HomeMy WebLinkAbout15 - Reconsideration of the Tennis Club at Newport Beach Project Amendment (PA2021-260) - CorrespondenceOctober 25, 2022
Agenda Item No. 15
From: Rieff, Kim
To: Mulvey. Jennifer
Subject: FW: Letter to City Council Objecting Agenda Item No. 15 at Sept. 27 Hearing
Date: October 20, 2022 2:33:51 PM
Attachments: Letter to City Council Re Co -Owners Obiecting to Agenda Item No. 15 at 9.27.22 Hearing.pdf
2022.09.23 Co -Owners Itr. to City Council - Exhibit 1 (OIC Agmt w. Ex. A Only).pdf
From: Brett Feuerstein <brett@mesacenters.com>
Sent: October 20, 2022 2:25 PM
To: Dept - City Council <CityCouncil@newportbeachca.gov>
Cc: Leung, Grace <gleung@newportbeachca.gov>; Jurjis, Seimone <sjurjis@newportbeachca.gov>;
Robert 0 Hill <roh@ohill.com>; Ryan Chase <ryanlylechase@gmail.com>
Subject: Letter to City Council Objecting Agenda Item No. 15 at Sept. 27 Hearing
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Dear Honorable City Council Members:
We understand at the upcoming City Council hearing on October 25, 2022, the City Council will
reconsider the Tennis Club at Newport Beach Project Amendment, which was Agenda Item No. 15 at
the City Council's September 27, 2022 hearing. At that September 27th hearing, the Council
Members voted 6-1 to refer the Project Amendment back to the Planning Commission for further
consideration and the inclusion of pickleball courts (with the necessary CEQA and impact analysis).
As we have previously expressed to the City Council, we believe the Council Members made the right
decision in referring the Project Amendment back to the Planning Commission so that it can be
revised to clearly provide for pickleball courts. We also believe this decision reflected good
governance because it provides the only guarantee to ensure that the applicant follows through on
his promises to include pickleball courts.
By this email, we are re -submitting our September 23, 2022, letter to you (which we previously
submitted in advance of the City Council's September 27th hearing) so that it may be a part of the
record for the October 25th hearing. Our September 23rd letter, among other things, expresses our
concern that the current Project Amendment does not provide for pickleball courts or reflect
pickleball as a future use at the Tennis Club. As we understand it, the Project Amendment being
considered at the October 25th hearing still does not do so, and the only way to guarantee pickleball
as a use going forward is for the City Council to stay the course with their original decision on
September 27th to refer the project back to the Planning Commission to allow for the incorporation
of pickleball courts into the plans.
Thank you for your consideration of our comments.
Best,
Brett
Brett Feuerstein
8294 Mira Mesa Blvd
San Diego, CA 92126
(858) 271-4682
(858) 271-5161 Fax
brett(@mesacenters.com
Mira Mesa Shopping Center - West, LLC
8294 Mira Mesa Blvd. San Diego, California 92126
Office (858) 271-4682 Fax (858) 271-5161
September 23, 2022
DELIVERED VIA EMAIL ONLY. citycouncilgnewportbeachca.gov
Newport Beach City Council
City of Newport Beach
100 Civic Center Drive
P.O. Box 1768
Newport Beach, CA 92658-8915
Re: September 27, 2022, City Council Agenda
Objection to Agenda Item No. 15
Project No. PA2021-260
Dear Honorable City Council Members:
We write to you today to express our objection to Agenda Item No. 15. As you may know,
we own 50% of the property at 1602 East Coast Highway ("Tennis Property"), where The Tennis
Club at Newport Beach is located. Our co-owner Golf Realty Fund, LP ("GRF") owns the other
50% of the Tennis Property; Robert O Hill represents GRF. We and GRF hold our ownership
interests in the Tennis Property as tenants in common, not as an LLC or partnership, which means
the individual owners retain significant rights.
