that an all residential use was not going to be approved. For more residential they would have to start the general plan amendment process all over. In 2014 he believed that groups would oppose an effort to change to residential density on the tennis club property; that remains his belief as of today. Moving to all residential would not be feasible due to exactions and the fact that it would take many years and a lot of money for purposes of attempting to get approval. All residential is not feasible. (The Jones’ appraisal of $42.5 million does not take into account exaction fees.) It would be a mistake at this time to change things around. In the past the Co-owners did not understand the economics of the master plan and thought it was unfeasible. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 20 (b.) Irv Chase’s Testimony There are three elements to the project and they are all interrelated; he wants to see the financials for all three elements of the property at one time. He wants to know how the parts of the project interrelate. He will not approve the sale of the villas unless the bungalow’s finances and development pencil out. He will not approve the lease to Mr. Abdali unless the other parts work; he wants to look at the economics of the entire project. He has not been presented with offers for all three elements globally. The most important would be a letter of intent from a bungalow tenant and to globally see how everything fits together in order to evaluate it, as opposed to piecemeal approach. All of the parts are interrelated. He has refused to allow the sale of the villas. In terms of the sale there needs more information about the purchaser. He wants an independent certified public accountant for purposes of determining the purchaser’s financial credibility. He has to be convinced that they have the financial wherewithal to purchase the property, cover shortfalls and be responsible for everything getting done. He wants more value for his investment; putting more residential property would be one element of that. He believes the entitlement process for more residential would take probably one year. The opposition in the community would be nonexistent. In February 2019 they indicated to the Managing Owner that a project with more residential units will create more value for all of the owners. He believes the initial zone change raised the value but the master plan has lowered the value because it is too specific and too complicated for developers to come in and develop. He believes the process has been backwards; that’s why the property is worthless. When he looked at the 2007 Jones’ appraisal and compared all of the hypothetical uses there were great differences. After the appraisal they asked the Managing Owner to explore adding more residential; he responded by indicating that no other project could be approved. He did not deal with Abdali and Sears after November of 2018 because of the threat of being sued for interference. In the Jones appraisal the Managing Owner’s plan was about 25% of the value of other potential uses. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 21 (c.) Elliot Feuerstein Testimony This is a prime location in Newport Beach and there should be a lot of interest in building. The price could be a lot higher if a builder is not locked into a plan. To properly evaluate the bungalows they need a letter to from an actual operator. In the vein of “alternatives and good faith reasons,” I chose to somewhat segregate testimony relative to IBC, the Tennis facility and what I characterize as “Changing Landscape.” Each have a particular relevance in determining whether the Co-owners’ refusal to consent to the Managing Owner’s proposed development, is objectively unreasonable. (d.) IBC (1) Managing Owner’s Testimony He has told Pacific Hospitality over the years that Golf Realty has no interest in selling its interest; it has been his consistent position throughout. He has indicated to the Co-owners that Pacific Hospitality was not interested in being a bungalow operator but would be interested in buying Co-owners 50% interest. Back in 2007 he proposed a lease to IBC, which was then under different ownership. At that time they were not interested in operating the bungalows. In May of 2017 he received a letter of intent from IBC expressing an interest in buying the property for $28 million. He met with IBC about buying out the Co-owners interest. IBC wanted control if they were to do so; he made it clear that as Managing Owner he would have control from a business point of view. In November 2018 he contacted IBC at the request of the Co-owners; in this general time frame the Co-owners shared with him that IBC was willing to negotiate a long-term lease which would include the addition of 25 condominiums. He has made no effort to inquire of IBC as it relates to a long-term ground lease. He thought it would be counterproductive because he has promised Mr. Abdali that he could operate the tennis club. Another reason is that he made promises to the tennis club members that the tennis club would be saved. In a January 2019 letter it was indicated by IBC that they did not have an interest in piecemeal participation in the tennis property. They further indicated that as experienced hotel owners and operators they did not believe the bungalow hotel pro forma made sense. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 22 IBC has sort of indicated to him that the operator of the bungalows could use the restaurant facilities at the golf club. IBC would be a logical operator for the bungalows. IBC wants to reduce the tennis courts to free land for use as apartments. (2) Irv Chase Testimony As it relates to the IBC offer the Managing Owner objected IBC’s first right of refusal and an extension of the ground lease on the country club. The Co-owners told the Managing Owner that IBC would D-Link those two requests. The Managing Owner’s response was that there was no reason to contact IBC because no other project could be approved other than his. He also said he had made promises to various tennis club stakeholders and the tennis club had to be part of the project. (3) Elliot Feuerstein Testimony After reaching out to Lennar the Co-owners contacted IBC because they were at an impasse with the Managing Owner and thought it may be a way out of the problem. In May of 2017 he believed IBC may have been interested in a long term ground lease and he asked the Managing Owner to explore it. He understands that IBC is still interested in ground leasing the property. IBC has not participated further because of the letter from Paul George. The Managing Owner has said that Pacific Hospitality would be a logical operator. (e) Tennis Club and Spa (1) Managing Owner Testimony The tennis facility is about 40 years old and has 24 courts. In 2007 IBC leased and operated the tennis club; their lease was to expire in a few years. Sean Abdali is the principal of Grand Slam Tennis. He took over the tennis facility sometime in 2014; he took possession without a lease and is still operating the tennis club without a lease. He pays $7,000 a month in rent. Grand Slam wanted a 20 year lease and agreed to pay the property taxes. The Managing Owner has indicated to Mr. Abdali that he could operate the club for 20 to 25 years. Recently, the Managing Owner and Mr. Abdali have signed a 12 year lease. The lease that has been signed by the Managing Owner and Mr. Abdali indicates that the landlord will use reasonable commercial efforts to cause the planned improvements of the new tennis club. All of the commitments have been without the Co-owners’ consent. The Co-owners have not signed the lease. They have indicated that they will not consent to the piecemeal division and sale of the property. He made a commitment that he was going to save the tennis club. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 23 Part of the personal reasons for him not being interested in selling his fee interest, is that he has fond memories of learning to play tennis on those courts. He has indicated to the Co- owners that their desire to sell the tennis courts is a non-starter. (2) Irv Chase Testimony He’s aware that Grand Slam Tennis is willing to enter into a lease and pay the property taxes. The proposed lease is at a base rent of $12,000 per month. He has refused to enter into a lease with Grand Slam Tennis. He has refused to execute a lease that will allow Grand Slam to lease a newly constructed facility. The Managing Owner, in response to the Co-owners’ February 2019 inquiries, did not provide a comprehensive verifiable cost estimate for the tennis clubhouse spa facility. They were willing to sign a tennis club lease at the end of 2018 with the changes and markups they made. The Managing Owner would not agree to sign the lease as marked up. They wanted flexibility as it relates to a short-term lease so that the rest of the property was not limited. (3) Elliot Feuerstein Testimony They did not sign the lease with Grand Slam tennis because they did not want to commit to the three-phase development project until they understood how it would all work together. He felt back in 2016 that going along with tennis facility was a segue into the master plan. In addition the proposed lease indicated that the landlord shall use its best efforts to cause improvements in the tennis spa facility. (f) Changing Landscape (1) Managing Owner’s Testimony In November of 2006 he thought there would be $2,400,000 in annual land rent from the bungalows and the tennis club spa. In February 2007 he indicated that the annual rent would be $1,284,000. It’s possible he told the Co-owners that the bungalow projections were a moving target. Later the estimates for the ground rent for the bungalows moved substantially lower. In 2007 he indicated or suggested the sale of the villa sub-area for $10 million. The purchaser of the villas was also to put in site improvements for the bungalow sub-area and build out the tennis club spa facility. The estimated cost of building the tennis clubhouse and spa building was $2 million. In the summer of 2016 the cost of constructing the shell for the tennis clubhouse and building was $2.6 million. He believes now the building cost for the tennis clubhouse and spa would be about $3 million. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 24 In 2016 the minimum bid price for the villas with a requirement to build tennis spa building was $6 million. Sears letter of intent initially expressed an amount for the villas as $6 million with an additional $1 million placed in escrow toward the cost of constructing among other things the new clubhouse and spa building. Subsequently the proposed purchasers withdrew the $1 million deposit into escrow and offered to transfer lot 5 back to the seller. Given this it is his plan to include lot five in the ground lease to the hotel developer along with the bungalow subarea. (2) Irv Chase Testimony In the early years the ground rent for the bungalow tenant was going to be $2 million and the sale of the villas $10 million. In 2007 the projected ground rent for the bungalow was reduced from $2 million per year to $1.28 million. He understands the proposed lease for the bungalows at the present time is $600,000 a year. Originally the buyer of villas was to place money into escrow to build the tennis clubhouse spa building. (3) Elliot Feuerstein Testimony In September 2016 the Managing Owner indicated that they were going to get a minimum bid of $6 million for the villas with a requirement that the purchaser build the tennis spa building. He thought $6 million was considerably less than $10 million. Further, it seemed to him that if the homebuilder was paying for the tennis spa building they were going to be paid less for the land. As for the sale of the villas and the construction of the tennis spa building it went from a $2.5 million in escrow, to a $1 million set aside, to no set aside but giving back a villa lot. (g) Discussion By way of the pleadings and the issues as framed by the parties, I am to construe the Agreement and determine under the present facts whether the Co-owners’ refusal to consent to the proposed lease of the bungalow sub-area and the lease of the tennis facility is objectively unreasonable. In viewing the issue of objective unreasonableness, the NBCC Master Plan (perhaps more a specific plan) has been presented to all as “a package.” There is a clear inter-relationship and perhaps inter-dependence between the bungalows, the tennis/spa facility and the villas. As originally conceived, the villas would provide the basic infra-structure for the development as Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 25 well as the construction of a new tennis spa facility. From the evidence, the bungalows were and are perceived to be the long-term money maker, anchor or primary “coupon clipper.” Relative to the bungalows, there has not been a serious overture from any hotel developer or operator. While IBC has perhaps expressed some interest, they appear to be unwilling to move forward under the conditions suggested by the Managing Owner. Further, over the years the anticipated ground rent from the bungalows has gone from over an annual $2 million to $1.24 million to $600,000. These facts in of themselves, are sufficient to conclude that the Co- owners reticence to move forward is not objectively unreasonable. And while not discussed in the factual portion of this opinion, it seemed that the underpinning of Mr. Baltin’s testimony, was somewhat problematic. The comparable boutique hotels used by him, all seemed to be full- service facilities with dining and a bar. Here, there was no testimony that clientele of the bungalows had access to a full service dining area or bar. There further was no evidence as to how the bungalow clientele would access the tennis club/spa should they be under separate operating agreements. In sum, given the fact that the bungalow feature of the NBCC Master Plan is as unsettled as it is, the Co-owners refusal to move forward with the Plan and its development is not objectively unreasonable. As for the tennis club/spa, from the evidence it is not only to be self-sufficient but also serve as an amenity for the bungalows. The Co-owners’ concern relative to a long-term lease with Mr. Abdali, without consideration for how the facility will interface with a yet unknown hotel operator, cannot be viewed as objectively unreasonable. Further, the commitment in the proposed lease to a new tennis club structure without construction funding, appears somewhat beyond the expectation of the parties and the purpose of the tenancy in common. (The Managing Owner indicated that the bungalow developer or operator would pay for the construction.) As earlier discussed, the Co-owners’ refusal to move forward with the sale of the villas does not need to be rationalized under the concept of good faith. They have the unfettered right to refuse to sell any portion of the property. This aside however, the initial projections for the sale of the villa lots was $10 million. It recent years the projection has been $6 million with the purchaser of the villa lots contributing substantial funds for the construction of the new tennis/spa facility. In Mr. Sears initial offer of $6 million, he was willing to deposit into escrow an additional $1 million for the construction of the facility. More recently, he has withdrawn that Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 26 offer, and indicated that he would deed-back lot 5 to the ownership, which the Managing Owner expects would become part of the bungalow deal. Without the funding for the tennis club/spa being provided by way of the bungalow operator, in conjunction with the long-term lease to Mr. Abdali with a quasi-commitment to upgrade the tennis facility at the expense of a bungalow operator who is presently unknown, there exists reasons which are not objectively unreasonable, for the Co-owners to refuse to move forward with development of the NBCC Master Plan. V. ATTORNEYS’ FEES AND COSTS Co-owners were the prevailing party. In the defense of this matter they incurred and paid substantial attorneys’ fees and costs.7 By way of Motion, they seek reimbursement for $2,230,384.41 in attorneys’ fees and $315,602.24 in costs. The Operating Agreement provides, “Section 27. Should any dispute arise between the parties hereto or their legal representatives, successors or assigns concerning any provision of this Agreement or the rights and duties of any person in relation thereto, the party prevailing in such dispute shall be entitled, in addition to such other relief that may be granted, to reasonable attorneys fees and legal costs in connection with such dispute.” Here, there is no dispute that the Co-owners are entitled to attorneys’ fees and legal costs. As variously set forth in PLMC Group v. Drexler (2000) 22 Cal.4th 1084, 1094-1096, “Reasonable attorney's fees shall be fixed by the court. This requirement reflects the legislative purpose to establish uniform treatment of fee recoveries in actions on contracts containing attorney fee provisions. (Citation) [The amount to be awarded in attorney's fees is left to the sound discretion of the trial court.].) As we have explained: The experienced trial judge is the best judge of the value of professional services rendered in his court. (Citation) The trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony. (Citation) “The fee setting inquiry in California ordinarily begins with the “lodestar,” i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. California courts 7 Co-owners also maintained a Counter Claim for Declaratory Relief. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 27 have consistently held that a computation of time spent on a case and the reasonable value of that time is fundamental to a determination of an appropriate attorneys' fee award. (Citation) “The reasonable hourly rate is that prevailing in the community for similar work. (Citation) The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. (Citation.) “The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. (Citation)”8 The necessity for the litigation is also a factor to be considered. (EnPalm LLC v. Teiler Family Trust (2008) 162 Cal. App.4th 770, 774) I would first like to discuss the “necessity” for the litigation. After the Fromholtz decision there continued to be some pushback by the Co-owners including the “2016 Stop Letter.” There was however no evidence of active conduct by the Co-owners’ with any governmental entity to interfere with the entitlement process. The claim filed by the Managing Owner in the present Arbitration sought damages for interference as well as, or in the alternative, damages for lost profits for the Co-owners’ refusal to go along with the Managing Owner’s project. The basic position taken by the Managing Owner by way of pleading and moving forward was that the Fromholtz Award gave the Managing owner full authority to entitle and commercialize the subject property accordingly. In June of 2018, I issued a Ruling as to the Collateral Estoppel/Res Judicata effect of the Fromholtz Award. As stated, “[h]ere, what was litigated, determined and necessarily decided in the prior arbitration, was that by way of acquiescence, and/or estoppel the Co-owners consented to the processing of development plans and land use changes up through and including the obtaining of entitlements. The issue of co-owners consenting to any specific plan and/or sale of the property or portions thereof was not litigated and not necessarily decided.” In my mind, that Ruling should have caused the Managing owner to press either the “pause” or “stop” button as to his efforts to claim that the Fromholtz decision encompassed a finding that the Co-owners consented to a specific plan and that he had the right to 8 The preceding is a compilation of direct quotes found at pages 1094-1095 of the PLMC Opinion. Internal quotations and citations have been omitted. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 28 commercialize that plan. It was a Ruling from which the Managing owner should rightfully have stepped back, and questioned exactly where he was going with the present Arbitration. Instead, the Managing Owner continued forward. He argued that the present Co-owners had acquiesced or were estopped from not consenting to the specific plan and the commercialization thereof, or in the alternative were not demonstrating good faith in their refusal to consent to the plan and commercialization thereof, and as such was entitled to damages. As to the issue of acquiescence and/or estoppel, the evidence was overwhelming that the Co-owners did not acquiesce to the overall plan. Mr. O’Hill even testified that since a February 20, 2008 letter, the Co-owners have never changed their position that the plan did not maximize the value of the property and they have never been supportive of the plan. This state of the facts was well within the knowledge of the Managing Owner in the mid-2018 time frame. And, as to the issue of the Co-owners withholding their consent to sell as not being in good faith, the “Interim Award’s” finding on that issue was strongly suggested in the March 2018 ruling on the Motion to Bifurcate wherein I indicated, “Based on the above interpretation of Provision 4 (b), the implied covenant of good faith and fair dealing and/or commercial reasonableness relative to Co-owners’ refusal to sell the property would not be implied into the contract in derogation of the 70% ownership threshold.”9 As such, there were very clear indications in March and June of 2018 of where this was going on the two dispositive legal issues. A very large percentage of all of the attorney’s fees and costs were incurred thereafter.10 Lodestar I would first like to address the hourly rates of Mr. Gonzales and Mr. Yoder. Mr. Gonzales’ hourly rate was $475 an hour and Mr. Yoder’s approximately $1,060 an hour. Both attorneys declared that the fees are reasonable for the community, given their legal knowledge, experience and training. While their declarations may or may not have conflated the considerations of a reasonable hourly rate in the community with the additional considerations 9 The decision did indicate that the Ruling was not law of the case. Additionally, the Interim Award dealt with the issue of the interrelationship between the consent to sell and good faith in a slightly different manner, however with the exact same resolution. It has been relatively clear from the beginning that the sale of the Villas was integral to the building of the tennis club and the provision of infrastructure for the bungalows. As early as March of 2018, resolution of that specific issue appeared to be going contrary to the Managing Owner’s position. 10 While the above discussion does not relate directly to the award of attorneys’ fees, it does in many ways help explain the number of hours expended by Co-owners’ counsel. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 29 including their experience and expertise, I have absolutely no problem with their hourly rates. Their advocacy was excellent. Throughout the proceeding, counsel were very well prepared on each of the legal issues presented. The written law and motion was concise, to the point, and well put together. Their preparation for the examination of witnesses was apparent. The examination of witnesses, including the Managing Owner and Mr. Baltin, was excellent. I have been involved in the legal field for a number of years, and over the course of this matter I observed, frankly from both sides, some of the strongest advocacy I have seen. I have reviewed the Declarations of Kim Karelis in detail numerous times. I simply find his analysis unavailing. It truly can be summed up with one statement: “He did not participate in the proceedings and did not observe what I observed.” His basic opinions are found at pages 11, 12 and 14 of his Declaration. Using the 2018 Real Rate Report data he characterizes, a very broad range of subject matters, including Real Estate -Non-Litigation, Real Estate Commercial Litigation and Real Estate: Land Use/Zoning/Restrictive Covenants as the barometer for Attorneys Fees; he thereafter concludes at page 12, lines 21 – 23, “[g]iving counsel the benefit of the doubt, and in consideration of the fact that the word ‘zoning’ appears quite frequently in their bills, I believe the higher rates for this latter category are appropriate.” (Emphasis Added.) At page 15, after considering the size of O’Melveny & Meyers, he then opines that a reasonable hourly fee for Mr. Yoder is $663 an hour. First, the case had little to do with zoning. The issue of zoning was relevant to the extent that Mr. O’Hill testified that given the sensitivity of the geographical area, it will be extremely difficult if not impossible to acquire a more intensive land use. Second, while I understand that firm size may be relevant to what firm’s charge, in my mind it has little relevance in terms of the reasonable value of an attorney’s services rendered. Further, I would think it extremely difficult to opine as Mr. Karelis did, that Mr. Yoder should bill for his services consistent with the Third Quartile (the data point being 75%) and that Mr. Gonzalez should bill at the “median rate of attorneys similarly situated.11 I now look to the time billed in the handling of this matter. 11 As to Mr. Yoder’s hourly rate, a Declaration from a member of the American College of Trial Lawyers might have been helpful. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 30 “ ‘The trial court did not abuse its discretion in accepting defense counsel's computation of attorney hours as hours reasonably spent working on the case. It is well established that ‘California courts do not require detailed time records, and trial courts have discretion to award fees based on declarations of counsel describing the work they have done and the court's own view of the number of hours reasonably spent.’ [Citations.] “Because time records are not required under California law ..., there is no required level of detail that counsel must achieve. See, PLMC Group, supra, [‘We do not want ‘a [trial] court, in setting an attorney’s fees, [to] become enmeshed in a meticulous analysis of every detailed facet of the professional representation. It ... is not our intention that the inquiry into the adequacy of the fee assume massive proportions, perhaps dwarfing the case in chief.’ (Citations)” See, e.g., ... Jaramillo v. County of Orange (2011) 200 Cal. App.4th 811, 830 (noting that records included very general descriptions, eg., ‘trial prep,’ ‘T/C- Client’); (Citation; [declaration stating time spent on various activities])’. (Citation)” (Seyers Properties III, Inc. v. Rankin (2014) 226 Cal. App.4th 691, 698-699) Here, the billing invoices were provided to Respondent. Mr. Karelis takes exception to the billing under the overall umbrella that the party seeking attorney’s fees from a non-client has a heightened duty to provide by clear and convincing evidence detailed records of time and services. For this he relies on Hensley v. Eckerhart (1983) 461 U.S. 424. I believe the case is inapposite. First, I have found no California authority indicating that the party seeking attorneys’ fees under the provisions of a contract, has a heightened duty to which the clear and convincing evidence standard applies. Second, Hensley deals with a fee shifting statute. (42 U.S.C. Section 1988.) Here we are not dealing with a fee shifting statute. In the present case, the hours were charged to the clients (Co-owners) and according to the supporting Declarations, the bills have been paid by the clients. As acknowledged in Mr. Karelis’ Declaration, Hensley provides, “A claim for legal services presented by the prevailing party to the losing party pursuant to Section 1988 presents quite a different situation from a bill that a lawyer presents to his own client. In the latter case, the attorney and client have presumably built up a relationship of mutual trust and respect; the client has confidence that his lawyer has exercised the appropriate ‘billing judgment,’ and unless challenged by the client, the billing does not need the kind of extensive documentation necessary for a payment under Section 1988. The statute requires the losing party in a civil rights action to bear the cost of his Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 31 adversary’s attorney and there is, of course, no relationship of trust and confidence between the adverse parties.” (id. 440-441) (Emphasis Added.) The present bills were sent by Respondents’ counsel to Respondents in a relationship of trust and confidence. The bills sought payment from a client for counsels’ time on an hourly basis. I am sure there existed an expectation that the bills would be paid; and I am relatively sure there were no assurances to the Co-owners that they would prevail, or that if they did not, the attorneys would refund the money paid. And, the bills have in fact been paid. Hensley, supra, has absolutely zero applicability except perhaps in favor of Respondents by negative implication. An attorney owes a duty of honesty and loyalty to his or her client. The attorney has an obligation to bill his or her client honestly, with the utmost scrutiny and accountability. It is within this context that the present attorneys’ fees were accrued, billed and paid. Mr. Karelis’ Declaration then identifies six areas in which the invoices should be cut, including but not limited to: block billing, excessively billed work, vague descriptions and duplicative work. I have looked at many of the descriptions that are characterized as vague and do not find them so. Mr. Karelis then, on many of the categories randomly selects a percentage number by which the total billings should be reduced. For example, on invoices which he believed were excessive, he reduced them by 50%. There is no explanation as to a methodology in arriving at 50% as opposed to 90% or 10%.12 In the final analysis, I do not find Mr. Karelis’ opinions, of any great assistance. Costs “Contractual arbitration allows the parties to an arbitration agreement to define the powers of the arbitrator, as opposed to judicial arbitration in which the arbitrator's powers are defined by operation of law. Contractual arbitration proceedings may also be regulated by the arbitration rules, by the parties' contract, and/or by other provisions of law regulating such nonjudicial arbitration. 12 Similar to Mr. Karelis, I can view some of the hours billed and think the allotment high. For example, the amount of time devoted to picking an arbitrator seems high. However, when considering the significance of the case, I can well see spending many hours inquiring in the legal community as to others’ experiences with any given prospective arbitrator. As to those prospective arbitrators who have published and unpublished Opinions, viewing said Opinions would not only be permissible, but a prudent expenditure of time. Further, as practicing lawyers, we all know that whatever legal task is at hand, it typically takes markedly more time to complete than we think it should. In the present matter there was a voluminous pre-arbitration record. To summarize, synthesize, and cogently present and use that record takes a great deal of time. All of the work-product of Respondents’ counsel was right on the mark; to have it be so, requires endless hours of preparation. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 32 “Because contractual arbitration is a matter of contract, the parties to an arbitration agreement are free to delineate the governing procedure.” (Century City Medical Plaza v. Sperling, Isaacs & Eisenberg (2001) 86 Cal. App.4th 865, 875.) As referenced supra, Section 27 provides, “Should any dispute arise between the parties hereto or their legal representatives, successors or assigns concerning any provision of this Agreement or the rights and duties of any person in relation thereto, the party prevailing in such dispute shall be entitled, in addition to such other relief that may be granted, to reasonable attorneys fees and legal costs in connection with such dispute.” (Emphasis Added.) The provision as to “legal costs,” is clearly ambiguous. It does not say “costs as allowed by law,” nor does it simply say “costs.” In that the provision uses the word “legal,” I believe the better interpretation is that the parties intended to allow costs as provided and allowed by law. I will therefore award costs pursuant to Code of Civil Procedure, Section 1033.5. Total Reimbursement to Co-owners After reviewing the billings and the Declarations submitted in support of and in opposition to the Award of Attorneys’ Fees and Costs, Co-owners are entitled to recover attorneys’ fees in the amount of $2,157,461.05. Pursuant to Code of Civil Procedure, Section 1033.5, costs are awarded in the amount of $165,563.97. VI. DISPOSITION 1. Each of Claimant’s (Managing Owner’s) prayers for Declaratory Judgment are denied. 2. As for Respondents’ (Co-owners’) prayers for Declaratory Judgment, the Judgment is as follows; (a) Co-owners have not already consented under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of O Hill’s Master Plan, and in particular, to the Sears/Patterson Offer. (b) Co-owners are not estopped from withholding their consent under the OIC Agreement (or otherwise) to the sale, lease or improvement of the Tennis Property as part of O Hill’s Master Plan, and in particular, to the Sears/Patterson Offer. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 33 (c) Neither Co-owners nor the Managing Owner have the duty to consent to a sale of the Tennis Property or portions thereof. Under the 1994 “Agreement Between Real Property Owners,” any owner has the unfettered right to refuse for any reason, to voluntarily sell (as opposed to a forced sale as provided for in Provision 4 (b) of the agreement) the Tennis Property or any portion thereof. (d) The Co-owners have no duty to consent to the Sears/Patterson offer. (d) Relative to the leasing of the Tennis Property or portions thereof, no owner may refuse to lease said property or portions thereof for an objectively unreasonable reason. (e) The Co-owners’ present refusal to consent to the leasing and construction of improvements on the Tennis Property and/or portions thereof, is not objectively unreasonable, and as such, the Co-owners do not presently have a duty to consent under the OIC Agreement to the development of O Hill’s Master Plan. 3. Respondents are awarded $2,157,461.05 for reimbursement of attorneys’ fees. 4. Pursuant to Code of Civil Procedure, Respondents are awarded $165,563.97 in costs. Dated: April 8, 2020 /s/ Jeffrey King Hon. Jeffrey King (Ret.) Arbitrator Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) PROOF OF SERVICE BY E-Mail Re: Golf Realty Fund, a California Limited Partnership vs. Mesa Shopping Center-East LLC, a Limited Liability Company, et al. Reference No. 1200053406 I, Steven McChristy, not a party to the within action, hereby declare that on April 09, 2020, I served the attached Final Award on the parties in the within action by electronic mail at Sherman Oaks, CALIFORNIA, addressed as follows: Paul B. George Esq. Jacob Gonzales Esq. Lane Powell PC Weintraub Tobin 601 SW Second Ave. 23 Corporate Plaza Dr. Suite 2100 Suite 200 Portland, OR 97204-3158 Newport Beach, CA 92660 Phone: 503-778-2100 Phone: 949-760-0204 georgep@lanepowell.com jgonzales@weintraub.com Parties Represented: Parties Represented: Golf Realty Fund LP Fainbarg Trust Dated April 19, 1982 Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC Michael G. Yoder Esq. Lauren A. Deeb Esq. O'Melveny & Myers LLP Nelson Mullins 610 Newport Center Dr. 19191 S Vermont Ave Suite 1700 Torrance, CA 90502 Newport Beach, CA 92660 Phone: 424-221-7400 Phone: 949-823-6900 lauren.deeb@nelsonmullins.com myoder@omm.com Parties Represented: Parties Represented: Golf Realty Fund