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HomeMy WebLinkAboutCover MemoCITY OF MIAMI OFFICE OF THE CITY ATTORNEY MEMORANDUM TO: Honorable Mayor Members of the City Commission, FROM: Jorge L. Fernan ity rrney ib DATE: July 16, 200 RE: Masztal, et aL, ind 'visually and on behalf of those similarly situated v. City of Miami, Florida, Case No: 98-11208 CA 31 (f/k/a Nagymihaly, et al. v. City of Miami, Florida) and Masztal, et aL, individually and on behalf of those similarly situated v. City of Miami, Florida, Case No: 05-2111 CA 31 (File No. 07-00890) The attached proposed Resolution seeks authorization for settlement in the above - referenced cases in the amount of $15,550,000. Background The above class action lawsuits have been pending since 1998 and 2005 respectively. The City adopted Ordinance 1158, on January 13, 1998, authorizing a Fire -Rescue Assessment pursuant to the broad home rule powers granted under Chapter 166, Florida Statutes and controlling case law. The original Nagymihaly plaintiffs, Nagymihaly, et al. v. City of Miami, Florida, challenged the City of Miami fire/rescue assessments levied for FY 97- 98 and FY 98-99, by claiming that the assessments were invalid taxes and that the apportionment methodology used in calculating the fire/rescue assessment rates was unreasonable. On May 4, 2004, the trial court issued an Order in Nagymihaly v. City of Miami holding the EMS portion of the challenged fire/rescue assessments (FY 97-98 & FY 98-99) invalid. The trial court's May 4, 2004, Order did not invalidate the statutory language authorizing assessments for fire services. On May 24, 2004, the City and the original Nagymihaly plaintiffs participated in a mediation conference. On May 26, 2004, the agreement to settle the "invalidity" portion of the Nagymihaly suit was announced to the trial court with the proviso that the settlement was subject to approval by the City Commission. The claims attacking the apportionment methodology used in calculating the fire/rescue assessments for FY 97-98 and FY 98-99, were not covered by the settlement proposal. On November 18, 2004, the City Commission approved Resolution No. 04-0748, thereby authorizing the settlement of the "validity" portion of the challenge by the Nagymihaly plaintiffs for $7 million. On December 5, 2004, the City disbursed the first $3.5 million installment of settlement payments to Adorno & Yoss trust account. On January 28, 2005, the new plaintiffs (Masztal, et al., individually and on behalf of those similarly situated v. City of Miami, Florida, Case No: 98-11208 CA 31) filed a motion to intervene in Nagymihaly. On June 6, 2005, the City filed a motion to set aside the Nagymihaly partial settlement. On March 17, 2006, Judge Lopez issued an Order setting aside the Nagymihaly partial settlement agreement. The trial court found that there had not been a meeting of the minds and allowed the settlement to be set aside on the grounds of unilateral mistake committed by the city commission which did not rise to level of inexcusable lack of due care. As of the date of this memo, the City has recovered $1.99 million of the settlement payment made in December 2004. At this time, Judge Lopez's order is on appeal to the Third District Court of Appeal. The Third Amended Complaint filed by new plaintiffs, Masztal, et al., individually and on behalf of those similarly situated v. City of Miami, Florida, Case No: 98-11208 CA 31 (f/k/a Nagymihaly, et al. v. City of Miami, Florida) and Masztal, et al., individually and on behalf of those similarly situated v. City of Miami, Florida, Case No: 05-2111 CA 31, seeks recovery of all alleged illegally collected assessments (fire/rescue &fire) imposed through FY 2006-2007. Terms and Conditions of the Proposed Settlement Agreement and Release The purpose of the proposed Settlement Agreement and Release discussed herein is to forever settle the claims stated in the Class Action complaint against the City in Masztal, et al., individually and on behalf of those similarly situated v. City of Miami, Florida, Case No: 98-11208 CA 31 (f/k/a Nagymihaly, et al. v. City of Miami, Florida) and Masztal, et aL, individually and on behalf of those similarly situated v. City of Miami, Florida, Case No: 05- 2111 CA 31. The class includes or will include all persons or entities that owned property in the City and paid the Fire/Rescue Assessment (enacted from FY 1997-1998 through FY 1999-2000) or paid the Fire Assessment (enacted from FY 2000-2001 through FY 2006-2007) (referred to as the "Class"). The Class is represented by Richard L. Williams, Esq., Michael Garcia -Petit, Esq., and Patrick A. Scott, Esq (referred to as "Class Counsel"). In these lawsuits, the Class challenges the legality of the City's Fire/Rescue Assessment and Fire Assessment (referred to as the "Assessments"), on two bases. The first basis, referred to as the "refund portion," challenges the Assessments to the extent that monies were collected and allocated to "rescue" or "EMS" services, and seeks a "refund" of all alleged illegally collected assessments. By law, the Class is only entitled to a refund of money collected and allocated to EMS or rescue services; the Class is not entitled to