Our families have lived in the City of Newport Beach ("City") since the 1920s, and we
own and operate a number of commercial, residential, and recreational properties throughout the
City. For example, one our families' patriarchs, Alan Fainbarg, operated one of the first beach
rental shops on Bay Avenue on the Balboa Peninsula in the 1930s. We have the interests of the
City at heart, and as generational families with deep roots here we see it as our duty to be involved
with and to give back to this community, which we have done and continue to do, including
through our philanthropic work.
As you may know, we are engaged in an arbitration with GRF to establish rights and
obligations of the owners under our private Owners in Common Agreement' for the Tennis
Property ("OIC Agreement"). A central issue in the arbitration proceeding is whether GRF has the
authority to unilaterally apply for the plans and entitlements for the Tennis Property that are before
the City Council on September 27, 2022. It is our position that GRF does not have the authority
under the OIC Agreement to apply for the plans and entitlements without our consent. That said,
we recognize this is a private dispute between private parties, and we are not seeking to involve
the City in our private dispute. Instead, we are giving you this background information to help you
understand our objection to the proposed planning application and its approvals and entitlements,
which is further explained in the attached Arbitration Demand.
' A copy of the OIC Agreement is attached as Exhibit A to the Arbitration Demand from the pending
arbitration, and a copy of the Arbitration Demand is enclosed with this correspondence as Exhibit 1 and is
hereby incorporated by reference as if fully set forth herein.
Also, we attended the City's Planning Commission hearing on September 8, 2022, where
we expressed to City staff and commissioners (among other things) our long-term commitment to
pickleball at the Tennis Club. We recognize the explosion of pickleball as a sport and realize its
growing popularity in our community and the club members' desire for pickleball. In fact, we have
been working on a lease with a prominent Newport Beach business operator that would: preserve
the club, preserve the pickleball courts, preserve the tennis courts and significantly upgrade the
club's facilities. The lease would be for 10 years and can be extended for an additional 10 years
should the tenant so desire — making the total possible term 20 years. We sent this lease to Mr. O
Hill and we hope he gives it fair consideration.
We also expressed at the September 8th Planning Commission hearing our concern that
the plans and entitlements for which GRF is applying do not provide for pickleball courts or reflect
pickleball as a future use at the Tennis Club. We also understood the City staff and commissioners
to say at the September 8th hearing that not only does GRF's plans not provide for pickleball at
the Tennis Club but if GRF's project were to be approved and constructed that pickleball would
be eliminated as a use at the Tennis Club. We hope that we could all agree that elimination of
pickleball would not be good for the pickleball members nor the future of the Tennis Club.
We were likewise very concerned to hear a statement read at the September 8th Planning
Commission hearing on behalf of an apparently large contingency of club members who oppose
GRF's project but did not attend the hearing out of fear because Mr. Abdali allegedly threatened
to kick such members out of the Tennis Club if they did attend and oppose the project. We have
heard that, unlike the Planning Commission hearing and despite the alleged threats against them,
members from the Tennis Club may appear at the City Council hearing to express their
dissatisfaction with GRF's project.
Thank you for your consideration of our letter. We appreciate the service you perform for
our shared community.
Sincerely,
Brett Feuerstein
as Manager of
Mesa Shopping Center -East, LLC
and Mira Mesa Shopping Center -West, LLC
R
q�w ew"
Ryan Chase
as Manager of Fainbarg III, LP
cc: Grace K. Leung, City Manager (gleung@newportbeachca.gov)
Seimone Jurjis, Community Development Director (sjurjis@newportbeachca.gov)
Robert O Hill, Golf Realty Fund (roh@golfrealtyfund.com)
Enclosures: Exhibit 1: March 25, 2022, Arbitration Demand from the Pending Arbitration with
Exhibit A only; Exhibits B to H to the Arbitration Demand can be provided upon
request
Page 2 of 2
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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)
igotyples@.j*cg-law.com
1cg I 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 AND
INJUNCTIVE RELIEF;
(2) BREACH OF CONTRACT;
(3) BREACH OF THE COVENANT OF
GOOD FAITH AND FAIR
DEALING;
(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:
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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
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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
I 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.
