Blog note: this article references a grand jury report of many years ago. Incredible!
On Wednesday, County Administrative Officer Carol Huchingson reported that the Board of Supervisors had “reluctantly” settled the lawsuit brought by the Lakeside Heights Homeowners Association and 45 property owners.
Huchingson said that the suit has been settled for $4.5 million, to be paid by the county to the homeowners within 90 days.
While it’s a far smaller amount than the county could have paid at the end of the trial – which had been under way since early June – the settlement total is still “devastating to the county’s strained financial resources,” Huchingson said in the statement.
"We homeowners are relieved that the first phase of our four year nightmare is over,” said Randall Fitzgerald, the homeowners association president for the past four years. “But as part of the settlement with the county, we are still burdened with the costs of removing the debris of damaged houses, damaged HOA street infrastructure, and stabilizing the top of the hillside to prevent further erosion.”
“It was a tough case. We put an enormous amount of time into this case,” said lead attorney Michael Green of the Santa Rosa law firm Abbey, Weitzenberg, Warren & Emery, which represented the plaintiffs.
Green and colleagues Scott Montgomery and Bart Weitzenberg took the case to trial on contingency. He said they were willing to take it on with no guarantees because they believed there was no other recourse for the property owners.
County Counsel Anita Grant said the board held a closed session on June 27, emerging to vote to approve the settlement.
She said the vote was 4-0. Supervisor Rob Brown, whose son-in-law is a plaintiff in the case, had recused himself from the matter at the outset and so didn’t participate in the vote.
Pointing to the devastating wildland fires that hit Lake County in 2015 and 2016, Huchingson said the county is especially challenged, now and in the future, due to its obligation to fund recovery efforts with partial state and federal reimbursement in the wake of the tremendous loss to its property tax base.
She said the county also has had to face the same “harsh actuality” as the property owners in Lakeside Heights – that damages due to subsidence are generally excluded from insurance coverage, which means no insurance monies are available to draw upon for the settlement.
In 2016, the Board of Supervisors received a loan from California State Association of California - Excess Insurance Authority in the amount of $750,000, intended to cover a portion of the cost of legal defense, Huchingson said.
Due to the county’s financial straits, Huchingson said the county intends to seek outside financing, in the form of a loan or loans, in order to pay the Lakeside Heights settlement.
“Unlike many local jurisdictions, the Lake County is not accustomed to meeting its obligations with loans but we are gearing up to do just that for the Lakeside Heights matter,” she said.
Building a case
The Lakeside Heights subdivision has a total of 29 homes, one of which was not involved in the lawsuit, said Green. There also are eight vacant lots.
The subdivision’s history has been marked by controversy. Since development on the site began in 1982, there was evidence of extensive grading without permits and other issues that a grand jury report several years later indicated were not stopped by county officials.
A sitting county supervisor, Jesse Combs, voted in support of the project without disclosing he was doing grading for the project. In 1987, Combs received the largest fine given to a Lake County official – $12,000 – by the Fair Political Practices Commission for 12 counts related to committing violations on matters “that clearly benefited business partners and developers who were sources of income” which were not disclosed on his statement of economic interests.
The subdivision’s developers were indicted in 1988 by the California Attorney General for forgery and grand theft in purchasing the properties. Combs also was indicted on 15 felony counts, including tax evasion, perjury and bribery, according to media reports at the time.
However, to find the cause of the landslide, Green said it wasn’t necessary to go back that far to the origins of the subdivision’s creation. And, indeed he considered those previous circumstances “ancient history.”
Rather, Green said it was an issue of tracing the cause of the landslide. While the county contended that the subdivision was built on a preexisting landslide, Green said that isn’t an uncommon occurrence in California.
Something was needed to trigger the slide. In this case, Green contended it was water – in a drought year.
The suit, filed in November 2013, alleged that it was the county’s water infrastructure that had caused the known landslide in the area.