a refund of any money collected and allocated to fire services. The second basis, referred to as the "apportionment portion," seeks a determination that the Assessments were not properly apportioned among various categories of property owners. The current Third Amended Complaint challenges the validity of the Fire/Rescue Assessment and the Fire Assessment for all 10 years they were enacted. There are also seven appeals, which were consolidated, pending before the Third District Court of Appeal. The primary issue on appeal is whether the trial court's March 17, 2006 Order, which granted the Class and City's Motions to Set Aside the May, 2004, settlement with the Original Plaintiffs (Nagymihaly), should be affirmed. All claims on appeal, and all current or potential Class or City claims against the Original Plaintiffs (Nagymihaly) their lawyers, or others, are not part of this settlement. The Class and Class Counsel have presented the City with an offer to settle all currently pending class action cases, encompassing all current or potential claims for all 10 claimed fiscal years, on behalf of all Class members, for $15,550,000. The settlement amount is inclusive of Class Counsel attorneys' fees, costs and all administrative costs. The Settlement Agreement and Release contains all of the terms and conditions of the settlement. It was drafted by Class Counsel and the City's Counsel, with the input of various experts, and the independent Third Party Administrator. 83211 Page 2 of 8 It is recommended that the proposed Settlement Agreement and Release in the amount of $15,550,000, be approved by this Commission for several reasons. First, the settlement amount is a fair and reasonable compromise of competing claims between the Class and the City. Second, the settlement is fair and reasonable under the law, the prior rulings of the Florida Supreme Court and the trial court's orders in this case. Third, each of the parties has conducted substantial investigation, and recognizes that the issues presented are unlikely to be resolved without further extensive and costly litigation, and that such litigation will cause inconvenience, distraction, disruption, delay and expense disproportionate to the potential benefits of continued litigation. Each of the parties has taken into account the risk and uncertainty inherent in any litigation. Each also recognizes that the Class is made up of the City's taxpayers who, in a manner of speaking, sue themselves. Finally, the proposed settlement will encompass as many property owners as possible. If the litigation were to continue, and the trial court were to rule in favor of the City on some of its claimed defenses, some of the Class members may not be entitled to a refund. For these reasons, and for the reasons more fully set forth in the Settlement Agreement and Release, it is recommended that the City Commission approve the settlement. The terms and conditions of the proposed Settlement Agreement and Release agreement are summarized in the attached Exhibit "A." 83211 Page 3 of 8 EXHIBIT "A" MASZTAL PROPOSED SETTLEMENT KEY POINTS: OFFER Total Amount $15,550,000 Class Attorneys' Fees Attorneys' fees will be paid from $15,550,000 (the "Common Fund"). Amount of Class Attorneys' Fees The amount of Class Attorney' fees will be determined solely by the court. Status of Disgorged Fees Collected from Original Plaintiffs Any disgorged funds will revert to City, for benefit of the Fire Department (if the City prevails in the pending appeals). Administrative Fees To be deducted from the $15,550,000 Common Fund after approval by the court. Appeals Pending appeals with Original Plaintiffs remain; settlement has no effect. Effect on Future Assessment(s) None. Unclaimed Money Remaining in Common Fund Any remaining unclaimed money after all valid refunds are paid will revert to City for the benefit of the Fire Department. A summary of additional and essential terms are set forth below. The complete terms are contained in the Settlement Agreement and Release: 1. This $15,550,000 settlement would be a settlement of all class claims in Masztal et al. v. City of Miami, Case No. 98-11208 CA 31, all class claims in Masztal et al. v. City of Miami, Case No. 05-2117 CA 31, and any and all claims that the class had, has, or may have against the City arising out of the Fire/Rescue Assessment (enacted from 1997- 1998 through 1999-2000) or Fire Assessment (enacted from 2000-2001 through 2006- 2007). The settlement amount is a compromise of what the Class and the City believe should be refunded by the City. However, given the costs, risks and uncertainties of litigation, and the delay that will necessarily result if the claims are not settled, both parties believe the settlement is fair and equitable to the class and to the City, 2. Class Counsel and counsel for the City, with input from various experts and the independent third party administrator, worked together to ensure the settlement terms are fair and equitable. 