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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
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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
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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
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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
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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:
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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 necessga 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
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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
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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
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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 bad not
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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, LLCan 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
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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. La., 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
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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.
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54. Below are pictures of alcohol being sold at the Clubhouse Grill on February 8,
1 2022:
Picture of Indian Pale Ale (IPA) draft
beer purchased on tap at Clubhouse
Grill on Tuesday, February 8, 2022.
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Thank you for your order. Below is a receipt for your recent visit to ClubHouse Grill_
trouble viewing this email'
Picture of receipt from
Clubhouse Grill showing
IPA draft beer purchased one
Tuesday, February 8, 2022,
for $7.00.
ClubHouse Grill
11 Clubhouse Drive
Newport Beach, CA 92660
server:
Che4l�
Gues ount='
Ord a red: 2JB/22 -
How was your visit?
1 IPA $7.00
55. Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday,
February 13, 2022:
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sit W. WR it F
tip
j!
tail
CLUB ly
BE jkc " / "' I 3w.
Irmo! �m
A 4:w
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Thank you for your order_ Below is a receipt for your recent visit to Clu bHouse Gril I
trouble viewing this email'
Picture of receipt from
Clubhouse Grill showingCZ
Bloody Mary with Titos Vodka
purchased on Sunday, February 1
13, 2022, for $12.00.
ClubHouse Grill
11 Clubhou&e Drive
Newport Beach, CA 92660
Server.
Check
Guest aunt■
Ordered: 2113122-
How Was your visit?
1 Tib=
$17-00
56. Below are pictures of alcohol being sold at the Clubhouse Grill on Sunday,
February 20, 2022:
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Picture of receipt from
Clubhouse Grill showing a
mixed drink with Titos Vodka
purchased on Sunday,
February 20, 2022 for $12.00.
MbHoma Grill
11 CIwhhause Drive
Newport Beach, CA 928BO
Server; - -40
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Guest Count;
Ordefed: 2J20l2 -
1 Titas
$12.00
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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 Abdalito 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
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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 Iry
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.
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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.
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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 I 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.
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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
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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
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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
ATPwithout 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
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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.
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ARBITRATION DEMAND AND STATEMENT OF CLAIMS
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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.
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ARBITRATION DEMAND AND STATEMENT OF CLAIMS
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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.
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Dated: March 25, 2022
MICHAEL YODER
O'MELVENY & MYERS LLP
JACQB C. GONZALES
1c9 I law
By:
11-Acob C Gon es
Attorneys for Co-Ownlzr§70aimants
Mesa Shopping Center -East LLC,
Mira Mesa Shopping Center -West LLC, and
Fainbarg III LP
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ARBITRATION DEMAND AND STATEMENT OF CLAIMS
Exhibit A
RECORDlNQ REQUESTED BY AND
WHEN RECORDED RETURN TO:
O Hill Properties
One Upper Newport Plaza
Newport Beach, CA 92660
sU
AGREEMENT BETWEEN REAL PROPERTY OWNERS
BALBOA BAY CLUB RACQUET CLUB
Newport Beach, California
This Agreement Between Real Property Owners ("Agreement") is entered into by
and between O Hill Properties, a California limited partnership ("O Hill"), The Fainbarg Trust
dated April 19, 1982 ("TFC"), 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").
O Trill, TFT, Mesa -Fast, Mira Mesa -West, and NBCC Ltd are sometimes referred to
singularly as an "Owner" or "party" or collectively as the "Owners" or "parties".
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 "A" 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. The Owners also believe it necessary and appropriate to have one Owner be the
managing Owner for purposes of accounting and administration.
6110193
NOW, THEREFORE, in consideration of the foregoing Recitals and the conditions and
covenants hereinafter contained, the Owners hereby agree as follows:
1. AGREIIIdENT 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 this Agreement,
each Owner retains the right to deal with his Interest 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, REFINANCINGS, 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.