In March of that year, cracks began to develop in the ground near homes in the hilltop subdivision. Several homes began to crack and slip down the hill. Roads in the subdivision also began to crack and buckle.
The landslide also threatened the water and sewer infrastructure maintained by Lake County Special Districts that served the subdivision. A section of highly vulnerable water infrastructure was capped in April 2013.
At one point, it was estimated that half of the subdivision’s residents were displaced through a combination of mandatory and voluntary evacuation orders issued by the Lake County Community Development Department.
A total of six homes and a detached garage were destroyed by the landslide. Two of the homes were abated by the county in the fall of 2013; four still need to be removed. Fitzgerald said the remaining 21 homes include two that are bank-owned and vacant. Half of all of the homes are occupied by renters.
The landslide also has impacted Hill Road East, which runs below the subdivision. For the past three winters that portion of road, near the entrance to Sutter Lakeside Hospital, has been closed because of the hillside collapsing across both lanes of the roadway.
The road was reopened this spring after county roads crews were able to once again clear it. The Lake County Public Works Department has hired Quincy Engineering to design a plan to fix the roadway and hillside issues.
The Lakeside Heights homeowners association and property owners filed tort claims in early 2013. After those claims were denied, they filed suit late that year.
Green alleged that the county had an “us versus them” mentality from the very beginning in its response to the landslide.
In June 2014, the county filed a countersuit that alleged that an irrigation line belonging to the association had been the source of a leak leading to the landslide.
The attorneys for the homeowners built their case on key pieces of evidence. Specifically, Green said they were able to demonstrate, through the use of soil and material science, that two county water pipes had been leaking for a long time – for as long as 10 years – before the landslide occurred.
Green said the two leaks in question were located in water pipes at the top of Lancaster Road and on Oxford Drive.
The county of Lake had done a leak detection on May 9, 2013, and then followed up the next day with repairs, as Lake County News has reported. Repairs at that time were conducted on Oxford Drive.
Both the Lancaster and Oxford leaks are in areas quite a distance from the slide material, which led the attorneys to argue that it would defy physical laws for the leaks to have been the result of the landslide, rather than the cause, as they believed.
This past January, Green said they had the pipes excavated in order to examine them.
The leak on Lancaster had appeared to have occurred in a corporation stop at a main line. The fittings were removed and thrown away and the portion of the leak in the pipe wasn’t preserved, so Green said it couldn’t be studied in-depth under a microscope.
However, he said the repairs to the pipe on Oxford did preserve evidence of the original leak. A full circle repair clamp had been placed on the pipe, keeping in place the original leak area.
He said they were able to take the part of the pipe that showed evidence of the original leak to Berkeley Labs, where they looked at it under an electron microscope and demonstrated that it showed the characteristics of a slow growth leak.
“It took a long time to develop,” Green said.
A lawsuit over the landslide at the Lakeside Heights subdivision in Lakeport, Calif., shown here on Wednesday, July 5, 2017, has been settled. Six houses and a detached garage have been destroyed in the subdivision of nearly 30 homes, with several others damaged. Photo by John Jensen/Lake County news.
Getting to trial
There were a number of delays getting the case to trial. It had been set to begin in October, but was put off to March, then reset again for June, with visiting retired Judge Richard Henderson from Mendocino County assigned to the case due to the recusal of the local judges.
Court records showed that the county began to drop the property owners from its countersuit in 2016. Green said the county dropped the remaining property owners about six months ago. The homeowners association remained a defendant until the remainder of the countersuit was dropped completely three months ago.
Fitzgerald said there was no evidence at all that the association’s water line had caused the landslide, and he suggested that the countersuit was a legal maneuver to win concessions in the case.
The case was being handled as a bench trial, with Henderson – not a jury – to ultimately decide the case.
Ahead of trial, the county’s attorney, John Whitefleet of the Sacramento law firm Porter Scott, submitted a five-page pretrial brief stating that leak repairs had been made to the water system in October 2012, and citing potential factors in the landslide including “significant” rainfall in late 2012 and a 4.5-magnitude earthquake near The Geysers in northern Sonoma County a week before the landslide fractures began to occur.