LP Fainbarg Trust Dated April 19, 1982 Mesa Shopping Center-East, LLC Mira Mesa Shopping Center, LLC I declare under penalty of perjury the foregoing to be true and correct. Executed at Sherman Oaks, CALIFORNIA on April 09, 2020. _________________________________ Steven McChristy JAMS SMcChristy@jamsadr.com /s/ Steven McChristy Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit D Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 1. Gheck Permits Requested: ! Approvat-in-Goncept - AIC # E Coastal Development Permit E Waiver for De Minimis Development E Coastal Residential Development fl Condominium Conversion E Comprehensive Sign Program E Development Agreement Amendment E Development Plan ! Lot Line Adjustment ! t-ot Merger E timiteO Term Permit - I Seasonal E < 90 day E>90 days n UoOification Permit fl Off-Site Parking Agreement E Planned Community Development Plan E Planned Development Permit El Site Development Review - E Major [E Minor I ParcelMap Community Development Department Planning Permit Application Cl-t'/ OF r\lIWPC)lt t- Bl:n Ci-l 100 Civic Center Drive Newport Beach, California 92660 949 644-3200 newportbeachca. gov/commun itydevelopment I StaffApproval ! Tract Map ! Traffic Study ! Use Permit -EMinor EConditionat n Amendment to existing Use Permit ! Variance E Amendment -DCode EPC EGP ELCPE other: 2.Add r's Parcel N and Justification ttach additional sheets if necessa3. through 11 Clubhouse Drive, Newport Beach, CA 92660;APNs: 442011 64 & 442011 65 See attached 4. ApplicanUCompa Name Realty Fund, Managing Owner Mail City Phone tn Address 949-378-8830 State Suite/Unit z,CA EmailFax ROH@ohill.com 1 Upper Newport Plaza Newport Beach 5. ContacUcom Name an Bailey Mail City Phone Address 714-397-9475 State CA Email Suite/Unit za 92660 Fax b@investorstrust.com 1 Upper Newport Plaza Newport Beach 6. Property Owner Name baNBCCL&l Mai Address 1 Upper Newport Plaza Suite/Unit City State CA 949-378-8830Phone Fax Email 7. Propefi Owner's Affidavit*: (l) (We) depose and say that (l am) (we are) the owner(s) of the property (ies) involved in this application. (l) (We) further certiff, under penalty of perjury, that the foregoing statements and answers herein contained and the information herewith submitted are in all respects true and correct to the best of (my) (our) knowledge and belief. Signature(s):Title Managing Owner Date: 1111121 MM/DDATEAR Signature(s):Title Date *May be signed by the lessee or by an authorized agent if written authorization from the owner of record is filed concurrently with the application. Please note, the owner(s)' signature for Parcel/Tract Map and Lot Line Adjustment Application must be notarized. Newport Beach ROH@ohill.com PA2021-260 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) I:\Users\CDD\Shared\Admin\Planning_Division\Current_Templates\Office Use Only Form Updated 01/27/2020 2700-5000 Acct. Deposit Acct. No. ________________________ For Deposit Account: Fee Pd: _______________________________________ Receipt No: ____________________________ FOR OFFICE USE ONLY Date Filed: _______________________ APN No: __________________________ Council District No.: _________________ General Plan Designation: ____________ Zoning District: _____________________ Coastal Zone: Yes No Check #: __________ Visa MC Amex # ____________ CDM Residents Association and Chamber Community Association(s): _______________________ Development No: __________________________ _____________________________________________ Project No: ________________________________ _____________________________________________ Activity No: _______________________________ Related Permits: ___________________________ Remarks: ________________________________________________________________________________________ LC2021-004,NT2021-002, PC2021-001 and SD2021-004 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) NBCC Tennis Property Entitlement Amendment & Project Description The 145-acre Newport Beach Country Club Planned Community District (PCD) is in the Newport Center Planning Area and is comprised of the existing Golf Club Property and the Tennis Club Property, both located in the Ll Statistical Area of the 2006 General Plan. The Tennis Property is represented as Anomaly 46 in the General Plan Land Use Element with a land use designation of MU-H3/PR with a California Coastal Development Permit and subject to a Development Agreement. The existing approved entitlements also consist of NBCC Planned Community Zoning with the Bungalows, Villas, and Tennis Club/Spa/Fitness PC Sub-Areas and Vesting Tentative Tract Map No. 15347. There is no Amendment to any approved entitlement proposed for the Golf Club Sub-Area. Tennis Property Entitlement Amendments: •Increase the number of approved tennis courts by one (1) for a total of eight (8) approved tennis courts as shown on the revised Master Plan. •Amend the approved number of visitor-serving boutique hotel units from twenty-seven (27) to forty-one (41), increasing the visitor-serving use by fourteen (14) hotel units which are referred to as “The Bungalows & Lofts.” •Add boutique hotel auxiliary uses to incorporate areas designed for Performance Therapy, Yoga Pavilion, and related Hotel/Spa/Fitness Office space on the first floor of the Bungalow Loft building shown on the revised Master Plan. •Eliminate three of the five residential homes, referred to as Villas C, D, and E, and replace them with three (3) Loft condominiums. •The Tennis Clubhouse and Fitness & Spa Building remain unchanged but the construction documents, which have been through three plan checks with the City, need to be brought up to the new California Building Code requirements. •The Vesting Tract Map No. 15347, Final Vesting Tract Map No. 15347, and Improvement Plans have been revised to eliminate the three single family lots with homes, referred to as “Villas C, D, and E” on the existing Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) approved entitlements and are replaced with two lots for the Fairway Lofts and Mayacama Bungalow as shown on the revised Master Plan. •The Development Agreement has been modified to reflect the above changes. •The California Coastal Permit has been modified to reflect the above changes. Impacts: The Traffic & Parking Study originally prepared by Kimley-Horn and Associates in August 2009 for the approved entitlements, was amended by LSA dated September 9, 2021 to reflect the amended Project, and indicates that the revised project (i) still has more parking than is required and (ii)“the revised proposed project continues to generate fewer daily trips and p.m. peak-hour trips compared to the existing uses,” (iii) “…does generate an increase of 5 trips in the a.m. peak- hour (4 inbound and 1 outbound) compared to existing uses. This increase, however, is nominal and would not result in any operational or LOS deficiencies.” The Fiscal and Economic Impact Study, completed by CBRE in July 2018, indicated that the approved entitlements will have a total economic impact of $24,153,000 annually for the City of Newport Beach and support 185 jobs. This also results in $842,400 in annual tax revenue for the City of Newport Beach. The financial impact is expected to increase pro rata, or approximately 52%, by the addition of 14 visitor serving Bungalows and/or Lofts in the revised project. This equates to $1,280,448 of annual tax revenue for the City. The approved and the proposed Amendments to the entitlements are consistent with and supportive of the policies and goals of the Land Use Element of the 2006 General Plan and the certified Local Coastal Plan. Vesting Tentative Tract Map 15347 as presented, addresses relevant findings within Sec. 19.12.70 of Title 19 (Subdivisions) of the Municipal Code, and is consistent with the Tennis Club residential, boutique hotel and ancillary commercial uses permitted by the MU-H3/PR designation. Implementation: The NBCC Tennis Property will be ground leased to a hotel developer who will be required to build the planned improvements substantially similar to the site improvements, Tennis Clubhouse, Spa & Fitness Center, and Villas A & B shown on the Construction Documents, and the Bungalows and Lofts shown on the Schematic Drawings. The developer will also be required to complete these improvements in one phase and to maintain the current operator of the Tennis Club, Grand Slam Tennis, as the operating Tenant. Grand Slam Tennis will keep the Tennis Club open during construction per the attached “Tennis Clubhouse Construction Plan.” Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) The Bungalows/Lofts Approved v Plan B Summary Approved Sqft Golf Club N/A Spa/Fitness Center 7,940 7,940 Tennis Clubhouse 3,725 3,725 Concierge Guest Center 2,200 2,200 Hotel +14 units = 41 units 28,300 44,785 4,686 +Performance Therapy N/A +Yoga Pavilion N/A +Office N/A +Common Area N/A Residential 24,583 20,632 3 condominiums replace3 condominiums replace 3 single family homes No change No change No change 5 overall units remain but No change No change Sub-Area Modification Net Sqft Change New Sqft N/A N/A N/A 16,485 852 633 2,620 581 (3,951) Ancillary to Hotel No change Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit E Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Community Development Department Planning Permit Application 1. Check Permits Requested: D Approval-in-Concept -AIC # D Lot Merger D Coastal Development Permit D Limited Term Permit- □ Waiver for De Minimis Development D Seasonal D < 90 day 0>90 days D Coastal Residential Development D Modification Permit D Condominium Conversion D Off-Site Parking Agreement D Comprehensive Sign Program D Planned Community Development Plan D Development Agreement D Planned Development Permit D Development Plan D Site Development Review -D Major D Minor D Lot Line Adjustment D Parcel Map 2. Project Address(es)/Assessor's Parcel No(s) ; l1l,113 ovs? D~~ Al" ✓J ClTY OF NEWPORT Btl\01 100 Civic Center Drive Newport Beach, California 92660 949 644-3200 newportbeachca.gov/communitydevelopment D Staff Approval D Tract Map <;f p<VZ,V 1AJ D Traffic Study / D Use Permit -llfMinor □Conditional D Amendment to existing Use Permit D Variance □ Amendment -□Code □PC □GP □LCP D Other: 3. Project Description and Justification (Attach additional sheets if necessary): 'IJ-;1Jr:--c:t C:>c:-S(ll',.,P. fto>J tt~ ,o IJ:xv112-t ,a..._ q12... Llee 5g-Al-f 1 /11i-'I\Jv~ Ust-Pee '1111' :/iJIZ-f ~lvl}/.k~",t-t;" ,t· · 'Tif-e·Tt:~vN¢,CLv~ e..Prv.~"t)9 0:-r'6t:14 c..t-t ,..-·1-it,_s. V5,t' ,~· lJJN{;1$i-ltJJ L -~ C ~ ~; R · ~ A I lo0-'c 1,J. r /1,AI ,11 I ' '4 ( . ·-I < ✓ Lt . ~ '· 4. Applicant/Company Name I CL , · /la· ~ .a·,-., . Mailing Address I ,I/ tLt.,BH.i.vse: /212.. I Suite/Unit "--1_ -_ -_ -_ -_ --__ _. City I . · ,..;;,-r.., • .n~,. IZ/ l3 · . I state I CJ4 I Zip I a Z&,G;. 0 I Phone I 71-1 tf· :!,z.3,'213~ Fax I Email l?A-fK,Pt.,,Fi-$j/f:,Jl1A,J.l,h. 5. Contact/Company Name I B11XJC~ --T: K.Qt/Ct-S,/CLv,~HiA-i:.eJJ rPi2,c- Mailing Address I ZQ O Se · fl.( · . ~, 7 I Suite/Unit I ·· I Cityle'.:,~,t l2e{/1!1!,1L I Statel Cif I Ziplqz~.zs-1 Phone J 7-/i/32,3}.l-j/ff Fax I Email I f~77<0~€¼/l?;f1f hJ-1 6. Property Owner Name !.-1 ~·_o_u_· _✓___,L,.t....;:e::;_e;._:,7\_· .E:,..L.. ~-.L.-__;_~,..,,L----------;:::_-=--=--=--=---=------_-___ __JI Mailing Address I / Vi' Pc: 1f?...... · · · t)/2_ · Suite/Unit .,__I,...:-_____________ ___._I City M.:w a.f & Clfc/1 State I ?d4 I Zip I o/Zh(Q I Phone qlf f-'2sl-2.o 111 Fax.:,___ _____ ------11 Email l&@r tF2..-tt-. +/f:.1,vJ), . I 7. Property Owner's Affidavit*: (1) (We) !...-.I ---4_;;_.?i_l._/:_· ~i-==~;__.;._/.:...._,j~....L...-._;;__-=-~__;___:::.:......:;_____:,~~....:....=..~~..- depose and say that (I am) (we are) the owner(s) of the prope (ies) involved in this application. (1) (>Ne) further certify, under penalty of perjury, t~the foregoing statements and answers herein contained and the information herewith subrti~~ / _,ivras~,Jr;f~ ~t ;~ ~best of. (my) (our) knowledge and belie_f_. ____ _ Signatd".'"~?/~ Title:l/$,,,....,,..).,ut?~ate:l -1/zr/21 I ~: -7 ~ fu,/DDNEAR Signature(s): ______________ Title: ,:__ ________ __.I Date: I I *May be signed by the lessee or by an authorized agent if written authorization from the owner of record is filed concurrently with the application. Please note, the owner(s}' signature for Parcel/Tract Map and Lot Line Adjustment Application must be notarized. PA2021-210 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) I:\Users\CDD\Shared\Admin\Planning_Division\Current_Templates\Office Use Only Form Updated 01/27/2020 2700-5000 Acct. Deposit Acct. No. ________________________ For Deposit Account: Fee Pd: _______________________________________ Receipt No: ____________________________ FOR OFFICE USE ONLY Date Filed: _______________________ APN No: __________________________ Council District No.: _________________ General Plan Designation: ____________ Zoning District: _____________________ Coastal Zone: Yes No Check #: __________ Visa MC Amex # ____________ CDM Residents Association and Chamber Community Association(s): _______________________ Development No: __________________________ _____________________________________________ Project No: ________________________________ _____________________________________________ Activity No: _______________________________ Related Permits: ___________________________ Remarks: ________________________________________________________________________________________ PA2021-210 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Project Address: 11 Clubhouse Dr., Newport Beach, CA 92660 (AKA: 1602 E. Coast Hwy., Newport Beach, CA 92660) 3. Project Description and Justification (Cont') Project Description is: for the Clubhouse ATP LLC to acquire a type 47 liquor license and City of Newport Beach Minor Use Permit to sell alcohol to club members and their guests at The Tennis Club of Newport Beach. Justifications for this Minor Use Permit are: 1. The property used to have city approvals and a license to sell alcohol in the past. The use is consistent with the General Plan. 2. The use is allowed within the zoning district and complies with all other applicable provisions of this Zoning Code and the Municipal Code. 3. The design, location, size and operating characteristics of the use are compatible with the allowed uses in the vicinity. 4. The site is physically suitable in terms of design, location, shape, size, operating characteristics, and the provision of public and vehicle (e.g. fire and medical) access and public services and utilities. 5. Past history indicates that operation of the use at the location proposed would not be detrimental to the harmonious and orderly growth of the city, or endanger, jeopardize, or otherwise constitute a hazard to the public convenience, health, interest, safety, or general welfare of persons residing or working in the neighborhood of the proposed use. PA2021-210 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit F Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 12/9/21, 2:27 PM License Details | Alcoholic Beverage Control https://www.abc.ca.gov/licensing/license-lookup/single-license/?RPTTYPE=14&COMPANY=Y&LICENSEE=clubhouse+atp 1/2 Report Date: Thursday, December 09, 2021 LICENSE INFORMATION License Number: 631387 Primary Owner: CLUBHOUSE ATP LLC Oice of Application: 11 - SANTA ANA BUSINESS NAME CLUBHOUSE GRILL THE BUSINESS ADDRESS 11 CLUBHOUSE DR , NEWPORT BEACH, CA, 92660 County: ORANGE Census Tract: 0630.08 LICENSEE INFORMATION Licensee: CLUBHOUSE ATP LLC Company Information OFFICER: CLUNIE, ROSEMARIE (MANAGER) OFFICER: ROLFES, PATRICK JOSEPH (MANAGER) MEMBER: ABDALI, SEAN MEMBER: CLUNIE, ROSEMARIE MEMBER: ROLFES, PATRICK JOSEPH LICENSE TYPES 57 - SPECIAL ON-SALE GENERAL License Type Status: PENDING Status Date: 28-SEP-2021 Term: 12 Month(s) Original Issue Date: Expiration Date: Master: Y Duplicate: Fee Code: P40 Transfers: From License Number: 47-599115 57 - SPECIAL ON-SALE GENERAL License Type Status: PENDING Status Date: 28-SEP-2021 Term: 12 Month(s) Original Issue Date: Expiration Date: Master: N Duplicate: 1 Fee Code: P40 Transfers: From License Number: 47-599115 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 12/9/21, 2:27 PM License Details | Alcoholic Beverage Control https://www.abc.ca.gov/licensing/license-lookup/single-license/?RPTTYPE=14&COMPANY=Y&LICENSEE=clubhouse+atp 2/2 OPERATING RESTRICTIONS: No Operating Restrictions found DISCIPLINARY ACTION: No Active Disciplinary Action found DISCIPLINARY HISTORY: No Disciplinary History found. HOLDS: Hold Type: BOARD OF EQUALIZATION HOLD Hold Date: 13-MAR-2020 Hold Type: FORM 220 Hold Date: 28-SEP-2021 ESCROWS: ABC ESCROW, 2222 DAMON ST LOS ANGELES,CALIFORNIA 90021 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit G Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit H Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 1/13/22, 10:01 AM Tennis Club – Savethetennislcub savethetennisclub.com/tennis-club/1/2 Save the Tennis Club at Newport Beach!! Stop the high-density wall of ve story, low-cost apartment towers, adjacent to 9th Green at Newport Beach Country Club, facing the new golf clubhouse and PCH!!! Co-Owners owning a non-controlling interest of the 7.5-acre NBCC Tennis Property have proposed a solid wall of ve-story apartment towers with 290-325 units of which 30% is for low income and 20% for moderate income renters. This would eliminate the promised beautiful new tennis clubhouse and our entire private tennis club. Sean Abdali of Grand Slam Tennis, the Tenant/Operator and Robert O Hill “Managing Owner” of the NBCC Tennis Property oppose the high density apartment towers. The Managing Owner spent a quarter century getting entitlements to preserve and enhance The Tennis Cub with a beautiful new Tennis Clubhouse, and 8 tennis courts including a new mini stadium court. The approved plan also has a boutique hotel with one-story Bungalows facing the golf course, plus a Fitness Center, Spa and Performance Therapy, all of which were supported by Grand Slam Tennis, Tenant and many of the tennis and golf members. Our goal is to collect enough petitions to decisively show that residents DO NOT WANT high density apartment towers in such a beautiful location in the heart of Newport Beach and want The Tennis Club preserved and enhance as promised during the entitlement process many years ago with the other approved improvements that produce over $1.5 Million of tax Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) 1/13/22, 10:01 AM Tennis Club – Savethetennislcub savethetennisclub.com/tennis-club/2/2 Copyright © 2021 No savethetennisclub - All Rights Reserved. revenue for our City and importantly, reduces instead of drastically increases peak-hour trafc in the heart of our City. Please sign the petition below asking decision makers to say “NO” to massive apartment towers and the loss of our iconic private tennis club. We will make copies of the petitions and put them in the hands of those who matter regarding this decision. Please pass the word to like-minded friends and neighbors. The petition can be downloaded from the website below and can be mailed (address on petition) or scanned and emailed to SaveTheTennisClub@yahoo.com Thank you for caring about our City. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit 2 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit 3 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 2 of 9 allegations at paragraphs 37-51 challenging any purported tenancy at the Tennis Property that Clubhouse may claim. Further, we learned that without our knowledge or consent a use permit—in conjunction with the ABC application for a liquor license—is being sought from the City of Newport Beach (the “City”) for the Tennis Property by Clubhouse and GRF, and the use permit application was signed by GRF purportedly on behalf of the Tennis Property ownership. We appealed the City Zoning Administrator’s approval of the use permit and that appeal is pending. It is our understanding that, pursuant to Newport Beach Municipal Code (NBMC) section 20.64.030- B.1.a., a use permit approval by the Zoning Administrator that is appealed has no force or effect as of the day the appeal is filed. Our Arbitration demand also seeks a legal determination and declaration that the use permit could not be applied for and sought without our authorization and consent – which has not been given. It seems the matter of Clubhouse’s lack of a right to tenancy at the Tennis Property, and whether the applications for a liquor license with the ABC and use permit with the City can proceed without our consent, pertain to material facts.2 Further, we view such matters as legal issues to be resolved in the arbitration between the Tennis Property owners and we ask the ABC to please not take action and to defer proceeding on Clubhouse’s application for a liquor license, including approving its application or an interim operating permit, while the arbitration between the Tennis Property owners is pending. We will promptly notify the ABC when the arbitration is concluded. 2. Clubhouse Does Not Seem to Be Qualified to Hold a Liquor License In February 2022, to our surprise, we were alerted that the restaurant Clubhouse seemingly operates at the Tennis Property—the Clubhouse Grill—had apparently been selling alcohol while Clubhouse’s liquor license application with the ABC was pending but no liquor license or permit had been obtained to allow for the sale of alcohol. Selling alcohol without a license or permit would seem to be at odds with the ABC’s requirement that an applicant be qualified to hold a liquor license. Cal. Bus. Prof. Code §§ 23300, 23301 (requires a license before selling alcohol and a violation is a misdemeanor); Cal. Bus. Prof. Code § 23958 (In reviewing an application for a liquor license, the ABC “shall make a thorough investigation to determine whether the applicant and the premises for which a license is applied qualify for a license... and shall investigate all matters connected therewith which may affect the public welfare and morals. The department shall deny an application for a license or for a transfer of a license if either the applicant or the premises for which a license is applied do not qualify for a license under this division.”); see also J. Gebauer, et al., 3 Cal. Jur. 3d. Alcoholic Beverages (March 2022 Update) § 58 (“In determining whether the granting of a license will be contrary to public welfare or morals, the Department may consider the applicant’s integrity as shown by his or her previous business experience, the kind of business to be conducted on the licensed premises, the probable manner in which it will be conducted, the type of guests and the probability that their consumption of alcoholic beverages will be moderate, and the nature of any protest made to the issuance of the license.”). 2 See ABC enumerated grounds for protest, No. 11: https://www.abc.ca.gov/information-regarding- alcoholic-beverage-license-applications-and-protests/. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 3 of 9 Below are pictures of alcohol being sold at the Clubhouse Grill on February 8, 2022: Picture of the cooler at Clubhouse Grill on Tuesday, February 8, 2022, stocked with beer, martini glasses, and beer taps. Picture of Indian Pale Ale (IPA) draft beer purchased on tap at Clubhouse Grill on Tuesday, February 8, 2022. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 4 of 9 Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday, February 13, 2022: Picture of the bar at Clubhouse Grill on Sunday, February 13, 2022, stocked with alcohol. Picture of receipt from Clubhouse Grill showing IPA draft beer purchased on Tuesday, February 8, 2022, for $7.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 5 of 9 Picture of bartender at Clubhouse Grill on Sunday, February 13, 2022, mixing and selling a Bloody Mary with Titos Vodka. Picture of Bloody Mary with Titos Vodka purchased at Clubhouse Grill on Sunday, February 13, 2022. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 6 of 9 Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday, February 20, 2022: Picture of Clubhouse Grill mixed drink specials on Sunday, February 20, 2022, including an Espresso Martini and Skinny Margarita. Picture of receipt from Clubhouse Grill showing Bloody Mary with Titos Vodka purchased on Sunday, February 13, 2022, for $12.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 7 of 9 Picture of bartender at Clubhouse Grill on Sunday, February 20, 2022, preparing and selling a mixed drink with Titos Vodka. Picture of receipt from Clubhouse Grill showing a mixed drink with Titos Vodka purchased on Sunday, February 20, 2022 for $12.00. Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Page 8 of 9 On February 22, 2022, we sent Mr. O Hill on behalf of GRF a letter, copying Mr. Rolfes on behalf of Clubhouse and Sean Abdali on behalf of Grand Slam Tennis (“GST”) – who is the current operator of the tennis club at the Tennis Property, asking that the sale of alcohol at the Tennis Property without a license or permit immediately stop. It is our understanding, however, that even after our February 22, 2022, letter was sent, that alcohol continued to be sold at the Tennis Property without a license or permit – sometimes openly, but also apparently secretly in an acknowledgment that alcohol should not have been sold. For example, it is our understanding that on March 1, 2022, Clubhouse tried to covertly sell beer and wine to customers by pouring such drinks into a cup or glass when ordered, and instead of the receipt actually showing the beer or wine for which the customer had paid and been served the receipt erroneously, and surreptitiously, showed a charge for a different item such as a soda. We further understand that on March 19, 2022, and even though it apparently did not have a permit or license to do so, Clubhouse sold wristbands to a taco bar it set up at the restaurant for $25, which included beer and wine. In light of the above, we question whether Clubhouse is qualified to hold a liquor license at the Tennis Property. 