Each Owner shall have a duty to fully cooperate and not interfere or impede, in any manner,
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in such refinancings including but not limited to signing appropriate documentation (e.g. notes,
deeds of trust, assignments of rents and leases, 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 rats ownership Interest in the Property, of the
payments of principal and interest and other costs owing under the Acquisition Financing and
refinancings . The Acquisition Pinanci ng 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
the 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. LIMPPATION OF OWNERS. Each Owner shall be subject to the following
limitations:
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(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 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.
(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 (1) 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 respective Interest in the Property and (ii) any involuntary lien which encumbers an
Owner's Interest (such as a tax, judgment or execution Tien or an attachment) (a "Cash Call").
If an Owner fails to pay its Cash Calll 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 required
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 necessary, 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 equity 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 Owner 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
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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 Owners
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 Owner'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 Owner'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 other 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 0 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
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as set forth in this Agreement.
(H) 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 andlor 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 sells 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 removat.
(c) Managing Owner is hereby appointed as attorney in fact for each Owner
for the purpose of taking all actions which are approved in writing by the requisite percentage
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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
terminations, 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 additional 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 ('!z %) 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 counsel at the
Owner's expense for a dispute between the Owners, unless the dispute results from a 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
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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 shall be defined 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 b 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
Property,
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 bankruptcy, 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, tnistee, 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-
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 on account of such Interest in the Property as provided for
in Section 8 above and shall have no management or other decision malting authority.
11. INCOME TAR 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 COMMON - 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 shall 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 attorneys 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 State of California.
(c) The purchase by one Owner of all the Interests of the other Owners in
the Property.
I Us
14. ONION TO PURCHASE.
(a) If an Owner desires to seR its Interest in the Property or a portion of its
Interest in the Property, O 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 Interest
in the Property. A selling Owner shall notify O Dill 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 Hill and selling Owner shall meet and try to agree on a purchase price. If, after
thirty (30) days, O 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 information and such third appraiser shall first
attempt 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 determined 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
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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;
(ii) 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 personally 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 change 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 recognized. 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 OF ESSENCE. Time is the essence of this Agreement and the
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provisions contained herein and each and every provision hereof.
18. AMENDMENIS. 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 amendment 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 Agreement contains the entire agreement
between the Owners and supersedes any prior or concurrent written or oral agreement between
said parties concerning the subject matter contained 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-
additional instruments or documents which are necessary or appropriate to carry out the intent
and purpose of this Agreement.
25. SPOUSES. Some of the Owners are married and may in the future take title 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 (x/2) interest and by the wife,
as to an undivided one-half (112-) 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 (�A) 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 is held shalt 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. ("TAMS") FOR BINDING ARBITRATION. THE PARTIES MAY
AGREE ON A RETIRED MOB FROM THE YAMS 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. 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 TIM
INSTITUTION OF ANY NEW PROCEEDINGS. THE AGGRIEVED PARTY CAN
INITIATE ARBITRATION BY SENDING WRITTEN NOTICE OF AN INTENTION TO
ARBITRATE BY REGISTERED OR CERTIFMD MAIL TO THE OTHER PARTY AND
TO JAMS. THE NOTICE MUST CONTAIN A DESCRIPTION OF THE DISPUTE, THE
AMOUNT INVOLVED, AND THE REMEDY SOUGHT, IF AND WHEN A DEMAND
FOR ARBITRATION IS MADE BY EITHER PARTY, THE PARTIES AGREE TO
-13-
EXECUTE A SUBMISSION AGREEMENT, PROVIDED BY JAMS, SETTING FORTH
THE RIGHTS OF THE PARTIES IF THE CASE IS ARBITRATED AND THE RULES
AND PROCEDURES TO 13B FOLLOWED AT THE ARBITRATION HEARING. THE
ARBITRATOR SHALL, AT THE MOTION OF A PARTY, PERMIT AND ORDER SUCH
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 RIGHT OR ABILITY TO OBTAIN INJUNCTIVE RELIEF OR
APPOINTMENT OF A RECEIVER THROUGH THE COURT SYSTEM.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE
ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION
OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED
BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT
POSSESS TO HAVE THE DISPUTE LITIGATED IN COURT OR JURY TRIAL. BY
Mln4LING 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
AUTHORITY OF THE CALWORNIA CODE OF CIVIL PROCEDURE. YOUR
AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBI RATION OF
DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
O Hill: L2mrzi TFT: f ' 1 Mesa -East: 145K- I I Ef: — }
Mira Mesa West f &2 [ ]' NBCC Ltd:
27. COST OF ENWRCE VIENT. Should any dispute arise between the parties
hereto or their legal representatives, successors or assigns concerning any provision of this
-14-
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 court
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 0f994, at Newport Beach, California.
