COUNCIL AGENDA: 4/8/2025
FILE: 25-381
ITEM: 3.5
TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Nora Frimann,
City Attorney
SUBJECT:
SETTLEMENT OF LAWSUIT
FILED BY UNITE HERE
RETIREMENT FUND, ET AL.
DATE:
March 27, 2025
RECOMMENDATION
Approve the settlement of a lawsuit brought by Plaintiffs Unite Here Retirement Fund and Trustees of the Unite Here Retirement Fund in the total amount of $1,550,000 to be paid in two (2) installment payments of $775,000 each and authorize the City Attorney to execute both the Settlement Agreement and a Side Letter to the Settlement Agreement that allows the City to pay the first installment payment by May 9, 2025.
OUTCOME
Settlement of the litigation concerning the withdrawal liability owed to the Unite Here Retirement Fund arising from the sale of the Hayes Mansion property in 2019 and the new owner’s withdrawal of the Hayes Mansion employees from the pension fund. The total amount of the settlement is $1,550,000. The parties will each bear their own costs and attorneys’ fees.
BACKGROUND
As a result of the City’s sale of the Hayes Mansion property in February 2019, the new owner did not retain Dolce International/San Jose, LLC (“Dolce Int’l”) as the manager of the Hayes Mansion property. The new owner also terminated the collective bargaining agreement (the “CBA”) covering the employees of Hayes Mansion while it was managed by Dolce Int’l. Under the CBA and the Multiemployer Pension Plan Amendments Act of 1980 (the “MPPAA”), the employer of the covered union workers was required to make monthly contributions to Plaintiff Unite Here Retirement Fund (“the Fund”) and was also obligated to pay any withdrawal liability to the Fund upon a complete withdrawal from the Fund. After the City’s sale of the Hayes Mansion, the Board of Trustees of the Fund determined the outstanding withdrawal liability was $1,136,994. During litigation, the Court found that the City was the employer of the Hayes Mansion employees and, thus liable for the withdrawal liability. Under ERISA, the City was required to pay the withdrawal liability plus interest, liquidated damages, and attorneys’ fees and costs arising from litigation over the withdrawal liability.
HONORABLE MAYOR AND CITY COUNCIL
April 3, 2025
Subject: Settlement of Lawsuit Filed by Unite Here Retirement Fund and Trustees of the Unite Here Retirement Fund
ANALYSIS
This is a negotiated settlement between the parties to avoid the risks inherent in litigation and to stop further accrual of interest charges, liquidated damages, and attorneys’ fees that the City would owe to the Fund. As of February 2024, Plaintiffs were seeking $1,937,864 to settle the matter, which included the ERISA withdrawal liability of $1,136,944, plus statutory interest that had accrued, liquidated damages equal to the amount of interest that had accrued, and the Fund’s attorneys’ fees and costs incurred during the litigation. Under this negotiated settlement, the City will pay Plaintiffs the total sum of $1,550,000 in full satisfaction and settlement of all claims, and Plaintiffs will dismiss their entire lawsuit with prejudice after the second installment payment is made in July 2025. The proposed Settlement Agreement will conclude the litigation between the Unite Here Plaintiffs and the City without further cost, expense, or risk of loss to the City. The parties will bear their own respective attorneys’ fees and litigation costs.
PUBLIC OUTREACH/INTEREST
This memorandum, the Settlement Agreement, and the Side Letter Agreement have been posted on the City’s website for the April 8, 2025 agenda.
COST SUMMARY/IMPLICATIONS
The settlement will be paid from the City’s claims reserve fund.
CEQA
Not a Project (File No. PP17-003), Agreements/Contracts (New or Amended) resulting in no physical changes to the environment.
By______/s/_________________
NORA FRIMANN
City Attorney
cc: Jennifer Maguire, City Manager
For questions, please contact NORA FRIMANN, City Attorney, at (408) 535-1900.