3. Clubhouse May Have Failed to Disclose to the ABC All of Its Owners From the information available at the ABC’s website, it appears Clubhouse stated in its application for a liquor license that its members (and, thus, seemingly its owners) are Patrick Rolfes, Rosemarie Clunie and Sean Abdali. However, in a recent email Clubhouse sent to members of the tennis club at the Tennis Property—an excerpt of which is below—an individual named Ted Angelo was represented as being an owner of the Clubhouse Grill: //// //// //// Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit 4 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) From:susan samanagementllc.com To:Robert O Hill Cc:elliot.feuerstein@gmail.com; brett@mesacenters.com; Irving M Chase; Ryan Chase; jacob gonzales; Yoder, Michael; seanabdali@gmail.com; pat@cafejo.com Subject:Letter Date:Tuesday, February 22, 2022 3:49:25 PM Attachments:Robert O Hill 2-22-22.pdf Robert, please see attached. Original to follow by Federal Express. Susan Walters Lease Administrator S & A Management, LLC 129 W. Wilson Street, Suite 100 Costa Mesa, CA 92627 949-722-7400 ph 949-722-8855 fax Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Exhibit 5 Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2b - Additional Materials Received Tennis Clubhouse Grill Appeal (PA2021-210) April 14, 2022 Ms. Liz Westmoreland City of Newport Beach Re: Mira Mesa Shopping Center - West LLC, Letter to the City, dated April 18, 2022 Dear Liz, I just received your email and the attachment from Mira Mesa Shopping Center - West LLC (in San Diego), dated April 18, 2022. There are a number of things that were stated in this document, many of which are false and some that I addressed in my previous letter to you dated April 14, 2022. In Mira Mesa’s April 18, 2022 letter, they accuse The Clubhouse Grill of selling beer and seltzer on March 19, 2022. Not only is that not true, but it seems that Mira Mesa is manipulating documents (see Exhibit 1 & 2) in their efforts to accomplish their objective. Specifically, the event where they falsely accuse The Clubhouse Grill of selling beer and seltzer was an event a volunteer member hosted, not The Clubhouse Grill. The Clubhouse Grill was contracted for a member event to supply food and beverage (specifically tacos, beer and seltzer). We worked with a licensed caterer to provide the alcohol service and filed the appropriate application with Alcohol and Beverage Control (see Exhibit 3). A couple of days before the event I received a call from ABC Supervisor, Darlinda Michael informing me that our permit application was denied because of their policy not to allow event permits while an entity is in the license application process. At that point in time, I contacted Patty Weber, the member who was organizing the member event, and informed her that The Clubhouse Grill would not be able to provide beer and seltzer for her event. Additionally, I informed her that we would not be allowed to have any alcohol in the restaurant, nor could my staff touch any alcohol, during our license application process. The Clubhouse Grill did, however, provide the tacos and non-alcoholic beverages for the member event. As you can see from the pictures in Mira Mesa’s document, this was not a Clubhouse Grill event, nor was the alcohol sold or served in the restaurant (see Exhibit 4). To be clear, we have done everything in our power to comply with all regulations of all government agencies, and the rental agreement we have that allows us to operate at The Tennis and Pickleball Club at Newport Beach. Planning Commission - April 21, 2022 Item 2c - Additional Materials Received from Applicant Tennis Clubhouse Grill Appeal (PA2021-210) Additionally, Mira Mesa - San Diego is making patently false statements with zero proof to substantiate them. For example: Not only is their above statement not true and potentially slanderous, but now they are painting a sinister picture of how we covertly sell beer and wine. These questionable tactics are disturbing, and are insulting to me and damaging to my good name in the community. I’m fine with Mira Mesa’s and Golf Realty Fund’s constant policing of our operation to ensure we continue to operate within the boundaries of the law. However, Mira Mesa’s false accusations and inaccurate representations of myself and my staff is in my opinion defamatory and certainly taking its toll on my family, to say nothing of damaging a small business in our community. I believe this issue has nothing to do with me, The Clubhouse Grill, or even the selling of alcohol on the property. In fact Mira Mesa stated: There is an ongoing power struggle between the two land ownership groups, which is not a matter for me or the City to resolve. Unfortunately, they continue to choose to involve us, impede our business and consume valuable man hours and energy at the City.. The fact is, I am a good operator with a valid rental agreement, and I have proven that. I have lived in this city for 56 years and have a long history of operating businesses and volunteering in the community. I have invested a great deal of time and money to build The Clubhouse Grill. This ongoing battle between the landowners for control over each other has cost my business tens of thousands of dollars, interfered with raising money for local schools and charities, and limited additional tax and employment revenue within our City, while showing no consideration for the overwhelming membership support of beer and wine service at The Tennis Club. Pat Rolfes Clubhouse ATP LLC 714-323-2739 Planning Commission - April 21, 2022 Item 2c - Additional Materials Received from Applicant Tennis Clubhouse Grill Appeal (PA2021-210) EXHIBITS 1) Below is the actual email that went out to the members. Please note that it appears that Mira Mesa - San Diego in the letter to the City, manipulated the document to make one believe that this document and event was being hosted by The Clubhouse Grill. It is clear that is not the case and furthermore, The Clubhouse Grill did not produce this document or email it. 2) Mira Mesa’s image used in their letter to the City. Planning Commission - April 21, 2022 Item 2c - Additional Materials Received from Applicant Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item 2c - Additional Materials Received from Applicant Tennis Clubhouse Grill Appeal (PA2021-210) 3) Below is the filed ABC-218 Catering Application and the check stub #24109 showing payment that was submitted to the ABC on March 7, 2022 for the March Madness event held on March 19, 2022. Planning Commission - April 21, 2022 Item 2c - Additional Materials Received from Applicant Tennis Clubhouse Grill Appeal (PA2021-210) 4) Please note the pictures of members not being served beer or seltzer from the restaurant by any employee of The Clubhouse Grill. Planning Commission - April 21, 2022 Item 2c - Additional Materials Received from Applicant Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2d - Additional Materials Received at the Meeting from Apellant Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2d - Additional Materials Received at the Meeting from Apellant Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2d - Additional Materials Received at the Meeting from Apellant Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2d - Additional Materials Received at the Meeting from Apellant Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2d - Additional Materials Received at the Meeting from Apellant Tennis Clubhouse Grill Appeal (PA2021-210) Planning Commission - April 21, 2022 Item No. 2d - Additional Materials Received at the Meeting from Apellant Tennis Clubhouse Grill Appeal (PA2021-210) Tennis Clubhouse Grill Use Permit Appeal Planning Commission Public Hearing April 21, 2022 Liz Westmoreland, Associate Planner Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210) Project Overview •Minor Use Permit for alcohol service •Tennis clubhouse •Zoning Administrator Approved Use Permit •December 16, 2021 •Project was appealed •January 3, 2022 •“De Novo” Public Hearing 2Community Development Department Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210) Vicinity Map Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210) Project Description •Existing concession area allowed by right •Snacks, light meals, sandwiches/salads etc. •Alcohol service requires MUP •Hours are 9:00 am –11:00 pm (no late hours) •Primarily intended for members and guests •Type 41 (On-Sale Beer and Wine –Eating Place) •Required to serve food •Beer and wine only 4Community Development Department Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210) Appeal •Ownership dispute •Civil matter •Qualifications of applicant to serve alcohol •Alcohol service prior to approval •Change in license type •Prior Public Comments •Alcohol concerns •Police Dept. reviewed and provided conditions 5Community Development Department Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210) Appeal License Type 57 vs. Type 41 •Land use remains the same•Clubhouse with alcohol •Type 57 (Special On-Sale General)•Liquor•No food•Members/guests •Type 41 (On-Sale Beer & Wine –Eating Place) •No Liquor•Food Service•Must allow the public access •No comments related to use permit findings •Staff has provided resolution with findings and conditions 6Community Development Department Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210) Recommended Action •Conduct a public hearing •Find project categorically exempt from CEQA •Adopt Resolution No. PC2022-006 7Community Development Department Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210) 8 Questions and Discussion Liz Westmoreland, Associate Planner 949-644-3234 or lwestmoreland@newportbeachca.gov Planning Commission, Public Hearing April 21, 2022 Planning Commission - April 21, 2022 Item No. 2e - Additional Materials Presented at the Meeting by Staff Tennis Clubhouse Grill Appeal (PA2021-210)