Owners:
O Hill Properties, a
California limited partnership
By: / r
Robert O U 1,
its General Partner
The Fainbarg Trust,
dated April 19, 1982
By: ON - t
Allan Fain arg, TMstee,
Newport Beach Country Club,
a California limited partnership
By: O Hill Properties,
a California limited partnership
Its General Partner
$Y
f�- . �
Robert �WFM -
General Partner
-15-
Mesa Shopping Center -East
A California General Partnership
By:-..Q.,Q
Arnold D. Feuerstein
Managing General Partner
By:
Elliot Feuerstein
Managing General Partner
Mira Mesa Shopping Center -West
A California General Partnership
By:• ---
Arnold D. Feuerstein
Managing General Partner
By;
Elliot Feuerstein
Managing General Partner
STATE OF CALIFORNIA
COUNTY OF ORANGE
On elkiE1'4 ', 1 `i 7 , 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 hand and official seal.
Lary Public in and or sai@ County acid State
STATE OF CALIFORNIA
COUNTY OF ORANGE
YVONNi N. RiTCHOT
z ? t COM #055585 z
z ,p Notary Pobric calilotnta
ORANGE COUNTY
tornm exphes FED 09,1906
On before me a Notary Public in and for said County and State,
personally appeared Allau Fainbnally 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
N in and for said County a d State
-16-
1
8Wt*MM'0XP1r09FE609
B iCNE N. RI
coMu. #M585 a
Z Notary PubliaCWtMia
R ORANGE COUNTY 49�]r r"'�
STATE OF CALIFORNIA
COUNTY OF ORANGE
On �7744e k � /991� , before me a Notary Public in and for said County and State,
personally appeared Robert 0 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 hand and official seal.
�Xitary Public in and for said County and State
STATE OF CALIFORNIA
COUNTY OF ORANGE
`YVONNE N. RITONQT
comm, #953895
•'o NOLW Pvbft- Irma
ORANGE COUNTY
hfy comm. erpkm FEB 09,106
On di � 95/ , 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 signature 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
SI./!✓YlIlfr/Crl1,�II1f �iJJSt
INC
tORMUCOUNly
Ex I 5 !
On jeAdAm If y 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 the instrument.
WITNESS my hand and official seal.
Notary Public in and for said County and State
Sr.��✓-�^✓r✓./Y.r✓• 1.�` ma's .irr ,
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 signature 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 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 the instrument.
WITNESS my hand and official seal.
Notary Public in and for said County and State
-18-
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROPERTY
Parcel 1:
That portion of Block 93 of Twine'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.
EXHIBIT "B"
OWNERSHIP INTEREST IN THE PROPERTY
Name and Address of Owner 'Interest in property
Allan and Sara Fainbarg, Trustees 25%
of The Fainbarg Trust dated
April 19, 1982
890 W. Baker
Costa Mesa, CA 92626
Mesa Shopping Center -East 15 %
c/o Arnold Feuerstein
2293 W. Ball Road
Anaheim, CA 92805
Mica Mesa Shopping Center -West 10%
clo Arnold Feuerstein
2293 W. Bail Road
Anaheim, CA 92805
With a copy of any notices to:
Mesa Shopping Center -East
c/o EJlliot Feuerstein
8294 Mira Mesa Blvd.
San Diego, CA 92126
Newport Beach Country Club 25 %
One Upper Newport Plaza
Newport Beach, CA 92660
Attn: Robert O Hill
O Hill Properties 25 %
One Upper Newport Plaza
Newport Beach, CA 92660
Attn: Robert O Hill
FOR VALUE RECEIVED,
to
PROMISSORY NOTE
Newport Beach, California
("Maker") hereby promises to pay
, 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 (21h %) 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.