3. The settlement will be administered by an independent third party administrator, mutually agreed to by all counsel. The administrative process includes providing notice to the class, verifying the claims, and issuing the refund checks. The Parties will cooperate in any manner requested by the administrator to provide the necessary information to process and confirm all claims made. 83211 Page 4 of 8 4. if the settlement is approved by the City Commission, it must then be approved by the court, per Florida law. A fairness hearing will occur where the court will rule on the fairness of the settlement. 5. The class is seeking judgment ordering the City to refund the Assessments collected. However, the amount of the refund owed, if any, has never been determined by any court. There is a dispute between counsel for the City and Class Counsel as to that amount. As a consequence of this settlement, the court will not determine the amount of the refunds. The court has only determined that the rescue portion of the fire/rescue assessment, from 1997-1998 through 1999-2000, was illegal. In the litigation, it is the City's position that money collected from 1997-1998 through 1999-2000 that was allocated to fire services and not rescue services was legally collected, and should not be refunded. It is also the City's position that the amended fire assessment, beginning in fiscal year 2000-2001 and currently in place, is a legal and constitutional assessment per the Florida Supreme Court. Thus, money collected from 2000-2001 through 2006- 2007 should also not be refunded. Finally, it is the City's position that the .statute of limitations bars any refund claims for fiscal years 1999-2000 through 2001-2002, and some other claims for fiscal years 1999-2000 through 2006-2007. The class disagrees with some of the claims set forth in this paragraph. Such disagreement would require extensive litigation and rulings from the court. Moreover, because of the uncertainties in any litigation, and the additional 'attorneys' fees, costs and time necessary to litigate these and other issues in court, the proposed settlement is for the entire case and shall encompass all fiscal years (1997-1998 through 2006-2007) and all claims alleged in the Third Amended Complaint. 6. Each Class member who does not opt out of the Class, and timely sends in the appropriate request for refund form, will receive a refund consisting of a percentage of the Fire/Rescue and Fire Assessments that they were billed and that they paid. 7. We cannot currently determine what percentage of the Assessments collected will be refunded to each property owner, because several variables exist, which are explained below. However, no refund will be in excess of the amount that a property owner actually paid in Assessments. 8. First, the exact amount of money that will be available for refunds is not currently known. After the City transfers the $15,550,000 Common Fund to the independent third party administrator, the money will be put into an interest bearing account. Any interest accrued will be added to the Common Fund for the benefit of the Class. This will increase the funds available to the Class. Second, Class Counsel's attorneys' fees and costs, and the administrative costs, have not yet been determined. These amounts will be determined and approved by the court. Once the court determines these amounts, they will be subtracted from the common fund. Therefore, we cannot currently determine the exact amount of money that will be available for distribution to the Class. The refund percentage will also be affected by the number of Class members who decide to make a valid claim. Some Class members may choose to opt out of the Class, as is their legal right. Some may not send in the request for refund forms, not send them in timely, or not send them in with the information required. Those who timely send in the forms with the required information will remain in the Class and their claim will be processed. The refund percentage will therefore also be affected by the number of Class members who present a valid claim. 83211 Page 5 of 8 9. The priority of distribution of the funds shall be, as is typical of class settlements, as follows: (a) the first priority shall be payment of Class Counsel's attorneys' fees and costs, as determined by the court; (b) the second priority shall be payment of administrative costs and expenses, as approved by the court; (c) the third priority shall be payment of valid refund claims;, and (d) the fourth priority shall be reversion of any remaining money back to the City. As aforementioned, the court will determine the attorneys' fees and costs and administrative costs first, before the exact amount available for Class claims is ascertained. If there is any money left in the Common Fund, that money will go back to the City's general fund solely for the use and benefit of the Fire Department. 10. If the settlement is approved by the City Commission, and the court, the City and all of its current and former officers, officials, agents, representatives, and employees will be fully released. However, the law allows any Class member to opt of the settlement and continue its individual claim against the City. We cannot predict if this will occur. 11. This settlement does not preclude the Class or the City from bringing additional claims against any other persons or entities who are not part of the Settlement Agreement and Release. 