Green and his colleagues prepared a 27-page pretrial brief that addressed those issues and maintained that it was the leaks in the county’s water system that were responsible for the land movement.
Opening arguments in the case began on June 7. During the first week, Green and his colleagues put a geotechnical expert, one of their key witnesses, on the stand.
That was followed by the showing of deposition videos of two state geologists who had been on the site and completed reports, as well as Lake County Special District Administrator Jan Coppinger.
As the trial got under way, the Board of Supervisors continued to have closed session discussions about the matter, according to their meeting agendas. In fact, it had been a topic of a total of nine agendized closed sessions from late Feb. 28 through June 27.
“We were two weeks in and then we adjourned when the county started offering real money,” said Green, noting the trial had been in recess for a few weeks. “I think obviously they saw a lot of risk.”
He suggested that it took getting through the opening statements and starting the presentation of expert witnesses “to get them to finally rethink this.”
In its statement on the case, the county said the original suit had been seeking a total of $230 million, or $5 million per property owner. Green called that statement “simply untrue.”
Green said there was no total number given originally and they weren’t seeking that amount.
“The county ultimately stepped up with a settlement number that is going to help my clients,” he said, adding, however, that it won’t make them whole for their losses.
Huchingson said that it remains the county’s position that neither its water nor its sewer system caused to the landslide.
However, had it been determined at trial that the county was liable under the theory of inverse condemnation, the presence or absence of fault by the county would be completely irrelevant, she said.
“Our board’s decision to settle the lawsuit is not an admission that the claims of the Lakeside Heights property owners are true,” she said. “Rather, it is recognition of the risks of trial, and the board’s balancing of the interests of all its constituents, given the uncertain outcome of protracted litigation, which could have been so much worse.”
Fitzgerald praised the attorneys for orchestrating the settlement in ways he never imagined possible, noting the homeowners were pleased with their efforts every step of the way.
“They took a huge risk with our case,” hiring expert witnesses who he said helped uncover the truth. “They felt that we had a strong case for a lot of reasons.”
He also credited the current Board of Supervisors with being farsighted in its willingness to accept the settlement, noting that the board had many opportunities over the past four years to settle the case.
What’s next
Moving forward, Hill Road, which is part of a pending repair project, remains under the county responsibility, while the “upper slope” area of the landslide in the subdivision, does not. The county does, however, need to maintain sewer and water services, Green said.
Green said the settlement calls for the homeowners association to take responsibility for removing the four homes and detached garage destroyed by the landslide which haven’t so far been abated.
“I anticipate that will be done soon,” Green said, estimating it could be completed within three months.
Green said he hopes the landslide is stabilized, as perfectly reengineering the hillside would be difficult.
Fitzgerald said the remaining homeowners – three of the original group have died since the case began – have a number of tasks to address with the settlement, once attorneys’ fees and expenses are paid.
“Our first priority is to stabilize everything,” said Fitzgerald, in addition to removing the homes and other debris, such as broken pavement and street lights.
Once that work is done, they need to grade and compact the soil to prevent erosion, he said.
Fitzgerald said they also hope that state and federal grants come through to help the county pay for the repairs necessary – including a retaining wall – for Hill Road.
They face other challenges, including heavily impacted home values, he said.
One of the bank-owned homes went on sale last month for $30,000. That home originally had been valued in the range of $250,000, he said. “That’s an indication of the impact on home values up here.”
Green added that landslide “really turned a lot of lives upside down.”
As for what the future holds for the people who own property and make their homes in Lakeside Heights, “I think the intent of most of the homeowners is to stick around,” said Green, which Fitzgerald confirmed.
Added Green, “It’s a pretty resilient and pretty special group of people.”
July 6, 2017
Lake County News 
By Elizabeth Larson