Received After Agenda Printed
October 25, 2022
Agenda Item No. 15
Bend OR
(541) 382-3011
Indian Wells BEST BEST & KRIEGER �
(760) 568-2611 ATTORNEYS AT L A W
Irvine
(949)263-2600
Los Angeles 18101 Von Karman Avenue, Suite 1000, Irvine, CA 92612
(213) 617-8100 Phone: (949) 263-2600 1 Fax: (949) 260-0972 1 www.bbklaw.com
Ontario
(909)989-8584
Alisha M. Winterswyk
(949) 263-6565
alisha.winterswyk@bbklaw.com
VIA E-MAIL
Brett Feuerstein
Mira Mesa Shopping Centers
8294 Mira Mesa Blvd.
San Diego, CA 92126
October 24, 2022
Ryan Chase
129 W. Wilson Street, Suite 100
Costa Mesa, CA 92627
Riverside
(951) 686-1450
Sacramento
(916) 325-4000
San Diego
(619) 525-1300
Walnut Creek
(925) 977-3300
Washington, DC
(202)785-0600
Re: CEQA Concerns Regarding The Tennis Club at Newport Beach
Amendment Project
Dear Mr. Feuerstein and Mr. Chase:
We have reviewed the Tennis Club at Newport Beach Amendment Project (the "Project"
or "Proposed Amendment") to determine whether the City of Newport Beach ("City") can lawfully
approve the Project as proposed (i.e., without additional pickleball courts) and adopt the
Addendum to the Mitigated Negative Declaration ("Addendum") prepared for the Tennis Club at
Newport Beach Project. Based on our review, the City cannot lawfully approve the Project as
proposed or adopt the Addendum on October 25, 2022, because such approval would constitute
improper project piecemealing under the California Environmental Quality Act ("CEQA").
To comply with CEQA, the Addendum must be revised to assess the potential
environmental impacts of the whole of the project—i.e., the Proposed Amendment with the
additional pickleball courts. Because the Addendum as drafted fails to comply with CEQA, the
City should remand the Proposed Amendment back to the Planning Commission for additional
CEQA analysis. Until the entirety of the Project is considered and analyzed under CEQA, the City
Council cannot approve the Project.
CEQA Prohibits Proiect Piecemealin2
Under CEQA, a public agency cannot approve a non-exempt project until it analyzes the
potential environmental impacts of the project. "Consequently, the determination of the scope of
the project is an important step in complying with the mandates of CEQA." (Tuolumne County
Citizens for Responsible Growth, Inc. v. City of Sonora (2007) 155 Cal.App.5th 4th 1214, 1222.)
55452.02600\40793291.5
lye
BEST BEST & KRIEGER
ATTORNEYS AT LAW
Brett Feuerstein and Ryan Chase
October 24, 2022
Page 2
The California Supreme Court has made clear that the scope of the project that must be
analyzed extends not only to a project as proposed, but also to "future expansion" of the project.
(Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d 376,
396.) To analyze when this future expansion must be analyzed as part of the initial project, the
California Supreme Court set forth a two -prong test: The scope of a project under CEQA must
include the future expansion where (1) the future expansion "is a reasonably foreseeable
consequence of the initial project; and (2) the future expansion or action will be significant in that
it will likely change the scope or nature of the initial project or its environmental effects." (Ibid.)
In Laurel Heights, the California Supreme Court held that the lead agency violated CEQA by
failing to analyze "anticipated future activities" where the agency had "formulated reasonably
definite proposals as to future uses of the building." (Id. at p. 397.)