12. There remain 7 different claims on appeal, all of which arise out of the previous settlement. No opinion has been issued as of July 16, 2007. The appellate court's ruling on the previous settlement will not affect this settlement with the Class. If the Class and the City are successful on appeal, and the trial court's order setting aside the prior settlement is upheld, all disgorged funds and any additional funds collected will revert to the City, solely for the use and benefit of the Fire Department. If the appellate court overturns the trial court's order setting aside the prior settlement, the City will have to return the disgorged funds, cease current collection efforts against the Original Plaintiffs, and make the additional $3,500,000 payment which was not made in December, 2005. 13. If the Commission approves the proposed Settlement Agreement and Release, the following is an estimated timeline of how the case will proceed: (A) The settlement agreement will be signed by all the parties. Within 15 days of execution of the agreement, the parties will move for preliminary approval of the settlement from the court. Within that same 15 days, Class Counsel will also change the definition of the Class members (to include all 10 fiscal years),. file their petition for attorney's fees and costs, and the administrator will file its estimated costs of administration. (B) Once preliminary approval is granted by the court, the class notice period will commence. The administrator will send out notice to every identified class member. In addition, at least 5 separate notices will also be published in The Miami Herald, El Nuevo Herald, and USA Today. The class notice period will last 30 days. A web site will be set up so the class members can obtain answers to fundamental questions. The administrator will also be available by toll -free telephone to answer questions. The Administrator may request that the City advance a portion of the Common Fund in an amount not to exceed $200,000, in order to cover the costs of postage, mailing and publication during the period of time prior to the fairness hearing. See Exhibit "B". 83211 Page 6 of 8 (C) The court will then set a date for a fairness hearing. Any Class members who opt out of the settlement, or any who stay in but object to any terms of the settlement, must do so by filing proper notice 15 days before the fairness hearing. (D) If the court approves the settlement after the fairness hearing, the City will immediately transfer the settlement amount to the administrator, to be placed in an interest bearing account. The administrator may ask the City to advance some of the costs of the claims administration (such as postage, mailing and publication) prior to final approval. If the City does this, that money will be credited against the Common Fund. (E) After court approval, the Class members will then have 30 days from the date of approval to mail in the request for refund forms. The administrator will process the forms, ensure the Class member is entitled to a refund, determine the amount, and mail out a check. The administrator has 90 days from, the date the request for refund forms are due to process the claims. If the administrator deems a class member's request invalid for any reason, the Class member has 15 days from the date the form is rejected to re -submit the claim. (F) Refund checks will be good for 180 days. (G) The administrator will file a report with the court showing the number of checks issued and the value of the claims made 20 days after the time period to issue refund checks closes. (H) Final Judgment should be entered by the court. The court will retain jurisdiction to enforce the terms of the settlement. 14. Section III of the Settlement Agreement and Release allows the parties to ask the court to alter any of the provisions or time deadlines relating to notice, opt out or objection, if necessary. Any reasonable alteration will not nullify the agreement or settlement. 15. All pertinent forms, notices and the web site will be in English, Spanish and Creole, and any other language deemed appropriate by the court, so all potential class members can review these documents in one of several languages. 16. When the settlement is presented to the Commission for approval on July 26, 2007, outside counsel for the City, Class Counsel and a representative of the independent third party administrator will be present to answer any questions from the public or the City Commission. If the City Commission or the court disapproves the settlement for any reason, the parties will resume the litigation as if this proposed settlement never occurred. No party will be deemed to have waived any claims or defenses if the settlement is not approved. Attachment(s) cc: Pedro G. Hernandez, City Manager Elvi Gallastegui, Agenda Coordinator 83211 Page 7of8 EXHIBIT "13" ESTIMATED PRELIMINARY COSTS ASSOCIATED WITH NOTICE AND PUBLICATION Item Cost Print/Mail 8-Image Notice and Request for Rebate $ 25,000 Insertion into USA Today $ 75,000 5 Insertions in Miami Herald and El Nuevo Herald $ 35,000 Translation Expenses $ 2,000 Website and VRU Setup (Multilingual) $ 4,500 Postage $ 75,000 $216,500 83211 Page 8 of 8