To comply with CEQA, the lead agency must therefore analyze the "whole of an action,"
including anticipated future activities. (State CEQA Guidelines, § 15378(a).) As discussed below,
the City has not analyzed the whole of the action in the Addendum.
The City Cannot Approve the Proposed Amendment Until It Analyzes The Environmental
Impacts of the Entire Proiect — Including The Future Pickleball Courts
The Addendum that the City Council will be considering at its October 25, 2022, meeting
is fatally flawed because it does not analyze the entirety of the project under CEQA. Notably, and
as recognized by the City, the Addendum does not define the project to include both the Proposed
Amendment and the future pickleball courts, improperly excluding the pickleball courts from the
project description and its environmental analysis. This constitutes improper project piecemealing
under CEQA.
Under the two -prong test established by the Laurel Heights court, the project description
and the scope of environmental analysis in the Addendum must encompass both the Proposed
Amendment and the future pickleball courts.
First, the future pickleball courts and the Proposed Amendment are part of the same project
under CEQA because (1) the pickleball courts are an anticipated future activity relating to the
Proposed Amendment; and (2) the project applicant has formulated reasonably definite proposals
relating to the courts. (Laurel Heights, supra, 47 Cal.3d at pp. 396-397.) Notably, on September
27, 2022, the City Council conducted a public hearing on the Proposed Amendment, at which it
remanded the Proposed Amendment to the Planning Commission to review the substitution of
pickleball courts for the proposed tennis courts. Thereafter, on October 5, 2022, the project
applicant submitted a letter to the City that included a "Revised Master Site Plan for the NBCC
Tennis Property reflecting pickleball courts replacing all of the previously proposed tennis courts,
except for the new Bollettieri Center Court." The letter, which is attached hereto, demonstrates
that the pickleball courts envisioned in the Revised Master Site Plan and the Proposed Amendment
55452.02600\40793291.5
lye
BEST BEST & KRIEGER
ATTORNEYS AT LAW
Brett Feuerstein and Ryan Chase
October 24, 2022
Page 3
are part of the same "project" under CEQA. The project applicant has "formulated reasonably
definite proposals as to future uses" of the project site to include pickleball courts, and as a result,
the environmental impacts of these pickleball courts must be analyzed in the Addendum before
the Proposed Amendment and Addendum are approved. (Laurel Heights, supra, 47 Cal.3d at pp.
396-397.)
Second, the pickleball courts envisioned in the Revised Master Site Plan must be analyzed
in the same environmental document as the Proposed Amendment because the future pickleball
courts "will be significant in that [they] will likely change the scope or nature of the initial project
or its environmental effects." (Laurel Heights, supra, 47 Cal.3d at p. 396.) The project applicant
itself concedes this point, as it has retained a consultant to analyze the future pickleball courts'
impacts on parking. (See Exh. A [October 5, 2022 letter].) Moreover, the Staff Report for Agenda
Item No. 15 of the City Council's October 25, 2022, meeting, relating to the Proposed Amendment,
confirms that the pickleball courts could have potentially unique environmental impacts. The Staff
Report provides:
The recommended actions would approve the applicant's requested
amendments that do not include pickleball. Staff has not evaluated
the project for pickleball, and parking, traffic and noise are issues
that would need to be analyzed as part of the project and require an
amended project application and further analysis prior to
consideration.
The City cannot approve the Proposed Amendment now, and then conduct future
subsequent analysis for the future pickleball courts later. (Tuolumne County Citizens for
Responsible Growth, Inc., supra, 155 Cal.App.5th 4th at 1222 [city violated CEQA where it treated
the realignment of a road and the construction of a home improvement center project as separate
projects subject to separate environmental reviews].) This approach would constitute improper
project piecemealing — chopping a larger project into smaller projects, and submerging the
environmental impacts of the project as a whole by improperly conducting separate analysis of
each of the smaller projects. (Ibid.)
To comply with CEQA, the Addendum must define the Proposed Amendment and the
pickleball courts as part of the same project, and the environmental analysis must address the whole
project. This has not been done, and the City cannot approve the Proposed Amendment or the
Addendum in compliance with CEQA until the Addendum is revised to consider the entirety of
the project —both the Proposed Amendment, and the future pickleball courts.
We suggest the City Council remand this item back to the Planning Commission with
instructions to (1) revise the project description to encompass the entirety of the project; and
(2) revise the Addendum to analyze the potential impacts of the entirety of the project. Until these
55452.02600\40793291.5
lye
BEST BEST & KRIEGER
ATTORNEYS AT LAW
Brett Feuerstein and Ryan Chase
October 24, 2022
Page 4
prerequisites to CEQA compliance are completed, the City Council cannot approve the Proposed
Amendment.
Sincerely,
Alisha M. WintersNltEGE
k
of BEST BEST & fLP
Encl.: October 5, 2022 letter from project applicant
cc: Jacob Gonzales
55452.02600\40793291.5
GRF
October 5, 2022
BY ELECTRONIC MAIL:
Mr. Seimone Jurjis
Community Development Director
City of Newport Beach
S Jurj isgNewportB eachCa. gov
Re: NBCC PCD Pickleball
Dear Seimone:
GOLF REALTY FUND
ONE UPPER NEWPORT PLAZA
NEWPORT BEACH
CALIFORNIA 92660
(949)251-2025
Attached is the revised Master Site Plan for the NBCC Tennis Property reflecting pickleball
courts replacing all of the previously proposed tennis courts, except for the new Bollettieri
Center Court. The attached Master Site Plan shows 26 pickleball courts, with 4 of the existing
pickleball courts changed to 2 stadium pickleball courts per the request of Grand Slam/Sean.
We retained LSA Associates to do a parking study to determine the number of parking spaces
needed for pickleball courts. Ken Wilhelm of LSA confirmed again that there is no data
nationally for parking count for pickleball courts. Therefore, LSA is conducting a survey at the
Tennis & Pickleball Club to determine the number of parking spaces needed per pickleball court.
We expect to have the parking survey completed within 2 weeks which would give LSA the
necessary parking data to finish their formal report. Plan B Amendment has 38 surplus parking
spaces plus the additional 30 Corporate Plaza -West parking spaces Grand Slam has obtained for
use on weekdays and the 554 Corporate Plaza -West parking spaces on weekends.
All the best,
Jonathan Bailey
Managing Director of Development
ec: James Campbell, Deputy Community Development Director
David Lee, Associate Planner
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Received After Agenda Printed
October 25, 2022
Agenda Item No. 15
From: Rieff, Kim
To: Mulvey. Jennifer
Subject: FW: CEQA Letter Concerning The Tennis Club at Newport Beach
Date: October 25, 2022 10:29:31 AM
Attachments: 10-24-22 Letter Memo re Tennis Club at Newport Beach Project Amendment with attach ment-cl.pdf
From: Brett Feuerstein <brett@mesacenters.com>
Sent: October 25, 2022 10:29 AM
To: Dept - City Council <CityCouncil@newportbeachca.gov>
Cc: Leung, Grace <gleung@newportbeachca.gov>; Jurjis, Seimone <sjurjis@newportbeachca.gov>;
Robert 0 Hill <roh@ohill.com>; Ryan Chase <ryanlylechase@gmail.com>
Subject: CEQA Letter Concerning The Tennis Club at Newport Beach
[EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the
content is safe.
Dear Honorable City Council Members:
In regards to today's City Council meeting, we reached out to a CEQA expert to conduct an
independent review of whether Robert's submittal of revised Master Site Plans that show pickleball
courts constitutes piecemealing with respect to the plans the City will consider today (that do not
include pickleball). We wanted to share with you the attached CEQA expert's conclusion that in light
of Robert 0 Hill's latest actions and submittal there is now a piecemealing issue and the City should
not proceed without conducting additional CEQA analysis.
Thanks,
Brett
Brett Feuerstein
Mira Mesa Shopping Centers
8294 Mira Mesa Blvd.
San Diego CA 92126
(858) 271-4682
brett(@mesacenters.com
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